Helping
Britain
Prosper
Lloyds Banking Group plc
Annual Report and Accounts 2024
Our purpose is
Helping Britain
Prosper
Our vision
To be the UK customer-focused
digital leader and integrated
financial services provider,
capitalising on new opportunities,
at scale.
Our strategy
Our purpose-driven strategy is
focused on supporting the needs
of our customers, colleagues and
communities, whilst delivering
long-term, sustainable returns and
creating value for our shareholders.
Our strategic priorities See pages → 16 to 25
See pages 16 to 25
Grow
Drive revenue
growth and
diversification
Focus
Strengthen
cost and capital
efficiency
Change
Maximise the
potential of people,
technology and data
Our strategic outcomes
We successfully completed
the first phase of
our strategy, building
broad momentum across
our businesses.
We are well positioned
to deliver our core
strategic objectives
and 2026 guidance.
Delivered 2024 guidance
• £0.8bn additional revenues
from strategic initiatives
• £1.2bn gross cost savings
• 12.3% RoTE (14.0% excluding
motor finance provision)
• 148bps capital generation
(177bps excluding motor
finance provision)
Increased confidence for 2026
• >£1.5bn additional revenues
from strategic initiatives
• <50% cost:income ratio
• >15% RoTE
• >200bps capital generation
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
In this report
L
y
ro
Su
t
e
2
For over 325 years we have supported Britain, helping people and businesses invest and grow
For over 325 years we have supported Britain, helping people and businesses invest and grow
For over 325 years we have supported Britain, helping people and businesses invest and grow
Strategic report
01 to 44
Chair’s statement
02
Group Chief Executive’s review
04
Our business model
08
Our external environment
12
Our strategy
16
Our key performance indicators
26
Our colleagues
30
Risk overview
33
Viability statement and going concern
39
Section 172(1) statement
40
Climate-related financial disclosures and TCFD
42
Non-financial and sustainability
information statement
44
Sustainability review
46 to 60
Sustainability review introduction
46
Our sustainability strategy
48
Our value chain
49
Sustainability risks and opportunities
50
Climate resilience
53
Supporting the transition to net zero
54
Financial planning and controls
60
Financial results
62 to 74
Results for the full year
62
Divisional results
72
Governance
75 to 136
Directors’ report
Corporate governance report
75
Committee reports
97
Directors’ remuneration report
110
Other statutory and regulatory information
134
Risk management
138 to 198
The Group’s approach to risk
138
Risk governance
138
Stress testing
142
Emerging and topical risks
143
Full analysis of principal risk categories
144
Financial statements
200 to 310
Independent auditors’ report
200
Consolidated financial statements
212
Parent company financial statements
303
Other information
312 to 332
Shareholder information
312
Alternative performance measures
314
Subsidiaries and related undertakings
318
Forward-looking statements
332
The 2024 annual report and accounts
incorporates the strategic report, the
directors’ report and the consolidated
financial statements, all of which have been
approved by the Board of directors.
On behalf of the Board
Sir Robin Budenberg
Chair, Lloyds Banking Group plc
19 February 2025
Our reporting
Our reporting suite is
designed to facilitate better
communication to a range
of stakeholders.
Our annual report and accounts
provides disclosures relating to our
strategic, financial, operational,
environmental and social performance
and provides detail on our strategy.
It also contains forward-looking
statements relating to the Group’s future
financial condition, performance, results,
strategic initiatives and objectives.
To supplement our statutory results, we
use a number of alternative performance
measures. Unless otherwise stated,
commentary within the strategic report
is given on an underlying basis. Further
information is set out on page 314.
Our wider reporting suite including our
sustainability report provides additional
information and disclosures. These are
available online, and referenced
throughout this report. To access more
content on a mobile device, point your
camera at the QR codes seen
throughout this report.
See our full reporting
suite including our
sustainability report
on the
Investors page
of our website.
Lloyds Banking Group plc Annual Report and Accounts 2024
01
Building a
sustainable and
inclusive future
Lloyds Banking Group
Sustainability Report 2024
We have successfully
completed the first phase
of our strategic plan
By laying strong foundations, we are well positioned
for sustained growth and enhanced value creation
as we move into the next phase.
Growing our digital
presence and enhancing
customer experience
As the UK ’s largest digital bank, we serve 28 million
customers with around 23 million digitally active users of
which more than 20 million use our leading mobile app. Our
brands touch nearly every community and household in the
UK. During peak times, we have around 28,000 logons per
minute, with more than 6 billion logons during 2024. We are
one of the most used digital services in any industry.
In 2024, responding to customer feedback, we launched
our re -imagined Lloyds mobile app with dedicated,
product -based spaces showcasing features and tools. For
example, Ready -M
ade Investments, which has 40 per cent
of customers under the age of 35 contributing regularly to
investment products, and our Benefit Calculator, which
empowers customers to identify support they might be
eligible for.
Our ability to adapt and evolve to meet changing customer
expectations means we continually enhance functionality
and speed to market, improving the digital journey for our
customers by creating services and features they need.
c.23m
digitally active users,
exceeding our 2024 ambition
Grow
Focus
>30%
increase in active
customers served
per distribution FTE
Focusing on cost and
capital efficiency
During the first phase of our strategic plan,
we have accelerated adoption of new
technologies, supporting a 17.5 per cent reduction
in legacy technology applications and a greater
than 30 per cent reduction in data centres. This
has helped us improve automation and efficiency
across the organisation, with distribution
colleagues now serving over 30 per cent more
active customers, delivering both improved
customer outcomes and cost savings.
We have also taken action to deliver a more capital
efficient business, with consistent strong capital
generation. This includes growing in fee generating
business areas and building new capabilities in
areas such as securitised risk transfers. As a result,
we realised around £18 billion of risk-weighted
asset optimisation in the first phase of our
strategic plan, mitigating regulatory headwinds.
Change
Empowering
our colleagues
for change
>4,000
new hires into technology
and data roles
Our strategy is allowing us to prepare our Group for
the future, by creating an inclusive environment that
supports our colleagues’ growth and development.
Reskilling our colleagues allows us to retain talent,
increase productivity and drive innovation.
In 2024, our reskilling initiatives helped colleagues
develop the core skills needed for their current and
future roles whilst strengthening the Group’ s
workforce. We have also recruited over 4,000 new
colleagues into technology and data roles to drive
growth and efficiency during the first phase of
our strategy.
Chair’s statement
We remain fully focused
on supporting customers,
whilst delivering strong
strategic progress and
sustainable returns, guided
by our purpose of Helping
Britain Prosper.
Read full biography
Aligning
purpose with
profitability
Sir Robin Budenberg Chair
Lloyds Banking Group plc Annual Report and Accounts 2024
02
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
2024 has been another year of significant progress for Lloyds
Banking Group. We have continued to invest and transform the
business, delivering innovative new products and services for our
customers. At the same time we navigated a complex external
environment while maintaining our commitment to customers,
communities and shareholders.
We recognise that the recent Court of Appeal ruling regarding motor
finance has created uncertainty for customers and shareholders
alike. The Group continues to assess the potential impacts of this
ruling and would hope to have greater clarity soon.
The Group has successfully completed the first phase of our
five-year purpose-driven strategy and delivered robust financial
results in 2024. There have been a number of notable achievements,
as identified below.
Shareholder returns
Attractive capital returns are critical to our shareholders. We were
pleased to be able to increase the total ordinary dividend again,
by 15 per cent to 3.17 pence, whilst also announcing a further share
buyback of £1.7 billion. In total we have made a distribution of
£3.6 billion for 2024.
Purpose-driven strategy
The Group has purpose at its core. Our commitment to Helping
Britain Prosper enables us to meet customers’ holistic financial
services needs, whilst delivering sustainable profit and growth for
shareholders. These aims support each other, and our strategy
balances them effectively.
Having successfully completed the first phase of our strategy, I am
pleased with the strategic progress being made. I am delighted to
report that we have delivered £0.8 billion of additional revenues in
2024 from our strategic initiatives, surpassing our initial target of
c.£0.7 billion.
I am really proud of the increased pace of delivery and provision of
digitally enabled services and solutions for our customers, which
helps increase financial empowerment. This exciting progress spans
the entire Group.
Our consumer lending teams are simplifying credit score management
and mortgage journeys. Our consumer relationships teams are
redesigning the app experience for Lloyds customers and are preparing
to launch a new brand experience for Halifax and Bank of Scotland
next year. Our insurance, pension and investment colleagues are
rethinking how customers engage with their future, while our business
and commercial banking teams are enhancing digital servicing and
origination, enabling customers to meet their needs more easily. Our
corporate and institutional banking teams are providing valuable
insights into customer retail network usage and leveraging our
understanding of the UK economy to benefit our clients.
Once again, I am hugely proud of how our colleagues helped to make
a real difference in 2024. Consistent with our purpose, our actions
across the Group are supporting our aim to provide strong, sustainable
communities, high-quality infrastructure and regional regeneration.
Providing a full range of housing options for our communities is a
core priority for the Group and during 2024 we have taken a number
of actions, including:
•
Getting more people on the housing ladder by lending more than
£15 billion to first-time buyers
•
Expanding the availability of affordable homes by supporting
more than £2 billion of new funding to the social housing sector
Climate risk and the green economy are changing the way we live,
work and do business. We are committed to enabling the transition
to net zero by working closely with our clients. Since 2022, we
provided more than £20 billion for sustainable financing in EPC A
and B mortgage lending and financing for electric vehicles and
plug-in hybrid vehicles for retail customers, surpassing our aggregate
target for these activities of £18 billion.
We enter the second phase of the strategy with momentum across
the business and remain confident in achieving our 2026 strategic
outcomes and financial guidance.
Culture
The Board and senior management have a vital role to play in
shaping, role modelling and embedding a healthy corporate culture.
This continued to be a focus in 2024. Our business insights help
shape our focus on inclusion and commerciality. We continue
to measure our progress on gender, ethnic minorities and our
colleagues with disabilities. Setting out clear ambitions that
enable us to measure our progress is important, both as a signal of
commitment and intent, and because it provides focus and means
that inclusion is approached like any other business issue.
This year we are the highest-ranked bank (5th) in the FTSE 100 in the
FTSE Women Leaders Review (February 2024 report) for women on
Boards and in leadership. We have achieved all of the FTSE Women
Leaders recommendations ahead of the 2025 deadline. Whilst we
are pleased with the progress we have made, we recognise that we
are not yet where we want to be and have more to do to achieve
gender balance in our organisation.
As we reflect on all the great work we have done to support Black
heritage customers, communities and colleagues, this support
hasn’t yet achieved its full potential for our colleagues. Currently
1.8 per cent of senior colleagues are of Black heritage against a goal
of 3 per cent by 2025. We continue to build our understanding of
how we can unlock further potential in this space. Meanwhile, we
are pleased to have surpassed our ambition of having 12 per cent of
senior roles filled by colleagues with disabilities ahead of time, with
current representation at 16.1 per cent. Inclusion remains a focus
area for our business as it’s important for us to reflect our customers
and the society in which we operate especially given our scale and
reach.
Directors
We review the Board’s composition and diversity regularly and are
committed to ensuring we have the right balance of skills and
experience within the Board.
As announced previously, Alan Dickinson and Lord Lupton stepped
down following the AGM in May 2024. In August 2024, Nathan
Bostock joined the Board as a non-executive director and also
became Chair of Lloyds Bank Corporate Markets plc. Nathan’s
financial services experience and UK banking market knowledge
are invaluable to the Group.
Remuneration
We know that as we deliver the next phase of our strategy it is
vital that we are able to attract and retain talent and reward our
colleagues appropriately. All awards are determined by the Board’s
Remuneration Committee following careful consideration and aligned
with market conditions, the changing regulatory framework, Group
performance and the sentiment of our shareholders. You can read
more about our remuneration approach on page 110.
Summary
We’re proud that we’ve delivered on the commitments we set out in
2022 for the first phase of our strategic plan, further strengthening
our track record of consistent performance. We have continued to
deliver in line with our purpose of Helping Britain Prosper and see
further opportunities to contribute to sustainable economic growth.
Our financial results continue to demonstrate resilience, with strong
capital generation and good shareholder distributions. Looking ahead,
we need to continue to change and transform the Group. Building on
the strong progress to date, we are confident in our ability to achieve
higher, more sustainable returns and capital generation by 2026.
Sir Robin Budenberg
Chair
Lloyds Banking Group plc Annual Report and Accounts 2024
03
Group Chief Executive’s review
We have successfully
delivered the first phase
of our strategy, creating
value for our stakeholders
and enhancing the Group’s
financial performance.
Read full biography
Delivering
sustainable growth
and returns
Charlie Nunn Group Chief Executive
Lloyds Banking Group plc Annual Report and Accounts 2024
04
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
2024 was a significant year for the Group. We continued to fulfil
our purpose of Helping Britain Prosper, supporting our customers,
shareholders and wider stakeholders. We have successfully
completed the first chapter of our ambitious purpose-driven
strategy. Our transformation is delivering at pace with tangible
progress on building our franchise and enhancing our change
capabilities, leveraging data and technology to drive both growth
and efficiency. We are significantly enhancing our customer
propositions across the Group and returning the business to growth.
These developments and continued business momentum position
us well to deliver stronger, more sustainable returns as we head into
the next phase of our strategy.
Alongside our strategic progress, we delivered a robust financial
performance in 2024. As expected, income grew in the second
half of the year, supported by a rising banking net interest margin,
lending growth and momentum in other income. We have
maintained discipline on costs, despite the inflationary backdrop.
Asset quality remains strong.
In the fourth quarter we took an additional £700 million provision
for the potential remediation costs relating to motor finance
commission arrangements. This is in light of the Court of Appeal
judgment on Wrench, Johnson and Hopcraft that goes beyond
the scope of the original FCA motor finance commissions review.
The provision reflects a probability weighted scenario based
methodology incorporating a number of inputs. Clearly significant
uncertainty remains around the final financial impact. In this
context we welcome the expedited Supreme Court hearing
at the beginning of April.
Despite the additional provision for motor finance commission
arrangements we remain highly committed to shareholder
distributions. Our robust performance and strong capital position
and generation has enabled the Board to recommend a final ordinary
dividend of 2.11 pence per share, resulting in a total dividend for the
year of 3.17 pence. This is up 15 per cent on the prior year, in line with
our progressive and sustainable ordinary dividend policy. In addition,
the Group has announced its intention to implement a share buyback
programme of up to £1.7 billion, as we continue to distribute excess
capital to shareholders. This is in line with our target to pay down to
13.5 per cent CET1 ratio by the end of 2024.
We are building momentum as we now move into the second phase
of our strategic plan. We are continuing to create innovative new
products for our customers. More broadly, as the largest UK bank,
the successful execution of our purpose-driven strategy is helping
to meet commitments across key societal challenges such as
infrastructure, energy transition, housing and pensions. Our talented
colleagues are critical to our transformation and I am very pleased
to see engagement increase in 2024 in the context of a period of
significant change.
Robust financial performance
and consistent delivery
As said, the Group delivered a robust financial performance in 2024.
Statutory profit after tax was £4.5 billion. Underlying profit was
£6.3 billion with net income down 5 per cent, operating costs up
3 per cent and higher remediation and underlying impairment
charges. Robust net income of £17.1 billion included a resilient
banking net interest margin of 2.95 per cent, in line with guidance,
and 9 per cent growth in underlying other income, offset by higher
operating lease depreciation. Operating costs of £9.4 billion, in
line with guidance, reflected cost efficiencies helping to partially
offset inflationary pressures, business growth costs and ongoing
strategic investment. Remediation costs of £899 million in the year
(2023: £675 million), include the £700 million previously referenced
in relation to motor finance, alongside £199 million charges in relation
to pre-existing programmes. We continue to see strong asset quality,
with improved credit performance in the year. The asset quality ratio,
including the benefit from improved economic assumptions, was
10 basis points. Overall, this resulted in a return on tangible equity of
12.3 per cent, or 14.0 per cent excluding the motor finance provision.
As evidence of the strength of our franchise, the Group’s balance
sheet grew in the year, with underlying loans and advances to
customers increasing by £9.4 billion to £459.1 billion. This reflected
growth across Retail, including mortgages and unsecured loans.
Customer deposits of £482.7 billion significantly increased
in the year, by £11.3 billion, including growth in Retail deposits
of £11.3 billion alongside stable Commercial Banking deposits.
The Group delivered strong capital generation of 148 basis points
(177 basis points excluding the motor finance provision) and a pro
forma CET1 ratio of 13.5 per cent. This is after £3.6 billion of
shareholder distributions including an increased ordinary dividend
and further announced share buyback of up to £1.7 billion.
Guiding purpose of Helping Britain Prosper
We have an important role to play in creating a more sustainable
and inclusive future for people and businesses across the UK,
shaping finance as a force for good. Our purpose is evident across
our franchise in all of our business areas as we seek to help our
customers realise their financial ambitions. It is also highlighted
in particular areas where we can drive positive change at scale,
creating value for all of our stakeholders.
As a leading commercial supporter of social housing, we are working
to help every UK household access quality and affordable housing.
As part of this journey, we are calling for 1 million affordable new
homes by the end of the decade. Since 2018 we have supported
around £20 billion of funding to the social housing sector. Alongside,
our colleagues have raised over £3 million since we started our
partnership with the housing charity Crisis.
Given our importance to the UK economy, we are deeply involved
in supporting a more sustainable future by supporting the UK
transition to net zero. Our strategy to progress to net zero by 2050
represents a strategic and commercial opportunity, consistent with
our purpose of Helping Britain Prosper.
In 2024, we continued to support customers in their transition as
well as making strong progress against our sustainability goals. Since
2022 we have completed £11.4 billion of EPC A and B mortgage
lending, compared to our original target of £10 billion, and delivered
more than £9 billion of financing and leasing for EVs. In Insurance,
Pensions and Investments (IP&I) we met our cumulative target of
investing £20 to £25 billion in climate-aware strategies a year early.
In Commercial Banking we delivered £10.7 billion of sustainable
financing in 2024, in line with our target of £30 billion from 2024
to 2026.
Moving forward, we continue to challenge ourselves. We have set
new targets for a further £11 billion of EPC A and B mortgages and
£10 billion of EV financing by 2027. Alongside, we continue to work
on the decarbonisation of our business as we work to achieve net
zero in our own operations by 2030.
First phase of purpose-driven strategy
complete, building strong momentum
Our vision is to become a customer-focused digital leader and
integrated financial services provider, able to capitalise on new
opportunities at scale. This will drive higher, more sustainable
returns for our shareholders.
In 2024 we completed the first chapter of our strategic plan,
returning the business to growth and generating £0.8 billion of
additional revenues from our strategic initiatives, surpassing our
target of c.£0.7 billion. Our strategy has helped support almost
£2 billion of net income growth from 2021 to 2024. We have
maintained discipline on costs, with £1.2 billion of gross cost savings
helping to offset higher investments and inflationary pressures.
We have also de-risked the business and reduced claims on capital
by, for example, addressing the pension deficit, securitising legacy
higher risk mortgage assets and dealing with significant in default
situations. We have transformed our capabilities by modernising
our technology estate and radically reforming our operations
function to deliver more change more efficiently.
Lloyds Banking Group plc Annual Report and Accounts 2024
05
Group Chief Executive’s review continued
Our performance
Robust financial performance with
continued business momentum and
strong strategic progress.
12.3%
RoTE
(14.0 per cent
excluding
motor finance
provision)
148bps
capital generation
(177 basis points
excluding motor
finance provision)
c.80%
2024 strategic
outcomes
delivered
£1.2bn
gross cost savings
mitigating
investment and
inflationary
pressures
£0.8bn
additional revenues
from strategic
initiatives exceeding
our target
of c.£0.7 billion
When we launched the strategy we committed to a number of 2024
strategic outcomes to support our ambitions and evidence our
progress. We have successfully delivered on these targets, meeting
around 80 per cent of them, with a significant proportion materially
ahead of the original target. For example, since 2021 we have
increased depth of relationship by 5 per cent and grown our
Corporate and Institutional Banking (CIB) other income by more
than 30 per cent, versus our original target of more than 20 per cent.
We have grown in high-value areas, with more than 15 per cent
growth in Mass Affluent banking balances. We have remained
focused on cost efficiency, reducing legacy applications by
17.5 per cent and our office footprint by more than 30 per cent.
We are enabling the franchise, having migrated around 50 per cent
of applications onto the cloud and reduced data centres by more
than 30 per cent.
Delivering broad-based growth
Business growth has been achieved through a number of levers. We
have grown the core franchise, increasing our flow share in mortgages
and improving our share of balances in Retail current accounts. We
have deepened relationships with existing customers, transforming
engagement through new and enhanced propositions, such as in
investments and mass affluent, enabling us to meet more of our
customers’ needs. We are growing in high-value areas, including
targeted sectors within Commercial Banking such as infrastructure.
We are driving cross-Group collaboration by connecting customers
with offerings across our franchise for example increased protection
penetration in mortgage new business.
Growth has been facilitated by leveraging our digital leadership. This
starts with our refreshed mobile app that, with over 20 million users
and over 6 billion annual logins, up by 50 per cent since 2021, creates
a platform for innovative new propositions that drive a competitive
advantage. For example, Your Credit Score now has over 11 million
users and has helped over 780,000 customers improve their credit
score in 2024. It has also enabled the pre-approval of customers for
different forms of credit, significantly improving our loan conversion
rate by 15 per cent. Ready-Made Investments is another example of
a new proposition gaining strong traction with our customers. The
investment tool is bespoke to each customer’s risk appetite and
makes investing easier and more accessible. We are seeing great
take-up, particularly among younger generations, with around
40 per cent of customers under the age of 35.
The successful execution of our first strategic phase means we
exceeded our target and delivered £0.8 billion of additional income
from strategic initiatives by 2024. We are building momentum as
we aim to unlock further growth in the period to 2026. We are now
targeting over £1.5 billion of additional strategic initiative income by
2026, of which half will be other income.
As part of our ambition, in Retail we will deliver market leading
customer journeys and expanded propositions, while continuing to
accelerate the shift to mobile-first by creating more personalised
digital experiences. By 2026 we aim to further improve customer
depth of relationship by 3 per cent versus 2024. We will continue to
target high-value areas, growing Mass Affluent total relationship
balances by more than 10 per cent. In Retail lending we will continue
to enhance our homes proposition, including by retaining £8.5 billion
mortgages in 2026 through our innovative homes ecosystem,
alongside expanding our unsecured offering and maintaining our
Transport market share at more than 15 per cent.
In Commercial we will further broaden CIB solutions, meeting more
transaction banking and market needs with continued balance
sheet discipline. We are targeting CIB other income growth
of around 45 per cent by 2026 versus 2021. In Business and
Commercial Banking (BCB) we are aiming to build the best digitally
led relationship bank. By scaling digital servicing we will maintain
deposit share and grow in valuable sectors with broader needs,
such as manufacturing, driving a more than 10 per cent increase
in transaction banking and working capital income by 2026.
Lloyds Banking Group plc Annual Report and Accounts 2024
06
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
In IP&I we are unlocking the potential of the bancassurance model
to deliver innovative digital solutions and expanded propositions.
We aim to scale our digital waterfront to over 1.5 million customers
by 2026, whilst improving Group connectivity to drive growth in
high-value areas, such as ranking in the top three for Protection
by 2025 and growing Workplace assets under administration.
In our Equity Investments business we are continuing to invest
in fast growing UK SMEs through LDC’s unique model. We are
also supporting the UK rental sector by scaling Lloyds Living,
our homes rental business.
Transforming capabilities to drive growth
and operating leverage
In order to deliver our growth ambitions, our strategy is to maximise
the potential of our people, technology and data. We have hired
more than 4,000 colleagues across data and tech who are
accelerating our technology modernisation. This transformation
of capabilities is unlocking operating leverage and helped us deliver
the £1.2 billion of targeted gross cost savings, including around
£300 million of change efficiencies. For example, improvements in
digital servicing mean that more than 70 per cent of new Business
Banking and SME lending decisions are now automated. As a further
example of productivity enhancement we increased the number of
active customers served per FTE by more than 30 per cent.
Looking forward, we will continue to hire new engineering talent,
scale cloud adoption and accelerate decommissioning activity. This
will allow us to continue to adopt new technologies that deliver a
step-change in our capabilities. This includes our aspirations for Gen
AI, for which we have created a centre of excellence including around
200 data scientists and engineers. We are developing use cases such
as our knowledge support tool currently being rolled out to 10,000
colleagues across the Group and an AI-driven money management
tool for our Mass Affluent customers. These initiatives will generate
further efficiencies as well as create opportunities for growth.
Together, they drive operating leverage, helping towards our target
of a cost:income ratio of less than 50 per cent by 2026.
We are making strong progress on our purpose-led strategy.
We have generated £0.8 billion of additional revenues from strategic
initiatives as we return the business to growth. We are transforming
our franchise through innovative propositions and enhanced
capabilities. This gives us confidence in further business growth and
our ambition to generate more than £1.5 billion in additional income
from our strategic initiatives by 2026 whilst remaining disciplined
around costs and capital. We are progressing well towards delivering
higher, more sustainable returns for shareholders.
2025 guidance
Based on our current macroeconomic assumptions,
for 2025 the Group expects:
•
Underlying net interest income of c.£13.5 billion
•
Operating costs of c.£9.7 billion
•
Asset quality ratio to be c.25 basis points
•
Return on tangible equity of c.13.5 per cent
•
Capital generation of c.175 basis points1
2026 guidance
Based on the expected macroeconomic environment and confidence
in our strategy, the Group maintains its guidance for 2026:
•
Cost:income ratio of less than 50 per cent
•
Return on tangible equity of greater than 15 per cent
•
Capital generation of greater than 200 basis points1
•
To pay down to a CET1 ratio of c.13.0 per cent
1
Excluding capital distributions. Inclusive of ordinary dividends received from the
Insurance business in February of the following year.
Purpose in action
Supporting the
UK housing
market
The Group is one of the largest housing finance
providers with a mortgage book of more than
£300 billion and a major supporter of the UK
housing sector. We are committed to expanding
the availability and affordability of safe, quality
and sustainable housing.
We are uniquely placed to enact change
and want to play our role in creating a more
sustainable and inclusive UK society through
access to better housing.
Across the UK, a chronic shortfall in social
housing contributes to various socio-economic
challenges in our communities. Committed
to Helping Britain Prosper, we are one of the
biggest supporters of social housing and the
wider housing sector.
Citizen Housing, a social housing provider,
addresses pressing issues around housing and
homelessness. We have supported them with
£75 million for development, regeneration, and
sustainability plans, aiming to build over 2,000
new homes in the next four years.
Charlie Nunn
Group Chief Executive
Read more about
social housing
Lloyds Banking Group plc Annual Report and Accounts 2024
07
Our business model
Our business model
focuses on supporting
customers whilst delivering
sustainable growth
and returns
’
Our purpose
Helping Britain Prosper.
We do this by creating a more
sustainable and inclusive future
for people and businesses, shaping
finance as a force for good.
Our vision
To be the UK customer-focused
digital leader and integrated
financial services provider,
capitalising on new opportunities,
at scale.
People-first
We listen and
care for people
as individuals.
Bold
We innovate and do
things differently to
better serve our
customers and grow
with purpose.
Inclusive
We learn about and
embrace our
differences, and
seek out diverse
perspectives.
Sustainable
We take
responsibility for the
impact of our
actions on nature
and Britain s
transition to
net zero.
Tr u s t
We give each other
the space and
support to take
things on and see
them through.
Our values
Lloyds Banking Group plc Annual Report and Accounts 2024
08
-
What we do
We have three core divisions that have been
structured to serve our customers’ needs effectively
Retail
Consumer lending
•
Mortgages
Credit cards
Personal loans
Motor finance
•
•
•
Consumer relationships
•
Current accounts
Savings accounts
Mass affluent proposition
•
•
See page 72
Insurance,
Pensions and
Investments
Insurance
•
Home, motor, pet
Protection
•
Pensions and retirement
•
Workplace pensions
Direct to customer pensions
Retirement
•
•
Investments
•
Ready-made investments
Share dealing
•
See page 74
Commercial
Banking
Business and
commercial banking
•
Business loans
•
Transactional banking
•
Working capital
•
Merchant services
Corporate and
institutional banking
•
Lending and debt capital markets
Cash liquidity
Risk management
•
•
See page 73
Our competitive advantages
Leading UK customer franchise
with deep customer insight
28 million customers with extensive
reach across the UK. Customer data and
analysis ensures we can meet the needs
of these customers more effectively.
All channel distribution focus with
digital leadership and trusted brands
Operating through a range of brands
and distribution channels, including
the UK s largest digital bank.
Unique customer proposition
Serving all our customers’ banking,
investment and insurance needs
through a comprehensive product range.
Operating at scale with cost discipline
Our scale and efficiency enable us to
operate and invest more effectively.
Focused and capital
generative business model
Allowing significant investment while
generating an attractive capital return
for shareholders.
Innovation through
modern technology
Continued investment in our technology
platform, apps and change function
enables us to innovate to anticipate
and meet customers’ needs.
Financial strength and
robust risk management
Strong capital position. Continue
to take a robust approach to risk,
as reflected through the quality of our
portfolio and underwriting criteria.
Dedicated colleagues
with strong values
Highly engaged, skilled, customer
focused, diverse workforce with
significant expertise and experience.
Our trusted brands
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
-
’
Lloyds Banking Group plc Annual Report and Accounts 2024
09
-
Our business model continued
How we do it
We are Helping Britain Prosper in a way
that delivers sustainable profit and returns.
We serve our customers’
needs effectively with:
We do this by continually innovating the
products and services we offer, developing
and investing in new solutions, and using
our expertise and influence to create
positive change.
Our impact
Sustainable and inclusive growth
t
p
m
e
n
o
v
e
l
c
e
e
d
e
n
n
,
o
i
n
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ti
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v
n
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o
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n
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o
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s
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o
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l
s
u
e
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r
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v
o
i
n
c
e
s
s
F
u
n
d
a
in
n
g
d
,
e
i
n
x
v
p
e
e
s
r
t
t
i
m
s
e
e
n
t
Helping
Britain
Prosper
e
c
n
l
a
u
f
s
s
e
c
f
o
r
m
c
S
u
er
p
b
u
s
in
e
ss
Customers
We provide financial services
to over half of the UK adult
population and more than
one million businesses.
By meeting our customers’
needs we’re unlocking growth
and transforming the Group.
Colleagues
We are committed to building
an inclusive and sustainable
organisation that is truly
representative of our customers
in modern day Britain.
We recognise that colleagues
who can be their authentic selves
at work are central to our success.
Communities
Our success is intrinsically linked
with the success of all regions
across the whole of the UK.
When local people, local businesses,
and their communities prosper,
so do we.
>£15bn
of funding for first -t ime
buyers in 2024
40.4%
of our senior roles were held
by women in 2024
>£2bn
new funding supported in the
social housing sector in 2024
>£10bn
of sustainable finance provided
for Commercial Banking
customers in 2024
12.6%
of our senior roles held by Black,
Asian or Minority Ethnic
colleagues in 2024
>£35m
donated to our Charitable
Foundations in 2024
Lloyds Banking Group plc Annual Report and Accounts 2024
10
Innovation,
development,
influence
Driving innovation through
effective use of customer
feedback, technology and
data ensures we remain
relevant to the customer
whilst enhancing industry
standards. Our commitment
to digital transformation
is c ritical for future growth
and sustainability.
Products,
services and
solutions
Offering a comprehensive
range of financial products
and services, increasingly
through digital channels.
We t ailor these offerings to
meet individual and business
needs, ensuring customers
have access to the right
financial solutions.
Successful
business
performance
Delivering sustainable profit
and growth provides
financial strength whilst
ensuring we can invest
for t he future (both in the
business and customer
propositions) whilst returning
capital to our owners.
Funding,
investment
and expertise
Ongoing investment in the
business ensures we can meet
the evolving needs of our
customers in a commercial
way. Our significant funding
helps people and businesses
invest and grow whilst
our expertise and tailored
solutions help clients navigate
financial challenges, fostering
success and sustainability.
“We’re transforming our business
to shape finance as a force for good
and deliver for Britain for
generations to come.”
Charlie Nunn Group Chief Executive
Sustainable profit and returns
Shareholders
We successfully completed the first
phase of our ambitious and purpose-
driven strategy, exceeding our revenue
target and transforming our capabilities
as we returned the business to growth.
The Group’s robust financial
performance has delivered
strong capital generation,
enabling an increased dividend
and £1.7 billion buyback.
3.17p
total ordinary dividend
per share for 2024, up 15 per cent
£3.6bn
returned to shareholders
for 2024
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
-
Lloyds Banking Group plc Annual Report and Accounts 2024
11
Our external environment
External context,
opportunities and risks
Link to strategy
Grow
Focus
Change
Economy
Link to strategy
Customers
Link to strategy
Competitors
Link to strategy
Market context
The UK economy recovered somewhat from its pause in the
second half of 2023. Households’ spending power is rising and the
unemployment rate remains low. The new Government aims to
boost growth through increased investment and a constructive
regulatory backdrop. Global conflicts and threats to global trade
integration remain headwinds.
Impact
Subdued growth in our key markets in 2024, although improving:
•
House prices up 3 per cent, housing transactions up 7 per cent
and mortgage balances up 1.5 per cent
•
Consumer credit balances up 4.9 per cent, back above their
pre-pandemic level
• Household deposit balances up 5.2 per cent
•
Lending to non-financial companies up 3.6 per cent, with
SMEs still paying down pandemic Government-guarantee
scheme balances
• Non-financial companies’ deposits up 1.2 per cent
Market context
Customers are preferring more convenient and personalised financial
solutions provided through digital channels. Customers are
proactively seeking to make their money ‘work harder’ through
managing their savings, pensions and investments more proactively.
Although cost-of-living pressures continue, overall household deposit
balances continue to strengthen.
Impact
•
Reducing interest rates are supporting an improved outlook for
mortgage holders to refinance, with two thirds of the market
now refinanced onto higher rates
•
Increasingly, embedded finance and ecosystems are delivering
convenient digital solutions at customers’ point of need
Market context
Major banks and building societies are consolidating and expanding
through acquisitions, with renewed focus on UK growth. Alongside,
neobanks and fintechs are diversifying their financial services
offerings to meet a broader range of needs. As an alternative
financing option to traditional banking lending, private credit
is also gaining traction amongst institutions and small business.
Impact
• Opportunity to deepen customer relationships through
personalised customer journeys
• With the intensified competition within the UK market, there
are ongoing margin pressures in deposit and mortgage markets
•
Neobanks and fintechs are disrupting traditional banking models
via seamless digital experience and widening product breadth
•
Banks are increasingly opting to partner with private credit firms
in debt provision
Lloyds Banking Group plc Annual Report and Accounts 2024
12
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
We’ve built our business and strategy in response to the fast
pace of change in our external environment and to adapt
to ever-evolving stakeholder needs. This helps ensure the
Group is resilient over the longer term and can capitalise
on opportunities and manage risks as they emerge.
Our response
In a positive or more challenging macroeconomic environment, our business
model and strategy position us well, in particular the strength of our
customer franchise, our scale and balance sheet, and our prudent approach
to risk. Our strategy and transformation, combined with further efficiency
improvements, will deliver profit growth, diversification and resilience.
2025 outlook
UK growth boost from Government spending plans largely offset
by a toughening global environment:
•
•
•
•
GDP growth expected to improve gradually
Inflation expected to remain above the 2 per cent target,
limiting the pace at which the Bank of England reduces interest rates
House prices expected to rise by around 2 per cent
Growth in most of our markets is expected to improve further,
although of a measured pace
UK economic
growth
% GDP growth
0.8%
(10.3)
2020
0.8
2024
8.6
2021
0.4
2023
4.8
2022
Our response
•
•
•
•
•
•
•
Refreshed our brand and enhanced our mobile app with streamlined
savings, borrowing and protection features
Our ready-made products have helped customers to invest more
easily and start saving for their pension
A more seamless onboarding process for business and
commercial customers
2025 outlook
Launch redesigned mobile banking apps for Halifax and Bank of
Scotland customers
Enhance Money Management capabilities through more customisable
spending insights improving customer experience
Further design improvements to Lloyds’ mobile app
Enhance our Virtual Assistant automation capabilities to fulfil more
customer demand
Digitally active
users
m
22.7m
17.4
2020
19.8
2022
22.7
2024
18.3
2021
21.5
2023
Our response
•
•
•
•
•
•
Deepen customer relationships through tailored propositions
Develop an investment and savings digital waterfront tailored by
channel to support customers, colleagues and advisers
Provide market-leading journeys across direct and intermediary
channels, for example, home buying journeys in our home ecosystem
2025 outlook
Create seamless access to relevant propositions to the customer’s life
stage to become a holistic proposition provider
Integration of Mass Affluent proposition to other parts of the Group,
for example, testing the provision of Financial Coaching for
Workplace Pension
Enhance the mobile app with new features and an improved customer
journey to become customers’ finance hub
Mortgage
market share
total gross
lending – flow
19.9%
19.3
2020
17. 2
2022
19.9
2024
18.5
2021
16.9
2023
Lloyds Banking Group plc Annual Report and Accounts 2024
13
Our external environment continued
Technol ogy
and data
Link to strategy
Society and
environment
Link to strategy
Regulation
Link to strategy
Market context
Technology is evolving rapidly, driven by artificial intelligence, digital
transformation and the growing integration of automation across
industries. GenAI is being increasingly tested by all providers to
give customers more effective and personalised engagement.
To encourage greater data accessibility, the Government has
introduced legislation on Digital ID and Open Finance, enabling
platforms to act as gateways in offering integrated services.
Impact
•
Streamlined digital models are lowering unit operational costs
and intensifying market competition due to accelerated speed
in innovation and delivery to market
•
Opportunity to reduce costs by reducing legacy technology
costs, and increasing revenue by improving customer journeys
•
GenAI is increasing fraud volumes and sophistication of cyber
threats, requiring banks to enhance their security measures to
protect customers’ assets and data
Market context
Evolving regulations and environmental and societal issues mean
companies are expected to have a clear understanding of the
impact of these issues on the company, as well as play an increased
role in supporting the country and its people in responding.
Impact
•
Organisations must have a clear understanding and integrate
sustainability into their strategies and decision making,
understand their impacts, dependencies, risks and opportunities
•
Organisations need to respond to the evolving regulatory
landscape, including developments in relation to UK
endorsement of the two International Sustainability Standard
Board’s sustainability reporting standards
Market context
The regulatory landscape is evolving at pace, with particular
developments across Basel 3.1, Ring-Fencing, APP fraud and access
to cash. Notably, in the recent Mansion House speech the
Chancellor set out the Government’s vision to enhance the
competitiveness of the UK’s financial services sector via a more
constructive regulatory backdrop.
Impact
•
The Group is subject to changes in regulation, in particular the
near-final rules on Basel 3.1, as published in September by the
PRA, which take effect on 1 January 2027, and the Government’s
near-term changes to ring-fencing which were recently passed
into law, as well as changes to APP fraud and access to cash
•
Following the upcoming Supreme Court outcome, further clarity
will be gained on motor finance regulation
•
Further complexity in UK regulation could impact our ability to
achieve our purpose of Helping Britain Prosper and deliver on our
growth opportunity
Lloyds Banking Group plc Annual Report and Accounts 2024
14
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Our response
•
Transitioning into a new simplified operational model to align and enhance
product delivery
•
Increasing our technology hires and expanding engineering teams to drive
digital transformation
•
Modernising legacy systems by migrating to cloud infrastructure and retiring
outdated applications
• Business customers benefitting from faster lending decisions via auto-credit
decisioning in applying for overdrafts and aggregated exposure
•
Deploying an AI code translation and writing tool to accelerate our Data
Migration programmes and our engineering capabilities
2025 outlook
•
Continue to address technology debt and invest in future technologies
•
Unlocking impact of Gen AI through centre of excellence with around
200 data scientists and engineers
•
New savings and loans to be initiated on NextGen core banking engine
to increase speed to market and lower cost to serve
IT applications
on cloud
%
c.50%
2
c.50
1
7
2021˝
2022˝
2023˝
2024
1
Change in measurement approach, so comparison to
current years is not like-for-like.
Our response
•
Sustainability is core to our purpose. Guided by our Group strategy, focusing
on areas where we can have the largest sustainability impact
•
Since 2022, supporting £47.3 billion of sustainable lending, with £17.5 billion
of sustainable lending supported in 2024. Discretionary investments of
£25.9 billion in climate-aware strategies
•
In July 2024 launched new £200 million of financing commitment to small
local housing organisations, providing specialist housing to people who need
it most
•
Group decarbonisation emissions ambitions were validated by a third party
2025 outlook
•
Launch £21 billion of new sustainable financing targets by 2027 for our EPC A
and B rated mortgage lending and financing for electric vehicles
•
Increase our support to those who wish to purchase a share of a property
through shared ownership schemes
•
Review our net zero bank ambition and sector level targets following the
release of the 7th carbon budget
Sustainable lending or investment target
Commercial Banking
£30 billion sustainable finance for Commercial Banking
customers from 1 January 2024 to end of 2026
£10.7bn
2024
Motor
£8 billion financing for EV and plug-in hybrid
electric vehicles by 2024
2024
£9.4bn
EPC A and B mortgage lending
£10 billion of mortgage lending for EPC A and B
rated properties by 2024
2024
£11.4bn
Scottish Widows
£20–£25 billion discretionary investment in
climate-aware strategies by 2025
2024
£25.9bn
Progress
For further details on our sustainable finance progress see
pages 46 to 60.
Our response
•
Continue to evaluate the impact of Basel 3.1 as we progress with
implementation ahead of 1 January 2027, with the initial impact
expected to be moderately positive
•
Implemented the new requirements around APP fraud and continue
to focus on supporting customers who are impacted
•
Maintain focus on delivering good outcomes for customers
•
Meeting new CRD IV modelling requirements
2025 outlook
• Support the Government’s National Payments Vision, as outlined
in November 2024
•
Close monitoring of further changes in the UK regulatory landscape.
In particular, any policy initiatives following the proposals outlined
in the Chancellor’s Mansion House speech
•
Ring-fencing changes will facilitate client solutions domestically
and internationally
Timeline of key regulatory changes
in the banking sector
2023
FCA Consumer Duty introduced
2025
Expected FCA Enhanced Accountability Rules
2025
Ongoing consultation on ring-fencing rules
2027
Expected Basel 3.1 implementation
Lloyds Banking Group plc Annual Report and Accounts 2024
15
Our strategy
We successfully completed the first phase
of our ambitious and purpose-driven
strategy, transforming our capabilities as
we returned the business to growth and
exceeding our revenue target
What we have achieved over the last three years
Our three strategic priorities are enabling us to
achieve our purpose of Helping Britain Prosper
whilst delivering long-term sustainable returns
Grow
Returned core franchise to growth and
deepened relationships
Delivered innovative new propositions
that set us up for future revenue
momentum
Improved access to quality and
affordable housing across the country,
supported regional development,
enabled financial empowerment, and
helped navigate the UK ’s transition to
a more sustainable future
Focus
Strengthened cost and capital
efficiency, demonstrating cost
discipline in an inflationary environment
and maintaining a strong balance sheet
supported by originate to distribute
capabilities
Optimised balance sheet to offset
regulatory capital headwinds, helped
customers and clients become more
resilient whilst reducing our carbon
footprint and maintaining a disciplined
approach to cost and capital
management
Change
Modernised our technology estate,
reducing tech debt to improve agility
and accelerate the pace of change
Improved the ways we use digital
technology and our data to drive better
outcomes for our customers
Our colleagues’ expertise and skills have
been instrumental to our success. Our
people have been innovative, while we
reskill them for change, and delivered
distinctive customer experience
•
•
•
•
•
•
•
•
Performance highlights
Performance highlights
Performance highlights
•
c.£2 billion net revenue growth 2021
to 2024
£0.8 billion additional revenues from
strategic initiatives
12.3 per cent RoTE (14.0 per cent
excluding motor finance provision)
•
£1.2 billion of gross cost savings
£7 billion pension deficit addressed
c.£18 billion three year risk-weighted
assets optimisation
•
17.5 per cent reduction in legacy
technology applications
c.50 per cent of applications on cloud
Over 10,000 customer -facing
colleagues using GenAI support tool
•
•
•
•
•
•
>
£1.5bn add
itiona
l r
evenue
s from
strategic initiatives <5
0% cost/in
come r
atio
>1
5% RoTE
>2
00bps capit
al gen
eratio
n
Increased confidence in delivering our 2026 strategic commitments
Our 2026 strategic commitments
Lloyds Banking Group plc Annual Report and Accounts 2024
16
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Grow
Growth is a core focus of our strategy.
Around two-thirds of our c.£3 billion strategic investment over
2022 to 2024 was aligned to growing and diversifying revenue.
There are four primary pillars for growth.
01
Deepen
and innovate
in Consumer
We are deepening and
innovating across our
Consumer business,
bringing more of our
products and services
to our customers, as
well as broadening our
product offerings and
making it easier for
customers to access
them through our
intermediary partners.
Highlights
22.7m
Digitally active customers
(versus 18.3 million in 2021)
02
Create a new
Mass Affluent
offering
We are creating a
new Mass Affluent
offering to grow in
this attractive and
underserved market
segment across
banking, protection
and investments.
Highlights
>3m
Mass Affluent customers
(versus 2.1 million in 2021)
03
Digitise
and diversify our
BCB business
We are digitising
and diversifying our
BCB business, to grow
revenues and generate
value in products and
sectors where we are
underrepresented.
Highlights
>50%
Share of Business Banking
and SME products originated
and fulfilled digitally
(versus 10 per cent in 2021)
04
Develop our
Corporate and
Institutional
business
We are developing
our Corporate
and Institutional
business to deliver
disciplined growth,
investing across
our Cash-Debt-Risk
management offering.
Highlights
>30%
CIB other operating
income growth
(versus 2021)
Lloyds Banking Group plc Annual Report and Accounts 2024
17
Our strategy continued
01
Deepen and innovate in Consumer
We are aiming to deepen and innovate in Consumer to bring more of our products
and services to our existing customers, as well as broaden our product offerings and
make it easier for customers to access them through our intermediary partners.
Progress in 2024
Relationships
•
Number of digitally active users grew to
22.7 million, retaining our position as the
UK’s largest digital bank
•
5 per cent growth since 2021 in depth of
relationship of customers, including growth
across all life stages1
•
Launched re-imagined Lloyds mobile app,
with new navigation spaces such as Borrow
and Insure, alongside personalised insights
and conversation prompts
•
New interactive tools such as Benefit
Calculator, which empowers customers to
identify support they might be eligible for
•
Over 11 million Your Credit Score customers
since launch, with over 780,000 customers
benefitting from improved credit scores and
access to new products and loans
Lending
Exceeded our sustainability target of
£10 billion new lending for EPC A and B
mortgages, delivering £11.4 billion by 2024
•
•
•
Provided £9.4 billion of financing for
battery electric and plug-in hybrid vehicles
since 2021
Developed an Embedded Finance
proposition for digital checkouts by
launching an e-commerce lending product
‘Black Horse FlexPay’ in partnership
with NewDay
Insurance, Pensions and Investments
Scottish Widows now has more than
1 million digitally registered customers.
We recently launched a refreshed app for
workplace pension customers which has
over 400,000 users, 60 per cent of which
are active users
Grew home insurance new policies market
share from 12 per cent in 2021 to 15 per cent
in 2024
Achieved over £20 billion discretionary
investment in climate-aware strategies,
one year early in 20242
•
•
•
Priorities for 2025 to 2026
Expanding and scaling product offering
to meet more customer needs
(e.g. Embedded Finance)
•
Leveraging digital leadership to deliver
innovative, personalised customer-led
propositions
•
Accelerating shift to mobile-first; adapting
physical footprint to maximise efficiency
and engagement
•
Delivering improvements across all
channels, streamlining customer journeys
•
Select 2026 outcomes
3%
further increase
in Depth of
Relationship
(versus 2024)3
c.50%
active customers
served per
distribution FTE
(versus 2021)
1
Customers retained from beginning of November 2021. Relates to product holdings, for franchise customers with active relationship.
2
This refers to funds that have a bias towards investing in companies that are adapting their business to be less carbon-intensive and/or developing climate solutions.
3
Customers retained since 2024. Relates to product holdings, for franchise customers with active relationship.
02
Create a new Mass Affluent offering
We are creating a new Mass Affluent offering to grow in this attractive and
underserved market segment across banking, protection and investments.
Progress in 2024
Overview
•
Growth in our Mass Affluent customer base
to more than 3 million
•
Over 15 per cent growth in Mass Affluent
banking balances since 2021 as we
continued to build our integrated and
digitally-led banking, insurance and
investments propositions
•
Evolved our dedicated Mass Affluent
proposition with new product offers,
digital tools and financial coaching to help
customers get the most from their money
•
Compared to 2023, the number of
customers opening a Ready-Made
Investment more than doubled,
accompanied by a fourfold increase in
associated assets under administration
New features and products
•
Interactive tools in app to support
customers in managing their finances,
including Goals functionality and
Investment Needs Finder
•
Launched two new Direct-to-Consumer
pension products: (i) Ready-Made Pensions
and (ii) Whole of Market SIPP to make
it easier for our customers to manage
their pensions
•
Continued to refine our lending policy to
support the complex needs of the Mass
Affluent segment, supporting growth
in mortgage completions for Mass
Affluent customers
Priorities for 2025 to 2026
•
To drive Mass Affluent customer
acquisition, launching a new PCA offering
in 2025 into the market
•
We will evolve the Mass Affluent
proposition, with enhanced digital
experiences such as a digital financial
planning space with personalised nudges
Select 2026 outcomes
>10%
increase in Mass Affluent total
relationship balances, including
assets under administration1
1
Banking balances and investment assets
under administration.
Lloyds Banking Group plc Annual Report and Accounts 2024
18
Purpose in action
Sustainably growing
our consumer lending
Our lending, investments, products and
services are powerful drivers of a sustainable
and inclusive future, and are key to how
we grow our business profitably.
In 2024, we achieved our two
consumer sustainable financing targets
totalling more than £20 billion for
EPC A and B mortgage lending and
financing for electric vehicles and
plug-in hybrid vehicles.
>£20bn
of lending against these
targets since 2022
Read more about green finance
Purpose in action
Providing finance
to local businesses
Community Development Finance
Institutions (CDFIs) provide finance
to local businesses, often in the
most disadvantaged communities.
We provided £43 million of funding to
three CDFIs as part of a £62 million fund.
This ground-breaking commitment is the
first commercial loan made to the sector
by a mainstream UK lender.
10,500
jobs to be supported
Read more about CDFIs
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Lloyds
-
Banking Group plc Annual Report and Accounts 2024
19
03
Digitise and diversify our BCB business
We are digitising and diversifying our BCB business to grow revenues and generate
value in products and sectors where we are underrepresented.
Our strategy continued
Progress in 2024
Priorities for 2025 to 2026
Select 2026 outcomes
Digitise and transform
•
We continue to make strides in our
multi-year journey to build a digitally-led
relationship bank, launching mobile-first
journeys and onboarding clients up to 15
times faster since roll-out in the first half
of 2023
•
Increased digital sales, with the number of
products originated and fulfilled digitally
growing from 10 per cent in 2021 to over
50 per cent in 2024
•
Faster lending decisions through auto-credit
decisioning for eligible Business Banking
customers applying for up to £50,000
overdrafts and up to £100,000 aggregated
exposure
Diversify
Enhanced Merchant Services propositions
including Clover (flexible point of sale
business management system) for
face-to-face transactions
Launched new card proposition for small
businesses. Features include longer interest
free periods, higher limits and cashback
•
Capturing targeted BCB sector and
segment opportunities, deepening
customer relationships
•
Increasing BCB shift to digital-first,
delivering experience improvements and
journey efficiencies
•
Connecting clients to wider Group solutions
(e.g. pensions and insurance)
•
•
Maintain
small business
deposit market share1
50%
of key servicing
interactions
digitised
1
UK Finance – businesses with less than £25 million
turnover.
04
Develop our Corporate
and Institutional business
We are developing our Corporate and Institutional business to deliver disciplined growth.
Progress in 2024
Cash-Debt-Risk management
Grown other operating income by over
30 per cent since 2021 (outperforming our
20 per cent target), expanding Institutional
Coverage and investing in Markets and
Transaction Banking
Delivered capital-lite growth by increasing
net risk weighted assets by just 1 per cent
since full-year 2021
Increased our market flows by growing our
all issuer sterling debt capital markets
market share from 6 per cent to 10 per cent
since full-year 2021
Broadened rates participation by improving
sterling interest-rate swap ranking from 7th
in 2021 to 2nd in 2024
Sustainable financing
•
Delivered £10.7 billion of Commercial
Banking sustainable financing1 in 2024,
supporting the Group’s sustainable lending
portfolio and clients’ net zero journeys
We continue to support the UK’s transition
to net zero with investment in regional
development, providing financing to
infrastructure projects across the UK
including wind farms, solar panels, and
investments in new technologies
Priorities for 2025 to 2026
Becoming a broader CIB solution provider
to meet more Transaction Banking and
Markets needs via Cash-Debt-Risk offering
Disciplined expansion domestically and
across US and European footprint
Connecting CIB clients to solutions
provided by the wider Group, for example
Workplace Pensions
•
•
•
•
•
•
•
Select 2026 outcomes
•
c.45%
increase in
CIB other
operating income
(versus 2021)
>5.25%
income / average
risk-weighted
assets
1
In line with the Group’s Sustainable Financing Framework.
Lloyds Banking Group plc Annual Report and Accounts 2024
20
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Purpose in action
Supporting
social housing
In partnership with the National Wealth Fund we
announced a £500 million funding arrangement to
support the retrofit of social housing in the UK. This
deal brings public and private expertise together to
deploy private capital to deliver warmer, greener
homes for social tenants – benefitting their health,
work and home lives.
Our support to this sector is unlocking profitable,
sustainable and inclusive growth opportunities for
the Group with improving returns year on year.
>£2bn
of lending supported to the
social housing sector in 2024
Read more about social housing
Lloyds Banking Group plc Annual Report and Accounts 2024
Purpose in action
Building new
homes through our
MADE partnership
£150 million joint venture with Homes England
and Barratt to oversee multiple large-scale
projects supporting the government’s plan
to build 1.5 million new homes over the next
5 years. Through this partnership the Group will
participate in a number of large scale residential
and community regeneration projects,
generating attractive sustainable returns.
£150m
joint venture with Homes
England and
Barratt
Read more on how we’re
supporting the UK housing market
21
Our strategy continued
Focus
We are investing to grow and diversify our revenue,
alongside maintaining our disciplined approach
to cost and capital management.
Strengthen cost and
capital efficiency
We have maintained our strong balance sheet with a disciplined
approach to cost and capital management.
Progress in 2024
Achieved £1.2 billion in gross cost savings
since 2021
In order to unlock efficiencies, we have
rationalised our branch footprint, whilst
continuing to invest in digital journeys.
As a result, the number of active customers
served per distribution FTE has increased
by over 30 per cent since 2021
Achieved our target of over 30 per cent
reduction in office footprint by 2024, as we
continue to adapt to new ways of working
Optimised our balance sheet through
increased use of securitisations and
originate to distribute capabilities. Capital
efficient securitisation activity contributed
towards the £7.1 billion of gross risk-
weighted assets optimisation in 2024
Strong capital generation of 148 basis
points, 177 basis points excluding motor
finance provision
Priorities for 2025 to 2026
Accelerate shift towards capital-lite growth
areas, increasing other operating income
contribution to additional revenues from
strategic initiatives
Ongoing commitment to driving further
cost efficiencies, supported by digitisation
and rationalisation of the property estate
Continued focus on risk-weighted assets
optimisation through securitisation activity
Select 2026 outcomes
•
•
>60%
reduction in
data centres
(versus 2021)
>200bps
capital generation
•
•
•
•
•
•
Lloyds Banking Group plc Annual Report and Accounts 2024
22
Purpose in action
Grounded in evidence
As one of the largest lenders to the agriculture sector,
we’re supporting farmers in diversifying their portfolios
and transforming environmental performance.
We’ve teamed up with Soil Association Exchange to
create the largest, most comprehensive review of
farm environmental performance ever carried out in
the UK with around 850 farmers benefitting to date.
This insight allows the Group to focus on
developing the key strategic levers to support the
decarbonisation and optimisation of one of our
hardest to abate sectors.
>4,000
bespoke recommendations
to farmers across the UK since 2021
Purpose in action
Supporting our
customers to save
In 2024, we launched MBNA Savings to our
customers, extending our products and
giving our customers more options suitable
for their savings needs.
Our expanded offerings have enabled us to
open an additional 20,000 savings accounts,
bringing the total to 3.9 million savings
accounts opened across all brands in 2024.
Additionally, our ISA products have helped
customers save an extra £8 billion tax-free.
3.9m
savings accounts
opened in 2024
Read the full report
Read more about
our brand MBNA
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Lloyds Banking Group plc Annual Report and Accounts 2024
23
Governance
Financial results
Sustainability review
Strategic report
Risk management
Governance
Our strategy continued
Change
Delivering our strategy requires the Group to accelerate
the intensity with which we use digital technologies and data
to support customers. Our colleagues’ expertise and skills
are instrumental to our success.
Maximise the potential of people,
technology and data
We are investing in our people, digital technologies and data
to enable us to deliver our strategy, thereby delivering for our customers.
People
Progress in 2024
Recruited over 4,000 new colleagues in
technology and data roles to drive growth
and efficiency since 2021
Built a more inclusive workforce led by senior
leadership hires, with improvement across
our Diversity, Equity and Inclusion metrics
Modernised property estate to support
improved ways of working, with over a
quarter of colleagues in transformed
workspaces
Priorities for 2025 to 2026
Enhance commitments to building a more
inclusive organisation and increase number
of hires in key skills areas (e.g. engineering)
Provide colleagues with GenAI support tools
Continue to modernise and enhance our
office estate to enhance productivity
of our colleagues
Select 2026 outcomes
Maintain
strong employee engagement
index (versus 2024)
•
•
•
•
•
•
Technology & data
Progress in 2024
Continued to digitise customer journeys,
and invested in refreshed app
Modernised technology estate, reducing
legacy tech applications by 17.5 per cent
since 2021 through decommissioning and
automation
Reduced legacy data centres and
accelerated cloud adoption, with
c.50 per cent of applications on Cloud
Provided data driven product solutions such
as Lloyds Bank Market Intelligence
Priorities for 2025 to 2026
Leverage new technologies (e.g. GenAI) and
data to drive innovative solutions for both
customers and colleagues
2025/26 GenAI use cases including
improved fraud detection, AI-driven money
management for Mass Affluent customers,
and scaled knowledge support tool
Accelerate legacy app decommissioning and
cloud migration activity
Select 2026 outcomes
•
•
>30%
applications
on modern
technology
35%
gross reduction
in run and change
technology costs
(versus 2021)
•
•
•
•
•
Lloyds Banking Group plc Annual Report and Accounts 2024
24
Purpose in action
Supporting
our colleagues
Our aim is to create a diverse and inclusive
workforce and unlock potential, making
us a more competitive Group as a result.
In 2024, we proudly continued our Line
Manager Race Education, building on
the momentum with c.10,000 colleagues
and senior leaders trained. This training
provides our colleagues with a deeper
understanding of how cultural differences
can play out in the workplace.
c.10,000
line managers
and senior leaders
participated
in sessions
since launch
Purpose in action
Supporting disabled
entrepreneurs
We are committed to providing an inclusive workplace for
colleagues with disabilities, long-term health and neurodivergent
conditions and providing accessible and inclusive products and
services to better support our customers.
In 2024, we became a signatory of the Disability Finance Code
for Entrepreneurship which aims to drive engagement between
the disabled entrepreneur community and the financial services
sector in the UK. We were also proud to host the launch of the
Lilac Review an independent, government-backed initiative
designed to identify and overcome the barriers faced by
disabled business owners.
Disabled entrepreneurs are a critical yet often overlooked
segment of society. By embracing this wealth of talent,
innovation and resilience, there is a significant opportunity
to further the Group’s commercial objectives and
economic potential.
£230bn
could be added to the
UK economy by improving
opportunities for
disabled entrepreneurs
(Lilac Review)
Read more on how
we’re supporting UK
entrepreneurs
Watch a colleague share their
experience at the Group in this video
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Lloyds
–
Banking Group plc Annual Report and Accounts 2024
25
Our key performance indicators
The business has delivered significant strategic
progress and a robust financial performance
Financial
Our key performance indicators
provide clear evidence of our
performance in relation to the
Group’s most important priorities.
These encompass a range of measures designed to assess both
financial and non-financial performance, ensuring a balanced
consideration of the interests of all stakeholders, including
customers, shareholders and colleagues. A detailed outline
of these can be found on the following pages 110 to 133.
These key performance indicators also inform remuneration at
all levels across the Group to ensure that our colleagues act in
the best interests of both customers and shareholders. This
alignment considers the Group’s financial performance as well
as specific conduct and risk management controls.
Key performance indicators that are directly linked
to our remuneration balanced scorecard are marked
with this symbol. See page 119.
We use a number of alternative performance measures in
the description of our business performance and financial
position. These measures are labelled with this symbol.
See page 314.
1
From 2021, to aid comparability with peers, we began reporting return on
tangible equity without adding back post-tax amortisation of intangible assets.
Pre-2021 comparatives have been restated.
2
Expectation based on the Group’s current macroeconomic assumptions.
3
Reported on a pro forma basis, reflecting declared share buybacks and the
dividends received from the Insurance business in the subsequent quarter, but
excluding phased unwind of IFRS 9 relief.
Link to strategy
Grow
Focus
Change
Statutory profit
after tax
£m
4,477
1,387
3,923
5,885
4,477
5,518
2020
2021
2022
2023
2024
Statutory profit after tax is lower than 2023 due to lower net income,
higher operating costs and higher charges for remediation and impairment.
Excluding the charge for motor finance commission arrangements,
statutory profit was £5,035 million.
Link to strategy
Net income
£m
17,117
14,404
17,465
15,763
17,117
17,932
2020
2021
2022
2023
2024
Net income is lower than 2023, with lower underlying net interest income
and increased operating lease depreciation, partly offset by higher
underlying other income. The banking net interest margin was resilient,
increasing since the first half of 2024. 2025 guidance2 : Underlying net
interest income of c.£13.5 billion.
Link to strategy
Return on tangible
equity
%
12.3
2.3
9.8
13.8
12.3
15.8
2020
2021˙
2022
2023
2024
Return on tangible equity of 12.3 per cent reflects the Group’s robust
financial performance. Excluding the charge for motor finance commission
arrangements, return on tangible equity was 14.0 per cent. 2025 guidance2 :
Return on tangible equity of c.13.5 per cent.
Link to strategy
Lloyds Banking Group plc Annual Report and Accounts 2024
26
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Operating costs
£m
9,442
8,202
2020
8,672
2022
8,312
2021
9,442
2024
9,140
2023
Operating costs are 3 per cent higher than 2023 with cost efficiencies
helping to partially offset inflationary pressures, business growth costs and
ongoing strategic investment. 2025 guidance2 : Operating costs of
c.£9.7 billion
Link to strategy
Common equity
tier 1 ratio (CET1)
%
13.5
16.2
2020
14.1
2022˝
16.3
2021˝
13.5
2024˝
13.7
2023˝
Pro forma CET1 ratio remains strong at 13.5 per cent, after increased
ordinary dividend and announced share buyback. Expect to pay down to a
CET1 ratio of c.13 per cent by 2026.
Link to strategy
Total shareholder
return
%
21.2
(42)
2020
0
2022
35
2021
21.2
2024
10.9
2023
Total in-year shareholder return was 21.2 per cent. The share price was
14.8 per cent higher with capital return of 6.4 per cent.
Link to strategy
Underlying profit
£m
6,343
1,742
2020
7,028
2022
7,536
2021
6,343
2024
7,809
2023
Underlying profit is lower than 2023 due to lower net income, higher
operating costs and higher remediation and underlying impairment
charges. Excluding the charge for motor finance commission arrangements,
underlying profit was £7,043 million.
Link to strategy
Ordinary dividend
p per share
3.17
0.57
2020
2.40
2022
2.00
2021
3.17
2024
2.76
2023
Total ordinary dividend of 3.17 pence per share, up 15 per cent, reflecting
our progressive and sustainable ordinary dividend policy. Includes both
interim and final dividends. The Group has also announced a share
buyback of up to £1.7 billion.
Link to strategy
Lloyds Banking Group plc Annual Report and Accounts 2024
27
Non-financial
Customer
Our key performance indicators continued
Digitally active users
m
22.7
17.4
2020
19.8
2022
18.3
2021
22.7
2024
21.5
2023
Reflecting the pace of digital adoption, the number of active digital users
increased in the year to 22.7 million, up 5.7 per cent year on year. Within
this we had 20.2 million app users, which is an 8.3 per cent increase from
last year.
Link to strategy
Customer
satisfaction
All-channel net
promoter score
67.0
68.5
68.8
67.4
68.2
67.0
2020˝
2021˝
2022˝
2023
2024
Our all-channel net promoter score measures the customer perception
of day-to-day service across our channels, seeing broadly stable
performance against the backdrop of considerable changes to how we
serve customers in all channels.
Link to strategy
Customer
complaints
FCA reportable
complaints per
1,000 accounts
3.33
2.74
2.58
2.60
2.57
3.33
H1 2022ˇ H2 2022ˇ H1 2023
H2 2023 H1 2024
We always want to provide our customers with the best possible service
and our colleagues work tirelessly to understand the concerns of those
who contact us. During the first half of 2024, we saw an increase due to
commission complaints in Motor. Data for the second half of 2024 is not
available at time of publishing.
Link to strategy
Group customer
dashboard (GCD)
(November YTD)
Pts – 2024
% – 2021 to 2023
Index – 2020
83
74
79
80
86
83
2020
2021˙
2022
2023
2024˝
In 2024, the total GCD score is 83, 8 points above target of 75. Across all
measures, 58 per cent of scores have improved compared to 2023.
Continued focus is required to maintain strong customer performance in
the context of our strategic priorities.
Link to strategy
Climate
Operational carbon
emissions
tCO2e
123,960 115,978 112,067 117,671 122,564 123,960
19/20˝
20/21˝
21/22˝
22/23˝
23/24
Our overall market-based carbon emissions were 123,960 tonnes CO2e,
a 30 per cent decrease since baseline year 2018/19 when market-based
carbon emissions were 176,993 tonnes CO2e. There is a 1.1 per cent
increase since 2022/23, mainly driven by an increase in our emissions
from business travel. Read more on page 59.
Link to strategy
Lloyds Banking Group plc Annual Report and Accounts 2024
28
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Colleague
Employee
engagement index
% favourable
81
2020˙
78
2022
72
2021˙
71
2024
66
2023
Engagement has increased since 2023. The improvement this year is due
to an increased sense of pride among colleagues working for the Group
and a perception of the Group having a supportive work environment.
Link to strategy
71
Women in senior roles by 2025
(%)
Progress
2025 ambition
Black, Asian and Minority Ethnic
representation in senior roles by 2025
(%)
Progress
2025 ambition
13.0
40.4
50.0
2021 Baseline
2021 Baseline
12.6
Link to strategy
Link to strategy
Black Heritage representation
in senior roles by 2025
(%)
Progress
2025 ambition
Disability representation
in senior roles by 2025
(%)
Progress
2025 ambition
12.4
1.8
3.0
2021 Baseline
2021 Baseline
Link to strategy
While proud of our progress, we recognise there’s more to do. We remain committed to meeting the FTSE Women Leaders report goals, where
we’re ranked 5th in the FTSE 100. We are also pleased to have surpassed our 12 percent goal for senior roles filled by colleagues with disabilities.
From 2025, we are taking a new approach to our representation ambitions, which we aim to achieve by the end of 2030. We are setting an ambition
to reach and maintain a gender balance of 45 per cent to 55 per cent in executive roles. Additionally, we are moving to goals ranging between
3.5 per cent and 4 per cent for Black heritage colleagues, and between 19 per cent and 22 per cent for Black, Asian and Minority Ethnic colleagues
in executive roles. Read more on pages 30 to 32.
Key performance indicators that are directly linked
to our remuneration balanced scorecard are marked
with this symbol. See page 119.
We use a number of alternative performance measures in
the description of our business performance and financial
position. These measures are labelled with this symbol.
See page 314.
Link to strategy
Grow
Focus
Change
1
Re-stated to reflect structural changes to our measurement programme.
2
Excludes PPI, claims management companies and legacy TSB accounts.
3
Change in measurement approach, so comparison to current years is not like-for-like.
4
Restated data since 2019/20 to improve the accuracy of reporting, using actual data
to replace estimates and updates to historical emissions.
16.1
Lloyds Banking Group plc Annual Report and Accounts 2024
29
40.4
50.0
2021 Baseline
Our colleagues
Engaged colleagues are critical
to the success of the Group and
our transformation
Read more from
our colleagues
We are committed to building an
inclusive organisation that is
representative of our customers and
modern-day Britain. We will enhance our
success if differences are embraced and
everyone reaches their potential.
71%
Engagement increased
by 5pts from prior year
to 71 per cent
+4pts
our advocacy measure
(employee net promoter
score) increased by
4 points to 8
Our colleague engagement
In 2024, we broadened how we listen to our colleagues to provide
a more regular and complete picture of sentiment.
We want people to love working here. With more than 66,000
colleagues working across the Group, we welcome their views and
opinions on a range of topics to help us grow together. We evolved
our pulse and annual surveys by providing greater alignment to our
strategy and purpose, with further changes to the survey made to
improve the colleague experience.
Our annual survey was completed by 81 per cent of colleagues in the
Group, which gave us a near-complete view on sentiment on our
transformation journey, including over 190,000 comments.
Engagement increased by 5 percentage points from prior year to
71 per cent and our advocacy measure (employee net promoter
score) increased by 4 points to 8. Both are robust outcomes
considering the backdrop of high volumes and pace of change. Our
line managers continue to be integral in building and maintaining a
positive culture, with trust in leadership showing strong growth.
During the year the Group communicated directly with colleagues
detailing Group performance, changes in the economic and financial
environment, and updates on key strategic initiatives. Meetings
were held throughout the year between the Group and our
recognised unions. Please see page 86 for further examples of how
the Board engages with the Group’s workforce and why the Board
considers those arrangements to be effective.
For 2024, the Remuneration Committee approved Group
Performance Share awards for colleagues, and colleagues are eligible
to participate in HMRC-approved share plans which promote share
ownership by giving employees an opportunity to invest in Group
shares. The vast majority of our colleagues hold shares in the Group.
Our approach to flexible working
Through Flexibility Works we offer colleagues a range of flexible
working options. We’re focused on balancing the needs of our
customers as we transform our business by creating a workplace
people love and where they feel supported in the moments that
matter.
All colleagues have access to a range of flexible working options,
depending on their role. These include flexibility for everyone,
flexibility for health and carers, flexibility for families and flexibility for
growth. For further information refer to our Colleague Handbook
.
Lloyds Banking Group plc Annual Report and Accounts 2024
30
Other information
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Risk management
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Sustainability review
Strategic report
Our approach to flexible working
Flexibility for everyone
79%
of colleagues used at least one element
of our Flexibility Works offering in 2024
Flexibility for health and carers
7, 500
carers have access to additional flexibility
Flexibility for families
3,821
colleagues used family leave to spend time
with their growing families
Flexibility for growth
26,000
hours of leave used to support public duties
Our 2024 diversity, equity
and inclusion performance
A more diverse and inclusive business is a stronger business. In line
with our Group strategy and our activity to maximise the potential
of people, our goal is to ensure diversity, equity and inclusion is at the
heart of everything we do, further integrating initiatives across our
operations, ensuring it influences every aspect of our work with our
customers, colleagues, communities and partners.
Our refreshed approach and plans remain centred around our
guiding principle of Inclusive Every Day, our internal campaign
launched in 2023. This is supported by our inclusion plans which
we have developed in partnership with our Group Executive Allies,
diverse colleague panels, and our employee networks.
Recognising the importance of social mobility, we are dialling
up our focus on this important topic, ensuring we provide equitable
opportunities for all.
The Board and senior management have a vital role to play in shaping,
role modelling and embedding a healthy corporate culture, and this
continues to be a priority in 2025.
We are setting a new ambition to reach and maintain a gender
balance of between 45 to 55 per cent in executive1 roles by the end
of 2030. Alongside this, we will continue to focus on meeting the
goals outlined in the FTSE Women Leaders report.
Our disclosures in relation to board diversity as required under the
UK Listing Rule UKLR6.6.6(9) are on page 136.
Ethnicity
We are committed to building an inclusive society and creating an
organisation that reflects the community we serve.
Increasing representation of colleagues from Black, Asian and
Minority Ethnic backgrounds remains challenging, but we are
focused on accelerating progress. At the end of 2024, 12.6 per cent
of senior manager positions were held by Black, Asian or Minority
Ethnic colleagues, and 1.8 per cent held by Black heritage colleagues.
We continue to be guided by the principles of our 2020 Race Action
Plan, which focuses on driving cultural change, improving
recruitment and progression within the Group, and actively
supporting Black heritage communities across the UK.
As we move into the next chapter, our new ambitions for 2030
reflect the fluid nature of both our transformation and our evolving
society. Grounded in census and industry benchmarking, we are
moving to ranging goals between 3.5 per cent and 4 per cent for
Black heritage and 19 per cent and 22 per cent for Black, Asian and
Minority Ethnic representation in executive2 roles.
Disability and neurodiversity
In April 2023, we set a public goal to double the representation of
senior management colleagues3 with disabilities to 12 per cent by
2025. Alongside this goal we committed to improve the working
environment and experience for our colleagues with disabilities,
including making our recruitment processes more accessible
and inclusive; supporting career development; improving the
accessibility of our workspaces and technology; upskilling colleagues
to reduce stigma; and taking work beyond our own organisation to
champion the disability community.
You can read more on the progress we have made as part of our
Blueprint for Disability and Neuro-inclusion
Blueprint for disability
and neuro-inclusion
. In addition in 2024, we launched a publicly
available
disability and neurodiversity training
which any
individual, business owner, or organisation can access.
As of the end of 2024, 16.1 per cent of our senior management
colleagues shared with us that they had a disability, meaning we’ve
exceeded our original target earlier than anticipated. Since launching
our goal, we’ve seen a significant uplift in the number of colleagues
sharing their disability data, rising from 24.7 per cent in March 2023 to
60.5 per cent at the end of 2024. Our aspiration is for 80 per cent of
UK colleagues to have shared their data with us by the end of 2025.
Sexual orientation and gender identity
We continue to focus on building an inclusive and open working
environment for our LGBTQ+ colleagues. Our LGBTQ+ colleague
network, Rainbow, continues to play a pivotal role in our approach
to supporting our colleagues. In 2024, we introduced comprehensive
guidance to support colleagues who transition or change their
gender at work. This guidance was developed in collaboration
with colleagues from our Rainbow network, internal experts, legal
advisors and external specialists. It aims to assist both colleagues
and their line managers, enhancing support for individuals on their
journey and improving line managers’ understanding of the
complexities involved in transitioning or changing gender identity.
Gender
We are committed to leading the way in gender equality. Our focus
is on enhancing the talent pipeline to achieve a gender balance,
championing gender equality for all, and promoting allyship and
inclusive leadership.
Our commitment to gender balance is reflected in the steady
progress we have made with 40.4 per cent of senior3 roles held by
women at the end of 2024. This is against an ambition we set
ourselves in 2020 to achieve 50 per cent representation of women
in senior roles by 2025.
Our dedication to gender diversity remains steadfast and in 2024
we refreshed our overall approach, moving to new ambitions that
better align to our strategic goals and accelerate meaningful
diversity in our leadership team from 2025.
We have piloted an enhanced Employee Assistance Programme
(EAP) specifically for our LGBTQ+ colleagues and allies. This initiative
was launched in response to feedback indicating that the existing
EAP could better address the unique challenges faced by our
LGBTQ+ colleagues.
1
Executive roles include Grade X colleagues only, subject to local laws and regulations.
2
Executive roles include UK based Grade X colleagues only.
3
Senior managers: Grades F, G and Executive.
Lloyds Banking Group plc Annual Report and Accounts 2024
31
2024 progress and performance on diversity, equity and inclusion metrics
Our colleagues continued
Number
2024
%
2024
%
2023
Gender1
Board members
Men
5
50.0
54.5
Women
5
50.0
45.5
Senior positions on the Board2
Men
3
75.0
75.0
Women
1
25.0
25.0
GEC
Men
7
53.8
53.3
Women
6
46.2
46.7
GEC and GEC direct reports
Men
71
54.6
53.8
Women
59
45.4
46.2
Senior managers
Men
4,691
59.6
59.9
Women
3,184
40.4
40.1
All colleagues
Men
30,090
45.2
43.7
Women
36,397
54.8
56.3
Ethnicity1
Board members
White British or other White
8
80.0
81.8
Asian heritage
1
10.0
9.1
Mixed/multiple ethnic groups
1
10.0
9.1
Senior positions on the Board2
White British or other White
4
100.0
100.0
GEC
White British or other White
11
84.6
86.7
Asian heritage
2
15.4
13.3
Colleague
Senior managers of Black, Asian
and Minority Ethnic heritage
950
12.6
11.3
Senior managers of Black
heritage
138
1.8
1.7
All colleagues of Black, Asian and
Minority Ethnic heritage
10,735
16.9
15.3
Disability
Colleagues who disclose that they have a disability
11,895
18.7
12.2
Senior managers who disclose that they have a disability
1,281
16.1
12.4
Sexual orientation
and gender identity
Colleagues who disclose their sexual orientation
49,682
77.8
72.9
Colleagues who disclose that they are LGBTQ+
2,569
4.0
3.6
Colleagues who disclose their gender identity
44,644
69.9
60.7
1
Data is collated and reported in compliance with the provisions of section 414C(8)(c)
Companies Act 2006. For Listing rule UKLR 6.6.6R (9) and (10) please see further
information on our Board diversity and executive management on page 136.
2
Senior positions on the Board refer to the roles of the Chief Executive Officer,
Chief Financial Officer, Senior Independent Director and Chair of the Board.
Indicator is subject to Limited ISAE 3000 (revised) assurance by Deloitte LLP for
the 2024 Sustainability Reporting. Deloitte’s 2024 assurance statement and the
sustainability metrics basis of reporting 2024 are available online at sustainability
download.
Methodology and definitions:
•
Data is sourced from the HR system (Workday) containing all permanent
colleague details
•
All data as at 31 December 2024
•
All diversity information for ethnicity, disability, sexual orientation and gender identity is
based on voluntary self-declaration by colleagues. Our systems do not record diversity
data of colleagues who have not declared this information and is for UK payroll only
•
Gender data includes international, those on parental/maternity leave, absent without
leave and long-term sick and excludes contractors, temporary and agency staff
•
LGBTQ+ includes Asexual / Ace Spectrum, Bisexual / Bi, Gay Man, Lesbian / Gay Woman,
Pansexual, Other Sexual Orientation and includes Trans*
•
The Group Executive Committee (GEC) assists the Group Chief Executive in strategic,
cross-business or Group-wide matters and inputs to the Board. GEC includes the Group
Chief Executive and excludes colleagues who report to a member or attendee of
the GEC, including administrative or executive support roles (personal assistant,
executive assistant)
•
GEC and GEC direct reports includes the Group Chief Executive, the Group Chief
Financial Officer and colleagues who report to them or to any other member or
attendee of the GEC, excluding administrative or executive support roles (personal
assistant, executive assistant)
•
Senior managers: Grades F, G and Executive (Executive being grades above G)
•
A colleague is an individual who is paid via the Group’s payroll and employed on a
permanent or fixed-term contract (employed for a limited period). Includes parental
leavers and internationals (UK includes Guernsey, Isle of Man, Jersey and Gibraltar).
Excludes leavers, Group non-executive directors, contractors, temps and agency staff
•
Diversity calculations are based on headcount, not full-time employee value
•
Ethnicity data excludes non-UK colleagues
Lloyds Banking Group plc Annual Report and Accounts 2024
32
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Risk overview
Evolving our risk
and control capabilities
The Group’s approach to risk
Risk management is integral to our business model and strategy,
taking advantage of appropriate opportunities and ensuring
sustainable growth for the Group. A strong risk management culture
is crucial to keep the Group, our colleagues and our customers safe
and secure from existing and emerging risks.
The enterprise risk management framework (ERMF) is the
foundation for the delivery of effective and consistent risk control
across the whole Group, and is regularly updated to ensure it
remains in line with regulatory expectations, corporate governance
and industry good practice. The ERMF enables proactive
identification, active management and monitoring of the Group’s
risks, and enables a consistent approach across the Group’s entities
and sub-groups.
Enhancements to the ERMF have been introduced during 2024 to
further define the Group’s proportionate and materiality-based
approach to risk management.
During 2024, the Group reviewed its three lines of defence model to
provide greater clarity to roles and responsibilities and further
strengthen the Group’s risk management capabilities.
Activity to deliver further improvements to the ERMF and its
supporting risk management methodologies will continue into 2025.
Further information on the changes can be found on page 138.
Risk profile and performance in 2024
The Group is committed to maintaining support for its customers
during continued economic uncertainties in both global and
domestic markets.
The Group’s credit performance improved in the year. The Group’s
loan portfolio continues to be well positioned and is closely
monitored to identify signs of stress.
Potential impacts to customers, shareholders and the Group’s risk
and control profile following the Court of Appeal decision on motor
finance commissions continue to be closely monitored and assessed.
As part of the Group’s strategy, there will be continued investment
in technology and infrastructure. The Group’s operational risks
continue to be a key area of focus, particularly relating to
information, cyber and physical security risk and supply chain
management.
The management of financial crime risks and consumer fraud
remains a key priority for the Group. The economic crime prevention
strategy has been reviewed, with funding allocated to deliver
improved systems and controls.
Model risk and the use of artificial intelligence are also areas of
significant internal and external focus.
The Risk overview provides a summary of the Group’s principal risk
performance and current emerging and topical risks.
01
Role of the Board
and senior
management
•
•
•
The Board and senior management are responsible for the approval of the ERMF,
together with Group-wide principles and policies
The Board delegates executive authorities to ensure there is effective oversight
of risk management
More information on the Board’s responsibilities can be found on page 91
02
Risk culture and
the customer
•
The Group’s Code of Ethics and Responsibility helps foster the appropriate culture, which ensures
performance, risk and reward are aligned and good customer outcomes are consistently delivered
03
Risk appetite
•
•
Risk appetite is approved by the Board annually and is defined as the type and aggregate level of
risk that the Group is willing to take or accept in pursuit of its strategic aims and business plans
Board-level risk appetite metrics are augmented further by lower-level measures to facilitate the
management of Board risk appetite
04
Risk and control
self-assessment
•
•
The Group adopts a continuous risk management approach from identifying the risks through risk
and control self-assessment, and managing the risks through to producing appropriate, accurate
and focused risk reporting
Further details regarding the Group’s risk and control cycle can be found on page 141, with a
summary of the changes to principal risk categories on page 138
05
Risk governance
•
•
The governance framework supports a consistent approach to enterprise-wide behaviour and
decision making
Senior executives are supported by a committee-based structure, which is designed to ensure
open challenge and enable effective Board engagement and decision making
06
Three lines
of defence
•
•
The three lines of defence model defines the responsibilities and accountabilities for risk
management, with effective independent oversight and assurance
Enhancements have been made to the model during 2024. The Risk management section on
page 137 provides further information
Enterprise risk management framework
Lloyds Banking Group plc Annual Report and Accounts 2024
33
Principal risks
The principal risks outlined in this section are used
to monitor and report the risk exposures posing
the greatest potential impact to the Group.
All principal risks are Board-approved enterprise-wide risk
categories which are reported to the Board Risk Committee
and the Board regularly.
Risk overview continued
The Group has undertaken a detailed review of its risk categories
during 2024 and implemented an events-based risk management
framework. This has resulted in a reclassification and reduction
in the number of principal risk types, and the simplification of level
two risk categories. Further information on these changes can be
found on page 138.
The risk management section on pages 137 to 198 provides a
detailed review of these risks, including definitions and how they are
identified, managed, mitigated and monitored.
The Board Risk Committee report on pages 104 to 108 outlines
its purpose, structure and responsibilities in addition to activities
during the year.
Key
Risk trends
Stable
Improving
Elevated
Link to strategy
Grow
Focus
Change
Changes to risk categories since 2023
New principal risk
Unchanged risk
Reclassified risk
Capital risk
Risk performance and key developments in 2024
The Group continued to maintain its strong capital
position in 2024 with a CET1 capital ratio of
13.5 per cent on a pro forma basis (2023: 13.7 per cent
pro forma). This remains ahead of minimum capital
requirements and in excess of the Group’s ongoing
target of c.13.0 per cent, which includes a management
buffer of around 1 per cent. Banking business profits for
the year and the receipt of dividends from the Insurance
business, partially offset by risk-weighted asset (RWA)
increases and other movements, has enabled strong
shareholder distributions.
Downside risks arising from economic and regulatory
challenges, including in relation to Retail secured CRD IV
RWA increases, along with the potential impact of the
Court of Appeal decision on motor finance commission
arrangements are being closely monitored.
Key mitigating actions
Capital management framework is in place, which
includes the setting of capital risk appetite, capital
planning and stress testing activities
Regular refresh and monitoring of a suite of early
warning indicators and maintenance of a Capital
Contingency Framework, designed to identify and
act on emerging capital concerns at an early stage
Derisking the business through prudent underwriting
standards and continual portfolio management, and
enhancing capital efficiency through optimisation
initiatives including net present value positive
securitisation activity
•
•
•
Risk trends
Stable
Link to strategy
See pages 22 to 23
Changes since 2023
Unchanged risk
Climate risk
Risk performance and key developments in 2024
The Group is continuing to develop and embed its
capabilities for measuring and managing key climate
risks within its risk management approach, including
cross-cutting impacts on other principal risks.
The Group has monitored its progress against net zero
ambitions, however the external landscape presents
increasing challenges, both in relation to the policy
changes required to support the transition to net zero,
as well as increasing regulatory expectations.
Key mitigating actions
Progress against our net zero ambitions and targets
monitored through the Group Net Zero Committee
Enhanced transition risk assessments across
commercial lending, expanding into key net zero
sectors, such as commercial and residential real
estate and agriculture
Incorporating quantification of climate impact
into the calculation of expected credit losses
Horizon scanning and tracking regulatory
compliance requ irements
•
•
•
•
Risk trends
Stable
Link to strategy
See pages 17 to 25
Changes since 2023
Unchanged risk
Lloyds Banking Group plc Annual Report and Accounts 2024
34
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Compliance risk
Risk performance and key developments in 2024
The compliance risk profile has remained stable in 2024,
however it continues to be closely monitored given the
pace of regulatory and legislative change and an
increasing volume of regulatory data requests.
In 2024, the Group dedicated investment to enhance
coverage of our regulatory and legal obligations to
ensure risk owners obtain prompt access to skilled
compliance risk specialists.
This risk was previously named regulatory and legal risk.
Key mitigating actions
•
Policies and procedures setting out clear
requirements and key controls that apply across
the business, which are aligned to the Group’s
risk appetite
• The identification, assessment and implementation
of regulatory and legal requirements by risk
specialists, with the involvement of legal colleagues
as required
• The establishment of local controls, processes,
procedures and resources to ensure appropriate
governance and compliance by business units
Risk trends
Risk performance and key developments in 2024
Conduct risk has been elevated in 2024, with several
areas of ongoing focus driven by legal decisions,
regulatory changes and geopolitical influences.
The Group continues to monitor impacts to customers
and its risk and control profile, liaising closely with
regulatory bodies regarding the review into motor
finance commission arrangements.
The Group continues to enhance its control
environment, with mitigating actions and controls in
place to deliver good outcomes for customers, protect
market integrity, prevent colleague misconduct and
ensure effective management of concerns raised
through whistleblowing.
Key mitigating actions
•
Robust policies in place to support good
customer outcomes, with ongoing focus on utilising
root cause insights, to support the management and
mitigation of complaint volumes
• Active engagement with regulatory bodies and
key stakeholders to ensure that the Group’s
strategic conduct focus continues to meet evolving
stakeholder expectations
• Continued focus on strengthening policies, controls
and reporting capabilities to demonstrate good
customer outcomes
Risk performance and key developments in 2024
Asset quality remains strong with improved credit
performance in the year. In UK mortgages and
unsecured portfolios, reductions in new to arrears
and flows to default have been observed in 2024.
Securitisations in primarily legacy Retail mortgages
during 2024 will help mitigate credit risks. The Group’s
commercial portfolio remains broadly stable and
resilient. Underlying impairment charge of £433 million,
increasing from a charge of £308 million in 2023, which
benefitted from a significant write-back following
the full repayment of debt from a single name client.
The Group’s expected credit loss allowances
have decreased in the year to £3,651 million
(2023: £4,337 million).
Key mitigating actions
•
Extensive and thorough credit processes, strategies
and controls to ensure effective risk identification,
management and oversight
•
Significant monitoring in place, including early
warning indicators
•
Selective credit tightening reflective of forecast
changes in the macroeconomic environment,
including updates to affordability lending controls
for forward-looking costs
Stable
Link to strategy
See pages 22 to 23
Changes since 2023
Reclassified risk
Risk trends
Elevated
Link to strategy
See pages 17 to 23
Changes since 2023
Reclassified risk
Risk trends
Improving
Link to strategy
See pages 17 to 23
Changes since 2023
Unchanged risk
Conduct risk
Credit risk
Lloyds Banking Group plc Annual Report and Accounts 2024
35
Risk overview continued
Economic crime risk
Risk performance and key developments in 2024
Economic crime has been promoted to a principal risk
during 2024. This is a result of increased inherent risks
seen across the industry, to which the Group is also
exposed, driven by the continued geopolitical instability
and ever-evolving economic crime threat landscape.
An effective framework is in place to manage risks
associated to bribery and corruption, fraud, money
laundering and sanctions, with business units continuing
to deliver action plans to strengthen the control
environment, lower residual risk and respond to changes
in regulatory expectations.
Key mitigating actions
•
Robust economic crime policy, standard
and framework
•
Implementation of the new Group-wide economic
crime prevention strategy
• Continued enhancements of our industry-leading
fraud detection capabilities to respond to
evolving threats
Risk trends
Stable
Link to strategy
See pages 22 to 23
Changes since 2023
New principal risk
Risk performance and key developments in 2024
Insurance underwriting risk remains stable. Life and
Pensions present value of new business premium
increased to £18.2 billion (2023: £17.4 billion), driven by
strong performance in the individual annuities and
workplace business, partly offset by the agreed sale
(subject to High Court approval) of the in-force bulk
annuity portfolio.
General Insurance total gross written premium
increased to £737 million (2023: £579 million), due to
strong trading.
Key mitigating actions
•
Significant reinsurance of mortality, morbidity and
General Insurance weather risk
• Robust processes for underwriting, reinsurance,
claims management, pricing, product design and
product management
• Management through diversification and pooling
of risks
Risk trends
Stable
Link to strategy
See pages 17 to 23
Changes since 2023
Unchanged risk
Risk performance and key developments in 2024
The Group maintained its strong liquidity and funding
position with a loan to deposit ratio of 95 per cent
(2023: 95 per cent). The Group’s liquid assets continue
to exceed the regulatory minimum and internal risk
appetite, with a monthly simple average over the
previous 12-months’ liquidity coverage ratio (LCR) of
146 per cent (2023: 142 per cent). The Group maintains
access to diverse sources and tenors of funding.
This risk was previously named liquidity and funding risk.
Key mitigating actions
•
Management and monitoring of liquidity risks
and ensuring that management systems
and arrangements are adequate with regard
to the internal risk appetite, Group strategy
and regulatory requirements
• Significant customer deposit base, driven by inflows
to trusted brands
•
Participation in term issuance programmes
Risk trends
Stable
Link to strategy
See pages 22 to 23
Changes since 2023
Reclassified risk
Insurance underwriting risk
Liquidity risk
Lloyds Banking Group plc Annual Report and Accounts 2024
36
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
•
•
•
•
•
•
Market risk
Risk performance and key developments in 2024
Market conditions in 2024 have stabilised. The Group
remains well hedged, ensuring near-term interest rate
exposure is appropriately managed. The Group’s
structural hedge has reduced to £242 billion in 2024
(2023: £247 billion) mainly due to the changing mix of
customer deposits.
The Group completed the triennial valuation of its main
defined benefit pension schemes as at 31 December
2022. There will be no further deficit contributions
for this triennial period (to 31 December 2025).
The IAS 19 accounting surplus reduced to £2.9 billion
(2023: £3.5 billion).
Key mitigating actions
•
Structural hedge programmes to stabilise earnings
•
Close monitoring of market risks and where
appropriate, undertaking of asset and liability
matching and hedging
•
Monitoring of the credit allocation in the defined
benefit pension schemes, as well as the hedges in
place against adverse movements in nominal rates,
inflation and longevity
Risk trends
Stable
Link to strategy
See pages 22 to 23
Changes since 2023
Unchanged risk
Model risk
Risk performance and key developments in 2024
Model risk has been stable in 2024, despite changes to
the regulatory environment, such as implementation of
the PRA’s model risk management principles for banks
(SS1/23) and continued regulatory scrutiny of model risk
across the industry.
Improvements to the Group’s model risk operating
framework have been made during 2024, focusing on
developing CRD IV models, strengthening capabilities
of our people through effective training and resources,
and continued proactive regulatory engagement.
The control environment for model risk continues to
be enhanced to meet both internal and regulatory
requirements, as well as industry-wide challenges.
Investment in model risk management remains a priority
for the Group to further improve risk management and
act as an enabler to drive strategic developments of AI
and machine learning in a safe way.
Key mitigating actions
Enhancement of the model risk management
framework for managing and mitigating model risk
within the Group
Establishment of an AI assurance framework
Implementation of new model risk management
policy and supporting standards to further increase
ownership and accountability
Initiation of model risk training for key stakeholders,
including Board and GEC members
Development of the process for the identification of
quantitative methods, including models, and cascade
across the Group
Risk trends
Risk performance and key developments in 2024
Operational risk has been stable in 2024, with key risks
relating to data and privacy, supplier risk, information,
cyber and physical security risk. Operational loss
event volumes are historically low, with the majority
relating to transaction processing, IT systems and
change execution.
Whilst there has been continued safe delivery of change,
some IT outages in the supply chain have occurred. No
material security breaches took place in 2024, though
some events at third-party suppliers reinforces the need
for vigilance.
Balancing people-related transformation and other
strategic initiatives remains key to the success of the
Group’s transformation activity, with ongoing focus on
evolving the operational risk framework and ensuring the
appropriate resource and capabilities are in place.
Key mitigating actions
• Deployment of a range of risk management
strategies, such as avoidance, mitigation, transfer
(including insurance) and acceptance
• Three-year control enhancement plans reviewed
annually by Board Risk Committee to monitor
progress against commitments
•
The Group continues to invest strategically to
mitigate operational risks, strengthen controls
and to meet future operational resilience
regulatory requirements
• Following IT outages, post-incident reviews
undertaken to assess future mitigating actions
for the Group and its suppliers
Enhancement of skills, capabilities and reporting
to strengthen supplier management practices
Stable
Link to strategy
See pages 22 to 25
Changes since 2023
Reclassified risk
Operational risk
Risk trends
Stable
Link to strategy
See pages 22 to 25
Changes since 2023
Reclassified risk
Lloyds Banking Group plc Annual Report and Accounts 2024
37
Emerging and topical risks
During 2024, the Group has continued to evolve and strengthen
its methodology to identify, assess and prioritise emerging risks.
Horizon scanning remains a key element in understanding and
adapting to the changing risk landscape.
In order to better reflect the persistent nature of these risks and
recognise the potential for changing impacts on the Group and its
customers, the Group has shifted its focus from horizon risks to
topical risks.
The Group has also refined its emerging and topical risk themes in
2024, enabling a deeper understanding of the underlying drivers and
stronger management focus on the most pertinent emerging risks.
An overview of these themes is shown below, with more information
on the changes provided on page 143.
Emerging and topical risks remain an area of ongoing focus for the
Group’s Board and senior management. During the year, a series of
deep dives on the emerging risk themes reported at year end 2023
have taken place at key executive and board-level committees,
including the Board Risk Committee, with actions assigned to
monitor more closely their future manifestation, potential business
growth and opportunities to reduce risk.
The emerging risk themes were also considered as part of the annual
strategic planning cycle. Geopolitical risks, and how these may
generate second order impacts for the Group, have been a focus.
Many emerging and topical risk topics are reviewed on a recurring
basis, alongside ongoing activity addressing their impacts. However,
it is acknowledged that the nature of the emerging risks will evolve
and could drive future trends in the long term, which the Group will
need to prepare for.
Looking ahead to 2025, the Group will continue to develop its
strategy to proactively identify and monitor internal and external
trends and consider effective measures to best protect its
customers, colleagues and shareholders.
For further details on how the Group is managing, monitoring and
mitigating key emerging and topical risks, see page 143, with a
summary of key matters discussed at Board Risk Committee on
pages 104 to 108.
•
•
•
•
•
Risk overview continued
Emerging and topical risk themes
01
Consumer expectations
and market dynamics
Consumer expectations: Customers are
increasingly seeking personalised, transparent
and digitally enhanced experiences, coupled
with reduced loyalty, which elevates the risk of
failing to meet expectations and delivering
poor outcomes. The role social media is
increasingly playing in influencing consumers’
finance decisions further increases this.
Consideration also needs to be made to a large
section of society that are not digitally literate
that are potentially being left behind and
balancing the cost of enhancing the digital
services and supporting customers that wish to
be served in a traditional way.
Market dynamics: The rapid proliferation of
new, often loss-leading financial products in
the market intensifies competition. Consumers
may be attracted in the short term. This can
create long-term sustainability challenges for
providers and increase the risk of mis-selling or
unsuitable offerings.
02
Evolution of operating model
Failure to adequately prepare for disruption of
service, third or fourth party supplier failure,
technology outages, severe data loss, whilst
evolving the structure and skillset of a dynamic
workforce in line with the Group’s strategy,
alongside maintaining pace with the industry
and delivering strong customer outcomes.
03
Evolution of technology,
AI and
cybercrime
Failure to keep pace with, or choosing not to
participate in, technological advancements
including AI, migration to cloud platform and
blockchain solutions whilst balancing the
competing requirements to:
•
Maximise customer opportunities
through adoption
•
Maintain trust and confidence in customer
data privacy
•
Protect our customers from fraud, cyber
and economic crime
•
Ensure transparency on data ethics
practices
•
Adhere to evolving data protection
regulations
•
Prepare for potential business model
disruption caused by adoption
of the technology
04
Global economic and
geopolitical environment
Inability to navigate changing international
regulations, including sanction and trade
compliance, economic fragmentation,
deglobalisation, global health shifts and
geopolitical events that may impact
operations, customers and suppliers.
05
Regulatory agendas and expectations
The impact of:
Potential political demands for tighter
consumer protections
Market interventions, leading to sudden
regulatory shifts
Evolving expectations on regulatory bodies
and impact on financial services
New entrants in the market benefitting
from regulatory arbitrage
Environmental, social and governance
expectations associated with its operations
and investments
06
UK economic and
political environment
Failure to anticipate the longer-term impacts
of a weak UK economy, quantitative
tightening, change in government and
resulting policy, regulatory shifts and the
consequences of the UK becoming less
attractive to external investors.
01
02
05
03
04
Emerging and
topical risks
Principal risks
Lloyds
06
Banking Group plc Annual Report and Accounts 2024
38
•
•
•
•
•
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Viability statement and going concern
Viability statement
The directors have an obligation under the UK Corporate
Governance Code to state whether they believe the Company
and the Group will be able to continue in operation and meet their
liabilities as they fall due over a specified period determined by the
directors, taking account of the current position and the principal
risks of the Company and the Group.
In making this assessment, the directors have considered a wide
range of information, including:
•
The principal risks and emerging and topical risks which could
impact the performance of the Group
•
The 2022 Strategic Review which sets out the Group’s customer
and business strategy for the period from 2022 to 2026
•
The Group’s operating plan which comprises detailed financial,
capital and funding projections together with an assessment
of relevant risk factors for the period from 2025 to 2027 inclusive
Group, legal entities and divisional operating plans are produced and
subject to rigorous stress testing on an annual basis. The planning
process takes account of the Group’s business objectives, the risks
taken to seek to meet those objectives and the controls in place to
mitigate those risks to ensure they remain within the Group’s overall
risk appetite.
The Group’s annual planning process comprises the following
key stages:
•
The Board reviews and agrees the Group’s strategy, risk appetite
and objectives in the context of the operating environment and
external market commitments
•
The divisional teams develop their operating plans, ensuring
that they are in line with the Group’s strategy and risk appetite
•
The financial projections and underlying assumptions in respect
of expected market and business changes, emerging and future
expected legal, accounting and regulatory changes, are subject
to rigorous review and challenge from both divisional and
Group executives
•
In addition, the Board obtains independent assurance from the
Risk function over the alignment of the plan with Group strategy
and the Board’s risk appetite. This assessment performed by the
Risk function also identifies the key risks to delivery of the
Group’s operating plan
•
The planning process is also underpinned by a robust capital
and funding stress testing framework. This framework allows
the Group to assess compliance of the operating plan with
the Group’s risk appetite
The scenarios used for stress testing are designed to consider a
range of plausible risks, vulnerabilities and severities, and take
account of the availability and likely effectiveness of mitigating
actions that could be taken by management to avoid or reduce the
impact or occurrence of the underlying risks. The Group conducts
internal stress testing and completes the PRA regulatory exercises.
In 2024, stress tests have considered a range of economic scenarios
covering multiple outlooks and economic paths, including differing
downward interest rates paths and a range of severity in other key
economic factors. Group stress results are segmented to provide
insight, inform risk appetite, and allow for development of
mitigating actions. In considering the likely effectiveness of such
actions, the conclusions of the Board’s regular monitoring and
review of risk and internal control systems, as discussed on pages
137 to 198, is taken into account. Further information on stress
testing and reverse stress testing is provided on page 142.
•
Stress testing outputs are presented to the Board Risk
Committee for review and challenge. All regulatory exercises
are approved by the Board
•
The final operating plan, Risk function assessment and the
results of the stress testing are presented to the Board for
approval. Once approved, the operating plan drives detailed
divisional and Group targets for the following year
The directors have specifically assessed the prospects of the
Company and the Group over the current plan period. The Board
considers that a three-year period continues to present a reasonable
degree of confidence over expected events and macroeconomic
assumptions, while still providing an appropriate longer-term
outlook. Information relevant to the assessment can be found in the
following sections of the annual report and accounts:
•
The Group’s principal activities, business and operating models
and strategic direction are described in the strategic report on
pages 1 to 44
•
Emerging and topical risks are disclosed on page 143
•
The principal risks, including the Group’s objectives, policies and
processes for managing credit, capital, liquidity and funding, are
provided in the risk management section on pages 138 to 198
•
The Group’s approach to stress testing and reverse stress testing,
including both regulatory and internal stresses, is described on
page 142
Based upon this assessment, the directors have a reasonable
expectation that the Company and the Group will be able to
continue in operation and meet its liabilities as they fall due
over the next three years to 31 December 2027.
Going concern
The going concern of the Company and the Group is dependent
on successfully funding their respective balance sheets and
maintaining adequate levels of capital.
In order to satisfy themselves that the Company and the Group
have adequate resources to continue to operate for the
foreseeable future, the directors have reviewed the Group’s
operating plan and its funding and capital positions, including
a consideration of the implications of climate change.
The directors have also taken into account the impact of further
stress scenarios as well as a number of other key dependencies
which are set out in the risk management section under principal
risks and uncertainties: funding and liquidity on pages 183 to 189
and capital position on pages 144 to 150. Additionally, the
directors have considered the capital and funding projections of
the Company.
Accordingly, the directors conclude that the Company and
the Group have adequate resources to continue in operational
existence for a period of at least 12 months from the date of
the approval of the financial statements and therefore it is
appropriate to continue to adopt the going concern basis in
preparing the accounts.
Lloyds Banking Group plc Annual Report and Accounts 2024
39
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Section 172(1) statement
Effective stakeholder
engagement is fundamental
to good governance
Stakeholder engagement takes place at all levels within the Group
and is an important part of how we are delivering on our purpose
of Helping Britain Prosper.
The Board recognises that engaging with its stakeholders is key to
achieving the strategy and long-term objectives of Lloyds Banking
Group plc (the Company). Managing and understanding their
interests forms a key part of the Board s ongoing activities and
training and the Board delegates day to day engagement with
stakeholders to senior management as part of running the business.
The Board considers its stakeholders when making decisions. To gain
an understanding of their perspectives, the Board receives feedback
from stakeholders through engagement both inside and outside of
the board room. Senior management supports Board decision
making by addressing stakeholder implications in proposals
submitted to the Board for consideration and routinely provides
the Board with details of stakeholder interactions.
Key Board discussions and decisions
Stakeholder and strategy key
Stakeholders
Customers and clients
Shareholders
Regulators and government
Colleagues
Communities and environment
Suppliers
Link to strategy
Grow
Focus
Change
Section 172(1)
statement
This section (pages 40 to 41) is our Section 172(1) statement
for the purposes of the Companies Act 2006 (the Act),
describing how the directors have had regard to the matters
set out in section 172(1) (a) to (f) of the Act when performing
their duty to promote the success of the Company under
section 172. Further detail on key stakeholder interaction is
also contained within the directors’ report on pages 86 to 87.
The directors remain mindful in all their deliberations of
the long-term consequences of their decisions, as well as the
importance of the Group maintaining a reputation for high
standards of business conduct and the Board engaging with,
and taking account of the views of, key stakeholders.
The three key Board decisions outlined in this section
(Customer-focused strategy, Consumer Duty and Operational
resilience) illustrate how the Board is engaged in key decisions.
Customer-
focused strategy
Stakeholder impact
Link to strategy
Board considerations:
The Board has an ongoing commitment to understanding and
addressing customer needs which is central to achieving the Group s
strategic ambitions.
Board initiatives:
•
In February, the Board approved targets for an enhanced Group
Customer Dashboard (GCD) which reflects the Group s strategy,
consists of a set of measures to evaluate and monitor customer
experience and includes increasing focus on the customer view of
the Group, customer experience and customer insights. The
Board supported steps taken by the executive to simplify and
personalise customer journeys including in relation to its digital
transformation and noted enhanced targets for Insurance,
Pensions & Investments (IP&I) including a commitment to
increase digitisation across customer journeys
In May, the Board considered the Group ’s focus to deepen
customer relationships both across the Group and within IP&I
and the progress made on bancassurance
•
Future focus:
The Board will continue to put the customer at the heart of its
decision making and remain focused on how the Group can best
support its customers and enhance the customer experience.
Lloyds Banking Group plc Annual Report and Accounts 2024
40
Section 172(1) statement
Consumer
Duty
Board considerations:
In 2024 the Board and its Responsible Business Committee
considered the Group’s progressive approach to implementation
of the Financial Conduct Authority’s (FCA) Consumer Duty (the
Duty) requirements to deliver good outcomes for customers in
line with the Group’s customer-centric strategy.
Board initiatives:
•
The Board and its Responsible Business Committee received
updates during 2024 regarding the Group’s approach to the
second implementation period regarding closed products and
services and on the transition to embedding the Duty further
into the Group’s culture
•
In June, the Board approved an assessment that the Group is
delivering good outcomes for its customers consistent with the
Duty as well as a tripartite approach to oversight of the Duty
as between the Board, its Board Risk Committee and its
Responsible Business Committee
Future focus:
The Board is aware that the Group’s approach to Consumer Duty
compliance will evolve over time and the Board will continue to
be updated on progress in 2025. Regular engagement with
customers will continue to be a priority for the Board.
Stakeholder impact
Link to strategy
Operational
resilience
Board considerations:
The Board considers operational resilience and sound risk
management to be fundamental for customers and to the strength
of the Group and its long-term success.
Board initiatives:
•
•
•
In 2024 the Board approved significant investment in the Group’s
operational resilience including new investment relating to
people, processes, data and technology
In March, deep dives on operational resilience were undertaken
by the IT and Cyber Advisory Forum, the Board Risk Committee
and the Board and the Boards of Lloyds Bank plc and Bank of
Scotland plc approved the Ring-Fenced Bank Operational
Resilience Self-Assessment
In September, the Board considered a review of the Group’s
Board Risk Appetite Metrics (BRAMs) relating to operational
resilience and approved the inclusion of 10 operational resilience
BRAMs in the Q1 2025 BRAMs refresh
Future focus:
The Board will continue to monitor operational resilience
capabilities in 2025 and will maintain focus on response, recovery
and remediation plans until 2027.
Stakeholder impact
Link to strategy
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
’
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Lloyds Banking Group plc Annual Report and Accounts 2024
41
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Task Force on Climate-related Financial Disclosures (TCFD)
Creating a sustainable and inclusive future is core to our purpose
of Helping Britain Prosper. We report on sustainability matters
throughout this annual report (ARA), in particular in the following
sections: (i) Strategic report, pages 30 to 32 and 42 to 44;
(ii) Sustainability review on pages 45 to 60; (iii) Risk management
on pages 150 to 153; (iv) Governance pages 88 to 89; and (v) in the
supplementary sustainability report.
We comply with the UKLR 6.6.6R(8) and Sections 414CA and 414CB
of the UK Companies Act 2006. Set out in the following table are
our disclosures which are presented consistent with the 2021 TCFD
recommendations and recommended disclosures across all four of
the TCFD pillars: strategy; governance; risk management; and
metrics and targets, requirements under Sections 414CA and 414CB
have been considered by cross-reference.
Additional detail on our progress against our metrics and targets
can be found in our
sustainability report 2024
. Our separate
supplement ensures we can provide a comprehensive response,
that is presented in a decision-useful manner for users of the reports.
We have referenced specific pages where additional detail and
technical content relevant to our TCFD disclosures can be found
in the table below.
In addition to the compliance below, in-scope entities within
our Insurance, Pensions and Investments business, which are
incorporated as part of Scottish Widows Group, are required to
report in compliance with FCA ESG Sourcebook (set out via FCA
PS21/24) reporting requirements for the period ending 31 December
2024. This additional compliance will be met through Entity and
Product level reporting to be published on the Scottish Widows
website in June 2025.
We will continue to assess and develop our disclosures against the
TCFD recommendations and recommended disclosures, considering
relevant TCFD guidance and materials along with new disclosure
requirements such as International Sustainability Standards Board:
IFRS S1 ‘General requirements’ IFRS S2 ‘Climate-related disclosures’.
TCFD and CFD cross -ref erence table
Recommendation
Summary of progress
Reference (ARA unless
specified otherwise)
Strategy
A. Describe the climate-related
risks and opportunities the
organisation has identified over
the short, medium and long
term. (Companies Act 2006 –
Sections 414CA and 414CB
2A (b) and (d))
Defined the key climate-related risks and opportunities across the Group and
identified the potential time horizons (aligned with Group financial planning)
over which they may arise
Pages 50 to 52
Identifying and assessing our principal risks allows us to understand where we have
the opportunities to deliver impact. With opportunities identified, assessed and
managed by functional-level and divisional teams
Pages 50 to 52
Disclosures made on the cross-cutting nature of climate risks and how this can
impact a broad range of principal risks
Pages 50 to 51
Pages 150 to 153
B. Describe the impact of
climate-related risks and
opportunities on the
organisation’s business, strategy
and financial planning.
(Companies Act 2006 –
Sections 414CA and 414CB
2A (e))
The Group’s financial statements consider the impact of climate-related risks on our
financial position and performance, including consideration of the impact on
expected credit losses in 2024
Page 150 to 151
Notes to financial
statements
Page 229 and 283
Continued to embed climate risk into our financial planning process with financed
emissions ambitions considered as part of the forecasting process
Page 60
Embedded monitoring of sector targets, as reported in our Group climate transition
plan, into the internal reporting process with the aim to support climate
considerations forming part of the Group’s regular decision making
Page 60
C. Describe the resilience of the
organisation’s strategy, taking
into consideration different
climate-related scenarios,
including a 2°C or lower
scenario. (Companies Act 2006
– Sections 414CA and 414CB
2A (f))
We have assessed the resilience of our lending and investment portfolio to climate
risk based on sector exposure
Page 53
We have used climate scenario analysis to assess the impact on expected credit loss
for climate-related physical and transition risk on our Retail and Commercial
Banking lending portfolio
Page 229
We have noted that our Commercial Banking lending exposure to sectors with
increased impacts from climate risk is relatively low
Page 53 and
150 to 151
Governance
A. Describe the Board’s oversight
of climate-related risks and
opportunities. (Companies Act
2006 – Sections 414CA and
414CB 2A (a))
Our governance structure provides clear oversight and ownership of the Group’s
environmental sustainability strategy and management of risks and opportunities at
the Board and executive levels
Pages 88 to 89
The Board received nine specific updates on climate-related matters in 2024,
including updates on our strategy, progress against targets and ambitions and
climate-related impacts on the four-year forecast
Page 88 to 89
B. D escribe management’s role in
assessing and managing
climate-related risks and
opportunities. (Companies Act
2006 – Sections 414CA and
414CB 2A (a))
The Group Net Zero Committee provides direction and oversight of the Group’s
environmental sustainability strategy including opportunities, supported by
divisional governance
Pages 88
The Group Risk Committee provides oversight of climate risk
Page 88
Key committee oversight in 2024 included external sector updates, evolving
regulatory environment and Group-wide framework to mitigate greenwashing risks
Page 89
Lloyds Banking Group plc Annual Report and Accounts 2024
42
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
-
TCFD and CFD cross reference table continued
Recommendation
Summary of progress
specified otherwise)
Reference (ARA unless
Risk management
A. Describe the organisation’s
processes for identifying and
assessing climate-related risks.
(Companies Act 2006 –
Sections 414CA and 414CB
2A (b)
•
The enterprise risk management framework supports the identification and
assessment of the Group’s material risks (including climate which has been identified
as a principal risk). Key climate-related risks have been identified at Group level
across four themes: net zero; greenwashing; disclosures; inbound physical and
transition risks
Page 34
Pages 150 to 153
•
The materiality of these risks has been assessed based on their potential impact on
the Group, with scenario analysis outputs used to inform this in key areas
B. D escribe the organisation’s
processes for managing climate
related risks. (Companies Act
2006 – Sections 414CA and
414CB 2A (b))
•
•
We have identified four key areas of climate risk: net zero, disclosures, greenwashing
and physical and transition risks; with management processes differing across the
risk types
We are continuing to embed consideration of climate risk within our existing risk
management processes to mitigate the cross-cutting impacts of climate risk
Pages 150 to 153
•
We have developed some initial controls for managing these risks, although we
expect to continue to enhance these as our understanding evolves
C. D escribe how processes for
identifying, assessing, and
managing climate-related risks
are integrated into the
organisation’s overall risk
management. (Companies Act
2006 – Sections 414CA and
414CB 2A (c))
•
Climate risk is embedded into our Enterprise Risk Management Framework, through
consideration of climate risk as its own principal risk, and integration into other
principal risks materially impacted
Pages 150 to 153
•
The Group climate risk policy provides an overarching framework for the
management of climate risks across the Group
Metrics and targets
A. Disclose the metrics used by
the organisation to assess
climate-related risks and
opportunities in line with its
strategy and risk management
process (Companies Act 2006
– Sections 414CA and 414CB
2A (h))
•
We monitor progress against our net zero ambitions and targets, including measures
related to our financed emissions, own operations emissions, supply chain emissions
and sustainable finance and investment. We also monitor our progress in relation to
our 10 NZBA sector targets
Pages 54 to 60
•
To support us to achieve our ambitions and targets sustainability measures form
part of the Group balanced scorecard and Long-Term Incentive Plan
Pages 121 and 131
Sustainability report
2024 page 140
TCFD supplemental guidance
•
Our exposure to sectors with increased climate risk has been analysed, and used to
set our bank emission ambition and Net Zero Banking Alliance (NZBA) sector targets
Sustainability report
2024 pages 80 to 81
B. D isclose Scope 1, Scope 2, and,
if appropriate, Scope 3
greenhouse gas (GHG)
emissions, and the related risks.
(Companies Act 2006 –
Sections 414CA and 414CB
2A (h))
•
We have disclosed our Scope 3 emissions for our supply chain and financed
emissions. We continue to develop our approach to calculating our Scope 3
emissions; in 2024 we have extended the scope of our disclosure to include
sovereign debt and facilitated emissions
Pages 54 to 59
Sustainability report
2024 pages 83 to 84
and 122
•
Our Scope 1 and 2 emissions for own operations have been reported in line with
Streamlined Energy Carbon Reporting requirements
Pages 59 to 60
TCFD supplemental guidance
•
We calculate our emissions in line with GHG Protocol as outlined within our basis of
GHG reporting
reporting, which includes details on our approach to all 15 categories of Scope 3
Sustainability metrics
basis of reporting 2024
pages 4 to 40
TCFD supplemental guidance
•
In June 2024 Scottish Widows published entity and product level TCFD reporting in
compliance with the FCA ESG Sourcebook (set out via FCA PS21/24). The next
annual reports will be published by June 2025
Scottish Widows fund
climate related
disclosure reports
C. D escribe the targets used by
the organisation to manage
climate-related risks and
opportunities and performance
against targets. (Companies
Act 2006 – Sections 414CA and
414CB 2A (g))
•
We have defined sustainable financing and investment targets for our core
business areas
Pages 56 to 57
•
We have set emissions ambitions across Own Operations, Supply Chain, Bank
Financed Emissions and Scottish Widows financed emissions. With most of the
ambitions supported by more detailed targets and pledges
Pages 54 to 60
•
Further details on additional metrics used for monitoring purposes can be found in
our risks and opportunities table
Pages 51 to 52
Lloyds Banking Group plc Annual Report and Accounts 2024
43
Non-financial and sustainability information statement
The Non-Financial Reporting requirements contained in Sections 414CA and 414CB of the Companies Act 2006 are addressed within this
section. The table below provides the information necessary to understand our Group’s development, performance and position and the
impact of our activity relating to environmental matters, our employees, social matters, our respect for human rights, and anti-corruption
and anti-bribery matters. We provide cross references to indicate in which part of the Group’s reporting the respective requirements
are embedded.
Statement
Information necessary to understand our Group
and its impact, policies, due diligence and outcomes
Reference to the
annual report and accounts
Non-financial and sustainability information reference table
Business model
Our business model
Pages 8 to 11
Our approach to sustainability materiality and value chain
Pages 48 to 49
Our Sustainability Strategy
Pages 48
Progress and performance based on key non-financial metrics
Pages 28 to 29 and 51 to 60
Principal risks
Risk overview including enterprise risk management framework
Pages 33 to 38
Climate risk
Pages 34 and 150 to 153
Economic crime risk
Pages 36 and 181
Operational risk
Pages 37 and 196 to 198
Conduct risk
Pages 35 and 154 to 155
Stakeholders
Stakeholder engagement
Pages 40 to 41 and 84 to 87
Further information on how we support our stakeholders is included within
the Code of ethics and responsibility
and internal colleague policies
including Colleague policy1 , Health and Safety policy1 and Speak up policy1
which are summarised in our sustainability report 2024
Environmental
sustainability
Transition to net zero and our progress on ambitions and targets
Pages 54 to 60
Identification, assessment and management of climate risk
Pages 150 to 153
Task Force on Climate-related Financial Disclosures (TCFD)
Pages 42 to 43
Climate-related financial disclosures (CFD)
Pages 42 to 43
Policies which support our approach to environmental sustainability include
our
sector statements
Social
sustainability
Social sustainability risk arises through operational, conduct and
credit risk with identified risks and opportunities disclosed along with
associated metrics
Pages 50 to 52
Core to our purpose, our sustainability strategy identified four social
sustainability focus areas, where we can make the biggest difference, while
creating opportunities for our future growth. Further detail is included in
the
Page 10, 30 to 31 and 46 to 49
sustainability report 2024
Anti-corruption
and bribery
Page 36, 140 and 181
The Group has a dedicated Economic Crime Prevention (ECP) function.
The ECP policy sets out the minimum requirements to which all Group
businesses must comply across anti-bribery and corruption (ABC);
anti-money laundering and counterterrorist financing (AML); fraud;
sanctions; and tax evasion. Economic crime is treated as a principal risk
Further policies which support our approach include: Anti-bribery policy
statement
and Code of ethics and responsibility
Human rights and
modern slavery
The Group is committed to operating in accordance with internationally
accepted human rights standards and with all relevant legislation including
the UK Modern Slavery Act 2015. The Group’s approach to human rights is
supported by several Group policies and programmes including:
Our Code
of Supplier Responsibilities
which sets out the key social, ethical and
environmental values and behaviours that we want our suppliers to abide
by.
Human rights policy statement
, Modern slavery and human trafficking
statement
and our colleague policy1 , data privacy policy1 , data ethics
policy1 and cyber security policy1 which has been summarised within the
sustainability report 2024
Topic is considered as part of conduct, economic crime and operational risk
Pages 35 to 37
Pages 30 to 32
Activities to support our colleagues and promote Diversity, Equity
and Inclusion
Governance
Key board discussions and decisions
Pages 40 to 41
Pages 88 to 89
Sustainability governance
1
Certain Group policies, internal standards and guidelines are not published externally.
Lloyds Banking Group plc Annual Report and Accounts 2024
44
Sustainability
review
In this section
Sustainability review introduction
46
Our sustainability strategy
48
Our value chain
49
Sustainability risks and opportunities
50
Climate resilience
53
Supporting the transition to net zero
54
Financial planning and controls
60
Creating a
sustainable
and inclusive
future
We deliver on our purpose through creating
a more sustainable and inclusive future
Other information
Financial results
Strategic report
Governance
Financial statements
Risk management
Sustainability review
Lloyds Banking Group plc Annual Report and Accounts 2024
45
Our 2024 sustainability report showcases how we
are delivering on our purpose of Helping Britain
Prosper, by unlocking sustainable and inclusive
growth for our customers, colleagues and
communities. By delivering on our sustainability
objectives and focusing on our customers, we’re
accessing new commercial growth opportunities,
providing positive outcomes for stakeholders and
building a more resilient and profitable business
that delivers higher, sustainable returns.
Key highlights
£15bn
funding provided to first-time buyers
£25bn
achieved 2025 Scottish Widows
target of discretionary investments
in climate-aware strategies
2.4m
customers registered for our in-app
credit score tool in the last 12 months
£43m
funding provided to support
the Community Development
Finance sector
Charlie Nunn
Group Chief
Executive
With over 28 million UK customers, we can help to create a more
sustainable and inclusive future for the people and businesses
we serve. In 2024, we continued to focus on making the biggest
impact we could for the UK in the interest of all our stakeholders.
I’m pleased to share our progress.
Improving access to housing
We are deeply involved in the UK’s housing sector, and we want to
help the UK access good quality and genuinely affordable housing.
As the UK’s largest mortgage lender, we helped more customers
onto the housing ladder last year by providing £15 billion to first-
time buyers, delivering growth in line with our strategy. In addition
to making finance available, we continue to support customers to
retrofit their homes through our Green Living Reward and renewed
Effective Homes partnership, to offer customers quality and
affordable insulation. We continue to champion the UK’s social
housing sector and alongside our charity partner, Crisis, we have
called for one million more homes at social rent by the end of the
decade. Since 2018, we have supported £19.5 billion of funding
to the sector, delivering £2.2 billion in 2024 and growing
our Commercial Banking business, while supporting our
purpose objectives.
Beyond our focus on new homes, we are working with partners
across the industry to improve the UK’s existing housing stock.
Last year, we announced the National Wealth Fund Partnership –
a £500 million fund to help bolster retrofitting of social homes in
the UK. This blended finance model will enable housing associations
to improve energy efficiency and bring down costs for residents –
improving health, work and home lives. Going forward, we will
continue our work across the housing sector to increase the
provision of safe, sustainable and affordable homes, in line
with our strategy to unlock sustainable and inclusive growth.
Empowering our customers
From day-to-day spending to saving for the long term, we want to
empower our customers to make confident decisions that add up to
a more prosperous future. As the UK’s biggest digital bank, we are
putting more power in the hands of our customers to help them
secure their financial wellbeing. Launched last year, our Ready-
Made Investments offer investments picked and managed by our
expert teams to help empower our customers to start investing.
Our Ready-Made Pensions are also helping customers grasp their
retirement planning by allowing them to view, track and top up
their pensions via our mobile app for the first time. By offering our
customers these new and easy to use digital products, we are
growing the Group’s assets under administration.
Elsewhere in the business, we launched our new Bill Switcher and
Benefit Calculator tools to help customers with their everyday
spending. Since launching in October, over 1 million customers have
interacted with the Benefit Calculator and over 300,000 have
accessed Bill Switcher to check potential savings. Over the last
12 months, 2.4 million customers took advantage of our in-app
Credit Score tool, with over 780,000 actively improving their credit
health. Tools like these help us better serve our customers and
support the growth we delivered in 2024. We also continued
our work to empower a diverse range of UK businesses last year,
providing over 32,500 hours of targeted support for under-
represented entrepreneurs. It’s been an important year of progress,
and we will continue to use our unparalleled data and insight to
empower our customers to improve their financial wellbeing.
Investing in our regions
Last year, we continued to support regional development and
thriving communities. In 2024, we became the first major UK bank
to lend to a Community Development Financial Institution (CDFI),
contributing £43 million to three CDFIs as part of a £62 million fund.
This investment is designed to support 800 businesses and up
to 10,500 regional jobs. This transaction was facilitated by our
Regional Impact Fund, committing £1 billion to regenerating housing
and communities, creating economic opportunities in regions and
supporting the transition to net zero across the UK.
Sustainability review introduction
Read full biography
46
Lloyds Banking Group plc Annual Report and Accounts 2024
Our reporting suite
We report on sustainability matters throughout this annual
report, in particular in the following sections: (i) Strategic report,
pages 30 to 31 and 42 to 44; (ii) Sustainability review on
pages 45 to 60; (iii) Risk management on pages 150 to 153;
(iv) Governance pages 88 to 89 and (v) in the supplementary
sustainability report.
In this ‘Sustainability review’, we set out our sustainability
strategy, risks and opportunities, with the remaining chapter
focusing on our progress against our ambitions and targets to
support the transition to net zero. These disclosures align to
our disclosure requirements for Climate-related Financial
Disclosures (CFD) sections 414CA and 414CB of the Companies
Act 2006 and the UK’s Listing Rule 6.6.6R(8) requirement to
include disclosures consistent with Task Force on Climate-
related Financial Disclosure (TCFD) recommendations.
The content in this chapter is subject to the statements included
in: (i) the ‘Forward-looking statements’ section; and (ii) the
‘sustainability metrics basis of reporting’ which details how our
metrics are calculated. This can be found on our website
.
Empowering
our customers
According to Policy in Practice households
across the UK are missing out on an estimated
£23 billion in benefits each year. Our new
Benefit Calculator helps customers find out
what benefits and grants they could be eligible
for, giving a personalised, detailed view of the
estimated amounts they may be entitled to,
along with next steps on how to make a claim.
From single young professionals who have
just moved into their first home not taking
advantage of Council Tax discounts,
homeowners who could claim for help with
sustainable home improvements to retirees with
unclaimed Pension Credit. The calculator makes
it easy and convenient for customers to
understand if they qualify for support, including
grants for home improvements and energy
efficiency schemes.
Through this in-app feature, our ambition is to
put at least £500 million in customers' pockets,
remaining focused on supporting the growth
of a resilient customer base.
Other information
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Risk management
Building a diverse business to
serve customers and communities
Beyond supporting the development of UK regions, we need
to make sure our own business understands and reflects the
communities we serve. To that end, we have continued to develop
our approach to diversity and now aim for a gender balance of 45 to
55 per cent in all executive roles by the end of 2030. We have also
strengthened our ethnic diversity targets, aiming for 3.5 to 4 per
cent of Black heritage and 19 to 22 per cent of Black, Asian and
Minority Ethnic colleagues in executive roles by end of 2030,
increasing our ambition for senior colleagues. We believe that a
diverse and inclusive workforce also allows us to retain and attract
the best talent which is essential for delivering our ongoing strategic
transformation.
We strengthened our approach to Credible Transition Plans in 2024,
expanding the number of clients we assess, with £14 billion of our
Commercial and Institutional Banking book now covered by
Transition Plan Assessments, a significant increase from the
£2.9 billion assessed last year. Supporting the net zero transition is
driving growth across our business and will help secure the long-
term resilience of our customers, communities and financial sector.
Delivering growth and opportunity in 2025
As we look forward to the rest of 2025, we will continue to unlock
sustainable and inclusive growth in line with our strategy and deliver
on our purpose of Helping Britain Prosper.
Building resilience by supporting
the net zero transition
We have further embedded our environmental strategy and Climate
Action Plan across the Group this year. We continue to support the
UK’s transition to net zero by advancing initiatives that decarbonise
our economy and protect nature.
Last year, we deployed significant lending and investment aligned to
our core business areas. In 2024, we achieved our financing targets
for EPC A and B mortgage lending and financing for electric vehicles
and plug-in hybrid vehicles. We made our first investment in nature
protection, becoming a founding business partner of Projects for
Nature, supporting three landmark nature recovery projects in
England. Through our banking business, we have now provided over
£47 billion of sustainable finance since 2022. In Scottish Widows, we
achieved our cumulative investment target of £25 billion in climate-
aware strategies one year early, with £25.9 billion invested by the
end of 2024.
Looking ahead, we’ve set new financing targets of £11 billion for EPC
A and B mortgages and £10 billion for electric vehicles by the end of
2027. We start 2025 in a strong position with emissions calculated
for 96 per cent of our bank lending and we continue to support our
clients with their net zero transitions.
47
Lloyds Banking Group plc Annual Report and Accounts 2024
Our purpose pillars
Creating a sustainable and inclusive future is core to our business
growth and purpose of Helping Britain Prosper. Guided by our
Group strategy, we are concentrating on areas where we can have
the biggest impact, delivering our purpose while creating value for
all our stakeholders.
They are built on the foundation of ongoing business activity to
embed sustainability in all that we do while acting in a trusted
and responsible manner through risk management, conduct
and governance.
We have identified purpose pillars which underpin how we are
Helping Britain Prosper and support the delivery of the Group’s
strategy. These pillars represent areas where we believe we can
deliver significant societal impact at scale for the UK, leveraging
our core capabilities as an integrated financial services provider.
By delivering on our objectives across these pillars, we can create
further commercial growth opportunities as well as positive
outcomes for our stakeholders and thus build a more resilient and
profitable business to deliver higher, more sustainable returns for
our shareholders.
Further detail on our progress in each of these pillars can be found in
our sustainability report 2024
.
Helping Britain Prosper
By creating a more sustainable and inclusive future for people and businesses – shaping finance
as a force of good. Guided by our Group strategy, we are concentrating on areas where we can have
impact at scale, delivering our purpose and create value for all our stakeholders.
Grow
Focus
Change
Drive revenue
growth and
diversification
Strengthen cost and
capital efficiency
Maximise the
potential of people,
technology and data
Our purpose pillars
Help every household
in the UK have access
to quality and
affordable housing,
notwithstanding
income and tenure
Empower customers
and businesses to a
more prosperous
financial future
Be the leading UK
business for diversity,
equity and inclusion
supporting our
customers, colleagues
and communities
Supporting regional
development and
communities
Support the UK
transition to net zero
by advancing initiatives
that address
climate change
and protect nature
Our purpose pillar objectives
Embedding sustainability in all that we do while acting in a trusted and responsible manner
•
Broaden access to
home ownership
•
•
Increase the supply
of social and
affordable housing
Improve the quality
of the private
rented sector
•
Support UK
housebuilders to
deliver quality and
sustainable housing
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Empowering and
supporting our
customers and
clients to build
financial resilience and
long-term security
Supporting customers
and businesses when
they need it most
Empowering financial
and digital education
and access to skills
Breaking down barriers
to access and inclusion,
empowering people and
businesses of all
backgrounds to thrive
Be a partner in the
regeneration of the UK's
regions and nations
Build and regenerate
housing to create
thriving communities
Broaden economic
opportunity by enabling
high-quality jobs and
inclusive growth
Help communities to
develop and adapt to
immediate and future
needs through
community investment
and engagement
Create a more diverse,
equitable and inclusive
organisation that is
representative of
modern-day Britain
Remove barriers and
provide opportunities
for our colleagues to
thrive regardless of their
background
Support the health and
wellbeing of our
colleagues
Provide the appropriate
technology, tools and
skills for our colleagues
to thrive
Promoting sustainable
finance and investment
Taking a systems-led
approach to considering
environmental issues:
Energy transition
Greening the built
environment
Low carbon transport
Sustainable farming
and food
Managing the footprint
of our own operations
and supply chain
Link to our strategy
Our sustainability strategy
–
–
–
–
48
Lloyds Banking Group plc Annual Report and Accounts 2024
Our value chain
•
•
•
•
•
•
•
•
•
49
Other information
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Risk management
u
t
e
ro
Developing our value chain
and materiality approach
Our value chain
At the heart of our purpose of Helping Britain Prosper is a desire
to create value for all our stakeholders by understanding what
matters to them. Engaging with and listening to our stakeholders
is intrinsic to our business in order for us to act in a trusted
and responsible manner.
As one of the largest UK financial services organisations with the
majority of our operations and exposure in the UK, we are impacted
by the country’s macroeconomic, regulatory, political and physical
environment – which poses challenges and dependencies as well as
opportunities for the business. Our role is to facilitate the flow of
funds between participants in the economy, act as custodians of
financial assets and protect value for our customers, all while
considering long-term trends and their impact on what we do and
the value we create for the society and communities in which we
operate. As such, the way we manage sustainability issues matters
and our performance is integral in how we shape finance as a force
for good.
Our customers, clients and shareholders input into our operations
by trusting us with their savings and investments and we ensure that
capital is allocated efficiently for the benefit of our customers and
clients who want to borrow. Access to credit supports economic
growth as customers and clients use their borrowings to
make investments and purchases, propelling production and
infrastructure development, supporting communities and wider
society. We work with our customers and clients to make sure we
help them fulfil their ambitions whilst protecting the climate and
nature and delivering products in a responsible manner.
Our operations are built around this management of capital for our
stakeholders requiring safeguarding of our customers’ money and
data. We know our colleagues are the key ingredient to our success
and we aim to create an inclusive and supportive environment in
which everyone can thrive. Suppliers are asked to comply with
specific Third Party Supplier Policies when applicable to the services
they provide. All suppliers are expected to conform to our Code of
Supplier Responsibility. We operate with prudent and appropriate
internal risk management, together with our regulators, ensuring we
protect our customers and clients, colleagues and communities, and
deliver sustainable returns to our shareholders while maintaining a
safe, stable and prosperous financial system for the UK.
We consider ‘materiality’ to be the threshold at which a
sustainability matter becomes sufficiently important to our
investors and other stakeholders and so should be reported. Our
approach to materiality also considers disclosure standards and
other applicable rules and regulations as part of our materiality
assessment for determining material topics and the associated risks
and opportunities arising from these topics. Further detail on how
we apply materiality in determining our climate risks can be found
within our risk management section on page 150.
Our material sustainability topics
In 2024, we have refreshed our material topics list through a review
of both our external and internal environments, which includes our
value chain, markets in which we operate, products, services and
activities, as well as horizon scanning and stakeholder engagement.
Our internal environment includes colleagues, processes and
policies, culture and management. We have used the outputs
from this exercise to refresh our materiality assessment.
We prioritise our material topics based on:
The strategic importance of the issue to the Group
The importance of the issue to our stakeholders
The social, economic and environmental impact of each
topic in relation to the core activities, products and
services provided by the Group
We conducted our materiality review and impact assessment of
our operations, products and services in line with the requirements
of the UNEP FI Principles for Responsible Banking, and we have
considered, among other inputs, the UN Sustainability Development
Goals (SDGs) which provide a common framework for us to show
how we use our operating model, scale and resources to respond to
some of the UK’s biggest societal challenges.
Identifying and assessing our material risks (including climate)
allows us to understand where we have the opportunities to deliver
impact. The assessment of our opportunities drives our strategy and
business model through our purpose pillars, with progress measured
against our ambitions, targets and pledges.
Our assessment has identified the following material topics:
Artificial intelligence (emerging topic)
Biodiversity and nature (emerging topic)
Climate change
Diversity, equity and inclusion
Financial inclusion and resilience
Governance and conduct
Health and wellbeing of colleagues
Human rights
Regional inequalities
Further details on on these material topics and how these are
demonstrated through our purpose pillars can be found in our
sustainability report page 11
Future developments to our materiality approach
We continue to evolve our approach to double materiality,
leveraging existing materiality processes and tools with the aim of
embedding a double materiality assessment in due course. The
Group is considering the regulatory landscape and is preparing for
readiness to report in alignment with the government adoption of
the ISSB and the implementation of CSRD reporting for selected EU
entities from reporting year 2025, with the remainder of the Group
falling into scope for CSRD reporting from 2028.
Building a
sustainable a nd
inclusive future
Lloyds Banking Group plc Annual Report and Accounts 2024
Lloyds Banking Group
Sustainability Report 2024
Our material topics have helped inform our understanding of the
key sustainability risks and opportunities of the Group, across a
range of Environmental, Social and Governance topics.
Identifying and assessing our material sustainability topics and
associated risks and opportunities (including climate) allows us to
align and consider their impact on our strategy and purpose pillars,
and be cognisant of their impact on our business model both now
and in the future. Key risk outcomes include experiencing losses
and/or reputational damage, sustainability risks to our colleagues
and communities and the transition to net zero because of the
Group’s response to tackling climate change.
The identification, assessment and management of our
opportunities is undertaken on a regular basis by our functional-
level and divisional teams, and approval of new initiatives governed
in line with our sustainability governance structure pages 88 to 89.
Through this work we have identified opportunities included in our
purpose pillar objectives, such as responding to increasing customer
preference for sustainable products and lending, supporting
investment in transition-related technology, embracing
opportunities to reduce our carbon footprint, increasing the supply
of social and affordable housing as well as empowering and
supporting our customers and clients to build financial resilience.
As shown in the table below, the impacts from sustainability risks
largely manifest through other principal risks that the Group faces
(including credit, conduct and operational risks). Therefore, our
approach is to embed consideration of sustainability-related risks
into our wider risk management processes.
The assessment of our opportunities drives our strategy and
business model through our purpose pillars, with progress measured
against our ambitions, targets and pledges.
Sustainability risks
Environmental risks (encompassing Climate and Nature) are primarily
considered to arise through two channels, physical or transition risks:
•
•
Physical risks arising from changes in climate or weather
patterns, or the degradation of nature. These can either be acute
(event driven such as floods, storms or pest outbreaks), or
chronic (longer-term shifts such as rising sea levels or droughts)
Transition risks due to societal changes or those associated with
moving towards a low carbon economy and nature recovery,
including changes to policy, legislation and regulation, technology
and market, or legal risks from failing to manage the transition
Social risks are considered to manifest through:
•
•
•
•
Operational risks due to failure to recruit, develop and retain a
diverse workforce with the required level of skills and capabilities
to meet the current and future needs of the Group. This includes
colleague wellbeing and business objectives not being met.
For further detail on other operational risks see page 196
Conduct risks with the Group’s activities, behaviours, strategy
or business planning having an adverse impact on outcomes for
customers and clients. For further details on conduct risks see
page 154
Compliance risk as a result of non-compliance with regulation,
which could lead to regulatory censure, reputational damage or
financial loss. For further detail on other compliance risks see
page 154
Credit risk due to clients or customers not complying with
legislation, the Group’s external sector statements or negative
market and consumer sentiment negatively impacting or
affecting the credit risk of a client. For further detail on credit
risks, see page 155
Consideration of sustainability-related risks within our enterprise
risk management framework continues to evolve, with our
approach more developed in some areas than others, for example,
our established approach to ESG credit risk management. We will
continue to enhance our overall approach as part of further
development of the Group’s approach to risk management and
principal risks we face.
Our approach to principal risk identification, assessment and
management as part of our enterprise risk management framework
can be found in our risk overview on pages 33 to 38.
Sustainability opportunities
Our biggest opportunities to support business growth, our
colleagues and our customers, are in relation to the areas where
we have the largest lending and investment portfolios.
Understanding our risks and impacts helps us to identify key
opportunities to support our customers. Identifying and assessing
our material risks (including climate) allows us to understand where
we have the opportunities to deliver impact.
We assess material risks and opportunities over the short, medium
and long term as sustainability-related matters materialise over
time, noting that the timings of these will also be impacted by
external factors, such as government policy and regulation,
technology developments, as well as our customers' response.
We have aligned time frames to those used for business planning:
The table within this section provides an overview of our
sustainability risks and opportunities assessment.
UK carbon capture
and storage (CCS)
In December 2024, Lloyds Banking Group supported
UK CCS project, Northern Endurance Partnership (NEP)
and Net Zero Teesside Power (NZT Power), as part of
an £8 billion financing package.
These landmark transactions are supported by
the UK Government and are pivotal to the UK s
decarbonisation strategy.
NEP, a collaboration between BP, Equinor and Total Energies is
a first of a kind CO2 transportation and storage product project
in the UK which is expected to store 100 million tonnes of CO2
across the Teesside and Humber industrial regions.
Supported by the UK Government ’s Dispatchable Power
Agreement, NZT Power will deliver flexible, dispatchable, and
clean power, and the capture of up to 2 million tonnes of CO2
per annum, which will be stored via the Northern Endurance
Partnership project.
The projects represent a significant opportunity for the UK
supply chain, in particular for businesses across the north of
England. The region will also benefit from the creation of
1000s of jobs throughout the projects construction and
operational lives.
In addition to the £450 million Lloyds participation and
Mandated Lead Arranger role in the £8 billion financing,
Lloyds Bank also undertook the roles of Hedge Provider,
Agent and Security Trustee demonstrating our stated
corporate and institutional banking growth strategy in action
through deepening client relationship on a multi product basis.
Sustainability risks and opportunities
’
50
Lloyds Banking Group plc Annual Report and Accounts 2024
Risks
Risk description
Principal risk
Driver
Time
horizon
How this is monitored
Sustainability
Material Topic
Reduction in customers’ creditworthiness and/
or affordability
Credit
Medium,
Long
Elements of climate change incorporated into annual
ECL assessment. Further details, see page 282.
Qualitative updates on nature provided to Group
Net Zero Committee, although measurement
capability is still evolving
Climate change,
Biodiversity and
nature
Devaluation of assets, investments or collateral,
including property and motor vehicles
Credit,
Market
Short,
Medium,
Long
Range of quantitative metrics across portfolios,
including EPC ratings and flood risk exposure for
residential mortgages, further details in our 2024
sustainability report pages 99 and 132
Climate change
Underwriting and insurance risk arising from
climate risks
Insurance
underwriting
Acute:
Short,
Medium
Chronic:
Long
Defined risk appetite. For further details of insurance
risk and policy, please see the 2024 sustainability
report page 136
Climate change
Disruption to the Group’s services and supply
chain due to increased frequency and severity
of extreme weather events, such as floods
and storms
Operational
Acute:
Short
Chronic:
Long
Invocation of Group Incident Management (GIM)
Operational Framework. Incident reports reviewed
monthly at Group Incident Operating Forum (GIOF)
Climate change
Not meeting our business objectives for
supporting the transition to net zero, including
failure to deliver on our external commitments
Conduct,
Climate
Medium,
Long
Progress against our emission reduction targets and
sustainable lending and investments. For further
details please see pages 54 to 59
Climate change
Governance and
conduct
Failure to meet requirements for Sustainability
related disclosures or management of risk
Compliance
Short,
Medium
Quantitative updates provided to Group executive
committees. Further details can be found on
pages 88 to 89
Climate change,
Diversity, Equity and
Inclusion, Human
rights
External perception of greenwashing in the
Group’s disclosures, marketing or product
communications
Conduct,
Compliance,
Operational
Short,
Medium
Qualitative updates provided on Group processes
and controls provided to Group Net Zero Committee
pages 88 to 89
Governance and
conduct
Financial hardship as a result of
macroeconomic pressures resulting
in delinquencies
Credit,
Market
Short,
Medium
Scenario updates are presented to executive
committees on a regular basis. See page 107
Financial inclusion
and resilience
Financial education gaps in society resulting in
lower engagement with financial products and
lower level of financial resilience
Credit,
Conduct
Short,
Medium
Purpose pillar updates are provided to Responsible
Business Committee. See page 109
Financial inclusion
and resilience
Artificial intelligence impacting customer
service experience and presenting limitations
for customers with accessibility needs
Conduct
Short,
Medium
Qualitative updates given to Responsible Business
Committee see page 89
Financial inclusion
and resilience,
Governance and
conduct
Colleague wellbeing – the failure to provide
an appropriate colleague culture, reward,
talent management and wellbeing policies
and process
Operational
Short,
Medium
Quantitative and qualitative indicators, such as
succession, diversity, retention see pages 30 to 32
Diversity, equity and
inclusion, Health and
wellbeing of
colleagues
Changes in social sentiment and expectations
of the Group in relation to sustainability topics
Conduct
Medium,
Long
Scenario updates are presented to executive
committees on a regular basis. See page 109
Financial inclusion
and resilience,
Health and
wellbeing of
colleagues
Other information
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Risk management
51
Lloyds Banking Group plc Annual Report and Accounts 2024
Opportunities
Opportunity description
Principal risk
Driver
Time
horizon
How this is monitored
Sustainability
Material Topic
Reducing the emissions and improving the
resilience of our own operations
Operational,
Climate
Short,
Medium
Our own operational pledges. For further details, see
sustainability report 2024 page 70
Climate change
Providing finance to support investment in
climate-related technology and solutions
Market,
Climate,
Credit
Short,
Medium
Our SW investment targets see page 57
Our Commercial Banking sustainable lending target
see page 57
Climate change
Develop products to support sustainable
projects including loans and green bonds
Market,
Credit
Short,
Medium
Our sustainable lending targets. For further details
please see page 57
Climate change,
Regional inequalities
Increasing consumer preference for
sustainable products
Market
Short,
Medium
Our ESG pension offering see sustainability report
2024 page 56
Climate change,
Regional
inequalities,
Financial inclusion
and resilience
Develop industry partnerships to help drive
sustainable, low carbon and nature positive
solutions for our customers and suppliers
to transition
Conduct,
Climate
Short,
Medium
Our sustainable lending targets. For further details
please see page 57
Climate change,
Biodiversity and
nature,
Regional inequalities
Supporting nature recovery projects as a test
and learn on how we can leverage green finance
to support nature restoration in the future
Market,
Credit
Medium,
Long
Internal KPIs set on a project level
Biodiversity and
nature
Transforming the diversity, equity and inclusion
of our business to support our colleagues and
enable us to develop more inclusive and
accessible products to serve our customers
Operational
Short,
Medium
Colleague diversity, equity and inclusion performance
see page 32 and support provided to businesses
owned by Black, disabled and women entrepreneurs
Diversity, Equity and
Inclusion, Human
Rights
Digital and artificial intelligence tools to
support, empowering customers financial
resilience and to identify customer
vulnerabilities while ensuring good outcomes
for customers
Conduct,
Operational
Short,
Medium
Qualitative updates given to Responsible Business
Committee see page 89
Artificial Intelligence,
Financial inclusion
and resilience,
Governance and
conduct
Opportunities to invest in the UK’s regions and
develop products and services that support
regeneration, job creation and productivity,
collaborating with government
Conduct,
Operational
Short,
Medium
Funding provided to support communities and
regions within the UK. See pages 41 to 48 of the
sustainability report 2024
Regional inequalities
Support the government ambitions increasing
accessibility and availability of affordable
quality and sustainable housing
Conduct,
Operational
Short,
Medium,
Long
First-time buyer performance and sustainable or
sustainability-linked social housing funding to the
social housing sector. See pages 15 and 22 of the
sustainability report 2024
Regional
inequalities,
Financial inclusion
and resilience
Sustainability risks and opportunities continued
Lloyds Banking Group plc Annua l Report and Account s 2024
52
Evaluating our resilience to climate risk
Climate change risks can expose the Group to potential financial
loss and therefore presents an important consideration for the
resilience of the Group’s strategy.
We believe our strategy provides resilience from the challenges of
climate risk. In forming this view, we have:
•
•
Assessed the areas of our business facing the greatest risk, based
on the size of the Group’s exposure and the potential relative
impact across key sectors
Undertaken further analysis to understand the potential
outcomes from these risks if they were to occur
We have also looked to ensure that the findings from this analysis
support and inform our strategy, with further action taken where
we have exposure potentially at risk as part of the Group’s plans to
support the transition to net zero.
Areas at greater risk
Understanding the potential impact of climate risk is initially
informed by identifying the areas of the Group’s portfolio which
could be affected by climate risk. We assess both physical and
transition risk, with physical risk more focused on our mortgage and
home insurance books. A summary of bank lending to sectors with
increased climate risk is shown in the table on page 80 of the
sustainability report 2024.
The make-up of the Group’s lending portfolio means the biggest
exposures identified are in the residential mortgages and real estate
sector. Although short-term risks are expected to be limited based
on the current policy landscape the Group continues to progress its
transition plans see page 89 of sustainability report for elaboration
on transition plans. For other sectors with higher sensitivity to
transition risk our exposure is lower and the Group continues to
monitor loans and advances in these sectors.
Climate change can increase the likelihood and severity of flood
events which could negatively impact property valuations and
increase insurance costs. Currently, less than 1 in 6 properties within
our mortgage portfolio are at risk of flooding, and just over 1 in 100
meet our very high risk criteria for present day. We continue to work
closely with the government to mitigate the risks around flood
resilience and have integrated property level controls into our
originations process. Stricter energy efficiency regulations rendering
properties non-compliant could also have a negative impact on
property valuations and lead to increased affordability pressures on
customers to transition.
For our Commercial Banking lending and investments, we have
undertaken further analysis to inform which sectors are most
exposed to climate risk using different models and scenarios,
including the Network for Greening the Financial System
(NGFS) scenarios.
Our latest analysis has assessed the potential financial impacts
across key sectors in the Net Zero 2050 scenario (NGFS Phase IV),
given this scenario describes the ideal outcome that the Group’s
net zero strategy and targets are aiming for. We recognise the
assumptions required for this scenario now tend to generate
increased transition risks when compared to previous iterations,
reflecting the lack of sufficient progress to date and external
dependencies such as government policy, therefore more stringent
future actions are required.
At a high level, this analysis continues to show Coal Mining, Oil &
Gas, Transport and Utilities as the sectors most impacted in the
modelled scenario (Net Zero 2050). Further detail is provided in the
risk management section page 150.
Analysis of potential impacts
The risks relating to climate change are complex, forward-looking
and uncertain, therefore our approach to assessing the impact of
these risks continues to evolve as our understanding matures and
develops. Unlike traditional financial models, there is no historic
dataset to test climate model outcomes against.
The following assessments have been undertaken to evaluate our
resilience to the impacts of the risks related to climate change:
Lending
The following analysis has not shown any material impact
at this stage:
•
•
We have performed a stress exercise on the largest credit
portfolio, retail mortgages, and quantified the impact on losses
and implication on capital. The stresses explored were
affordability shocks due to retrofitting and physical risk costs.
The climate impact was immaterial in relation to both
impairment and capital effect
In 2023 we incorporated consideration of some impacts of
climate risk into our calculation of expected credit losses. This
exercise was repeated in 2024 with similar results. This continues
to support management’s view that there is a low residual risk of
material error or omission in the Group’s financial statements
due to climate-related risks and as a result no adjustments have
been made to ECL measured as at 31 December 2024. See the
climate risk, risk management section for elaboration
Investment and insurance
We assessed risks to the achievement of our strategic objectives
over the short to medium term by stress testing our business plan.
In 2024, amongst other stress tests, we considered a bespoke
climate scenario and compared this to the base planning scenario.
In the analysis, we projected our Insurance and Investment balance
sheet and profit and loss account. The key components of the stress
scenarios were:
•
•
•
Physical risk events cause household insurance claims and a food
price shock in the short to medium term1
Governments then commence a disorderly transition which is
priced in by markets
The consequences of higher food prices and the transition cause
stresses to asset values, deterioration of the business
environment with reduced sales, people saving less, and our
costs increasing
This analysis showed us the variation in projected profitability
caused by an adverse climate scenario and the potential for it to
impact Scottish Widows Group’s capital position.
1
The implied long-medium term reduction in crop production was not considered.
Informing our strategy
We continue to drive action to help reduce emissions across our
lending and investment portfolios, see page 82 of the sustainability
report 2024 for details of our NZBA targets, with a particular focus
on defining our approach to tackle our highest emitting sectors. Our
business strategy is kept under continual review to ensure that it
remains current and updated to take account of emerging risks.
Long-term climate scenario analysis alerts us to potential changes in
the economic and physical environment, to which we adapt by
reviewing our strategy.
Our scenario analysis capabilities continue to evolve and we’re
continuing to embed, as detailed within the risk management
section page 150.
Climate resilience
Other information
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Risk management
53
Lloyds Banking Group plc Annual Report and Accounts 2024
Supporting the transition to net zero
Progress in reduction of our Group’s emissions (MtCO2e)
Our environmental strategy
In delivering against our purpose pillars, we developed and agreed a
new environmental sustainability strategy in 2023 taking a system-
led approach to start a journey to enable cross-group collaboration
and to support and assist us in our understanding of the changes
and solutions needed to enable the transition to net zero.
Considering the transition in this context has started to inform the
actions and understanding of the impact and progress needed to be
made by the Group.
A systems-led approach also supports us to consider the synergies
and potential trade-offs between areas of the Group, the systems
themselves, other environmental issues such as nature and our
broader social purpose pillars. These are all interconnected and we
will continue to explore greater integration across these moving
forward.
The Group has four systems where we believe we can leverage our
scale, reach in the market and products and services that we offer
to support the transition to net zero. These systems are focused on
where we live through greening the built environment, how we
move through low carbon transport, how we farm with a more
sustainable farming and food system and through the energy we use
with an energy transition fundamental to broader decarbonisation.
Further to this, we will need to ensure we transition the broader
business, including our supply chain, and manage our own impacts
to support progress against our net zero ambitions and targets.
Our emissions reduction ambitions
The Group have set several ambitions across our own operations,
supply chain and lending and investments to support the
decarbonisation of our business in line with limiting global warming
to 1.5°C, recognising that there are significant challenges and
external dependencies in many areas of the economy, including the
technologies, solutions and policies required, that will need to be
addressed for us to achieve these.
Bank
Work with customers, government and the market to help
reduce the carbon emissions we finance by more than 50 per
cent by 2030 on the path to net zero by 20501 or sooner.
Scottish Widows
Align all our investments with the goals of the Paris Agreement,
reaching net zero carbon emissions2 by 2050 or sooner.
Supply chain
Working with our suppliers to reduce the emissions generated
by 50 per cent by 2030, on the path to net zero by 2050
or sooner3 .
Our operations
Net zero carbon operations4 by 2030.
1
From a 2018 baseline, covering Scope 1 and 2 emissions.
2
From a 2019 baseline; covering Scope 1 and 2 emissions.
3
From a 2021/22 baseline.
4
From a 2018/19 baseline.
Statement on assurance provider
Deloitte were appointed to provide independent limited assurance over
certain data points and 2030 emissions reduction ambitions, targets and
pledges within this Annual Report, indicated with a . The assurance
engagement was planned and performed in accordance with the
International Standard on Assurance Engagements 3000 (Revised),
Assurance Engagements Other Than Audits or Reviews of Historical Financial
Information (ISAE 3000 (Revised)) and International Standard on Assurance
Engagements 3410 (ISAE 3410). This independent assurance report is
separate from Deloitte’s audit report on the financial statements and is
available at sustainability downloads
.
Globally, we are not moving quickly enough to tackle the climate
crisis at the speed we know is required and we will need to do more
and collaborate with a wide range of stakeholders to unblock the
barriers that stand in our way or we will not achieve our ambitions.
The financial ecosystem provides a critical means to accelerate the
low carbon transition, by leveraging purposeful engagement with
our stakeholders.
To date, our emissions footprint has guided where we have the
biggest role to play. We calculate our emissions in line with the
Greenhouse Gas Protocol, further detail is in our sustainability
metrics basis of reporting 2024
. Our lending portfolio means our
biggest exposure to sectors at increased climate risk is in relation to
our residential mortgages and our real estate sector. The scale of our
emissions varies across different areas of the business. A breakdown
of our Group’s absolute emissions is shown below.
1
Baseline year determined by ambition (2018 for Bank, 2019 for Scottish Widows, 2021/22
for Supply Chain and 2018/2019 for Own Ops) MtCO2e – Megatonnes Carbon Dioxide
equivalents.
2
Based on 2023 data available for Bank and Scottish Widows financed emissions Scope 1
and 2 emissions only. 2023/24 period end data for supply chain emissions and own
operations includes Scope 1, 2 and 3 categories and is reported on a market basis.
3
Supply Chain emissions are calculated from supplier spend totalling £4.6 billion (net of VAT).
In addition there is a further £5.6 billion (including VAT) spread across other business areas.
Further details on our methodology see sustainability metrics basis of reporting 2024
.
Lloyds Banking Group plc Annu al Rep ort and Accounts 2 024
54
Bank
Our ambition
Work with customers, government and
the market to help reduce the carbon
emissions we finance by more than
50 per cent by 2030 on the path to
net zero by 2050 or sooner.
Our progress
MtCO2e reduction
l Progress
l 2030 ambition
Our actions
Our overall bank financed emissions reduction ambition is
supported by 10 sector-specific NZBA targets covering our highest
emitting sectors.
These targets are supported by sector-specific transition plans
which detail how we are supporting our customers and clients
to transition in these areas.
Other information
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Risk management
–
–
NZBA sector target summary
System and targets1
Baseline year of target
Target baseline2
2023 Target progress
Divergence from pathway3
Greening the built environment
UK mortgages – 41 per cent reduction in emissions
intensity to 28kgCO2e/m2 by 2030
2020
46kgCO2e/m2
4
43kgCO2e/m2
1.0%
Commercial and residential real estate (C&RRE) –
48 per cent reduction in emissions intensity to
21kgCO2e/m2 by 2030
2021
39kgCO2e/m2
38kgCO2e/m2
5.4%
Low carbon transport
Retail motor3 – reduce emissions intensity of our
cars and vans by more than 50 per cent by 2030,
reaching:
75gCO2e/km or lower (cars)
2018
150gCO2e/km 4
135gCO2e/km
8.6%
99kgCO2e/km or lower (LCVs)
2018
198gCO2e/km 4
190gCO2e/km
11.9%
Road passenger transport – 49 per cent reduction
in emissions intensity to 72gCO2/pkm by 2030
2019
141gCO2e/pkm
130gCO2e/pkm
4.3%
Automotive (OEMs) – 47 per cent reduction in
emissions intensity to 133gCO2e/vkm by 2030
2020
249gCO2e/vkm
259gCO2e/vkm
22.5%
Aviation – 31 per cent reduction in emissions
intensity to 737gCO2e/rtk by 2030
2019
1,068gCO2e/rtk
904gCO2e/rtk
(4.6) %
Sustainable farming and food
Agriculture – 25 per cent reduction of absolute
emissions to 5.0 MtCO2e by 2030
2021
6.7MtCO2e
5.9MtCO2e
(3.7) %
Energy transition
Oil and gas – 50 per cent reduction of absolute
emissions to 3.2 MtCO2e by 2030
2019
6.4MtCO2e
2.0MtCO2e
(45.0)%
Power generation – 81 per cent reduction in
emissions intensity to 53gCO2e/kWh by 2030
2020
276gCO2e/kWh 4
54gCO2e/kWh
(74.1) %
Thermal coal – full exit of thermal coal power in
the UK since 2024. Full exit from all entities that
operate thermal coal facilities by 2030
–
–
–
– %
1
There are rounding differences between target baseline, percentage reduction and 2030 target. Targets cover on-balance sheet assets. The scope of our target has been defined
within the sustainability metrics basis of reporting 2024 available at sustainability downloads
.
2
C&RRE, Road passenger transport, Automotive (OEMs), Aviation, Agriculture and Oil and gas baselines have been updated due to methodology changes, revised client data and
clarification of client scope 3 data.
3
Shows divergence between 2023 actual and 2023 reference pathway emission intensity. Arrow up performance for 2023 ahead of reference pathway. Arrow down
performance for 2023 behind reference pathway. Retail motor cars and LCVs divergence, is based on divergence from scenario pathway as no reference pathway is available.
4
The baseline metrics for UK mortgages, Retail Motor and Power have not been restated in the current period and were previously subject to limited assurance by Deloitte LLP in
2023. This limited assurance report is available at sustainability downloads
.
Indicator is subject to limited assurance by Deloitte LLP see page 54 for details.
55
Lloyds Banking Group plc Annual Report and Accounts 2024
Our sustainable financing
and investment targets
We have established sustainable
finance and investment targets
aligned to our core business areas.
Our financing and investment target horizons align to the Group’s
strategic and performance management timelines that will continue
to build up to support our 2030 ambitions and beyond to 2050. In
2024, we achieved three of our four targets totalling £20.8 billion
for sustainable financing in EPC A and B mortgage lending and
financing for electric vehicles and plug-in hybrid vehicles for retail
customers, as well as achieving our Scottish Widows £25 billion
discretionary investment in climate-aware strategies target.
Our sustainable financing framework has continued to evolve to
provide greater clarity on what Lloyds Banking Group considers to
be eligible types of sustainable finance covering the Group’s retail
and commercial lending sustainability downloads
. Sustainable
finance and investment targets continue to be part of our long-term
incentive plan (LTIP) assessment as set out on page 132.
Banking Group plc Annu eor
t and Accounts 2
Lloyds
Supporting the transition to net zero continued
Divergences and the challenges with transition
Energy transition
Energy contributes to 21.2 per cent1,2 of UK emissions, and makes up
1.5 per cent of the Group’s bank financed emissions.
The energy system interacts with all other systems as the transition
of this system is critical to support the decarbonisation of other
industries, such as EV public charging infrastructure for Low Carbon
Transport or the electricity grid for Greening the Built Environment.
The supply of energy is central to our society and plays a critical role
in providing energy security to the UK.
Our retail-focused banking activities means we do not have
significant exposure to the oil and gas sector and our total Bank
exposure to oil and gas has reduced by c.70 percent since 2022.
Our strategy focuses on supporting a clean energy future for the UK,
benefitting households, businesses and communities across the
country. We are actively seeking to support established clean
technologies and identifying maturing and emerging technologies
and how to increase their bankability to unlock financing at scale.
Greening the built environment
Contributing to 26.3 per cent1,2 of UK emissions and 27.4 per cent
of the Group’s bank financed emissions the built environment is a
material and complex system that touches a number of areas across
the Group, including our residential mortgages portfolio and our
commercial real estate clients that have both residential and non-
residential properties in their portfolio.
The energy system is intrinsically linked to decarbonisation of the
built environment with decarbonisation of electricity, both on site
and via the grid, a critical enabler alongside a switch away from gas
boilers to lower carbon heating alternatives such as heat pumps.
Furthermore, many of the buildings which are expected to be
occupied in 2050 already exist, making retrofit the primary focus
as well as greener new builds. The most significant external
dependencies on policy are centred on the need to improve
commercial viability of retrofit to drive its uptake across all
customer types at scale, and the need for robust low carbon
standards for new builds to prevent locking in future emissions.
To date, key areas of focus include providing tools to support
customers to understand their impacts and act on these insights,
with partnerships and incentives to facilitate retrofit uptake
alongside engaging on policy developments.
Moving forward our priority areas include:
•
Continuing to enhance our data capability across the built
environment including buildings within our agriculture system
•
Identifying new finance models to support customers and make
retrofit more affordable over the long term
•
Enhancing customer education that supports customers
in understanding options available to make properties
more efficient
•
Encouraging the policy development needed to enable retrofit
at scale
•
Unlocking skills through our participation in industry leading skills
and diversity initiatives
Low carbon transport
Surface transport is the highest emitting sector in the UK,
accounting for 22.2 per cent1,2 of total emissions and 14.2 per cent of
the Bank’s financed emissions. Our low carbon transport system
addresses transport by road and by air. Emissions for our rail and
shipping activities within the transportation sector are not currently
included, due to their low materiality and exposure.
The most material policy impact for this system is across road
transport, driven by the Zero Emission Vehicle (ZEV) mandate
which is noted to have made good progress by the Climate Change
Committee, together with the Labour government’s recent
commitment to restore the 2030 date for the phase out of
new ICE (internal combustion engine) cars and 2035 for vans.
We have developed products and propositions to help customers
understand the best way to transition to greener vehicles and to
ensure switching to electric fuel types is as hassle-free and cost-
effective as possible, including via partnerships. We are also
engaging our corporate clients to set science-based targets and with
government and other external stakeholders to ensure there is a
supportive external environment to facilitate transition.
Sustainable farming and food
The agriculture sector is responsible for 12 per cent1,2 of UK emissions
and 29.9 per cent of Bank financed emissions. Unlike other systems,
emissions are derived from natural processes which are challenging
to abate.
Our sustainable farming and food system addresses primary
agriculture and the food value chain and plays an important role
in ensuring food security in the UK. Agriculture is one of the largest
sources of financed emissions for the Group. Developing more
sustainable business models involves farmers and other actors
in the direct and indirect value chain, coupled with a supportive
policy environment.
Through our partnership with the Soil Association Exchange, we
have developed tools and services to provide our larger clients with
consultancy support that provides valuable insights into the
financial and environmental impact of sustainability measures.
We are also using our voice through policy engagement with
government and industry to help drive the transition.
Further information is available in our sustainability report 2024
1
Sourced from Department for Energy Security and Net Zero – 2022 UK greenhouse
gas emissions.
2
UK emissions from 2022, including energy supply were 106.6 MtCO2e for built
environment, 90.2 MtCO2e for Passenger Car, Electric Vehicle, Buses and Light Duty
Vehicles, and aviation transport and 49.1 MtCO2e for sustainable farming and food.
Total UK emissions from 2022, including energy supply where 406.0MtCO2e for the
entire UK.
3
UK emissions from energy supply in 2022 were 85.7MtCO2e.
.
Lloyds Banki
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56
Scottish Widows
Our ambition
To align all our investments with the goals
of the Paris Agreement, reaching net zero
carbon emissions by 2050 or sooner.
To support our ambition we have set ourselves the following targets:
•
Invest between £20 billion to £25 billion in climate-aware
investment strategies1 , with at least £1 billion invested into climate
solutions investments by 2025
•
Halving the carbon footprint2,3 of our investment portfolios by 2030
Our progress
tCO2e/£m reduction
l Progress
l 2030 target
Our 2023 carbon footprint was 64.7 tCO2e/£m, down from
our 2019 baseline of 116.1 tCO2e/£m. The carbon footprint
has continued to decline from 2019 to 2023. Whilst investee
company emissions have declined, most notably in 2020 because
of reduced production and energy usage during the COVID-19
pandemic, company market values have increased by more in
2023 which has led to a further reduction in the footprint. As the
carbon footprint is sensitive to market fluctuations in addition to
the absolute value of emissions and our own investment activity,
we expect to see short-term variation of the footprint and will
be studying the medium-term trend from future reporting.
Our five-year Climate Action Plan, launched in 2022 outlines our
current plans for action on climate change with regard to our
overall portfolio. It sets out four key actions to aid us in achieving
our net zero targets and our ambition to align with the goals of
the Paris Agreement.
The following activities have contributed to the progress on our
Climate Action Plan since its launch:
•
Develop climate-aware investment strategies and climate
solutions1 investments
•
Product development and strategic asset allocation actions
have seen Scottish Widows achieve its 2025 target early.
See progress table on the left.
•
Integrate climate considerations into asset allocation
optimisation
•
Our Responsible Investment and Stewardship Framework
and policies influence fund selection and asset allocation
decisions across our portfolio to ensure that material ESG
considerations are embedded
•
Exclude high-carbon investments that we believe present a
high risk of becoming stranded assets
•
In place since 2020 our exclusion policy helps to ensure that
our investment approach is aligned with the long-term
interests of our customers. As two of the most CO2-intensive
fossil fuels, companies involved in thermal coal and tar sands
are not aligned with our long-term investment strategy
•
Focus our stewardship activity on companies failing to
address climate risk
Scottish Widows is currently in the process of revising its Climate
Action Plan, with a new plan expected to be released in 2025
covering the period from 2025 to 2030. Further details on this
activity is included in our sustainability report 2024
on
page 117.
1
Climate-aware investment strategies: This refers to funds that have a focus on
investment in companies that are either adapting this business to reduce carbon
emissions or developing solutions to address climate change. We will invest in
climate solution investments either within these strategies or other funds. For more
information on our calculation methodology for these targets please see the
sustainability metrics basis of reporting 2024 which is available on our sustainability
downloads
.
2
From a 2019 baseline.
3
Carbon footprint is a measure of carbon intensity calculated as absolute value
of emissions applicable to an investment divided by the value of investment.
The carbon footprint measured, where data is available, for year-end 2023 was
64.7 tCO2e/£m against a 2019 baseline of 116.1 tCO2e/£m .
Indicator is subject to limited assurance by Deloitte LLP for further details see
page 54.
Summary of our progress
Sustainable finance and investment target
2024
Commercial Banking
£30 billion sustainable finance1 for Commercial Banking2
customers from 1 January 2024 to end of 2026
£10.7bn
Motor
£8 billion financing for EV and plug-in hybrid electric
vehicles by 20243
£9.4bn
EPC A and B mortgage lending
£10 billion of mortgage lending for EPC A and B rated
properties by 20244
£11.4bn
£20–£25 billion discretionary investment in climate-
aware5 strategies by 2025
£25.9bn
Scottish Widows
1
As defined within the sustainable financing framework.
2
Commercial Banking target relates to both corporate and institutional customers and
small and medium businesses. In the prior year we achieved our previous sustainable
finance target for corporate and institutional customers. The cumulative sustainable
finance supported since 2022 is £26.5 billion for Commercial Banking.
3
Includes new lending advances for Black Horse and operating leases for Lex Autolease
(gross) and operating leases for Tusker (gross, post-acquisition by the Group in February
2023 only); includes cars and vans. £3.7 billion achieved in 2024.
4
New mortgage lending on UK (excluding Channel Islands) residential property that meets
an Energy Performance Certificate (EPC) rating of B or higher. The target includes re-
mortgages but excludes further advances. £11.4 billion covers the period from January 2022
to September 2024. With £3.1 billion achieved from 1 January 2024 to 30 September 2024.
5
This refers to funds that have a focus on investment in companies that are either
adapting their business to reduce carbon emissions or developing solutions to address
climate change.
Indicator is subject to limited assurance by Deloitte LLP for further details see page 54.
New targets
Other information
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Risk management
We have set two new consumer lending sustainable financing
targets from 2025
EPC A and B mortgage lending
£11 billion of mortgage lending for EPC A and B rated properties by
2027
Motor
£10 billion financing for electric vehicles by 2027
Lloyds Banking Group plc Annual Report and Accounts 2024
57
Our progress
Net zero ambition progress
l Progress l 2030 ambition
Net zero carbon operations by 2030
1
From a 2018/19 baseline.
2
From 2023/24 our travel related carbon emissions pledge considers domestic
travel only.
3
Reduce operation waste by 80 per cent by 2025 from a 2014/2015 baseline.
4
Water neutrality across our buildings, reducing our water consumption as much as
possible, and offsetting the residual volume. Includes water consumption across
our full operational estate.
Our actions
We continue to make strong progress against our ambition
and pledges. We recognise that achieving these will not be easy,
and we will need to keep investing in our buildings, as well as
supporting colleagues in the transition towards a greener future.
To reduce our direct emissions, we continue to commit to the
procurement of 100 per cent renewable electricity. We signed
a three-year corporate power purchase agreement (PPA) to
complement our longer-term PPA agreed in the previous year.
This short-term agreement will cover around 25 per cent of our
electricity requirement, providing a direct line of sight from the
electricity produced from two onshore wind farms to our
buildings. We will continue our drive to reduce the energy
consumption of our property portfolio and invest in upgrading
our properties with better and more efficient lighting.
Our operating model has evolved since originally setting our
travel pledge in 2021, with the Group drawing more select skills
from the global market; we have therefore had to re-assess
our existing travel pledge commitment. The operating model
evolution has impacted our carbon emissions through a need for
increased international travel by our colleagues. From reporting
year 2023/24, we have revised the elements reported within our
travel pledge to focus on domestic travel only aligned with our
action plans. This includes domestic commuting, business travel
and company vehicles.
Moving forward, we will continue to actively promote
sustainable travel options and monitor international travel
emissions. We commit to putting controls in place to minimise
international emissions to a essential level.
Further details of progress against our operation pledges can be
found within the sustainability report 2024
.
Supporting the transition to net zero continued
Supply chain
Our ambition
Reduce our supply chain emissions by
50 per cent by 2030, on a path to net
zero by 2050.1
Our progress
tCO2e
Restated
baseline2 year
2021/22
2022/23
Current
year
2023/24
Scope 3 emissions GHG
Protocol Categories 1,2,4
532,168
627,275
560,506
1
From a 2021/22 baseline.
2
Our supply chain emissions have been calculated using supplier emissions
disclosure data where possible which is supplemented with CEDA carbon factors
when we are unable to draw on supplier emissions. Our numbers were restated in
2024 to account for revised CEDA emission factors.
Our operations
Our ambition
Achieve net zero own operations by
2030, based on our 2018/19 baseline.
The delivery of our ambition is supported by five pledges:
•
Reduce our direct carbon emissions by at least 90 per cent
by 20301
•
Reduce total energy consumption across our operations
by 50 per cent by 20301
•
Maintain travel-related carbon emissions below 50 per cent1,2
•
Zero waste by 2030 (includes our legacy waste reduction pledge)3
•
Water neutrality by 20304
Indicator is subject to limited assurance by Deloitte LLP see page 54 for details.
We recognise the significant challenges we face in meeting our
ambition given the indirect nature of supply chain emissions,
the drive to grow our business, the need for new technologies
including the use of AI, and policies to support achievement
of it. We are committed to managing our demand for goods
and services sustainably and working collaboratively with
suppliers on our shared journey to net zero, notably through
the Emerald Standard.
In October 2024, the Comprehensive Environmental Data
Archive (CEDA), published updated carbon factors for the year
2022 and in line with the Green House Gas (GHG) Protocol, we
took the decision to apply these retrospectively to our prior
disclosures which includes our baseline year (October 2021 to
September 2022). We believe it is important to provide the most
accurate view of our emissions based on available data. As a
result, our restated emissions are lower compared to those
previously disclosed for our baseline year and baseline year +1.
For the latest reporting period, October 2023 to September
2024, emissions are calculated from supplier spend totalling
£4.6 billion (net of VAT). This represents a 15 per cent increase in
supplier spend compared to our baseline year. Emissions have
also risen but at a lower rate of 5 per cent over the same period,
illustrated by a reduction in our emissions intensity from 132
tCO2e/£M to 121 tCO2e/£M.
We continue to support our key suppliers on their
decarbonisation journey through the Emerald Standard engaging
with 162 suppliers in 2024. These suppliers represent more than
80 per cent of our supply chain spend and supply chain emissions
as disclosed in our
sustainability report 2023
.
We assess our key suppliers across four areas:
•
GHG emissions calculation and disclosure
•
Net zero commitments
•
Science-aligned emission reduction targets
•
ESG scorecard
Additional details on our supply chain emissions and our Emerald
Standard are included within our sustainability report 2024
.
58
Lloyds Banking Group plc Annual Report and Accounts 2024
Streamlined energy carbon reporting
Methodology
The Group follows the principles of the Greenhouse Gas (GHG)
Protocol Corporate Accounting and Reporting Standard to
calculate Scope 1, 2 and 3 emissions from our worldwide operations.
Energy consumption is calculated according to guidance set out by
the Department for Energy Security and Net Zero. The reporting
period is 1 October 2023 to 30 September 2024.
Emissions are reported based on the operational control approach.
Reported Scope 1 emissions are from activities for which the
Group is responsible, including those generated from gas and oil
used in buildings, emissions from fuels used in UK company
owned vehicles used for business travel, and fugitive emissions
from the use of air conditioning and chiller/refrigerant plant
Reported Scope 2 emissions are generated from the use and
purchase of electricity and imported heat through heat networks
which are calculated in line with GHG protocol using both the
location and market-based methodologies
Reported Scope 3 emissions relate to business travel (category 6)
and commuting (category 7) undertaken by colleagues, emissions
from colleagues working from home (category 7), operational
waste (category 5) and the extraction and distribution of each of
our energy sources – electricity, imported heating, gas and oil
(category 3). Scope 3 emissions do not include purchased goods
and services, capital goods and upstream transportation and
distribution (category 1, 2 and 4) and investments (category 15),
these figures are included in our supply chain and financed
emissions reporting shown on pages 54 to 58
The methodology to derive reported Scope 1, 2 and 3 emissions is
provided in the
•
•
•
•
sustainability metrics basis of reporting 2024
Exclusions
Emissions associated with our joint ventures and investments are
not currently calculated as they fall outside the scope of our
operational boundary. The Group does not have any emissions
associated with the purchase of steam or cooling for its own use
and is not aware of any other material sources of omissions from
our reporting.
Intensity ratio
October 2023 to
September 2024
October 2022 to
September 20231
October 2021 to
September 20221
GHG emissions (CO2e)
per £m of underlying
income (location based)
10.2
9.8
10.1
GHG emissions (CO2e)
per £m of underlying
income (market based)
7.2
6.8
6.7
1
Intensities have been restated for 2021/22 and 2022/23 emissions data to improve the
accuracy of reporting, using actual data to replace estimates and improvements to
fugitive gas calculations. Underlying income figures for those years have not changed.
Our overall location-based carbon emissions2 were 174,661 tonnes
CO2e; a 0.9 per cent decrease year on year. While our overall
market-based3 carbon emissions were 123,960 tonnes CO2e;
a 1.1 per cent increase since 2022/23. Group energy consumption
(electricity and gas) has continued to reduce in line with extensive
investment in energy efficiency across our buildings and adaptations
to our established hybrid work style, this has been offset by an
increase in our emissions from business travel. The Group promotes
sustainable travel through our sustainable car scheme and refreshed
travel and expenses colleague guidance.
2
Includes Scope 1, 2 emissions and Scope 3 categories 3, 5, 6 and 7. Scope 3 categories 1,
2, 4 and 15 are excluded.
3
Since January 2019, our Scope 2 market-based emissions relating to electricity
consumption are zero tCO2e as we have procured renewable electricity mainly through
our Power Purchase Agreement (PPA) and Green Tariff, and renewable certificates
equivalent to the remainder to make up the total electricity consumption in each of the
markets in which we operate.
Carbon emissions (tonnes CO2e)
October 2023 to
September 2024
tonnes CO2e
October 2022 to
September 2023
tonnes CO2e4
October 2021 to
September 2022
tonnesCO2e4
Total tCO2e
(location based)
174,661
176,320
176,446
Total tCO2e
(market based)
123,960
122,564
117,671
Total Scope 1 and 2
(location based)
71,146
75,494
86,251
Of which: UK Scope 1
and 2 (location based)
70,427
74,732
85,384
Total Scope 1 and 2
(market based)
20,445
21,738
27,475
Of which: UK Scope 1
and 2 (market based)
20,262
21,528
27,208
Total Scope 1
20,441
21,727
27,473
Total Scope 2
(market based)
4
11
2
Of which: Electricity
–
–
–
Total Scope 2
(location based)
50,704
53,767
58,777
Total Scope 3
103,515
100,826
90,196
Indicator is subject to limited assurance by Deloitte LLP see page 54 for details
4
Metrics have been restated for 2021/22 and 2022/23 emissions data to improve the
accuracy of reporting, using actual data to replace estimates and improvements to
fugitive gas calculations.
Further information covering our baseline year 2018/19 to 2023/24 is
available in our sustainability metrics datasheet 2024
.
Focusing
on reducing
our operational
carbon footprint
This year, we entered into two new
long-term power purchase agreements
to purchase renewable electricity
from specific wind and solar assets across
the UK. Not only does this provide valuable
focus and support for UK renewable energy
generation, it is also an essential component
of the Group’s ambition for our own
operations to be net zero by 2030,
locking in supply and price stability.
Banking Group plc Ann
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Other information
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Risk management
Lloyds Banki
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Global energy use (kWhs)
October 2023 to
September 2024
kWhs
October 2022 to
September 2023
kWhs1
October 2021 to
September 2022
kWhs1
Total global
energy use
334,739,294
362,639,743
420,824,628
Of which:
UK energy use
331,150,563
358,779,700
416,340,738
Total building
energy
320,967,285
347,966,736
409,209,957
Total Company
owned vehicle
energy
8,704,843
10,108,961
7,599,309
Total grey fleet2
vehicle energy
5,067,165
4,564,047
4,015,361
1
Restated data since 2021/22 to improve the accuracy of reporting, using actual data to
replace estimates and updates to historical emissions. Scope 3 – Business Travel
(category 6) also restated to reflect improving data coverage for Air and Rail emissions.
2
Grey fleet refers to colleague and hired road vehicles being used for a business purpose.
Indicator is subject to limited assurance by Deloitte LLP see page 54 for details.
Energy efficiency
Our ongoing optimisation programme continues to support
energy savings in 2024 across our own operations. This workstream
includes efficiency improvements such as energy efficient
lighting, fabric improvements and increased delivery of building
management systems. In addition to this work, we have undertaken
strategic alterations of building management and control systems to
match the businesses core operating hours and ensure temperature
settings are aligned with Group comfort guidelines.
During the year, we completed 60 LED installations across our
branch network bringing our total LED installations to over 350
branches. We completed either full or partial LED installations
across a total of 22 offices within our portfolio. In 2024, we
have added another 49 properties to our connected branches
programme. This provides a remote monitoring solution which
enables us to utilise the building management technology to ensure
our building heating, ventilation and air conditioning is performing
as required.
We have also optimised power usage, leveraged technology,
and implemented innovative solutions to reduce consumption
in our data centres. Alongside safely decommissioning our older,
less efficient data centres, we are building a new highly energy
efficient one.
Financial planning and controls
How sustainability is factored into our
internal reporting and planning process
Climate considerations form part of our planning and forecasting
activities. We consider climate effects in our base case economic
scenario and forecast financed emissions alongside climate risks and
opportunities within the Group’s four-year financial plan, primarily
across four key areas Bank financed emissions, Scottish Widows
investment carbon intensity, own operation and supply chain.
Our financial planning process acknowledges the dependencies on
external factors such as policies, technology developments and
customer behaviour. We continue to monitor the impact of these
external factors on our Group ambitions and targets alongside
working in partnership with our customers and other stakeholders
to achieve our common ambition of achieving net zero by 2050.
How finance is supporting the Bank’s reporting
of sustainability-related matters
•
•
Forecasting our Bank financed emissions to 2030 for our high-
carbon-intensive sectors, along with our supply chain and own
operations. In 2024 we enhanced this forecast to include
Scottish Widows carbon investment footprint to 2030, now
covering all our Group emissions ambitions
We have established capability to report our sustainable lending
and investments progress on a quarterly basis as well as regularly
reporting our financed emissions, providing management with
insight on our progress against our ambitions and targets. This
process is used to support executive remuneration and Board risk
appetite metrics. In 2025 we will explore how this reporting can
be extended to consider wider social sustainability metrics
•
•
We have implemented a number of controls in relation to the
calculation and reporting of financed emissions and in 2024
enhanced our controls in relation to sustainability-related
regulatory disclosures
Finance track sustainability-related investment across key
climate, nature and social initiatives through direct engagement
with business unit teams ensuring alignment and prioritisation
with our strategic objectives. As part of this, the Group has
dedicated investment of c.£30 million to support our customers’
transition in 2024, in addition to the day-to-day activities
integrated into business-as-usual. Regular monitoring of our
sustainability-related investment across the Group aligns our
financial goals with our purpose, supporting the ability to
measure progress and delivery
Financial statement preparation includes consideration of the
impact of climate change on the Group’s financial position. While
the effects of climate change represent a source of uncertainty, the
Group does not consider there to be a material short-term impact,
see page 174 for further details.
Supporting the transition to net zero continued
60
Lloyds Banking Group plc Annual Report and Accounts 2024
Financial results
In this section
Results for the full year
62
Divisional results
72
Delivering
long-term,
sustainable
returns
We are Helping Britain Prosper in a way
that delivers sustainable profit and growth
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
Lloyds Banking Group plc Annual Report and Accounts 2024
61
2024
£m
2023
£m
Change
%
Underlying net interest income
12,845
13,765
(7)
Underlying other income
5,597
5,123
9
Operating lease depreciation
(1,325)
(956)
(39)
Net income
17,117
17,932
(5
)
Operating costs
(9,442)
(9,140)
(3)
Remediation
(899)
(675)
(33)
Total costs
(10,341)
(9,815)
(5
)
Underlying profit before impairment
6,776
8,117
(1 7)
Underlying impairment charge
(433)
(308)
(4
1)
Underlying profit
6,343
7,809
(1 9)
Restructuring
(40)
(154)
74
Market volatility and asset sales
(144)
35
Amortisation of purchased intangibles
(81)
(80)
(1 )
Fair value unwind
(107)
(107)
Volatility and other items
(332)
(152)
Statutory profit before tax
5,971
7,503
(20
)
Tax expense
(1,494)
(1,985)
25
Statutory profit after tax
4,477
5,518
(1 9)
Earnings per share
6.3p
7.6p
(1.3) p
Dividends per share – ordinary
3.17p
2.76p
1 5
Share buyback value
£1.7bn
£2.0bn
(1 5)
Banking net interest marginA
2.95%
3.11%
(16)bp
Average interest-earning banking assetsA
£451.2bn
£453.3bn
Cost:income ratioA
60.4%
5 4.7%
5.7 pp
Asset quality ratioA
0.10%
0 .07 %
3bp
Return on tangible equityA
12.3%
1 5.8%
(3.5
) pp
A
See page 314.
Key balance sheet metrics
At 31 Dec
2024
At 31 Dec
2023
Change
%
Underlying loans and advances to customersA
£459.1bn
£449.7bn
2
Customer deposits
£482.7bn
£471.4bn
2
Loan to deposit ratioA
95
%
9 5%
CET1 ratio
14.2%
1 4.6%
(0
.4) pp
Pro forma CET1 ratioA,1
13.5%
1 3.7%
(0
.2) pp
UK leverage ratio
5.5%
5 .8%
(0
.3) pp
Risk-weighted assets
£224.6bn
£219.1bn
3
Wholesale funding2
£92.5bn
£98.7bn
(6)
Wholesale funding <1 year maturity2
£31.3bn
£35.1bn
(1 1)
of which: money market funding <1 year maturity2
£16.9bn
£23.8bn
(29)
Liquidity coverage ratio – eligible assets3
£134.4bn
£136.0bn
(1 )
Liquidity coverage ratio4
1 46%
142
%
4 pp
Net stable funding ratio5
1 29%
13
0%
( 1)p p
Tangible net assets per shareA
52.4p
50.8p
1.6p
1
31 December 2023 and 31 December 2024 reflect both the full impact of the share buybacks announced in respect of 2023 and 2024 and the ordinary dividends received from the
Insurance business in February 2024 and February 2025.
2
Excludes balances relating to margins of £2.8 billion (31 December 2023: £2.4 billion).
3
Eligible assets are calculated as a monthly rolling simple average of month end observations over the previous 12 months post any liquidity haircuts.
4
The liquidity coverage ratio is calculated as a simple average of month-end observations over the previous 12 months.
5
The net stable funding ratio is calculated as a simple average of month-end observations over the previous four quarter-ends.
Income statement – underlying basisA
62
Lloyds Banking Group plc Annual Report and Accounts 2024
At 31 Dec
2024
£bn
At 30 Sep
2024
£bn
Change
%
At 30 Jun
2024
£bn
Change
%
At 31 Dec
2023
£bn
Change
%
UK mortgages1,2
312.3
310.1
1
306.9
2
306.2
2
Credit cards
15.7
15.7
15.6
1
15.1
4
UK Retail unsecured loans
9.1
8.8
3
8.2
1 1
6.9
32
UK Motor Finance3
15.3
15.6
(2)
16.2
(6)
15.3
Overdrafts
1.2
1.1
9
1.0
2 0
1.1
9
Retail other1,4
17.9
17.3
3
17.2
4
16.6
8
Business and Commercial Banking5
29.7
30.7
(3)
31.5
(6)
33.0
(1 0)
Corporate and Institutional Banking
57.9
57.2
1
56.6
2
55.6
4
Central Items6
–
0.5
(0.8)
(0.1)
A
Underlying loans and advances to customers
459.1
457.0
452.4
1
449.7
2
Retail current accounts
101.3
100.6
1
101.7
102.7
(1 )
Retail savings accounts7
208.2
204.3
2
201.5
3
194.8
7
Wealth
10.2
10.1
1
10.1
1
10.9
(6)
Commercial Banking
162.6
160.7
1
161.2
1
162.8
Central Items
0.4
–
0.2
0.2
Customer deposits
482.7
475.7
1
474.7
2
471.4
2
Total assets
906.7
900.8
1
892.9
2
881.5
3
Total liabilities
860.8
854.4
1
847.8
2
834.1
3
Ordinary shareholders’ equity
39.5
40.3
(2)
39.0
1
40.3
(2)
Other equity instruments
6.2
5.9
5
5.9
5
6.9
(1 0)
Non-controlling interests
0.2
0.2
0.2
0.2
Total equity
45.9
46.4
( 1)
45.1
2
47.4
(3)
Ordinary shares in issue, excluding own shares
60,491m
61,419m
(2)
62,458m
(3)
63,508m
(5
)
1
From the first quarter of 2024, open mortgage book and closed mortgage book loans and advances, previously presented separately, are reported together as UK mortgages; Wealth
loans and advances, previously reported separately, are included within Retail other. The 31 December 2023 comparative is presented on a consistent basis.
2
The increases between 31 December 2023 and 30 June 2024 and between 30 September 2024 and 31 December 2024 are net of the impact of the securitisations of primarily legacy
Retail mortgages of £0.9 billion and £1.0 billion respectively.
A
3
UK Motor Finance balances on an underlying basis exclude a finance lease gross up. See page 314.
4
Within underlying loans and advances, Retail other includes the European and Wealth businesses.
5
Previously named Small and Medium Businesses.
6
Central Items includes central fair value hedge accounting adjustments.
7
From the first quarter of 2024, Retail relationship savings accounts and Retail tactical savings accounts, previously reported separately, are reported together as Retail savings
accounts. The 31 December 2023 comparative is presented on a consistent basis.
Balance sheet analysis
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
63
Lloyds Banking Group plc Annual Report and Accounts 2024
Statutory results
The Group’s profit before tax for 2024 was £5,971 million, 20 per cent lower than in 2023. This was driven by lower total income,
higher operating expenses and a higher impairment charge. Profit after tax was £4,477 million and earnings per share was 6.3 pence
(2023: £5,518 million and 7.6 pence respectively).
Total income, after net finance expense in respect of insurance and investment contracts for 2024 was £18,003 million, a decrease of 3 per
cent on 2023. Within this, net interest income of £12,277 million was down 8 per cent on the prior year, driven by a lower margin. The
margin performance over the year reflected anticipated headwinds due to deposit churn and asset margin compression, particularly in the
mortgage book as it refinances in a lower margin environment. These factors were partially offset by benefits from higher structural hedge
earnings as balances are reinvested in the higher rate environment.
Other income amounted to £22,004 million in 2024, broadly in line with 2023. Within other income, net trading income was
£17,825 million compared to £18,049 million in 2023. Within the Group’s insurance activities, net trading income was £16,013 million in
2024 (2023: £16,742 million), a decrease of £729 million largely reflecting less favourable market performance in 2024. Within the Group’s
banking activities, net trading income was £1,812 million (2023: £1,307 million) with growth in Commercial Banking driven by strong markets
performance and higher levels of client activity. Outside of net trading income within Retail, there was improved performance in UK Motor
Finance, with growth following the acquisition of Tusker in 2023 and higher average vehicle rental values. Net fee and commission income
was £1,759 million compared to £1,831 million in 2023. The £729 million decrease in net trading income within the Group’s insurance
activities was largely offset by the £498 million decrease in net finance expense in respect of insurance and investment contracts.
Total operating expenses of £11,601 million were 7 per cent higher than in the prior year. This reflects higher operating lease
depreciation, as a result of fleet growth, the depreciation of higher value vehicles and declines in used electric car prices, primarily in the
first half, alongside inflationary pressures, business growth costs and ongoing strategic investments including severance. It also includes
c.£0.1 billion relating to the sector-wide change in the charging approach for the Bank of England Levy taken in the first quarter, largely
offset across the year in net interest income. The Group has maintained its cost discipline with cost efficiencies partly offsetting these
items. In 2024, the Group recognised remediation costs of £899 million (2023: £675 million), including a £700 million provision in relation
to the potential impact of motor finance commission arrangements, alongside £199 million charges in relation to pre-existing programmes.
Asset quality remains strong with improved credit performance in the year. The impairment charge was £431 million compared to a
£303 million charge in 2023 (which benefitted from a significant write-back following the full repayment of debt from a single name client).
The charge in 2024 includes a credit from an improved economic outlook, notably house price growth and changes in the first half of the
year to the severe downside scenario methodology. The charge also benefitted from strong portfolio performance and the release of
judgemental adjustments for inflation and interest rate risks in 2024, as well as a release in Commercial Banking from loss rates used in the
model in the first half of the year and a debt sale write back in Retail in the third quarter.
The Group saw good lending growth in 2024 with loans and advances to customers increasing by £10.2 billion to £459.9 billion. This
included £6.1 billion growth in UK mortgages (net of the impact of the securitisation of £1.9 billion of primarily legacy Retail mortgages in
the second and fourth quarters), £2.2 billion growth in UK Retail unsecured loans driven by organic balance growth and lower repayments
following a securitisation in the fourth quarter of 2023, alongside a £0.6 billion increase in credit card balances and growth in other Retail
lending (principally in the European retail business). In Commercial Banking, Business and Commercial Banking lending decreased by
£3.3 billion, including repayments of £1.6 billion of government-backed lending. Corporate and Institutional Banking balances increased
£2.3 billion from strategic growth, notably higher infrastructure lending.
Customer deposits of £482.7 billion significantly increased in the year by £11.3 billion. Retail deposits were up £11.3 billion in the year driven
by inflows to limited withdrawal and fixed term deposits, partly offset by a £1.4 billion reduction in current account balances. Commercial
Banking deposits were stable in the year, reflecting growth in target sectors offset by an expected outflow in the third quarter.
Total equity of £45.9 billion at 31 December 2024 decreased from £47.4 billion at 31 December 2023. The movement reflected attributable
profit for the year and issuance of an AT1 capital instrument in October 2024, which was more than offset by the dividends paid in
May 2024 and September 2024, the impact of redemption of AT1 capital instruments in June 2024 and December 2024 and the impact of
the share buyback programme in respect of 2023.
Summary of Group results
Lloyds Banking Group plc Annual Report and Accounts 2024
64
Underlying resultsA
The Group’s underlying profit was £6,343 million in 2024, a reduction of 19 per cent compared to £7,809 million in the prior year with lower
net income, higher operating costs and higher remediation and underlying impairment charges. Underlying profit of £993 million in the
fourth quarter was down 46 per cent compared to the third quarter of 2024, with net income slightly up, more than offset by higher
operating costs, including the annual Bank Levy and a charge for the potential impacts of motor finance commission arrangements.
Net incomeA
2024
£m
2023
£m
Change
%
Underlying net interest income
12,845
13,765
(7)
Underlying other income
5,597
5,123
9
Operating lease depreciation1
(1,325)
(956)
(39)
Net incomeA
17,117
17,932
(5)
Banking net interest marginA
2.95%
3.11%
(16)bp
Average interest-earning banking assetsA
£451.2bn
£453.3bn
1
Net of profits on disposal of operating lease assets of £59 million (31 December 2023: £93 million).
Net income of £17,117 million was down 5 per cent on 2023, driven by lower underlying net interest income and an increased charge for
operating lease depreciation. This was partly offset by higher underlying other income. Net income in the fourth quarter of 2024 was
slightly up on the third quarter, building on the growth seen in the third quarter.
Underlying net interest income of £12,845 million was down 7 per cent on 2023, with a resilient banking net interest margin of 2.95 per cent
(2023: 3.11 per cent), compared to guidance of greater than 2.90 per cent, benefitting from fewer than expected UK Bank Rate cuts, the
change in charging approach for the Bank of England Levy, solid deposit volumes and the structural hedge contribution. The margin
performance over the year reflected anticipated headwinds due to deposit churn and asset margin compression, particularly in the
mortgage book as it refinances in a lower margin environment. These factors were partially offset by benefits from higher structural hedge
earnings as balances are reinvested in the higher rate environment. Average interest-earning banking assets in 2024 of £451.2 billion were in
line with guidance and broadly stable versus 2023. This includes growth across Retail products partly offset by the impact of securitisations,
alongside a reduction in Commercial Banking assets, which included continued repayments of government-backed lending in Business and
Commercial Banking and lower lending to banks. Underlying net interest income in 2024 included a non-banking net interest expense of
£469 million (2023: £311 million), increasing as a result of higher funding costs and growth in the Group’s non-banking businesses.
Underlying net interest income of £3,276 million in the fourth quarter of 2024 was 1 per cent higher than in the third quarter (three months
to 30 September 2024: £3,231 million), building on growth in the third quarter. Growth in structural hedge earnings more than offset the
impact from the expected continuation of headwinds in respect of deposit churn and asset margin compression, resulting in an increase in
banking net interest margin to 2.97 per cent in the fourth quarter (three months to 30 September 2024: 2.95 per cent). Average interest-
earning banking assets were £455.1 billion, up on the third quarter from growth in UK mortgages, Retail unsecured loans and Corporate and
Institutional Banking. The non-banking net interest expense was in line with the third quarter. Looking forward, the Group expects the
underlying net interest income for 2025 to be c.£13.5 billion.
The Group manages the risk to earnings and capital from movements in interest rates by hedging the net liabilities which are stable or
less sensitive to movements in rates. At the end of the fourth quarter, the notional balance of the sterling structural hedge was
maintained at £242 billion (31 December 2023: £247 billion) with a weighted average duration of approximately three-and-a-half years
(31 December 2023: approximately three-and-a-half years). This is consistent with the balance at the end of the second and third quarters
of 2024 (30 September 2024: £242 billion, 30 June 2024: £242 billion), given stability in deposit flows. The Group generated £4.2 billion of
total income from sterling structural hedge balances in 2024, representing material growth over the prior year (2023: £3.4 billion). The
Group expects sterling structural hedge earnings in 2025 to be £1.2 billion higher than in 2024 and £1.5 billion higher in 2026 than in 2025.
Underlying other income in 2024 of £5,597 million grew by 9 per cent (2023: £5,123 million). Retail was up 10 per cent versus 2023, primarily
due to UK Motor Finance, including growth following the acquisition of Tusker in 2023 and higher average vehicle rental values. Within
Commercial Banking growth of 8 per cent was driven by strong markets performance as a result of strategic investment and higher levels of
client activity. Insurance, Pensions and Investments underlying other income grew by 7 per cent compared to 2023 driven by strong trading
and higher general insurance income net of claims and after the disposal of the in-force bulk annuities portfolio. In Equity Investments and
Central Items, underlying other income was up 50 per cent on the prior year, driven by strong income growth from Lloyds Living. Underlying
other income in the fourth quarter was 11 per cent higher than the fourth quarter of 2023 with growth across divisions.
The Group delivered organic growth in assets under administration (AuA) in Insurance, Pensions and Investments and Wealth (reported
within Retail), with combined £5.7 billion net new money in open book AuA over 2024. In total, open book AuA stand at c.£201 billion at
31 December 2024.
Operating lease depreciation of £1,325 million increased compared to the prior year (2023: £956 million), as a result of fleet growth,
the depreciation of higher value vehicles and declines in used electric car prices, primarily in the first half. The increase in 2024 includes the
c.£100 million additional charge taken in the second quarter to reflect revised future expected residual values. The charge in the fourth
quarter was £331 million, consistent with expectations, given used car prices have performed in line with assumptions.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
65
Lloyds Banking Group plc Annual Report and Accounts 2024
Total costsA
2024
£m
2023
£m
Change
%
Operating costsA
9,442
9,140
(3)
Remediation
899
675
(33)
Total costsA
10,341
9,815
(5)
Cost:income ratioA
60.4%
54.7%
5.7 pp
Total costs, including remediation, of £10,341 million were 5 per cent higher than the prior year, with operating costs of £9,442 million up
3 per cent. Operating costs include c.£0.1 billion relating to the sector-wide change in the charging approach for the Bank of England Levy
taken in the first quarter. Excluding the Levy, operating costs were up 2 per cent. The Group has maintained its cost discipline with cost
efficiencies helping to partially offset inflationary pressures, business growth costs and ongoing strategic investments including severance.
Operating costs in 2025 are expected to be c.£9.7 billion, including further increased severance and the impact from National Insurance
contributions changes (c.£0.1 billion).
The Group recognised remediation costs of £899 million in 2024 (2023: £675 million), with £775 million in the fourth quarter, including an
additional £700 million in relation to the potential impact of motor finance commission arrangements in light of the Court of Appeal
(CoA) judgment in relation to Wrench, Johnson and Hopcraft (WJH) in October 2024, which goes beyond the scope of the original FCA
motor finance commissions review. The Supreme Court granted the relevant lenders permission to appeal the WJH judgment and the
substantive hearing is scheduled to be heard on 1 April to 3 April 2025. The total £1,150 million provision, including £450 million provided
in 2023, represents the Group’s best estimate of the potential impact, including both redress and operational costs, but notes that there
is a significant level of uncertainty in terms of the final outcome. As a result, the final financial impact could differ materially to the
amount provided.
The Group’s cost:income ratio for 2024 was 60.4 per cent compared to 54.7 per cent in the prior year, and 73.7 per cent in the fourth
quarter impacted by the provision charge for motor finance commission arrangements and the Bank Levy.
Underlying impairmentA
2024
£m
2023
£m
Change
%
Charges (credits) pre-updated MES1
Retail
789
1,064
26
Commercial Banking
48
(487)
Other
(10)
(12)
(17)
827
565
(46)
Updated economic outlook
Retail
(332)
(233)
42
Commercial Banking
(62)
(24)
(394)
(257)
53
Underlying impairment chargeA
433
308
( 41)
Asset quality ratioA
0.10
%
0 .07 %
3bp
Total expected credit loss allowance (at end of year)A
3,651
4,337
16
1
Impairment charges excluding the impact from updated economic outlook (multiple economic scenarios, MES) taken each quarter.
Asset quality remains strong with improved credit performance in the year. Underlying impairment was a charge of £433 million
(2023: £308 million), resulting in an asset quality ratio of 10 basis points. The charge reflects a £394 million multiple economic scenarios
(MES) credit (2023: £257 million credit) from an improved economic outlook, notably house price growth and changes in the first half of the
year to the severe downside scenario methodology. The charge in the fourth quarter of £160 million includes a £70 million MES credit.
The pre-updated MES charge of £827 million is equivalent to an asset quality ratio of 19 basis points. This is higher than the prior year pre-
updated MES charge of £565 million, which benefitted from a significant write-back following the full repayment of debt from a single
name client. The charge in 2024 benefitted from strong portfolio performance and the release of judgemental adjustments for inflation and
interest rate risks in 2024, as well as a one-off release in Commercial Banking from loss rates used in the model in the first half of the year
and a one-off debt sale write back in Retail in the third quarter. In the fourth quarter, the pre-updated MES charge was £230 million,
equating to 20 basis points. Looking forward, the Group expects the asset quality ratio to be c.25 basis points in 2025.
Summary of Group results continued
66
Lloyds Banking Group plc Annual Report and Accounts 2024
Restructuring, volatility and other items
Restructuring costs during 2024 were £40 million (2023: £154 million) and include costs relating to the integration of Embark and Tusker as
well as those related to a contract termination. Volatility and other items were a net loss of £332 million for the year (2023: net loss of
£152 million). This included £81 million for the amortisation of purchased intangibles (2023: £80 million) and £107 million relating to fair
value unwind (2023: £107 million). Negative market volatility of £144 million (2023: positive volatility of £35 million) was substantially driven
by longer-term rate rises in the period, driving negative insurance volatility, partly offset by positive impacts from banking volatility. The
fourth quarter volatility and other items charge of £150 million, was primarily driven by insurance volatility including from movements in
interest rates.
The return on tangible equity for 2024 was 12.3 per cent (2023: 15.8 per cent), with 7.1 per cent in the fourth quarter reflecting the
provision charge in relation to the potential impacts of motor finance commission arrangements. Excluding this impact, the return on
tangible equity was 14.0 per cent in 2024 and 13.9 per cent in the fourth quarter. The Group expects the return on tangible equity for
2025 to be c.13.5 per cent.
Tangible net assets per share at 31 December 2024 was 52.4 pence, up 1.6 pence in the year (31 December 2023: 50.8 pence). The increase
resulted from attributable profit and a reduction in the number of shares following the share buyback programme announced in
February 2024. This was offset by capital distributions, a lower pension surplus from negative market impacts and the foreign exchange
impact on the redemption of a US dollar denominated AT1 capital instrument. Tangible net assets per share was down 0.1 pence in the
fourth quarter. The decrease was due to increased long-term rates impacting the cash flow hedge reserve and pension surplus, partly offset
by attributable profit, impacted by the provision charge relating to motor finance commission arrangements.
In February 2024, the Board decided to return surplus capital in respect of 2023 through a share buyback programme of up to £2.0 billion.
This commenced on 23 February 2024 and completed on 13 November 2024 with c.3.7 billion (c.6 per cent) ordinary shares repurchased.
Further information on the reconciliation of statutory to underlying results is included on page 314.
Tax
The Group recognised a tax expense of £1,494 million in the year (2023: £1,985 million). This reflected lower profits than the prior year and
tax credits of £100 million on the finalisation of prior year returns within the fourth quarter charge of £124 million. The Group expects a
medium-term effective tax rate of around 27 per cent based on the banking surcharge rate of 3 per cent and the corporation tax rate of
25 per cent. An explanation of the relationship between the tax expense and the Group’s accounting profit for the year is set out in note 15
to the consolidated financial statements on page 255.
Balance sheet
The Group saw good lending growth in 2024 with underlying loans and advances to customers increasing by £9.4 billion to £459.1 billion.
This included £6.1 billion growth in UK mortgages (net of the impact of the securitisation of £1.9 billion of primarily legacy Retail mortgages
in the second and fourth quarters), £2.2 billion growth in UK Retail unsecured loans driven by organic balance growth and lower
repayments following a securitisation in the fourth quarter of 2023, alongside a £0.6 billion increase in credit card balances and growth in
other Retail lending (principally in the European retail business). In Commercial Banking, Business and Commercial Banking lending
decreased by £3.3 billion, including repayments of £1.6 billion of government-backed lending. Corporate and Institutional Banking balances
increased £2.3 billion from strategic growth, notably higher infrastructure lending. Growth of £2.1 billion in underlying loans and advances to
customers in the fourth quarter included £2.2 billion in UK mortgages (net of the £1.0 billion impact from a securitisation) and stable
Commercial Banking balances.
Customer deposits of £482.7 billion significantly increased in the year by £11.3 billion, including £7.0 billion in the fourth quarter. Retail
deposits were up £11.3 billion in the year driven by inflows to limited withdrawal and fixed term deposits, partly offset by a £1.4 billion
reduction in current account balances (significantly lower than the prior year, as expected). In the fourth quarter, Retail current account
balances increased by £0.7 billion in contrast to a £1.1 billion reduction in the third quarter helped by calendar timing impacts. Deposit
churn observed within savings and between savings and current accounts was lower in 2024 than in 2023 and lower in the second half of
2024 than in the first half. Commercial Banking deposits were stable in the year, reflecting growth in target sectors offset by an expected
outflow in the third quarter. The increase in Commercial Banking deposits in the fourth quarter of £1.9 billion reflected growth in target
sectors alongside foreign exchange impacts.
The Group has a large, high quality liquid asset portfolio held mainly in cash and government bonds, with all assets hedged for interest rate
risk. The Group’s liquid assets continue to significantly exceed regulatory requirements and internal risk appetite, with a strong, stable
liquidity coverage ratio of 146 per cent (31 December 2023: 142 per cent) and a strong net stable funding ratio of 129 per cent (31 December
2023: 130 per cent). The loan to deposit ratio of 95 per cent, broadly stable compared to 31 December 2023 and 30 September 2024,
continues to reflect a robust funding and liquidity position.
The underlying expected credit loss (ECL) allowance reduced to £3.7 billion (31 December 2023: £4.3 billion) in the period, reflecting
releases driven by improvements to the Group’s economic base case scenario. The uplift from the base case to probability-weighted ECL
is £0.4 billion (31 December 2023: £0.7 billion). The ECL allowance includes judgemental adjustments which reduce the ECL by £15 million
(31 December 2023: £67 million increase to ECL). The reduction in judgemental adjustments in the year was primarily from the release of
those held in respect of inflationary and interest rate risks, which are now stabilising, with a resilient credit performance being observed.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
Lloyds Banking Group plc Annual Report and Accounts 2024
67
Capital
Capital generation
Pro forma CET1 ratio as at 31 December 2023A,1
13.7%
Banking build (bps)2
221
Insurance dividend (bps)
14
Risk-weighted assets (bps)
(14)
Other movements (bps)3
(17)
Retail secured CRD IV increases and phased unwind of IFRS 9 transitional relief (bps)4
(27)
Capital generation excluding provision charge for motor finance commission arrangements (bps)
177
Provision charge for motor finance commission arrangements (bps)
(29)
Capital generation (bps)
148
Ordinary dividend (bps)
(91)
Share buyback accrual (bps)
(80)
Pro forma CET1 ratio as at 31 December 2024A,1
13.5%
1
31 December 2023 and 31 December 2024 reflect both the full impact of the share buybacks announced in respect of 2023 and 2024 and the ordinary dividends received from the
Insurance business in February 2024 and February 2025.
2
Includes impairment charge and excess regulatory expected losses, excludes a charge for motor finance commission arrangements.
3
Includes share-based payments and foreign exchange loss on a US dollar AT1 redemption.
4
Retail secured CRD IV increases with respect to performing exposures.
The Group’s pro forma CET1 capital ratio at 31 December 2024 was 13.5 per cent (31 December 2023: 13.7 per cent pro forma), in line with
guidance. Capital generation during the year was 148 basis points. Excluding the provision for motor finance commission arrangements,
capital generation was 177 basis points, in line with guidance.
Capital generation reflects robust banking build and the interim half-year and full-year dividends received from the Insurance business in
June 2024 (£200 million) and February 2025 (£100 million) respectively, partially offset by risk-weighted asset increases and other
movements, including 15 basis points relating to the foreign exchange translation loss following the US dollar AT1 capital instrument
redemption in June. Regulatory headwinds of 27 basis points in the year reflect an adjustment for part of the impact of the Retail secured
CRD IV increases and the reduction in the transitional factor applied to IFRS 9 dynamic relief on 1 January 2024. There was a further
29 basis points resulting from a provision relating to the potential impacts of motor finance commission arrangements. The impact of the
interim ordinary dividend paid in September 2024 and the accrual for the recommended final ordinary dividend equates to 91 basis points,
with a further 80 basis points to cover the accrual for the announced ordinary share buyback programme of up to £1.7 billion.
The Group expects capital generation in 2025 to be c.175 basis points and reaffirms guidance for capital generation in 2026 of greater than
200 basis points.
Excluding the Insurance dividend received in February 2025 and the full impact of the announced ordinary share buyback programme, the
Group's CET1 capital ratio at 31 December 2024 was 14.2 per cent (31 December 2023: 14.6 per cent).
Risk-weighted assets increased by £5.5 billion in the year to £224.6 billion at 31 December 2024 (31 December 2023: £219.1 billion), in line
with guidance. This reflects the impact of lending growth, Retail secured CRD IV increases and other movements, partly offset by
optimisation including capital efficient, net present value positive securitisation activity. In the fourth quarter, risk-weighted assets
increased by £1.3 billion primarily driven by lending growth, operational risk and Retail secured CRD IV increases, again partly offset by
optimisation activity. In the context of the Retail secured CRD IV increases, a risk-weighted asset increase of £3.3 billion was recognised
against performing exposures in 2024. Including this increase, it is now envisaged that the overall uplift could be modestly higher than
£5 billion, subject to finalisation with the PRA. The PRA published its second policy statement on implementing Basel 3.1 in the UK in
September 2024. The final regulations, which are now due to be implemented on 1 January 2027 following a PRA announcement in January
2025, will introduce substantial revisions to the approaches for calculating risk-weighted assets. The Group expects the initial impact of
Basel 3.1 implementation to be moderately positive.
The Group’s regulatory CET1 capital requirement remains at around 12 per cent, including the Pillar 2A CET1 capital requirement remaining
at around 1.5 per cent of risk-weighted assets. The Board’s view of the ongoing level of total CET1 capital required to grow the business,
meet current and future regulatory requirements and cover economic and business uncertainties is c.13.0 per cent. This includes a
management buffer of around 1 per cent. In order to manage risks and distributions in an orderly way, the Board intends to progress
towards paying down to the current CET1 capital target of c.13.0 per cent by the end of 2026.
Pensions
Following completion of the triennial valuation of its main defined benefit pension schemes as at 31 December 2022, there will be no
further deficit contributions for this triennial period (to 31 December 2025).
Dividend and share buyback
The Group has a progressive and sustainable ordinary dividend policy whilst maintaining the flexibility to return further surplus capital
through share buybacks or special dividends. In February 2024, the Board decided to return surplus capital in respect of 2023 through a
share buyback programme of up to £2.0 billion. This commenced on 23 February 2024 and completed on 13 November 2024 with
c.3.7 billion (c.6 per cent) ordinary shares repurchased.
In respect of 2024, the Board has recommended a final ordinary dividend of 2.11 pence per share, which, together with the interim ordinary
dividend of 1.06 pence per share totals 3.17 pence per share, an increase of 15 per cent compared to 2023, in line with the Board’s
commitment to a progressive and sustainable ordinary dividend. The Board has also announced its intention to implement an ordinary
share buyback of up to £1.7 billion, which will commence as soon as is practicable and is expected to be completed by 31 December 2025.
Based on the total ordinary dividend and the announced ordinary share buyback, the total capital return in respect of 2024 will be up to
£3.6 billion, equivalent to c.9 per cent (as at 14 February 2025) of the Group’s market capitalisation value. The Group intends to pay down
to its ongoing CET1 capital target of c.13.0 per cent by the end of 2026.
Summary of Group results continued
68
Lloyds Banking Group plc Annual Report and Accounts 2024
Other financial information
Post-tax return on average assets
2024
%
2023
%
Post-tax return on average assets
0.50
0.63
Share buyback in respect of 2023 results
During 2024, the Group completed a £2.0 billion share buyback programme, in respect of 2023 results, with c.3.7 billion shares purchased
at an average price of 54.21 pence per share. Through a reduction in the weighted average number of ordinary shares in issue, share
buybacks have the effect of increasing earnings per share and, depending on the average price paid per share, can either increase or
decrease the tangible net assets per share. The share buyback in respect of 2023 results had the effect of increasing the earnings per share
by 0.2 pence and increasing the tangible net assets per share by 3.0 pence.
Insurance, Pensions and Investments performance summaryA
2024
£m
2023
£m
Change
%
Life and pensions sales (PVNBP)A,1
18,249
1
7,449
5
New business value of insurance and participating investment contracts recognised in the yearA,2
of which: deferred to contractual service margin and risk adjustment
126
173
(27)
(15)
(20)
25
of which: losses recognised on initial recognition
111
153
(27)
Assets under administration (net flows)3
£5.3bn
£5.1bn
4
General insurance underwritten new gross written premiumsA
197
124
59
General insurance underwritten total gross written premiumsA
737
579
27
General insurance combined ratio
97%
106%
(9)pp
At 31 Dec
2024
At 31 Dec
2023
Change
%
Insurance Solvency II ratio (pre-dividend)4
158%
186%
(28) pp
Total customer assets under administration
£231.9bn
£213.1bn
9
1
Present value of new business premiums.
2
New business value represents the value added to the contractual service margin and risk adjustment at the initial recognition of new contracts, net of acquisition expenses and any
loss component on onerous contracts (which is recognised directly in the income statement) but does not include existing business increments.
3
The movement in asset inflows and outflows driven by business activity (excluding market movements).
4
Equivalent estimated regulatory view of ratio (including With-Profits funds and post dividend where applicable) was 148 per cent (31 December 2023: 166 per cent, post-February
2024 dividend).
Breakdown of net incomeA
2024
2023
Deferred
1
profit release
£m
Other in-year
profit
£m
Total
£m
Deferred
1
profit release
£m
Other in-year
profit
£m
Total
£m
Life open book (pensions, individual annuities,
Wealth and protection)
350
318
668
267
290
557
Non-life (General insurance)
–
229
229
–
171
171
Other items2
69
190
259
85
223
308
Bulk annuities3
–
–
–
35
6
41
Net incomeA
419
737
1,156
387
690
1,077
1
Total deferred profit release is represented by contractual service margin (CSM) and risk adjustment releases from holdings on the balance sheet. CSM is released as insurance contract
services are provided; risk adjustment is released as uncertainty within the calculation of the liabilities diminishes. Amounts are shown net of reinsurance.
2
Other items represents the income from longstanding business, return on shareholder assets and interest on subordinated debt.
3
2024 reflects the agreed sale (subject to High Court approval) of the in-force bulk annuity portfolio to Rothesay Life plc. Please see note 24 to the consolidated financial statements on
page 286.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
69
Lloyds Banking Group plc Annual Report and Accounts 2024
Movement in deferred profit1 (contractual service margin (CSM) and risk adjustment)
Life open book
£m
Other
products2
£m
Bulk annuities3
£m
Total1
£m
At 1 January 2024
4,025
702
578
5,305
New business written
126
126
Release to income statement
(350)
(69)
(419)
Other movements
415
53
(460)
8
At 31 December 2024
4,216
686
118
5,020
At 1 January 2023
3,661
909
538
5,108
New business written
120
53
173
Release to income statement
(267)
(85)
(35)
(387)
Other movements
511
(122)
22
411
At 31 December 2023
4,025
702
578
5,305
1
Total deferred profit is represented by CSM and risk adjustment, both held on the balance sheet. CSM is released as insurance contract services are provided; risk adjustment is
released as uncertainty within the calculation of the liabilities diminishes. Amounts are shown net of reinsurance.
2
Other products includes longstanding business and European business.
3
Bulk annuities for 2024 reflects the reinsurance agreement entered into as part of the agreed sale (subject to High Court approval) of the in-force bulk annuity portfolio to Rothesay
Life plc, with the impact of the reinsurance agreement included within Other movements.
Volatility arising in the Insurance business
2024
£m
2023
£m
Insurance volatility
(56)
198
Policyholder interests volatility
162
116
Total volatility
106
314
Insurance hedging arrangements
(442)
(422)
Total1
(336)
(108)
1
Total insurance volatility is included within market volatility and asset sales, which in total resulted in a loss of £144 million in 2024 (2023: gain of £35 million). See page 314.
Insurance volatility impacts statutory profit before tax (through volatility and asset sales) but does not impact underlying profit, which is
based on an expected return. The impact of the actual return differing from the expected return is included within insurance volatility.
This is because movements in their value can have a significant impact on the profitability of the Group. Management believes that it is
appropriate to disclose the results on the basis of an expected return.
The Group manages its Insurance business exposures to equity, interest rate, foreign currency exchange rate and inflation movements
within the Insurance, Pensions and Investments division. It does so by balancing the importance of managing the impacts to both
Solvency capital and earnings volatility, as these factors can impact the dividend that the Insurance business can pay up to Lloyds
Banking Group plc. This approach can result in volatility in statutory profit before tax. Total insurance volatility resulted in losses of
£336 million (2023: £108 million), driven by increases in interest rates and equity performance.
Summary of Group results continued
–
–
–
–
70
Lloyds Banking Group plc Annual Report and Accounts 2024
2024
Retail
£m
Commercial
Banking
£m
Insurance,
Pensions and
Investments
£m
Equity
Investments
and Central
Items
£m
Group
£m
Underlying net interest income
8,930
3,434
(136)
617
12,845
Underlying other income
2,384
1,825
1,292
96
5,597
Operating lease depreciation
(1,319)
(6)
–
–
(1,325)
Net income
9,995
5,253
1,156
713
17,117
Operating costs
(5,596)
(2,762)
(924)
(160)
(9,442)
Remediation
(750)
(104)
(19)
(26)
(899)
Total costs
6,346)
(2,866)
(943)
(186)
(10,341)
Underlying profit before impairment
3,649
2,387
213
527
6,776
Underlying impairment (charge) credit
(457)
14
7
3
(433)
Underlying profit
3,192
2,401
220
530
6,343
Banking net interest marginA
2.49%
4.39
%
2.95%
Average interest-earning banking assetsA
£370.1bn
£81.1bn
–
–
£451.2bn
Asset quality ratioA
0.12%
0.00%
0.10%
Underlying loans and advances to customersA,1
£371.5bn
£87.6bn
–
–
£459.1bn
Customer deposits
£319.7bn
£162.6bn
–
£0.4bn
£482.7bn
Risk-weighted assets
£125.1bn
£73.8bn
£0.4bn
£25.3bn
£224.6bn
(
2023
Retail
£m
Commercial
Banking
£m
Insurance,
Pensions and
Investments
£m
Equity
Investments
and Central
Items
£m
Group
£m
Underlying net interest income
9,647
3,799
(132)
451
13,765
Underlying other income
2,159
1,691
1,209
64
5,123
Operating lease depreciation
(948)
(8)
–
–
(956)
Net income
10,858
5,482
1,077
515
17,932
Operating costs
(5,469)
(2,647)
(880)
(144)
(9,140)
Remediation
(515)
(127)
(14)
(19)
(675)
Total costs
(5,984)
(2,774)
(894)
(163)
(9,815)
Underlying profit (loss) before impairment
4,874
2,708
183
352
8,117
Underlying impairment (charge) credit
(831)
511
7
5
(308)
Underlying profit (loss)
4,043
3,219
190
357
7,809
Banking net interest marginA
2.73%
4.63%
3 .11%
Average interest-earning banking assetsA
£365.6bn
£86.8bn
–
£0.9bn
£453.3bn
Asset quality ratioA
0.23 %
(0
.54) %
0.07 %
Underlying loans and advances to customersA,1
£361.2bn
£88.6bn
–
(£0.1bn)
£449.7bn
Customer deposits
£308.4bn
£162.8bn
–
£0.2bn
£471.4bn
Risk-weighted assets
£119.3bn
£74.2bn
£0.2bn
£25.4bn
£219.1bn
1
Equity Investments and Central Items includes central fair value hedge accounting adjustments.
Number of employees (full-time equivalent)
At 31 Dec
2024
At 31 Dec
20231
Retail
29,734
32,217
Commercial Banking
8,850
9,399
Insurance, Pensions and Investments
5,882
5,903
Group functions and services
17,544
16,114
62,010
63,633
Agency staff
(782)
(1,064)
Total number of employees
61,228
62,569
1
During 2024, employees have been reallocated between Commercial Banking and Group functions and services. 2023 has been presented on a consistent basis.
The Group has reduced its non-permanent worker population by around 11 per cent in 2024. Overall, the Group has reduced its permanent
workforce and invested in growth within the Lloyds Technology Office to increase skills in technology and data.
Segmental analysis – underlying basisA
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
Lloyds Banking Group plc Annual Report and Accounts 2024
71
Retail offers a broad range of financial services products to personal customers, including current accounts, savings, mortgages, credit
cards, unsecured loans, motor finance and leasing solutions. Its aim is to build enduring relationships that meet more of its customers’
financial needs and improves their financial resilience throughout their lifetime. Retail operates the largest digital bank in the UK and
continues to improve digital experience through a mobile-first strategy, deliver market-leading products and meet consumer duty
expectations whilst working within a prudent risk appetite. Through strategic investment, alongside increased use of data, Retail aims to
deepen consumer relationships, deliver personalised propositions, broaden its intermediary offering, improve customer experience and
operational efficiency.
Strategic progress
•
UK’s largest digital bank with 22.7 million digitally active users; 20.2 million actively using the Group’s mobile apps, up 8 per cent in 2024,
with over 6 billion logons this year. Mobile messaging interactions up over 60 per cent on 2023
Enriched mobile offering, including a redesigned Lloyds Bank app with six new spaces allowing customers to manage their finances
alongside ‘Link Pay’, a safe and fast way to request payment. Enhanced personalisation of in-app journeys and messaging, through data
utilisation to better understand customer needs
Mortgage gross lending share increased 3 percentage points since 2023 to 20 per cent, alongside £15.1 billion lending to first time buyers
in 2024 and a 6 percentage point increase in take-up of protection insurance in 2024
Grown Mass Affluent customer base to over 3 million and exceeded target for growth in banking balances, up 15 per cent since 2021,
with a dedicated digital-first proposition providing product offers, digital tools and financial coaching
Increased customers served per distribution FTE by 30 per cent since 2021 and utilised the expertise of branch colleagues to answer
personal banking calls, to support 725,000 customers in 2024
5 per cent growth in depth of relationship1 with customers, including growth across all life stages
11.2 million customers registered for ‘Your Credit Score’, including 2.4 million registrations in 2024, contributing c.7 per cent of direct
mortgages applications value. Over 780,000 customers have improved their score in 2024
Introduced fee free overseas debit card usage on the majority of packaged bank accounts, supporting an increase in customers using
debit cards overseas and a stronger value proposition driving income diversification
Launched ‘Black Horse FlexPay’, a flexible and easy way to pay for larger purchases in instalments
Surpassed 2024 sustainability targets, lending £11.4 billion in mortgages on properties with an EPC rating of A or B2 and £9.4 billion for
financing and leasing of battery electric and plug-in hybrid vehicles2
•
•
•
•
•
•
•
•
•
Financial performance
•
Underlying net interest income 7 per cent lower, reflecting expected mortgage and unsecured lending asset margin compression and
continued deposit churn headwinds, partly offset by higher structural hedge earnings
Underlying other income up 10 per cent, driven by UK Motor Finance including growth following the acquisition of Tusker in 2023 and
higher average vehicle rental values
Operating lease depreciation charge higher due to fleet growth, the depreciation of higher value vehicles and declines in used electric
car prices, primarily in the first half
Operating costs up 2 per cent, with cost efficiencies helping to partially offset inflationary pressures, business growth costs, ongoing
strategic investment including increased severance charges and the sector-wide Bank of England Levy. Remediation costs of £750
million include a £700 million provision in relation to the potential impacts of motor finance commission arrangements
Underlying impairment charge of £457 million, lower than prior year and includes a £332 million credit from an improved economic
outlook, notably house price growth, the release of judgemental adjustments for inflation and interest rate risks, a one-off debt sale
write back and strong portfolio performance in UK mortgages
Loans and advances to customers up £10.3 billion, including £6.1 billion growth in UK mortgages (net of securitisations of £1.9 billion), UK
Retail unsecured loans up £2.2 billion due to organic growth and lower repayments following a securitisation in 2023, alongside £1.9
billion growth across credit cards and other Retail (driven by European lending)
Customer deposits up £11.3 billion, with inflows into limited withdrawal and fixed term products, partly offset by a £1.4 billion reduction
in current account balances (significantly lower than the prior year, as expected)
Risk-weighted assets up 5 per cent in 2024, given higher lending and Retail secured CRD IV model increases, partly offset by capital
efficient securitisation activity
•
•
•
•
•
•
•
1
Customers retained from November 2021. Relates to product holdings, for franchise customers with active relationship.
2
Since 1 January 2022, new mortgage lending on residential property with an Energy Performance Certificate rating of A or B at 30 September 2024; and new lending for Black Horse and
operating leases for Lex Autolease and Tusker at 31 December 2024.
Retail
72
Lloyds Banking Group plc Annual Report and Accounts 2024
Commercial Banking serves small and medium businesses and corporate and institutional clients, providing lending, transactional banking,
working capital management, debt financing and risk management services whilst connecting the whole Group to clients. Through
investment in digital capability and product development, Commercial Banking will deliver an enhanced customer experience via a digital-
first model in Business and Commercial Banking and an expanded client proposition across Commercial Banking, generating diversified
capital efficient growth and supporting customers in their transition to net zero.
Strategic progress
•
•
•
•
Maintained position as number 1 ranked1 Infrastructure and Project Finance Bank in the UK, financing wind farms, solar, and investments
into newer low carbon technologies
Increased euro and US dollar debt capital markets issuance volumes by 39 per cent, outperforming the market2
Awarded Best Bank for Digitalisation at the Global Trade Review Awards 2024. Completed the Group’s first electronic bill of lading
transaction, reducing transaction time, execution risk, costs and environmental impact
Delivered £10.7 billion of sustainable financing3 in 2024. Ranked first in ESG-labelled bond issuance for UK issuers4
•
Launched ‘Lloyds Bank Market Insights’ bringing together economics and markets expertise to provide topical and timely thought
leadership to clients; consistently recognised as one of the leading forecasters of the UK economy
•
Awarded Best Bank Foreign Exchange Trading for Corporates in the UK5 and delivered 42 per cent year on year increase in foreign
exchange volumes
•
Achieved strategic objective of Top 5 sterling interest rate swap counterparty with number 2 ranking
•
Expanded the mobile-first onboarding journey following initial launch in 2023 to include multiple party limited companies, clubs and
societies; around 9 in 10 Business Banking accounts now being originated digitally
•
Threshold for automated credit decisioning increased to up to £100,000 for customers meeting criteria, with new mobile overdraft
journey enabling Business Banking customers to digitally apply for an overdraft facility
•
Launched new mobile app journeys for instant access, term and notice accounts
•
Enhanced Merchant Services proposition, including improved access to Clover offering and introduction of tailored terminal
integrations, helping customers to automate business management processes
•
Delivered increased personalised content for customers in both mobile app and browser, resulting in over half a billion personalised
digital impressions and driving significant increase in engagement
•
Hosted the Lilac Review following the publication of the Disability and Entrepreneur Report in partnership with Small Business Britain
and founding signatory to the Disability Finance Code for Entrepreneurship
Financial performance
•
Underlying net interest income of £3,434 million, down 10 per cent on the prior year, driven by expected customer movements into
interest-bearing accounts, as well as lower average deposit balances
•
Underlying other income increased 8 per cent to £1,825 million, reflecting client franchise growth due to strategic investment and higher
levels of client activity, driving a strong markets performance
•
Operating costs 4 per cent higher with cost efficiencies helping to partially offset inflationary pressures, business growth costs, ongoing
strategic investment and the sector-wide Bank of England Levy. Remediation costs were £104 million
•
Underlying impairment credit of £14 million, reduced from the prior year which included a significant one-off write-back. The credit in
2024 reflected strong asset quality, a one-off release from model loss rates and updated economic scenarios. The charge on new and
existing Stage 3 clients remains low
•
Customer lending 1 per cent lower at £87.6 billion reflecting ongoing net repayments within Business and Commercial Banking,
including government-backed lending, partly offset by strategic growth in Corporate and Institutional Banking, notably higher
infrastructure lending
•
Customer deposits stable at £162.6 billion, with growth in target sectors, offset by an expected outflow in the third quarter
•
Risk-weighted assets 1 per cent lower at £73.8 billion, reflecting efficient allocation of capital and optimisation activity
1
Infralogic 1 January 2024 to 31 December 2024, by deal volume and value.
2
Refinitiv Eikon; all international bonds in euro and US dollar, excluding Sovereign, supranational and agency issuance.
3
In line with the Group’s Sustainable Financing Framework.
4
Bondradar; excluding Sovereign, supranational and agency issuance.
5
Coalition Greenwich Voice of Clients - 2024 European Corporate Foreign Exchange Study.
Commercial Banking
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
Lloyds Banking Group plc Annual Report and Accounts 2024
73
Insurance, Pensions and Investments (IP&I) supports over 10 million customers, with a number one ranking in Home Insurance new policy
share, a number two ranking in UK defined contribution Workplace provision, and a top three position for Individual Annuities provision
with annualised annuity payments of over £0.9 billion. Total Assets under administration (AuA) are £232 billion (excluding Wealth). The
Group continues to invest significantly into IP&I to develop the business, including the investment propositions to support the Group’s Mass
Affluent strategy, digitisation, innovating intermediary propositions and accelerating the transition to a low carbon economy.
Strategic progress
•
Scottish Widows now has more than 1 million digitally registered customers. Recently relaunched an app for workplace pension
customers which has over 400,000 users, 60 per cent of which are active users
•
Increased the product offering with the introduction of Ready-Made Pensions, the Self Invested Personal Pension and Pet Insurance.
Alongside Ready-Made Investments launched in 2023, with c.45,000 accounts opened to date and c.40 per cent of customers under
the age of 35, this creates a significant opportunity to grow the business and drive deeper customer relationships
•
Continued to grow home insurance market share through the Group’s strong brands, transforming customer experiences through
digitisation, whilst also delivering productivity gains. New policies increased by over 24 per cent and market share grew by
0.9 percentage points to 15.0 per cent compared to 2023
•
Continued momentum in the protection insurance offering, utilising Retail channels with take-up rates (as a percentage of mortgage
completions) increasing from 9.1 per cent to 15.2 per cent in 2024
•
Successful launch of refreshed independent financial advisor proposition on new architecture driving significant new business with
applications for protection cover up 50 per cent in the second half of the year following the launch
•
Open book AuA of £185 billion (2023: £164 billion), with 13 per cent growth in the year. Net AuA flows of £5.3 billion, contributing to an
increased stock of deferred profit. This included a significant contribution from the workplace pensions business, with a 9 per cent
increase in regular contributions to pensions administered and £108 billion of AuA
•
Market share of stocks and shares ISA new account openings at 19.8 per cent, second in the market1 (12 months to 30 September 2023:
20.2 per cent, second in the market)
•
Grew individual annuities market share by 4 percentage points to 23.5 per cent1 , issuing c.£1.7 billion of policies (2023: c.£1.0 billion).
Focused strategic presence following the sale (subject to High Court approval) of the bulk annuities business
•
Completed the transfer of the longstanding life and pensions business to IP&I’s strategic platform with four migrations successfully
executed during 2024
•
Climate-aware investments increased by £4.2 billion in 2024, bringing overall investment to £25.9 billion, currently exceeding the target
of £20 billion to £25 billion by the end of 20252
•
Ended the year with a Trustpilot score of 4.3 stars for Scottish Widows and 4.6 for Lloyds Insurance
Financial performance
•
Underlying profit up 16 per cent after agreed sale (subject to High Court approval) of the in-force bulk annuity portfolio
•
Underlying other income of £1,292 million, up 7 per cent from strong trading, with higher net general insurance income
•
Operating costs up 5 per cent, with cost efficiencies helping to partially offset inflationary pressures, business growth costs and ongoing
strategic investment including increased severance charges
•
Balance of deferred profits broadly stable in the year at £5.0 billion (after release to income of £419 million) and after allowing for the
reinsurance agreement entered into for the in-force bulk annuity portfolio, including £126 million from new business, reflecting value
generation in workplace pensions and individual annuities
•
Life and pensions sales (PVNBP) up 5 per cent driven by strong performance in the individual annuities and workplace business partly
offset by the agreed sale (subject to High Court approval) of the in-force bulk annuity portfolio
•
Payment of a £100 million final dividend to Lloyds Banking Group plc in February 2025, after the £200 million interim dividend,
supported by a strong capital position with an estimated Insurance Solvency II ratio of 158 per cent (154 per cent after
proposed dividend)
•
Credit asset portfolio strong, rated ‘A-’ on average. Well diversified, with less than 2.5 per cent of assets backing annuities being sub-
investment grade or unrated. Strong liquidity position with c.£3 billion cash and cash equivalents
1
ISA information reflects opening through direct channels and is based on 12 months to 30 September 2024. Annuities information reflects nine months to 30 September 2024.
2
Includes a range of funds with a bias towards investing in companies that are reducing the carbon intensity of their businesses and/or are developing climate solutions.
Equity Investments and Central Items
Equity Investments and Central Items includes the Group’s equity investments businesses, including Lloyds Development Capital (LDC), the
Group’s share of the Business Growth Fund (BGF) and the Housing Growth Partnership (HGP), as well as Lloyds Living. Also included are
income and expenses not attributed to other divisions, including residual underlying net interest income after transfer pricing (which
includes the recharging to other divisions of the Group’s external AT1 distributions), and the unwind of hedging costs relating to historic gilt
sales.
Net income in 2024 was higher compared to 2023, with stronger underlying net interest income and higher underlying other income. This
included £393 million, after funding costs relating to the Group’s equity and direct investment businesses (2023: £344 million). Underlying
net interest income was higher than in 2023, which was impacted by short-term central hedging costs in the first half of 2023. Underlying
other income includes £502 million (2023: £437 million) generated by the Group’s equity and direct investment businesses increasing as a
result of strong income growth from Lloyds Living, while income from LDC was flat in the year at £425 million (2023: £418 million).
Total costs of £186 million in 2024 increased 14 per cent on the prior year, largely due to costs associated with the agreed sale (subject to
High Court approval) of the Group’s in-force bulk annuity portfolio. Underlying impairment was a £3 million credit compared to a £5 million
credit in 2023.
Insurance, Pensions and Investments
74
74
Lloyds Banking Group plc Annual Report and Accounts 2024
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Governance
In this section
Directors’ report
UK Corporate Governance Code
75
Chair ’s statement
76
Our Board at a glance
77
Our Board
78
Boards of the Ring -Fenced Banks
80
Group Executive Committee
81
Board leadership and company purpose
82
Division of responsibilities
91
Composition, succession and evaluation
92
Audit, risk and internal control
96
Committee reports
Nomination and Governance
Committee report
97
Audit Committee report
100
Board Risk Committee report
104
Responsible Business Committee report
109
Directors’ remuneration report
110
Other statutory and regulatory information
134
Governance
with purpose
UK Corporate Governance Code
Compliance statement
The UK Corporate Governance Code 2018 (the Code) applied to
the financial year ended 31 December 2024. The Code is available
at
www.frc.org.uk
.
Principles of the Code
This directors’ report is set out in a way that helps shareholders
and investors to evaluate how the Company has applied the
principles and complied with the provisions of the Code during
2024. The table to the right signposts parts of the annual report
and accounts which relate to the principles and provisions of the
Code, including where the relevant information is not in the
directors’ report.
The Company confirms that it applied the principles
and complied with all relevant provisions of the Code
throughout 2024.
On 22 January 2024, the Financial Reporting Council published
an updated version of the Code which applies to the Company’s
financial year which began on 1 January 2025. The Board gave
detailed consideration to the changes and the Group’s
preparations in readiness for their implementation, with
dedicated sessions arranged for the Board and senior executives.
The Company will report against the updated version of the
Code in its annual report and accounts for the year ending
31 December 2025.
1. Board leadership and company purpose (pages 82 to 90)
Chair’s statement
76
Our Board
78 to 79
Purpose, values and strategy
2 to 25 and 84 to 85
Culture
3 and 90
Board stakeholder engagement and decision making
40 to 41 and 86 to 87
Key performance indicators and strategic performance
26 to 29
Risk assessment
33 to 38
Risk management
137 to 198
Rewarding our workforce
110 to 133
Whistleblowing arrangements
96 and 103
2. Division of responsibilities (page 91)
Our Board and governance structure
82
Independence and time commitments
91 and 98
Committee reports
97 to 114
Board and Committee meeting attendance
80
3. Composition, succession and evaluation (pages 92 to 95)
Our Board
78 to 79
Our Board and governance structure
82
Board and Committee meeting attendance
80
Nomination and Governance Committee report
97 to 99
4. Audit, risk and internal control (page 96)
Audit Committee report
100 to 103
Statement of directors’ responsibilities
136
Risk management
137 to 198
Principal risks and emerging risks
34 to 38 and 143 to 198
Board Risk Committee report
104 to 108
Going concern
39
Viability statement
39
5. Remuneration
Directors’ remuneration report
110 to 133
Lloyds Banking Group plc Annual Report and Accounts 2024
75
Strong governance
underpins the delivery
of our strategy
and
en
Chair’s statement
Sir Robin
Budenberg
Chair
Read full biography
Last year I highlighted how governance provides the foundation for
all that we do at Lloyds Banking Group. It is one year on and I am
immensely proud of how the Group has continued to fulfil its
purpose of Helping Britain Prosper, achieve good outcomes for
customers and deliver higher, more sustainable returns.
2024 marked the completion of the first phase of the Group’s
strategy which is closely aligned with our purpose. Throughout
the year, the Board monitored the evolution and implementation
of our strategy providing support and challenge to the executive.
I continue to be impressed by the transparency of the executive
and by the engagement of the non-executive directors which
together have enhanced the quality of Board deliberations on
strategy. The customer is at the heart of our strategy and through
various channels as detailed on page 86, the Board ensures that
the ‘voice of the customer’ is heard in the boardroom.
As the Group moves forward, the Board is keenly aware that the
external environment in which we operate continues to present not
only opportunities but also challenges and interconnecting risks.
Strong governance underpins how the Group manages risk, delivers
its strategy and drives long-term value for its stakeholders.
I am pleased to present this report on governance and key
governance activities in 2024. Going forward, the Board will build
on the progress made in 2024 and continue to focus on effective
governance for the benefit of stakeholders.
Board oversight of strategy
As mentioned above, in 2024 the Board monitored the tangible
progress made on delivering the 2024 commitments. Read more
on pages 84 to 85.
Consumer Duty
The Board and its Responsible Business Committee considered the
Group’s approach to implementation of the Financial Conduct
Authority’s Consumer Duty requirements. In June the Board
approved an assessment that the Group is delivering good outcomes
for its customers. Read more on page 109.
Sustainability
The Board, through its Responsible Business Committee, has
continued to oversee the Group’s sustainability strategy. In January
and July respectively, the Board approved new targets for heavily
carbonised sectors and a new interim statement on forestry and
agriculture commodities. Read more on pages 88 and 109.
Culture
Throughout 2024, the Board provided oversight of the Group’s
cultural transformation. The Board maintained its focus on diversity
and inclusion which is a cornerstone of a healthy culture. Read more
on pages 90, 99 and 109.
Board
Committee changes
Nathan Bostock was appointed as a non-executive director of
the Company, Chair of Lloyds Bank Corporate Markets plc and
a member of the Board Risk Committee on 1 August 2024. He
became a member of the Audit Committee on 1 October 2024.
Alan Dickinson and Lord Lupton both stepped down from the Board
at the Company’s annual general meeting held on 16 May 2024.
Amanda Mackenzie was appointed as a member of the Audit
Committee on 1 January 2024 and Cathy Turner was appointed
as a member of the Board Risk Committee on 1 February 2024.
Read more on page 97.
Ring-fencing governance
Although this is Lloyds Banking Group plc’s corporate governance
report, I would like to thank Nigel Hinshelwood, Sarah Bentley
and Brendan Gilligan for their contribution to the Group as
non-executive directors of Lloyds Bank plc and Bank of Scotland plc
(the Ring-Fenced Banks). Read more on pages 80 and 83.
Corporate Governance Code
The Company’s statement of compliance with the UK Corporate
Governance Code 2018 can be found on page 75.
Stakeholder
gagement
Understanding and meeting the Group’s responsibilities and duties
to shareholders, customers and the communities we serve is central
to our purpose and remains paramount. Read more on pages 86
to 87.
Sir Robin Budenberg
Chair
Lloyds Banking Group plc Annual Report and Accounts 2024
76
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
Our Board at a glance
Our Board in 2024
Skills experience and knowledge of our Board
Collective view of the skills, experience and knowledge of the
non -e xecutive directors1
Deep experience – distinctive strength
Retail/
commercial banking
Financial markets/
wholesale banking industry
Insurance
Audit
and finance
Risk – in financial
institutions
Technology/
digital
Consumer/marketing/
distribution
Good experience and knowledge
Major change
programmes
ESG: environment,
sustainability and
climate change
ESG: social, inclusion and
diversity, and governance
Government/
regulator interface
Listed Board Governance,
including investor relations
and remuneration
Strategic thinking
A.
B.
A.
B.
Board gender
balance over
the years2
Women (%)
33%
2020
40%
2021
45%
2022
45%
2023
50%
2024
Met the UK Listing Rules targets2
of at least:
• 40 per cent of the board
being women
• One of the senior board positions
being held by a woman3
• One member of the board being
from a minority ethnic background
Gender balance2
A. Female – 5 (50%)
B. Male – 5 (50%)
Ethnicity2
A. Black, Asian or Minority
Ethnic – 2 (20%)
B. White – 8 (80%)
Age2
A. 46 -50 – 1 (10%)
B. 51 -55 – 1 (10%)
C. 56 -60 – 3 (30%)
D. 61 -65 – 5 (50%)
B.
A.
D.
C.
1
Assessment by the Nomination and Governance Committee as at 16 January 2025.
2
As at 31 December 2024 and remains correct as at the date of publication of the
annual report.
3
Cathy Turner is the Senior Independent Director.
Lloyds Banking Group plc Annual Report and Accounts 2024
77
A. 46-50 – 1 (10%)
B. 51-55 – 1 (10%)
C. 56-60 – 3 (30%)
D. 61-65 – 5 (50%)
Our Board
Sir Robin
Budenberg CBE
Chair
RB
Re
Appointed: October 2020 (Board),
January 2021 (Chair)
Skills, experience and contribution:
NG
•
Extensive financial services and investment
banking experience
• Strong governance and strategic advisory skills
in relation to companies and government
• Regulatory, public policy and stakeholder
management experience
Robin spent 25 years advising UK companies
and the UK Government while working for S.G.
Warburg/UBS Investment Bank and was formerly
Chief Executive and Chairman of UK Financial
Investments (UKFI), managing the Government’s
investments in UK banks following the
2008 financial crisis. He is qualified as a
Chartered Accountant.
Key external appointments:
Chair of The Crown Estate.
Appointed: August 2021
Skills, experience and contribution:
• Extensive financial services experience including
in chief executive and other leadership roles
• Strategic planning and implementation
•
Extensive experience of digital transformation
Charlie has over 25 years’ experience in the financial
services sector. Prior to joining the Group, Charlie
held a range of leadership positions at HSBC,
including Global Chief Executive, Wealth and
Personal Banking, and Group Head of Wealth
Charlie Nunn
Executive director
and Group
Chief Executive
Management and Digital, as well as Global Chief
Operating Officer of Retail Banking and Wealth
Management. Charlie began his career at
Accenture, where he worked for 13 years in the US,
France, Switzerland and the UK before being made
a Partner. He then moved to McKinsey & Co. as a
Senior Partner, leading on projects for five years.
Key external appointments:
None
William Chalmers
Executive director
and Chief
Financial Officer
Appointed: August 2019
Skills, experience and contribution:
•
Significant board level strategic and financial
leadership experience
•
Strategic planning and development, mergers
and acquisitions, equity and debt capital
structuring and risk management
William joined the Board in August 2019, when he
was appointed Chief Financial Officer and was
Interim Group Chief Executive from May 2021 to
August 2021. William has worked in financial services
for over 25 years and previously held a number of
senior roles at Morgan Stanley, including Co-Head of
the Global Financial Institutions Group and Head of
EMEA Financial Institutions Group. Before joining
Morgan Stanley, William worked for J. P. Morgan,
again in the Financial Institutions Group.
Key external appointments:
None
Cathy Turner
Senior Independent
Director
Re
NG
BR
Appointed: November 2022 (Board),
September 2023 (Senior Independent Director)
Skills, experience and contribution:
•
Significant executive and non-executive financial
services experience
• Knowledge of complex remuneration matters
• Communications expertise with a broad range of
stakeholders including investors, regulators,
government, media and unions
Cathy has significant financial services experience,
having worked in senior executive positions at
Barclays plc and at the Group. Cathy has previously
been a Non-Executive Director and Chair of the
Remuneration Committee of Aldermore Group plc,
Quilter plc and Countrywide plc.
Key external appointments:
Non-Executive Director of Rentokil Initial plc and
Senior Independent Director of Spectris plc.
Partner on a part-time basis at Manchester Square
Partners LLP.
Nathan Bostock
Independent
non-executive director
and Chair of Lloyds
Bank Corporate
Markets plc
BR
A
Appointed: August 2024
Skills, experience and contribution:
•
A wealth of financial, risk and regulatory expertise
• Extensive experience in large-scale customer and
corporate facing businesses
• Significant executive experience in the financial
services industry
Nathan was Chief Executive Officer of Santander
UK plc from 2014 until 2022 and then Head of
Investment Platforms at Banco Santander S.A. until
his retirement from Santander in 2023. Prior to
joining Santander in 2014, Nathan was an executive
director and Group Chief Financial Officer of RBS
and previously held the post of Chief Risk Officer at
RBS. Before joining RBS, Nathan held various senior
positions at Santander UK plc between 2004 and
2009, including Executive Director, Finance Director
and commercial Chief Executive Officer roles
in Financial Markets and Corporate Banking
and in Cards and Insurance. He is qualified
as a Chartered Accountant.
Key external appointments:
Non-Executive Director of Centrica plc.
Sarah Legg
Independent
non-executive
director
RB
BR
A
Appointed: December 2019
Skills, experience and contribution:
• Strong financial leadership and regulatory
reporting skills
• Significant audit and risk experience in
financial leadership
•
Strong transformation programme experience
Sarah has spent her entire executive career in
financial services with almost 30 years at HSBC.
She was the Group Financial Controller, a Group
General Manager and CFO for HSBC’s Asia Pacific
region. She also spent eight years as a Non-
Executive Director of Hang Seng Bank Limited.
Key external appointments:
Non-Executive Director of Severn Trent plc,
Non-Executive Director of Man Group plc and a
Trustee of the Lloyds Bank Foundation for England
and Wales.
Lloyds Banking Group plc Annual Report and Accounts 2024
78
Lloyds Banking Group plc Annual Report and Accounts 2024
79
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Amanda Mackenzie
LVO OBE
Independent non-
executive director
Re
RB
NG
A
Appointed: October 2018
Skills, experience and contribution:
• Extensive experience in ESG matters including
responsible business and sustainability
• Strong customer engagement and digital
technology experience
• Significant marketing and brand background
Amanda was Chief Executive of Business in the
Community, of which King Charles III is the Royal
Founding Patron and which promotes responsible
business and corporate responsibility. Prior to that
role, she was a member of Aviva’s Group
Executive for seven years as Chief Marketing and
Communications Officer and was seconded to
help launch the United Nations Sustainable
Development Goals. She is also a former Director
of British Airways AirMiles, BT, Hewlett Packard Inc
and British Gas.
Key external appointments:
Non-Executive Director of The British Land
Company plc, Chair of The Queen’s Reading Room
and Chair and partner of Otherwise Partners LLP.
Harmeen Mehta
Independent
non-executive
director
Appointed: November 2021
Skills, experience and contribution:
• Over 25 years’ experience leading digital and
complex transformation
• Experience of building and running technology-
led businesses and creating new ventures
• A wealth of international and financial services
knowledge having lived in 11 countries and
worked across 30 countries on six continents
Harmeen was appointed Chief Digital and
Innovation Officer at BT in April 2021. Prior to
that role, she spent seven years as Global Chief
Information Officer and Head of Cyber Security and
Cloud Business at Bharti Airtel, leading its cloud and
security businesses. Earlier in her career, Harmeen
held CIO positions at BBVA, HSBC and Bank of
America Merrill Lynch.
Key external appointments:
Chief Digital and Innovation Officer at BT.
Scott Wheway
Independent
non-executive
director and Chair
of Scottish Widows
Group
NG
BR
Appointed: August 2022 (Board),
September 2022 (Chair of Scottish Widows Group)
Skills, experience and contribution:
• Significant financial services board and
chair experience
• Extensive knowledge and experience of
large-scale banking and insurance businesses
• Track record as a non-executive and executive in
customer-centric companies
Scott was a Non-Executive Director of Centrica plc
between 2016 and 2020 and served as Chair of
Centrica plc between 2020 and 2024. He was
formerly Chair of AXA UK plc, Chair of Aviva
Insurance Limited, a Non-Executive Director of
Aviva plc and Senior Independent Director of
Santander UK plc. He worked as an executive in
the retail sector for over 25 years where he held
positions including chief executive officer of Best
Buy Europe, managing director of Boots the
Chemist plc and a number of senior executive
positions at Tesco plc.
Key external appointments:
None.
Catherine Woods
Independent
non-executive
director
Re
BR
Appointed: March 2020
Skills, experience and contribution:
• Extensive executive experience of
international financial institutions
• Deep experience of risk and
transformation oversight
• Strong focus on culture and
corporate governance
A
Catherine is a former Deputy Chair and Senior
Independent Director of AIB Group plc where she
also chaired the Board Audit Committee. In her
executive career with J.P. Morgan Securities, she
was Vice President, European Financial Institutions,
Mergers and Acquisitions, and Vice President
Equity Research Department, forming the European
Banks Team.
Key external appointments:
Deputy Chair of BlackRock Asset Management
Ireland Limited.
Kate Cheetham
Chief Legal Officer
and Company
Secretary
Appointed: July 2019 (Company Secretary)
Skills, experience and contribution:
• Significant legal and governance leadership
experience within financial services
• Strategic functional planning and development,
corporate, mergers and acquisitions, regulation
and risk management
Kate became Group General Counsel
(now Chief Legal Officer) in May 2015 and
Company Secretary in July 2019. Kate joined the
Group in 2005 from Linklaters, where she was
a corporate lawyer specialising in mergers and
acquisitions transactions. Before her current roles,
Kate held a number of senior positions including
Deputy Group General Counsel and General
Counsel for Group Legal.
Key
A
Audit Committee member
NG Nomination and Governance Committee
member
RB Responsible Business Committee member
BR Board Risk Committee member
Re Remuneration Committee member
Committee Chair
Board and Committee membership and attendance at meetings in 20241
C Chair
Board
Nomination and
Governance
Committee
Audit
Committee
Board Risk
Committee
Remuneration
Committee
Responsible
Business
Committee
Our Board continued
Sir Robin Budenberg
10/10
6/6 C
5/5
5/5
Charlie Nunn
10/10
William Chalmers
10/10
Cathy Turner
6/6
10/10
7/96
5/5 C
Nathan Bostock2
3/3
1/1
4/4
Alan Dickinson3
3/3
5/5
3/3
4/4
2/2
Sarah Legg
10/10
6/6 C
10/10
5/5
Lord Lupton3
5/5
2/2
Amanda Mackenzie
6/6
5/65
10/10
5/5
5/5 C
Harmeen Mehta
10/10
Scott Wheway
6/6
10/10
9/107
Catherine Woods
5/64
9/104
10/10 C
4/54
1
Where a director is unable to attend a meeting he/she receives papers in advance and
has the opportunity to provide comments to the Chair of the Board or to the relevant
Committee Chair.
2
Nathan Bostock was appointed to the Board and became a member of the Board Risk
Committee on 1 August 2024 and became a member of the Audit Committee on
1 October 2024.
3
Alan Dickinson and Lord Lupton stepped down from the Board and relevant
Committees on 16 May 2024.
4
Catherine Woods was unable to attend one meeting of each of the Board, the Audit
Committee and the Remuneration Committee for personal reasons.
5
Amanda Mackenzie was unable to attend one meeting due to a commitment scheduled
before she joined the Audit Committee.
6
Cathy Turner became a member of the Board Risk Committee on 1 February 2024. Cathy
Turner was unable to attend two meetings due to commitments scheduled before she
joined the Board Risk Committee.
7
Scott Wheway was unable to attend one meeting due to the rescheduling of the
January meeting.
Boards of the Ring-Fenced Banks
Each of the directors of Lloyds Banking Group plc is also a director of Lloyds Bank plc and Bank of Scotland plc, which are the banks within
the Group which have been included within the ring-fence (together, the Ring-Fenced Banks). The boards of the Ring-Fenced Banks have
three additional independent non-executive directors: Nigel Hinshelwood (Senior Independent Director), Sarah Bentley and Brendan
Gilligan. Read their biographies below and read more about the role of the Ring-Fenced Bank-only directors and the Group’s structure on
page 83.
Nigel Hinshelwood
Senior Independent
Director
Lloyds Bank plc
and Bank of
Scotland plc
Appointed: January 2019
Skills, experience and contribution:
• Extensive experience in the financial services
sector in the UK and worldwide
• Significant experience of large-scale
transformation, operations and technology
Nigel was a partner at Ernst & Young, and also held
various roles at HSBC, including Deputy CEO of
HSBC Bank plc, Head of HSBC Insurance Holdings,
Chief Operating Officer for EMEA and Global Head
of Operations. Nigel was formerly a Non-Executive
Director of Lloyd’s of London, Nordea Bank and
Ikano Bank.
Key external appointments:
Chair of AXA XL Underwriting Agencies Limited
and AXA XL Insurance Company UK Limited,
International Advisory Council Member of Adobe
Systems Software Ireland Limited, Advisory Council
Member of International Association of Credit
Portfolio Managers and Member of the Finance and
Risk Committee of Business in the Community.
Sarah Bentley
Non-executive
director
Lloyds Bank plc
and Bank of
Scotland plc
Appointed: January 2019
Skills, experience and contribution:
•
Extensive digital and digital transformation
experience
• Strong customer and marketing skills
Sarah is Chair of the Gender Equality Leadership
Team at Business in the Community. She was
formerly Chief Executive Officer and Executive
Director of Thames Water Utilities Limited and
Director of Water UK, the trade association of the
water and wastewater industry. Prior to those roles,
Sarah was Chief Customer Officer at Severn Trent
plc and a member of its Executive Committee and
the Managing Partner for Accenture’s Digital
business unit in the UK & Ireland. She has worked
internationally in a number of roles including
Strategy, Marketing & Propositions for BT’s Global
Services division, CEO of Datapoint and Senior Vice
President of eLoyalty.
Key external appointments:
Director of Scanes Bentley & Associates Limited and
Chair of the Gender Equality Leadership Team at
Business in the Community.
Brendan Gilligan
Non-executive
director
Lloyds Bank plc
and Bank of
Scotland plc
Appointed: January 2019
Skills, experience and contribution:
• Extensive experience in core strategic finance
and controllership roles in the financial
services industry
• Significant experience of serving on the boards of
regulated financial services businesses in the UK,
France, Switzerland and Poland
Brendan’s career began in the Public Audit division
of KPMG in Ireland and Canada. He subsequently
worked in commercial and consumer banking
services and financing with Woodchester
Investments plc and, after its acquisition by General
Electric Company, with GE Capital until his
retirement in April 2018.
Key external appointments:
Non-Executive Director of Cabot Credit
Management Group Limited.
Lloyds Banking Group plc Annual Report and Accounts 2024
80
Lloyds Banking Group plc Annual Report and Accounts 2024
81
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Group Executive Committee
C
Charlie Nunn
Executive director and
Group Chief Executive
M
William Chalmers
Executive director and
Chief Financial Officer
M
Chirantan Barua
Chief Executive Officer,
Scottish Widows and Insurance,
Pensions and Investments
M
Kate Cheetham
Chief Legal Officer and
Company Secretary
Appointed: August 2021
Appointed: June 2019
Appointed: May 2023
Appointed: July 2017
M
M
M
M
Elyn Corfield
Sharon Doherty
Jo Harris
Ron van Kemenade
Chief Executive Officer,
Chief People and
Chief Executive Officer,
Chief Operating Officer
Business and Commercial
Places Officer
Mass Affluent
Banking
Appointed: July 2022
Appointed: June 2022
Appointed: July 2022
Appointed: June 2023
A
M
M
M
Laura Needham
Jayne Opperman
Stephen Shelley
Jasjyot Singh OBE
Chief Internal Auditor
Chief Executive Officer,
Chief Risk Officer
Chief Executive Officer,
Consumer Relationships
Consumer Lending
Appointed: October 2022
Appointed: January 2023
Appointed: September 2017
Appointed: July 2022
M
Andrew Walton
Chief Sustainability Officer and
Chief Corporate Affairs Officer
Key
M
A
C
Committee Chair
Group Executive
Committee member
Group Executive
Committee attendee
Read the full
biographies of the
Group Executive
Committee
Appointed: September 2018
Appointed: September 2022
M
John Winter
Chief Executive Officer,
Corporate and Institutional
Banking
Board leadership and company purpose
Our Board and governance structure
Lloyds Banking Group plc
Board
Role of the Board
The Board is responsible for ensuring the Group’s long-term
sustainable success, generating value for shareholders and
contributing to wider society. It sets the Group’s purpose,
values and strategy, with the aim of Helping Britain Prosper
– read more on pages 84 to 85.
The Board is also responsible for establishing and promoting a
culture of customer focus (including treating customers fairly),
risk awareness and ethical behaviours through the Group
values, and monitoring how that culture has been embedded
within the Company – read more about the Board’s customer
focus on pages 40, 84 and 86 and about its monitoring of
culture on page 90.
Sustainability and inclusivity are central to the Group’s
purpose. The Responsible Business Committee oversees
sustainability ambitions, with the Audit and Board Risk
Committees sharing reporting and risk management duties for
sustainability-related matters (including climate). Details on
our sustainability governance are on pages 88 to 89.
The Board is also responsible for ensuring that the Group’s
culture is aligned with its purpose, values and strategy – read
more on pages 85 and 90.
The Board retains ultimate responsibility for ensuring the
necessary resources are in place to meet agreed objectives.
Effective risk management is central to the Group’s strategy,
supported by the Group’s enterprise risk management
framework – read more on pages 137 to 198.
The Board believes that engaging with stakeholders is crucial
for achieving the Group’s strategy and long-term goals. Details
on stakeholder engagement are on pages 86 to 87 and the
directors’ section 172 statement is on pages 40 to 41.
Board
Committees
Nomination and Governance Committee
Responsible for keeping the Board’s governance arrangements
under review, ensuring there is a formal, rigorous and transparent
procedure for the appointment of new directors, ensuring
succession plans are in place for leading the process for Board
appointments and assisting the Board in ensuring its composition
is regularly reviewed and refreshed.
See page
97
Audit Committee
Responsibilities include monitoring and reviewing the formal
arrangements established by the Board in respect of the integrity
of the financial reporting and narrative reporting of the Group and
the Company, the independence and effectiveness of the internal
and external audit functions, and the effectiveness of the internal
controls and the risk management framework.
See page 100
Board Risk Committee
Responsible for assisting the Board in fulfilling its risk governance
and oversight responsibilities.
See page 104
Remuneration Committee
Responsibilities include reviewing, overseeing the design and
making recommendations to the Board on the remuneration
policy and framework for the Company’s directors and the overall
remuneration policy and philosophy of the Group and overseeing
the implementation of those policies.
See page 110
Responsible Business Committee
Responsibilities include providing oversight of and support for the
Group’s strategy and plans for delivering the Company’s
aspirations to become a truly purpose-driven organisation and
considering and recommending to the Board for approval the
Group’s reporting relating to purpose and ESG matters.
See page 109
The terms of reference for the Board Committees and the matters
reserved for the Board can be found on our
corporate governance page
.
Corporate Governance Framework
Key decisions and matters reserved for the Board, including the
Group’s long-term strategy and priorities, are outlined in the
Corporate Governance Framework, which is reviewed periodically.
Committees support the Board by making decisions or
recommendations on delegated matters like Board appointments,
internal controls, risk management, financial reporting, governance,
and remuneration policies. This allows the Board to focus more on
strategic, forward-looking issues. More details on the Corporate
Governance Framework are on page 98.
Each Board Committee is composed solely of non-executive
directors and led by an experienced chair. Committees are
structured to encourage open discussion and thorough
consideration of proposals.
The executive directors make decisions within the parameters and
principles set out in the Corporate Governance Framework, which
aims to ensure that decisions are made by management under the
correct authority. Any activity can be escalated to the full Board if
needed. Executive committees, particularly the Group Executive
Committee, support the Group Chief Executive. Read about the
Group Chief Executive Committees on page 140 and see the Group
Executive Committee members and attendee on page 81.
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82
Lloyds Banking Group plc Annual Report and Accounts 2024
83
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Board meetings in 2024
There are separate boards and board committees of Lloyds Banking
Group plc, Lloyds Bank plc, Bank of Scotland plc and HBOS plc, but
most meetings are held concurrently under the ‘Aligned Board
Model’. As most of the Group’s business sits within the Ring-Fenced
Banks, the interests of the Ring-Fenced Banks, Lloyds Banking
Group plc and HBOS plc are aligned in most circumstances. This
model is supported by a number of safeguards to enable us to
operate in this way including the appointment of three Ring-Fenced
Bank-only non-executive directors and a Ring-Fenced Bank Risk
Officer, all of whose primary focus is on protecting the interests of
the Ring-Fenced Banks. Read more about the Group’s governance
structure and ring-fencing governance arrangements below.
Updates are regularly provided at Board meetings by the Committee
Chairs, the Chair, the Group Chief Executive, the Chief Financial
Officer, the Chief Risk Officer, the Group Chief Operating Officer
and the Chairs of Lloyds Bank Corporate Markets plc and Scottish
Widows Group Limited. The non-executive directors also receive
offline updates from management to give context to current issues.
The Chair regularly meets with non-executive directors without
executive directors present.
Lloyds Banking Group plc has a continuous agenda-setting and
escalation process to ensure the Board receives timely and relevant
information for decision making. Led by the Chair, with support from
the Group Chief Executive and the Company Secretary, this ensures
that sufficient time is allocated for strategic discussions and
business critical items.
The process for escalating issues and setting agendas is regularly
reviewed and enhanced as needed.
The Chair and Committee Chairs structure meetings to encourage
open discussion, debate and challenge. Where directors have
concerns about the operation of the Board or the management of
the Company that cannot be resolved, their concerns would be
recorded in the board minutes. On resignation or retirement,
non-executive directors can provide a written statement of
concerns to the Chair for circulation to the Board. No such written
statement was provided to the Chair in 2024 or up to the date of
this report.
Group structure and ring-fencing
governance arrangements
Since 1 January 2019, UK legislation has required large UK banks
to separate personal banking services, such as current and savings
accounts, from riskier activities, such as investment banking,
in other parts of their business. This is called ring-fencing.
The Group’s structure and governance arrangements meet
these regulatory requirements.
As mentioned on page 80, Lloyds Bank plc and Bank of Scotland
plc are the banks within the Group which have been included
within the ring-fence (together, the Ring-Fenced Banks).
The governance structure focuses on ensuring:
•
Independent decision making by the Ring-Fenced Banks’
boards – on any matters where there might be a conflict
between the interests of the Ring-Fenced Banks and the
interests of another part of the Group and that any such
conflicts are identified and appropriately managed
•
Risks affecting the Ring-Fenced Banks are considered and
managed from the Ring-Fenced Banks’ perspective – including
maintenance of the capital adequacy and liquidity of the
Ring-Fenced Banks
•
Clear and effective governance at both Ring-Fenced Bank and
Lloyds Banking Group plc level – including second and third lines
of defence in respect of risk management
The subsidiaries in the Group are structured into the following
sub-groups under Lloyds Banking Group plc, providing effective
governance for the business undertaken in each sub-group:
•
Ring-Fenced Banks sub-group containing Lloyds Bank plc
and Bank of Scotland plc (including the Halifax and
MBNA businesses), serving both their UK personal
and commercial customers
•
Non-Ring-Fenced Bank sub-group – Lloyds Bank Corporate
Markets plc – which provides products and services to Group
customers that are not allowed within the ring-fence, as well as
serving financial institutions’ customers and holding certain of
the Group’s subsidiaries and branches outside the UK
•
Insurance sub-group under Scottish Widows Group Limited
(including Scottish Widows Limited)
•
Equity sub-group under LBG Equity Investments Limited
(including Lloyds Development Capital (Holdings) Limited)
The boards of the Ring-Fenced Banks comprise all of the Group
directors plus three additional independent non-executive
directors: Nigel Hinshelwood (Senior Independent Director), Sarah
Bentley and Brendan Gilligan – read their biographies on page 80.
These Ring-Fenced Bank-only directors are independent of the
management and the rest of the Group and their role is to act
exclusively in the best interests of the Ring-Fenced Banks. They
therefore play a crucial role in the governance structure, with an
enhanced role in managing any potential conflicts between the
Ring-Fenced Banks and the Group.
-
Lloyds Banking Group plc simplified sub group structure
Lloyds Banking Group plc Board
Aligned boards
Lloyds Bank plc1
HBOS plc
Bank of Scotland plc1
1 Ring -Fenced Banks
Lloyds Bank
Corporate
Markets plc
Non -Ring-Fenced Bank
Scottish
Widows Group
Limited
Insurance
LBG Equity
Investments
Limited
Equity Investments
Board activities, stakeholders and strategy
These pages set out some of the key activities of the Board during
the year, the stakeholder groups central to these activities and the
Board’s oversight of the Group’s strategy.
How the Board oversees the implementation
of the Group’s strategy
Board meetings
The Board regularly discusses strategy at Board meetings,
both as part of the updates from the Group Chief Executive,
the Chief Financial Officer and the Group Chief Operating Officer
and as dedicated agenda items. These included updates on
the implementation of the Group’s strategic transformation,
business-specific strategies and strategies related to customers,
employees, suppliers, sustainability, finance and risk.
Board Committees
The Board’s Committees oversee several aspects of the Group’s
strategy. For example, the Board Risk Committee considers updates
on the performance of the Group’s change programme being
undertaken as part of the strategy including the related execution
risks and the Audit Committee provides oversight of the strategic
development of the reporting environment and benefits from the
independent insight provided by internal and external audit,
supporting rigorous review of strategic change.
Strategy offsites
Strategy offsite meetings were held in June and November, providing
the Board opportunities to consider detailed updates on topics
relating to the Group’s strategic transformation and to provide
challenge and feedback to inform planning and implementation.
Board leadership and company purpose continued
Our Group strategic priorities
Grow
Drive revenue growth
and diversification
Focus
Strengthen cost and
capital efficiency
Change
Maximise the potential of
people, technology and data
Key
Stakeholders
Customers and clients
Shareholders
Regulators and government
Colleagues
Communities and environment
Suppliers
Board and Committees
B
A
NG
RB
Board
Audit Committee
Nomination and Governance
Committee
Responsible Business
Committee
SO
BR
Strategy offsite
Board Risk Committee
Remuneration Committee
Re
Key focus areas for 2024
This table shows some of the key focus areas for the Board during
2024, the stakeholder groups integral to those areas and the
strategic priorities to which those areas align.
Board and Committee meetings 2024
January
February
March
April
B
A
BR NG
Re RB
B
A
BR NG
Re
B
BR
B
A
BR NG
RB
Strategy
Customers
and clients
•
Updates on strategic
transformation including on
operational resilience
•
Updates on business unit
strategic and financial
performance
•
Strategy offsites to discuss
the delivery of the strategy
and cultural change and to
consider the external
environment
•
Senior management and
senior leadership
development and succession
planning – read more on
pages 97 and 98
•
Group’s approach to
environmental sustainability
– read more on pages 88
to 89
•
Market trends, investor
perspectives and
stakeholder engagement
•
Group’s location strategy
•
Group customer dashboard
targets for assessing
customer experience
outcomes – read more on
page 40
•
Updates on key trends
impacting customers and
how the Group is addressing
customers’ needs
•
The Group’s operational
resilience self-assessment as
the Group seeks to ensure
resilient services for its
customers – read more on
page 41
•
Annual Board report on
Consumer Duty and
assessment of good
outcomes for customers –
read more on page 41
•
Consumer products and
propositions
Strategic objectives
Stakeholders
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84
Lloyds Banking Group plc Annual Report and Accounts 2024
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Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Topics at the June offsite included business unit strategic progress,
the evolving external landscape, the strategy for generative artificial
intelligence and consideration of potential options for the next
phase of the Group’s strategy.
At the November offsite, the Board considered the potential
strategic vision beyond 2026, future growth ambitions and the
Group’s operating model.
These offsites allowed the Board to discuss strategy with the
executive team in an iterative manner and to test strategic
assumptions from a stakeholder perspective. The Board also used
these offsite events to engage with customers, colleagues and
clients, with activities including colleague recognition events, branch
visits, client dinners and meeting the UK mortgage business team
and the team working on the refresh of the mobile application.
One-to-one discussions with management
The non-executive directors have open access to senior
management including one-to-one meetings with the Group Chief
Executive, the Chief Financial Officer, the Chief Risk Officer, the
Group Chief Operating Officer and the CEOs of the different
businesses to discuss strategy. This provides the non-executive
directors with the opportunity to explore particular matters in
greater detail outside of Board meetings.
Purpose,
culture and
values
Financial
•
Updates on the Group’s
culture transformation
programme
•
The Group’s progress and
performance on diversity,
equity and inclusion – read
more on pages 31 and 32
•
Updates on the Group’s
environmental strategy,
including on its net zero
ambitions – read more on
pages 54 to 60 – and the
Group’s external
environmental statements
•
Reputation and geopolitical
updates, including impacts
from the external
environment
•
Approval of the overall
internal Group Remuneration
Policy and philosophy
•
Modern slavery and human
trafficking statement
•
Discussion and approval of
the Group’s four-year
operating plan
•
Annual Report, Form 20-F
and half-year and quarterly
interim management
statements
•
Payment of final dividend for
2023 and interim dividend
for 2024
•
Share buyback programme
•
Economic assumptions
•
Financial updates from the
Chief Financial Officer
including key financial
highlights and performance
against budget and sub-
group business performance
•
Board risk appetite metrics
•
Ring-Fenced Bank
governance modifications
renewal and modification
attestation
•
Group Ring-Fencing Policy
•
Enterprise Risk Management
Framework
•
Risk reports and reports from
the Board Risk Committee
•
PRA Periodic Summary
Letter and actions
•
FCA Firm Evaluation Letter
and actions
•
Group Speak Up Champions
report
•
Economic crime prevention
•
Incident Management
Framework
•
Director and committee
appointments – read more
on pages 76 and 97 to 99
•
Contracts with major
suppliers
•
Corporate Governance
Framework
•
Recommendations from the
2023 Board and Committee
effectiveness review
•
Proposed format of the 2024
annual general meeting
•
Group’s outsourcing strategy
•
Updates on workforce
engagement
•
Updates on new regulations
impacting corporate
governance
Risk
management
and regulatory
Governance
May
June
July
August
September
October
November
December
B
BR
Re
B
SO
A
NG
B
A
BR RB
B
BR
NG Re
A
BR
RB
B
SO
BR NG
Re
B
BR
Stakeholder engagement
The Board recognises the vital importance of engaging with all its
stakeholders. The Group’s Closer to Customers, Clients and
Colleagues Programme is a key method by which non-executive
directors hear directly from key stakeholders.
The programme was designed to help the directors better
understand the important issues for our customers, clients and
colleagues, the role the Group plays in supporting them and how the
Group is performing in this respect, helping to inform the directors’
decision making.
A number of activities took place under the programme, which
included meetings with customers and clients and conversations
with colleagues. The non-executive directors continue to find these
sessions beneficial, providing valuable insight which helps in their
consideration of the proposals reviewed by the Board during
the year.
Below is a description of how the Board engages with all its
stakeholders and examples of decision making by the Board which
had particular stakeholder relevance can be found on pages 40
to 41.
Board leadership and company purpose continued
Customers and clients
The Group’s customer-centric approach means the Board has an
ongoing commitment to understanding and addressing customer
and client needs, which remains central to achieving the Group’s
strategic ambitions.
Examples of Board engagement included:
Non-executive directors attended events to provide deeper
insight into the issues which customers and clients have faced
during the year
In 2024, Board members actively participated in customer
sessions to gain a deeper understanding of the daily challenges
the Group’s customers encounter. These sessions covered a
wide range of important topics, including the financial resilience
of customers, family finances, the challenges of starting out in
life, managing home finances, planning for later life and the
challenges of running a small business in the current climate
•
The Board took the opportunity to meet with clients when
visiting Group sites in Leeds and Birmingham
Dedicated updates to the Board from across the organisation,
which identified areas of customer and client concern and
covered a range of internal and external performance
measures; in addition, concerns relevant to customers and
clients were identified for consideration in wider proposals put
to the Board
Regular updates to the Board giving insight into the Group’s
performance in delivering on its customer and client-related
objectives and commitments, which assisted in determining
where further action was required to meet these objectives.
Read about the Group Customer Dashboard on page 40
The Chair and the Group Chief Executive attended customer
and client engagement events across various regions of the UK,
providing an important opportunity for customers and clients
to raise their concerns directly with these Board members
•
•
•
•
•
Colleagues
Colleagues remain central to the delivery of the Group’s strategic
ambitions and the Board continues to recognise this in its
engagement with them. Engagement this year included a variety of
sessions across the Group to discuss topical issues relating to
challenges both at and outside of work.
As in 2023, the Board’s Responsible Business Committee has been
the designated body for workforce engagement, providing focus,
but with the Board retaining a commitment for individual Board
members to engage with colleagues directly throughout the year.
The Responsible Business Committee reports regularly to the
Board on all of its activities, including on its colleague engagement
agenda. The Board considers these arrangements to be effective
as involvement of all members of the Responsible Business
Committee enables a broader range of colleague engagement
activities, as described in this section.
In continuing to consider its arrangements for engaging with the
Group’s workforce, the Board approved in 2024 an evolved
approach to colleague engagement, to be implemented during
2025. This new approach builds on existing colleague listening
activity and will introduce three forums to better represent
colleagues particularly at grades where trade union membership
is low. The forums will include the People Forum, the People
Consultation Forum and the Management Advisory Forum.
Examples of Board engagement included:
•
Review by the Responsible Business Committee of the findings
of surveys of colleague sentiment, including annual and ad hoc
surveys. Regular review by the Responsible Business Committee
of other workforce engagement reports, covering key
issues raised, trends on people matters and updates
on colleague sentiment
Reports summarising colleague engagement activity, including
key themes and issues which colleagues have raised during
the year
Non-executive directors attended a number of colleague focus
groups, allowing colleagues to share their perspective on
matters on the Board’s agenda and discuss the Group’s progress
against its strategic objectives
Members of the Board visited a number of the Group’s sites,
including Leeds and Birmingham, where they met with
colleagues and visited a number of branches
Sessions were hosted by both the Chair and the Group Chief
Executive, complemented by engagement sessions led by other
senior leaders with feedback shared with the wider Board
Board members attended a range of other events held for the
Group’s senior leaders and other colleague network events
•
•
•
•
•
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Lloyds Banking Group plc Annual Report and Accounts 2024
87
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
•
•
•
•
Shareholders
The Group has one of the largest shareholder bases in the UK,
which includes most of our colleagues. The Board is committed to
understanding the needs and expectations of our shareholders,
both private and institutional.
Examples of Board engagement included:
A number of directors engaged directly with institutional
shareholders, including the Chair, the Group Chief Executive
and the Chief Financial Officer. The Chair held meetings during
the year with a number of major shareholders of the Group
The Group Chief Executive and the Chief Financial Officer
undertook numerous meetings covering topics such as the
Group’s strategy, its purpose and its financial performance
The Group held during December 2024 a Board governance
event for both institutional equity and debt investors; further
detail of this event can be found on page 92
Regular updates from Investor Relations on market views and
shareholder sentiment/feedback, including an annual
presentation from the Group’s corporate brokers on market
dynamics and perception of the Group
The Board’s Nomination and Governance Committee
considered correspondence received from institutional
shareholders and non-governmental organisations, along with
market feedback
The Senior Independent Director and Chair of the
Remuneration Committee engaged with shareholders
and proxy agencies on matters relevant to remuneration
and other topics
Overall, the Group undertook approximately 355 meetings with
institutional investors, many of which were attended by
management and directors
•
•
•
Communities and
environment
The Group is present in almost every community and the Board
places great importance on engagement and action to help these
communities prosper, while helping to build a more sustainable
and inclusive future.
Examples of Board engagement included:
Updates on climate, environmental and social matters, covering
aspects of the Group’s business, where the Board reviewed
progress made against its stated ambitions in these areas and
agreed any further action it considered was required
The Board continues to be supported in environmental matters
by its Responsible Business Committee. The Committee
considers stakeholder views on all matters relating to the
Group’s ambition to be a trusted, sustainable, inclusive and
responsible business. The report of the Committee on its work
during the year can be found on page 109
•
•
Regulators and
government
The Board continues to maintain strong and open relationships with
the Group’s regulators and with government authorities, including
key stakeholders such as the Financial Conduct Authority (FCA),
the Prudential Regulation Authority (PRA), HM Treasury and HMRC.
Examples of Board engagement included:
The Chair and individual directors, including the Chairs of
the Board’s Committees, held continuing discussions with
the FCA and PRA on a number of aspects relevant to the
regulatory agenda
The Board reviewed updates on wider Group regulatory
interaction, providing a view of key areas of focus and also
progress made in addressing key regulatory priorities
At a meeting of the July Board, the outcomes and progress of
actions relevant to the PRA’s Periodic Summary Meeting letter
and the FCA’s Firm Evaluation Letter were discussed with the
PRA and the FCA respectively
The Chair and individual directors had a number of meetings
with the regulators to discuss the Board’s oversight of the
Group, key risks and strategic priorities
•
•
•
•
Suppliers
The Group has a number of partners it relies on for important
aspects of our operations and customer service provision and the
Board recognises the importance of these supplier relationships in
achieving the Group’s wider ambitions.
Examples of Board engagement included:
The Board’s Audit Committee considered reports from the
Group’s Sourcing and Finance teams on the efficiency of
supplier payment practices, including those relating to the
Group’s key suppliers, ensuring our approach continued to meet
wider industry standards
The Board continued to oversee resilience in the supply chain,
ensuring our most important supplier relationships were not
impacted by potential material events
•
•
and
Sustainability governance
Given the strategic importance of our sustainability ambitions and
commitments in managing the impacts arising from climate change
and broader social issues, the Group’s governance structure provides
clear oversight and ownership of the Group’s sustainability strategy
and management of risks and opportunities.
Sustainability-related responsibilities at Board-level are overseen by
the Responsible Business Committee, with specific reporting and
risk management responsibility in relation to sustainability-related
matters (including climate) shared with the Audit Committee and
the Board Risk Committee. This ensures appropriate Board-level
coordination and cooperation on these matters.
Climate risks and opportunities are identified, assessed and managed
by business unit level teams governed via functional and divisional level
steering groups and committees. For further details on the control
environment operating at a business unit level for climate-related
controls, please see page 140 of the sustainability report 2024
Board leadership and company purpose continued
.
The Responsible Business Committee oversees the Group’s delivery
of its purpose including the delivery of our sustainability strategy.
It conducts deep dives into current priority areas and escalates for
review and discussion to the Board as appropriate. Our purpose
pillars are outlined on page 48. The Committee also makes
recommendations to the Board for social strategies and
environmental sustainability activities.
Key areas of Board-level involvement in 2024 were the review of our
purpose priorities and approval of our updates to external sector
statements and carbon offsetting principles.
Our sustainability governance structure
Board level
Lloyds Banking Group plc Board1
Responsible
Business
Committee2
Audit
Committee
Board Risk
Committee
Executive level
Group Executive
Committee1
Group Net Zero
Committee3
Group Risk
Committee
Division and
function/platform level
Divisional a nd functional-level
climate an d sustainability
steering groups or committees
The Responsible Business Committee report provides an overview of
the role of the Responsible Business Committee – read more on
page 109.
We engage proactively with investors and other key stakeholders
throughout the year on our sustainability priorities and plans. Given
net zero and sustainability are at the heart of our purpose-driven
strategy, with ambitious climate targets reflected in strategic
objectives, the progress already being made in this area and the
Group’s existing focus on enhanced disclosure, transparency and
engagement, the Board does not believe it is necessary to propose
a separate climate vote at the Company’s 2025 annual general
meeting at this time. We will continue to be transparent on our
sustainability strategy, targets, plans and progress. We will continue
to consider on a regular basis whether to propose a climate vote.
Executive-level governance
The accountable executive for the Group’s sustainability strategy is
the Chief Sustainability Officer and Chief Corporate Affairs Officer,
with relevant teams in place to drive this strategy forward. There are
three key committees that provide management oversight from an
executive level: the Group Net Zero Committee, the Group Risk
Committee and the Group Executive Committee. These are
supported by a number of divisional and function-level teams who
consider sustainability topics.
Group Executive Committee
Group Net Zero
Committee governance
Updates on the key areas of the Group’s sustainability strategy are
provided to the Responsible Business Committee by the Group
Executive Committee on a quarterly basis. The Group Net Zero
Committee provides direction and oversight of the Group
environmental sustainability strategy, as well as oversight of the
Group’s approach to meeting external environmental ambitions and
targets, including targets made as part of the Group’s membership
of the Net Zero Banking Alliance. Climate considerations form part
of our planning and forecasting activities. This includes forecasting
of our Bank financed emissions to 2030 for our high-carbon-
intensive sectors, along with our supply chain and own operations.
These emissions forecasts are included as part of our four-year
forecasting process, shared with the Group Executive Committee
and the Board. Through regular meetings the Group Net Zero
Committee reviews sustainability opportunities and makes
recommendations to the Group Executive Committee and the
Responsible Business Committee where appropriate.
The Group Net Zero Committee is supported by divisional and
functional-level teams; further details on their role can be found on
pages 140 and 141 of the
sustainability report 2024
.
Group Risk Committee governance
Responsibility for overseeing the management of financial risks from
climate change rests with the relevant Chief Risk Officers across the
Group, who have Senior Management Function (SMF) responsibility
covering the Ring-Fenced Banks (Lloyds Bank plc and Bank of
Scotland plc), Lloyds Bank Corporate Markets and the Solvency UK
(Solvency II as modified by the PRA’s 2024 reforms) regulated entities
in Scottish Widows Group (under Scottish Widows Group, the
Finance Director has additional SMF responsibilities to manage the
risks while the Chief Risk Officer has oversight).
The Group Risk Committee oversees the Group’s management of
emerging and principal risks such as climate risk, operational risk,
conduct risk and economic crime. Climate risk is considered regularly
through the Group’s risk reporting to the Group Risk Committee, in
addition to standalone updates on a half-yearly basis which inform
discussions at the Board Risk Committee. Relevant updates are also
provided across the Group’s key legal entities, as required.
Additional engagement on relevant climate-related matters is
undertaken through the existing risk governance structure, for
example, sector risks and opportunities related to climate are
presented and discussed at senior credit forums.
Programme governance is also in place for oversight of plans
to develop the Group’s climate risk management and scenario
analysis capabilities.
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The Chair of the Scottish Widows Board sits on the Lloyds Banking Group plc Board. The
Scottish Widows CEO sits on the Group Executive Committee and updates the Group
Executive Committee on relevant insurance matters which can include papers for Group
Executive Committee consideration.
2
The Chair of the Responsible Business Committee, Amanda Mackenzie, is a non-
executive director on the Board, a member of the Remuneration Committee, the
Nomination and Governance Committee and the Audit Committee. Amanda helps
ensure that sustainability is discussed and considered by the Board. Amanda has
extensive experience in ESG matters, including helping launch the United Nations
Sustainable Development Goals.
3
The Group Net Zero Committee provide oversight from a climate and nature
perspective only.
88
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Other information
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Strategic report
’
Key sustainability topics discussed at the Board s Committee meetings in 2024
Across the Group’s governance structure, key areas of discussion at Board Committee level are detailed below in relation to the Group’s
sustainability strategy, targets and approach to managing climate-related risk. These Committees meet at least quarterly with
sustainability matters, including climate, discussed at a number of these meetings. There were nine specific updates given to the Board in
2024 on climate-related matters.
Lloyds Banking Group plc Board
Topics discussed
•
Review of purpose pillars, including
deep dives on regional development
and financial empowerment
•
Approval of Group carbon offsetting
principles and external sector
statement updates
•
Review plans for mobilising
environmental sustainability strategy
and our approach for nature
•
Monitoring progress against climate
ambitions, targets, pledges, strategic
levers and updates on these
throughout the year
•
Review and discussion of diversity and
inclusion performance against our
ambitions and new approach
•
Review, discussion and approval of our
Group Modern Slavery Statement
•
Review of Consumer Duty programme
and implementation progress
•
Review of colleague engagement
strategy, feedback and outcomes
Responsible Business
Committee
Audit
Committee
Board Risk
Committee
Topics discussed
•
Review of new regulations including
International Sustainability Standards
Board, Corporate Sustainability
Reporting Directive and Climate-
related Financial Disclosures
•
Activity to assess impacts of climate-
related risks and opportunities on the
financial statements including
quantification of impacts of climate
risk on Expected Credit Loss
•
Updates on the control environment
embedded to support 2024
sustainability reporting
•
Review of sustainability reporting
approach and integrated
sustainability disclosures for the
Group in 2024
See the Responsible Business Committee
report on page 109
See the Audit Committee report on
pages 100 to 103
See the Board Risk Committee report on
pages 104 to 108
Topics discussed
•
Climate Risk Deep Dive presented in
July updating on the Group’s activity
to manage climate risk, noting
current regulatory expectations
and evolving requirements. Key areas
of discussion included:
Pace of technology with some
sectors more advanced than
others and challenges around
the absence of demand for
new technologies
Government policy and
consumer demand
Greenwashing risk and
development of the Group-wide
framework to mitigate
greenwashing risks
Review of Board risk appetite and
metrics for climate risk to be
presented in next deep dive
–
–
–
–
Focus on sustainability skills and training
Members of each of the Responsible Business, Audit and Board
Risk Committees must have the appropriate knowledge, skills
and expertise to respond to sustainability-related risks and
opportunities. They are provided with appropriate and timely
training, both in the form of an induction programme for new
members and on an ongoing basis for all members.
Members of each these Committees use their previous
sustainability knowledge and experience to perform their roles.
For example, the Chair of the Responsible Business Committee
Amanda Mackenzie brings extensive experience in ESG matters
including helping launch the United Nations Sustainability Goals.
We are upskilling the members of these Committees through
additional specific training such as training on double materiality
assessments, deep dives on climate risk and ESG training on
upcoming reporting developments.
We continue to educate our Board members, with this year’s focus
on upcoming sustainability regulation including the EU Corporate
Sustainability Reporting Directive. A specific training session was
delivered to the Board on some of the key concepts and terms on
the theme of double materiality in October 2024.
Our culture
in action
How the Board monitors and assesses culture
Our non -e xecutive directors continue to engage with colleagues
to deepen their understanding of how colleagues experience our
culture and use this insight to shape decision making in Board
sessions. We have adopted several engagement methods for
assessing and monitoring culture in 2024 as set out below,
enabling colleagues to share ideas and feedback with the Board:
•
Colleague surveys and listening activities
•
Closer to Colleagues, Customers and Clients sessions, where the
Chair and members of the Board meet with colleagues to listen
across a range of topics including safety, pace of change and agile
ways of working
•
Groups of colleagues met with in 2024 include our branch area
directors, platform leads, leaders and colleagues under the age
of 25, to understand different perspectives
•
The Board also attended apprentice events, branch visits,
colleague networking lunches, events and training sessions.
The Chair and the Group Chief Executive have comprehensive
colleague engagement programmes throughout the year
We looked at data and insights from the following sources:
•
Colleague surveys: 81 per cent of colleagues responded to our
annual all -c olleague survey in September
•
We conducted regular pulse surveys with 25 per cent of the
organisation each time to focus on key topics
•
We analysed sentiment from internal and external sources
including over 190,000 comments from our annual survey
•
We tapped into sentiment being expressed about the world
of work online to see external trends and influences
•
We refocused existing metrics to create a culture dashboard
focusing on the internal and external environment
•
We held dedicated listening sessions for colleagues during times
of civil unrest, fostering a sense of safety and inclusion
Highlights
Board leadership and company purpose continued
The Group Culture Dashboard
81%
Colleague Survey Response Rate
190,000
survey comments analysed
Our Group Culture Dashboard is now an embedded part of culture
reporting cadence, now in its third cycle. Introduced in November
2023, the dashboard aims to make connections between
performance, change and customer outcomes. The Culture
Dashboard tracks both quantitative and qualitative insights and
recommends actions to drive progress that will help the Group to
Grow, Focus and Change.
How the dashboard works
We combine Customer Experience and Colleague Experience
metrics, then correlate these data sets to:
•
Understand how colleague and customer outcomes are linked
•
Empower colleagues to deliver the right customer experience
•
Drive business outcomes
This gives us the opportunity to plot our progress against our culture
goals, linked to our strategic pillars of Grow, Focus and Change. Our
culture measurement activities drive outcomes by being a key input
to our culture plans at Group and business levels, driving action to
embed our cultural transformation. Through this activity, we are
able to track and predict change over time, as a continuation of
our commitment to creating a strong culture that drives good
customer outcomes.
Embedding of our values
Our values are
embedded into our
engagement, culture
and measurement
programmes
People-first
Bold
Inclusive
Sustainable
Trust
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Strategic report
re
Board
sponsibilities
As Chair, Sir Robin Budenberg has overall responsibility for the
leadership of the Board and for ensuring its effectiveness in all
aspects of its operation.
The composition of the Board helps ensure that no one individual
or small group of individuals dominates the Board’s decision making.
The diversity of skills, experience and background on the Board
enables the Board to provide constructive challenge and strategic
guidance and to offer specialist advice.
There is a clear division of responsibilities between the leadership
of the Board and the executive leadership of the Group – please
refer to the role summaries below. The responsibilities of the Chair,
Group Chief Executive, Senior Independent Director, Board and
Committees are agreed by the Board and publicly available on the
Group’s website on our
corporate governance page
Division of responsibilities
. The Chair
periodically refreshes membership of the Committees.
Monitoring independence
The Nomination and Governance Committee monitors whether
there are any relationships or circumstances which may affect a
director’s independence. Nathan Bostock and Scott Wheway were
board members of both Centrica plc and Lloyds Banking Group plc
for a short period. This was considered as part of Nathan’s
appointment process and it was determined that it would not
compromise their ability to exercise objective and independent
judgement or act in the best interests of the Company.
Following the most recent review of independence, the Nomination
and Governance Committee concluded that all non-executive
directors are independent in character and judgement and are
independent directors for the purposes of the Code. Sir Robin
Budenberg was independent on appointment when assessed
against the circumstances set out in provision 10 of the Code.
Monitoring time commitments
Non-executive directors are advised of time commitments for the
Board and relevant Committees prior to their appointment and are
required to devote such time as is necessary to discharge their
duties effectively. The time commitments of the directors are
considered by the Board on appointment and annually thereafter
and, following the most recent review, the Board is satisfied there
are no directors whose time commitments are considered to be a
matter for concern.
External appointments, which may affect existing time
commitments to the Board and its Committees, must be agreed
with the Chair and prior Board approval must be obtained. During
2024, Sarah Legg was appointed a non-executive director of Man
Group plc. The Board considered the time commitment and
potential conflicts involved prior to Sarah accepting the role and
was satisfied that she would continue to have sufficient time to
commit to her Board and Committee appointments. The executive
directors do not have any significant external appointments.
Information on directors’ attendance at meetings can be found on
page 80.
The right information and support
The Chair, supported by the Company Secretary, ensures that Board
members receive appropriate and timely information. All directors
have access to the advice of the Company Secretary and the Group
provides access, at its expense, to the services of independent
professional advisers in order to assist directors in their role. Board
Committees are also provided with sufficient resources to discharge
their duties.
Non -executive directors
The Chair and the independent non-
executive directors challenge management
constructively and help develop and set the
Group’s strategy. They actively participate in
Board decision making and scrutinise
management performance. They satisfy
themselves on the integrity of financial
information and review the Group’s risk
exposures and controls. The non-executive
directors, through the Remuneration
Committee, also determine the
remuneration of executive directors.
Sir Robin
Budenberg CBE
Chair
Cathy Turner
Senior Independent
Director
Sir Robin Budenberg leads the Board and
promotes high standards of corporate
governance. He leads in building an effective
and complementary Board and sets the Board’s
agenda. The Chair also leads Board succession
planning and seeks to ensure effective
communication with shareholders.
As Senior Independent Director, Cathy Turner is
a sounding board for the Chair and Group Chief
Executive. She acts as a conduit for the views of
non-executive directors and conducts the
Chair’s annual performance appraisal. She is
available to help resolve shareholders’ concerns
and attends meetings with major shareholders
to understand issues and concerns.
Executive directors
Company Secretary
Charlie Nunn
Group Chief
Executive
William Chalmers
Kate Cheetham
Chief Financial
Officer
Chief Legal Officer
and Company
Secretary
Charlie Nunn manages and leads the Group on
a day-to-day basis, making decisions on matters
affecting the operation and performance of the
Group’s business and the delivery of the Board’s
approved strategy. He delegates aspects of his
authority, as permitted under the Corporate
Governance Framework, to other members of
the Group Executive Committee. Charlie
regularly meets with major shareholders to
understand issues and concerns.
Under Charlie Nunn’s leadership, William
Chalmers makes and implements decisions in all
matters affecting the management of financial
resources. He provides specialist knowledge
and experience to the Board. Together with
Charlie Nunn, he designs, develops and seeks to
implement strategic plans and deals with the
day-to-day operations of the Group. William
regularly meets with major shareholders to
understand issues and concerns.
As Company Secretary, Kate Cheetham advises
the Board on governance matters, supports the
Chair and helps the Board and its Committees
function effectively. She is also responsible for
facilitating directors’ induction and training.
Both the appointment and removal of the
Company Secretary are matters for the Board
as a whole.
-
Composition
The balance of skills, experience, independence and knowledge on
the Board is the responsibility of the Nomination and Governance
Committee and is reviewed annually or whenever appointments are
considered. The Nomination and Governance Committee assesses
the skills, experience and knowledge of the non-executive directors
on an individual basis and on a collective basis – please see page 77
for the results of the latest collective assessment, which was
approved on 16 January 2025. Having the right balance of skills
and experience helps to ensure directors discharge their
duties effectively.
The Nomination and Governance Committee leads the process for
Board appointments, which makes recommendations to the Board.
Open advertising and/or an external search consultancy is used for
the appointment of the Chair and non-executive directors.
Appointments are made on merit and due consideration is given to
diversity in its broadest sense, including gender, social, regional and
ethnic backgrounds and cognitive and personal strengths.
Succession planning
The Nomination and Governance Committee ensures plans are in
place for orderly succession to both Board and senior management
positions and oversees the development of a diverse pipeline for
succession. More information about the work of the Nomination and
Governance Committee on succession planning can be found on
pages 97 to 98.
All directors are subject to annual re-election. All directors intend to
seek re-election at the Company’s annual general meeting in 2025.
Composition, succession and evaluation
Tenure of non executive directors
2018
2019
2020
2021
2022
2023
2024
Sir Robin Budenberg
4
Cathy Turner
2
Nathan Bostock
0
Sarah Legg
5
Amanda Mackenzie
6
3
Scott Wheway
2
Catherine Woods
4
Length of tenure in complete years as at 31 December 2024
Board governance event
In December 2024 the Group held a Board governance event to
highlight our approach to governance and update the market on
key areas of interest. The event was hosted by the Chair and
involved all the Committee Chairs and the Senior Independent
Director of the Ring-Fenced Banks. It was attended by both
institutional equity and debt investors and other stakeholders
including proxy advisers and rating agencies.
The event took the form of three panel discussions, each of which
was followed by a question and answer session:
•
Robin Budenberg, Cathy Turner and Sarah Legg discussed
ensuring appropriate governance and diverse challenge across
the business
•
Catherine Woods, Sarah Legg and Nigel Hinshelwood discussed
overseeing risks in a dynamic environment
•
Robin Budenberg, Cathy Turner and Amanda Mackenzie
discussed balancing the needs of shareholders and other
stakeholders and the importance of sustainability
The event is an important element of our engagement programme
with c.80 attendees including representation from more than 30
per cent of the issued share capital of the Company. In addition,
there have been a number of people who have viewed the webcast
replay of the event, read the event transcript and/or read the
event slides.
The webcast replay, transcript and
presentation slides can be found on our
Event presentations and webcasts page
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Harmeen Mehta
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Board evaluation
How the Board performs and is evaluated
The annual performance evaluation of the Board provides an
opportunity to identify improvements to its effectiveness,
maximise strengths and highlight areas of further development,
enabling the Board continuously to improve its own performance
and the performance of the Group. The Board is committed to the
independent evaluation of its own performance and that of its
Committees at least once every three years, as recommended by
the UK Corporate Governance Code 2024. An external evaluation
was carried out by Boardroom Review in 2022 and while thematic
topics will continue to be areas of focus, all specific findings from the
evaluation have been addressed. The next external evaluation will
take place in 2025.
The Chair of the Board, with the support of the Nomination and
Governance Committee, leads the Board in considering and
responding to the review of the Board’s effectiveness, which
includes a review of its Committees and individual directors.
Performance evaluation of the Chair is carried out by the non-
executive directors, led by the Senior Independent Director,
considering the views of the executive directors.
Stage 1
November – December 2024
The Company Secretary invited all
directors to complete a questionnaire
relating to the Board and to the
Committees of which they are members.
During this stage, the Company Secretary
met with each of the directors to discuss
their responses.
Stage 2
January 2025
The findings, based on the questionnaire
results and discussions with individual
directors, were considered by the
Nomination and Governance Committee
in January 2025. Committee-specific
findings and actions were considered by
each Board Committee.
Progress against actions from the 2023 evaluation of the
Board’s performance
A summary of progress against the feedback from the 2023
evaluation is set out on page 94.
2024 evaluation of the Board’s performance
The 2024 evaluation was conducted internally by the Company
Secretary between November 2024 and February 2025 and was
overseen by the Nomination and Governance Committee. The
evaluation took into account the findings from the 2023 evaluation
as well as an externally facilitated Board Development session.
The 2024 evaluation sought the directors’ views on the thematic
areas of development identified in the most recent external
evaluation in 2022 and in the 2023 review, including: Board
contribution and challenge; customer and external environment
focus; risk and control updates; and cultural transformation. The
directors were also invited to provide feedback on any other areas
they felt would improve the Board’s performance. Key findings from
the 2024 evaluation are set out in the table below.
Key findings from the 2024 evaluation
Process and timeline for 2024 evaluation
Stage 3
February 2025
The proposed actions based on these
discussions were discussed at the Board’s
meeting in February 2025.
The evaluation concluded that the performance of the Board, the Committees, the Chair and each of the directors continues to be
effective. All directors demonstrated commitment to their roles and contributed effectively.
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Theme and link to strategy
Strengths
Areas for improvement/continued focus
Board leadership
and contribution
Grow
Board and Committee meetings are chaired effectively,
allowing all directors to contribute and inviting diverse
views and perspectives to be heard
The culture of the Board sets the tone for constructive
challenge and effective collaboration
Explore opportunities to increase external perspectives
and time for unstructured conversations, enhancing the
richness of content and views
Continue to consider Board composition and focus on
skills required for future Board recruitment
Strategy
Change
The Board maintains strong discipline and rigour in
iteratively reviewing both strategy and purpose
The Board dedicates time to understand the
perspectives of business units when considering
strategic priorities and execution
Continued focus on both the opportunities and threats
resulting from a fast evolving external environment
Ensure customer and colleague perspectives and
insights shared with the Board are presented in a
holistic way
Risk and control
Focus
The Board continues to provide effective oversight of
the system of risk management and internal controls
The Board has effective line of sight into business unit
financial performance with effective mechanisms for
the timely escalation of any issues
Continue to enhance the quality of materials to the
Board to ensure they highlight the key messages,
challenges and expected outcomes so as to optimise
the efficiency of meetings
Expand the extent to which presentations demonstrate
iterative thinking as well as lessons learned
People culture
and environment
Change
The Board provides effective oversight of the culture
and ethics of the Group, with actions and decisions
reflecting the Group’s purpose and values
The Board dedicates significant time to assessing the
impacts of the culture and risk transformation
The Board to further support and challenge
management in the implementation of cultural
change throughout the organisation to deliver
the right outcomes
Composition, succession and evaluation continued
Progress against the 2023 evaluation
The main focus in improvements to Board effectiveness in 2024 have centred around adapting the strategic focus to address rapidly
evolving areas such as technology, cyber and data, and the competitive landscape. The Board has also continued to cultivate a ‘sense of
team’, with a sustained emphasis on fostering an ‘open’ culture that encourages more constructive challenge during Board meetings.
Theme and link to strategy
Feedback from the 2023 evaluation
Actions taken in 2024
Board leadership
and contribution
Grow
Continuing to progress ‘sense of team’ by
encouraging and facilitating Board members
to spend constructive time together outside
formal meetings
Continue to consider Board composition
and focus on skills required for future
in Board recruitment
Opportunities for constructive time together included
informal Board dinners where the Board received
presentations on thematic topics, such as the evolving
external environment and economics
Meeting schedules were re-arranged to allow Board
members and senior management to spend more time
together to engage with customers, colleagues
and clients
Board composition and skills continue to be reviewed
by the Nomination and Governance Committee, with
priority skills for recruitment identified. The Board’s
breadth of skills was enhanced through the
appointment of Nathan Bostock in August 2024
Risk and control
Focus
Ensuring those who are not members of Board
Risk Committee or Audit Committee have
sufficient exposure to Internal Audit’s findings,
capabilities and its interactions with Group
Executive Committee members
Continue improving the quality of Board papers
Board papers included updates from Internal Audit
where appropriate, and the work of Internal Audit was
highlighted in the Chair reports from the Audit
Committee and the Board Risk Committee
There was continued focus on the quality of Board
papers ongoing guidance and training provided by the
Company Secretariat throughout the year
Strategy
Change
Consider increasing Board agenda time for
fast-changing topics e.g. technology, cyber and
data, competitors and disintermediation
Consider increasing Board agenda time to
discuss holistic customer lens
The Board has spent dedicated time on a range of
fast-changing topics both at Board meetings and at the
strategy offsite meetings in June and November. Topics
included business unit strategy and competitive
landscape, the fast evolving external environment and
its reputational, geopolitical and economic implications
and data, technology and use of artificial intelligence
The scope and cadence of updates to the Board from
the Chief Customer Officer were increased during the
year, including updates on Consumer Relationships,
Customer Insights and the Group Customer Dashboard.
The Annual Consumer Duty Report was approved by
the Board in June 2024
People, culture
and environment
Change
Ensuring the Board understands customer and
colleague views
Continuing focus on an ‘open’ culture and
constructive challenge at Board meetings
There were regular updates to the Board and Board
Committees from People and Places to understand
colleague views and progress of the cultural
transformation agenda
Led by the Chair, the Board continued to foster an open
and constructive environment through an iterative
approach, with early stage discussion of topics as
they developed
Board papers captured engagement between the Board
and senior management outside the meeting, to allow
for more focused and effective discussion
The Board had the opportunity to develop a deeper
understanding of customer and colleague views through
various activities, including engagement and events at
offsites and participation in the ‘Closer to Customers,
Clients and Colleagues’ programme
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
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Financial results
Sustainability review
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’
-
Board training
The Chair is responsible for leading the development, and
monitoring the effective implementation, of training policies and
procedures for the directors. On appointment, each director
receives a formal and tailored induction. There is also a programme
of ongoing training for directors.
The directors are committed to their own ongoing professional
development and the Chair discusses training with each non-
executive director at least annually. The Company Secretary
oversees a training plan for the non-executive directors, with the
plan for 2024 discussed at the Nomination and Governance
Committee at the start of the year with the non-executive directors
encouraged to suggest training topics of interest.
In 2024, Nathan Bostock
received a tailored and
comprehensive induction
that provided clarity on
key issues facing the Group
as a whole, together
with specific insight into
Lloyds Bank Corporate
Markets’ business.
Read full biography
Induction
New non executive directors like Nathan Bostock receive a tailored
induction that includes meetings with key internal stakeholders and
focuses on the Group s culture and values, stakeholders, strategy,
structure, operations and governance with an emphasis on ensuring
that the induction brings the business and its issues alive, taking
account of the specific role the director has been appointed to fulfil
and their skills and experience to date.
An induction pack is provided containing key corporate documents
and information relating to the Group covering aspects such as the
role of a director (including relevant Group policies such as anti
bribery, conflicts of interest, expenses, gifts and hospitality and share
dealing), the Board and its Committees, financials and strategy,
governance, risk management, culture, shareholders and training.
Group training modules
Non-executive directors are asked to complete training modules
each year. In 2024, these modules were on:
•
Conduct Rules
•
Speak Up (the Group’s whistleblowing programme)
Committee training
Committee specific training is agreed by Committee Chairs as
and when needed such as IFRS 9 training this year for members of
the Audit Committee, training on models, motor residual value
risk and the structural hedge for the members of the Board Risk
Committee, and training on Pensions for the members of the
Remuneration Committee.
New role training
Directors who take on new roles or change roles during the year attend induction or handover meetings in respect of those new roles.
Other training
Training sessions have been offered across a range of topics of
particular interest that were chosen to complement the Board
agenda and facilitate advanced discussion. Where training was
offered online, the sessions have been recorded and made available
to all directors. The topics are produced based on the level of
knowledge and experience of Board members.
Key topics during 2024 included:
•
Blockchain, cryptocurrencies and cloud services
•
Consumer Duty update
•
Corporate governance reforms
•
Environmental sustainability – introduction to double materiality
•
Culture
•
Financial crime
In addition to the above, a board incident management exercise
was undertaken. Members of the Board and its Responsible
Business Committee also continued to upskill in relation to
sustainability matters – read more on page 89.
Audit and risk
There are formal policies and procedures in place designed to ensure
the independence and effectiveness of the internal and external audit
functions. Group Audit is a single independent internal audit function,
reporting to the Audit Committee. Further detail can be found in the
sections headed ‘Group Audit’ and ‘Auditor independence and
remuneration’ on page 103.
The Board has delegated a number of responsibilities to the Audit
Committee, including monitoring and reviewing financial reporting, the
effectiveness of internal controls and the risk management framework,
whistleblowing, the internal audit process and the external auditor’s
process. The Audit Committee reports regularly to the Board on its
activities and its report for 2024 is on pages 100 to 103.
Requirements that the annual report is fair, balanced and
understandable are considered during the drafting and reviewing
process and the Board has concluded that the 2024 annual report
meets this requirement. The Board is supported in this by its Audit
Committee and a sign-off process involving different sections of the
annual report being approved for inclusion by senior management,
with additional review by the Group Disclosure Committee. The
statement of directors’ responsibilities can be found on page 136 and
the statement of the Auditor’s responsibilities for the audit of the
financial statements can be found on page 210.
The Board is responsible for the Group’s risk management and internal
controls systems, including the determination of the nature and
extent of risk the Company is willing to take. Risk is further managed
through the Board-approved risk management framework, as
discussed in the risk management report on pages 137 to 198. The
Board Risk Committee helps the Board in fulfilling its risk governance
and oversight responsibilities, including by the provision of advice to
the Board on risk strategy and overseeing the development,
implementation and maintenance of the Group’s overall risk
management framework, strategy, principles and policies and its risk
appetite. The Board Risk Committee reports regularly to the Board
on its activities and its report for 2024 is on pages 104 to 108.
Internal control
Board responsibility
The Board is responsible for, and monitors, the Group’s risk
management and internal control systems. These are designed to
facilitate effective and efficient operations and to ensure the quality
and integrity of internal and external reporting and compliance with
applicable laws and regulations, and for the determination of the
nature and extent of the principal risks the Group is willing to take
to achieve its strategy. The directors and senior management are
committed to maintaining a robust control framework as the
foundation for the delivery of effective risk management. The directors
acknowledge their responsibilities in relation to the Group’s risk
management and internal control systems, and for reviewing
their effectiveness.
In establishing and reviewing the risk management and internal control
systems, the directors carried out a robust assessment of the emerging
and principal risks facing the Company, including those that would
threaten its business model, future performance, solvency or liquidity
and reputation, the likelihood of a risk event occurring and the costs of
control. The process for identification, evaluation and management of
the emerging and principal risks faced by the Group is integrated into
the Group’s overall enterprise framework for risk. The risk
identification, evaluation and management process is designed to also
identify whether the controls in place result in an acceptable level of
risk. At Group level, a Group Control and Risk Environment report and
risk appetite dashboard are reviewed and regularly debated by the
Group Risk Committee and the Board Risk Committee, with formal
updates provided to the Board to ensure that they are satisfied with
the overall risk profile, risk accountabilities and mitigating actions. The
report and dashboard provide a view of the Group’s overall risk profile,
key risks and management actions, together with performance against
risk appetite and an overview of emerging risks which could affect the
Group’s performance over the life of the operating plan. Information
regarding the main features of the internal control and risk
Audit, risk and internal control
Lloyds Banking Group plc Annual Report and Accounts 2024
management systems in relation to the financial reporting process is
provided within the risk management report on pages 137 to 198.
The Lloyds Banking Group Risk Management Framework is being
refreshed and the design will cover the whole of the Group whilst
providing sufficient flexibility to allow for legal entity and local
jurisdiction requirements.
Control effectiveness review
All material controls are reviewed and assessed in response to material
triggers. Control assessments consider both the adequacy of their
design and operating effectiveness. In the event a control is not
effective, action plans are implemented to improve control design or
performance. Control effectiveness against all residual risks is
aggregated by risk category, reported and monitored regularly via the
Group Control and Risk Environment (GCRE) report. The GCRE report
is produced by the Enterprise-Wide Risk Management team and
reviewed and challenged by the Risk Function Executive Committee
and Group Risk Committee. On an annual basis, a point in time
assessment is made for control effectiveness against each risk
category and across the sub-groups. The Operational Risk System,
Key Risk Insights or GCRE are the sources used for this point in time
assessment and a year-on-year comparison on control effectiveness
is reported to the Board Risk Committee and the Board.
Reviews by the Board
The effectiveness of the risk management and internal control
systems is reviewed at least annually by the Board, the Board Risk
Committee and the Audit Committee, which also receive reports of
reviews undertaken by the Risk Division and Group Audit. The Audit
Committee receives reports from the Company’s auditor, Deloitte
LLP (which include details of significant internal control matters that
they have identified) and has a discussion with the auditor at least
once a year without executives present, to ensure that there are no
unresolved issues of concern. The Group’s risk management and
internal control systems are regularly reviewed by the Board Risk
Committee and the Board and are consistent with the Guidance on
Risk Management, Internal Control and Related Financial and
Business Reporting issued by the Financial Reporting Council. There
is also an annual independent Control Effectiveness review by
Group Audit which is reviewed by the Board Risk Committee and
Audit Committee. These reports have confirmed appropriate risk
and internal control systems have been in place for principal risks in
the year under review and up to the date of the approval of the
annual report. The Group, Ring-Fenced Bank sub-group and Lloyds
Bank Corporate Markets have achieved full compliance with BCBS
239 risk data aggregation and risk reporting requirements and
actively continue to maintain this status.
Conclusion
The 2024 Enterprise Risk Management Framework review provides
reasonable assurance that the Group’s risks and controls are
effective or that where control weaknesses are identified, they are
subject to management oversight and action plans.
The Board in conjunction with the Audit Committee and the Board
Risk Committee concluded that the Group’s risk management
arrangements throughout 2024 were adequate overall. The Board is
confident that the continuous improvements underway will ensure
that the Group’s risk management arrangements will remain
sufficiently robust to meet developing risk management best
practice for the future.
Supporting colleagues – Speak Up and whistleblowing
Speak Up is the Group’s whistleblowing framework, enabling
colleagues to raise concerns. Sarah Legg, Chair of the Audit
Committee, is the Group’s Whistleblowing Champion, overseeing
the integrity, independence and effectiveness of the Group’s
whistleblowing arrangements. She presents an annual
whistleblowing report to the Board. In addition, the Audit
Committee receives regular updates on the Speak Up framework,
including case volumes, emerging trends, investigation outcomes,
and actions taken.
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Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
and re
and
Nomination and Governance Committee report
Sir Robin
Budenberg
Chair, Nomination
and Governance
Committee
Strong succession planning and Board member
development helps the Board maintain an effective
and diverse range of qualities and strengths.
Read full biography
Key activities in 2024
•
Board and senior executive succession planning
•
Board and Committee composition, skills and training
•
Board evaluation outcomes
•
Diversity and inclusion
Q &A
Q How has the Nomination and Governance Committee
(the Committee) ensured that membership of the Board and
the senior executive continues to reflect the needs of the Group
and its strategy?
A The Committee is responsible for overseeing succession planning
at both Board and executive level, playing a key role in the ongoing
development of the Board and executive members. As we
continue to deliver on our strategy and transformation, the
current and future needs of the business are considered, providing
insights on the ongoing strength and alignment of succession
plans. This helps ensure focus on not only the overall composition
and diversity of the Board, but also the development needs of the
Board and senior executive. Succession planning is given regular
consideration throughout the year. More details can be found on
page 98.
Q How does the Committee ensure that the Board continues to
remain effective in a constantly evolving environment?
A The Committee oversees the Board evaluation process and
implementation of associated actions. The Committee also
discusses the training plan for non-executive directors,
encouraging their involvement in its development. The Chair
discusses effectiveness and training and development needs with
non-executive directors on at least an annual basis. Further details
can be found on page 98. During 2024, non-executive directors
participated in a number of additional teach-ins covering topical
matters and an externally facilitated Board Development session
was also undertaken, centred around behaviours. This session was
aimed at helping build even stronger connections and assisting
Board members in becoming even more conscious and intentional
about how they interact on both an individual and group level.
Feedback and reflections from the session will be used to inform
ongoing training and development discussions. This also aligns well
with the 2024 UK Corporate Governance Code’s change in
emphasis, from Board Effectiveness to Board Performance.
Q What are the key areas of focus for the Committee in 2025?
A The Committee will continue to focus on the core areas of Board
and executive succession planning, training and development of
Board members and overseeing implementation of actions arising
from the Board evaluation.
Introduction
As indicated in last year’s report both Alan Dickinson and Lord
Lupton retired from the Board at the Group’s annual general
meeting on 16 May 2024 and Nathan Bostock was formally
appointed as a non-executive director with effect from 1 August
2024. The Board benefits greatly from Nathan’s deep knowledge of
the UK banking market and his extensive capital markets and wider
financial services experience. I take this opportunity to express the
Board’s gratitude to both Alan and James for their contribution to
the Board and the tremendous insights they have provided on a
wide range of topics during their respective tenures.
During 2024, the Committee focused on Board training and
development and on succession planning for the Board, Board
Committees and at an executive level. Board effectiveness,
including implementation of actions arising from the 2023 Board
evaluation process, were also core to the Committee’s proceedings.
These areas are covered in more detail throughout this report.
Committee purpose
sponsibilities
The Committee keeps the Board’s effectiveness, composition, skills,
experience, knowledge, independence and succession arrangements
under review and makes appropriate recommendations to the
Board to ensure the Company’s arrangements are consistent with
the highest corporate governance standards.
Committee composition, skills and experience
To ensure a broad representation of experienced and independent
directors, membership of the Committee currently comprises the
Chair, the Senior Independent Director (who is also the Chair of the
Remuneration Committee) and the Chair of the Responsible
Business Committee, together with a further independent non-
executive director (who is the Chair of Scottish Widows Group). The
Senior Independent Director of the Ring-Fenced Banks also attends
meetings as an observer in order to provide insights on matters
relevant to the Ring-Fenced Banks when required and as part of his
role in the Group’s overall governance structure. The Group Chief
Executive attends meetings as appropriate. Details of Committee
membership and meeting attendance during the year can be found
on page 80.
Board
Committee changes
As highlighted above, Alan Dickinson and Lord Lupton did not seek
re-election at the annual general meeting held on 16 May 2024 and
Nathan Bostock was formally appointed as a non-executive
director, and also as Chair of Lloyds Bank Corporate Markets plc,
with effect from 1 August 2024. Details of the selection process for
Nathan’s appointment can be found on page 99. As announced on
5 July 2024, Nathan was appointed as a member of the Board Risk
Committee, effective from 1 August 2024, and as a member of the
Audit Committee, effective from 1 October 2024. As detailed in last
year’s report and announced on 18 December 2023 and 25 January
2024 respectively, Amanda Mackenzie was appointed as a member
of the Audit Committee with effect from 1 January 2024 and
Cathy Turner was appointed as a member of the Board Risk
Committee with effect from 1 February 2024. As part of its wider
responsibilities, the Committee also considered and approved the
appointment of a number of individuals to the boards of the Group’s
material subsidiaries.
Succession planning
Consideration has been given to tenure of Board members,
potential future Board retirements and the impact of these on
membership of the Board and its Committees. The Committee’s
ongoing review of the structure, size and composition of the Board
and its Committees helps ensure that the appropriate mix of
knowledge, skills, experience and diversity is maintained. A summary
of Board and Board Committee composition and attendance can
be found on page 80. A number of non-executive directors sit across
multiple Board Committees, an approach which enhances
discussion on relevant matters. Further details on the Committee’s
approach to succession planning can be found on page 98.
Nomination and Governance Committee report continued
Succession planning
Succession planning, at both Board level and across key senior
management roles, remained a core area of consideration for the
Committee during 2024.
Effective succession planning assists the Group in delivering
on its strategic objectives over the medium and longer term
by ensuring the desired mix of skills and experience of Board
members and executives.
Executive succession planning
The Board recognises the importance of the ongoing
development of a diverse pipeline of current and future leaders
across the Group’s executive and management levels. As the
Group’s strategic transformation continues to progress, this
ensures not only the provision of a range of development
opportunities for colleagues, but also facilitates the recognition
and promotion of diversity across senior management. This is
supported by a range of policies across the Group which promote
the engagement of under-represented groups within the business
in order to help continue to build a diverse talent pipeline.
Further details can be found on page 31.
At an executive level, the Chair is responsible for developing and
maintaining a succession plan for the Group Chief Executive who
is, in turn, primarily responsible for developing and maintaining
succession plans for key leadership positions in the senior
executive team. As part of its regular oversight and review of the
adequacy and effectiveness of succession arrangements for
executive directors and members of the senior executive team,
the Committee received and discussed regular updates from the
Group Chief Executive covering executive succession planning
arrangements. These demonstrated the continuing strength
and effectiveness of the Group’s approach, through the depth
and diversity of the succession plans covering key senior
management roles.
Board succession planning
The Committee also supports the Chair in keeping the
composition of the Board and its Committees under regular
review and in leading the appointment process for nominations
to the Board. This helps ensure continued focus on increasing the
overall diversity of the Board and capacity for future succession
planning, bearing in mind tenure of Board members and potential
future retirements from the Board. The appointment process set
out on the following page helps illustrate how this works in
practice. The Committee continues to give consideration to the
appointment of further non-executive representation to the
Board, keeping in view the current and future needs of the
business and the Board as we continue to deliver on the Group’s
strategy and transformation.
The Chair leads an ongoing assessment of the Board’s technical
and governance skill set, on both an individual and collective
basis. A Board skills matrix is used to track the Board’s strengths
and to identify any gaps in the desired collective skills profile of
the Board. Consideration is given to a range of factors such as the
Group’s future strategic direction and helping to ensure that due
weight is given to diversity in its broadest sense. The skills matrix
is considered in the appointment of all Board members. The
Group’s diversity commitments and outcomes of the Board
evaluation process are also taken into consideration.
Board effectiveness, training and development
The Board evaluation was again internally facilitated in 2024 and
overseen by the Committee. Full details of how the review was
undertaken, and its outcomes, are provided on page 93, together
with a summary of how the actions arising from the 2023 Board
evaluation process were addressed, on page 94. The Committee
considered the outcomes of the review and agreed, and
recommended to the Board for approval, the actions arising from
the review. The Committee will oversee implementation of the
outcomes from the 2024 review, which also incorporate ongoing
themes from the 2023 review. The Committee has also undertaken
an annual review of its effectiveness, the findings of which, together
with the outcomes of the Board evaluation process as relevant to
the Committee, were considered by the Committee at its January
2025 meeting. It was considered that the performance of the
Committee continues to be effective.
The Committee discusses the training plan undertaken by the
non-executive directors and encourages their involvement in the
development of those plans. The Chair also discusses training with
each non-executive director at least annually. As set out in the
summary of Board training on page 95, training sessions have been
offered across a range of topics which complement the Board
agenda, in addition to mandatory training requirements. Non-
executive directors were provided with a number of teach-ins
throughout the year covering topical matters and also participated
in an externally facilitated Board Development session. Learning
and engagement opportunities have been undertaken by all
non-executive directors in relation to material aspects of the
Group’s business.
Independence and time commitments
Based on its assessment for 2024, the Committee is satisfied that,
throughout the year, all non-executive directors remained
independent1 in character and judgement and are independent
directors for the purposes of the Code. Nathan Bostock’s
independence was considered as part of his appointment process
and it was determined that he would be independent for the
purposes of the Code – read more on page 91. As noted on page 91
of the corporate governance report, consideration is given to time
commitments when directors seek to take on any additional
external appointments.
In recommending directors for re-election at the annual general
meeting, the Committee has reviewed the performance of each
non-executive director and their ability to continue meeting the
time commitments required. This takes into consideration individual
capabilities, skills and experiences and any potential conflicts of
interest that have been disclosed. The external roles held by all
directors were considered to be appropriate. Fuller details of any
conflicts of interest can be found on page 134.
The Group’s Corporate Governance Framework
The most recently completed annual review of the Corporate
Governance Framework was finalised in March 2024, with the
current review nearing completion. In addition to updates reflecting
the 2024 UK Corporate Governance Code changes, the current
review will see a significant updating of the content aimed at
providing a more proportionate and user-friendly governance
approach to help facilitate more effective decision making
throughout the Group. Additional focus is also being given to the
enhancement of subsidiary entity governance.
As part of its broader governance responsibilities, the Committee
considered regular updates on developments in corporate
governance during the year. This included reviewing and considering
changes made in the 2024 version of the UK Corporate Governance
Code, updates to the UK Listing Rules and aspects of the Economic
Crime and Corporate Transparency Act 2023. The Committee also
considered correspondence with shareholders on governance issues.
Lloyds Banking Group plc Annual Report and Accounts 2024
1
The Chair was independent on appointment. Under the Code, thereafter the test of
independence is not appropriate in relation to the Chair.
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Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
UK Corporate Governance Code
The Company applied the UK Corporate Governance Code 2018 for
the year ending 31 December 2024 and complied with all relevant
provisions. A table in relation to the Company’s compliance can be
found on page 75. The Committee reports to the Board on how it
discharges its responsibilities and makes recommendations to the
Board, all of which have been accepted during the year. The
Committee’s terms of reference can be found on the corporate
governance page
on our website.
Board Diversity Policy
The Board Diversity Policy (the Policy) sets out the Board’s approach
to diversity and provides a high-level indication of the Board’s
approach to diversity and inclusion in senior management roles
which is governed in greater detail through the Group’s policies.
A copy of the Policy is available on the social sustainability page
on our website.
The Board places great emphasis on ensuring that its membership
reflects diversity in its broadest sense. Consideration is given to the
combination of diversity demographics, skills, experience,
educational and professional background, and other relevant
personal attributes on the Board to provide the range of
perspectives, insights and challenge needed to support good
decision making.
New appointments and succession plans are made on merit, taking
account of the specific skills and experience, independence and
knowledge needed to ensure a rounded Board and the diverse
benefits each candidate can bring to the overall Board composition.
They should promote diversity, inclusion and equal opportunity.
Objectives for achieving Board diversity are reviewed on a regular
basis. On gender balance, the Board is committed to maintaining at
least four women Board members and aspires to maintain 45 per
cent to 55 per cent female representation on the Board, higher than
the FTSE Women Leaders recommendation of 40 per cent, while
recognising the limited numbers involved. The representation of
women on the Board is currently 50 per cent (based on five
directors being women and five directors being men). On ethnicity,
the Board is committed to meeting the Parker Review
recommendation of having at least one Black, Asian or Minority
Ethnic Board member, which the Board currently exceeds.
Currently, the Policy is not applied to Board Committees
individually, although we strive to apply similar representation
across the Committees. The Board is comfortable that the diversity
of the Board is reflected across Committee memberships and that
this remains an ongoing consideration. As at 31 December 2024, the
Group meets all three board diversity targets specified under UK
Listing Rule 6.6.6(9), namely that the Board comprises at least 40
per cent women, at least one of the chair, the chief executive, the
senior independent director or the chief financial officer is a woman
and at least one member of the Board is from a Minority Ethnic
background. Further information disclosed in accordance with UK
Listing Rule 6.6.6(9), (10) and (11) can be found on page 136.
The Board places high emphasis on not only its own diversity
composition but on the oversight of the Group’s Diversity, Equity
and Inclusion approach and ambitions and expects to be kept
updated on progress. Any material changes to the Group’s Diversity,
Equity and Inclusion approach are approved by the Executive
Committee, noted by the Responsible Business Committee and
approved at Board level. This includes material changes in our
Diversity, Equity and Inclusion ambitions and supporting plans.
The Group’s policies are subject to local laws and regulations,
and aspirations identified above reflect targets set out in the
UK Listing Rules LR6.6.6(9).
Further information on the current approach to the Group’s
Diversity, Equity and Inclusion ambitions, progress and performance
can be found on pages 31 to 32.
Appointment process – non -executive directors
The Committee oversees the process for appointing non-
executive directors, providing recommendations to the Board for
the selection of a preferred candidate. During 2022, in
anticipation of Alan Dickinson’s expected retirement from the
Board following nine years of service, the Committee initiated a
search to recruit an additional non-executive director. The Chair
was delegated authority to lead this process, with the aim of
identifying a candidate with extensive retail and commercial
banking experience. Russell Reynolds Associates were engaged to
conduct search activities based on identified criteria and the
Committee was regularly updated throughout the process.
The search involved open advertising and resulted in a shortlist of
potential candidates, who were interviewed by the Chair and
other non-executive directors. Further interviews were then
conducted with preferred candidates. Following this, a
recommendation was made to the Committee which, in turn,
recommended to the Board Nathan Bostock’s appointment as a
non-executive director and as Chair of Lloyds Bank Corporate
Markets plc. This formal, rigorous and transparent appointment
process considered a broad range of factors, including merit,
objective criteria, gender balance, social and ethnic backgrounds,
cognitive and personal strengths and the Group’s future
strategic direction.
Russell Reynolds Associates, who were engaged in the
recruitment that led to Nathan Bostock’s appointment, have no
connection with the Group or individual directors other than
providing leadership search and succession planning services and
facilitating leadership performance services.
and re
Key activities in 2024
•
Reviewing the continuous improvement in financial and
regulatory reporting
•
Monitoring the end-to-end sustainable improvement in the
internal control environment
•
Continued oversight of matters relevant to sustainability
•
Assessing the effects and action required on matters
relevant to the remit of the Audit Committee resulting from
external factors
Audit Committee report
Sarah Legg
Chair,
Audit Committee
End-to-end sustainable improvement in the internal
control environment remains a key priority.
Read full biography
Q &A
Q How has the Audit Committee (the Committee) ensured that it
continues to provide challenge and add value to the Group’s
reporting?
A The Committee has received an education session during the year
on IFRS 9 expected credit losses. It has also held both formal and
informal sessions with the Group’s internal and external auditors
and worked closely with the Board Risk Committee on matters
that impact both risk and accounting, especially from
a reporting perspective.
Q How has the Committee continued to support the Group’s
sustainability reporting during the year?
A The Committee continues to review and assess the developments
in sustainability reporting in line with emerging disclosure
standards and UK regulatory requirements, with a focus on the
translation to financial statement impact. Progress on disclosure
enhancements with improvements in dedicated sustainability
reporting processes and the control environment have been
monitored, alongside the external assurance activity on key
sustainability metrics and targets.
The Committee supports the commitment to continuous
improvement in sustainability reporting, which will remain a
priority in 2025 given the pace of change with external standards.
Q What role has the Committee played in supporting transformation
within the Finance function?
A The Committee has reviewed and challenged the plans and
progress made with Finance transformation and strategy, a
multi-year programme that is critical to the success of Finance and
the wider Group. This included three detailed reviews during 2024
from management and the views of Internal and External Audit.
The Committee has also had the opportunity to consider further
areas which are key to supporting the transformation, including
the next phase of the transformation plans and finance talent and
succession plans.
Introduction
I am pleased to report on the Committee’s activities over the past
year. I thank the Committee members for their contributions and
support. The participation of Ring-Fenced Bank-only directors as
observers has provided valuable insights. Additionally, I welcome
Amanda Mackenzie and Nathan Bostock, who joined the
Committee on 1 January 2024 and 1 October 2024 respectively.
I also extend the Committee’s thanks to Alan Dickinson, who retired
as a director and member of the Committee in May 2024.
In 2024, the Committee collaborated closely with other Board
Committees, especially on the Group’s sustainability goals and
climate-related disclosures. The joint Audit and Risk Forum
established in 2022 met again in 2024 to discuss topics of mutual
interest. Looking forward to 2025, in addition to our core
responsibilities, the Committee will continue to monitor areas of
continuous improvement, and the audit plan to deliver focus from
a risk perspective.
Committee purpose
sponsibilities
The Committee’s purpose is to oversee the integrity of the Group’s
and Company’s financial and narrative reporting. It also reviews the
independence and effectiveness of internal and external audits,
internal controls, the risk management framework and
whistleblowing arrangements.
This includes the statutory audit of consolidated financial
statements and the independence of the external auditor.
The Committee reports to the Board on its responsibilities and
recommendations, all of which were accepted during the year.
Full responsibilities are in the Committee’s terms of reference
on the
corporate governance page of the Group’s website
.
In satisfying its purpose, the Committee undertakes the functions
detailed within Disclosure Guidance and Transparency Rule 7.1.3R.
During the year the Committee considered a number of matters
relating to the Group’s financial reporting, which are summarised on
the following pages. In addition, the Committee considered a
number of other matters not related directly to financial reporting.
These matters are discussed in detail on the final page of the report.
Committee composition, skills, experience
and operation
The Committee operates independently of the executive to safeguard
shareholders’ interests in financial reporting and internal control.
All members of the Committee are independent non-executive
directors with competence in the financial sector, and their
biographies can be found on pages 78 to 79. Sarah Legg is a Fellow
of the Chartered Institute of Management Accountants and of the
Association of Corporate Treasurers, with extensive knowledge of
financial markets, treasury, risk management and international
accounting standards. She is a member having recent and relevant
financial experience for the purposes of the UK Corporate
Governance Code and is the Audit Committee financial expert for
SEC purposes.
During the course of the year, the Committee held separate sessions
with the internal and external audit teams, without members of the
executive management present. The Committee undertook an
annual review of its effectiveness, the findings of which, together
with the outcomes of the Board evaluation process as relevant to
the Committee (which, for 2024, was internally facilitated) were
considered by the Committee at its January 2025 meeting. It was
considered that the performance of the Committee continues to
be effective.
While the Committee’s membership comprises the non-executive
directors noted on page 80, all non-executive directors may attend
meetings as agreed with the Chair of the Committee.
The Group Financial Controller, the Chief Internal Auditor, the
external auditor, the Group Chief Executive, the Chief Financial
Officer and the Chief Risk Officer also attend meetings as
appropriate. Details of Committee membership and meeting
attendance can be found on page 80.
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100
Lloyds Banking Group plc Annual Report and Accounts 2024
101
Matters considered during 2024
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Reporting
Jan Feb Apr Jun
Jul
Oct
Review of external reporting documents
Significant accounting judgements
Going concern assumption/viability
statement
Regulatory reporting
Sustainability-related reporting
Activities of subsidiary audit committees
Corporate governance reforms and the Audit
and Assurance Framework
Control environment
Control update (including Sarbanes-Oxley)
Annual review of risk management framework
and control effectiveness review summary
Financial reporting
Group Audit
Reports from Group Audit, including Speak
Up (whistleblowing)
External audit
Reports from the external auditor (including
external audit plan)
Reappointment, remuneration, non-audit
services and effectiveness
Other
Audit committee effectiveness review
Finance strategy and transformation
During the year, and in relation to the year ended 31 December 2024, the Committee considered the following issues in relation to the
Group’s financial statements and disclosures, with input from management, the risk function and Group Audit.
Jan Feb Apr Jun
Jul
Oct
Areas of focus
Key issues
Committee review an d conclusion
Allowance for
impairments on
loans and advances
31 December 2024:£3,481 million
31 December 2023:
£4,084 million
The Group’s impairment
provision is dependent on
management’s judgements
on matters such as future
interest rates, house prices
and unemployment rates,
as well as its assessment of
the current financial
position of its customers.
During the year, the Committee has reviewed the level of provision held for
expected credit losses (ECL) by the Group and the judgements and estimates
used to calculate the provision. The Committee has monitored underlying
credit performance trends and the evolution of the Group’s economic outlook
and Multiple Economic Scenario (MES) approach over a year where inflationary
pressures and interest rate risks evolved. This saw the gradual removal in
judgemental adjustments relating to inflationary risks as the position improved
and customer behaviour proved to be resilient. The Committee has also
overseen progress on ECL modelling and the corresponding reduction of
judgemental adjustments for model limitations where mitigated by model
development. Note 21 to the financial statements includes details of the
Group’s ECLs allowances, including those resulting from judgemental adjustments
(31 December 2024: £44 million debit; 31 December 2023: £28 million credit).
The Committee has reviewed management’s rationale for these provisions and
has challenged whether their inclusion and quantification are appropriate. It also
considered management’s assessment of climate risk impacts on ECL and the
conclusion that no adjustment was required.
Conclusion: The Committee was satisfied that the impairment provision and the
disclosures provided in the financial statements were appropriate.
Uncertain tax
provisions
The Group has open tax
matters which require it to
make judgements about
the most likely outcome for
the purposes of calculating
its tax position.
The Committee reviewed management’s assessment of the Group’s uncertain tax
positions, which took into account the views of the relevant tax authorities and
any external advice it received. In particular, it considered the Group’s claim for
group relief of losses incurred in its former Irish banking subsidiary.
Conclusion: The Committee was satisfied that the provisions and disclosures made
in respect of uncertain tax positions were appropriate.
Retirement benefit
obligations
31 December 2024:
£27,118 million
31 December 2023:
£30,201 million
The value of the Group’s
defined benefit pension
plan obligations is
determined using
both financial and
demographic assumptions.
The Committee reviewed the process used by management to determine
appropriate assumptions to calculate the Group’s defined benefit liabilities.
These included the discount rate, the future rate of inflation and expected
mortality rates.
Conclusion: The Committee was satisfied that management had used appropriate
assumptions that reflected the Group’s most recent experience and were
consistent with market data and other information.
and
and
•
•
•
Audit Committee report continued
Areas of focus continued
Key issues
Committee review
conclusion
Insurance liabilities
and participating
investment
contracts
31 December 2024:
£127,332 million
31 December 2023:
£120,123 million
Determining the value of
the Group’s liabilities arising
from insurance and
participating investment
contracts requires
management to make
significant estimates
for both economic
and non-economic
actuarial assumptions.
The Committee considered updates from management and from the Group’s
Insurance Audit Committee summarising its activities, which included a review of
the economic and non-economic assumptions made by management to determine
the carrying value of Group’s liabilities arising from insurance and participating
investment contracts. The assumptions discussed were in respect of workplace
pension persistency, annuitant longevity and expenses as well as updates to the
risk adjustment confidence level and refinement of methodology for coverage units
and illiquidity premium.
Conclusion: The Committee was satisfied that the assumptions used to calculate
the Group’s liabilities arising from insurance and participating investment contracts
were appropriate.
Conduct risk
provisions
31 December 2024:
£1,600 million
31 December 2023: £1,105 million
Management judgement is
used to determine the
expected costs of
remediation and, where
appropriate, the related
administration costs.
The Committee has received regular updates on the Group’s conduct risk matters
and the progress it has made including updates in relation to the FCA review on
historical motor finance commission arrangements, the Court of Appeal’s recent
commission disclosure arrangements decision and on HBOS Reading.
Conclusion: The Committee has considered management’s assessment of the
Group’s provision for conduct-related matters and was satisfied that the provisions
held at 31 December 2024 were appropriate, noting a high level of uncertainty in
relation to these estimates.
Going concern
statement
The directors are required
to confirm whether they
have a reasonable
expectation that the
Company and the Group
will be able to continue to
operate and meet their
liabilities as they fall due for
a specified period.
The Committee assisted the Board in determining the appropriateness of adopting
the going concern basis of accounting. This assessment was based on the Group’s
operating, funding and capital plans which included consideration of climate-
related matters on the Group’s performance and its projected funding and capital
position. The Committee also took into account the results of the Group’s stress
testing activities (page 142), its principal risks (pages 144 to 198) and its emerging
and topical risks (page 143).
Conclusion: The Committee determined that the going concern basis of
accounting was appropriate.
Fair value of
financial assets
classified as level 3
31 December 2024:
£9,889 million
31 December 2023:
£11,681 million
Determining the fair value
of the Group’s financial
assets classified as level 3
requires management to
make significant estimates.
Financial assets held at fair value through profit or loss are classified into three
levels according to the quality and reliability of information used to determine their
fair values. Those classified as level 1 or level 2 are valued using observable market
data, either directly or within models. Assets classified as level 3 are those where at
least one input which could have a significant effect on the instrument’s valuation
is not based on observable market data and as such involves significant judgement.
During the year, the Committee reviewed the valuations of the Group’s level 3
financial assets, the valuation techniques and the Group’s governance processes.
Conclusion: The Committee was satisfied that the valuations and disclosures made
in respect of the Group’s level 3 financial assets classified at fair value through
profit or loss were appropriate.
Other significant issues
The following matters were also considered by the Committee.
Viability statement
The viability statement must disclose the basis for the directors’
conclusions and explain why the period chosen is appropriate.
The Committee assisted the Board in performing the assessment of
the viability of the Company and the Group. This assessment was
based on the Group’s operating, funding and capital plans which
included consideration of climate-related matters on the Group’s
performance and its projected funding and capital position. The
Committee also took into account the results of the Group’s stress
testing activities (page 142), its principal risks (pages 144 to 198) and
its emerging and topical risks (page 143). The Committee advised
the Board that three years was a suitable period of review for the
viability statement and that the viability statement could be
provided. The viability statement is disclosed within the strategic
report on page 39.
Risk management
internal control systems
Full details of the internal control and risk management framework
in relation to the financial reporting process are given within the risk
management section on pages 137 to 198. Specific related matters
that the Committee considered for the year included:
The effectiveness of systems for internal control, financial
reporting and risk management
The extent of the work undertaken across the Group to ensure
that the control environment continued to operate effectively
The major findings of internal investigations into control
weaknesses, fraud or misconduct and management’s response,
along with any control deficiencies identified through the
assessment of the effectiveness of the internal controls over
financial reporting under the US Sarbanes-Oxley Act (SOX).
Specifically, the Committee continued to closely monitor the
deficiencies identified in respect of privileged and user access
across certain business applications and associated IT
infrastructure and the Group’s remediation activity to address
the control findings identified. The Committee was satisfied that
internal controls over financial reporting were appropriately
designed and operating effectively
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Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Risk-weighted assets and regulatory reporting
The focus on the quality of regulatory reporting continues to be high
on the PRA’s agenda. Across the first, second and third lines of
defence, management continues to focus on strengthening the
control environment in regulatory reporting with a link to longer-
term and strategic initiatives also being considered.
The ongoing programme of external assurance on regulatory
reporting commissioned by the Committee has to date focused on
risk-weighted assets. Management have provided regular updates to
the Committee over the year to highlight progress made in
improving the reporting control environment across a number of
regulatory reports.
IFRS 17
The Committee has continued to monitor the embedding of IFRS 17
processes and the improvements that have been made to the
Group’s IFRS 17 reporting.
Restoring trust in audit and corporate governance
As part of its proposed corporate governance reforms, the
government planned to introduce a statutory instrument (SI) that
would have required companies to disclose an Audit and Assurance
Policy setting out their plans for both the internal and external
assurance that they planned to obtain over their annual report and
accounts on a rolling three-year basis. Whilst the government
withdrew the SI in October 2023, the Group recognises the value of
documenting its assurance plans and continued its work in this area
by developing an internal Audit and Assurance Framework.
The Committee has received updates throughout the year on the
proposed Framework and reviewed and supported the final 2024
Audit and Assurance Framework.
Speak Up (the Group’s whistleblowing
vice)
ser
The Committee reviewed management reports on the Group’s
whistleblowing arrangements, ensuring colleagues can report issues
confidentially and without fear of retaliation. These well-publicised
arrangements allow reporting of inappropriate practices, with
independent investigations or follow-ups. The Committee reported
on its consideration of whistleblowing arrangements to the Board.
Sustainability
orting
rep
The Committee challenged the Group’s progress with sustainability
related reporting. Emerging sustainability reporting frameworks
alongside existing compliance with UK companies regulation
requirements for climate-related financial disclosure have been
considered, assessing the near term and future impacts on external
disclosures. The Committee has continued to monitor Group
capabilities and progress with the production of sustainability
reporting and linkage to financial statements, the enhanced control
environment and the developments with governance and assurance.
Further discussion can be found on pages 45 to 60.
Group Audit
In monitoring the activity, role and effectiveness of the internal
audit function and their audit programme the Committee:
•
•
•
•
•
Approved the updated Audit Charter which sets out the purpose,
role and mandate of internal audit
Approved the annual audit plan and budget, including resources
Reviewed progress against the plan through quarterly updates
Considered the major findings of significant internal audits,
management’s response and themes by major risk type
Assessed and concluded upon the quality of Group Audit’s
work through review of quality assurance reporting
on a six-monthly basis
Based on the above and through regular interactions by all Audit
Committee members with the Chief Internal Auditor, the
Committee is satisfied with the effectiveness and impact of the
internal audit function and the appropriateness of its resources.
Finance strategy and transformation
Significant investment has been committed to transform the
Finance function, including 2025 delivery of a new Group General
Ledger in addition to the transformation of cost and investment
management processes. Further investment in the coming years
will continue to transform financial data to support improved
forecasting and commercial insights, in addition to further
enhancing the controls and reporting landscape. The Committee
received timely updates throughout the year with regard to the
proposed plans, progress with them and the associated financial
and non-financial benefits.
Auditor independence and remuneration
The Committee is responsible for establishing the Group’s policies
and procedures designed to protect the independence and
objectivity of the external auditor. In April 2024, the Committee
reviewed its non-audit services policy; no substantive changes were
made to the policy.
The policy details those services that the auditor is permitted to
carry out and pre-approves certain of these services provided the
fee is below a threshold; all other permitted services must be
specifically approved in advance by the Committee. Prior to the
engagement of the auditor for a permitted service, the policy
requires that senior management confirms whether the Committee
has pre-approved the service or specific approval is required.
The total amount of fees paid to the auditor for both audit and
non-audit related services in 2024 and further information on the
policy is disclosed in note 13 to the financial statements.
External auditor
Following an external audit tender in 2018, Deloitte LLP (Deloitte)
was appointed as auditor of the Company and the Group with
effect from the 2021 financial year. Mike Lloyd is the statutory audit
partner for the Group and attends all meetings of the Committee.
The Committee oversees the relationship with the external auditor
including its terms of engagement and remuneration and monitors
its independence and objectivity. During 2024, the Chair of the
Committee spent time meeting with the broader Deloitte team to
better understand their audit. Some of their team members across
all levels presented a more detailed overview of their work in areas
such as audit risk assessment, expected credit losses, regulatory and
litigation matters, technology audit and approach to auditing the
key assumptions in the Insurance business. The Chair fed back their
perspectives of those presentations to other members of the
Committee. The Committee also reviewed Deloitte’s audit plan,
including the underlying methodology and Deloitte’s risk
identification processes. In its assessment of Deloitte’s performance
and effectiveness, the Committee has considered: Deloitte’s
interactions with the Committee; the responses to a questionnaire
issued to the Group’s businesses, Finance, Risk, Internal Audit and
non-executive directors; and the FRC’s Audit Quality Inspection
Report published in July 2024. The Committee concluded that it
was satisfied with the auditor’s performance and recommended to
the Board a proposal for the reappointment of the auditor at the
Company’s annual general meeting.
Statutory Audit Services compliance
The Company and the Group confirm compliance with the provisions
of The Statutory Audit Services for Large Companies Market
Investigation (Mandatory Use of Competitive Tender Processes and
Audit Committee Responsibilities) Order 2014, which relates to the
frequency and governance of tenders for the appointment of the
external auditor and Audit Committee responsibilities including
negotiating and agreeing the statutory audit fee and the setting
of a policy on the provision of non-audit services, for the year to
31 December 2024. There are no plans as at the date of this report
to conduct a tender exercise for external audit services.
Audit Committees and the External Audit:
Minimum Standard
The Group is compliant with Audit Committees and the External
Audit: Minimum Standard published by the FRC in May 2023.
•
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Board Risk Committee report
Q &A
Q What has been the Board Risk Committee’s (the Committee) role
in the transformation of the Group’s risk and control environment?
A A key focus for the Committee during 2024 has been to oversee
the development and implementation of significant changes to
the Group’s three lines of defence approach, initially focused on
non-financial risks. This included recommending to Board the
adoption of a new risk taxonomy which provides an enhanced
view on the Group’s principal risks, greater clarity and focus for risk
and control owners, together with the adoption of a consistent
approach across all areas of the business.
The Committee also provided oversight and challenge on key
business areas’ risk reduction and control improvement plans and
a number of deep dives, to ensure the Committee has good
visibility of the Group’s key risks.
Q How does the Committee evaluate the potential impact of
emerging risks in a rapidly changing external environment, which
will continue to present evolving challenges for the Group and the
wider economy?
A The Committee regularly evaluates topical risk issues and
emerging risks and regularly reviews and assesses its schedule of
planned deep dives. This structured, yet agile, approach ensures
that the Committee can adapt its focus to new topics throughout
the year and, if appropriate, give further consideration to specific
areas of interest. Other events such as the Audit and Risk Forum
and networking events with senior executives, also provide
opportunity for more informal discussion on topical matters.
Q What are the key areas of focus for the Committee in 2025?
A The Committee will remain focused on several key areas that have
been central to its discussions during 2024, while also considering
emerging risks, such as the impacts and opportunities of
Generative AI. The FCA’s review of motor finance commission
arrangements and sales, the Court of Appeal decisions which
determined that lenders will be liable for dealers’ non-disclosures
of motor commissions and the relevant lenders’ appeal against
these decisions, will also remain a key focus.
Maintaining an appropriate balance between forward agenda
planning and flexibility ensures that the Committee continues
to focus on the most material risks and issues for the Group.
Areas of strategic and regulatory importance will remain key areas
of focus, such as operational resilience, supplier risk, model risk
management, economic crime and climate risk, together with
credit reviews across a range of sectors to reflect the challenging
external environment.
Catherine Woods
Read full biography
Chair, Board Risk
Committee
An enhanced risk taxonomy and continued
strengthening of the Group’s already robust three
lines of defence approach will help drive clarity and
pace of decision making.
Key activities in 2024
Provided oversight on the implementation of changes to the
Group’s three lines of defence approach, and the adoption
of a new risk taxonomy
Oversight of the management of change and execution
risks arising from the Group’s strategic transformation,
with an emphasis on evolution of the platform
based-operating model
Reviewed enhancements to the Group’s economic crime
prevention strategy and vision and oversight of the
management of economic crime risks
Continued assessment of the management of operational
resilience risks, including cyber, supply chain management
and technology risks, data risks and artificial intelligence
Considered the complexities of climate risk, particularly
transition of technology, customer adoption, regulatory
expectations and greenwashing risks
Reviewed management of the Group’s funding and liquidity
risks, market risk including consideration of trading book risk,
structural hedge activity and ongoing oversight and
challenge of the design and execution of stress testing
Ongoing assessment of key emerging risks
Introduction
I am pleased to report on how the Committee has discharged its
responsibilities during 2024, a year which has seen significant
development in the Group’s approach to risk management, including
the implementation of changes to the Group’s three lines of defence
approach and enhancements to the risk taxonomy.
These were key focus areas for the Committee, together with
overseeing and providing challenge on associated risk reduction and
control improvement plans across key business areas. This work
further strengthens the Group’s robust risk culture, simplifies the
overall risk management framework and provides greater clarity and
ownership for colleagues in the management of risk.
Actions taken to mitigate the potential impacts of constantly
evolving risks such as economic crime, technology, supplier and
cyber risks remained high on the Committee’s agenda, with focus on
enhancement of controls.
The Committee continued to assess several other key risks, including
operational resilience, change execution, data and privacy, and
people risks, and how these risks could potentially impact delivery of
the Group’s strategic transformation objectives.
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Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Credit risk was also a core topic, with the Committee receiving
various deep dives during the year covering the automotive sector,
where the continued evolution of the sector drives a range of
potential risks to be managed. The Committee and the Board will
continue to assess the outcomes and impacts of the FCA’s review of
motor finance commission arrangements and sales, the Court of
Appeal’s determination that lenders will be liable for dealers’
non-disclosure of motor commissions and the relevant lenders’
appeals against these decisions. The Chief Risk Officer also provides
insights on the overall credit environment during Committee
meetings when presenting his regular report. Oversight and
challenge of model risk management and capital, liquidity and
funding requirements, also continued to be provided on a frequent
basis. Each of these areas is covered in more detail throughout
this report.
As highlighted in my report last year, Cathy Turner joined the
Committee with effect from 1 February 2024. I would like to take
this opportunity to formally welcome Nathan Bostock, who was
appointed as a member of the Committee with effect from 1 August
2024 and to thank Alan Dickinson who retired from the Committee
and the Board on 16 May 2024. Alan’s contribution to the
Committee’s proceedings over the years has been highly valued.
Nathan’s deep knowledge of the UK banking market and his
breadth of experience will be of great benefit to the Committee
going forward.
Committee purpose and responsibilities
The Committee assists the Board in fulfilling its risk governance
and oversight roles and responsibilities. The Committee is also
responsible for ensuring the risk culture is fully embedded and
supports at all times the Group’s agreed risk appetite, including
the extent and categories of risk which the Board considers as
acceptable for the Group to bear. A review and update of the
Committee’s terms of reference was completed during the year,
with no material changes being made. Changes arising from the
update of the UK Corporate Governance Code will be incorporated
into the Committee’s terms of reference.
The Committee is responsible for reviewing and reporting its
conclusions to the Board on the Group’s risk management
framework, which captures risk principles, policies, methodologies,
systems, processes, procedures and people. This also includes the
review of new, or material, amendments to risk principles and
policies and overseeing any action resulting from material breaches
of such policy. As highlighted in my introduction, the Committee
has been heavily involved in overseeing the development and
implementation of changes to the Group’s overall risk management
framework and risk taxonomy. This clarifies the roles of risk and
control owners, second line risk specialists and chief control offices
across all parts of the business, to ensure consistency and enhance
focus on controls and expertise.
More details on the Group’s wider approach to risk management
can be found in the risk management section on pages 137 to 198.
Full details of the Committee’s responsibilities are set out in its
terms of reference, which can be found on the corporate
governance page
on our website.
Committee composition, skills, experience
and operation
As highlighted in my introduction, Nathan Bostock, independent
non-executive director, was appointed as a member of the
Committee in August 2024, following Alan Dickinson ceasing to be
a member of the Committee in May 2024, upon his retirement from
the Board. As a result of this appointment, membership of the
Committee now includes the chairs of both Lloyds Bank Corporate
Markets plc and Scottish Widows Group Limited. Two of the three
designated independent non-executive directors of the Ring-Fenced
Banks also attend meetings as observers in order to provide insights
on matters relevant to the Ring-Fenced Banks when required and
as part of their role in the Group’s overall governance structure.
The Chief Risk Officer has full access to the Committee and attends
all meetings. The Chief Internal Auditor and members of the
executive also attend meetings as appropriate. Details of
Committee membership and meeting attendance can be found
on page 80.
The Committee undertook an annual review of its effectiveness,
the findings of which, together with the outcomes of the Board
evaluation process as relevant to the Committee (which, for 2024,
was again led by the Company Secretary), were considered by the
Committee at its January 2025 meeting; it was considered that the
performance of the Committee continues to be effective. Details of
the Board evaluation process can be found on page 93.
During the year, Committee members attended a number of
training sessions and briefings, helping deepen Committee
members’ knowledge on a range of specific topics and risks, further
enhancing the discussion and challenge which took place at
subsequent Committee meetings.
As the most senior risk committee in the Group, the Committee
interacts with other related risk committees, including the executive
Group Risk Committee. These interactions help ensure the
appropriate escalation of relevant matters to the Committee for
review and consideration. A networking event was also held with
senior Risk executives, providing opportunity for Committee
members and the Risk executive to discuss risk matters in a more
informal environment.
Matters considered by the Committee
During 2024, the Committee considered a wide range of risks facing
the Group and its Ring-Fenced Banks, both current and forward-
looking, across all key areas of risk management, in addition to risk
culture and risk appetite. The Committee continues to focus on key
risk topics through, for example, the use of deep dives to provide
greater analysis of particular topics and associated risks.
The following pages provide a summary of the risks considered by
the Committee, its role and an outline of the conclusions which
were ultimately reached. The Committee continues to be supported
by the IT and Cyber Advisory Forum, which dedicates additional
time and resource to reviewing and challenging risks associated with
IT infrastructure, IT strategy, IT resilience and cyber risks. The Chair
and other members of the Committee attend this Forum.
The Board Risk Committee Chair is a member of the Audit
Committee, in addition to the Audit Committee Chair being
a member of the Board Risk Committee; this close interaction
continues to help ensure that common issues of interest are
addressed appropriately.
Now a regular annual event, a Group-wide Audit and Risk Forum
was once again held during the year, providing an opportunity for
members of both Committees to discuss key areas of common
interest. This continues to strengthen the debate and challenge
of matters provided by these Committees. There continues to be
regular interaction with other Board Committees, with the Chair
of the Responsible Business Committee attending Committee
meetings for matters of specific interest. The Chair of the
Remuneration Committee is also now a member of the Committee,
further enhancing discussion on alignment of remuneration to risk
performance. Each of these connections helps ensure strong
relationships between the respective Board Committees.
The Committee also reviewed regular updates from the Non-Ring-
Fenced Bank and Insurance sub-groups, headed up by Lloyds Bank
Corporate Markets plc and Scottish Widows Group Limited
respectively, summarising key discussions and decisions taken at the
relevant entities’ risk committees. During the year, the Committee
also undertook reviews into aspects of the control environments
within each of these sub-group’s businesses.
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Board Risk Committee report continued
Key activities for the year
Area of focus
Key role of Committee
Key outcomes
Enterprise risk management framework
The Committee received regular updates
on the effectiveness of the enterprise risk
management framework to enable
oversight of its development and ensure
it is in line with emerging regulatory,
corporate governance and industry
best practice
In January, the Committee agreed to recommend to the Board a
proposal to adopt an events-based taxonomy, which provides
better alignment with Basel event categories. Simplification of the
enterprise risk management framework by reducing the number of
the Group’s principal risks was also supported
The Committee has overseen a significant change to the Group’s
three lines of defence approach. The new approach clarifies the
roles of risk owners and control owners and introduces a consistent
controls office structure across all parts of the business
The effectiveness of the enterprise risk management framework was
supported in November. It was highlighted that the Committee has
good visibility of the Group’s most important risk matters and has
appropriate coverage of the Group’s risk and control profile, with
deep dives having been undertaken throughout the year
Risk and control profile
Time was spent at every Committee
meeting reviewing the Group’s risk and
control profile
Control improvement has been a
significant focus area for the Committee in
2024 and will continue to receive
attention in 2025
The Group’s One Risk and Control Self-Assessment (One RCSA) has
been fully embedded and is providing an effective control
environment for all business activity. The Committee oversaw the
completion of One RCSA embedding in January
At the Committee’s request, risk and control reporting has
evolved during 2024, to improve the visibility of material risk
and control issues
Continued monitoring of business area risk reduction and
control improvement plans was undertaken throughout 2024,
with the Committee welcoming the progress on risk and
control improvements
The Committee continuously challenged management on progress
towards an improved control environment, with particular focus on
economic crime and supplier risk management
In November, the Committee reviewed and supported the Risk
Function and Group Internal Audit’s report on the effectiveness of
internal controls required to manage risk
Non-financial risks
Conduct and
compliance
The Committee is responsible for
overseeing that effective controls are
in place to ensure that good outcomes
are realised for customers and that
the Group complies with its existing
regulatory obligations
Complaints performance has been tracked by the Committee on a
half-yearly basis. The volume of customers awaiting an outcome
from their complaint has reduced compared to 2023 (excluding
those relating to motor finance commission arrangements)
A Group-wide emphasis on the effective application of Consumer
Duty and greater self-identification of historic issues requiring
rectification, as well as an increase in pace of strategic system
migrations, has resulted in an increased volume of remediation
cases. The Committee continues to closely monitor rectification
activity and operational capacity
Conduct risk will continue to be an area of focus for the Committee
in 2025, with more frequent updates requested
Detailed reports on legal developments and litigation risks were
considered on a half-yearly basis
The Committee reviewed the Group’s ring-fencing arrangements
and supported the Board in giving their confirmation of overall
compliance with ring-fencing governance requirements
Economic crime •
Recognising the significant external threat
from economic crime to the Group and its
customers, the Committee received
frequent updates on its exposure, and
prevention, throughout the year
This included progress updates on the
Group’s economic crime prevention
strategy, consumer fraud and the
Money Laundering Reporting Officer’s
annual report
•
As part of changes to the risk taxonomy, the Committee agreed to
create a new economic crime principal risk, supported by secondary
risks for anti-bribery, anti-money laundering, fraud and sanctions
In April, the Committee reviewed and supported enhancements to
the economic crime prevention strategy and vision, with more
funding allocated to deliver enhanced systems and controls. The
strategy was launched in the second half of the year, with a progress
update shared with the Committee in November
The Committee oversaw the Group’s implementation of the
Payment Systems Regulator’s (PSR) Authorised Push Payment (APP)
fraud reimbursement rules
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Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Key activities for the year continued
Area of focus
Key role of Committee
Key outcomes
Non-financial risks continued
Strategic
transformation
oversight
•
The Committee received quarterly updates
on the performance of the Group’s
extensive current and future strategic
change agenda. This enabled the
Committee to assess the impact of any
material change programmes on the Group
•
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The Committee was pleased to note that there were no material
risk impacts from changes implemented as part of the strategic
transformation work
The Committee continued with its focus on the management of
change execution risk, with a strong emphasis on delivery from the
evolving platform-based operating model
Operational
resilience
•
Emphasising its importance to the Group
and the scale of regulatory attention,
oversight of operational resilience was one
of the most frequently discussed items at
the Committee and will continue to be a
key focus area in 2025
The Committee considered the
operational resilience self-assessment
prior to approval by the Board
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Progress against compliance requirements from regulatory policy
statements on operational resilience, due in March 2025, have been
carefully tracked via a new dashboard and completion of an annual
self-assessment
Oversight of the Group’s important business services framework
was conducted
The Committee reviewed and supported revised operational
resilience Board-level risk appetite measures
Deep dives were undertaken in December on IT systems risk and
information, cyber and physical security risk
Readiness for the Digital Operational Resilience Act (DORA) was
noted by the Committee
Supplier risk
management
•
•
Close attention has been paid to the
Group’s suppliers to ensure resilience of
service to the Group’s customers
The Committee oversaw improvements to
the Group’s supplier risk management
frameworks
•
•
The Group’s supplier risk framework has evolved during 2024,
in response to supplier incidents, regulatory developments and
internal assurance activity. Updates were shared with the
Committee
The Committee noted the reliance on suppliers for delivery of
certain key services. A watchlist of critical suppliers at risk of
financial distress was reviewed by the Committee
People and
health, safety
and premises
risks
•
The performance and safety of colleagues
is of utmost importance to the
Committee, which has provided advice,
oversight and challenge during the year
•
•
The Committee has considered an enhanced framework of activity
to mitigate people risk. Discussions focused on culture, capability
and capacity, the management and delivery of the Group’s strategic
workforce plan and ensuring communications with colleagues are
transparent and clear
Significant progress in increasing accountability and visibility of
safety issues in the Group’s branches and offices was presented to
the Committee in March, with a further update in October
Data and
privacy risk
•
Data and privacy risk is a continuing area
of focus for the Committee
The Committee received updates on the
data management risk profile and data
privacy breaches
•
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•
A deep dive on the current data and privacy risk profile was
undertaken at the Committee in December. Discussion focused on
enhancements to its framework and strategy
The Committee noted that data integrity plays a critical role in
ensuring the Group’s resilience and is pleased that skills gaps across
the Group are being addressed
Financial risks
Credit risk
•
The Committee has frequently reviewed
and challenged the performance of the
Group’s commercial and consumer credit
portfolios, through regular credit
management information and deep dives
on portfolios requiring additional focus
•
•
•
•
The Committee was pleased to note that the Group’s credit
performance remains resilient despite broader macro-economic
risks persisting
A deep dive of the credit card portfolio was provided to the
Committee in February, which considered early warning indicators
and the impacts of increases in the cost-of-living. The Committee
acknowledged the resilient credit performance of the portfolio,
which has benefitted from low unemployment
The Committee undertook a deep dive on the Group’s exposure to
non-bank financial institutions, or shadow banking, in May.
Recognising its importance, further discussion took place in
October, in response to the Committee’s request to review the
securitisation portfolio and outputs from stress testing scenarios
In September, a deep dive of the commercial real estate portfolio
took place. The Committee commended the proactive management
of the portfolio despite falls seen in valuations across the sector.
While challenges remained, the Committee gained comfort that
lending origination remained disciplined
Board Risk Committee report continued
Key activities for the year continued
Area of focus
Key role of Committee
Key outcomes
Financial risks continued
Motor finance
•
With significant external factors impacting
the motor finance sector, the Committee
has carefully monitored the transport
portfolio’s performance and the evolving
situation in relation to motor finance
commission arrangements
•
The Committee received deep dives on the credit performance of
the automotive sector and motor residual value risk in September.
The Committee noted continuing volatility in residual value risk,
particularly in relation to battery electric vehicles (BEVs) and
recommended new risk appetite metrics to manage residual value
risk to the Board
The Group will continue to assess the potential impacts of
October’s Court of Appeal decisions pending the outcome of the
relevant lenders’ appeals against these decisions and also awaits
findings from the FCA motor finance commission arrangements and
sales review. Systems have been built at pace to support customer
requests for information about their products and complaints
handled in line with FCA guidance
•
Capital,
liquidity and
funding
•
The Committee has closely monitored the
associated risks from capital, liquidity
and funding
•
After challenge and discussion from the Committee, the ICAAP was
approved in March. The Committee was satisfied that the Group’s
current and planned capital adequately covers the risk of financial
loss it was, or might be, exposed to. The Committee continues to
track actions following regulatory feedback on ICAAP
In April, the Committee scrutinised and approved the Group’s
ILAAP. This included compliance with the PRA’s Overall Liquidity
Adequacy Rules (OLAR) and updated Pillar 2 assessments
Updates on customer deposit trends and mix and the subsequent
impacts this has for structural hedge activity were provided to the
Committee in April and October
•
•
Other
Model risk
•
Model risk continued to be an area of
significant internal and external focus,
with the Committee overseeing the
Group’s current model risk landscape and
proposed improvements
•
During 2024, the Committee continued its oversight of model risk
management, with quarterly updates being provided
The Committee gave particular focus to the implementation of
Capital Requirements Directive (CRD) IV models, the conclusion of
market risk models within Interbank Offered Rate (IBOR) transition
activities and responding to the PRA’s Supervisory Statement 1/23
on Model Risk Management. The Committee challenged
management on progress and regulatory expectations while noting
the evolving regulatory landscape
The Committee was also interested in the validation process for
artificial intelligence-related models, which will remain a continuing
area of focus during 2025
•
•
Climate risk
•
The Committee oversaw the impact of
climate risk on the Group’s activities and
considered the Group’s climate risk
capabilities, frameworks and risk appetite
•
A deep dive on Climate Risk was completed in July. The Committee
considered the complexity of climate risk, including those related to
regulatory expectations, greenwashing, transition of technology and
its adoption by customers
Recovery plans
and resolution
•
Recovery planning and resolution has been
an important area of focus for the
Committee throughout 2024
The Committee has periodically reviewed
the Group’s recovery and resolution plans
and helped to embed the topics across
the Group
•
•
The biennial Recovery Plan was approved by the Committee, prior
to submission to the PRA in June 2024. The 2024 Recovery Plan
reflected four different stress scenarios, one of which was a fire drill
scenario overseen by the Committee in April, which concluded that
the Group was better prepared to take action
Enhancements to resolution have been addressed, following
feedback from the Bank of England. In October, the Committee
recognised the strong approach taken to resolution ahead of a
future Resolvability Assessment Framework cycle
The Committee considered plans to meet new Trading Activity
Wind Down (TWD) rules, which become effective from March 2025
•
•
Emerging risks
•
Emerging risk trends have been regularly
monitored by the Committee during 2024
•
The Group’s approach to emerging risks has been refined further
during 2024. In December, the Committee reviewed a streamlined
register of emerging risk themes
The Committee also approved a change in terminology from
emerging and horizon risks to emerging and topical risks. The
Committee was satisfied that topical more accurately reflects the
time horizon these risks may materialise within, while recognising
some future risks are ever-present
Deep dives on generative AI took place in May with a further update
in November, which involved a review of the Group’s evolving AI risk
and control environment
•
•
Lloyds Banking Group plc Annual Report and Accounts 2024
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109
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
and re
Responsible Business Committee report
Amanda Mackenzie
Chair, Responsible
Business Committee
Read full biography
By supporting the needs of our customers,
colleagues and communities, shaping finance as a
force for good, we bring our purpose to life every day.
Key activities in 2024
Helping Britain Prosper in action
Diversity and inclusion
Engaging our employees to deliver cultural change
Delivering on our duty to customers and stakeholders
•
•
•
•
Q &A
Q What are the key priorities of the Responsible Business Committee
(Committee) in 2025?
A The Group continues to make significant progress in embedding its
purpose across all its activities and this year we have seen more
examples of delivering significant societal benefits at the same
time as creating new business opportunities for the Group.
2025 will be crucial as we continue to support colleagues,
customers and communities transition to net zero, access quality
housing and unlock regional development. We want to empower
our customers to achieve a more prosperous future and be a
leader in diversity and inclusion.
Introduction
I am pleased to report on the Committee’s work in 2024 and I would
like to thank members for their contributions. Over the course of
the year, we covered different aspects of how the Group helps build
a more sustainable and inclusive future for people and businesses
and we will continue to focus on the key topics of purpose and
environmental sustainability. This is how we will grow our business
profitably and provide long-term, sustainable value for shareholders
and all our stakeholders.
Committee purpose
sponsibilities
The purpose of the Committee is to support the Board in overseeing
the Group’s policies, performance and priorities as a responsible
business. We will continue our oversight of the Group’s work in 2025
and engage on emerging topics like AI and their potential impact for
our industry. The Committee’s terms of reference can be found on
the
corporate governance page
The findings of the internal annual review of effectiveness were
considered by the Committee at its January 2025 meeting. Based
on the evaluation, the feedback was that the performance of the
Committee continues to be effective.
Purpose in action
Helping Britain Prosper every day means making the biggest
difference through our core business. The Committee
considered how the Group delivers good customer outcomes
and positive impact for wider society, alongside achieving
our commercial objectives.
Specific topics covered environmental systems, our social housing
initiative, which builds on our position as a leading supporter of the
sector, with around £19.5 billion of new funding supported since
2018, our regional development programme (where we became the
first UK high street bank to support the Community Development
Finance Institutions (CDFI) sector acting as the lead investor in a
new £62 million fund) and our collaboration with UK universities to
help stimulate economic growth. As you should expect, we also
looked at how we can further empower our customers through our
products and services.
Environmental sustainability
A key focus for 2024 has been on embedding our environmental
strategy with detailed discussions and challenge on the plans across
our four key systems and in-depth updates on the Group’s progress
towards its sustainability ambitions. We looked at our augmented
commitment to provide £30 billion of sustainable financing to
commercial banking clients before the end of 2026. Special focus
was also given to the Group’s approach to nature and further
integrating nature into our targets, decision making and broader
environmental strategy.
Diversity and inclusion
The Committee is pleased with the continued progress in increased
representation of women and Black, Asian and Minority Ethnic
colleagues in senior roles and to be the highest-ranked bank in
the FTSE 100 for ‘Women in Leadership’. Since launching our goal
in 2023 to double the representation of senior colleagues with
disabilities, we have also seen a significant increase in colleagues
sharing their disability data.
With a bold new approach to our representation ambitions, which
we are committed to achieving by the end of 2030, we look forward
to continued progress updates on how we are ensuring diversity and
inclusion is at the heart of everything we do. Our business will be
stronger for it.
Colleagues and culture
Our colleagues are central to the delivery of the Group’s strategic
ambitions. The Committee, as the designated body for workforce
engagement, supports the Group’s wider engagement strategy,
reporting at least annually to the Board on the key themes and
issues we are hearing from our colleagues. This year we discussed
change readiness, the pace of transformation and the future of the
organisation, as well as focusing on the safety of our colleagues.
Please refer to page 86 for more details on our colleague
engagement activities.
on our website.
Consumer Duty
The Committee is the designated body that fulfils the Board’s
responsibility for Consumer Duty, and I am the Board Consumer
Duty Champion. During 2024, the Committee received progress
reports on the Consumer Duty Programme, reviewed both the
implementation plan to meet the FCA’s second deadline for closed
products in July 2024 and the first annual assessment report ahead
of submission to the Board.
Committee composition, skills, experience
and operation
The Committee met on five occasions in 2024 and is composed of
independent non-executive directors and is attended by the Group
Chief Executive. It benefits from a range of perspectives, insight and
experience, with representatives from Group Internal Audit
attending meetings as appropriate. Details of Committee
membership and meeting attendance can be found on page 80.
As a Committee, we recognise how Consumer Duty underpins
everything we do and embedding the Duty into the Group’s culture
of delivering good outcomes for customers in line with our customer-
centric strategy is essential.
Remuneration Committee
Chair’s statement
Our two-year pay deal for 2024 and 2025 remains
industry leading; between April 2024 and April
2025, we will have provided a minimum £3,0001
pay award, worth a total of between 8.2 to
13.6 per cent of salary, for our colleagues at
lower grades.
Remuneration content
Chair’s statement
pages 110 to 112
Remuneration at a glance
page 113
2023 Directors’ Remuneration Policy summary pages 115 to 116
2024 annual report on remuneration
pages 118 to 133
Cathy Turner
Chair,
Remuneration
Committee
Dear shareholder
On behalf of the Board, I am pleased to present the directors'
remuneration report for the year ended 31 December 2024. We are
grateful for the strong support received at the 2024 annual general
meeting (AGM), with 96.4 per cent approval of our 2023 report.
Supporting our customers,
colleagues and communities in 2024
We are proud of how we have continued to deliver on our purpose
of Helping Britain Prosper by supporting our customers, colleagues
and our communities throughout 2024.
In 2023 we announced our two-year pay deal for 2024 and 2025
which remains industry leading. In the context of improving
economic conditions and an easing of price increases, we will have
provided a real-term pay increase for almost 55,000 colleagues at
grades A to E in 2025. Our minimum award of £1,5001 , means our
colleagues at lower grades received an average increase of between
4.4 and 6.3 per cent.
That means that between April 2024 and April 2025, we will have
provided a minimum £3,0001 pay award, worth a total of between
8.2 to 13.6 per cent of salary, for our colleagues at lower grades.
From 1 April 2025 we will also be increasing our minimum salary
from £23,5001 to £25,0001 which will be 9 per cent above the
national Real Living Wage; our London rates will be 13.9 per cent
above the London Real Living Wage.
For 2024, we extended eligibility for significantly increased Group
Performance Share (GPS) annual bonus plan awards to those of our
more junior colleagues who have made an exceptional contribution
to our purpose of Helping Britain Prosper.
In addition to our core reward offering, we also have a range of
flexible options to provide colleagues with additional choice and to
allow them to tailor their reward package to their own or their
family’s individual circumstances. Colleagues can also access a range
of financial products at discounted rates from the Group portfolio;
these include current accounts, mortgages and rental deposit or
season ticket loans. For more information see page 117.
Incentivising our colleagues helps us to deliver on our strategy and
deliver for our customers by, for example, providing a range of
housing options for our communities; amongst a range of actions,
we have increased the number of people on the housing ladder by
lending more than £15 billion in 2024 to first time buyers and
expanding the availability of affordable homes by supporting over
£2 billion of new funding to the social housing sector in 2024.
We also aim to bring more of our products and services to existing
customers and broaden our product offerings. Our digitally active
users grew to 22.7 million in 2024, retaining our position as the UK’s
largest digital bank and we launched new interactive tools such as
Benefit Calculator, which empowers customers to identify support
they might be eligible for.
Group balanced scorecard
The Group balanced scorecard (BSC) is intended to provide insight
into performance for the full range of our stakeholders and informs
a range of key reward decisions, including for our executive
directors. 60 per cent of the scorecard is linked to financial metrics,
aligned to the interests of our shareholders, 20 per cent of the
scorecard assesses how effectively we are serving customers across
all our brands, products and services, 7.5 per cent relates to our
culture and colleague engagement and 12.5 per cent is weighted to
carbon reduction and inclusivity.
As discussed in more detail on page 5, our financial results for 2024
include an additional provision for the potential remediation costs
relating to motor finance commission arrangements; this has
negatively impacted the profit after tax and return on tangible
equity (RoTE) measures in the BSC resulting in a reduced outturn of
68.12 per cent of maximum, fully inclusive of the impact of the
provision. More information on our Group BSC outcome can be
found on page 119.
As a consequence of including the outcome above, the Committee
does not consider that the BSC outcome properly reflects the
strength of the underlying Group performance or the performance
of the executive directors whose variable reward is directly linked
to it.
After careful consideration of the importance of transparency and
to demonstrate the Group’s commitment to respecting the targets
it sets for itself, the Committee has decided not to exercise its
discretion this year to adjust the BSC outcome to a higher level
which it considers would better reflect the underlying performance.
The Committee considers it critical that it can set robust financial
targets which provide clear line of sight to delivery against its
ambitious strategy and align with the financial planning and
budgeting process. As such, for the financial measures within our
2025 BSC (and beyond if required) we will exclude the impact of
provisions related to the motor finance matter (as it is not a
budgeted item) and the Committee will instead consider any
impact on a discretionary case-by-case basis taking account of the
impact on the full range of the Group’s stakeholders including its
customers, colleagues, shareholders and communities. With the
exception of relative Total Shareholder Return (rTSR), the financial
measures used to determine the future vesting of our Long Term
Incentive Plan (LTIP) awards, including the remaining two years of
our 2024 award, will be treated in the same way.
1
Pro-rated for reduced hours.
2
In line with our cost guidance, the BSC outcome includes a £0.1 billion adjustment to
the Operating Cost measure target relating to the sector-wide change in the charging
approach for the Bank of England Levy which was not included in the financial
objective this measure was set against.
Directors’ remuneration report
110
Read full biography
110
Lloyds Banking Group plc Annual Report and Accounts 2024
2024 variable reward outcomes
The Group delivered robust financial results in 2024 and successfully
completed the first phase of our five-year purpose-driven strategy.
With that in mind, one of the key principles for the Committee this
year has been the need to ensure colleague engagement and reward
colleagues fairly for their contribution; this is reflected in the
Committee’s decision making and the pay and variable reward
outcomes discussed below.
The Committee has considered a range of factors to determine the
2024 Group Performance Share (GPS) annual bonus pool outcome;
these include the Group’s underlying financial performance, its
performance for our customers and communities and its reward
market positioning.
The Committee has approved a 2024 GPS pool of £368 million,
representing a year on year reduction of 4 per cent when compared
to 2023. This acknowledges that, whilst our underlying results are
robust and in line with our published guidance, underlying profit is
down year on year, which the Committee considered is important
to recognise in its GPS decision.
In 2022, Long Term Share Plan (LTSP) awards were granted to
approximately 750 colleagues including our executive directors. To
ensure that subsequent performance has been sustained a ‘pre-vest
test’ consisting of three financial underpins and four key questions
has been considered by the Committee. Based on the outcome of
that test the Committee has determined that the awards should
fully vest. More detail is provided on page 121. The Committee also
considered whether there was a requirement to adjust for windfall
gains in respect of this award and determined that no adjustment
is necessary.
Executive director remuneration outcomes
Charlie Nunn, our Group Chief Executive (GCE), has overseen the
successful completion of the first phase of our strategy and
delivered robust financial results in 2024. The GCE has embodied
the Group’s values and has led through a year of substantial
transformation and external uncertainties whilst maintaining a
strong regulatory and risk environment.
Our Chief Financial Officer (CFO) has had a critical role in strategy
development, communication and execution. He has embedded
strong commercial and investment discipline across the Group.
The Committee determined that the GPS awards for the GCE and
CFO should be in line with the Group’s performance as assessed by
the Group BSC of 68.1 per cent of maximum, with resultant awards
of £1,126,633 and £812,014 respectively.
The 2024 Group BSC outcome also acts as part of a ‘pre-grant test’
for the 2025 LTIP awards. Given our robust 2024 performance, the
Committee has determined to grant LTIP awards to the GCE and
the CFO of 300 per cent of salary in line with the current Directors’
Remuneration Policy (the Policy). The vesting outcome of the LTIP
award will be subject to the achievement of stretching performance
targets measured over the period 2025 to 2027.
The Committee assessed the performance measures and weightings
used in the 2024 grant and concluded they remain strongly aligned
to the Group’s strategic transformation and public financial and
environmental commitments. Therefore, they remain appropriate
for the 2025 grant. For more details see page 132.
As set out on page 86, in continuing to consider its arrangements for
engaging with the Group’s workforce, the Board approved in 2024
an evolved approach to colleague engagement, to be implemented
during 2025. This new approach builds on existing colleague
listening activity and will introduce three forums to better represent
colleagues particularly at grades where trade union membership is
low. The forums will include the People Forum, the People
Consultation Forum, and the Management Advisory Forum. Where
appropriate, these forums will be engaged on matters of
remuneration, including executive remuneration.
Executive directors’ 2025 pay
Aligned with its principle of ensuring all colleagues are rewarded
fairly, an important area of focus for the Committee this year has
been reviewing the appropriateness of executive directors’ pay.
On appointment, the Committee set the base salary of the GCE
lower than his predecessor, by 13 per cent, to recognise that this
was his first lead executive role in a listed environment. This is in line
with good practice and investor preferences.
The GCE made an immediate impact and, over the last three and a
half years, has provided strong leadership of the Group, delivering
progress against our ambitious strategic objectives and a series of
robust financial results in a challenging and uncertain economic
climate. Externally, he has raised the profile of the Group, to aid us
in the delivery of our purpose of Helping Britain Prosper particularly
in respect of the UK’s housing crisis. Since 2018 we have supported
around £20 billion of funding to the social housing sector.
Given the GCE’s increased experience and strong track-record of
delivery, the Committee has determined that it is an appropriate
time to review his package. The most obvious inconsistency was his
fixed pay recognising that it has only increased modestly since he
was appointed – his fixed pay has risen by just 5 per cent over three
and a half years.
The Committee also reviewed the fixed pay of the CFO. The
Committee recognised the strong financial leadership throughout
our transformation and the breadth of the role which includes
responsibility for Lloyds Development Capital, Lloyds Living and
Housing Growth Partnership, all key enablers of our purpose of
Helping Britain Prosper.
After careful consideration, including consultation with shareholders
(see next section), the Committee decided, effective 1 January 2025,
to reverse the impact of the discount applied to the GCE’s salary on
appointment (13 per cent) and apply a 3 per cent annual increase
effective 1 April 2025 to the salary of both executive directors; the latter
is less than the 4.1 per cent pay budget which colleagues will benefit
from under our two-year pay deal. In line with our current Policy, the
Fixed Share Award (FSA) of the GCE and CFO will be increased by
£283,381 and £353,094 respectively to align with their salaries.
As part of its decision, the Committee considered that, excluding the
exceptional salary increase in January 2025, the GCE’s salary will
have increased by 8 per cent between his date of appointment and
April 2025; over the equivalent period, colleagues will have
benefitted from a total pay budget of 18.2 per cent.
In determining these changes, the Committee reviewed the relevant
benchmarking data. This included comparing the on-target total
reward opportunity of the Group’s executive directors with peers,
including the FTSE 30 and our main UK banking peers. Due to
significant pay practice differences compared to the UK, US and
European firms were not included in the analysis.
Changes in respect of the GCE improve the competitiveness of his
total reward opportunity, but the package remains below the
median of both our UK banking peer group and the FTSE 30.
Group Chief Executive Charlie Nunn
Other information
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Risk management
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The changes for our CFO will align his fixed pay and on-target
opportunity with the market.
Chief Financial Officer William Chalmers
Shareholder consultation
In 2024, I consulted with a range of shareholders and proxy rating
agencies to discuss their views on executive pay and our thoughts
on Policy implementation for 2025 and beyond. During this process
I spoke with our largest shareholders, representing around 25 per
cent of the Group’s issued share capital, as well as representative
bodies whose members make up a significant portion of our register.
The feedback received was valuable and indicated broad
understanding amongst investors for both the 2025 modifications
and the longer-term trajectory for executive pay at the Group which
is considered to be managed responsibly. Our shareholders clearly
understood our rationale and need to pay the executive directors,
who are well respected amongst our investors, fairly for their roles in
the short term as well as over the long term.
One area of particular discussion was the timing of fixed pay
increases given the opportunity the Group now has to set its own
variable to fixed pay ratio.
The Committee considered the variable to fixed pay ratio feedback
carefully and determined to take a two-step approach. To ensure
the executive directors are paid fairly ahead of the 2026 Policy
review, the fixed pay changes set out above would be implemented.
Fixed pay will be reconsidered as part of the 2026 Policy review
where it is anticipated that, consistent with anticipated market
movements, the FSA element will be significantly reduced and a
higher, performance-related, variable reward opportunity will be
recommended to shareholders as part of the new Policy presented
to the 2026 AGM.
I would like to thank our shareholders and advisory bodies for their
engagement and the feedback received as part of our consultation;
your support is important and I look forward to engaging with
shareholders again as we develop our 2026 Policy over the
coming year.
Board Chair fee
The Committee has also considered how the fee paid to the Board
Chair compares with the market. This was reduced, at his request,
on appointment by 20 per cent versus his predecessor.
Recognising investor expectations that non-executive director fees
properly recognise the time commitment, skills and experience
necessary to perform the role, the Committee decided, in line with
the Policy and with Sir Robin Budenberg not participating in the
discussion, to increase the Chair fee to a more market comparable
level of £850,000 in two steps over 2025 and 2026. In January 2025,
the Chair fee increased from £654,500 to £750,000.
Variable to fixed pay ratio for material risk takers
(MRTs)
Following the approval by the Group’s shareholders of a resolution
to allow the Committee to set an appropriate variable to fixed pay
ratio for its MRTs, it has approved a maximum ratio of 8:1 for 2024
and later years. The Committee considers that this will provide it
with sufficient flexibility in terms of variable reward design without
creating an incentive for excessive risk taking.
The variable opportunity for the executive directors will remain
subject to the limits set out in the 2023 Policy and cannot be
increased as a consequence of the increase in the ratio.
Dilution limits
As our GPS, somewhat unusually, operates across such a broad base
of colleagues, (approximately 30,000 received shares in respect of
awards over £2,000 in 2024) it is more consistent with an all
employee, rather than an executive, share plan. Therefore the ‘inner’
dilution limit is a particular challenge for the Group. To aid the
operation of our share plans, we will be recommending a resolution
at the upcoming AGM to remove the 5 per cent ‘inner’ dilution limit
for our discretionary share schemes. We will maintain the ‘outer’
dilution limit of 10 per cent for all our share plans.
This change aligns with the recent updates to the Investment
Associations Principles of Remuneration and certain proxy rating
agencies guidance and will provide the Group with more flexibility in
terms of how it administers colleague share awards in its overall
capital management.
Together with my Committee members, I would like to thank our
shareholders for their ongoing support and our colleagues for their
continued commitment to our customers and our communities.
On behalf of the Board
Cathy Turner
Chair, Remuneration Committee
Directors’ remuneration report continued
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2022 Long Term Share Plan (LTSP) outcome
The award level for the 2022 Long Term Share Plan was set at
grant in March 2022 by reference to the ‘pre-grant test’ which
considered the 2021 balanced scorecard, the share price and
four key questions. Vesting was subject to a ‘pre-vest test’ which
has been assessed as ‘met’. For full details on the ‘pre-vest test’
please see page 121.
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
2024 Remuneration at a glance
Detail of the 2024 Group balanced scorecard and 2022 Long Term
Share Plan can be found on pages 119 to 121.
Chief Financial Officer
Key financial highlights
12.3%
Return on tangible equity (14.0 per cent
excluding motor finance provision)
148bps
Capital generation (177 basis points
excluding motor finance provision)
£3.6bn
Total capital return including an
ordinary dividend of 3.17 pence per share,
up 15 per cent vs 2023
2024 Total remuneration (£000)
Group Chief Executive
Group Chief Executive Charlie Nunn
The single total figure of remuneration for the Group Chief
Executive during 2024 was £5.6 million. This is an increase of
53 per cent compared to 2023 largely driven by the 2022 LTSP
vesting outcome, the first long-term incentive vesting for GCE
since he joined the Group in 2021. Excluding this, the year-on-year
figure would be down 2 per cent largely driven by the lower
annual GPS award recognising 2024 Group performance.
Chief Financial Officer William Chalmers
The single total figure of remuneration for the Chief Financial
Officer during 2024 was £3.8 million. This is an increase of
20 per cent compared to 2023 which was largely driven
by a higher 2022 LTSP award than the previous 2021 award.
The 2021 award was reduced by 40 per cent upfront at the time
of grant, showing restraint based on 2020 Group performance.
The figure also includes a lower annual GPS award recognising
2024 Group performance.
2024 Group balanced scorecard performance
68.1%
Our Group balanced scorecard reflects a robust business
performance. Further details can be found on pages 119 to 120.
2024 Group Performance Share (GPS) pool
£368m
The Committee determined a GPS pool for 2024 of £368
million, down 4 per cent from 2023. This recognises that, whilst
our underlying results are robust and in line with our published
guidance, underlying profit is down year over year.
2025 Long Term Incentive Plan (LTIP) award
The Committee has considered the Group’s performance in
2024 and other factors as part of the ‘pre-grant test’ as well as
the individual contribution of the executive directors and will
grant 2025 Long Term Incentive Plan awards of 300 per cent of
salary to the Group Chief Executive and the Chief Financial
Officer (see page 132).
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Lloyds Banking Group plc Annual Report and Accounts 2024
Remuneration Committee
The Committee comprises of four non-executive directors. Sir Robin
Budenberg attends the Committee in his role as Group Chair. The
non-executive directors are from a wide background to provide a
balanced and independent view on remuneration matters. Two of
the three designated independent non-executive directors of the
Ring-Fenced Banks also attend meetings of the Committee as
observers in order to provide insights on matters relevant to the
Ring-Fenced Banks and as part of their role in the Group’s overall
governance structure. For further details of Committee membership
and attendance at meetings, please see page 80.
During the year, Charlie Nunn, as the GCE provided regular briefings
to the Committee. In addition, the Committee engaged with and
received updates from the Chief People and Places Officer, Total
Reward Director and the Chief Risk Officer.
The purpose of the Committee is to set the remuneration for all
executive directors and the Chair, including pensions rights and any
compensation payments. It recommends and monitors the level and
structure of remuneration for senior management and material risk
takers. It also considers, agrees and recommends an overall
remuneration policy and philosophy for the Group that is aligned
with its long-term business strategy, its business objectives,
its risk appetite, purpose and values and the long-term interests of
the Group and recognises the interests of the relevant stakeholders
including the wider workforce.
The Committee’s operation is designed to ensure that no conflicts
of interest arise and in particular, the Committee ensures that no
individual is present when matters relating to their own
remuneration are discussed.
Advisers
PwC was appointed by the Committee in May 2022 following
a competitive tender process and was retained for 2024.
The Committee is of the view that PwC provides independent
remuneration advice to the Committee and does not have any
connections with the Group or any director that may impair
its independence.
More broadly, PwC provides unrelated professional services to the
Group in the ordinary course of business including tax, advisory,
internal audit and non-audit assurance services. PwC attended
Committee meetings upon invitation and fees payable for the
provision of services in respect of directors’ remuneration in 2024
amounted to £113,092 excluding VAT. Fees paid to PwC for advising
the Committee are based partly on a fixed fee and partly on a time
and materials basis.
Committee activities in the year
Jan
Feb
May
Sep
Nov
Executive directors’ remuneration
Executive directors’ fixed pay proposals
Yes
Yes
No
Yes
No
Executive directors’ performance and variable remuneration
Yes
Yes
No
Yes
Yes
Directors’ remuneration report
No
Yes
No
No
Yes
All employee remuneration
2025 pay proposals
No
No
No
Yes
Yes
Group performance and GPS pool
Yes
Yes
Yes
Yes
Yes
Gender and ethnicity pay reporting
No
No
No
Yes
Yes
Employee insights
No
Yes
Yes
No
No
Remuneration for other senior executives
Yes
Yes
Yes
Yes
Yes
Reward governance
Consideration of policy and conduct matters
Yes
Yes
Yes
Yes
Yes
Statement of voting at annual general meeting
The table below sets out the voting outcome at the annual general meeting in May 2024 in relation to the annual report on remuneration.
The Remuneration Policy was subject to a binding vote at the annual general meeting in May 2023.
Votes
cast in favour
Votes
cast against
Number of
shares
(millions)
Percentage of
votes cast
Number of
shares
(millions)
Percentage of
votes cast
Votes
withheld
Number of
shares
(millions)
2023 annual report on remuneration (advisory vote)
39,404
96.36%
1,488
3.64%
34
Directors’ Remuneration Policy (binding vote in 2023)
39,002
96.00%
1,623
4.00%
68
Directors’ remuneration report continued
4
114
Lloyds Banking Group plc Annual Report and Accounts 2024
2023 Directors’ Remuneration Policy summary
and 2024 implementation
The 2023 Directors’ Remuneration Policy was approved by
shareholders at the AGM on 18 May 2023 with 96 per cent of votes
cast and took effect from that date. The full policy is set out in the
2022 Annual Report and Accounts (pages 125 to 133)
which is
available on our website.
The Committee extensively consulted on the Policy proposals with
the Group’s institutional shareholders and proxy rating agencies.
The Committee regularly engages and consults with key
shareholders to take into account their feedback on the Policy and
its implementation.
A summary of the Policy for the executive directors and how it was
implemented during 2024 is shown below. For how we intend to
implement the Policy for 2025 please see pages 130 to 133.
Directors’ remuneration
Wider workforce alignment
Base
Salary
•
Base salaries are reviewed annually with increases typically
taking effect from 1 April
•
Increases will normally be no more than the increase
awarded to the overall employee population
With effect from 1 April 2024 salaries for the executive directors
increased by 4 per cent, in line with the wider workforce, to
£1,181,700 for the GCE and £851,703 for the CFO.
The pay deal for the wider workforce in
2024 reflected a 4.2 per cent budget.
The approach focused on lower paid
colleagues with junior colleagues receiving a
minimum £1,500 award.
Fixed Share
Award
•
Delivered entirely in Lloyds Banking Group shares, released
over three years with 33 per cent being released annually
following the year of the award
•
The maximum award is 100 per cent of base salary
Fixed share awards were increased from 1 April 2024 as part of
the 4 per cent fixed pay increase to £1,092,000 for the GCE and
£524,160 for the CFO.
To maintain an appropriate balance
between fixed and variable remuneration,
and to further align the interests of executive
directors and shareholders, a portion of fixed
pay is delivered in the form of shares.
Fixed share awards are only granted to the
GCE and the CFO.
Pension
•
The maximum allowance for executive directors is set at 15
per cent of base salary
•
Any director may elect to receive some or all of their pension
allowance as cash in lieu of pension
Pension allowances for all executive directors were set at 15 per
cent of base salary.
The maximum allowance for all executive
directors is set at 15 per cent of base salary in
line with the majority of the workforce.
Benefits
Benefits may include those currently provided and disclosed in
the annual report on remuneration. Core benefits include a
company car or car allowance, private medical insurance, life
insurance and other benefits that may be selected through the
Group’s flexible benefits plan.
Benefits were unchanged from 2023. Executive directors
received a flexible benefit allowance of 4 per cent of base
salary. The Chief Financial Officer also received a car allowance.
Flexible benefit allowance of 4 per cent of
base salary was consolidated into base salary
in July 2023 for colleagues, simplifying their
reward package and incurring pension
contribution entitlement.
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
115
Lloyds Banking Group plc Annual Report and Accounts 2024
Directors’ remuneration
Wider workforce alignment
Group
Performance
Share
(Short Term Variable)
•
The normal ‘target’ level of the GPS is 50 per cent of
maximum opportunity
•
The maximum GPS opportunity is 140 per cent of salary for
the executive directors
•
The Group will apply deferral in line with minimum
regulatory requirements. See below section on deferral
•
Awards may be subject to malus and clawback. See below
section on performance adjustment
The Group Chief Executive and Chief Financial Officer received
2024 GPS awards of 68.1 per cent of maximum. Outcomes are
shown in detail on page 119.
All Group employees are eligible to receive
an award through the Group Performance
Share scheme.
The Committee determined a GPS pool of
£368 million for 2024.
Long Term
Incentive Plan
(Long Term Variable)
•
Awards will be granted in the form of conditional rights to
shares in the Group
•
The maximum LTIP opportunity is 300 per cent of salary for
the executive directors
•
The Group will apply deferral in line with minimum
regulatory requirements. See below section on deferral
•
Awards may be subject to malus and clawback. See below
section on performance adjustment
Awards were granted in March 2024 at 300 per cent of salary
for executive directors. The 2022 LTSP award vested in full as
show on page 121.
The wider workforce are not eligible
for LTIP awards, consistent with
market practice.
Deferral of variable remuneration and holding periods
The GPS and LTIP are both considered variable remuneration for the
purpose of regulatory and deferral requirements. Deferral levels are
determined at the time of award in compliance with regulatory
requirements which currently require that, for executive directors, at
least 60 per cent of the aggregate variable remuneration (GPS + LTIP)
is deferred up to seven years with pro rata vesting between the third
and seventh year, and at least 50 per cent of total variable
remuneration is delivered in shares or other equity-linked instruments
subject to a minimum one-year holding period.
Performance adjustment
•
The Committee determines that the financial results for a given year
do not support the level of variable remuneration awarded
•
Any other circumstances where the Committee considers relevant
Performance adjustment is determined by the Remuneration
Committee and/or Board Risk Committee and may result in a
reduction of up to 100 per cent variable remuneration opportunity for
the relevant period. It can be applied on a collective or individual basis.
When considering collective adjustment, a report is submitted to the
Remuneration Committee and Board Risk Committee regarding any
adjustments required to balanced scorecards or the overall GPS
and/or LTSP/LTIP outcome to reflect in-year or prior year risk matters.
The application of malus will generally be considered when:
•
There is reasonable evidence of employee misbehaviour or material
error or that they participated in conduct which resulted in losses
for the Group or failed to meet appropriate standards of fitness
and propriety
•
There is material failure of risk management
Judgement on individual performance adjustment is informed by taking
into account the severity of the issue, the individual’s proximity to the
issue and the individual’s behaviour in relation to the issue. Individual
adjustment may be applied through adjustments to balanced scorecard
assessments and/or through reducing the variable remuneration outcome.
Awards are subject to clawback for a period of up to seven years after
the date of award which may be extended to 10 years where there is an
ongoing internal or regulatory investigation. The application of clawback
will generally be considered when:
•
There is reasonable evidence of employee misbehaviour
or material error
•
There is material failure of risk management at a Group, business
area, division and/or business unit level
Directors’ Remuneration Policy and Group remuneration policy alignment
Directors’ remuneration report continued
16
16
1
Executive
directors
Group Executive
Committee
Other material
risk takers
Other
employees
Fixed
Base salary
Yes
Yes
Yes
Yes
Fixed Share Award / Role-based allowance
Yes
Yes
Yes
No
Pension and benefits
Yes
Yes
Yes
Yes
Variable
Short term incentive
Yes
Yes
Yes
Yes
Long term incentive
Yes
Yes
No
No
Lloyds Banking Group plc Annual Report and Accounts 2024
Recognition
To create an environment of belonging, recognition is a key
component to boosting morale, increase productivity and foster
a positive workplace culture. It helps employees feel valued and
motivated, leading to higher job satisfaction and retention.
From Group-wide alignment to annual awards, celebrating
those who have had game changing outcomes for our
customers, to a platform refresh, enabling our colleagues to
have an updated experience of recognising each other.
20%
of our colleagues have been nominated
for an annual award since June 2024
Colleague wellbeing
At Lloyds Banking Group, the health and wellbeing of our colleagues
is at the heart of everything we do. We want our people to thrive
both at work and in life, no matter what their role is, or where they
work. We're dedicated to creating an inclusive culture and to
provide the support needed for physical and mental wellbeing. Our
diverse range of health and wellbeing resources is there to help for
in-the-moment support, and to help our colleagues to make
healthy, sustainable choices to maintain their wellbeing.
Financial products and colleague offers
Colleagues can access a wide range of financial products, some at
discounted rates, from the Lloyds Banking Group portfolio. These
include current accounts and mortgages. We also offer rental
deposit and season ticket loans which support colleagues with day
to day expenses and budgeting.
Colleague Offers is an online one-stop shop for hundreds of great
discounts from some of the high street’s leading brands. The
website is available for colleagues and up to 10 friends or family
members and can be accessed from home or work.
Flexible working
Through Flexibility Works we offer colleagues a range of flexible
working options. We’re focused on balancing the needs of our
customers as we transform our business, with creating a place people
love to work and feel supported in the moments that matter.
117
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
Explore life at Lloyds Banking Group
In addition to our core reward offering, we also offer a range of
wider benefits.
Sharesave
Sharesave is a savings account combined with a share option plan, it
enables our colleagues to save for their future and then buy shares
in the Group at a discounted price.
52%
of colleagues participate in Sharesave
Sharematch
Sharematch allows our colleagues to invest in Lloyds Banking
Group shares in a tax-efficient way. For every two shares
bought, we give three matching shares completely free up to a
maximum colleague investment of £30 per month. This allows
our colleagues to share in the success of the Group through
share price growth as well as dividend income.
60%
of colleagues participate in Sharematch
Colleague Sustainable Cars
Colleague Sustainable Cars is a salary sacrifice scheme which allows
colleagues to drive a brand new Ultra Low Emission Vehicle (ULEV),
funded by a reduction in salary. Our scheme is one of the largest in
the private sector with some 3,000 ULEV vehicles provided.
These cars greatly reduce the environmental impact on
climate change and urban air quality supporting our Group
sustainability ambitions.
Taking leave
We understand colleagues may need time off for various reasons.
Some leave will be planned, such as holidays or taking time out to
care for family, while other times it may be needed to deal with
unexpected situations.
Whatever the reason, we’re committed to supporting colleagues by
providing the time they need.
Lloyds Banking Group plc Annual Report and Accounts 2024
Executive director single total figure of remuneration (audited)
Charlie Nunn
William Chalmers
Totals
£000
2024
2023
2024
2023
2024
2023
Base salary
1,170
1,136
844
819
2,014
1,955
Fixed Share Award1
1,082
1,050
519
504
1,601
1,554
Benefits
52
48
63
62
115
110
Pension
176
170
127
123
303
293
Total fixed pay
2,480
2,404
1,553
1,508
4,033
3,912
Group Performance Share2
1,127
1,277
812
921
1,939
2,198
Long-term Incentive3,4,5
2,008
1,448
749
3,456
749
Total variable pay
3,135
1,277
2,260
1,670
5,395
2,947
Other remuneration6
1
1
Total remuneration
5,615
3,681
3,813
3,179
9,428
6,860
Less: Performance adjustment
Total remuneration less performance adjustment
5,615
3,681
3,813
3,179
9,428
6,860
1
The Fixed Share Award is part of fixed remuneration and is not subject to any performance conditions (see page 115).
2
Awards for Charlie Nunn and William Chalmers will be made in March 2025 in a combination of cash and shares.
3
The 2022 Long Term Share Plan (LTSP) vesting (see page 121) at 100 per cent was confirmed by the Remuneration Committee at its meeting on 13 February 2025. The total number
of shares vesting will be 3,588,364 for Charlie Nunn and 2,586,292 for William Chalmers. The average share price between 1 October 2024 and 31 December 2024 of 55.969 pence
has been used to indicate the value. The shares were awarded in 2022 based on a share price of 47.027 pence and as such 19 per cent of the reported value is attributable to share
price appreciation.
4
The long-term incentive figures for 2023 have been adjusted to reflect the share price on the date of vesting (6 March 2024) of 48.4 pence instead of the average price of 43.564 pence
reported in the 2023 report.
5
The 2021 LTSP awards were granted prior to Charlie Nunn joining as Group Chief Executive from 16 August 2021.
6
Other remuneration payments comprise income from all employee share plans, which arises through employer matching or discounting of employee purchases.
2024 pension and benefits (audited)
Charlie
Nunn
2024
William
Chalmers
2024
Pension/Benefits
Pension
175,551
126,527
Car or car allowance1
4,141
12,000
Flexible benefits payments2
46,814
49,490
Private medical insurance
1,130
1,130
Subtotal for Total Benefits less pension
52,085
62,620
1
For Charlie Nunn this includes the benefit associated with the Colleague Sustainable Car Scheme (salary sacrifice) and for William Chalmers this includes a car allowance.
2
Includes flexible benefits allowance and for William Chalmers, includes holidays sold through the Group's flexible benefits plan.
Defined benefits pension arrangements (audited)
There are no executive directors with defined benefit pension entitlements.
Payments for loss of office (audited)
No payments for loss of office were made in 2024.
Payments within the reporting year to past directors (audited)
There were no payments made to past directors in 2024.
External appointments
No executive director served as a non-executive director on the board of another company in 2024.
Directors’ remuneration report continued
18
–
–
–
–
–
–
–
–
–
–
–
18
1
Lloyds Banking Group plc Annual Report and Accounts 2024
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
2024 Group balanced scorecard
The balanced scorecard provides transparency on how our
executive directors’ remuneration outcomes for 2024 GPS directly
aligns with our performance.
Profit after tax and return on tangible equity measures have been
impacted by the additional provision for the potential remediation
costs relating to motor finance commission arrangements. However,
underlying performance remains robust. Strong cost discipline
combined with customer and sustainability performance has
resulted in an overall outcome of 68.1 per cent as set out in the
scorecard table below.
Our 2024 employee engagement index score has increased to 71 per
cent, up 5 percentage points from 2023, reflecting our colleagues’
positive outlook as we continue to serve our customers and
transform our business. Further commentary on non-financial
performance is described on page 120.
For 2024, sustainability measures aligned to our public commitments
on climate change, promoting inclusion and diversity and colleague
engagement accounted for 20 per cent of the scorecard.
Our 2024 balanced scorecard
As mentioned on pages 110 to 112, the Committee does not consider
that the BSC outcome properly reflects the strength of the
underlying Group performance or the performance of the executive
directors whose variable reward is directly linked to it.
After careful consideration of the importance of transparency and
to demonstrate the Group’s commitment to respecting the targets
it sets for itself, the Committee has decided not to exercise its
discretion to adjust the BSC outcome to a higher level which it
considers would better reflect the underlying performance.
Charlie Nunn – Group Chief Executive
Maximum award
£1,654,380
Group balanced scorecard outcome
68.1%
Initial scorecard outcome
£1,126,633
Committee discretion
—
Annual GPS award/% of maximum
68.1%
•
Delivered the first phase of the strategy, financial targets, and
investment priorities, which will set the Group up for success in
2025 and 2026
•
Continued strong leadership throughout the year that included
some uncertainties for consumers, such as a change in government
•
Group financials remain positive, driven by robust income
performance, strategic delivery and effective risk management
William Chalmers – Chief Financial Officer
Maximum award
£1,192,384
Group balanced scorecard outcome
68.1%
Initial scorecard outcome
£812,014
Committee discretion
—
Annual GPS award/% of maximum
68.1%
•
Played a critical role in the strategic execution of the Group and
maintained positive engagement with investors and regulators on
the Group performance and strategy, throughout 2024
•
Strong financial management, delivering the plan throughout
2024, with a strong focus on cost management, net interest
income & other operating income growth
•
Effective balance sheet management with a pro forma CET1 ratio
of 13.5 per cent, ahead of regulatory requirements
Lloyds Banking Group plc Annual Report and Accounts 2024
119
119
Non-financial measures (40 per cent) commentary
The scorecard that the Committee used in determining the annual GPS awards for the executive directors, along with the assessment of
performance against the scorecard, is detailed on page 119. The table below outlines the Committee’s assessment of the non-financial
elements of the scorecard.
Measure
Commentary
Group customer
dashboard
•
The 2024 Group Customer Dashboard (GCD) contains 150 measures, of which 46 drive
the overall balanced scorecard (BSC) outcome. These 46 measures focus on customer
advocacy (NPS), customer satisfaction, complaints and digital growth
•
In 2024, the total GCD BSC score is 83, on a 0-100 scale. Progress is evident across key
strategic areas; such as products experience, banking app enhancements and increased
digital engagement
•
The overall positive result is supported by performance relative to peers, with Lloyds
Banking Group brands typically ranking between 1st-3rd amongst key competitors for
customer experience benchmark metrics
Our assessment of how effectively we are
serving customers across our brands,
products and services.
Reducing operational
carbon emissions
•
A 30 per cent reduction has been achieved in 2024 from our 2018/19 baseline. The Group
continues to make good progress reducing direct emissions, although increases continue
to be seen in commuting and business travel emissions in line with the hybrid working
expectation of colleagues spending 40 per cent of their time in offices
•
This metric supports our external commitments to achieve net zero carbon operations by
2030, reduce energy usage by 50 per cent by 2030, and the updated pledge to maintain
domestic travel emissions below 50 per cent of 2018/19 levels
Reported vs 2018/2019 baseline. Includes
Scope 1, Scope 2 and Scope 3 carbon
emissions. Reporting Year is October to
September.
Increasing our gender
and ethnic representation
in senior roles
•
•
We have seen an increase in women in senior roles to 40.4 per cent during 2024. This is
against an ambition we set ourselves in 2020 to achieve 50 per cent representation of
women in senior roles by 2025
Senior roles include all colleagues at grade
F and above.
Throughout 2024, we have seen a continued increase in the representation of Black,
Asian and Minority Ethnic representation in senior roles. At the end of 2024, 12.6 per cent
of senior manager positions were held by Black, Asian or Minority Ethnic colleagues
Culture
and colleague
engagement
•
•
Our employee engagement index (EEI) encompasses pride and satisfaction working for
the Group, and also recommending the Group as a great place to work
Our 2024 EEI score reflects our colleagues’ improving sentiment on change and change
communications, and the positive impact this has had on their trust in our leadership
Our employee engagement index score
Directors’ remuneration report continued
120
Lloyds Banking Group plc Annual Report and Accounts 2024
2022 Long Term Share Plan
A Long Term Share Plan award was granted in relation to 2021
performance under the terms of the previous Policy.
It is an important feature of the LTSP that performance is assessed
and appropriately recognised upfront in the award size during the
‘pre-grant test’.
A final ‘pre-vest test’ of financial underpins and consideration
of four key questions takes place prior to vesting to ensure
performance over the period has been sustainable. The Committee
has completed the full assessment and there is nothing known now
which, had it been known at the time of grant, would have changed
the initial award levels.
The outcome of the ‘pre-vest test’ of both financial underpin
performance and consideration of the four key questions
is shown below.
Pre-vest test – additional consideration by the Committee
In conjunction with the assessment of performance against the
financial underpins above, the Committee considered the four
questions below to satisfy itself that there is nothing known now
which, had it been known at the time of grant, would have
changed the initial award levels:
Q
Q
Q
Q
A
Has the bank lived up to its ambition to be the Best Bank
for Customers?
Do the Group’s financial results and capital position
adequately reflect risk, conduct and any other non-financial
considerations, including ESG?
Has the Group made meaningful progress in supporting the
UK’s transition to net zero?
Has the Group suffered a serious conduct event or has severe
reputational damage arisen from the Group not living
its values?
The Group has maintained its strong capital position and
support for customers, clients and communities since making
awards in 2022. Risk management has remained a key
element in shaping our business model, with a focus on safely
progressing our strategic ambitions.
In determining the final vesting outcome of the 2022 Long Term
Share Plan, the Committee carefully considered alignment with
shareholder experience and whether adjustments were required for
windfall gains.
Awards were granted in March 2022 at 47.027 pence, around 20 per
cent higher than awards granted in March 2021.
The Group continues to make meaningful progress against our
environmental commitments including the delivery of current
sustainable finance and investment targets across Commercial
Banking, EPC A and B mortgage lending, Motor and Scottish
Widows. Our targets for EPCA and B mortgage lending and Motor
were achieved earlier than planned.
During the 2022 to 2024 performance period, there have been no
serious external conduct matters or severe reputational damage.
While there continues to be uncertainty around motor finance
commission arrangements, provisions relate to the potential
remediation costs. Significant uncertainty remains around the
ultimate financial impact therefore the Committee determined it
should not impact the 2022 LTSP vesting outcome.
The Committee concluded that performance considered in the
‘pre-grant test’ has been sustainable and therefore no discretion
has been applied. The 2022 LTSP awards will vest at 100 per cent,
as the outcome represents a fair reflection of performance during
the period.
The award price is considered a fair reflection of the share price in
the 12 months leading up to grant. The share price used to calculate
indicative value is 55.969 pence (page 118). While 19 per cent higher,
the Committee considers it reasonably represents performance over
the period.
The Committee concluded there was no windfall gain over the
period and as such no adjustment was required.
Pre-vest test – underpins
1
Peers: Barclays Group, HSBC Holdings, NatWest Group, Santander UK and Virgin Money UK.
2
2024 peer bank average based on latest company published consensus as of 6 February 2025 where full-year results not available.
3
RoTE not restated for impact of IFRS 17.
4
Dividend shown includes both interim and final for the respective performance year.
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
121
Lloyds Banking Group plc Annual Report and Accounts 2024
Relative importance of spend on pay
The graphs below illustrate the total remuneration of all Group employees compared with returns of capital to shareholders in the form of
dividends and share buyback.
1
2024: Ordinary dividend in respect of the financial year ended 31 December 2024,
partly paid in 2024 and partly to be paid in 2025 and intended share buyback. 2023:
Ordinary dividend in respect of the financial year ended 31 December 2023, partly paid
in 2023 and partly paid in 2024 and share buyback.
2
Performance-based compensation includes expense for the following plans: Group
Performance Share (2024: £368 million, 2023: £410 million), Long Term Incentive Plan,
Long Term Share Plan and Executive Group Ownership Share (2024: £28 million, 2023:
£30 million), Executive Share Awards (2024: £0.03 million, 2023: £0.06 million). For the
2024 performance year, the value of awards was £368 million for Group Performance
Share and £26 million for Long Term Incentive Plan.
Comparison of returns to shareholders and Group Chief Executive total remuneration
The required chart below shows the historical total shareholder return (TSR) of Lloyds Banking Group plc compared with the FTSE 100.
The FTSE 100 Index has been chosen as it is a widely recognised equity index of which Lloyds Banking Group plc has been a constituent
throughout this period.
GCE
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
Charlie Nunn1
n/a
n/a
n/a
n/a
n/a
n/a
5,523
3,767
3,681
5,615
GCE single figure of
remuneration £000
William Chalmers2
n/a
n/a
n/a
n/a
n/a
n/a
819
n/a
n/a
n/a
Sir António Horta-Osório
8,704
5,791
6,434
6,544
4,424
3,604
2,444
n/a
n/a
n/a
Annual bonus/GPS payout
(% of maximum
opportunity)
Charlie Nunn
n/a
n/a
n/a
n/a
n/a
n/a
57.8 %
84.1 %
80.3 %
68.1 %
William Chalmers2
n/a
n/a
n/a
n/a
n/a
n/a
78.2 %
n/a
n/a
n/a
Sir António Horta-Osório3
5 7 %
77 %
77 %
67.6 %
n/a
n/a
5 7.8 %
n/a
n/a
n/a
Long-term incentive
vesting (% of maximum
opportunity)
Charlie Nunn
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
100
%
William Chalmers2
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Sir António Horta-Osório
94.18 %
55 %
66.3 %
68.7 %
49.7 % 33.75 %
41.8 %
n/a
n/a
n/a
1
Charlie Nunn succeeded Sir António Horta-Osório as Group Chief Executive with effect from 16 August 2021 and the single figure total remuneration for 2021 includes a one-off buy-out
of £4.231 million.
2
William Chalmers was the Interim Group Chief Executive from 1 May 2021 until 15 August 2021, remuneration in the table above is for this period.
3
Sir António Horta-Osório independently requested that he be withdrawn from consideration for a Group Performance Share award in 2019 and 2020. There were no GPS awards for
2020 performance.
Directors’ remuneration report continued
122
Lloyds Banking Group plc Annual Report and Accounts 2024
Single total figure of remuneration for Chair and non-executive directors (audited)
Fees (£000)
Benefits (£000)4
Total (£000)
2024
2023
2024
2023
2024
2023
Chair and non–executive directors
Sir Robin Budenberg
655
629
1
2
656
631
Nathan Bostock1
140
140
Alan Dickinson2
112
402
4
3
116
405
Sarah Legg
232
228
13
5
245
233
Lord Lupton3
112
286
2
6
114
292
Amanda Mackenzie
219
179
3
1
222
180
Harmeen Mehta
106
102
5
1
111
103
Cathy Turner
277
157
2
279
157
Scott Wheway
475
458
17
25
492
483
Catherine Woods5
250
246
(9)
23
241
269
1
Nathan Bostock was appointed on 1 August 2024.
2
Alan Dickinson retired on 16 May 2024.
3
Lord Lupton retired on 16 May 2024.
4
Benefits for the non-executive directors relates to reimbursement for expenses incurred in the course of duties. The Chair’s benefits also include private medical insurance, including a
one-off settlement of tax in 2023 relating to the restatement in the 2022 annual report. Non-executive directors do not receive variable pay.
5
The value of benefits in respect of 2024 includes the correction of previous tax treatment from 2023. Excluding the correction, the benefits figure for 2024 is £7,047. The figure on a
revised basis for 2023 is £6,548.
Directors’ share interests and share awards Directors’ interests (audited)
Number of shares
Number of options
Owned outright
Unvested
subject to
continued
employment
Unvested
subject to
performance
Unvested
subject to
continued
employment
Vested
unexercised
Total shareholding1
Totals at
31 December
20242
Executive directors
Charlie Nunn
7,602,947
335,442
17,248,972
3,968,909
29,156,270
William Chalmers
9,113,285
2,662,483
12,432,089
56,878
24,264,735
Non-executive directors
Sir Robin Budenberg
2,500,000
2,500,000
Nathan Bostock
430
430
Alan Dickinson3
200,000
200,000
Sarah Legg
200,000
200,000
Lord Lupton3
2,250,000
2,250,000
Amanda Mackenzie
63,567
63,567
Harmeen Mehta
20,000
20,000
Cathy Turner
424,113
424,113
Scott Wheway
168,356
168,356
Catherine Woods
119,281
119,281
1
Includes holdings of any Person Closely Associated.
2
There has been no change in shareholdings from 31 December 2024 to 20 February 2025.
3
Alan Dickinson and Lord Lupton retired on 16 May 2024; the number of shares shown is as of 16 May 2024.
4
Directors are not permitted to enter into any hedging arrangements in relation to share awards. No director uses shareholding as collateral.
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
123
Lloyds Banking Group plc Annual Report and Accounts 2024
Directors’ share interests and share awards Directors’ interests (audited)
Outstanding share plan interests (audited)
At 1 January
2024
Granted/
awarded
Vested/
released/
exercised
Lapsed
At 31
December
2024
Exercise
price
Exercise periods
From
To
Notes
Charlie Nunn
LTSP 2022 – 2024
3,588,364
–
–
–
3,588,364
2
LTSP 2023 – 2025
3,283,896
–
–
–
3,283,896
2
LTIP 2024 – 2026
– 10,376,712
–
–
10,376,712
2,3,4
Deferred GPS awarded in 2022 (2021 GPS)
74,139
–
74,139
–
–
5
Deferred GPS awarded in 2023 (2022 GPS)
773,294
–
437,852
–
335,442
5
Deferred GPS awarded in 2024 (2023 GPS)
–
1,363,431
1,363,431
–
–
6,7
Share Buy-Out
1,368,990
– 1,368,990
–
–
–
12/03/2024
11/03/2029
1
1,368,990
–
–
–
1,368,990
–
11/03/2025
10/03/2030
1
1,369,012
–
–
–
1,369,012
–
11/03/2026
10/03/2031
1
891,217
–
–
–
891,217
–
11/03/2027
10/03/2032
1
339,690
–
–
–
339,690
–
11/03/2028
10/03/2033
1
William Chalmers
GOS 2020 – 2022
1,722,544
–
430,636
–
1,291,908
2
LTSP 2021 – 2023
1,547,340
–
309,468
–
1,237,872
2
LTSP 2022 – 2024
2,586,292
–
–
–
2,586,292
2
LTSP 2023 – 2025
2,366,848
–
–
–
2,366,848
2
LTIP 2024 – 2026
– 7,478,949
–
–
7,478,949
2,3,4
Deferred GPS awarded in 2022 (2021 GPS)
149,835
–
149,835
–
–
5
Deferred GPS awarded in 2023 (2022 GPS)
398,104
–
265,401
–
132,703
5
Deferred GPS awarded in 2024 (2023 GPS)
–
982,685
982,685
–
–
6,7
2020 Sharesave
46,317
–
46,317
–
–
24.25p
01/01/2024 30/06/2024
2021 Sharesave
17,177
–
–
–
17,177
39.40p
01/01/2025 30/06/2025
2023 Sharesave
20,171
–
–
–
20,171
38.55p
01/01/2027 30/06/2027
2024 Sharesave
–
19,530
–
–
19,530
52.35p
01/01/2028 30/06/2028
1
When Charlie Nunn joined the Group on 16 August 2021 as Group Chief Executive and executive director, he was granted deferred share awards and deferred cash to replace unvested
awards from his previous employer, HSBC. Options vested on 11 March 2024 and Charlie Nunn exercised the options on 25 March 2024, acquiring 711,874 shares, after the settlement of
income tax and national insurance contributions. The shares received are subject to holding periods that mirror those of the replaced HSBC shares, with 282,888 shares having no
holding period and 428,986 a 12-month holding period.
2
All GOS, LTSP and LTIP awards have a three-year performance/underpin period ending 31 December. Awards were made in the form of conditional rights to free shares.
3
In line with regulatory requirements, LTIPs awarded during 2024 were ineligible for dividend equivalents. In accordance with the Remuneration Policy, the LTIP award was determined
at 300 per cent of salary for Charlie Nunn and William Chalmers. The number of shares to be granted was determined by taking the average share price over the five days prior to grant
(27 February 2024 to 4 March 2024), which was 46.844 pence and applying a discount based on Lloyds Banking Group’s expected dividend yield for the vesting period (32.85 pence).
4
2024 LTIP vesting is subject to performance conditions applicable for the first three years from grant as detailed on page 124 of the 2023 directors’ remuneration report. Each year the
Remuneration Committee will monitor the Group’s progress in relation to the performance conditions.
5
The third tranche of the 2021 GPS deferred award and the second tranche of the 2022 GPS deferred award vested on 6 March 2024. The closing market price of Lloyds Banking Group
shares on that date was 48.4 pence. The awards were settled in shares net of tax, with the resulting shares subject to a one-year holding period.
6
The 2023 GPS is delivered half in an immediately vested share award with shares subject to a holding period until March 2025, and half paid in cash. The value of the shares awarded in
respect of the GPS granted in March 2024 was £638,686 (1,363,431 shares) for Charlie Nunn; and £460,329 (982,685 shares) for William Chalmers. The awards are not subject to
performance conditions. The number of shares granted was determined by taking the average Lloyds Banking Group share price over the five days prior to grant (27 February 2024 to
4 March 2024), which was 46.844 pence.
7
The 2023 GPS share award vested on 6 March 2024. The closing market price of the Lloyds Banking Group shares on that date was 48.4 pence. The award was settled in shares net of
tax, with the resulting shares subject to a one-year holding period.
Outstanding cash awards (audited)
At 1 January
2024
£
Granted/
awarded
£
Vested /
released /
exercised
£
At 31
December
2024
£
Notes
Charlie Nunn
Deferred GPS cash awarded in 2022 (2021 GPS)
34,865
34,865
Deferred GPS cash awarded in 2023 (2022 GPS)
401,346
227,250
174,096
William Chalmers
Deferred GPS cash awarded in 2022 (2021 GPS)
70,463
70,463
1
Deferred GPS cash awarded in 2023 (2022 GPS)
206,620
137,746
68,874
1
1
Half of the deferred portion of the 2021 and 2022 GPS awards are delivered in cash.
2
£2,000 of 2023 GPS was delivered in cash in March 2024 for both executive directors. Half of the remaining 2023 GPS was delivered in cash on 20 June 2024. Charlie Nunn received
£636,686 and William Chalmers received £458,329.
Directors’ remuneration report continued
–
–
–
–
–
–
124
Lloyds Banking Group plc Annual Report and Accounts 2024
Shareholding requirement
To further strengthen the alignment between executive directors’
interests and those of our shareholders, executives are expected to
build and maintain a significant shareholding in the Group in direct
proportion to their salary.
Increased shareholding requirements were approved by
shareholders as part of the 2023 Policy and came into effect from
1 January 2024.
The minimum shareholding requirements applicable to executive
directors at 31 December 2024 are 400 per cent of salary for the
Group Chief Executive and 300 per cent of salary for the Chief
Financial Officer. Executive directors have five years from the date
of appointment to meet the requirement. In the event that
exceptional individual circumstances exist resulting in an executive
not being able to comply with the Policy, the Remuneration
Committee will consider whether an exception should apply.
Charlie Nunn has until 15 August 2026 to meet the requirement
and currently holds 344 per cent of salary in Group shares at
31 December 2024. This is an increase from 196 per cent which
was published in the 2023 directors’ remuneration report.
William Chalmers met the requirement by 2 June 2024 and currently
holds 656 per cent of salary in Group shares at 31 December 2024,
more than double his shareholding requirement. This is an increase
from 467 per cent which was published in the 2023 directors’
remuneration report.
Unvested shares that remain subject to performance or continued
employment do not count towards the requirement but contribute
to aligning the interests of executive directors and shareholders
through share price exposure.
Post-employment shareholding requirement
Executive directors are contractually bound to a post-employment
shareholding requirement of two years at a level equal to the lower
of the shareholding requirements immediately prior to departure or
the actual shareholding on departure. The post-employment
requirement will be maintained through self-certification, with the
Committee keeping this approach under review.
None of those who were directors at the end of the year had
any other interest in the capital of Lloyds Banking Group plc
or its subsidiaries.
1
Calculated using the average share price for the period 1 January 2024 to 31 December 2024 (53.439 pence). Includes ordinary shares, net of tax where appropriate, acquired through
the vesting of the deferred Group Performance Share plan, Fixed Share Awards as the shares have no performance conditions, awards in the form of options which have vested but
have not been exercised, unvested performance tested Executive Group Ownership Share awards and Long Term Share Plan awards, shares held in the Share Incentive Plan (SIP) Trust,
i.e. Free, Partnership, Matching and Dividend shares which are no longer subject to forfeiture, as defined in the SIP Rules. Shares held by Persons Closely Associated, as defined by the
Companies Act, but broadly meaning spouse or partner and children, are also included.
2
2023 shareholding has been recalculated using the average share price for the period 1 January 2024 to 31 December 2024 (53.439 pence).
3
Unvested shares subject to continued employment do not count towards the shareholding requirement and are shown after deduction of estimated income tax and national
insurance.
4
Unvested shares subject to performance are shown with an assumed 100 per cent vesting outcome and after deduction of estimated income tax and national insurance. The final
vesting outcome could range between 0-100 per cent. Shares subject to performance are also subject to continued employment.
Shareholding requirement
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
125
Lloyds Banking Group plc Annual Report and Accounts 2024
Gender and ethnicity pay
We’re proud of the journey that the Group has been on since 2017
when our Gender Pay Gap reporting began, and from 2020, when
as part of our Race Action Plan we began voluntarily sharing our
Ethnicity Pay Gap report. Since then, we’ve achieved solid results
and made year-on-year progress against our Diversity, Equity and
Inclusion (DE&I) agenda.
Inclusion is a core value at Lloyds Banking Group, and for good
reason. A more inclusive society is a more prosperous society,
and a diverse business is a better business. Achieving this requires
focus and effort right through the business to make this happen.
Our Executive Ally Sponsors for Gender, Ethnicity and other diversity
strands are driving change from the top, alongside our volunteer
colleague networks, who work tirelessly to help our colleagues feel
seen, valued and included. These efforts are underpinned by centrally
led targeted initiatives and propositions.
The pay gap progress we have made in the last year is moving us in the
right direction albeit slower than we would like. However, as our
transformation continues at pace, we are confident that our choices
and actions are paving the way for a brighter and more equitable future.
Directors’ remuneration report continued
Gender pay gap – April 2023 to April 2024
Progress has continued to close the mean Gender Pay Gap; this has
reduced 0.8 percentage points to 25.9 per cent. As of April 2024,
40.4 per cent of senior leadership roles were held by women.
Overview
This is not about pay equality – a Gender Pay Gap exists because
women hold fewer senior positions within the Group than men.
What the data shows
Continued progress has been made in closing the Gender Pay Gap,
with the gap reducing by 0.8 percentage points to 25.9 per cent. This
improvement demonstrates that our actions are moving us in the right
direction, however, we remain committed to accelerating our progress.
Our commitments to gender inclusion
Integrating DE&I into the way we run our business has been core
to our success to date. Holding our Group executives to account
is paramount. We use business area goals and delivery against
these forms a core part of individual scorecards and
performance conversations.
Our data-led approach, which is grounded in key metrics and insight
gathered through colleague feedback, allows our business area
executives to identify opportunities to accelerate progress and to also
address any gaps.
We take active steps to improve equity through all stages of our
colleague lifecycle from recruitment, to progression and retention.
We will continue to focus on improving the representation of women
in senior roles. This is crucial to our ability to close our Gender Pay Gap.
We have committed to support the recommendations set out by the
FTSE Women Leaders review of 40 per cent women representation in
the Executive Committee and direct report population, and we have
met these recommendations ahead of the 2025 target date. We have
climbed from 73rd position in the 2017 FTSE 100 rankings to 5th in the
2024 rankings.
Ethnicity pay gap – April 2023 to April 2024
Continued progress has been made with the mean gap reducing by 2.7
percentage points from 5.7 per cent to 3.0 per cent from last year, the
largest improvement since we started reporting in 2020.
Overview
We remain committed to publishing our Ethnicity Pay Gap report on a
voluntary basis. We have chosen to publish for the past three years
because we recognise the importance of transparency in encouraging
focus and inspiring purposeful, action-led change. It helps to hold us
accountable to delivering on our commitment and we believe will lead
to sustainable positive change for our people.
What the data shows
90.4 per cent of our colleagues have chosen to disclose their ethnicity
with us, an encouraging increase from 88.2 per cent in April 2023.
Whilst we have more to do to close the gap, we have seen
improvements within the representation of our senior leadership
teams which has had a significant impact on gap closure to date.
Our commitments to ethnic diversity
As an organisation we stand against racism, and our Race Action Plan
created in 2020 outlines the steps we continue to take to drive
sustainable change for our people.
We are focused internally on driving change through our culture,
recruitment and progression to improve representation. For example,
our Race Education training programme, undertaken by all colleagues
within the Group, aims to equip everyone with the skills they need to
reflect on their own behaviours and the impact these can have on
those around them, ultimately helping us to create a more positive
working culture for everyone.
Having identified opportunities to improve the progression of our Black
heritage colleagues, we continue to invest in our bespoke Senior
Leadership and Career Acceleration programmes, with colleagues
promoted or making lateral moves to enhance their career progression
since inception.
We have seen steady growth in ethnicity representation across the
Group and specifically at senior levels, but to further accelerate our
progress we are looking closely at the colleague life cycle, increasing
representation in skills growth areas in technology and data,
continuing the upskilling of our colleagues and leaders and ensuring
equity in our people policies and processes.
Additionally, we have continued in our active support for Black
business communities through our partnerships with Foundervine and
the Black Business Network.
126
Lloyds Banking Group plc Annual Report and Accounts 2024
Percentage change in remuneration levels
The table below sets out the change in the directors’ base salary/fees, taxable benefits and annual bonus compared with the change in our
UK-based colleagues’ pay. Lloyds Banking Group plc is not an employing entity, and therefore the disclosure below is made on a voluntary
basis to compare any change with all employees of the wider Group based in the UK. This population has been chosen as the majority of
our workforce are based in the UK and is considered to be the most appropriate group of employees. The same population is used for the
purposes of the Chief Executive Officer pay ratio disclosure on page 128 of the report.
% change in base salary/fees
% change in GPS
% change in benefits
2019 to
2020
2020 to
2021
2021 to
2022
2022 to
2023
2023 to
2024
2019 to
20204
2020 to
2021
2021 to
2022
2022 to
2023
2023 to
2024
2019 to
2020
2020 to
2021
2021 to
2022
2022 to
2023
2023 to
2024
All employees1
4
4
6
139
109
(100)
n/a
12
(14)9
(4)
(32)
1
5
(43)9
(71)9
Executive directors
Charlie Nunn2
n/a
n/a
1
3
n/a
n/a
47
(5)
(12)
n/a
n/a
4
(37)
8
William Chalmers3
2
12
(9)
3
(100)
n/a
(2)
34
(12)
(1)
2
35
2
Non-executive directors5,6
Sir Robin Budenberg
n/a
243
1
1
4
n/a
n/a
n/a
n/a
n/a
n/a
n/a
100
(50)
Nathan Bostock10
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Alan Dickinson7
45
14
12
(10)
(26)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Sarah Legg
131
28
6
2
2
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Lord Lupton8
(8)
(2)
1
4
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Amanda Mackenzie
6
(1)
7
2
22
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Harmeen Mehta
n/a
n/a
2
4
4
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Cathy Turner
n/a
n/a
n/a
38
76
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Scott Wheway
n/a
n/a
n/a
1
4
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Catherine Woods
n/a
43
4
2
2
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1
Lloyds Banking Group is not a contracting entity but considers all UK-based employees to be appropriate for purposes of an ‘All employees’ calculation.
2
Charlie Nunn became the Group Chief Executive in August 2021. Figures for 2021 have been annualised based on the single total figure table.
3
William Chalmers was the Interim Group Chief Executive from May to August 2021 and received a deputisation payment for this period.
4
No Group Performance Share (bonus) was paid for 2020 performance.
5
In some instances, non-executive directors may change membership or become the Chair of a Committee during the year, resulting in year-on-year percentage changes in fees. In
particular, during 2024 Cathy Turner and Amanda Mackenzie joined the Risk and Audit Committee’s respectively.
6
Some non-executive directors have received other benefits that relate to reimbursement for expenses incurred in the course of duties. Reimbursements of these expenses do not
provide an accurate comparison to benefits received by colleagues and are therefore not included.
7
Alan Dickinson retired on 16 May 2024. Figures for 2024 have been annualised based on the single total figure table.
8
Lord Lupton retired on 16 May 2024. Figures for 2024 have been annualised based on the single total figure table.
9
2022 to 2023 and 2023 to 2024 variance was impacted by the consolidation of variable pay and Flex cash allowance into base salary.
10 Nathan Bostock was appointed on 1 August 2024 and therefore no year-on-year comparison shown.
Service agreements
The service contracts of all current executive directors are terminable on 12 months’ notice from the Group and six months’ notice from the
individual. The Chair also has a letter of appointment. The Chair’s engagement may be terminated on six months’ notice by either party.
Letters of appointment
The non-executive directors all have letters of appointment and are appointed for an initial term of three years after which their
appointment may continue subject to an annual review. Non-executive directors may have their appointment terminated, in accordance
with statute, regulation and the articles of association, at any time with immediate effect and without compensation.
All directors are subject to annual re-election by shareholders.
The service contracts and letters of appointments are available for inspection at the Company’s registered office.
NED
Date of letter of appointment
Date of appointment
Sir Robin Budenberg1
4 July 2020
1 October 2020
Nathan Bostock
29 July 2024
1 August 2024
Sarah Legg
21 October 2019
1 December 2019
Amanda Mackenzie
17 April 2018
1 October 2018
Harmeen Mehta
5 October 2021
1 November 2021
Cathy Turner
11 October 2022
1 November 2022
Scott Wheway
26 July 2022
1 August 2022
Catherine Woods
22 October 2019
1 March 2020
1
Chair is subject to a six-month notice period.
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
–
–
–
–
–
127
Lloyds Banking Group plc Annual Report and Accounts 2024
Chief Executive Officer pay ratio
The Remuneration Committee views pay ratios as a useful reference point to inform policy-setting, but also takes into consideration a
number of other factors. The table below shows the ratios of the GCE’s total remuneration to the remuneration of colleagues since 2017.
The change in the pay ratios for 2024 is explained in more detail below.
Total compensation
Fixed pay
Year
Methodology
P25 (Lower
Quartile)
P50
(Median)
P75 (Upper
Quartile)
P25 (Lower
Quartile)
P50
(Median)
P75 (Upper
Quartile)
2024
A
165:1
114:1
63:1
75:1
53:1
29:1
2023
A
112:1
80:1
45:1
76:1
54:1
31:1
2022
A
120:1
86:1
48:1
81:1
59:1
35:1
2021
A
316:1
225:1
120:1
93:1
66:1
38:1
2020
A
132:1
95:1
54:1
103:1
75:1
42:1
2019
A
179:1
128:1
71:1
114:1
82:1
47:1
2018
A
237:1
169:1
93:1
113:1
81:1
48:1
2017
A
245:1
177:1
97:1
113:1
82:1
48:1
Y-o-Y (2023 vs 2024)
43%
(2) %
Notes to the table:
•
•
•
•
•
•
•
The 2024 total remuneration for the colleagues identified at P25, P50 and P75 are as follows: £34,122, £49,372, £88,790
The 2024 base salary for the colleagues identified at P25, P50 and P75 are as follows: £29,853, £43,258, £74,212
The P25, P50 and P75 colleagues were determined on 31 December 2024 based on calculating total remuneration for all UK employees
for the 2024 financial year. Payroll data from 1 January 2024 to 31 December 2024
Colleague total remuneration has been calculated in line with the single total figure of remuneration. The single total figure of
remuneration has been calculated for 54,423 UK colleagues within the Group for a full year including full-time equivalent base pay, 2024
Group Performance Share awards, vesting Long Term Share Plan awards (for eligible colleagues), core benefits, pension, overtime and
shift payments, travel/relocation payments (for eligible colleagues) and private medical benefit
The average share price between 1 October 2024 and 31 December 2024 of 55.969 pence has been used to indicate the value of vesting
Long Term Share Plan awards
Due to operational constraints, the calculation of the colleague Pension Input Figure excludes inflationary adjustments for those
on the defined benefit scheme. The omission of this factor does not materially affect the outcome of the ratio and/or distort the validity
of the valuation
All other data has been calculated in line with the methodology for the single total figure of remuneration for the GCE
Our ratios have been calculated using Methodology option A on the basis that it provided the most accurate means of identifying the
median, lower and upper quartile colleagues. The ratio has been calculated taking into account the pay and benefits of 54,423 UK
employees, other than the individual performing the role of GCE.
The change in total remuneration ratios since 2017 is largely driven by the more volatile nature of variable pay for the GCE.
In 2021 the median ratio was calculated for all three individuals undertaking the role of GCE and increased by 137 per cent year-on-year.
This increase can be attributed to the one-off buy-out awards granted to Charlie Nunn, an increase in the vesting of the LTIP and the
payment of Group Performance Share (annual bonus), which were not awarded for 2020.
The reduction in 2022 was due to two factors. Firstly, Charlie Nunn’s remuneration for 2022 did not include any value in respect of Long
Term Incentive plans, as no 2020 Executive Group Ownership Share (EGOS) award was granted to him given that he was not an executive
director at the time of grant. Secondly, the 2021 ratio included the one-off buy-out awards granted to Charlie Nunn. In addition the 2021
ratio was calculated for all three individuals undertaking the role of GCE. Over the same time period, employee total compensation
increased by 12 per cent at the lower quartile, 11 per cent at the median and 7 per cent at the upper quartile, also contributing to the
decrease in pay ratios.
The further reduction in 2023 was attributed to three key factors. Recognising the desire to focus on the remuneration of lower paid
colleagues, no annual pay award was proposed for the GCE for 2023 while the pay budget for the wider workforce was 6.3 per cent. Given
the approach focused on lower paid colleagues and colleagues lower in their pay range, this resulted in pay increases of between 8 per cent
and 13 per cent for around 43,000 colleagues. In addition, from July 2023 we consolidated a significant portion of our Group Performance
Share into base salary for around 32,000 colleagues, further increasing the fixed pay element. Finally, the GCE received a lower annual
short-term variable award for 2023 compared to 2022.
In 2024, the total compensation ratio increased by 43 per cent largely driven by the 2022 LTSP award vesting for Charlie Nunn, the first
vesting of a long-term incentive award for our Group Chief Executive since appointment. Excluding this, the year-on-year comparison
would be down 9 per cent on 2023. The fixed pay ratio has reduced by 2 per cent as colleagues realise a full-year impact of Group
Performance Share consolidation from July 2023.
For the majority of colleagues, year-on-year changes in remuneration are principally driven by pay increases and the impacts of Group
performance and collective adjustment. The Group has a commitment to pay progression and a continued focus on ensuring higher
pay awards for colleagues who are lower paid, or paid lower within their pay range. We are committed to ensuring all colleagues are
rewarded fairly.
The Committee is thoughtful of the volatility in pay ratios due to variable reward outcomes. Although the pay ratio is used as a useful
reference point to inform policy-setting, the Committee takes into account a number of other factors to assess colleague pay progression.
Directors’ remuneration report continued
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Lloyds Banking Group plc Annual Report and Accounts 2024
Alignment to culture
•
Annual and long-term variable remuneration are designed to drive behaviours consistent with the Group’s strategy, purpose
and values
•
When considering individual executive directors’ performance, the Committee takes account of the Group’s values
Policy alignment to Provision 40 of the Corporate Governance Code
A summary of how the Remuneration Policy addresses the principles set out in the UK Corporate Governance Code is detailed below.
Clarity
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
•
•
•
•
•
•
The Committee regularly consults with key shareholders to ensure transparency on our policy and remuneration outcomes and
topics. Shareholder feedback is shared with Board members and considered in the Committee’s reward decisions and policy
considerations
Targets are aligned to the Group’s strategy and purpose, providing clarity to shareholders and stakeholders on the relationship
between delivery of the strategy and remuneration outcomes
During the year the Group communicated directly with colleagues detailing Group performance, changes in the economic and
financial environment, and updates on key strategic initiatives. Meetings were held throughout the year between the Group and our
recognised unions
Non-executive directors attended a number of colleague focus groups, allowing colleagues to share their perspective on matters on
the Board’s agenda and discuss the Group’s progress against its strategic objectives
We regularly engage with colleagues through engagement surveys and townhalls. The Group Chief Executive hosted two all
colleague townhall sessions in 2024. Colleagues were invited to submit questions with the most popular questions answered on the
day. Categories included ‘People and culture’ where colleagues can submit questions around remuneration
As set out on page 86, in continuing to consider its arrangements for engaging with the Group’s workforce, the Board approved in
2024 an evolved approach to colleague engagement, to be implemented during 2025. This new approach builds on existing
colleague listening activity and will introduce three forums to better represent colleagues particularly at grades where trade union
membership is low. The forums will include the People Forum, the People Consultation Forum, and the Management Advisory
Forum. Where appropriate, these forums will be engaged on matters of remuneration, including how executive remuneration aligns
to the wider workforce
Proportionality
•
•
There is clear alignment between the performance of the Group, the business strategy, and the reward paid to executive directors
The Committee has the discretion to reduce the annual bonus, LTIP and LTSP awards, if it considers the payout does not
appropriately reflect the performance of the Group during the performance period
Simplicity
•
The Remuneration Policy has been designed so that it is easy to understand and transparent, while complying with all regulatory
requirements and meeting the expectations of our shareholders
•
The purpose of each remuneration element is explained in the Policy and the amount paid in respect of each element is clearly
set out
Risk
•
The Remuneration Policy supports the Group’s risk management framework
•
Risk and conduct considerations are taken into account in setting the annual bonus pool
•
The annual bonus, deferred bonus, LTIP and LTSP incorporate malus and clawback provisions, and overarching Committee
discretion to adjust formulaic outcomes
Predictability
•
•
The summarised Remuneration Policy on pages 115 to 116 describes the operation and maximum potential for each
remuneration element
The full Policy set out on pages 125 to 133 of the 2022 annual report and accounts illustrates a range of potential outcomes
for executive directors
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Lloyds Banking Group plc Annual Report and Accounts 2024
Implementation of the Policy in 2025
The 2023 Directors’ Remuneration Policy was approved at the AGM in May 2023. The Policy is summarised on pages 115 and 116.
The Group proposes to operate the Policy in the following way for 2025.
Base Salary
As set out in the Chair statement on pages 110 to 112, on
appointment the GCE’s base salary was set lower than his
predecessor, by 13 per cent, to recognise that this was his first
lead executive role in a listed environment. This is in line with
good practice and investor preferences. Given the GCE’s
increased experience and strong track-record of delivery, the
Committee has determined that it is an appropriate time to
review his package. The most obvious inconsistency was his fixed
pay recognising that it has only increased modestly since he was
appointed – his fixed pay has risen by just 5 per cent over three
and a half years.
After careful consideration, including consultation with
shareholders, the Committee decided, effective 1 January 2025,
to reverse the impact of the discount applied to the GCE’s salary
on appointment and apply a 3 per cent annual increase effective
1 April 2025 to the salary of both executive directors; this is less
than the 4.1 per cent pay deal for wider workforce.
As part of its decision, the Committee considered that, excluding
the exceptional salary increase in January 2025, the GCE’s
salary will have increased by 8 per cent between his date
of appointment and April 2025; over the equivalent period,
colleagues will have benefitted from a total pay budget of
18.2 per cent.
For further context and detail, including the benchmarking used
by the Committee to test its decision making, please refer to
pages 110 to 112.
Salaries from 1 January 2025 will therefore be as follows:
GCE: £1,335,321
Salaries from 1 April 2025 will therefore be as follows:
GCE: £1,375,381
CFO: £877,254
Fixed Share Award
As set out in the Chair statement on pages 110 to 112, in line with
our current Policy, the Fixed Share Award (FSA) of the GCE and
CFO will be increased by £283,381 and £353,094 respectively to
align with their salaries.
Shares will be released in equal tranches over three years.
Awards from 1 January 2025 will therefore be as follows:
GCE: £1,335,321
CFO: £851,703
Awards from 1 April 2025 will therefore be as follows:
GCE: £1,375,381
CFO: £877,254
Pension
Pension allowances for all executive directors are set at 15 per
cent of base salary. Any new executive director appointments in
2025 will also attract a maximum allowance of 15 per cent of
base salary.
Around 55,000 colleagues participate in the Group’s Defined
Contribution (DC) Pension scheme where the maximum
opportunity for the workforce is 15 per cent of base salary.
Executive directors’ employer pension contributions are
therefore aligned with those available to the majority of the
workforce.
Benefits remain unchanged from 2024. Executive directors
receive a flexible benefit allowance of 4 per cent of base salary.
Benefits
Other benefits include transportation and private medical cover.
The Chief Financial Officer also receives a car allowance.
This can be used to select benefits including life assurance and
critical illness cover.
Directors’ remuneration report continued
Directors’ remuneration
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Group Performance Share (Short Term Variable)
Overview
Maximum opportunities for executive directors for 2025 are 140 per
cent of base salary. For the 2025 performance year, any GPS
opportunity will be awarded in March 2026 in a combination of cash
(up to 50 per cent) and shares.
Individual awards as a percentage of maximum will directly relate to
the overall Group balanced scorecard performance assessment
outcome in the first instance.
The Group will apply deferral in line with minimum regulatory
requirements as set out in the Policy. Under current rules, at least 60 per
cent of total variable remuneration awarded to our executive directors
will remain deferred over a period of up to seven years, maintaining strong
alignment to shareholders.
2025 Group balanced scorecard
The performance measures for determining any individual 2025 GPS
awards for executive directors are outlined in the table below.
The measures and targets are set annually by the Committee to reflect
the strategic priorities of the Group and take into account both the
annual financial plan and operating plan against the backdrop of the
rapidly evolving external economic and societal landscape.
Performance measures and weightings
The 2025 scorecard metrics have been reviewed alongside the 2025 LTIP
measures, shown on page 132, to ensure they are complementary and
there is minimal overlap which would risk duplication of outcomes.
Whilst a RoTE measure is also included in the LTIP performance metrics, it
is considered a fundamental indicator of Group performance and creation
of shareholder value. The RoTE within the annual scorecard focuses on
in-year performance while the LTIP assesses long-term performance.
Performance measures and weightings remain unchanged from 2024.
Targets and methodology
Setting stretching targets is a key component of our demanding
performance-driven culture. The Committee has undertaken a
thorough exercise to ensure targets are sufficiently stretching, taking
into consideration our operating plan and, where applicable, forward-
looking guidance.
The Committee agreed targets to evaluate performance in 2025 and
these will be disclosed retrospectively in the 2025 annual report
alongside the level of performance achieved, as the Committee
considers such targets to be commercially sensitive.
There are three changes to measure definitions from 2024. As discussed
in the Chair statement on pages 110 to 112, profit after tax and return
on tangible equity measures will exclude any future potential impact of
motor finance provisions. Instead, items will be reviewed on a case-by-
case basis by the Committee to determine their inclusion.
The Group is now drawing more select skills from the global market and
we have therefore had to re-assess our existing travel pledge
commitment. From reporting year 2023/24, we have revised the
elements reported within our travel pledge to focus on domestic travel
only aligned with our action plans. To ensure consistency, the
operational carbon emissions measure in the 2025 Group BSC will be
adjusted to also exclude international travel emissions.
In 2025 we have refreshed the Groups gender and ethnicity strategic
plan and we’re setting new ranging ambitions for executive roles, to
achieve by 2030. The 2025 BSC will reflect the targets for this
population to align with the delivery of the new ambitions.
Discretion
When determining the final outcome, the Committee may consider any
personal or business area objectives and whether there has been
effective, consistent and proactive risk management and conduct
outcomes across all dimensions.
When assessing performance, the Committee can exercise its
judgement to determine the appropriate outcome. This helps to avoid
any potential unintended outcomes that might arise from the
application of formulaic performance criteria.
1
Profit after tax and return on tangible equity measures will exclude any future potential impact of motor finance provisions. Instead, items will be reviewed on a case-by-case basis
by the Remuneration Committee to determine their inclusion.
2
Operating costs will exclude remediation and in-year GPS expense.
3
Executive roles include grade X colleagues only.
4
Reducing our operational carbon emissions will exclude international travel.
Directors’ remuneration continued
Our 2025 balanced scorecard
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
131
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Directors’ remuneration report continued
Directors’ remuneration continued
Long Term Incentive Plan (Long Term Variable)
Overview
The Group’s demanding, high performance culture is critical to delivering
our ambitious strategy. LTIP awards will be granted in relation to 2024
performance under the terms of the current Policy. The Committee
concluded that 2024 performance, including assessment of our 2024
Group scorecard and other factors, was at a level to make awards. This
is known as the ‘pre-grant test’.
To ensure strong alignment between variable reward outcomes and the
creation of shareholder value through the delivery of our strategy and
the deepening of our relationships with our customers, the Committee
has determined that LTIP awards will be granted with a value of
300 per cent of salary to the GCE and CFO to reflect the Group’s
performance in 2024.
In accordance with regulatory requirements LTIP awards will not accrue
dividend equivalents over the vesting period; in line with the Policy, the
number of shares granted under the awards will be determined using a
share price adjusted to reflect the absence of dividends or equivalents
during the vesting period.
Performance measures and weightings
The Committee reviews the performance measures and weightings
ahead of each award grant. For 2025, the Committee has concluded
measures and weightings from 2024 remain aligned to the Group’s
strategic direction and public commitments. Three financial measures
make up a total weighting of 50 per cent of the scorecard. Return on
tangible equity (RoTE) emphasises the efficient use of capital and ensures
focus on long-term value creation, capital generation recognises the
importance of maintaining a strong financial foundation for the Group
2025-2027 LTIP scorecard
and prioritises capital-accretive decision making for the long-term and
rTSR compares the value delivered to a shareholder in the Group over the
performance period with the value delivered to shareholders by our peers.
A dedicated 35 per cent weighting will focus on the Group’s delivery of
its strategy and success of our strategic initiatives in driving revenue
growth and diversification. The Committee will give consideration to an
assessment of performance against quantifiable Board metrics aligned
to each of our four strategic growth pillars.
Finally, 15 per cent weight is attributed to environmental measures,
reflecting that the transition to a low carbon economy is at the core of
our strategy and aligns with our purpose of Helping Britain Prosper.
As discussed in the Chair statement on pages 110 to 112, return on
tangible equity and capital generation measures will exclude any future
potential impacts of motor finance provisions. Instead, items will be
reviewed on a case-by-case basis by the Committee to determine their
inclusion.
Target setting
Setting targets is a critical focus area for the Committee and a rigorous
exercise has been undertaken to ensure our targets are sufficiently
stretching. We have taken into account our long-term strategic ambitions,
commitments to our ESG agenda and comparable industry returns.
Operation
The awards made in 2025 will vest based on the Group’s performance
between January 2025 to December 2027. The following table provides
a breakdown of the construct which the Committee considers aligns
management and shareholder interests appropriately.
1
Return on tangible equity and capital generation measures will exclude any future potential impacts of motor finance provisions. Instead, items will be reviewed on a case-by-
case basis by the Remuneration Committee to determine their inclusion.
2
If average RoTE reaches 13 per cent then 5 per cent of the award vests. If average RoTE reaches 16 per cent then 20 per cent of the award vests. If average RoTE is between the
threshold and maximum, vesting is calculated on a straight-line basis between these two points.
3
If average capital generation reaches 185 basis points then 2.5 per cent of the award vests. If average capital generation reaches 230 basis points then 10 per cent of the award
vests. If average capital generation is between the threshold and maximum, vesting is calculated on a straight-line basis between these two points. Target includes the
anticipated impact of Basel 3.1 implementation in 2027, expected to be moderately positive.
4
Peer group: HSBC, Barclays, NatWest, BNP Paribas, Santander, ING, Intesa Sanpaolo, BBVA, UniCredit, Nordea, Crédit Agricole, Caixa, KBC Group, Deutsche Bank, SocGen,
Danske, ABN AMRO, Bank of Ireland. Where performance falls between threshold and maximum levels, an intermediate percentage will vest.
5
See page 54 for an overview of our environmental metrics and targets.
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Lloyds Banking Group plc Annual Report and Accounts 2024
Chair and non-executive director fees and benefits
Any increases normally take effect from 1 January of a given year.
The Committee is responsible for evaluating and making
recommendations to the Board with regard to the Chair’s fees.
The Chair does not participate in these discussions. The GCE
and the Chair are responsible for evaluating and making
recommendations to the Board in relation to the fees of
the non-executive directors (NEDs).
Additional fees are also paid to the Senior Independent Director
to reflect additional responsibilities.
The Chair and the NEDs are not entitled to receive any payment
for loss of office (other than in the case of the Chair’s fees for the
six-month notice period) and are not entitled to participate in
the Group’s variable remuneration arrangements, all employee
share plan or pension arrangements.
The Chair receives an all-inclusive fee, which is reviewed
periodically plus benefits including life insurance, medical
insurance and transportation. The Committee retains
the right to provide additional benefits depending on
individual circumstances.
NEDs are paid a basic fee plus additional fees for the Chair/
membership of Committees and for membership of Group
company Boards, non-Board level committees and/or other
specific responsibilities.
NEDs are reimbursed for expenses incurred in the course
of their duties, such as travel and accommodation expenses,
on a grossed-up basis (where applicable).
Non-executive directors may receive more than one of the
above fees.
Chair and non-executive director fees in 2025
As set out in the Chair statement on pages 110 to 112 there is a £95,500 increase to the annual fee for the Chair (£750,000). This is step
one of a two-stage increase. The second increase will take place from 1 January 2026 and will increase the fee to £850,000.
Following a detailed review of peer benchmarks and to ensure our non-executive directors are paid appropriately for the experience
and time requirements required, the basic Board fee, Chair fees for Audit, Remuneration and Risk Committees will increase by
3 per cent for 2025. The Chair fees for the Responsible Business Committee and the IT and Cyber Advisory Forum will increase
by 35 per cent.
The Audit, Remuneration and Risk Committee member fees will increase by 2 per cent and the Nomination and Governance
Committee member fee will increase by 1 per cent for 2025. The Responsible Business Committee and IT and Cyber Advisory Forum
member fees will increase by 49 per cent.
There is no increase to the Senior Independent Director fee for 2025.
2025
2024
Basic non-executive director fee
92,200
89,500
Senior Independent Director
64,200
64,200
Audit Committee Chair
77,250
75,000
Remuneration Committee Chair
77,250
75,000
Risk Committee Chair
77,250
75,000
Responsible Business Committee Chair
60,000
44,500
IT and Cyber Advisory Forum Chair
60,000
44,500
Audit Committee member
35,000
34,300
Remuneration Committee member
35,000
34,300
Risk Committee member
35,000
34,300
Responsible Business Committee member
25,000
16,750
IT and Cyber Advisory Forum member
25,000
16,750
Nomination and Governance Committee member
16,550
16,375
Audited content
All narrative and quantitative tables within the directors’ remuneration report are unaudited unless otherwise stated. Where disclosures
have been audited, this has been carried out under International Standards on Auditing (ISAs).
Directors’ remuneration continued
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
133
Lloyds Banking Group plc Annual Report and Accounts 2024
This directors’ report on pages 75 to 136 is our
directors’ report for the purposes of the Companies
Act 2006 and fulfils the requirements of the
corporate governance statement for the purposes
of the Financial Conduct Authority’s Disclosure
Guidance and Transparency Rules (DTR).
Profit and dividends
The consolidated income statement shows a statutory profit
before tax for the year ended 31 December 2024 of £5,971 million
(2023: £7,503 million).
The directors have recommended a final dividend for 2024, which
is subject to approval by the shareholders at the annual general
meeting (AGM), of 2.11 pence per share, which together with the
interim dividend of 1.06 pence per share represents a total dividend
for the year of 3.17 pence per share, equivalent to £1.9 billion.
If approved by shareholders, the final dividend will be paid
on 20 May 2025.
A final dividend of 1.84 pence per share totalling £1,169 million
in respect of 2023 was paid on 21 May 2024, and an interim
dividend of 1.06 pence per share totalling £659 million was paid on
10 September 2024. Further information on dividends is shown in
note 36 on page 295 and is incorporated into this directors’ report
by reference.
The Board continues to give due consideration at each year end to
the return of any surplus capital to shareholders and for 2024, the
Board intends to return up to £1.7 billion through a share buyback
programme in respect of the Company’s ordinary shares. This
represents the return of capital over and above the Board’s view of
the current level of capital required to grow the business, meet
regulatory requirements and cover uncertainties.
The share buyback programme is intended to commence as soon
as is practicable and is expected to be completed, subject to
continued authority from the PRA, by 31 December 2025. Based
on the total ordinary dividend and the intended ordinary share
buyback the total capital return in respect of 2024 will be up
to £3.6 billion.
The Company intends to use the authority for the repurchase of
ordinary shares granted to it at the 2024 AGM to implement the
proposed share buyback. Details of this existing authority are set
out under ‘Power of directors in relation to shares’. Shareholders will
be asked to renew the authority at the 2025 AGM, in line with
common practice.
Directors’ and officers’ liability insurance
Throughout 2024 the Group had appropriate insurance cover in
place to protect directors, including the directors who retired during
the year, from liabilities that may arise against them personally in
connection with the performance of their role.
As well as insurance cover, the Group agrees to indemnify the
directors to the maximum extent permitted by law. Further
information on the Group’s indemnity arrangements is provided in
the directors’ indemnities section.
Directors’ indemnities
The directors of the Company have entered into individual deeds
of indemnity with the Company which constituted ‘qualifying
third-party indemnity provisions’ for the purposes of the Companies
Act 2006. The deeds indemnify the directors to the maximum
extent permitted by law and remain in force. The deeds were in
force during the whole of the financial year. Deeds for existing
directors are available for inspection at the Company’s
registered office.
The Company has also granted deeds of indemnity by deed poll and
by way of entering into individual deeds, which constitute ‘qualifying
third-party indemnity provisions’ to the directors of the Group’s
subsidiary companies, including to former directors who retired
during the year and since the year end, and to Group colleagues
subject to the provisions of the Senior Managers and Certification
Regime. Such deeds were in force during the financial year ended
31 December 2024 and remain in force as at the date of this report.
Qualifying pension scheme indemnities have also been granted to
the trustees of the Group’s pension schemes, which were in force for
the whole of the financial year and remain in force as at the date of
this report.
Conflicts of interest
The Board has a comprehensive procedure for reviewing, and as
permitted by the Companies Act 2006 and the Company’s articles
of association, approving actual and potential conflicts of interest.
Directors have a duty to notify the Chair and Company Secretary as
soon as they become aware of actual or potential conflict situations.
Any changes to the commitments of directors are reported
to the Nomination and Governance Committee and the Board
and a register of directors’ interests is regularly reviewed and
authorised by the Board to ensure the authorisation status
remains appropriate.
Share capital
Detail of the rights and obligations attaching to the Company’s
issued share capital may be found in notes 29 and 30 to the financial
statements on page 290 to 292.
Appointment and retirement of directors
The appointment and retirement of directors is governed by the
Company’s articles of association, the UK Corporate Governance
Code and the Companies Act 2006. The Company’s articles of
association may only be amended by a special resolution of the
shareholders in a general meeting.
In the interests of good governance and in accordance with the
provisions of the UK Corporate Governance Code, all directors
will retire at the 2025 AGM and those wishing to serve for the first
time or again will submit themselves for election or re-election
(as applicable). Biographies of the current directors are set out
on pages 78 to 79. Details of the directors seeking election or
re-election at the AGM are set out in the Notice of Meeting.
Board composition changes
Changes to the composition of the Board since 1 January 2024 up to
the date of this report are shown in the table below:
Joined the Board
Left the Board
Alan Dickinson
16 May 2024
Lord Lupton
16 May 2024
Nathan Bostock
1 August 2024
Power of directors in relation to shares
The Board manages the business of the Company under the powers
set out in the articles of association, which include the directors’
ability to issue or buy back shares. The directors were granted
authorities to issue and allot shares and to buy back shares at the
2024 AGM. Shareholders will be asked to renew these authorities at
the 2025 AGM.
The authority in respect of purchase of the Company’s ordinary
shares, as granted at the 2023 AGM, was limited to 6,701,169,260
ordinary shares, equivalent to 10 per cent of the issued ordinary
share capital of the Company as at the latest practicable date prior
to publication of the 2023 AGM Notice of Meeting. Such authority
was used during the year under review in connection with the share
buyback programme described below and, as at 31 December 2024
and the date of this report, a total of 3,686,477,708 ordinary shares
had been repurchased.
Other statutory and regulatory information
134
Lloyds Banking Group plc Annual Report and Accounts 2024
Lloyds Banking Group plc Annual Report and Accounts 2024
135
Other information
Financial statements
Risk management
Governance
Financial results
Sustainability review
Strategic report
The Company undertook an ordinary share buyback programme,
which was launched on 23 February 2024 and ended on
13 November 2024. The programme repurchased in aggregate
3,686,477,708 ordinary shares, each with a nominal value of 10
pence, for an aggregate consideration of c.£2.0 billion (aggregate
nominal value of the ordinary shares £368,647,770.80) as a means
by which to return surplus capital to shareholders.
All of the repurchased ordinary shares were cancelled and together
represented 6.07 per cent of the called up share capital of the
Company. Further information in relation to the 2024 ordinary share
buyback programme is provided on pages 68 and 69.
The authority in respect of purchase of the Company’s ordinary
shares, as granted at the 2024 AGM, was limited to 6,377,697,127
ordinary shares, none of which was utilised as at 31 December 2024.
Information incorporated by reference
Branches
The Group provides a wide range of banking and financial services
through branches and offices in the UK and overseas.
Research and development activities
During the ordinary course of business, the Group develops new
products and services within the business units.
Change of control
The Company is not party to any significant agreements which take
effect, alter or terminate upon a change of control of the Company
following a takeover bid. There are no agreements between the
Company and its directors or employees providing compensation for
loss of office or employment resulting from a takeover, except for
the Company’s employee share plans which contain provisions
relating to a change of control set out on page 292.
Capital Requirements
(Country-by-Country Reporting)
As required under the Capital Requirements (Country-by-Country
Reporting) Regulations 2013, the Group’s related disclosures may be
found online on the financial downloads page of our website.
Post balance sheet events
Details of events since the date of the balance sheet are provided in
note 43 on page 302.
Substantial shareholders
Major shareholders do not have different voting rights from other
holders of ordinary shares. Information provided to the Company by
substantial shareholders pursuant to the DTR is published via a
Regulatory Information Service. As at 31 December 2024, the
Company had been notified by its substantial shareholders under
Rule 5 of the DTR of the following interests in the Company’s shares:
Content
Pages
Group results
Summary of Group results
64 to 70
Ordinary dividends
Dividends on ordinary shares
295
Directors’ emoluments
Directors’ remuneration report 110 to 133
Internal control and
financial risk management
Financial reporting risk
141
Risk management
33 to 38
137 to 198
Financial instruments
258 to 268
300
Information included in
the strategic report
Future developments
1 to 39
Post balance sheet events
3 and 5
Environmental disclosures
42 to 43
45 to 60
Supporting disability
31
Engagement with colleagues
30 and 86
Engagement with customers,
suppliers and others
86 to 87
Disclosures required
under UK Listing Rule
6.6.1R
Significant contracts
296 to 297
Dividend waivers
295
Principal risks and
uncertainties
Funding and liquidity
36
183 to 189
Capital position
34
144 to 150
Viability statement
Risk overview
39
Going concern statement
Risk overview
39
Share capital and control
Share capital and restrictions
on the transfer of shares or
voting rights
291 to 292
Employee share schemes –
exercise voting rights
291 to 292
Rights and obligations
attaching to the Company’s
issued share capital
291 to 292
Environmental disclosures Carbon reporting
59 to 60
Independent auditor and audit information
Each person who is a director at the date of approval of this report
confirms that, so far as the director is aware, there is no relevant
audit information of which the Company’s auditor is unaware and
each director has taken all the steps that he or she ought to have
taken as a director to make himself or herself aware of any relevant
audit information and to establish that the Company’s auditor is
aware of that information.
Interest in shares
% of issued share capital
with rights to vote in all
circumstances at
general meetings1
BlackRock Inc.
3,668,756,7652
5.14%
Harris Associates L.P.
3,546,216,7873
4.99%
Norges Bank
1,935,747,756
3.02%
1
Percentage provided was correct at the date of notification.
2
The most recent notification provided by BlackRock Inc. under Rule 5 of the DTR
identifies (i) an indirect holding of 3,599,451,380 shares in the Company representing
5.04 per cent of the voting rights in the Company, and (ii) a holding of 69,305,385 in
other financial instruments in respect of the Company representing 0.09 per cent of the
voting rights of the Company. BlackRock Inc.’s holding most recently notified to the
Company under Rule 5 of the DTR varies from the holding disclosed in BlackRock Inc.’s
Schedule 13-G filing with the US Securities and Exchange Commission dated 8 February
2024, which identifies beneficial ownership of 5,352,886,800 shares in the Company
representing 8.4 per cent of the issued share capital in the Company. This variance is
attributable to different notification and disclosure requirements between these
regulatory regimes.
3
An indirect holding.
No further notifications have been received under Rule 5 of the DTR
as at the date of this report.
This confirmation is given and should be interpreted in accordance
with the provisions of the Companies Act 2006.
Board diversity (these disclosures are made in compliance with UK Listing Rules UKLR 6.6.6(9) and UKLR 6.6.6(10))
Reporting table on gender representation
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
(GEC)
Percentage in
executive
management
(GEC)
Number of
Board members
Percentage of
the Board
Men
5
50%
3
8
57.1%
Women
5
50%
1
6
42.9%
Other categories
0
0%
0
0
0.0%
Not specified/Prefer not to say
0
0%
0
0
0.0%
Reporting table on ethnicity representation
Number of
Board members
Percentage of
the Board
Number of senior
positions on the
Board (CEO, CFO,
SID and Chair)
Number in
executive
management
(GEC)
Percentage in
executive
management
(GEC)
White British or other white
8
80%
4
12
85.7%
Mixed/Multiple ethnic groups
1
10%
0
0
0%
Asian/Asian British
1
10%
0
2
14.3%
Black/African/Caribbean/Black British
0
0%
0
0
0%
Other ethnic group
0
0%
0
0
0%
Not specified/prefer not to say
0
0%
0
0
0%
Methodology and definitions
Data is sourced from the Group’s HR system (Workday) containing all
permanent colleague details. All data is disclosed as at 31 December
2024. The Group has 100 per cent completion of gender data and
ethnic background data for the Board and Group Executive
Committee (GEC). All diversity information for ethnicity is based on
voluntary self-declaration by colleagues. Our systems do not record
diversity data of colleagues who have not declared this information
and is for UK payroll only. Gender data includes international, those on
parental/maternity leave, absent without leave and long-term sick and
excludes contractors, Group non-executive directors and temporary
and agency staff. The GEC assists the Group Chief Executive in
strategic, cross-business or Group-wide matters and inputs to the
Board. GEC includes the Group Chief Executive. Diversity calculations
are based on headcount, not full-time employee value. Ethnicity data
excludes non-UK colleagues.
Statement of directors’ responsibilities
The directors are responsible for preparing the annual report,
including the directors’ remuneration report and the financial
statements, in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law, the directors are required to
prepare the Group and parent Company financial statements in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006.
Under company law, the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs of the Group and the Company and of
the profit or loss of the Company and Group for that period. In
preparing these financial statements, the directors are required to
properly select and apply accounting policies; present information,
including accounting policies, in a manner that provides relevant,
reliable, comparable and understandable information; provide
additional disclosures when compliance with the specific
requirements in international accounting standards in conformity
with the requirements of the Companies Act 2006 are insufficient
to enable users to understand the impact of particular transactions,
other events and conditions on the entity’s financial position and
financial performance; and make an assessment of the Company’s
ability to continue as a going concern.
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s
transactions and disclose with reasonable accuracy at any time the
financial position of the Company and the Group and enable them
to ensure that the financial statements and the directors’
remuneration report comply with the Companies Act 2006. They
are also responsible for safeguarding the assets of the Company and
the Group and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
A copy of the financial statements is placed on our website on the
financial downloads page. The directors are responsible for the
maintenance and integrity of the Company’s website. Legislation in
the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Each of the current directors who are in office as at the date of this
report, and whose names and functions are listed on pages 78 to 79
of this annual report, confirm that, to the best of his or her knowledge:
•
The Group and the Company financial statements, which have
been prepared in accordance with international accounting
standards in conformity with the requirements of the Companies
Act 2006, give a true and fair view of the assets, liabilities, financial
position and profit or loss of the Group and the Company
•
The management report contained in the strategic report and
the directors’ report includes a fair review of the development
and performance of the business and the position of the Group
and the Company together with a description of the principal
risks and uncertainties they face
•
The annual report and accounts, taken as a whole, are fair,
balanced and understandable and provide the information
necessary for shareholders to assess the Company and the
Group’s position, performance, business model and strategy.
The directors have also separately reviewed and approved the
strategic report.
Other statutory and regulatory information continued
Kate Cheetham
Company Secretary
On behalf of the Board
19 February 2025
Lloyds Banking Group plc
Registered in Scotland, No. SC095000
Lloyds Banking Group plc Annual Report and Accounts 2024
136
Risk management
In this section
The Group’s approach to risk
138
Risk governance
138
Stress testing
142
Emerging and topical risks
143
Full analysis of principal risk categories
144
Protecting our
stakeholders
and the Group
Risk management is a key element in shaping our
business model and delivering the Group’s strategy
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Lloyds Banking Group plc Annual Report and Accounts 2024
137
Risk management is at the heart of
Helping Britain Prosper and creating a
more sustainable and inclusive future
for people and businesses.
Our mission is to protect our customers,
shareholders, colleagues and the Group, while
enabling sustainable growth. This is achieved through
informed risk decisions and robust risk management,
supported by a consistent risk-focused culture.
The Risk overview (pages 33 to 38) provides a summary of risk
management within the Group and the key focus areas for 2024.
This full risk management section provides a more in-depth view of
how risk is managed within the Group including key developments
in 2024, and the framework by which risks are identified, managed,
mitigated and monitored.
All narrative and quantitative tables within the risk management
section are unaudited unless otherwise stated. The audited
information is required to comply with the requirements of relevant
IFRS Accounting Standards.
The Group’s approach to risk
The Group operates a prudent approach to risk, with rigorous
management controls, supporting sustainable business growth
within the Group’s risk appetite and minimising losses. Through a
strong and independent risk function, a robust control framework is
maintained to identify and escalate current and emerging risks, and
drive and inform good risk-reward decision making.
To comply with UK-specific ring-fencing requirements, core banking
services are ring-fenced from other activities within the overall
Group. The Group’s enterprise risk management framework (ERMF)
and risk appetite apply across the Group. The Group’s Corporate
Governance Framework applies across Lloyds Banking Group plc,
Lloyds Bank plc, Bank of Scotland plc and HBOS plc. It is tailored
where needed to meet the entity-specific needs of Lloyds Bank plc
and Bank of Scotland plc, within the Ring-Fenced Bank sub-group
(RFB) and supplementary corporate governance frameworks are in
place to address the specific requirements of the other sub-groups
(Non-Ring-Fenced Bank, Insurance and Equity Investments).
The Group’s ERMF is structured to align with the industry-accepted
internal control framework standards and applies to every area of
the business, covering all types of risk. In 2024, the framework was
reviewed and updated to align more closely to the changing nature
of risks within the industry and the Group, along with evolving
regulatory expectations.
The ERMF provides the Group with an effective mechanism for
developing and embedding risk policies and risk management
strategies which are aligned with the risks faced by its businesses.
It also seeks to facilitate effective communication on these
matters across the Group.
Updates to the enterprise risk management framework
The Group has transformed its approach to risk management to
support its strategic ambition and purpose of Helping Britain
Prosper, and has conducted a comprehensive review of its ERMF.
This has resulted in a reduction in the number of principal risk types
(or level one risk categories) from 15 to 11, and the simplification of
level two risk categories.
•
Compliance risk supersedes the previous regulatory and legal risk
•
Economic crime is now a principal risk, recognising the increased
focus on topics such as fraud
•
Previous change and execution, data and people risks are now
classified as level two risks within the principal operational risk
•
Operational resilience and strategic risk are no longer individual
risks, but are addressed throughout the updated framework
•
New definitions for conduct, model and operational risks
This change better aligns to the Basel Committee on Banking
Supervision’s event categories which will benefit the Group for
scenario activities and regulatory reporting. This review will continue
in 2025, with further focus on level three risks.
Further details of each principal risk, including level two risks, are
provided on pages 144 to 198.
Risk appetite
The Group’s approach to setting, and the ongoing management of
risk appetite is detailed in the risk appetite framework, which is an
integral component of the Group’s ERMF.
The Group defines risk appetite as the type and aggregate level of
risk the Group is willing to take or accept in pursuit of its strategic
objectives and business plans.
Risk appetite aligns to organisational objectives, defined through
consideration of how it enables the Group to achieve its strategic
aims. It reinforces our purpose, strategy and objectives by driving
behaviour and setting boundaries around risk taking, to monitor
changes in risk exposure, enabling the delivery of business plans.
The Board is responsible for approving the Group’s Board risk
appetite at least annually. Group Board-level risk appetite metrics
are augmented further by lower-level measures to facilitate the
management of Board risk appetite.
Risk culture
Guided by the Board, the senior management articulates and role
models the core risk values to which the Group aspires. Senior
management establishes a strong focus on building and sustaining
long-term relationships with customers, through the economic
cycle. The Group’s Code of Ethics and Responsibility reinforces
colleagues’ accountability for the risks they take and supports
better decision making to meet their customers’ needs.
Risk skills and capabilities
To support a strong risk culture across the Group, all colleagues
complete risk training as part of their annual mandatory training.
A library of risk management learning resources is available, which
all colleagues who have specific risk management roles can access
to build their skills and capabilities.
There is ongoing investment in risk systems and models alongside
the Group’s focus on customer and product systems and processes.
This drives improvements in risk data quality, aggregation and
reporting, enabling effective and efficient risk decisions.
Risk governance
Governance frameworks
The Group’s approach to risk is based on a robust control
framework and strong risk management culture, enabling the
delivery of effective risk management, guiding the way all
employees approach their work, behave and make decisions.
Authority is delegated from the Board to individuals through the
management hierarchy. Senior management are supported by a
committee-based structure, ensuring open challenge and effective
decision making.
The Group’s risk appetite, principles, policies, procedures, controls,
and reporting are regularly reviewed and updated as required, to
ensure they remain in line with evolving regulation, law, corporate
governance and industry good practice.
The Board and senior management encourage a culture of
transparency which supports the interaction of the executive and
non-executive governance structure.
Board-level engagement, combined with senior management in
Group-wide risk issues at Group Executive Committee level, ensure
that any escalated issues are addressed promptly and that
necessary remediation plans are initiated as required.
Line managers are accountable for identifying and managing risks in
their individual businesses, ensuring that business decisions balance
risk and reward, and are consistent with the Group’s risk appetite.
The risk committee governance framework is explained on page 140.
Risk management
138
Lloyds Banking Group plc Annual Report and Accounts 2024
Risk governance structure
The risk governance structure below is integral to effective risk
management across the Group. To meet ring-fencing requirements,
the Boards and Board Committees of the Group and the Ring-
Fenced Banks, as well as relevant Committees of the Group and the
Ring-Fenced Banks, will sit concurrently and referred to as the
Aligned Board Model. Please see page 83 for further information on
the Group’s approach to ring-fencing.
Three lines of defence model
The Group’s ERMF is implemented through a 'three lines of defence'
model, which has been enhanced during 2024 to ensure more
clearly defined responsibilities and accountabilities across the
business, and drive further consistency across the Group's oversight
and assurance activities.
The Group’s three lines of defence model distinguishes between risk
management, risk oversight and risk assurance, with continued
focus on ensuring appropriate risk resource and capabilities is in
place within each area:
•
Senior management within the business areas (first line of
defence) have primary responsibility for risk decisions within
Group risk appetite parameters set and approved by the Board.
They have end-to-end accountability for all risks within their
end-to-end business processes. They must ensure effective
controls are in place both within the business and at third
parties to manage risk appropriately within risk appetite. They
are responsible for managing the direct and consequential risk
by identifying, assessing, mitigating, monitoring and reporting
risks. They are also responsible for complying with relevant laws
and regulations
•
The Risk function (second line of defence) is independent from
the first line of defence. It advises on, monitors, challenges,
approves, escalates where required, and reports on the risk-
taking activities undertaken by the first line, ensuring these are
within the constraints of the ERMF and risk appetite set by the
Board. It provides oversight of governance, risk management and
controls across the Group to ensure risks are identified and
reported appropriately to the Board and the Group Chief
Executive. The Risk function also provides regulatory advice,
supports interpretation of regulatory requirements and provides
oversight of first line compliance
•
Group Audit (third line of defence) provide independent
assurance to the Group Audit Committee, Board Risk
Committee and the Board on the effectiveness of control and
governance processes in place across the first and second lines. It
exercises its role as a single independent internal audit function
through the delivery of reviews and insights, identifying the most
significant risks facing the Group. The function provides opinion
and challenge on the Group’s control environment to the Audit
Committee, Board and Board Audit Committees of the sub-
groups, subsidiaries and legal entities where applicable
•
The Company Secretariat supports senior and Board level
committees and supports agenda planning. This gives a further
line of escalation outside the three lines of defence
Risk governance structure
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
139
Lloyds Banking Group plc Annual Report and Accounts 2024
Risk governance structure
Board, Executive and Risk Committees
The Group’s risk governance structure strengthens risk evaluation and management, while also positioning the Group to manage the
changing regulatory environment in an efficient and effective manner.
Assisted by the Board Risk and Audit Committees, the Board approves the Group’s overall governance, risk and control frameworks and
risk appetite. Refer to the corporate governance section on pages 76 to 96, for further information on Board Committees.
The sub-group, business unit (where appropriate) and functional risk committees review and recommend relevant risk appetite and
monitor local risk profile and adherence to appetite.
Executive and Risk Committees
The Group Chief Executive is supported by the following:
Committees
Risk focus1
Group Executive Committee (GEC)
Assists the Group Chief Executive in exercising their authority in relation to material matters which have
strategic, cross-business unit, cross-function or Group-wide implications.
Group and Ring-Fenced Banks Risk
Committees (GRC)
Responsible for the development, implementation and effectiveness of the Group’s enterprise risk
management framework, the clear articulation of the Group’s risk appetite and monitoring and reviewing of
the Group’s aggregate risk exposures, control environment and concentrations of risk.
Group and Ring-Fenced Banks Asset
and Liability Committees (GALCO)
Responsible for the strategic direction of the Group’s assets and liabilities and the profit and loss
implications of balance sheet management actions. The Committee reviews and determines the appropriate
allocation of capital, liquidity and funding, and market risk resources and makes appropriate trade-offs
between risk and reward.
Group and Ring-Fenced Banks Cost
Management Committees
Leads and shapes the Group’s approach to cost management, ensuring appropriate governance and process
over Group-wide cost management activities and effective control of the Group’s cost base.
Group and Ring-Fenced Banks
Contentious Regulatory Committees
Provides senior management oversight, challenge and accountability in connection with the Group’s
engagement with contentious regulatory matters as agreed by the Group Chief Executive.
Group and Ring-Fenced Banks
Strategic Delivery Committees
Responsible for driving the execution of the Group’s investment portfolio and strategic transformation
agenda as agreed by the Group Chief Executive. Monitors execution performance and progress against
strategic objectives. Assists in resolving issues on individual project areas and prioritisation across the Group.
Seeks to resolve challenges that require cross-Group support, ensuring appropriate funding is available.
Ensures that project performance provides value for money for the Group, and that autonomy is maintained
alongside accountability for projects and platforms.
Group and Ring-Fenced Banks
Disclosure Committee
Provides oversight of the accuracy, completeness and timeliness of disclosures made to the market and/or
prospective investors.
Group and Ring-Fenced Banks Net
Zero Committees
Provides direction and oversight of the Group’s environmental sustainability strategy, with particular focus on
the net zero transition and nature strategy. Oversight of the Group’s approach to meeting external
environmental commitments and targets, including the Net Zero Banking Alliance (NZBA). Recommend all
external material commitments and targets in relation to environmental sustainability.
Group and Ring-Fenced Banks
Conduct Investigations Committee
Protects and promotes the Group’s conduct, values and behaviours by taking action to rectify the most
serious cases of misconduct within the Group. The Committee makes decisions and recommendations
(including sanctions) on investigations which have been referred from the triage process, and oversees regular
reviews to identify thematic outcomes and lessons learned, which are shared with the business.
The Group Risk Committee is supported by business unit risk committees, cross-business unit committees addressing specific matters of
Group-wide significance, and the following second line of defence Risk committees which ensure oversight of risk management:
Group Market Risk Committee
Responsible for monitoring, oversight and challenge of market risk exposures across the Group. Reviews and
proposes changes to the market risk management framework, and reviews the adequacy of data quality
needed for managing market risks. Issues of Group-level significance are escalated to GALCO or GFRC as
required, including those held in the Group’s insurance companies.
Group Economic Crime Prevention
Committee
Ensures that the Group’s economic crime risk management complies with its strategic aims, corporate
responsibility, risk appetite and economic crime prevention policy. The Committee provides direction and
appropriate focus on priorities to enhance the Group’s economic crime risk management capabilities in line
with business and customer objectives, whilst aligning to the Group’s target operating model.
Group Financial Risk Committee
(GFRC)
Responsible for overseeing, reviewing, challenging and, where relevant, making recommendations to GALCO,
GEC and/or BRC for the following matters: internal capital stress tests; all PRA and any other regulatory stress
tests; reverse stress tests; ICAAP; Pillar 3; recovery plans and resolution; sign-off of level one models; annual
refresh of through the cycle loss rates; Resolvability Assessment Framework; and relevant ad-hoc stress tests
or other analysis as and when required by the Committee.
Group Capital Risk Committee
Provides oversight and challenge over holistic capital risk matters, focusing on Group, Ring-Fenced Bank and
material subsidiaries. Reviews latest capital positions and plans, capital risk appetite proposals, early warning
indicators, Capital Contingency Framework assessment and regulatory developments specific to capital.
Issues of Ring-Fenced Bank and Group-level significance are escalated to GALCO or GFRC as required.
Group Model Governance Committee
Provides debate, challenge and support of decisions relating to the Group’s model risk management policy.
Facilitating the approval of models, model changes and model-related items as required by model policy,
including items related to the governance framework as a whole and its application.
Group Liquidity Risk Committee
Provides oversight, monitoring, challenge, and approval for liquidity and funding risks across the Ring-Fenced
Bank and Group. Reviews and proposes changes to the liquidity and funding risk management framework,
including the ILAAP, liquidity risk appetite and internal liquidity stress testing. Issues of Ring-Fenced Bank and
Group-level significance are escalated to GALCO or GFRC as required.
1
Reference to Group within the risk focus of each Committee relates to the Group and the Ring-Fenced Banks.
Risk management continued
0
140
Lloyds Banking Group plc Annual Report and Accounts 2024
Risk decision making and reporting
Risk analysis and reporting enables better understanding of risks and
returns, supporting the identification of opportunities as well as
better management of risks.
An aggregate view of the Group’s overall risk profile, key risks and
management actions, and performance against risk appetite,
including the Group Control and Risk Environment report, is
reported to and discussed regularly at Group Risk Committee and
Board Risk Committee.
Risk and control cycle from identification to reporting
To allow senior management to make informed risk decisions, the
business follows a continuous risk management approach. This risk
and control cycle, from identification to reporting, ensures that
there is consistency in the approach to managing and mitigating
risks impacting the Group.
The risk and control self-assessment (RCSA) process is used to
identify, measure and manage operational risks across the Group.
Risks are identified and measured on an inherent basis, using a
consistent quantification methodology.
Financial reporting risk management systems
and internal controls
Following the updated enterprise risk management framework,
financial reporting (including tax) is now recognised as a level two
risk within the principal operational risk. Please see pages 196 to 198
for further detail.
The Group has a Disclosure Committee which assists the Group
Chief Executive and Chief Financial Officer in fulfilling their
disclosure responsibilities under relevant listing and other regulatory
and legal requirements. In addition, the Audit Committee reviews
the quality and acceptability of the Group’s financial disclosures. For
further information on the Audit Committee’s responsibilities
relating to financial reporting see pages 100 to 103.
Risk and control cycle
Identify
Risk identification is conducted on a continuous
basis through the use of scenario analysis which
considers the most material and emerging risks
the Group faces, and identifies and assesses
extreme, but plausible instances which
may occur.
Report
Measure
Risks are reported via appropriate Group, sub-Group
and Divisional level risk reports and committees,
allowing independent challenge by the Risk function.
When thresholds for risk appetite are breached,
committee minutes are clear on the actions and time
frames required to address the risk and bring the
exposure back within tolerance.
Risks are measured against the impact and
likelihood of the risk occurring, using prescribed
matrices, and are determined as to whether they
satisfy the Group risk appetite.
Monitor
Manage
Proactive monitoring or testing is established to
ensure that controls continue to be effective, and
that the Group remains within risk appetite.
Risks are then managed with appropriate
controls or mitigation plans put in place, which
are reviewed to ensure their effectiveness.
Any risks which cannot be mitigated will then
require risk acceptance via the appropriate
risk governance.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
141
Lloyds Banking Group plc Annual Report and Accounts 2024
Exposure to risk arising from the business activities of the Group
The table below provides a high level guide to how the Group’s business activities are reflected through its risk-weighted assets (RWAs),
which are calculated in accordance with prudential capital requirements. There are a number of risks that are not captured in RWAs such
as pension obligation risk and interest rate risk in the banking book, which instead fall within the scope of the Group's Pillar 2A capital
requirements. Furthermore the risk relating to Insurance activities is not included in this table as Insurance is subject to a different set of
prudential rules (Solvency II regime). Business activities for each division are provided in the divisional results on pages 72 to 74.
At 31 December 2024
Retail
£bn
Commercial
Banking
£bn
Insurance, Pensions and
Investments1
£bn
Equity Investments and
Central Items2
£bn
Group
£bn
Risk-weighted assets (RWAs)
Credit risk
107.7
55.5
0.2
12.5
175.9
Counterparty credit risk3
6.0
1.1
7.1
Market risk
3.7
3.7
Operational risk
17.4
8.6
0.2
1.0
27.2
Total (excluding threshold)
125.1
73.8
0.4
14.6
213.9
Threshold4
10.7
10.7
Total
125.1
73.8
0.4
25.3
224.6
1
As a separate regulated business, the Insurance business maintains its own solvency requirements, including appropriate management buffers, and reports directly to the Insurance
Board. Insurance does not hold any RWAs as its assets are removed from the Group’s banking regulatory capital calculations. However, in accordance with banking capital rules part of
the Group’s equity investment in Insurance is included in the calculation of threshold RWAs, while the remainder is taken as a deduction from common equity tier 1 (CET1) capital.
2
Equity Investments and Central Items includes the risk-weighted assets of the Group’s equity investments businesses (including Lloyds Development Capital and Lloyds Living) and
Group Corporate Treasury, in addition to other central amounts.
3
Exposures relating to the default fund of a central counterparty and credit valuation adjustment risk are included in counterparty credit risk.
4
Threshold RWAs reflect the proportion of significant investments and deferred tax assets that are permitted to be risk-weighted instead of deducted from CET1 capital. Significant
investments primarily arise from the investment in the Group’s Insurance business.
Stress testing
Overview
Stress testing is recognised as an important risk management tool
by the Boards, senior management, the businesses and the Risk and
Finance functions of all parts of the Group and its legal entities. It is
fully embedded in the planning process of the Group and its key
legal entities as a key activity in medium-term planning, and senior
management is actively involved in stress testing activities.
Scenario stress testing is used to support:
Risk identification:
•
Understanding key vulnerabilities of the Group and its key legal
entities under adverse economic conditions
Risk appetite:
•
Assessing the results of the stress test against the risk appetite of
all parts of the Group to ensure the Group and its legal entities
are managed within their risk parameters
•
Setting of risk appetite by assessing the underlying risks under
stress conditions
Strategic and capital planning:
•
Senior management and the Boards of the Group and its key
legal entities to adjust strategies if the plan does not meet risk
appetite in a stressed scenario
•
The ICAAP, by demonstrating capital adequacy and meeting the
requirements of regulatory stress tests that are used to inform
the setting of the PRA and management buffers (see capital risk
on pages 144 to 150) of the Group and its separately regulated
legal entities
•
The capital allocation process which feeds into business unit
performance management
Risk mitigation:
•
The development of potential actions and contingency plans to
mitigate the impact of adverse scenarios. Stress testing also links
directly to the recovery and resolution planning process of the
Group and its legal entities
Regulatory stress tests
Following the 2022/23 ACS stress test, the PRA completed a desk-
based stress test in 2024. The test evaluated the resilience of the UK
banking system to two hypothetical scenarios including severe but
plausible combinations of adverse shocks to the UK and global
economies. The results were published in November 2024 and the
report concluded the UK banking system is well capitalised,
maintains high levels of liquidity and asset quality remains strong.
The report did not publish individual bank results and the Group
was not required to take any capital actions. The Bank of England
has updated its approach to stress testing the UK banking system,
as part of that, in 2025 the Group will participate in the PRA Bank
Capital Stress Test. Scottish Widows will participate in the 2025 Life
Insurance Stress Test.
Internal stress tests
On at least an annual basis, the Group conducts macroeconomic
stress tests to highlight and understand the key vulnerabilities of the
Group’s and its legal entities’ business plans to adverse changes in the
economic environment, to evaluate mitigating actions and ensure that
there are adequate financial resources in the event of a downturn.
Reverse stress testing
Reverse stress testing is used to explore the vulnerabilities of the
Group’s and its key legal entities’ strategies and plans for extreme
adverse events that would cause the businesses to fail. Where this
identifies plausible scenarios with an unacceptably high risk, the
Group or its entities will adopt measures to prevent or mitigate that
and reflect these in strategic plans.
Other stress testing activity
The Group’s stress testing programme also involves undertaking
assessments of liquidity scenarios, market risk sensitivities and
scenarios, and business-specific scenarios. If required, ad hoc stress
testing exercises are also undertaken to assess emerging risks, as
well as in response to regulatory requests. This wide-ranging
programme provides a comprehensive view of the potential impacts
arising from the risks to which the Group is exposed and reflects the
nature, scale and complexity of the Group. In 2024, the Group also
participated in the Bank of England’s System-wide exploratory
scenario (SWES), to improve understanding of the behaviours of
banks and non-bank financial institutions during stressed financial
market conditions. The results were published at a sectorial level;
for the banking sector, this stress had minimal impact.
Risk management continued
–
–
–
–
–
–
–
–
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Lloyds Banking Group plc Annual Report and Accounts 2024
Detailed stress testing information can be found within each
relevant risk in the Risk management section (capital risk page 144,
insurance underwriting risk page 182, liquidity risk page 183 and
market risk page 190).
Methodology
The stress tests process must comply with all regulatory
requirements, which is achieved through comprehensive scenarios
and a rigorous divisional, functional, risk and executive review and
challenge process, supported by analysis and insight into impacts on
customers and business drivers.
All relevant business, Risk and Finance teams are involved in the
delivery of analysis, and ensure the sensitivity of the business plan
to each risk is well understood. The methodologies and modelling
approach used for stress testing embed direct links between the
macroeconomic scenarios and the drivers for each business area
to give appropriate stress sensitivities. All material assumptions
used in modelling are documented and justified, with a clearly
communicated review and sign-off process. Modelling is
supported by expert judgement and is subject to the Group model
governance policy.
The Group is continually enhancing its methods for identifying and
prioritising emerging and topical risks. Throughout 2024, the Group
enhanced its emerging risk methodology, further allowing greater
focus on the underlying risk drivers and enabling a more granular
level of assessment alongside targeted planning and mitigation
activity. These improvements reflect the Group’s strategic
transformation journey, and the planned investments outlined in its
business plans. The 2024 assessment has refined the emerging and
topical risk themes from eight to six.
Governance
Clear accountabilities and responsibilities for stress testing are
assigned to senior management and the Risk and Finance functions
throughout the Group and its key legal entities. This is formalised
through the Group business planning and stress testing policy and
procedure, which are reviewed at least annually.
The Group Financial Risk Committee (GFRC), chaired by the Chief
Risk Officer and attended by the Chief Financial Officer and other
senior Risk and Finance colleagues, has primary responsibility for
overseeing the development and execution of the Group’s and Ring-
Fenced Bank’s stress tests. A similar process is in place within Lloyds
Bank Corporate Markets (LBCM) and Scottish Widows for
governance of their specific results.
The review and challenge of the Group’s and Ring-Fenced Bank’s
detailed stress forecasts, the key assumptions behind these, and the
methodology used to translate the economic assumptions into
stressed outputs conclude with the appropriate Finance and Risk
sign-off. The outputs are then presented to the GFRC and the Board
Risk Committee for review and challenge. With regulatory exercises
being approved at Board Risk Committee and Board where
appropriate. There is a similar process within the LBCM for the
governance of the LBCM-specific results.
The emerging risk themes detailed in the Risk overview section on
page 38 align to the current principal risks the Group is managing,
many of which are continuous areas of focus. The nature of
emerging risks is expected to evolve and may require different
solutions to mitigate from the measures used today. The risks also
correlate, for example consumer expectations and market dynamics
will be influenced by the UK economic and political environment.
Risk mitigation and monitoring
Emerging risk themes have been discussed at executive-level
committees throughout 2024, with key actions assigned to closely
monitor their manifestation and potential opportunities, and in
some cases, also forming part of the business planning process.
Deep dives on selected emerging risk themes are also planned
for 2025.
The table below details how the Group is monitoring and mitigating
against each of its emerging risk themes:
Emerging and topical risks
Background and framework
Recognising emerging risks is a crucial part of the Group’s risk
management strategy. It allows the Group to pinpoint key risks and
opportunities, enabling proactive responses through strategic
planning and effective risk mitigation. Although emerging risks are
not classified as principal risks, they require strong focus to prevent
potentially adverse impacts or missed opportunities.
Impacts from emerging risks on the Group’s principal risks can
materialise in two ways:
•
Emerging risks can impact the Group’s principal risks directly in
the absence of an appropriate strategic response
•
Emerging risks can be a source of new risks, dependent on the
chosen response and the underlying assumptions on how given
emerging risks may manifest
Risk identification
The basis for risk identification is underpinned by horizon scanning,
external research and insights, supported by collaboration between
functions across the Group. The Group works closely with regulatory
authorities and industry bodies to ensure that it can monitor
external developments and identify and respond to the evolving
landscape, particularly in relation to compliance risk. In addition,
the Group engages with external experts to gain external insight
and context. This activity complements and builds upon the annual
strategic planning cycle and is used to identify key external trends,
risks and opportunities for the Group.
Emerging and
topical risk theme
Mitigating actions
Consumer
expectations
and market
dynamics
Regular reviews into:
•
Impacts caused by cost-of-living challenges
•
Customer proposition by business area
•
The Group’s strategy, including performance, key
risks and external environment
Evolution of
operating
model
•
Implementation of playbooks in the event
significant disruptive events occur, for example a
pandemic or system outages, which are refreshed
at least annually
•
Strengthened measures to ensure that the Group is
prepared for significant disruption to supply chains
•
Enhanced business continuity plans ahead
of the March 2025 operational resilience
regulatory deadline
•
Review of the Group’s strategic workforce planning
to ensure the required skills composition
Evolution of
technology, AI
and cybercrime
•
Continued transformation and modernisation of
our technology and infrastructure
•
Deep dives completed on Generative AI, cyber risk,
IT systems risk and economic crime prevention at
Board-level committees
•
Implementation of a data ethics and AI framework
within our Group data and model risk policies
Global
economic and
geopolitical
environment
•
Evaluation of the Group’s economic assumptions
in response to the macroeconomic environment
•
Intelligence scanning to detect and identify
triggers and events that may impact the Group
and its operations
Regulatory
agenda and
expectations
•
Monitoring of regulatory developments through
horizon scanning activity
•
Engagement with regulators on key areas of focus
•
Oversight of the Group’s climate strategy and
external sector statements
UK economic
and political
environment
•
Evaluation of the Group’s base case
economic assumptions in response to
the macroeconomic environment
•
Undertake stress tests to assess the
impact of various economic scenarios
on the Group’s performance
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
143
Lloyds Banking Group plc Annual Report and Accounts 2024
Capital risk
Definition
Capital risk is defined as the risk that an insufficient
quantity or quality of capital is held to meet
regulatory requirements or to support business
strategy, an inefficient level of capital is held or that
capital is inefficiently deployed across the Group.
The Risk overview, on page 34, contains a summary of capital risk
performance and key mitigating actions.
Full analysis of principal risk categories
The Group’s risk framework covers all types of risk which affect the Group and could impact on the achievement of its strategic objectives.
Detailed information relating to each principal risk is included over the following pages, 144 to 198.
F
Financial risk indicators
•
CET1 ratio: 14.2 per cent (2023: 14.6 per cent)
•
MREL ratio: 32.2 per cent (2023: 31.9 per cent)
•
Total capital ratio: 19.0 per cent (2023: 19.8 per cent)
Exposures
A capital risk event arises when the Group has insufficient capital
resources to support its strategic objectives and plans, and to meet
both regulatory and external stakeholder requirements and
expectations. This could arise due to a depletion of the Group’s
capital resources as a result of the crystallisation of any of the risks
to which it is exposed, or through a significant increase in risk-
weighted assets as a result of rule changes or economic
deterioration. Alternatively a shortage of capital could arise from an
increase in the minimum requirements for capital or leverage or the
minimum requirement for own funds and eligible liabilities (MREL)
either at Group, Ring-Fenced Bank (RFB) sub-group or regulated
entity level. The Group’s capital management approach is focused
on maintaining sufficient and appropriate capital resources across
all regulated levels of its structure in order to prevent such
exposures while optimising value for shareholders.
Measurement
Risk management continued
The minimum amount of total capital, under Pillar 1 of the
regulatory capital framework, is set at 8 per cent of total risk-
weighted assets. At least 4.5 per cent of risk-weighted assets are
required to be met with common equity tier 1 (CET1) capital and at
least 6 per cent of risk-weighted assets are required to be met with
tier 1 capital. Minimum Pillar 1 requirements are supplemented by
both additional minimum requirements under Pillar 2A of the
regulatory capital framework, the aggregate of which is referred to
as the Group’s Total Capital Requirement (TCR), and by a number
of regulatory capital buffers as described below.
The Group maintains capital levels across all regulated entities
commensurate with a prudent level of solvency to achieve
financial resilience and market confidence. To support this,
capital risk appetite is calibrated by taking into consideration
both an internal view of the amount of capital to hold as well as
external regulatory requirements.
Additional minimum capital requirements under Pillar 2A are set by
the PRA as a firm-specific Individual Capital Requirement (ICR)
reflecting a point in time estimate, which may change over time, of
the minimum amount of capital to cover risks that are not fully
covered by Pillar 1, such as concentration risk, residual value risk and
operational risk, and those risks not covered at all by Pillar 1, such as
pension obligation risk and interest rate risk in the banking book
(IRRBB). This is set as a variable amount for Pillar 2A (being a set
percentage of risk-weighted assets), with fixed add-ons for certain
risk types. The Group’s Pillar 2A capital requirement at 31 December
2024 is the equivalent of around 2.6 per cent of risk-weighted
assets, of which the minimum amount to be met by CET1 capital is
the equivalent of around 1.5 per cent of risk-weighted assets.
The Group is also required to hold a number of regulatory capital
buffers which must be met with CET1 capital.
Systemic buffers are designed to hold systemically important banks
to higher capital standards, so that they can withstand a greater
level of stress before requiring resolution.
•
The Group is not classified as a global systemically important
institution (G-SII) but has been classified as an ‘other’
systemically important institution (O-SII) by the PRA
•
The O-SII buffer applies to the Group’s RFB sub-group and is set
at 2.0 per cent of the RFB sub-group’s risk-weighted assets at
December 2024. This equates to 1.7 per cent of risk-weighted
assets at Group level, with the difference reflecting the risk-
weighted assets of the Group that are not in the RFB sub-group
and for which the O-SII buffer does not therefore apply. It is the
PRA’s policy to include this in the Group’s PRA Buffer. The latest
review point under the Financial Policy Committee’s (FPC)
framework occurred during November 2024 (based upon the
average of the RFB sub-group’s quarter-end UK leverage
exposure measures over 2023) which resulted in no change to
the buffer
The Group assesses both its regulatory capital requirements and
the quantity and quality of capital resources it holds to meet
those requirements in accordance with the relevant provisions of
the Capital Requirements Directive (CRD V) and Capital
Requirements Regulation (UK CRR). This is supplemented
through additional regulation set out under the PRA Rulebook
and through associated statements of policy, supervisory
statements and other regulatory guidance.
The capital conservation buffer (CCB) is a standard buffer of 2.5 per
cent of risk-weighted assets designed to provide for losses in the
event of stress.
Further details of the regulatory capital and leverage frameworks to
which the Group is subject, including the means by which its capital
and leverage requirements and capital resources are calculated, are
provided in the Group’s Pillar 3 disclosures.
The countercyclical capital buffer (CCyB) is time-varying and is
designed to require banks to hold additional capital to remove or
reduce the build-up of systemic risk in times of credit boom,
providing additional loss-absorbing capacity and acting as an
incentive for banks to constrain further credit growth. The amount
of the buffer is determined by reference to published buffer rates
for the individual countries where the Group has relevant credit
exposures. The FPC sets the UK CCyB rate, which as at 31 December
2024 is set at 2 per cent. The FPC judges that the neutral rate for
the UK CCyB is around 2 per cent.
Given the Group’s UK-focused business model, the Group’s CCyB at
31 December 2024 was around 1.8 per cent of risk-weighted assets.
14
144
Lloyds Banking Group plc Annual Report and Accounts 2024
As part of the Group’s capital planning process, forecast capital
positions are subjected to stress testing to determine the adequacy
of the Group’s capital resources against minimum requirements,
including the Pillar 2A requirement. The PRA considers outputs from
both the Group’s internal stress tests and Bank of England (BoE)
stress tests, in conjunction with other information, as part of the
process for informing the setting of a bank-specific capital buffer for
the Group, known as the PRA Buffer. The PRA requires this buffer to
remain confidential.
Under previous Bank of England stress tests, the BoE has taken
action to avoid an unwarranted de facto increase in capital
requirements that could result from the interaction with IFRS 9.
The stress hurdle rates for banks participating in the annual cyclical
scenario (ACS) stress test exercises were adjusted to recognise the
additional resilience provided by the earlier provisions taken under
IFRS 9. The BoE is continuing to work towards a more enduring
treatment of IFRS 9 for the purposes of future stress tests.
All buffers are required to be met with CET1 capital. Usage of the
PRA Buffer (which includes the Group’s share of the RFB sub-
group’s O-SII buffer) would trigger a dialogue between the Group
and the PRA to agree what action is required whereas a breach of
the combined buffer (all other regulatory buffers, as referenced
above) would give rise to mandatory restrictions upon any
discretionary capital distributions. The PRA has previously
communicated its expectation that banks’ capital and liquidity
buffers can be drawn down as necessary to support the real
economy through a shock and that sufficient time would be made
available to restore buffers in a gradual manner.
In addition to the risk-based capital framework outlined above, the
Group is also subject to minimum capital requirements under the
UK Leverage Ratio Framework. The leverage ratio is calculated by
dividing tier 1 capital resources by the leverage exposure which is a
defined measure of on-balance sheet assets and off-balance sheet
items.The minimum tier 1 leverage ratio requirement under the UK
Leverage Ratio Framework is 3.25 per cent. This is supplemented
by a time-varying countercyclical leverage buffer (CCLB)
requirement which is determined by multiplying the Group’s CCyB
rate by 35 per cent. As at 31 December 2024 the CCLB for the
Group was 0.6 per cent. An additional leverage ratio buffer
(ALRB) requirement of 0.7 per cent applies to the RFB sub-group
and is determined by multiplying the RFB sub-group O-SII buffer
by 35 per cent. At Group level an equivalent buffer of 0.6 per
cent applies.
At least 75 per cent of the 3.25 per cent minimum leverage ratio
requirement as well as 100 per cent of regulatory leverage buffers
must be met by CET1 capital.
As at 31 December 2024 the leverage ratio framework did not give
rise to higher regulatory capital requirements for the Group than the
risk-based capital framework.
Mitigating actions
The Group has a capital management framework that includes the
setting of capital risk appetite and capital planning and stress
testing activities. Close monitoring of capital, leverage and MREL
ratios is undertaken to ensure the Group meets regulatory
requirements and risk appetite levels and deploys its capital
resources efficiently.
The Group regularly refreshes and monitors its suite of early warning
indicators and maintains a Capital Contingency Framework as part
of a Recovery Plan, which is designed to identify and escalate
emerging capital concerns at an early stage, so that mitigating
actions can be taken, if needed. For example, the Group is able to
accumulate additional capital through the retention of profits over
time, which can be enhanced through reducing or cancelling
proposed dividend payments and share buybacks, by raising new
equity via, for example, a rights issue or debt exchange and by
raising additional tier 1 or tier 2 capital securities. The cost and
availability of additional capital are dependent upon market
conditions and perceptions at the time.
The Group is also able to manage the demand for capital through
management actions including adjusting its lending strategy,
business disposals and through the efficient use of securitisations
and other optimisation activity.
Capital policies and procedures are well established and subject to
independent oversight.
Monitoring
The Group’s capital is actively managed and monitoring capital
ratios is a key factor in the Group’s planning processes, which
separately cover the RFB sub-group and key individual banking
entities. Multi-year base case forecasts of the Group’s capital
position, based upon the Group’s operating plan, are produced at
least annually to inform the Group’s capital plan whilst shorter-
term forecasts are more frequently undertaken to understand and
respond to variations of the Group’s actual performance against
the plan. The Group’s capital plan is tested for capital adequacy
using relevant stress scenarios and sensitivities covering adverse
economic conditions as well as other adverse factors that could
impact the Group.
Regular monitoring of the capital position is undertaken by a range
of committees, including Group Capital Risk Committee (GCRC),
Group Financial Risk Committee (GFRC), Group and Ring-Fenced
Banks Asset and Liability Committees (GALCO), Group and Ring-
Fenced Banks Risk Committees (GRC), Board Risk Committee
(BRC) and the Board. This includes reporting of actual ratios against
risk appetite, base case and stress scenario projected ratios, and
review of early warning indicators and assessment against the
Capital Contingency Framework.
The regulatory capital framework within which the Group operates
continues to evolve and further detail on this is provided in the
Group’s Pillar 3 disclosures. The Group continues to monitor
prudential developments very closely, analysing the potential
capital impacts to ensure that, through organic capital generation
and management actions, the Group continues to maintain a strong
capital position that exceeds both minimum regulatory
requirements and the Group’s risk appetite and is consistent with
market expectations.
Target capital ratios
The Board’s view of the ongoing level of CET1 capital required by the
Group to grow the business, meet current and future regulatory
requirements and cover economic and business uncertainties is
c.13.0 per cent which includes a management buffer of around 1 per
cent. This takes into account, amongst other considerations:
•
The minimum Pillar 1 CET1 capital requirement of 4.5 per cent of
risk-weighted assets
•
The Group’s Pillar 2A CET1 capital requirement, set by
the PRA, which is the equivalent of around 1.5 per cent of
risk-weighted assets
•
The Group’s countercyclical capital buffer (CCyB) requirement
which is around 1.8 per cent of risk-weighted assets
•
The capital conservation buffer (CCB) requirement of 2.5 per
cent of risk-weighted assets
•
The Ring-Fenced Bank (RFB) sub-group’s other systemically
important institution (O-SII) buffer of 2.0 per cent of risk-
weighted assets, which equates to 1.7 per cent of risk-weighted
assets at Group level
•
The Group’s PRA Buffer, set after taking account of the results of
any PRA stress tests and other information, as well as outputs
from the Group’s own internal stress tests. The PRA requires this
buffer to remain confidential
•
The likely performance of the Group in various potential stress
scenarios and ensuring capital remains resilient in these
•
The economic outlook for the UK and business outlook for
the Group
•
The desire to maintain a progressive and sustainable
ordinary dividend policy in the context of year to year
earnings movements
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
145
Lloyds Banking Group plc Annual Report and Accounts 2024
Capital returns
The Group has in place a progressive and sustainable ordinary
dividend policy which allows for flexibility to return surplus capital
to shareholders through share buybacks or special dividends.
Surplus capital represents capital over and above the amount
management wish to retain to grow the business, meet current and
future regulatory requirements and cover uncertainties. The amount
of required capital may vary from time to time depending on
circumstances and by its nature there can be no guarantee that any
return of surplus capital will be made.
Given the Group’s robust financial performance and strong capital
position at the year end, the Board has recommended a final
ordinary dividend of 2.11 pence per share. This is in addition to the
interim ordinary dividend of 1.06 pence per share that was
announced as part of the 2024 half-year results and paid in
September 2024. The total ordinary dividend for the year is
therefore 3.17 pence per share. The Group also intends to
implement a share buyback programme of up to £1.7 billion which
will commence as soon as is practicable and is expected to be
completed by 31 December 2025.
The Board remains committed to future capital returns. Going
forward, the Board intends to maintain its progressive and
sustainable ordinary dividend policy alongside further returns of
surplus capital at the end of the year as appropriate. The Board will
continue to give due consideration at year end to the size of the
final dividend payment and to the return of any surplus capital
based upon the circumstances at the time.
The ability of the Group to pay a dividend is also subject to
constraints including the availability of distributable reserves,
legal and regulatory restrictions and the Group’s financial and
operating performance.
Distributable reserves are determined as required by the
Companies Act 2006 by reference to a company’s individual
financial statements. At 31 December 2024 Lloyds Banking
Group plc (‘the Company’) had accumulated distributable
reserves of approximately £13 billion. Substantially all of the
Company’s merger reserve is available for distribution under UK
company law as a result of transactions undertaken to
recapitalise the Company in 2009.
Lloyds Banking Group plc acts as a holding company which also
issues capital and other securities to capitalise and fund the
activities of the Group. The profitability of the holding company,
and its ability to sustain dividend payments, is therefore dependent
upon the continued receipt of dividends and interest from its main
operating subsidiaries, including Lloyds Bank plc (the Ring-Fenced
Bank), Lloyds Bank Corporate Markets plc, LBG Equity Investments
Limited and Scottish Widows Group Limited (the Insurance
business). The principal operating subsidiary is Lloyds Bank plc
which, at 31 December 2024, had a consolidated CET1 capital ratio
that exceeded minimum regulatory requirements and internal risk
appetite levels. A number of Group subsidiaries, principally those
with banking and insurance activities, are subject to regulatory
capital requirements which require minimum amounts of capital to
be maintained relative to their size and risk. The Group actively
manages the capital of its subsidiaries, which includes monitoring
the regulatory capital ratios for its banking and insurance
subsidiaries and, on a consolidated basis, the RFB sub-group against
approved risk appetite levels. The Group operates a formal capital
management policy which requires all subsidiary entities, subject to
agreement by their governing bodies, to remit surplus capital to
their parent companies.
Minimum requirement for own funds
and eligible liabilities (MREL)
Global systemically important banks (G-SIBs) are subject to an
international standard on total loss absorbing capacity (TLAC). The
standard is designed to enhance the resilience of the global financial
system by ensuring that failing G-SIBs have sufficient capital to
absorb losses and recapitalise under resolution, whilst continuing to
provide critical banking services.
In the UK, the Bank of England has implemented the requirements
of the international TLAC standard through the establishment of a
framework which sets out MREL. The purpose of MREL is to require
firms to maintain sufficient own funds and eligible liabilities that are
capable of credibly bearing losses or recapitalising a bank whilst in
resolution. MREL can be satisfied by a combination of regulatory
capital and certain unsecured liabilities (which must be subordinate
to a firm’s operating liabilities).
Although the Group is not classified as a G-SIB it is subject to the
Bank of England’s MREL framework, including the statement of
policy on MREL (the ‘MREL SoP’) which requires the Group to
maintain a minimum level of MREL resources.
Under the requirements of the framework, the Group operates a
single point of entry (SPE) resolution strategy, with Lloyds Banking
Group plc as the designated resolution entity.
Applying the MREL SoP to minimum capital requirements at
31 December 2024, the Group’s MREL, excluding regulatory capital
and leverage buffers, is the higher of 2 times Pillar 1 plus 2 times
Pillar 2A, equivalent to 21.3 per cent of risk-weighted assets, or
6.5 per cent of the UK leverage ratio exposure measure.
In addition, CET1 capital cannot be used to meet both MREL and
capital or leverage buffers.
Internal minimum requirements for own funds and eligible liabilities
(Internal MREL) also apply to the Group’s material sub-groups and
entities, being the RFB sub-group, Lloyds Bank plc, Bank of Scotland
plc and Lloyds Bank Corporate Markets plc.
Analysis of pro forma CET1 capital position
The Group’s pro forma CET1 capital ratio at 31 December 2024 was
13.5 per cent (31 December 2023: 13.7 per cent pro forma), in line with
guidance. Capital generation during the year was 148 basis points.
Excluding the provision for motor finance commission arrangements,
capital generation was 177 basis points, in line with guidance. Capital
generation reflects robust banking build and the interim half-year and
full-year dividends received from the Insurance business in June 2024
(£200 million) and February 2025 (£100 million) respectively, partially
offset by risk-weighted asset increases and other movements,
including 15 basis points relating to the foreign exchange translation
loss following the US dollar AT1 capital instrument redemption in
June. Regulatory headwinds of 27 basis points in the year reflect an
adjustment for part of the impact of the Retail secured CRD IV
increases and the reduction in the transitional factor applied to
IFRS 9 dynamic relief on 1 January 2024. There was a further 29 basis
points resulting from a provision relating to the potential impacts of
motor finance commission arrangements. The impact of the interim
ordinary dividend paid in September 2024 and the accrual for the
recommended final ordinary dividend equates to 91 basis points, with
a further 80 basis points to cover the accrual for the announced
ordinary share buyback programme of up to £1.7 billion.
The full impact of the share buyback will be accrued for through the
Group’s actual capital position during the first quarter of 2025.
Excluding the Insurance dividend received in February 2025 and the
full impact of the announced ordinary share buyback programme,
the Group's CET1 capital ratio at 31 December 2024 was 14.2 per
cent (31 December 2023: 14.6 per cent).
Risk management continued
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Lloyds Banking Group plc Annual Report and Accounts 2024
Capital resources (audited) and MREL resources (unaudited)
An analysis of the Group’s capital position and MREL resources as at 31 December 2024 is presented in the following table. This reflects the
application of the transitional arrangements for IFRS 9. The Group’s Pillar 3 disclosures provide a comprehensive analysis of the own funds
of the Group.
At 31 Dec
2024
£m
At 31 Dec
20231
£m
Common equity tier 1: instruments and reserves
Share capital and share premium account
24,782
24,926
Banking retained earnings2
19,582
19,000
Banking other reserves2
2,786
3,136
Adjustment to retained earnings for foreseeable dividends
(1,276)
(1,169)
45,874
45,893
Common equity tier 1: regulatory adjustments
Cash flow hedging reserve
3,755
3,766
Goodwill and other intangible assets
(5,679)
(5,731)
Prudent valuation adjustment
(354)
(417)
Excess of expected losses over impairment provisions and value adjustments
(270)
Removal of defined benefit pension surplus
(2,215)
(2,653)
Significant investments2
(5,024)
(4,975)
Deferred tax assets
(4,025)
(4,048)
Other regulatory adjustments
(83)
62
Common equity tier 1 capital
31,979
31,897
Additional tier 1: instruments
Other equity instruments
6,170
6,915
Additional tier 1: regulatory adjustments
Significant investments2
(800)
(1,100)
Total tier 1 capital
37,349
37,712
Tier 2: instruments and provisions
Subordinated liabilities
6,366
6,320
Eligible provisions
371
Tier 2: regulatory adjustments
Significant investments2
(964)
(964)
Total capital resources (audited)
42,751
43,439
Ineligible AT1 and tier 2 instruments3
(94)
(139)
Amortised portion of eligible tier 2 instruments issued by Lloyds Banking Group plc
891
1,113
Other eligible liabilities issued by Lloyds Banking Group plc4
28,675
25,492
Total MREL resources (unaudited)
72,223
69,905
Risk-weighted assets (unaudited)
224,632
219,130
Common equity tier 1 capital ratio (unaudited)
14.2%
14.6%
Tier 1 capital ratio (unaudited)
16.6%
17.2%
Total capital ratio (unaudited)
19.0%
19.8%
MREL ratio (unaudited)
32.2%
31.9%
1
Restated for presentational changes.
2
In accordance with banking capital regulations, the Group’s Insurance business is excluded from the scope of the Group’s capital position. The Group’s investment in the equity and
other capital instruments of the Insurance business are deducted from the relevant tier of capital (‘Significant investments’), subject to threshold regulations that allow a portion of the
equity investment to be risk-weighted rather than deducted from capital. The risk-weighted portion forms part of threshold risk-weighted assets.
3
Instruments not issued out of the holding company.
4
Includes senior unsecured debt.
Total capital requirement
The Group’s total capital requirement (TCR) as at 31 December 2024, being the aggregate of the Group’s Pillar 1 and Pillar 2A capital
requirements, was £23,907 million (31 December 2023: £23,322 million).
Other information
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–
–
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Movements in CET1 capital resources
The key movements are set out in the table below.
Common
equity
tier 1
£m
At 31 December 2023
31,897
Banking business profits1
4,765
Movement in foreseeable dividend accrual2
(107)
Dividends paid out on ordinary shares during the year
(1,828)
Adjustment to reflect full impact of share buyback
(2,011)
Dividends received from the Insurance business3
450
IFRS 9 transitional adjustment to retained earnings
(159)
Excess regulatory expected losses
(270)
Redemption of other equity instruments
(316)
Distributions on other equity instruments
(498)
Other movements
56
At 31 December 2024
31,979
1
Under banking capital regulations, profits made by Insurance are removed from CET1 capital. However, when dividends are paid to the Group by Insurance these are recognised
through CET1 capital.
2
Reflects the reversal of the brought forward accrual for the final 2023 ordinary dividend, net of the accrual for the final 2024 ordinary dividend.
3
Received in February 2024 and June 2024.
The Group’s CET1 capital ratio reduced to 14.2 per cent at 31 December 2024 from 14.6 per cent at 31 December 2023, with the increase in
CET1 capital resources more than offset by the increase in risk-weighted assets.
CET1 capital resources increased by £82 million, with banking business profits for the year and the receipt of dividends paid up by the
Insurance business offset by:
•
The interim ordinary dividend paid in September 2024, the accrual for the final 2024 ordinary dividend of 2.11 pence per share and
distributions on other equity instruments
•
The recognition of the full capital impact of the ordinary share buyback programme announced as part of the Group’s 2023 year end
results, which completed in November 2024
•
The recognition of a foreign exchange translation loss upon the redemption of a US dollar denominated AT1 capital instrument
in June 2024
The IFRS 9 transitional arrangements for dynamic relief amounted to £13 million (31 December 2023: £196 million) through CET1 capital.
The transitional arrangements ended on 1 January 2025.
Movements in total capital and MREL
The Group’s total capital ratio reduced to 19.0 per cent at 31 December 2024 (31 December 2023: 19.8 per cent), reflecting reductions in
both Additional Tier 1 and Tier 2 capital and the increase in risk-weighted assets, partly offset by the increase in CET1 capital. The reduction
in Additional Tier 1 capital reflects redemptions, including the US dollar AT1 capital instrument redeemed in June 2024, offset in part by a
new issuance and a reduction in the Group’s significant investment in instruments issued by the Insurance business following a redemption
by the Insurance business as it sought to refine its capital structure. The reduction in Tier 2 capital primarily reflects the impact of regulatory
amortisation on instruments, interest rate movements and a reduction in eligible provisions recognised through Tier 2 capital, partially
offset by new issuances.
The MREL ratio increased to 32.2 per cent at 31 December 2024 (31 December 2023: 31.9 per cent) largely reflecting the increase in other
eligible liabilities driven by new issuances, net of calls and maturities. This was partly offset by the reduction in total capital resources and
the increase in risk-weighted assets.
Risk management continued
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Risk-weighted assets
At 31 Dec
2024
£m
At 31 Dec
2023
£m
Foundation Internal Ratings Based (IRB) Approach
43,366
44,504
Retail IRB Approach
90,567
85,459
Other IRB Approach1
21,878
20,941
IRB Approach
155,811
150,904
Standardised (STA) Approach1
22,532
22,074
Credit risk
172,978
Securitisation
178,343
8,346
8,958
Counterparty credit risk
6,561
5,847
Credit valuation adjustment risk
485
689
Operational risk
27,183
26,416
Market risk
3,714
4,242
Risk-weighted assets
224,632
219,130
of which: threshold risk-weighted assets2
10,738
11,028
1
Threshold risk-weighted assets are included within Other IRB Approach and Standardised (STA) Approach.
2
Threshold risk-weighted assets reflect the element of significant investments and deferred tax assets that are permitted to be risk-weighted instead of being deducted from CET1
capital. Significant investments primarily arise from the investment in the Group’s Insurance business.
Risk-weighted assets increased by £5.5 billion in the year to £224.6 billion at 31 December 2024 (31 December 2023: £219.1 billion), in line
with guidance. This reflects the impact of lending growth, Retail secured CRD IV increases and other movements, partly offset by
optimisation including capital efficient, net present value positive securitisation activity.
Leverage ratio
The table below summarises the component parts of the Group’s leverage ratio.
At 31 Dec
2024
£m
At 31 Dec
2023
£m
Total tier 1 capital
37,349
37,712
Exposure measure
Statutory balance sheet assets
Derivative financial instruments
24,065
22,356
Securities financing transactions
69,941
56,184
Loans and advances and other assets
812,691
802,913
Total assets
906,697
881,453
Qualifying central bank claims
(62,396)
(77,625)
Deconsolidation adjustments1
Derivative financial instruments
563
585
Loans and advances and other assets
(191,551)
(178,552)
Total deconsolidation adjustments
(190,988)
(177,967)
Derivatives adjustments
(6,254)
(4,896)
Securities financing transactions adjustments
3,351
2,262
Off-balance sheet items
40,186
40,942
Amounts already deducted from tier 1 capital
(12,395)
(12,523)
Other regulatory adjustments2
(4,127)
(4,012)
Total exposure measure
647,634
Average exposure measure3
UK leverage ratio
5.5%
5.8%
Average UK leverage ratio3
5.5%
Leverage exposure measure (including central bank claims)
736,470
725,259
Leverage ratio (including central bank claims)
5.1%
5.2%
Total MREL resources
72,223
69,905
MREL leverage ratio
10.7%
10.8%
674,074
689,726
1
Deconsolidation adjustments relate to the deconsolidation of certain Group entities that fall outside the scope of the Group’s regulatory capital consolidation, primarily the Group’s
Insurance business.
2
Includes adjustments to exclude lending under the Government’s Bounce Back Loan Scheme (BBLS).
3
The average UK leverage ratio is based on the average of the month end tier 1 capital position and average exposure measure over the quarter (1 October 2024 to 31 December 2024).
The average of 5.5 per cent compares to 5.5 per cent at the start and 5.5 per cent at the end of the quarter.
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Climate risk
Definition
The Group defines climate risk as the risk from the
impacts of climate change and the transition to net
zero (‘inbound risk’), or a result of the Group’s
response to tackling climate change and supporting
the transition to net zero (‘outbound risk’).
The Risk overview, on page 34, contains a summary of climate risk
performance and key mitigating actions.
Analysis of leverage movements
The Group’s UK leverage ratio reduced to 5.5 per cent (31 December
2023: 5.8 per cent) reflecting the reduction in the total tier 1 capital
position and the increase in the leverage exposure measure
following lending growth and increases across securities financing
transactions and other assets (excluding central bank claims).
The average leverage exposure measure reflected higher levels of
securities financing transactions during the quarter.
Stress testing
The Group undertakes a wide-ranging programme of stress testing,
providing a comprehensive view of the potential impacts arising
from the risks to which the Group and its key legal entities are
exposed. One of the most important uses of stress testing is to
assess the resilience of the operational and strategic plans of the
Group and its legal entities to adverse economic conditions and
other key vulnerabilities. As part of this programme the Group
participated in the PRA desk-based stress test in 2024. The test
evaluated the resilience of the UK banking system to two
hypothetical scenarios including severe but plausible combinations
of adverse shocks to the UK and global economies. Both scenarios
had House Price Index (HPI) falls of 28 per cent, Commercial Real
Estate (CRE) falls of 35 per cent and an increase in unemployment
of 4.7 per cent. One scenario tested a Base Rate peak of 9 per cent
whilst the other explored a Base Rate reduction to 0.1 per cent. The
results were published in November 2024 and the report concluded
the UK banking system is well capitalised, maintains high levels of
liquidity and asset quality remains strong. The report did not publish
individual Bank results and the Group was not required to take any
capital actions. The Bank of England has updated its approach to
stress testing the UK banking system and, as part of that, in 2025
the Group will participate in the PRA Bank Capital Stress Test.
G-SIB indicators
Although the Group is not classified as a Global Systemically
Important Bank (G-SIB) at 31 December 2024, by virtue of the
Group’s leverage exposure measure exceeding €200 billion the
Group is required to report G-SIB indicator metrics to the PRA.
The Group’s indicator metrics used within the 2024 Basel G-SIBs
annual exercise will be disclosed at the end of April 2025 and the
results are expected to be made available by the Basel Committee
later this year.
Insurance business
The business transacted by the insurance companies within the
Group comprises both life insurance business and general insurance
business. Life insurance comprises unit-linked, non-profit and With-
Profits business.
Scottish Widows Limited (SW Ltd) holds the only With-Profits funds
managed by the Group. The UK insurance companies within the
Group are regulated by the PRA. SW Ltd’s European insurance
subsidiary is regulated by the CAA.
Risk management continued
The Solvency II regime for insurers and insurance groups came
into force from 1 January 2016 and was most recently updated in
December 2024 as part of the Solvency UK reforms. Insurance is
required to calculate solvency capital requirements and available
capital on a risk-based approach. Insurance calculates regulatory
capital on the basis of an internal model, which has been
approved by the PRA.
The minimum required capital must be maintained at all times
throughout the year. These capital requirements and the capital
available to meet them are regularly estimated in order to ensure
that capital requirements are being met. The capital position of
the Group’s insurance businesses is reviewed on a regular basis by
the Insurance, Pensions and Investments Executive Committee.
All minimum regulatory requirements of the insurance companies
have been met during the year.
Embedding
Climate risk continues to be a principal risk, recognising the
importance of the topic as it progresses toward being fully
embedded. However, the approach is less mature compared to the
Group’s other principal risks and continues to evolve. Climate risk
also differs from other risks, as it can materialise through inbound
risk, outbound risk or potentially both:
• Inbound risk: impacts of a risk on the Group’s balance sheet,
which can lead to a financial loss. Managing inbound risks is
critical to mitigate this potential impact, including supporting
customers to be aware of potential risks. Examples include
property devaluation, relied on as collateral, from physical
and transition risks and extreme weather events increasing
insurance losses
• Outbound risk: impacts of the Group’s balance sheet or activity
on the environment driven by our strategy or purpose. Examples
include the insufficient consideration of climate risk in external
disclosure, or external perception of the Group’s actions, claims
and disclosures
Understanding the potential impacts from climate risk on the Group
and other stakeholders continues to develop through our evolving
approach to double materiality across a range of sustainability risks,
including climate risk. See page 49 for more information on how the
Group considers materiality.
The Group’s climate risk policy provides an overarching framework
for managing climate risks. This aims to ensure awareness of key
climate-related risks across the different areas of the Group, and
that appropriate processes and controls are in place to mitigate
these risks. The policy includes requirements for governance,
scenario analysis and management of climate risks, as well as
governance requirements for different aspects of the Group’s net
zero strategy. Activity across the Group to meet these requirements
is actively monitored, including through the development of the
Group’s climate risk profile.
The impacts from climate risk largely manifest through other
principal risks. Therefore, the Group aims to ensure that
consideration of climate risk is reflected within its approach for
managing other principal risks.
Exposures
Climate risks arise through two channels, physical and transition
risks, with various methods used to help identify and assess the
Group’s potential exposure.
Examples of how the Group seeks to understand physical risks
include identifying areas at high risk of flooding and assessing our
potential exposure to flood risk across our mortgage and insurance
portfolios. Flood risk and coastal erosion is discussed in more detail
in the Group’s sustainability report 2024 on page 133.
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Examples of how the Group seeks to understand transition
risks include:
For example:
•
Within the Home Insurance business there is a dedicated
weather modelling team
•
For the UK Motor Finance portfolio, the transition from internal
combustion engines (ICE) to electric vehicles (EVs) is a key
consideration in measuring residual value risk (see page 164 for
credit performance of UK Motor Finance)
•
For Commercial Banking lending, the Group’s ESG tool assesses
exposure to the impact of climate risk for specific customers as
part of the credit decisioning process
•
For Retail lending, energy efficiency is assessed for the Homes
portfolio via energy performance certificates (EPC)
•
Scottish Widows analysis of impact of transition risk upon
equities is detailed within the sustainability report 2024 on
page 134
Transition risks have been assessed to have more short to medium
term impacts, although are particularly dependent on the extent of
government policies to meet climate commitments on limiting
future global warming. However, current modelling approaches
suggest significant impacts relating to physical risks will be longer
term, although there are industry-wide weaknesses in determining
the economic impact of physical risk. Addressing these gaps might
increase the estimated impact of physical risk and potentially
reduce the estimated timeframe to manifest.
The Group has identified the sectors at increased risk from the
impacts of climate change and continues to monitor its loans and
advances to customers in these sectors, see page 80 in the Group’s
sustainability report 2024.
Scenario analysis
The Group continues to develop its climate scenario analysis
capabilities to inform analysis of climate risks, as well as to help
shape the Group’s strategy to reflect climate opportunities
and assess its resilience. Subsequent analysis has focused
on understanding the areas of the Group most impacted
by climate change, as well as assessing the impact from key
climate-related risks.
Separate assessments have been undertaken for the Group’s
Commercial Banking lending and Scottish Widows investments
portfolios to identify the sectors most exposed to climate transition
risks. Whilst climate modelling is still relatively immature, the Group
has deliberately trialled different approaches in order to understand
where modelled outputs provide consistent messages with each
other, or where they disagree and further exploration is needed.
Taken together, these assessments, supported by consideration of
the risks relating to the Group’s response to managing these, inform
the key climate-related risks at Group level, with input from other
entities to capture any material risks not reflected. The table on
page 51 provides a high-level overview of the Group’s key climate
risks, alongside other wider sustainability risks and opportunities.
This considers the cross-cutting impacts across other principal risks
in the Group’s ERMF. A similar exercise has been carried out for
Scottish Widows, as outlined on page 136 in the Group’s
sustainability report 2024.
For Scottish Widows’ investments, the analysis focused on the
impact of climate risk on broadly defined sectors. The conclusions
from this work on the overall ranking of sector sensitivities to
transition risk align with the Commercial Banking lending portfolio
summary below.
The materiality of the Group’s key climate risks reflects their
potential impact on the Group, as a key component of the ERMF,
all risks, including climate risk are assessed against a matrix with
impact and likelihood axes. Several factors are assessed to
determine the materiality of impacts.
These impacts are considered on an ongoing basis, with formal
assessment at least annually or driven more frequently by numerous
triggers. This assessment is supported by horizon scanning of
climate-related developments and additional quantitative and
qualitative analysis, such as scenario analysis results.
The following chart analyses climate risk for a benchmark of sectors
using data from Planetrics, a McKinsey & Company solution1 . This
data focuses on listed companies and provides a European and
North American benchmark view of each sector and is not specific
to the Group’s portfolio.
The estimated financial impacts from transition risk are modelled
for each entity.
Measurement
The Group undertakes a number of different activities to measure
the impact of the key inbound and outbound risks relating to
climate change.
From an outbound perspective, the Group measures its emissions
relating to activities across Bank finance, Scottish Widows’
investments, supply chain and its own operations. This provides a
view on the impact of the Group’s activities, as well as identifying
areas where the Group can most effectively reduce emissions to
support the transition to net zero. Further detail on the approach
for each of these areas is provided on pages 4 to 40 in the Group’s
sustainability metrics basis of reporting 2024.
From an inbound perspective, the levels of climate risk impacting
different areas of the Group are measured through a variety of
metrics and approaches. In general, quantifying the impact of the
risks associated with climate change requires scenario analysis
particularly given the different potential outcomes and time
horizons over which the risks may manifest. This is explored further
in the following sub-section, however, there are some areas where
consideration of climate-related risks is already embedded,
reflecting the relative certainty of impacts resulting from these risks.
The relative difference between this climate estimate and a baseline
provides an indicative foresight view of discounted cashflow
reflecting transition risks to 2050 and physical risks to 2080. These
entity-level Net Present Value (NPV) differences are aggregated to
provide a view aligned to lending sectors with increased transition
risk in the NGFS Phase IV Net Zero 2050 scenario.
1
This chart represents the Group’s own selection of applicable scenarios that is applied
to a wide set of public companies (larger than the Group’s own portfolio). The Group is
responsible for all assumptions in its scenario selection, resulting findings, conclusions
and decisions. McKinsey & Company is not an investment adviser and has not provided
any investment advice.
NPV impacts in Net Zero 2050 scenario
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This is broadly comparable with the results obtained from previous
NGFS Phases, with two main comments:
•
The 2nd quartiles have shifted slightly left, indicating a worsening
view – which is consistent with the increasing assumptions
required for later versions of the Net Zero 2050 scenario given
lack of transition developments in the meantime
•
Automobile manufacturing sector outlook has improved
significantly as NGFS pathway updates reflect the switch from
ICE to EV production already witnessed
Results of scenario analysis undertaken continue to support the
conclusion that the Group has a relatively low Commercial Banking
lending exposure to sectors which experience the most significant
negative impacts when compared to exposure across those sectors
with lower expected impacts. See page 174 for further detail of the
Group’s lending by sector.
Climate risks also transmit via traded assets and the Group has
undertaken climate scenario analysis across three bespoke climate
scenarios, to understand the impact of very short-term market risk
factor shocks stemming from both physical and transition risks.
Resulting stressed valuations fell within existing stress test
framework outcomes demonstrating the resilience of existing risk
management approaches.
In 2024, the Group has explored the effects of policy tightening
leading to significant increases in expectations for managing
sustainability. A scenario exercise was undertaken to assess the
potential financial impacts of a regulatory enquiry, stemming from
observed market failings, on processes associated to green and
sustainable products and services relevant to the Group’s
Commercial Banking lending activities. The scenario analysis
identified actions to further enhance the robustness of internal
controls to mitigate the risks of greenwashing.
The use of scenario analysis in assessing the impact of climate
related change on credit quality in expected credit losses (ECL) saw
improvements in both quantification and granularity for the 2024
assessment. Retail and commercial loan portfolios were assessed for
both transition and physical risks.
For transition risk, the quantitative assessment was extended to the
entire residential real estate portfolio and now assessed at account
level for sensitivity to affordability stress arising from changes in
energy efficiency regulations. Physical risk assessments were
extended from flood risk to include coastal erosion risk for
residential real estate.
For Commercial Banking lending, a top-down sector level approach
used to estimate impacts, was updated to use the latest available
NGFS scenarios. The approach combines sector level NPV impact
estimates, NGFS Gross Domestic Product (GDP) pathways, historic
impairment data and other inputs, to assess the impact of physical
and transition risks.
All the individual portfolio assessments fell below materiality
thresholds and, hence, the overall impact continues to be
immaterial. The approach and outcomes are described in more
detail in note 21 to the consolidated financial statements on
page 282.
Mitigating actions
The Group manages climate-related risk in different ways across
the four key areas of climate risk identified (net zero, disclosures,
greenwashing and physical and transition risks). The following
sections provide an overview of the Group’s mitigation approach,
including the relevant cross-cutting impacts across each of
these themes.
Net zero
The Group has continued to develop action plans across its systems-
led approach. The Group’s climate transition plan sets out the steps
it will take to reduce emissions to net zero for its own operations
and supply chain, as well as the emissions associated with its lending
and investments portfolios. Progress against these ambitions is
monitored through the Group Net Zero Committee on a quarterly
basis and the outputs from this have been used to measure the
Group’s risk appetite for climate risk. For further details, please see
the Group’s sustainability report 2024 on page 68.
Disclosures
The Group’s external disclosures are subject to a robust governance
process, including appropriate legal review. This includes an
assessment of the relevant regulatory requirements, particularly to
ensure alignment with Climate-related Financial Disclosures
requirements (CFD) and Task Force on Climate-related Financial
Disclosures (TCFD) recommendations. External disclosures will
continue to progress in line with the changing regulatory landscape,
and the Group will ensure suitable controls remain in place as these
develop. A number of topics are being introduced this year aiming
to support early compliance of the requirements of ISSB IFRS S1 and
S2 expected to be endorsed by the Government in 2025.
Greenwashing
The Group is enhancing its controls and processes in relation to
greenwashing, aiming to ensure communications are clear, fair and
not misleading. The Group is committed to investigating any
challenge or suggestion of greenwashing and feeding any learnings
into enhancing the control framework. Approaches the Group takes
to support transparency, accuracy and appropriateness of products,
communications and disclosures include:
•
External legal review on the suitability of content within the
Group’s sustainability report and annual report and accounts,
endeavouring to support clear and accurate disclosures
•
Scottish Widows ESG Claims Framework, requiring first line
teams to assess ESG claims prior to publication of
communications to ensure any claims are accurate, clear,
not misleading and can be substantiated
•
Group product policy aligned to Consumer Duty and focus
on customer outcomes
•
Dedicated ESG guidance to support product
governance processes
Risk management continued
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Physical and transition risks
Physical and transition risks can impact different areas of the Group
in different ways, some of the key areas are elaborated on below.
Own operations and supply chain
Climate risk is embedded in the Group’s approach for managing
operational resilience, as one of the key drivers within the Group
strategy, considering the impact on and from climate as part of
ensuring its operations remain resilient. Climate-related impacts
could affect operational resilience through properties, IT systems,
people and third party suppliers and create disruption to services.
The Group has processes in place to consider the resilience of its
property in relation to physical risks, particularly focused on its
offices, data centres and branch network, to minimise the risk of
service disruption. Insurers periodically highlight the Group’s
buildings that are subject to high flood risk. These sites are then
surveyed in detail to quantify that risk and determine appropriate
flood defence mitigation. The Group proactively monitors the
temperature and humidity in its data centres, with root cause
analysis undertaken for any incidents to identify any local climate
issues and remediate. Additionally, resilient tech rooms have
been created where power, temperature and humidity are
robustly controlled.
Commercial Banking and Retail lending
For the Group’s Commercial Banking and Retail lending this could
manifest in potential devaluation of property or collateral or a
reduction in clients creditworthiness or affordability. The Group
continues to integrate climate risk in its credit process, in addition
to wider ESG considerations, with continued progress in 2024. This
is through a credit risk integration strategy, which includes the
Group’s ESG credit risk framework and policies, development of an
ESG risk indicator framework at sector level helping to inform
lending decisions as well as portfolio and case management.
Key developments in 2024 for assessing climate-related credit
risks include:
•
Transition risk assessments across Commercial Banking lending
have been enhanced, including updating of the assessment
criteria, incorporating methodology from our credible transition
plan work, expanding into key net zero sectors: SME agriculture
and commercial and residential real estate
•
Retail credit decisioning has EPC controls for new and existing
lending for buy-to-let, and property specific transition costs
considered as part of the residential affordability assessment
•
The mortgage origination stage requires a physical inspection for
all properties exposed to increased flood and coastal erosion risk
Further detail on management of climate-related and ESG
credit risks is provided on page 125 of the Group’s sustainability
report 2024.
The Group expects its third party suppliers to review their business
continuity plans and recovery strategies, ensuring these are
appropriately updated to mitigate potential risks posed by climate
change, to ensure continued provision of service and appropriate
consideration of environmental sustainability related to
their activities.
Home insurance
Provision of household insurance can be impacted by both physical
and transition risks, in particular, the potential for underwriting and
insurance risks arising from climate change, such as increased
frequency and severity of extreme weather events. Given the short-
term nature of home insurance policies, the Group is able to update
its view of risk regularly and change its approach as risks develop.
This helps mitigate the long-term exposure to climate risks. The
Group aims to support customers in improving the resilience of their
homes, including reaching out ahead of extreme weather events
providing elements of advice and guidance on how to protect
themselves and their homes.
Monitoring
The Group ensures visibility and awareness of climate risks wherever
they present themselves across its risk profile, with regular reporting
and tracking of any identified risks. Management information across
a range of themes is regularly assessed to provide insight into and
oversight of management of climate risk, together with tracking
of associated action plans and identification of triggers for
reassessment. This follows appropriate Risk governance, across the
relevant business units and is reported on a regular basis through
the Group Control and Risk Environment report. This provides
insight into any changes to risk profiles together with a rationale for
awareness and scrutiny by senior leaders.
Investments
To help manage possible impacts of physical and transition risk in
the value or availability of assets, the Group has various controls in
place including due diligence around the selection and oversight of
our external fund managers, including around ESG factors. The
investments team has dedicated fund investment leads who are
responsible for all aspects of oversight, including review of climate-
related risks and ESG factors and related data supplied by external
fund managers. The Group also utilises the ESG Tool as part of its
credit risk assessment process.
The Group also closely monitors climate-related regulatory
developments to ensure our approach meets evolving expectations.
This includes understanding the current relevant requirements,
monitoring the Group’s activity and progress against expectations,
for example Dear CEO and CFO letters, as well as horizon scanning
for new developments, such as how the ISSB IFRS disclosure
standards are adopted in the UK. The Group also seeks to include
and map regulatory obligations within its risk and control profile in
support of compliance traceability.
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Conduct risk
Definition
The risk of the Group’s activities, behaviours,
strategy or business planning, having an adverse
impact on outcomes for customers, undermining the
integrity of the market or distort competition, which
could lead to regulatory censure, reputational
damage or financial loss.
Level two risks
Colleague, Customer, Market
The Risk overview, on page 35, contains a summary of conduct risk
performance and key mitigating actions.
Risk management continued
Compliance risk
Definition
The risk of financial penalties, regulatory censure,
criminal or civil enforcement action or customer
detriment as a result of failure to identify, assess,
correctly interpret, comply with, or manage
regulatory and/or legal requirements.
Level two risks
Regulatory, Legal
The Risk overview, on page 35, contains a summary of compliance risk
performance and key mitigating actions.
Exposures
The Group does not tolerate non-adherence to regulatory and legal
requirements, and all colleagues employed by the Group are
expected to comply with legal and regulatory obligations,
requirements, statutes, voluntary codes and permissions. Where
inadvertent instances of non-compliance occur, these are addressed
promptly with corrective action to minimise exposure and avoid
recurrence. The Group remains exposed to the evolving legal and
regulatory landscape, such as changes to the regulatory framework
and other standards.
Measurement
Compliance risk is measured against the defined risk appetite
metrics, which is an assessment of material regulatory breaches and
material legal incidents.
Mitigating actions
The Group undertakes a range of key mitigating actions to manage
compliance risk. These include the following:
•
•
•
•
•
•
•
•
•
A Group-wide risk appetite and metrics for compliance risk
Principles are reinforced by Group policies and standards and
apply across the business, aligning to the Group risk appetite
Business units identify, assess and implement policy and
regulatory and legal requirements and establish controls,
processes, standards and resources to ensure appropriate
governance and compliance
Business units have systems and controls to deliver against the
purpose and expectation of legal and regulatory requirements
Business units regularly produce management information to
assist in the identification of issues and test management
controls are working effectively
The Legal function provides legal advice and together, the Risk
and Legal functions provide oversight, proactive support and
constructive challenge to the wider business in identifying and
managing regulatory and legal issues
The Risk function conducts reviews to provide oversight of
regulatory compliance
Horizon scanning is conducted to identify and address changes in
regulatory and legal requirements
The Group engages with regulatory authorities and industry
bodies on forthcoming regulatory changes, market reviews and
investigations, ensuring programmes are established to deliver
new regulation and legislation
Exposures
The Group faces significant conduct risks, which affect all aspects of
the Group’s operations and all types of customers. The introduction
of the FCA’s Consumer Duty regulation has increased expectations
in relation to customer outcomes, including how the Group
demonstrates, monitors and measures them.
The Group continues to monitor and assess potential impacts to
customers following the Court of Appeal decision on motor finance
commission arrangements, liaising closely with regulatory bodies.
See note 28 to the consolidated financial statements on page 289.
The Group is exposed to the risk of engaging in activities which
could constitute market abuse, undermine the integrity of a market
in which it is active, distorting competition or creating conflicts
of interest.
There is a high level of scrutiny from regulatory bodies, the media,
politicians and consumer groups regarding financial institutions’
treatment of customers, with particular attention to those with
characteristics of vulnerability. The Group continues to apply
significant focus to its treatment of all customers, in particular those
in financial difficulties and those with characteristics of vulnerability,
to ensure good outcomes.
The Group continuously responds and adapts to market
developments that could pose heightened conduct risk, and actively
monitors for early signs of customer financial difficulty.
Other key areas of focus include transparency and fairness of pricing
communications; ensuring victims of Authorised Push Payment
Fraud receive good outcomes; and a continued mindset shift in line
with Consumer Duty requirements to improve customer outcomes
throughout the Group, with particular focus on improvements to
Group-wide reporting and monitoring.
Measurement
To articulate its conduct risk appetite, the Group has Conduct Risk
Appetite Metrics (CRAMs) throughout all business units, with
tolerances indicating where it may be operating outside its conduct
risk appetite. These contain a range of product design, sales and
process metrics (including outcome testing results) to provide a
more holistic view of conduct risks; some products also have a suite
of additional bespoke metrics.
Monitoring
Material risks are managed through the relevant business
committees, with review and escalation provided through Group-
level committees, including the escalation of any material regulatory
breaches or material legal incidents. For further detail of Group-level
committees, see page 140.
Each of the tolerances for the metrics are agreed for the individual
product or service and are regularly tracked. At a consolidated level,
these metrics form part of the Board risk appetite. The Group has,
and continues to, evolve its approach to conduct risk measurements
to include emerging conduct themes.
Mitigating actions
The Group’s ongoing commitment to delivering a leading customer
experience is led by the Board, and supports the continued
development of our values-led culture, with customer outcomes as
a priority. There is a strong focus on strengthening the link between
actions to support conduct, culture and customer, enabling robust
control management.
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Financial risk indicators (underlying basisA )
•
Impairment charge: £433 million (2023: £308 million)
•
Expected credit loss: £3,651 million (2023: £4,337 million)
•
Loans and advances in Stage 2: 10.4 per cent (2023: 12.5 per cent)
Exposures
The principal sources of credit risk within the Group arise from loans
and advances, contingent liabilities, commitments and debt
securities to customers, financial institutions and sovereigns.
Credit risk arises from:
• Loans and advances (for example mortgages, term loans and
overdrafts) and commitments or guarantees (for example credit
instruments): The Group can experience potential losses from
both amounts advanced and commitments to extend credit to a
customer or a bank
• Debt securities and derivatives. The potential financial loss
to the Group as a result of a counterparty defaulting on
its obligations
• Leasing arrangements where the Group is the lessor. Note 2(J)
to the consolidated financial statements on page 223 provides
details on the Group’s approach to the treatment of leases
Credit risk exposures in the Insurance, Pensions and Investments
division relate mostly to bond and loan assets which, together with
some related swaps, are used to fund annuity commitments within
shareholder funds; plus balances held in liquidity funds to manage
Insurance division’s liquidity requirements, and exposure
to reinsurers.
The investments held in the Group’s defined benefit pension
schemes also expose the Group to credit risk. Note 12 to the
consolidated financial statements on page 248 provides further
information on the defined benefit pension schemes’ assets
and liabilities.
Loans and advances, contingent liabilities, commitments, debt
securities and derivatives also expose the Group to refinance risk.
Refinance risk is the possibility that an outstanding exposure cannot
be repaid at its contractual maturity date. If the Group does not
wish to refinance the exposure then there is refinance risk if the
obligor is unable to repay by securing alternative finance.
The maximum credit risk exposure of the Group in the event of
other parties failing to perform their obligations is considered to
be the balance sheet carrying amount or, for non-derivative off-
balance sheet transactions and financial guarantees, their
contractual nominal amounts (not taking into account any
collateral held).
Further details can be seen in note 16 to the consolidated
financial statements on page 258 and note 38 to the
consolidated financial statements on page 297.
5
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Actions to support good conduct include:
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Conduct risk appetite established at Group and divisional level,
with metrics included in the Group risk appetite to ensure
ongoing focus and escalation
Conduct policies and procedures to ensure appropriate controls
and processes to deliver good customer outcomes, and support
market integrity and competition requirements
Customer needs considered through divisional customer plans,
with an integral conduct lens
Implementation of the vulnerability strategy continues, with
focus on the monitoring of vulnerable customer outcomes,
providing strategic direction and ensuring consistency of
outcomes across the Group
Robust product governance framework to ensure products
continue to offer customers fair value, and consistently meet
their needs throughout their product lifecycle
Complaints management through responding to, and learning
from, root causes of complaint volumes and Financial
Ombudsman Service (FOS) change rates
Robust colleague recruitment and training, with a continued
focus on how the Group manages colleagues’ performance with
clear customer accountabilities
Ongoing engagement with third parties involved in serving the
Group’s customers to ensure consistent delivery in line with the
Group’s own standards and expectations
Enhancements made to monitoring and testing of customer
outcomes to ensure the Group delivers good outcomes for
customers throughout the product and service lifecycle, with
areas of improvement addressed via continuous improvements
to products, services and processes
Continued focus on market conduct. The Group is a member of
the Fixed Income, Currencies and Commodities Markets
Standard Board and is committed to conducting its market
activities in line with the principles of the UK Money Markets
Code, the Global Precious Metals Code and the FX Global Code
Adoption and investment in robust change delivery
methodology, to enable the prioritisation and delivery of
initiatives which address conduct challenges
Continued focus on proactive identification and mitigation of
conduct risk in the Group’s strategy
Active engagement with regulatory bodies and other
stakeholders to develop understanding of concerns related to
customer treatment, effective competition and market integrity,
to ensure that the Group’s strategic conduct focus continues to
meet evolving stakeholder expectations
Ongoing investment in additional support for customers
impacted by the rising cost-of-living, including the ‘More Money
in Your Pocket’ and ‘MyExtras’ hub, in addition to the benefits
calculator and bill switcher tools
Continued embedding of Consumer Duty to meet the increased
expectations relating to customer outcomes
Monitoring
Conduct risk is governed through divisional risk committees and
significant issues, including thematic conduct items are escalated to
the Group Risk Committee, in accordance with the Group’s ERMF,
as well as through regular risk reporting. The risk exposures are
reported, discussed and challenged at divisional risk committees.
Remedial action is recommended, if required. All material conduct
risk events are escalated in accordance with the Group’s
operational risk management toolkit.
A number of activities support the close ongoing monitoring of
conduct risk, including:
•
The use of CRAMs across the Group, with an escalation route
to Board
•
Oversight and assurance activities across the three lines
of defence
•
Horizon scanning to highlight developments and trends, allowing
the Group to anticipate upcoming challenges and opportunities
Credit risk
Definition
Credit risk is defined as the risk that parties with
whom the Group has contracted fail to meet their
financial obligations (both on and off-balance sheet).
Level two risks
Retail credit (page 159), Commercial credit (page 160)
The Risk overview, on page 35, contains a summary of credit risk
performance and key mitigating actions.
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The maximum credit risk exposure of the Group in the event of
other parties failing to perform their obligations is considered to
be the balance sheet carrying amount or, for non-derivative off-
balance sheet transactions and financial guarantees, their
contractual nominal amounts (not taking into account any
collateral held).
Further details can be seen in note 16 to the consolidated
financial statements on page 258 and note 38 to the
consolidated financial statements on page 297.
Measurement
The process for credit risk identification, measurement and
control is integrated into the Board-approved framework for
credit risk appetite and governance.
Credit risk is measured from different perspectives using a range
of appropriate modelling and scoring techniques at a number of
levels of granularity, including total balance sheet, individual
portfolio, pertinent concentrations and individual customer – for
both new business and existing exposure. Key metrics, which
may include but are not limited to, total exposure, ECL, risk-
weighted assets, new business quality, concentration risk and
portfolio performance, are reported monthly to risk committees
and forums.
Measures such as ECL, risk-weighted assets, observed credit
performance, predicted credit quality (usually from predictive
credit scoring models), collateral cover and quality, and other
credit drivers (such as cash flow, affordability, leverage and
indebtedness) have been incorporated into the Group’s credit
risk management practices to enable effective risk measurement
across the Group.
The Group is strengthening its ability to manage climate-related
risks and opportunities recognising the impact of climate change on
credit risk. For more details refer to the sustainability report 2024.
Stress testing and scenario analysis are used to estimate impairment
losses and capital demand forecasts for both regulatory and internal
purposes and to assist in the formulation and calibration of credit
risk appetite, where appropriate.
The Risk function also tests the effectiveness of credit risk
management and internal credit risk controls. This includes ensuring
that the control and monitoring of higher risk and vulnerable
portfolios and sectors is appropriate and confirming that
appropriate loss allowances for impairment are in place. Output
from these reviews helps to inform credit risk appetite, credit policy
and portfolio mandates.
As the third line of defence, Group Internal Audit undertakes regular
risk-based reviews to assess the effectiveness of credit risk
management and controls.
Mitigating actions
The Group uses a range of approaches to mitigate credit risk.
Prudent credit principles, risk policies and appetite statements:
The independent Risk function sets out the credit principles, credit
risk policies and credit risk appetite statements.
Credit risk appetite is set at Board level and is described and
reported through a suite of metrics devised from a combination
of accounting and credit portfolio performance measures, which
include the use of various credit risk rating systems as inputs and
assess credit risk at a counterparty level using three components:
(i) the probability of default by the counterparty on its
contractual obligations; (ii) the current exposures to the
counterparty and their likely future development, from which
the Group derives the exposure at default; and (iii) the likely loss
ratio on the defaulted obligations, the loss given default.
Limitations on concentration risk: there are portfolio controls
on certain industries, sectors and products to reflect risk appetite
as well as individual, customer and bank limit risk tolerances.
Credit policies, appetite statements and mandates are aligned to
the Group’s risk appetite and restrict exposure to higher risk
countries and potentially vulnerable sectors and asset classes.
Exposures are monitored to prevent both an excessive
concentration of risk and single name concentrations. These
concentration risk controls are not necessarily in the form of a
maximum limit on exposure, but may instead require new
business in concentrated sectors to fulfil additional minimum
policy and/or guideline requirements. The Group’s largest credit
limits are regularly monitored by the Board Risk Committee and
reported in accordance with regulatory requirements.
Defined country risk management framework: the Group sets a
broad maximum country risk appetite. Risk-based appetite for all
countries is set within the independent Risk function, taking into
account economic, financial, political and social factors as well as
the approved business and strategic plans of the Group.
Specialist expertise: credit quality is managed and controlled by
a number of specialist units within the business and Risk function,
which provide for example: intensive management and control;
security perfection; maintenance of customer and facility records;
expertise in documentation for lending and associated products;
sector-specific expertise; and legal services applicable to the
particular market segments and product ranges offered by
the Group.
Stress testing: the Group’s credit portfolios are subject to regular
stress testing, including Group-led PRA and other regulatory stress
tests focusing on individual divisions and portfolios. For further
information see pages 142 to 143.
Frequent and robust credit risk assurance: An independent
function within the Risk function provides oversight that credit risk
is effectively managed and to ensure appropriate controls are in
place and being adhered to. Group Audit conducts assurance on the
effectiveness of credit risk management.
Credit principles, risk policies and appetite statements are subject
to regular review and governance, with any changes subject to an
approval process. Risk teams monitor credit performance trends
and the outlook. Risk teams also test the adequacy of and
adherence to credit risk policies and processes throughout the
Group. This includes tracking portfolio performance against an
agreed set of credit risk appetite tolerances.
Robust models and controls: see model risk on page 195.
Collateral
The principal types of acceptable collateral include: residential
and commercial properties; charges over business assets such
as inventory and accounts receivable; financial instruments such
as debt securities; vehicles; cash; and guarantees received from
third parties.
The Group maintains appetite parameters on the acceptability of
specific classes of collateral.
For non-mortgage retail lending to small businesses, collateral may
include second charges over residential property and the
assignment of life cover.
Collateral held as security for financial assets other than loans and
advances is determined by the nature of the underlying exposure.
Debt securities, including treasury and other bills, are generally
unsecured, with the exception of asset-backed securities and similar
instruments such as covered bonds, which are secured by portfolios
of financial assets. Collateral is generally not held against loans and
advances to financial institutions and debt securities. Debt
securities are classified as financial assets held at amortised cost.
Securities are held as part of reverse repurchase or securities
borrowing transactions or where a collateral agreement has been
entered into under a master netting agreement. Derivative
transactions with financial institutions are typically collateralised
under a Credit Support Annex (CSA) in conjunction with the
International Swaps and Derivatives Association (ISDA) Master
Agreement. Derivative transactions with non-financial customers
are not usually supported by a CSA.
Risk management continued
156
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Credit risk appetite is set at Board level and is described and
reported through a suite of metrics devised from a combination
of accounting and credit portfolio performance measures, which
include the use of various credit risk rating systems as inputs and
assess credit risk at a counterparty level using three components:
(i) the probability of default by the counterparty on its
contractual obligations; (ii) the current exposures to the
counterparty and their likely future development, from which
the Group derives the exposure at default; and (iii) the likely loss
ratio on the defaulted obligations, the loss given default.
Collateral requirements at origination depend on the transaction’s
nature and the borrower’s credit quality, size and structure.
For non-retail exposures, the Group may seek:
•
A first charge over land and buildings owned and occupied by
the business
•
A debenture over the assets of a company or limited liability
partnerships
•
Limited personal guarantees from directors of a company or
limited liability partnership
•
Key man insurance
The Group has policies on acceptable collateral valuations,
maximum loan-to-value (LTV) ratios, and other criteria for
application reviews. The customer must demonstrate its ability to
generate funds from normal operations to repay a customer or
counterparty’s financial commitments, rather than relying on the
disposal of collateral.
Additional mitigation for Retail customers
The Group uses a variety of lending criteria when assessing
applications for mortgages and unsecured lending. The general
approval process uses credit acceptance scorecards and involves a
review of an applicant’s previous credit history using internal data
and information held by Credit Reference Agencies (CRA).
The Group also assesses the affordability and sustainability of
lending for each borrower. For secured lending this includes use of
an appropriate stressed interest rate scenario. Affordability
assessments for all lending are compliant with relevant regulatory
and conduct guidelines. The Group takes reasonable steps to
validate information used in the assessment of a customer’s income
and expenditure.
Although lending decisions are primarily based on expected cash
flows, any collateral provided may impact the pricing and other
terms of a loan or facility granted. This will have a financial impact
on the amount of net interest income recognised and on internal
loss given default estimates that contribute to the determination of
asset quality and returns.
The Group requires collateral to be valued by a qualified,
independent source at the time of borrowing, where
appropriate. For retail residential mortgages, automated
valuation models may be used, subject to accuracy and LTV
limits. Third party valuations are regularly monitored and
reviewed. Collateral values are reviewed based on lending type,
collateral and account performance to ensure they remain
appropriate. If collateral value declines, the Group may seek
additional collateral or amend facility terms. The Group adjusts
estimated market values to take account of the costs of
realisation and any discount associated with the realisation of
the collateral when estimating credit losses.
In some circumstances, where the discounted value of the
estimated net proceeds from the liquidation of collateral (i.e. net
of costs, expected haircuts and anticipated changes in the value
of the collateral to the point of sale) is greater than the
estimated exposure at default, no credit losses are expected and
no ECL allowance is recognised.
In addition, the Group has in place quantitative limits such as
maximum limits for individual customer products, the level of
borrowing to income and the ratio of borrowing to collateral. Some
of these limits relate to internal approval levels and others are policy
limits above which the Group will typically reject borrowing
applications. The Group also applies certain criteria that are
applicable to specific products, for example applications for buy-to-
let mortgages.
The Group considers risk concentrations by collateral providers and
collateral type with a view to ensuring that any potential undue
concentrations of risk are identified and suitably managed by
changes to strategy, policy and/or business plans.
The Group seeks to avoid correlation or wrong-way risk where
possible. Under the Group’s repurchase (repo) policy, the issuer of
the collateral and the repo counterparty should be neither the same
nor connected. The same rule applies for derivatives. The Risk
function has the necessary discretion to extend this rule to other
cases where there is significant correlation. Countries with a rating
equivalent to AA- or better may be considered to have no adverse
correlation between the counterparty domiciled in that country and
the country of risk (issuer of securities).
The Group’s credit risk disclosures for unimpaired other retail
lending show assets gross of collateral and therefore disclose the
maximum loss exposure.
During the year, £285 million of collateral was repossessed
(2023: £229 million), consisting primarily of residential property.
For UK mortgages, the Group’s policy permits owner occupier
applications with a maximum LTV of 95 per cent. This can increase
to 100 per cent for specific products where additional security is
provided by a supporter of the applicant and held on deposit by the
Group. Applications with an LTV above 90 per cent are subject to
enhanced underwriting criteria, including higher scorecard cut-offs
and loan size restrictions.
Buy-to-let mortgages within Retail are limited to a maximum loan
size of £2,000,000 and 80 per cent LTV for a single property. Buy-
to-let applications must pass a minimum rental cover ratio of 125
per cent under stressed interest rates, after applicable tax liabilities.
Portfolio landlords (customers with four or more mortgaged buy-to-
let properties) are subject to additional controls including
evaluation of overall portfolio resilience.
The Group’s policy is to reject any application for a lending product
where a customer is registered as bankrupt or insolvent, or has a
recent County Court Judgment or financial default registered at a
CRA used by the Group above de minimis thresholds. In addition,
the Group typically rejects applicants where total unsecured debt,
debt-to-income ratios, or other indicators of financial difficulty
exceed policy limits.
Where credit acceptance scorecards are used, new models, model
changes and monitoring of model effectiveness are independently
reviewed and approved in accordance with the governance
framework set by the Group Model Governance Committee.
The Group generally does not take physical possession of
properties or other assets held as collateral and uses external
agents to realise the value as soon as practicable, generally at
auction, to settle indebtedness. Any surplus funds are returned
to the borrower or are otherwise dealt with in accordance with
appropriate insolvency regulations. In certain circumstances the
Group takes physical possession of assets held as collateral
against commercial lending. In such cases, the assets are carried
on the Group’s balance sheet and are classified according to the
Group’s accounting policies.
Additional mitigation for Commercial Banking customers
Individual credit assessment and independent sanction of
customer and bank limits: with the exception of small exposures to
small to medium-sized enterprises (SME) customers where certain
relationship managers have limited delegated credit approval
authority, credit risk in commercial customer portfolios is subject to
approval by the independent Risk function, which considers the
strengths and weaknesses of individual transactions, the balance of
risk and reward, and how credit risk aligns to risk appetite.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
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Lloyds Banking Group plc Annual Report and Accounts 2024
The Group requires collateral to be valued by a qualified,
independent source at the time of borrowing, where
appropriate. For retail residential mortgages, automated
valuation models may be used, subject to accuracy and LTV
limits. Third party valuations are regularly monitored and
reviewed. Collateral values are reviewed based on lending type,
collateral and account performance to ensure they remain
appropriate. If collateral value declines, the Group may seek
additional collateral or amend facility terms. The Group adjusts
estimated market values to take account of the costs of
realisation and any discount associated with the realisation of
the collateral when estimating credit losses.
In some circumstances, where the discounted value of the
estimated net proceeds from the liquidation of collateral (i.e. net
of costs, expected haircuts and anticipated changes in the value
of the collateral to the point of sale) is greater than the
estimated exposure at default, no credit losses are expected and
no ECL allowance is recognised.
The Group’s credit risk disclosures for unimpaired other retail
lending show assets gross of collateral and therefore disclose the
maximum loss exposure.
During the year, £285 million of collateral was repossessed
(2023: £229 million), consisting primarily of residential property.
The Group generally does not take physical possession of
properties or other assets held as collateral and uses external
agents to realise the value as soon as practicable, generally at
auction, to settle indebtedness. Any surplus funds are returned
to the borrower or are otherwise dealt with in accordance with
appropriate insolvency regulations. In certain circumstances the
Group takes physical possession of assets held as collateral
against commercial lending. In such cases, the assets are carried
on the Group’s balance sheet and are classified according to the
Group’s accounting policies.
Exposure to individual counterparties, groups of counterparties or
customer risk segments is controlled through a tiered hierarchy of
credit authority delegations and risk-based credit limit guidances
per client group for larger exposures. Approval requirements for
each decision are based on a number of factors including, but not
limited to, the transaction amount, the customer’s aggregate
facilities, any risk mitigation in place, credit policy, risk appetite,
credit risk ratings and the nature and term of the risk. The Group’s
credit risk appetite criteria for counterparty and customer loan
underwriting is generally the same as that for loans intended to be
held to maturity. All hard loan/bond underwriting must be approved
by the Risk function. A pre-approved credit matrix may be used for
‘best efforts’ underwriting.
Models
The performance of all models used in credit risk is monitored in line
with the Group’s model governance framework – s ee model risk on
page 195.
Counterparty credit limits: limits are set against all types of
exposure in a counterparty name, in accordance with an agreed
methodology for each exposure type. This includes credit risk
exposure on individual derivatives and securities financing
transactions, which incorporates potential future exposures from
market movements against agreed confidence intervals. Aggregate
facility levels by counterparty are set and limit breaches are subject
to escalation procedures.
Intensive care of customers in financial difficulty
The Group operates a number of solutions to assist borrowers who
are experiencing financial distress. The material elements of these
solutions through which the Group has granted a concession,
whether temporarily or permanently, are set out below.
Forbearance
The Group’s aim in offering forbearance and other assistance to
customers in financial distress is to benefit both the customer and
the Group by supporting its customers and acting in their best
interests by, where possible, bringing customer facilities back into a
sustainable position.
The Group offers a range of tools and assistance to support
customers who are encountering financial difficulties. Cases are
managed on an individual basis, with the circumstances of each
customer considered separately and the action taken judged
as being appropriate and sustainable for both the customer
and the Group.
Daily settlement limits: settlement risk arises in any situation where
a payment in cash, securities or equities is made in the expectation
of a corresponding receipt in cash, securities or equities. Daily
settlement limits are established for each relevant counterparty to
cover the aggregate of all settlement risk arising from the Group’s
market transactions on any single day. Where possible, the Group
uses Continuous Linked Settlement in order to reduce foreign
exchange (FX) settlement risk.
Master netting agreements
It is credit policy that a Group-approved master netting agreement
must be used for all derivative and traded product transactions and
must be in place prior to trading, with separate documentation
required for each Group entity providing facilities. This requirement
extends to trades with clients and the counterparties used for the
Group’s own hedging activities, which may also include clearing
trades with Central Counterparties (CCPs).
Any exceptions must be approved by the appropriate credit
approver. Master netting agreements do not generally result in an
offset of balance sheet assets and liabilities for accounting purposes,
as transactions are usually settled on a gross basis. However, within
relevant jurisdictions and for appropriate counterparty types,
master netting agreements do reduce the credit risk to the extent
that, if an event of default occurs, all trades with the counterparty
may be terminated and settled on a net basis. The Group’s overall
exposure to credit risk on derivative instruments subject to master
netting agreements can change substantially within a short period,
since this is the net position of all trades under the master netting
agreement.
Forbearance measures consist of concessions towards a debtor that
is experiencing or about to experience difficulties in meeting its
financial commitments. This can include modification of the
previous terms and conditions of a contract or a total or partial
refinancing of a troubled debt contract, either of which would
not have been required had the debtor not been experiencing
financial difficulties.
The provision and review of such assistance is controlled through
the application of an appropriate policy framework and associated
controls. Regular review of the assistance offered to customers
is undertaken to confirm that it remains appropriate, alongside
monitoring of customers’ performance and the level of
payments received.
Other credit risk transfers
The Group also undertakes asset sales, credit derivative based
transactions, securitisations (including significant risk transfer
transactions), purchases of credit default swaps and purchase of
credit insurance as a means of mitigating or reducing credit risk and/
or risk concentration, taking into account the nature of assets and
the prevailing market conditions.
The Group classifies accounts as forborne at the time a customer in
financial difficulty is granted a concession.
Balances in default or classified as Stage 3 are always considered to
be non-performing. Balances may be non-performing but not in
default or Stage 3, where for example they are within their non-
performing forbearance cure period.
Monitoring
In conjunction with the Risk function, businesses identify and define
portfolios of credit and related risk exposures and the key
behaviours and characteristics by which those portfolios are
managed and monitored. This entails the production and analysis of
regular portfolio monitoring reports for review by senior
management. The Risk function in turn produces an aggregated
view of credit risk across the Group, including reports on material
credit exposures, concentrations, concerns and other management
information, which is presented to senior officers, divisional credit
risk forums, business unit committees and forums, Group Risk
Committee and the Board Risk Committee.
Non-performing exposures can be reclassified as performing
forborne after a minimum 12-month cure period, providing there are
no past due amounts or concerns regarding the full repayment of
the exposure. A minimum of a further 24 months must pass from
the date the forborne exposure was reclassified as performing
forborne before the account can exit forbearance. If conditions to
exit forbearance are not met at the end of this probation period,
the exposure shall continue to be identified as forborne until all the
conditions are met.
The Group’s treatment of loan renegotiations is included in the
impairment policy in note 2(H) to the consolidated financial
statements on page 222.
Customers receiving support from Government
sponsored programmes
To assist customers in financial distress, the Group participates in
Government sponsored programmes for households, including the
Income Support for Mortgage Interest programme, under which the
government pays the Group all or part of the interest on the
mortgage on behalf of the customer. This is provided as a
government loan which the customer must repay.
Risk management continued
158
Lloyds Banking Group plc Annual Report and Accounts 2024
The Group credit risk portfolio in 2024
Overview
The Group’s portfolios are well positioned to benefit from an
improved, but still challenging macroeconomic environment. The
Group maintains a prudent approach to credit risk appetite and risk
management, with strong credit origination criteria including
evidence of affordability and robust LTVs in the secured portfolios.
Asset quality remains strong with improved credit performance in
the year. In UK mortgages and unsecured portfolios, reductions in
new to arrears and flows to default have been observed in 2024.
Securitisations of primarily legacy Retail mortgages, totalling
£2.0 billion of gross loans and advances to customers, during the
second and fourth quarter will help mitigate credit risks in higher risk
assets. Credit quality remains broadly stable and resilient in
Commercial Banking. The Group continues to monitor the impacts
of the economic environment carefully through a suite of early
warning indicators and governance arrangements that ensure risk
mitigating action plans are in place to support customers and
protect the Group’s positions.
The underlying impairment charge in 2024 was £433 million,
increasing from a charge of £308 million in 2023 which benefitted
from a significant write-back following the full repayment of debt
from a single name client. The 2024 charge included a higher credit
from improvements in the Group’s macroeconomic outlook in the
year, resulting in a release of £394 million (2023: a release of
£257 million).
The Group’s underlying probability-weighted total ECL allowance
decreased in the year to £3,651 million (31 December 2023:
£4,337 million).
Group Stage 2 underlying loans and advances to customers
decreased to £48,075 million (31 December 2023: £56,545 million)
and as a percentage of total lending to 10.4 per cent (31 December
2023: 12.5 per cent). The movement includes a redevelopment of
the IFRS 9 staging approach and criteria for UK mortgages which
increased Stage 2 assets, introduced alongside the adoption of a
new ECL model, which together are more than offset by the
transfer of assets from Stage 2 to Stage 1 as a result of
improvements in the Group’s macroeconomic outlook. Of the total
Group Stage 2 loans and advances to customers, 92.3 per cent are
up to date (31 December 2023: 91.3 per cent). Stage 2 coverage
reduced slightly to 2.8 per cent (31 December 2023: 3.0 per cent).
Stage 3 underlying loans and advances to customers decreased to
£9,021 million (31 December 2023: £10,110 million), and as a
percentage of total lending to 2.0 per cent (31 December 2023:
2.2 per cent), as a result of improved credit performance in addition
to the securitisation of primarily legacy accounts within UK
mortgages. The lower proportion of UK mortgages in Stage 3 led to
an increase in Group Stage 3 coverage to 16.4 per cent
(31 December 2023: 15.8 per cent).
Retail credit performance
•
The Retail portfolio has remained resilient and well positioned.
Consumers have adjusted to a higher rate environment, leading
to a reduction in arrears over the year
•
Robust risk management remains in place, with strong
affordability and indebtedness controls for both new and
existing lending and a prudent risk appetite approach
•
In 2024, reductions in new to arrears and flow to default
have been observed across UK mortgages and the
unsecured portfolios
•
In UK Motor Finance, new to arrears have slightly increased,
returning to pre-COVID-19 levels. Flows to default have also
increased, largely driven by a rise in Voluntary Terminations (VT)
as used car prices have fallen from their historic highs during
the pandemic
•
Lending strategies are under continuous review and have been
proactively managed and calibrated to the latest
macroeconomic outlook, with actions taken to enhance both
living and housing cost assumptions in affordability assessments
•
The Retail impairment charge in 2024 was £457 million, lower
than the charge of £831 million for 2023. This was due to a
combination of improvements in the Group’s macroeconomic
outlook, notably from improved house price growth, driving a
£332 million credit compared to a £233 million credit in 2023,
alongside improvements in UK mortgages credit performance,
one-off benefits from the release of judgemental adjustments for
inflation risk and debt sale write backs
•
For UK mortgages, a redevelopment of the IFRS 9 staging
approach and criteria has been introduced alongside the
adoption of a new ECL model. At 31 December 2024, the
significant increase in credit risk (SICR) quantitative trigger to
transfer accounts from Stage 1 to Stage 2 is defined as a doubling
of an account’s PD since origination. IFRS 9 staging rules and
triggers for other Retail portfolios are the same as at
31 December 2023. Retail customer related ECL allowance as a
percentage of drawn loans and advances (coverage) is lower at
0.7 per cent (31 December 2023: 0.9 per cent)
•
Improvements in the Group’s macroeconomic outlook primarily
in the first half of 2024, combined with improved credit
performance have reduced Stage 2 loans and advances to
11.5 per cent of the Retail portfolio (31 December 2023:
13.3 per cent), of which 92.2 per cent are up to date loans
(31 December 2023: 91.0 per cent). Stage 2 ECL coverage also
reduced slightly to 2.4 per cent (31 December 2023: 2.6 per cent)
•
Reductions within UK mortgages, as a result of improved credit
performance in addition to securitisation activity resulted in a
decrease in Retail Stage 3 loans and advances to 1.9 per cent of
total loans and advances (31 December 2023: 2.2 per cent)
•
Retail Stage 3 ECL coverage increased slightly to 14.1 per cent
(31 December 2023: 13.9 per cent) as a result of a lower
proportion of UK mortgages, which typically require lower
coverage compared to other Retail products due to security, and
higher Stage 3 ECL coverage for unsecured products following
debt sale activity, which has reduced recoveries balances
reported at net realisable value
Prudent risk appetite and risk management
•
The Group continues to take a prudent and proactive approach
to credit risk management and credit risk appetite with robust
oversight, particularly in response to recent external events. Risk
appetite is in line with the Group’s strategy, and helps support
customers during continued economic uncertainties in both
global and domestic markets
•
Sector, asset and product concentrations within the portfolios
are closely monitored and controlled, with mitigating actions
taken where appropriate. Sector and product risk appetite
parameters help manage exposure to higher risk and cyclical
sectors, segments and asset classes
•
The Group’s effective risk management seeks to ensure early
identification and management of customers and counterparties
who may be showing signs of distress
•
The Group will continue to work closely with its customers to
ensure that they receive the appropriate level of support,
including but not restricted to embracing the standards outlined
in the Mortgage Charter
UK mortgages
•
The UK mortgages portfolio increased to £313.3 billion
(31 December 2023: £307.6 billion), net of the impact of the
securitisation of primarily legacy Retail mortgages, totalling
£2.0 billion of gross loans and advances to customers, in the
second and fourth quarters. Growth was largely driven by strong
application volumes in the first half of the year
•
The UK mortgages portfolio is well positioned with low arrears
and a strong loan to value (LTV) profile. The Group has actively
improved the quality of the portfolio in recent years using robust
affordability and credit controls, while the balances of higher risk
legacy vintages have continued to reduce
•
New to arrears in the UK mortgages portfolio have reduced in
2024. The Group continues to proactively monitor existing
mortgage customers as they reach the end of fixed rate deals
with customers’ behaviour remaining stable
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
159
Lloyds Banking Group plc Annual Report and Accounts 2024
•
The impairment credit of £194 million in 2024 increased,
compared to a credit of £51 million for 2023, due to
improvements in the economic outlook and stronger
credit performance
•
Stage 2 loans and advances have reduced following
improvements to both the Group’s macroeconomic outlook and
observed performance, which more than offset the
redevelopment of the IFRS 9 staging approach and criteria
following adoption of a new ECL model. At 31 December 2024,
the significant increase in credit risk (SICR) quantitative trigger to
transfer accounts from Stage 1 to Stage 2 is defined as a doubling
of an account’s PD since origination
•
Stage 3 loans and advances have reduced due to improved credit
performance and securitisation activity over 2024, which also
reduces total ECL. Improvements to the macroeconomic outlook
result in a reduction in Stage 3 ECL coverage
Credit cards
•
Credit card balances increased to £16.2 billion
(2023: £15.8 billion), due to higher demand for new cards
and increased spend
•
The credit card portfolio is a prime book. New to arrears have
reduced in 2024 and repayment rates remained strong
•
The impairment charge of £270 million for 2024 is lower than the
charge of £457 million in 2023 due to improvements in the
Group’s macroeconomic outlook, in combination with the
release of ECL judgemental adjustments raised to cover the risk
of increased defaults from high inflation and cost-of-living
pressures, given continued resilient portfolio performance. Total
ECL coverage also reduced as a result
•
Improvements in the macroeconomic outlook also result
in a reduction in Stage 2 loans and advances, and Stage 2
ECL coverage
•
Resilient observed arrears and default performance has also
resulted in lower Stage 3 loans and advances. Stage 3 ECL
coverage was higher at 50.2 per cent (2023: 45.8 per cent)
following debt sale activity
•
The Commercial portfolio credit quality remains broadly stable
and resilient, benefitting from a focused approach to credit
underwriting and monitoring standards and proactively
managing exposures to higher risk and cyclical sectors
UK unsecured loans and overdrafts
•
UK unsecured loans and overdraft balances increased to
£10.7 billion (2023: £8.5 billion) driven by organic balance growth
and lower repayments following a securitisation in the fourth
quarter of 2023
•
Impairment charge of £272 million for 2024 is slightly higher than
the charge of £251 million for 2023, largely in overdrafts where
one-off benefits in the prior year have not repeated
•
Improvements in the macroeconomic outlook and release of
inflation judgements reduce total ECL and coverage. Stage 3 ECL
coverage increased following debt sale activity
Commercial Banking credit performance
Portfolio overview
•
Credit strategies and policy remains robust, and within our credit
risk appetite tolerances. The Group remains cognisant of the
continued relatively elevated interest rate environment
especially in, but not limited to, sectors reliant upon consumer
discretionary spend. Risks include reduced asset valuation and
refinancing risk, a reduction in market liquidity impacting credit
supply and pressure on both household discretionary spending
and business margins
•
The Group continues to review segments of our portfolios as
appropriate, ensuring our credit strategies, appetite, sensitivities
and mitigation action plans are up-to-date and suitable for rapid
action in response to both risks and opportunities, whilst
supporting clients in the right way and ensuring the Group is
protected. Credit Playbooks are in place to cover a number of
potential credit downside scenarios and these are regularly
reassessed and updated. Early warning indicators and risk
appetite metrics are in place to ensure the Group tracks and
takes action, where appropriate, including credit risk mitigation
•
The Group continues to provide early support to customers in
difficulty through focused risk management via its Watchlist and
Business Support framework. The Group also balances prudent
risk appetite with ensuring support for financially viable clients
Impairments
•
Impairment credit of £14 million, reduced from the prior year
which included a significant one-off write-back. The credit in
2024 reflected strong asset quality, a one-off release from model
loss rates and updated economic scenarios. The charge on new
and existing Stage 3 clients remains low
•
Customer related ECL allowances decreased in the year to
£985 million at 31 December 2024 (31 December 2023:
£1,165 million), driven by the one-off release in Commercial
Banking from loss rates used in the impairment model in the first
half of the year
•
Stage 2 loans and advances decreased to £5,168 million
(31 December 2023: £7,987 million), largely as a result of
improvements in the Group’s macroeconomic outlook, with
93.2 per cent of Stage 2 balances up to date (31 December 2023:
92.8 per cent). Stage 2 as a proportion of total loans and
advances to customers decreased to 5.8 per cent (31 December
2023: 8.9 per cent). Stage 2 ECL coverage was higher at 6.1 per
cent (31 December 2023: 5.6 per cent), with the increase in
coverage largely as a result of a reduction in Stage 2 balances
•
Stage 3 loans and advances decreased to £1,839 million
(31 December 2023: £2,068 million) and as a proportion of total
loans and advances to customers, reduced to 2.1 per cent
(31 December 2023: 2.3 per cent). Stage 3 ECL coverage
increased to 26.9 per cent (31 December 2023: 24.1 per cent)
UK Motor Finance
•
The UK Motor Finance portfolio remained broadly flat at
£15.6 billion (31 December 2023: £15.7 billion)
•
Updates to Residual Value (RV) and Voluntary Termination (VT)
provisions held against Personal Contract Purchase (PCP) and
Hire Purchase (HP) lending are included within ECL and the
impairment charge. A combination of more stable used car prices
in the second half of the year, as well as utilisation of existing
judgement within this item results in a small decrease to
£178 million as at 31 December 2024 (31 December 2023:
£187 million)
•
The impairment charge of £116 million for 2024 is lower than the
charge of £169 million for 2023 as RV provisions decreased
slightly year on year
Other
•
Other loans and advances increased to £18.0 billion
(31 December 2023: £16.6 billion), largely driven by the
European business
•
Stage 3 loans and advances remained broadly stable at
0.8 per cent of total loans and advances (31 December 2023:
0.9 per cent)
•
There was an impairment credit of £7 million in 2024, compared
to a £5 million charge in 2023
Risk management continued
160
Lloyds Banking Group plc Annual Report and Accounts 2024
Total Group assets
Impairment charge (credit) by division – statutory and underlyingA basis
Loans and
advances to
customers
£m
Loans and
advances to
banks
£m
Debt
securities
£m
Financial
assets at
fair value
through other
comprehensive
income
£m
Other
£m
Undrawn
balances
£m
2024
£m
2023
£m
UK mortgages
(188)
(6)
(194)
(51)
Credit cards
286
(16)
270
457
UK unsecured loans and
overdrafts
264
8
272
251
UK Motor Finance
115
1
116
169
Other
(7)
(7)
5
Retail
470
(13)
457
831
Business and Commercial
Banking
47
47
114
Corporate and Institutional
Banking
(10)
(7)
(6)
(38)
(61)
(625)
Commercial Banking
37
(7)
(6)
(38)
(14)
(511)
Insurance, Pensions and
Investments
(9)
(9)
(12)
Equity Investments and
Central Items
(3)
(3)
(5)
Total impairment charge (credit)
507
(7)
(6)
(3)
(9)
(51)
431
303
Insurance, Pensions and
Investments (underlying basis)A
(7)
(7)
(7)
Total impairment charge (credit)
(underlying basis)A
507
(7)
(6)
(3)
(7)
(51)
433
308
Asset quality ratioA
0.10%
0.07%
Credit risk balance sheet basis of presentation
The balance sheet analyses which follow have been presented on two bases; the statutory basis which is consistent with the presentation
in the Group’s accounts and the underlying basis which is used for internal management purposes. A reconciliation between the two bases
has been provided.
In the following statutory basis tables, purchased or originated credit-impaired (POCI) assets include a fixed pool of mortgages that were
purchased as part of the HBOS acquisition at a deep discount to face value reflecting credit losses incurred from the point of origination to
the date of acquisition. The residual expected credit loss (ECL) allowance and resulting low coverage ratio on POCI assets reflects further
deterioration in the creditworthiness from the date of acquisition. Over time, these POCI assets will run off as the loans redeem, pay down
or as loans are written off.
The Group uses the underlying basis to monitor the creditworthiness of the lending portfolio and related ECL allowances because it
provides a different perspective of the credit performance of the POCI assets purchased as part of the HBOS acquisition. The underlying
basis assumes that the lending assets acquired as part of a business combination were originated by the Group and are classified as either
Stage 1, 2 or 3 according to the change in credit risk over the period since origination. Underlying ECL allowances have been calculated
accordingly. Unless otherwise stated, the following credit risk commentary is provided on an underlying basis.
The statutory basis also includes an accounting adjustment within UK Motor Finance required under IFRS 9 to recognise a continuing
involvement asset following the partial derecognition of a component of the Group’s finance lease book via a securitisation in the third
quarter of 2024.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
161
Lloyds Banking Group plc Annual Report and Accounts 2024
Total expected credit loss allowance – statutory and underlyingA basis
At 31 Dec
2024
£m
At 31 Dec
2023
£m
Customer related balances
Drawn
3,191
3,717
270
322
Undrawn
3,461
4,039
Loans and advances to banks
1
8
Debt securities
4
11
Other assets
15
26
Total expected credit loss allowance
3,481
4,084
Acquisition fair value adjustment
170
253
Total expected credit loss allowance (underlying basis)A
3,651
4,337
Of which: Customer related balances (underlying basis)A
3,631
4,292
Of which: Drawn (underlying basis)A
3,361
3,970
Movements in total expected credit loss allowance – statutory and underlyingA basis
Opening ECL at
31 Dec 2023
£m
Write-offs
and other1
£m
Income
statement
charge (credit)
£m
Net ECL
increase
(decrease)
£m
Closing ECL at
31 Dec 2024
£m
UK mortgages2
1,115
(69)
(194)
(263)
852
Credit cards
810
(406)
270
(136)
674
UK unsecured loans and overdrafts
515
(264)
272
8
523
UK Motor Finance
342
(98)
116
18
360
Other
88
(14)
(7)
(21)
67
Retail
2,870
(851)
457
(394)
2,476
Business and Commercial Banking
538
(100)
47
(53)
485
Corporate and Institutional Banking
644
(79)
(61)
(140)
504
Commercial Banking
1,182
(179)
(14)
(193)
989
Insurance, Pensions and Investments
26
(2)
(9)
(11)
15
Equity Investments and Central Items
6
(2)
(3)
(5)
1
Total3
4,084
(1,034)
431
(603)
3,481
UK mortgages (underlying basis)A,4
1,368
(152)
(194)
(346)
1,022
Retail (underlying basis)A
3,123
(934)
457
(477)
2,646
Insurance, Pensions and Investments (underlying basis)A
26
(4)
(7)
(11)
15
Total (underlying basis)A
4,337
(1,119)
433
(686)
3,651
1
Contains adjustments in respect of purchased or originated credit-impaired financial assets.
2
Includes £53 million within write-offs and other relating to the securitisation of primarily legacy Retail mortgages, totalling £2.0 billion of gross loans and advances to customers.
3
Total ECL includes £20 million relating to other non-customer-related assets (31 December 2023: £45 million).
4
Includes £81 million within write-offs and other relating to the securitisation of primarily legacy Retail mortgages, totalling £2.0 billion of gross loans and advances to customers.
Total expected credit loss allowance sensitivity to economic assumptions – statutory and underlyingA basis
The measurement of ECL reflects an unbiased probability-weighted range of possible future economic outcomes. The Group achieves this
by generating four economic scenarios to reflect the range of outcomes; the central scenario reflects the Group’s base case assumptions
used for medium-term planning purposes, an upside and a downside scenario are also selected together with a severe downside scenario. If
the base case moves adversely, it generates a new, more adverse downside and severe downside which are then incorporated into the ECL.
Consistent with prior years, the base case, upside and downside scenarios carry a 30 per cent weighting; the severe downside is weighted
at 10 per cent.
The following table shows the Group’s ECL for the probability-weighted, upside, base case, downside and severe downside scenarios, with
the severe downside scenario incorporating adjustments made to CPI inflation and UK Bank Rate paths. The stage allocation for an asset is
based on the overall scenario probability-weighted probability of default and hence the staging of assets is constant across all the
scenarios. In each economic scenario the ECL for individual assessments is held constant reflecting the basis on which they are evaluated.
Judgemental adjustments applied through changes to model inputs or parameters, or more qualitative post model adjustments, are
apportioned across the scenarios in proportion to modelled ECL where this better reflects the sensitivity of these adjustments to each
scenario. The probability-weighted view shows the extent to which a higher ECL allowance has been recognised to take account of
multiple economic scenarios relative to the base case; the uplift on a statutory basis being £445 million compared to £678 million at
31 December 2023.
Risk management continued
2
162
Lloyds Banking Group plc Annual Report and Accounts 2024
Probability-
weighted
£m
Upside
£m
Base case
£m
Downside
£m
Severe
downside
£m
UK mortgages
852
345
567
1,064
2,596
Credit cards
674
518
641
773
945
Other Retail
950
843
923
1,010
1,172
Commercial Banking
989
745
889
1,125
1,608
Other
16
16
16
16
17
At 31 December 2024
3,481
2,467
3,036
3,988
6,338
UK mortgages (underlying basis)A
1,022
512
735
1,235
2,773
At 31 December 2024 (underlying basis)A
3,651
2,634
3,204
4,159
6,515
UK mortgages
1,115
395
670
1,155
4,485
Credit cards
810
600
771
918
1,235
Other Retail
945
850
920
981
1,200
Commercial Banking
1,182
793
1,013
1,383
2,250
Other
32
32
32
32
32
At 31 December 2023
4,084
2,670
3,406
4,469
9,202
UK mortgages (underlying basis)A
1,368
650
930
1,400
4,738
At 31 December 2023 (underlying basis)A
4,337
2,925
3,666
4,714
9,455
Group loans and advances to customers
The following pages contain analysis of the Group’s loans and advances to customers by sub-portfolio. Loans and advances to customers
are categorised into the following stages:
•
Stage 1 assets comprise of newly originated assets (unless purchased or originated credit-impaired), as well as those which have not
experienced a significant increase in credit risk. These assets carry an expected credit loss allowance equivalent to the expected credit
losses that result from those default events that are possible within 12 months of the reporting date (12 month expected credit losses).
•
Stage 2 assets are those which have experienced a significant increase in credit risk since origination. These assets carry an expected
credit loss allowance equivalent to the expected credit losses arising over the lifetime of the asset (lifetime expected credit losses).
•
Stage 3 assets have either defaulted or are otherwise considered to be credit-impaired. These assets carry a lifetime expected
credit loss.
•
Purchased or originated credit-impaired assets (POCI) are those that have been originated or acquired in a credit-impaired state. This
includes within the definition of credit-impaired the purchase of a financial asset at a deep discount that reflects impaired credit losses.
Reconciliation between statutory and underlying bases of gross loans and advances to customers and expected credit loss
allowance on drawn balances
Gross loans and advances to customers
Expected credit loss allowance on drawn balances
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 2
£m
Stage 1
£m
Stage 3
£m
POCI
£m
Total
£m
At 31 December 2024
Underlying basisA
405,324
48,075
9,021
462,420
1,426
736
1,199
3,361
POCI assets
(762)
(3,310)
6,377
(2,305)
(318)
(39)
357
Acquisition fair
value adjustment
(170)
(170)
(170)
(170)
Continuing use asset
798
798
36
(3,310)
6,207
(2,305)
628
(39)
(318)
187
(170)
Statutory basis
405,360
44,765
6,716
6,207
463,048
1,160
736
1,108
187
3,191
At 31 December 2023
Underlying basisA
387,060
56,545
10,110
453,715
1,532
901
1,537
3,970
POCI assets
(1,766)
(3,378)
(2,963)
8,107
(65)
(1)
(400)
466
Acquisition fair
value adjustment
(253)
(253)
(253)
(253)
(1,766)
(3,378)
(2,963)
7,854
(253)
(65)
(1)
(400)
213
(253)
Statutory basis
385,294
53,167
7,147
7,854
453,462
900
1,467
1,137
213
3,717
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
163
Lloyds Banking Group plc Annual Report and Accounts 2024
Loans and advances to customers and expected credit loss allowance – statutory and underlyingA basis
At 31 December 2024
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 2 as % of
total
%
Stage 3 as % of
total
%
Loans and advances to customers
269,760
UK mortgages
32,995
4,166
6,207
313,128
10.5
1.3
13,534
Credit cards
2,441
265
16,240
15.0
1.6
9,314
UK unsecured loans and overdrafts
1,247
175
10,736
1.6
13,897
UK Motor Finance
2,398
124
16,419
0.8
17,373
Other
516
147
18,036
2.9
0.8
Retail
323,878
39,597
4,877
6,207
374,559
1.3
Business and Commercial Banking
25,785
3,172
1,197
30,154
10.5
4.0
Corporate and Institutional Banking
55,692
1,996
642
58,330
3.4
1.1
Commercial Banking
81,477
5,168
1,839
88,484
5.8
2.1
Equity Investments and Central Items1
5
5
Total gross lending
405,360
6,207
44,765
6,716
463,048
9.7
1.5
UK mortgages (underlying basis)A,2
270,522
36,305
6,471
313,298
2.1
UK Motor Finance (underlying basis)A,3
13,099
2,398
124
15,621
0.8
Retail (underlying basis)A
323,842
42,907
7,182
373,931
1.9
Total gross lending (underlying basis)A
405,324
48,075
9,021
462,420
2.0
Customer related ECL allowance (drawn and undrawn)
UK mortgages
55
187
275
335
852
Credit cards
210
331
133
674
UK unsecured loans and overdrafts
170
235
118
523
UK Motor Finance4
173
115
72
360
Other
16
14
37
67
Retail
624
187
970
695
2,476
Business and Commercial Banking
132
187
166
485
Corporate and Institutional Banking
122
129
249
500
Commercial Banking
254
316
415
985
Equity Investments and Central Items
Total
878
187
1,286
1,110
3,461
UK mortgages (underlying basis)A,2
55
314
653
1,022
UK Motor Finance (underlying basis)A,3
173
115
72
360
Retail (underlying basis)A
624
1,009
1,013
2,646
Total (underlying basis)A
878
1,325
1,428
3,631
11.6
14.6
10.6
11.6
15.4
11.5
10.4
Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers
Stage 1
%
Stage 2
%
Stage 3
%
POCI
%
Total
%
Adjusted
Stage 35
%
Adjusted
Total5
%
UK mortgages
3.0
Credit cards
1.6
13.6
50.2
4.2
UK unsecured loans and overdrafts
1.8
18.8
67.4
4.9
UK Motor Finance
1.2
4.8
58.1
2.2
Other
0.1
2.7
25.2
0.4
Retail
0.2
2.4
14.3
3.0
0.7
Business and Commercial Banking
0.5
5.9
13.9
1.6
1.6
Corporate and Institutional Banking
0.2
6.5
38.8
0.9
38.8
0.9
Commercial Banking
0.3
6.1
22.6
1.1
26.9
1.1
Equity Investments and Central Items
Total
0.2
2.9
16.5
3.0
0.7
17.3
0.7
UK mortgages (underlying basis)A,2
0.9
10.1
0.3
UK Motor Finance (underlying basis)A,3
1.3
4.8
58.1
2.3
Retail (underlying basis)A
0.2
2.4
14.1
0.7
Total (underlying basis)A
0.2
2.8
15.8
0.8
16.4
0.8
0.8
8.0
0.3
18.4
1
Contains central fair value hedge accounting adjustments.
2
UK mortgages balances on an underlying basisA exclude the impact of the HBOS acquisition-related adjustments.
3
UK Motor Finance balances on an underlying basisA at 31 December 2024 exclude a finance lease gross up.
4
UK Motor Finance includes £178 million relating to provisions against residual values of vehicles subject to finance leases.
5
Stage 3 and Total exclude loans in recoveries in Business and Commercial Banking of £296 million and Corporate and Institutional Banking of £1 million.
Risk management continued
16
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4
16
Lloyds Banking Group plc Annual Report and Accounts 2024
At 31 December 2023
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 2 as % of
total
%
Stage 3 as % of
total
%
Loans and advances to customers
UK mortgages
256,596
38,533
4,337
7,854
307,320
12.5
1.4
Credit cards
12,625
2,908
284
15,817
18.4
1.8
UK unsecured loans and overdrafts
7,103
1,187
196
8,486
14.0
2.3
UK Motor Finance
13,541
2,027
112
15,680
12.9
0.7
Other
15,898
525
144
16,567
3.2
0.9
Retail
305,763
45,180
5,073
7,854
363,870
12.4
1.4
Business and Commercial Banking
27,525
4,458
1,530
33,513
13.3
4.6
Corporate and Institutional Banking
52,049
3,529
538
56,116
6.3
1.0
Commercial Banking
79,574
7,987
2,068
89,629
8.9
2.3
Equity Investments and Central Items1
(43)
6
(37)
Total gross lending
385,294
53,167
7,147
7,854
453,462
11.7
1.6
UK mortgages (underlying basis)A,2
258,362
41,911
7,300
307,573
13.6
2.4
Retail (underlying basis)A
307,529
48,558
8,036
364,123
13.3
2.2
Total gross lending (underlying basis)A
387,060
56,545
10,110
453,715
12.5
2.2
Customer related ECL allowance (drawn and undrawn)
UK mortgages
169
376
357
213
1,115
Credit cards
234
446
130
810
UK unsecured loans and overdrafts
153
244
118
515
UK Motor Finance3
188
91
63
342
Other
20
21
47
88
Retail
764
1,178
715
213
2,870
Business and Commercial Banking
140
231
167
538
Corporate and Institutional Banking
156
218
253
627
Commercial Banking
296
449
420
1,165
Equity Investments and Central Items
4
4
Total
1,060
1,627
1,139
213
4,039
UK mortgages (underlying basis)A,2
170
441
757
1,368
Retail (underlying basis)A
765
1,243
1,115
3,123
Total (underlying basis)A
1,061
1,692
1,539
4,292
Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers
POCI
%
Adjusted
Stage 34
%
Adjusted
Total4
%
UK mortgages
0.1
1.0
8.2
2.7
0.4
Credit cards
1.9
15.3
45.8
–
5.1
49.4
5.1
UK unsecured loans and overdrafts
2.2
20.6
60.2
–
6.1
65.6
6.1
UK Motor Finance
1.4
4.5
56.3
–
2.2
Other
0.1
4.0
32.6
–
0.5
Retail
0.2
2.6
14.1
2.7
0.8
14.2
0.8
Business and Commercial Banking
0.5
5.2
10.9
–
1.6
13.9
1.6
Corporate and Institutional Banking
0.3
6.2
47.0
–
1.1
Commercial Banking
0.4
5.6
20.3
–
1.3
24.1
1.3
Equity Investments and Central Items
–
66.7
–
Total
0.3
3.1
15.9
2.7
0.9
16.8
0.9
UK mortgages (underlying basis)A,2
Retail (underlying basis)A
Total (underlying basis)A
0.1
0.2
0.3
1.1
2.6
3.0
10.4
13.9
15.8
0.4
0.9
0.9
13.9
15.8
0.9
0.9
Stage 1
%
Stage 2
%
Stage 3
%
Total
%
1
Contains central fair value hedge accounting adjustments.
2
UK mortgages balances on an underlying basisA exclude the impact of the HBOS acquisition-related adjustments.
3
UK Motor Finance includes £187 million relating to provisions against residual values of vehicles subject to finance leases.
4
Stage 3 and Total exclude loans in recoveries in credit cards of £21 million, UK unsecured loans and overdrafts of £16 million and Business and Commercial Banking of £327 million.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
165
Lloyds Banking Group plc Annual Report and Accounts 2024
Stage 2 loans and advances to customers and expected credit loss allowance – statutory and underlyingA basis
Up to date
1-30 days past due2
PD movements
Other1
Over 30 days past due
As % of
gross
lending
%
As % of
gross
lending
%
As % of
gross
lending
%
As % of
gross
lending
%
Gross
lending
£m
Gross
lending
£m
Gross
lending
£m
Gross
lending
£m
ECL3
£m
ECL3
£m
ECL3
£m
ECL3
£m
At 31 December 2024
UK mortgages
28,909
191
0.7
1,869
38
2.0
1,240
22
1.8
977
24
2.5
Credit cards
2,174
248
11.4
149
43
28.9
83
24
28.9
35
16
45.7
UK unsecured loans
and overdrafts
630
129
20.5
439
52
11.8
131
36
27.5
47
18
38.3
UK Motor Finance
1,192
49
4.1
1,029
30
2.9
141
25
17.7
36
11
30.6
Other
103
3
2.9
321
7
2.2
37
2
5.4
55
2
3.6
Retail
33,008
620
1.9
3,807
170
4.5
1,632
109
6.7
1,150
71
6.2
Business and
Commercial Banking
2,445
154
6.3
426
18
4.2
176
10
5.7
125
5
4.0
Corporate and
Institutional Banking
1,903
125
6.6
45
1
2.2
6
–
–
42
3
7.1
Commercial Banking
4,348
279
6.4
471
19
4.0
182
10
5.5
167
8
4.8
Total
37,356
899
2.4
4,278
189
4.4
1,814
119
6.6
1,317
79
6.0
UK mortgages
(underlying basis)A
31,510
216
0.7
2,000
41
2.1
1,559
27
1.7
1,236
30
2.4
Retail (underlying
basis)A
35,609
645
1.8
3,938
173
4.4
1,951
114
5.8
1,409
77
5.5
Total (underlying
basis)A
39,957
924
2.3
4,409
192
4.4
2,133
124
5.8
1,576
85
5.4
At 31 December 2023
UK mortgages
26,665
146
0.5
9,024
133
1.5
1,771
52
2.9
1,073
45
4.2
Credit cards
2,612
345
13.2
145
49
33.8
115
34
29.6
36
18
50.0
UK unsecured loans
and overdrafts
756
148
19.6
279
46
16.5
112
34
30.4
40
16
40.0
UK Motor Finance
735
30
4.1
1,120
30
2.7
138
21
15.2
34
10
29.4
Other
125
5
4.0
295
7
2.4
52
5
9.6
53
4
7.5
Retail
30,893
674
2.2
10,863
265
2.4
2,188
146
6.7
1,236
93
7.5
Business and
Commercial Banking
3,455
202
5.8
590
17
2.9
253
8
3.2
160
4
2.5
Corporate and
Institutional Banking
3,356
214
6.4
14
–
–
28
3
10.7
131
1
0.8
Commercial Banking
6,811
416
6.1
604
17
2.8
281
11
3.9
291
5
1.7
Total
37,704
1,090
2.9
11,467
282
2.5
2,469
157
6.4
1,527
98
6.4
UK mortgages
(underlying basis)A
28,126
157
0.6
9,990
156
1.6
2,297
64
2.8
1,498
64
4.3
Retail (underlying
basis)A
32,354
685
2.1
11,829
288
2.4
2,714
158
5.8
1,661
112
6.7
Total (underlying
basis)A
39,165
1,101
2.8
12,433
305
2.5
2,995
169
5.6
1,952
117
6.0
1
Includes forbearance, client and product-specific indicators not reflected within quantitative PD assessments.
2
Includes assets that have triggered PD movements, or other rules, given that being 1 to 29 days in arrears in and of itself is not a Stage 2 trigger.
3
Expected credit loss allowance on loans and advances to customers (drawn and undrawn).
The Group’s assessment of a significant increase in credit risk, and resulting categorisation of Stage 2, includes customers moving into early
arrears as well as a broader assessment that an up to date customer has experienced a level of deterioration in credit risk since origination.
A more sophisticated assessment is required for up to date customers, which varies across divisions and product type. This assessment
incorporates specific triggers such as a significant proportionate increase in probability of default relative to that at origination, recent
arrears, forbearance activity, internal watch lists and external bureau flags. Up to date exposures in Stage 2 are likely to show lower levels
of expected credit loss (ECL) allowance relative to those that have already moved into arrears given that an arrears status typically reflects
a stronger indication of future default and greater likelihood of credit losses.
Risk management continued
166
Lloyds Banking Group plc Annual Report and Accounts 2024
Movements in balances for the year ended 31 December 2024 (audited)
The movement tables below are compiled by comparing the position at the end of the period to that at the beginning of the year. Transfers
between stages are deemed to have taken place at the start of the reporting period, with all other movements shown in the stage in which
the asset is held at the end of the period. Purchased or originated credit-impaired are not transferable.
Additions and repayments comprise new loans originated and repayments of outstanding balances throughout the reporting period.
The Group’s impairment charge comprises impact of transfers between stages, other changes in credit quality and additions
and repayments.
Advances written off have first been transferred to Stage 3 and then acquired a full allowance through other changes in credit quality.
Recoveries of amounts previously written off are shown at the full recovered value, with a corresponding entry in repayments and release of
allowance through other changes in credit quality.
Movements in the gross carrying amount for loans and advances to customers and for allowance for expected credit losses were as follows:
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
At 1 January 2024
385,294
53,167
7,147
7,854
453,462
900
1,467
1,137
213
3,717
Exchange and other adjustments1
(910)
(23)
(74)
12
(995)
(12)
(6)
21
53
56
Transfers to Stage 1
25,658
(25,607)
(51)
–
413
(404)
(9)
–
Transfers to Stage 2
(25,390)
25,967
(577)
–
(66)
126
(60)
–
Transfers to Stage 3
(1,104)
(2,119)
3,223
–
(21)
(178)
199
–
Net change in ECL
due to transfers
(293)
340
303
350
Impact of transfers between stages2
(836)
(1,759)
2,595
–
33
(116)
433
350
Other changes in credit quality2
(130)
(66)
709
66
579
Additions and repayments
22,529
(6,140)
(1,612)
(910)
13,867
(50)
(107)
(193)
(72)
(422)
Charge (credit) to the income
statement
(147)
(289)
949
(6)
507
Disposals and derecognition3
(717)
(480)
(366)
(694)
(2,257)
(5)
(12)
(25)
(18)
(60)
Advances written off
(1,174)
(55)
(1,229)
(1,174)
(55)
(1,229)
Recoveries of amounts previously
written off
200
–
200
200
–
200
At 31 December 2024
405,360
44,765
6,716
6,207
463,048
736
1,160
1,108
187
3,191
Allowance for
expected credit losses
(736)
(1,160)
(1,108)
(187)
(3,191)
Net carrying amount
404,624
43,605
5,608
6,020
459,857
Drawn ECL coverage4 (%)
0.2
2.6
16
.5
3.0
0.7
1
Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of
purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in
its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2
Includes a credit for methodology and model changes of £24 million, split by stage as £20 million credit for Stage 1, £2 million charge for Stage 2, £15 million charge for Stage 3 and
£21 million credit for POCI.
3
Relates to the securitisations of primarily legacy Retail mortgages.
4
Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
The total allowance for expected credit losses includes £178 million (2023: £187 million) in respect of residual value impairment and
voluntary terminations within the Group’s UK Motor Finance business.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
167
Lloyds Banking Group plc Annual Report and Accounts 2024
Movements in Retail UK mortgage balances were as follows:
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Retail – UK mortgages
At 1 January 2024
256,596
38,533
4,337
7,854
307,320
161
374
357
213
1,105
Exchange and other adjustments1
–
–
–
12
12
1
–
50
53
104
Transfers to Stage 1
21,133
(21,105)
(28)
–
135
(132)
(3)
–
Transfers to Stage 2
(21,077)
21,473
(396)
–
(11)
32
(21)
–
Transfers to Stage 3
(299)
(1,341)
1,640
–
–
(39)
39
–
Net change in ECL due to transfers
(122)
114
56
48
Impact of transfers between stages2
(243)
(973)
1,216
–
2
(25)
71
48
Other changes in credit quality2
(94)
(19)
26
66
(21)
Additions and repayments
13,901
(4,143)
(956)
(910)
7,892
(16)
(48)
(79)
(72)
(215)
Charge (credit) to the income
statement
(108)
(92)
18
(6)
(188)
Disposals and derecognition3
(494)
(422)
(366)
(694)
(1,976)
(1)
(9)
(25)
(18)
(53)
Advances written off
(70)
(55)
(125)
(70)
(55)
(125)
Recoveries of amounts previously
written off
5
–
5
5
–
5
At 31 December 2024
269,760
32,995
4,166
6,207
313,128
53
273
335
187
848
Allowance for expected credit losses
(53)
(273)
(335)
(187)
(848)
Net carrying amount
269,707
32,722
3,831
6,020
312,280
Drawn ECL coverage4 (%)
–
0.8
8 .0
3.0
0.3
1
Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of
purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in
its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2
Includes a charge for methodology and model changes of £7 million, split by stage as £1 million charge for Stage 1, £9 million charge for Stage 2, £18 million charge for Stage 3 and
£21 million credit for POCI.
3
Relates to the securitisations of primarily legacy Retail mortgages.
4
Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Movements in Retail credit cards were as follows:
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Retail – credit cards
At 1 January 2024
12,625
2,908
284
15,817
168
401
130
699
Exchange and other adjustments
(18)
(18)
Transfers to Stage 1
1,162
(1,162)
128
(128)
Transfers to Stage 2
(642)
683
(41)
(13)
31
(18)
Transfers to Stage 3
(184)
(241)
425
(5)
(65)
70
Net change in ECL due to transfers
(71)
84
84
97
Impact of transfers between stages
336
(720)
384
39
(78)
136
97
Other changes in credit quality
(31)
(22)
284
231
Additions and repayments
573
253
(15)
811
(27)
(4)
(11)
(42)
Charge to the income statement
(19)
(104)
409
286
Advances written off
(506)
(506)
(506)
(506)
Recoveries of amounts previously written off
118
118
118
118
At 31 December 2024
13,534
2,441
265
16,240
149
297
133
579
Allowance for expected credit losses
(149)
(297)
(133)
(579)
Net carrying amount
13,385
2,144
132
15,661
Drawn ECL coverage1 (%)
1.1
12.2
50.2
3.6
1
Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Risk management continued
168
Lloyds Banking Group plc Annual Report and Accounts 2024
Movements in Commercial Banking lending were as follows:
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Commercial Banking
At 1 January 2024
79,574
7,987
2,068
89,629
232
372
418
1,022
Exchange and other adjustments
(103)
(5)
(64)
(172)
(13)
(5)
1
(17)
Transfers to Stage 1
2,361
(2,347)
(14)
–
86
(85)
(1)
–
Transfers to Stage 2
(1,850)
1,951
(101)
–
(12)
13
(1)
–
Transfers to Stage 3
(301)
(258)
559
–
(4)
(19)
23
–
Net change in ECL due to transfers
(63)
70
62
69
Impact of transfers between stages1
210
(654)
444
–
7
(21)
83
69
Other changes in credit quality1
(11)
(20)
152
121
Additions and repayments
1,796
(2,160)
(449)
(813)
(10)
(62)
(81)
(153)
Charge to the income statement
(14)
(103)
154
37
Advances written off
(163)
(163)
(163)
(163)
Recoveries of amounts previously written off
3
3
3
3
At 31 December 2024
81,477
5,168
1,839
88,484
205
264
413
882
Allowance for expected credit losses
(205)
(264)
(413)
(882)
Net carrying amount
81,272
4,904
1,426
87,602
Drawn ECL coverage2 (%)
0.3
5.1
22.5
1.0
1
Includes a credit for methodology and model changes of £25 million, split by stage as £17 million credit for Stage 1, £8 million credit for Stage 2 and £nil for Stage 3.
2
Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Movements in balances for the year ended 31 December 2023 (audited)
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
At 1 January 2023
380,991
61,164
7,640
9,622
459,417
700
1,808
1,757
253
4,518
Exchange and other adjustments1
1,830
(24)
(6)
18
1,818
(7)
(1)
105
67
164
Transfers to Stage 1
18,991
(18,953)
(38)
–
401
(393)
(8)
–
Transfers to Stage 2
(18,010)
18,592
(582)
–
(53)
121
(68)
–
Transfers to Stage 3
(1,216)
(2,507)
3,723
–
(13)
(223)
236
–
Net change in ECL
due to transfers
(260)
402
312
454
Impact of transfers between stages
(235)
(2,868)
3,103
–
75
(93)
472
454
Other changes in credit quality2
105
(103)
804
8
814
Additions and repayments
6,393
(4,213)
(2,353)
(1,043)
(1,216)
81
(85)
(862)
(81)
(947)
Charge (credit) to the income
statement
261
(281)
414
(73)
321
Disposals and derecognition3
(3,685)
(892)
(122)
(743)
(5,442)
(54)
(59)
(24)
(34)
(171)
Advances written off
(1,231)
–
(1,231)
(1,231)
–
(1,231)
Recoveries of amounts previously
written off
116
–
116
116
–
116
At 31 December 2023
385,294
53,167
7,147
7,854
453,462
900
1,467
1,137
213
3,717
Allowance for
expected credit losses
(900)
(1,467)
(1,137)
(213)
(3,717)
Net carrying amount
384,394
51,700
6,010
7,641
449,745
Drawn ECL coverage4 (%)
0.2
2.8
15.9
2.7
0.8
1
Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of
purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in
its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2
Includes a charge for methodology and model changes of £60 million, split by stage as £96 million charge for Stage 1, £33 million credit for Stage 2, £1 million credit for Stage 3 and
£2 million credit for POCI.
3
Relates to the securitisations of primarily legacy Retail mortgages and Retail unsecured loans.
4
Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
169
Lloyds Banking Group plc Annual Report and Accounts 2024
Movements in Retail UK mortgage balances were as follows:
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Retail – UK mortgages
At 1 January 2023
257,517
41,783
3,416
9,622
312,338
91
552
311
253
1,207
Exchange and other adjustments1
–
–
–
18
18
–
–
53
67
120
Transfers to Stage 1
12,202
(12,195)
(7)
–
66
(65)
(1)
–
Transfers to Stage 2
(12,673)
13,103
(430)
–
(7)
33
(26)
–
Transfers to Stage 3
(450)
(1,656)
2,106
–
–
(66)
66
–
Net change in ECL due to transfers
(50)
91
115
156
Impact of transfers between stages
(921)
(748)
1,669
–
9
(7)
154
156
Other changes in credit quality2
43
(104)
14
8
(39)
Additions and repayments
1,202
(1,955)
(553)
(1,043)
(2,349)
19
(49)
(67)
(81)
(178)
Charge (credit) to the income
statement
71
(160)
101
(73)
(61)
Disposals and derecognition3
(1,202)
(547)
(94)
(743)
(2,586)
(1)
(18)
(7)
(34)
(60)
Advances written off
(108)
–
(108)
(108)
–
(108)
Recoveries of amounts previously
written off
7
–
7
7
–
7
At 31 December 2023
256,596
38,533
4,337
7,854
307,320
161
374
357
213
1,105
Allowance for expected credit losses
(161)
(374)
(357)
(213)
(1,105)
Net carrying amount
256,435
38,159
3,980
7,641
306,215
Drawn ECL coverage4 (%)
0.1
1.0
8.2
2.7
0.4
1
Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of
purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in
its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2
Includes a charge for methodology and model changes of £74 million, split by stage as £91 million charge for Stage 1, £12 million credit for Stage 2, £3 million credit for Stage 3 and
£2 million credit for POCI.
3
Relates to the securitisations of primarily legacy Retail mortgages.
4
Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Movements in Retail credit cards were as follows:
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Retail – credit cards
At 1 January 2023
11,416
3,287
289
14,992
120
433
113
666
Exchange and other adjustments
–
–
–
–
–
–
(16)
(16)
Transfers to Stage 1
1,311
(1,308)
(3)
–
142
(141)
(1)
–
Transfers to Stage 2
(744)
782
(38)
–
(11)
28
(17)
–
Transfers to Stage 3
(172)
(266)
438
–
(4)
(69)
73
–
Net changes in ECL due to transfers
(80)
125
80
125
Impact of transfers between stages
395
(792)
397
–
47
(57)
135
125
Other changes in credit quality1
15
9
298
322
Additions and repayments
814
413
(13)
1,214
(14)
16
(11)
(9)
Charge to the income statement
48
(32)
422
438
Advances written off
(449)
(449)
(449)
(449)
Recoveries of amounts previously written off
60
60
60
60
At 31 December 2023
12,625
2,908
284
15,817
168
401
130
699
Allowance for expected credit losses
(168)
(401)
(130)
(699)
Net carrying amount
12,457
2,507
154
15,118
Drawn ECL coverage2 (%)
1.3
13.8
45.8
4.4
1
Includes a credit for methodology and model changes of £18 million, split by stage as £2 million charge for Stage 1, £20 million credit for Stage 2 and £nil for Stage 3.
2
Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Risk management continued
1
70
1
Total
–
Lloyds Banking Group plc Annual Report and Accounts 2024
Movements in Commercial Banking lending were as follows:
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Commercial Banking
At 1 January 2023
80,509
11,493
3,371
95,373
214
414
1,070
1,698
Exchange and other adjustments
(968)
(14)
(6)
(988)
(6)
–
83
77
Transfers to Stage 1
4,026
(4,011)
(15)
–
101
(101)
–
–
Transfers to Stage 2
(3,074)
3,143
(69)
–
(16)
19
(3)
–
Transfers to Stage 3
(369)
(327)
696
–
(3)
(26)
29
–
Net changes in ECL due to transfers
(76)
117
32
73
Impact of transfers between stages
583
(1,195)
612
–
6
9
58
73
Other changes in credit quality
17
9
230
256
Additions and repayments
(550)
(2,297)
(1,657)
(4,504)
1
(60)
(771)
(830)
Charge to the income statement
24
(42)
(483)
(501)
Advances written off
(256)
(256)
(256)
(256)
Recoveries of amounts previously written off
4
4
4
4
At 31 December 2023
79,574
7,987
2,068
89,629
232
372
418
1,022
Allowance for expected credit losses
(232)
(372)
(418)
(1,022)
Net carrying amount
79,342
7,615
1,650
88,607
Drawn ECL coverage1 (%)
0.3
4.7
20.2
1.1
1
Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Credit quality of loans and advances to customers (audited)
The analysis of lending has been prepared based on the division in which the asset is held, with the business segment in which the exposure
is recorded reflected in the ratings system applied. The internal credit ratings systems used by the Group differ between Retail and
Commercial, reflecting the characteristics of these exposures and the way that they are managed internally; these credit ratings are set out
below. All probabilities of default (PDs) include forward-looking information and are based on 12-month values, with the exception of
credit-impaired.
Retail
Quality classification
IFRS 9 PD range
RMS 1–3
0.00–0.80%
RMS 4–6
0.81–4.50%
RMS 7–9
4.51–14.00%
RMS 10
14.01–20.00%
RMS 11–13
20.01–99.99%
RMS 14
100.00%
Commercial
Quality classification
IFRS 9 PD range
CMS 1–5
0.000–0.100%
CMS 6–10
0.101–0.500%
CMS 11–14
0.501–3.000%
CMS 15–18
3.001–20.000%
CMS 19
20.001–99.999%
CMS 20–23
100.000%
Stage 3 assets include balances of £297 million (2023: £364 million) (with outstanding amounts due of £971 million (2023: £1,167 million))
which have been subject to a partial write-off and where the Group continues to enforce recovery action.
There were no modifications of Stage 2 and Stage 3 assets during the year (2023: £180 million). No material gain or loss was recognised by
the Group.
As at 31 December 2024 there were no (2023: £5 million) significant assets that had been previously modified while classified as Stage 2 or
Stage 3 and were classified as Stage 1.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
171
Lloyds Banking Group plc Annual Report and Accounts 2024
Drawn exposures
Allowance for expected credit losses
Gross drawn exposures and expected credit
loss allowance (audited)
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
At 31 December 2024
Retail – UK mortgages
RMS 1–3
261,101
21,213
–
–
282,314
46
143
–
–
189
RMS 4–6
8,487
7,384
–
–
15,871
6
51
–
–
57
RMS 7–9
112
1,296
–
–
1,408
–
15
–
–
15
RMS 10
17
273
–
–
290
–
5
–
–
5
RMS 11–13
43
2,829
–
–
2,872
1
59
–
–
60
RMS 14
–
–
4,166
6,207
10,373
–
–
335
187
522
269,760
32,995
4,166
6,207
313,128
53
273
335
187
848
Retail – credit cards
RMS 1–3
5,058
10
–
–
5,068
11
1
–
–
12
RMS 4–6
7,231
1,129
–
–
8,360
87
52
–
–
139
RMS 7–9
1,242
859
–
–
2,101
51
107
–
–
158
RMS 10
3
149
–
–
152
–
31
–
–
31
RMS 11–13
–
294
–
–
294
–
106
–
–
106
RMS 14
–
–
265
–
265
–
–
133
–
133
13,534
2,441
265
–
16,240
149
297
133
–
579
Retail – UK unsecured loans and
overdrafts
RMS 1–3
1,207
2
–
–
1,209
3
–
–
–
3
RMS 4–6
7,020
484
–
–
7,504
98
27
–
–
125
RMS 7–9
1,047
307
–
–
1,354
40
36
–
–
76
RMS 10
31
111
–
–
142
3
22
–
–
25
RMS 11–13
9
343
–
–
352
1
112
–
–
113
RMS 14
–
–
175
–
175
–
–
118
–
118
9,314
1,247
175
–
10,736
145
197
118
–
460
Retail – UK Motor Finance
RMS 1–3
8,967
760
–
–
9,727
112
16
–
–
128
RMS 4–6
4,487
1,169
–
–
5,656
55
40
–
–
95
RMS 7–9
440
247
–
–
687
2
17
–
–
19
RMS 10
–
46
–
–
46
–
6
–
–
6
RMS 11–13
3
176
–
–
179
–
36
–
–
36
RMS 14
–
–
124
–
124
–
–
72
–
72
13,897
2,398
124
–
16,419
169
115
72
–
356
Retail – other
RMS 1–3
15,163
238
–
–
15,401
4
4
–
–
8
RMS 4–6
2,132
190
–
–
2,322
11
7
–
–
18
RMS 7–9
78
72
–
–
150
–
3
–
–
3
RMS 10
–
7
–
–
7
–
–
–
–
–
RMS 11–13
–
9
–
–
9
–
–
–
–
–
RMS 14
–
–
147
–
147
–
–
37
–
37
17,373
516
147
–
18,036
15
14
37
–
66
Total Retail
323,878
39,597
4,877
6,207
374,559
531
896
695
187
2,309
Commercial Banking
CMS 1–5
26,925
6
–
–
26,931
3
–
–
–
3
CMS 6–10
17,126
56
–
–
17,182
13
–
–
–
13
CMS 11–14
32,424
1,128
–
–
33,552
122
21
–
–
143
CMS 15–18
5,002
3,253
–
–
8,255
67
166
–
–
233
CMS 19
–
725
–
–
725
–
77
–
–
77
CMS 20–23
–
–
1,839
–
1,839
–
–
413
–
413
81,477
5,168
1,839
–
88,484
205
264
413
–
882
Other1
5
–
–
–
5
–
–
–
–
–
Total loans and advances to
customers
405,360
44,765
6,716
6,207
463,048
736
1,160
1,108
187
3,191
1
Drawn exposures include centralised fair value hedge accounting adjustments.
Risk management continued
2
172
Lloyds Banking Group plc Annual Report and Accounts 2024
Drawn exposures
Allowance for expected credit losses
Stage 1
£m
£m
Stage 3
£m
POCI
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Gross drawn exposures and expected credit loss
allowance (audited)
Stage 2
Total
£m
At 31 December 2023
Retail – UK mortgages
RMS 1–3
226,740
4,137
–
–
230,877
123
37
–
–
160
RMS 4–6
29,637
27,037
–
–
56,674
38
151
–
–
189
RMS 7–9
219
2,713
–
–
2,932
–
37
–
–
37
RMS 10
–
590
–
–
590
–
13
–
–
13
RMS 11–13
–
4,056
–
–
4,056
–
136
–
–
136
RMS 14
–
–
4,337
7,854
12,191
–
–
357
213
570
256,596
38,533
4,337
7,854
307,320
161
374
357
213
1,105
Retail – credit cards
RMS 1–3
3,906
5
–
–
3,911
9
–
–
–
9
RMS 4–6
7,159
1,248
–
–
8,407
91
65
–
–
156
RMS 7–9
1,548
1,069
–
–
2,617
67
145
–
–
212
RMS 10
12
220
–
–
232
1
50
–
–
51
RMS 11–13
–
366
–
–
366
–
141
–
–
141
RMS 14
–
–
284
–
284
–
–
130
–
130
Retail – UK unsecured loans and
overdrafts
12,625
2,908
284
–
15,817
168
401
130
–
699
RMS 1–3
638
1
–
–
639
1
–
–
–
1
RMS 4–6
5,152
250
–
–
5,402
83
18
–
–
101
RMS 7–9
1,256
473
–
–
1,729
44
50
–
–
94
RMS 10
43
135
–
–
178
4
27
–
–
31
RMS 11–13
14
328
–
–
342
2
113
–
–
115
RMS 14
–
–
196
–
196
–
–
118
–
118
7,103
1,187
196
–
8,486
134
208
118
–
460
Retail – UK Motor Finance
RMS 1–3
9,979
569
–
–
10,548
142
12
–
–
154
RMS 4–6
2,791
998
–
–
3,789
41
29
–
–
70
RMS 7–9
769
228
–
–
997
3
13
–
–
16
RMS 10
–
63
–
–
63
–
7
–
–
7
RMS 11–13
2
169
–
–
171
–
30
–
–
30
RMS 14
–
–
112
–
112
–
–
63
–
63
13,541
2,027
112
–
15,680
186
91
63
–
340
Retail – other
RMS 1–3
13,613
240
–
–
13,853
3
4
–
–
7
RMS 4–6
2,197
186
–
–
2,383
16
13
–
–
29
RMS 7–9
–
86
–
–
86
–
4
–
–
4
RMS 10
–
6
–
–
6
–
–
–
–
–
RMS 11–13
88
7
–
–
95
–
–
–
–
–
RMS 14
–
–
144
–
144
–
–
47
–
47
15,898
525
144
–
16,567
19
21
47
–
87
Total Retail
305,763
45,180
5,073
7,854
363,870
668
1,095
715
213
2,691
Commercial Banking
CMS 1–5
14,100
7
–
–
14,107
2
–
–
–
2
CMS 6–10
30,534
124
–
–
30,658
32
–
–
–
32
CMS 11–14
31,210
2,927
–
–
34,137
133
59
–
–
192
CMS 15–18
3,719
4,115
–
–
7,834
65
232
–
–
297
CMS 19
11
814
–
–
825
–
81
–
–
81
CMS 20–23
–
–
2,068
–
2,068
–
–
418
–
418
79,574
7,987
2,068
–
89,629
232
372
418
–
1,022
Other1
(43)
–
6
–
(37)
–
–
4
–
4
Total loans and advances to
customers
385,294
53,167
7,147
7,854
453,462
900
1,467
1,137
213
3,717
1
Drawn exposures include centralised fair value hedge accounting adjustments.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
173
Lloyds Banking Group plc Annual Report and Accounts 2024
Average PD grade (audited)
The table below shows the average PD for the major portfolios used in the calculation of ECL and therefore Stage 2 average PD reflects the
lifetime value. These reflect the forward-looking view under the Group’s base case scenario prior to the application of MES and post-model
adjustments which further impact ECL.
2024
2023
Stage 1
average PD
%
Stage 2
average PD
%
Stage 1
average PD
%
Stage 2
average PD
%
Retail
UK mortgages1
0.29
26.13
0.57
17.60
Credit cards
1.80
22.21
2.14
23.02
UK unsecured loans and overdrafts
2.12
28.43
2.75
29.66
UK Motor Finance
0.65
10.62
0.61
10.00
Commercial Banking
Loans and advances to customers
0.93
22.95
0.92
22.55
1
2024 calculated using updated models.
Concentrations of exposure (audited)
The Group’s management of concentration risk includes portfolio controls on certain industries, sectors and products to reflect risk
appetite as well as individual, customer and bank limit risk tolerances. Credit policies and appetite statements are aligned to the Group’s
risk appetite and restrict exposure to higher risk countries and potentially vulnerable sectors and asset classes. Exposures are monitored to
prevent both an excessive concentration of risk and single name concentrations. The Group’s largest credit limits are regularly monitored by
the Board Risk Committee and reported in accordance with regulatory requirements. As part of its credit risk policy, the Group considers
sustainability risk (which incorporates environmental (including climate), social and governance) in the assessment of Commercial
Banking facilities.
At 31 December 2024 the most significant concentrations of exposure were in mortgages.
2024
£m
2023
£m
Agriculture, forestry and fishing
6,338
7,038
Construction1
3,079
3,543
Energy and water supply
4,569
3,468
Financial, business and other services
36,924
35,112
Lease financing
17,144
17,374
Manufacturing
3,972
4,021
Mining and Quarrying1
169
335
Personal:
Mortgages2
330,840
323,627
Other
28,015
25,342
Postal and telecommunications
3,162
2,654
Property companies
19,252
20,904
Transport, distribution and hotels
9,584
10,044
Total loans and advances to customers before allowance for impairment losses
463,048
453,462
Allowance for impairment losses (note 21 to the consolidated financial statements, page 274)
(3,191)
(3,717)
Total loans and advances to customers
459,857
449,745
1
Mining and quarrying, previously included within construction, is now presented separately.
2
Includes both UK and overseas mortgage balances.
Risk management continued
174
174
Lloyds Banking Group plc Annual Report and Accounts 2024
UK mortgages product analysis
–
At 31 December 2024
At 31 December 2023
Mainstream
Buy-to-let
Specialist
Total
Mainstream
Buy-to-let
Specialist
Total
UK mortgages loans and advances to customers
(statutory basis)1
Total UK mortgages (£m)
261,630
47,984
3,514
313,128
254,416
47,549
5,355
307,320
UK mortgages greater than 3 months in arrears
(excluding repossessions, underlying basisA )
Number of cases (cases)
20,112
4,511
2,818
27,441
23,123
5,037
4,726
32,886
Total mortgages accounts (%)
1.2
1.2
9.2
1.3
1.3
1.4
10.5
1.5
Value of loans2 (£m)
2,910
651
531
4,092
3,094
692
806
4,592
Total mortgage balances (%)
1.1
1.4
14.7
1.3
1.2
1.5
14.7
1.5
Loan to value (underlying basisA )
Less than 60 per cent (%)
55.5
68.1
87.3
57.8
55.3
66.9
84.8
57.7
60 per cent to 70 per cent (%)
16.6
21.2
7.2
17.2
17.6
21.8
9.2
18.1
70 per cent to 80 per cent (%)
14.1
10.4
2.3
13.4
14.3
10.8
2.4
13.5
80 per cent to 90 per cent (%)
11.9
0.1
1.2
10.0
9.4
0.4
1.2
7.8
90 per cent to 100 per cent (%)
1.8
0.1
0.9
1.5
3.3
1.1
2.8
Greater than 100 per cent (%)
0.1
0.1
1.1
0.1
0.1
0.1
1.3
0.1
Total (%)
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Average loan to value (underlying basisA )3
Stock of residential mortgages (%)
43.2
47.4
33.2
43.7
43.1
48.1
35.0
43.6
New residential lending (%)
64.1
56.4
n/a
63.2
62.5
51.6
n/a
61.7
1
Balances include the impact of HBOS-related acquisition adjustments.
2
Value of loans represents total gross book value of mortgages more than three months in arrears; the balances exclude the impact of HBOS acquisition adjustments.
3
Average loan to value is calculated as total loans and advances as a percentage of the total indexed collateral of these loans and advances; the balances exclude the impact of HBOS
acquisition adjustments.
Interest-only UK mortgages
The Group provides interest-only mortgages to owner occupier mortgage customers whereby only payments of interest are made for the
term of the mortgage with the customer responsible for repaying the principal outstanding at the end of the loan term. At 31 December
2024, owner occupier interest-only balances as a proportion of total owner occupier balances had reduced to 12.5 per cent (31 December
2023: 14.4 per cent). The average indexed loan to value remained low at 36.5 per cent (31 December 2023: 36.9 per cent).
For existing interest-only mortgages, a contact strategy is in place during the term of the mortgage to ensure that customers are aware of
their obligations to repay the principal upon maturity of the loan. Treatment strategies are in place to help customers anticipate and plan
for repayment of capital at maturity and support those who may have difficulty in repaying the principal amount. A dedicated specialist
team supports customers who have passed their contractual maturity date and are unable to fully repay the principal. A range of
treatments are offered to customers based on their individual circumstances to create fair and sustainable outcomes.
Analysis of owner occupier interest-only UK mortgages (statutory basis)
At 31 Dec 2024
At 31 Dec 2023
Interest-only balances (£m)
33,023
37,278
Stage 1 (%)
39.4
54.7
Stage 2 (%)1
44.5
27.6
Stage 3 (%)
5.5
5.6
Purchased or originated credit-impaired (%)
10.6
12.1
Average loan to value (%)
36.5
36.9
Maturity profile (£m)
Due
1,541
1,982
Within 1 year
1,012
1,129
2 to 5 years
8,209
8,803
6 to 10 years
10,772
13,918
Greater than 10 years
11,489
11,446
Past term interest-only balances (£m)2
1,490
1,925
Stage 1 (%)
0.3
0.2
Stage 2 (%)
8.6
9.3
Stage 3 (%)
51.8
52.2
Purchased or originated credit-impaired (%)
39.3
38.4
Average loan to value (%)
35.2
35.2
Negative equity (%)
2.5
2.6
1
Includes adoption of a new ECL model, where the significant increase in credit risk (SICR) quantitative Stage 2 trigger is now defined as a doubling of an account’s PD since origination.
2
Balances where all interest-only elements have moved past term. Some may subsequently have had a term extension, so are no longer classed as due.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
175
Lloyds Banking Group plc Annual Report and Accounts 2024
Collateral held as security for Retail loans and advances to customers (audited)
UK mortgages
An analysis by loan-to-value ratio of the Group’s UK residential mortgage lending is provided below. The value of collateral used in
determining the loan-to-value ratios has been estimated based upon the last actual valuation, adjusted to take into account subsequent
movements in house prices. The market takes into account many factors, including environmental considerations such as flood risk and
energy efficient additions, in arriving at the value of a home.
In some circumstances, where the discounted value of the estimated net proceeds from the liquidation of collateral (i.e. net of costs,
expected haircuts and anticipated changes in the value of the collateral to the point of sale) is greater than the estimated exposure at
default, no credit losses are expected and no ECL allowance is recognised.
At 31 December 2024
At 31 December 2023
Stage 1
(£m)
Stage 2
(£m)
Stage 3
(£m)
POCI
(£m)
Total
(£m)
Stage 1
(£m)
Stage 2
(£m)
Stage 3
(£m)
POCI
(£m)
Total
(£m)
Gross drawn exposures
Less than 60 per cent
145,055
27,851
3,014
5,066
180,986
145,285
22,739
3,209
6,209
177,442
60 per cent to 70 per cent
49,746
2,954
643
638
53,981
47,950
6,015
673
959
55,597
70 per cent to 80 per cent
40,292
1,168
307
232
41,999
36,413
4,506
290
333
41,542
80 per cent to 90 per cent
30,215
898
123
109
31,345
20,949
2,821
87
142
23,999
90 per cent to 100 per cent
4,420
109
36
63
4,628
5,981
2,389
30
91
8,491
Greater than 100 per cent
32
15
43
99
189
18
63
48
120
249
Total
269,760
32,995
4,166
6,207
313,128
256,596
38,533
4,337
7,854
307,320
Allowance for expected
credit losses
Less than 60 per cent
14
165
130
66
375
26
118
127
70
341
60 per cent to 70 per cent
11
51
77
36
175
31
90
99
48
268
70 per cent to 80 per cent
13
30
59
27
129
37
75
61
26
199
80 per cent to 90 per cent
13
23
32
17
85
48
53
27
20
148
90 per cent to 100 per cent
2
3
13
10
28
19
31
12
14
76
Greater than 100 per cent
1
24
31
56
7
31
35
73
Total
53
273
335
187
848
161
374
357
213
1,105
UK mortgages energy performance certificate analysis
The energy performance certificate (EPC) profile of the security associated with the Group’s UK mortgage portfolio is shown below:
EPC profile
A
£m
B
£m
C
£m
D
£m
E
£m
F
£m
G
£m
Unrated
properties
£m
Total
At 31 December 2024
1,113
40,469
68,128
97,392
33,021
6,293
1,370
65,342
313,128
At 31 December 2023
971
41,250
64,466
95,958
34,327
6,663
1,465
62,220
307,320
The above data is sourced using the latest available government EPC information. The Group has no EPC data available for 20.9 per cent
(2023: 20.2 per cent) of the UK mortgage portfolio; this portion is classified as unrated properties.
EPC ratings are not considered to be a material credit risk factor, and do not form part of the Group’s credit risk calculations.
Other Retail lending
At 31 December 2024, Stage 1 and Stage 2 other retail gross lending amounted to £60,720 million (2023: £55,814 million). Stage 3 other
retail lending amounted to £351 million, net of an impairment allowance of £360 million (2023: £378 million, net of an impairment
allowance of £358 million).
Lending decisions are predominantly based on an obligor’s ability to repay rather than reliance on the disposal of any security provided.
Where the lending is secured, collateral values are rigorously assessed at the time of loan origination and are thereafter monitored in
accordance with business unit credit policy.
The Group’s credit risk disclosures for unimpaired other retail lending show assets gross of collateral and therefore disclose the maximum
loss exposure.
Risk management continued
–
–
176
Lloyds Banking Group plc Annual Report and Accounts 2024
Retail forbearance
The basis of disclosure for forbearance is aligned to the FINREP reporting definitions. On a statutory basis forbearance for the major retail
portfolios reduced £332 million to £3,550 million. This reduction was primarily driven by the impact of removing balances following UK
mortgage securitisations. The main customer treatments included are: repair, where arrears are added to the loan balance and the arrears
position cancelled; instances where there are suspensions of interest and/or capital repayments; and refinance.
Retail forborne loans and advances (statutory (audited) and underlying basisA )
Total
£m
Of which
Stage 2
£m
Of which
Stage 3
£m
Of which
POCI
£m
ECL as a % of
total loans and
advances
which are
forborne1
%
At 31 December 2024
UK mortgages
2,984
618
1,161
1,146
4.8
Credit cards
271
87
149
33.0
UK unsecured loans and overdrafts
291
119
108
34.7
UK Motor Finance
4
3
1
18.8
Total
3,550
827
1,419
1,146
9.4
UK mortgages (underlying basis)A
3,054
810
2,182
6.9
Total (underlying basis)A
3,619
1,019
2,440
11.1
At 31 December 2023
UK mortgages
3,269
695
1,008
1,552
4.1
Credit cards
268
89
141
32.5
UK unsecured loans and overdrafts
275
107
108
35.5
UK Motor Finance
70
36
32
30.7
Total
3,882
927
1,289
1,552
8.8
UK mortgages (underlying basis)A
3,374
1,012
2,343
7.1
Total (underlying basis)A
3,987
1,244
2,624
11.2
1
Expected credit losses as a percentage of total loans and advances which are forborne are calculated excluding loans in recoveries for credit cards and loans and overdrafts
(31 December 2024: £33 million; 31 December 2023: £55 million).
Commercial Banking forbearance
Commercial Banking forborne loans and advances reduced by £170 million to £2,219 million in 2024 (2023: £2,389 million), of which
£1,784 million were in Stage 3 (2023: £1,946 million).
Collateral held as security for Commercial Banking loans and advances to customers (audited)
Stage 1 and Stage 2 secured lending
For Stage 1 and Stage 2 secured commercial lending, the Group reports assets gross of collateral and therefore discloses the maximum
loss exposure.
Stage 1 and Stage 2 secured commercial lending is predominantly managed on a cash flow basis. On occasion, it may include an assessment
of underlying collateral, although, for Stage 3 lending, this will not always involve assessing it on a fair value basis. No aggregated collateral
information for the entire unimpaired secured commercial lending portfolio is provided to key management personnel.
Stage 3 secured lending
The value of collateral is re-evaluated and its legal soundness reassessed if there is observable evidence of distress of the borrower;
this evaluation is used to determine potential loss allowances and management’s strategy to try to either repair the business or recover
the debt.
At 31 December 2024, Stage 3 secured commercial lending amounted to £450 million, net of an impairment allowance of £150 million
(2023: £507 million, net of an impairment allowance of £133 million). The fair value of the collateral held in respect of impaired secured
commercial lending was £575 million (2023: £608 million). In determining the fair value of collateral, no specific amounts have been
attributed to the costs of realisation. For the purposes of determining the total collateral held by the Group in respect of impaired secured
commercial lending, the value of collateral for each loan has been limited to the principal amount of the outstanding advance in order to
eliminate the effects of any over-collateralisation and to provide a clearer representation of the Group’s exposure.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
–
–
–
–
–
–
177
Lloyds Banking Group plc Annual Report and Accounts 2024
Commercial Banking UK Real Estate
•
•
•
•
•
•
•
•
Commercial Banking UK Real Estate, including Business Banking, committed drawn lending stood at £9.3 billion at 31 December 2024
(net of £3.1 billion exposures subject to protection through Significant Risk Transfer (SRT) securitisations). In addition there are undrawn
lending facilities of £2.8 billion to predominantly investment grade rated corporate customers
The Group classifies Direct Real Estate as exposure which is directly supported by cash flows from property activities (as opposed to
trading activities, such as hotels, care homes and housebuilders). Exposures of £7.2 billion to social housing providers are also excluded
Despite some headwinds, the portfolio continues to remain well positioned and proactively managed with conservative LTVs, good
levels of interest cover and appropriate risk mitigants in place
Overall performance of the portfolio has remained resilient. The Group has seen improvement within this sector, with a decrease in
cases in its more closely monitored Watchlist category and limited flow into Business Support
Lending continues to be heavily weighted towards investment real estate (c.91 per cent) rather than development. Of these investment
exposures, c.91 per cent have an LTV of less than 70 per cent, with an average LTV of 45 per cent. The average interest cover ratio was
3.1 times, with 71 per cent having interest cover of above 2 times. In SME, LTV at origination has been typically limited to c.55 per cent,
given prudent repayment cover criteria (including notional base rate stress)
The portfolio is well diversified with limited speculative commercial development lending (defined as property not pre-sold or pre-let at
a level to fully repay the debt or generate sufficient income to meet the minimum interest cover requirements). Approximately 47 per
cent of exposures relate to commercial real estate, including c.13 per cent secured by office assets, c.10 per cent by retail assets and
c.12 per cent by industrial assets. Approximately 51 per cent of the portfolio relates to residential
Recognising this is a cyclical sector, total (gross and net) and asset type quantum caps are in place to control origination and exposure.
Focus remains on the UK market and new business has been written in line with a prudent risk appetite criteria including conservative
LTVs, strong quality of income and proven management teams. Development lending criteria also includes maximum loan to gross
development value and maximum loan to cost, with funding typically only released against completed work, as confirmed by the
Group’s monitoring quantity surveyor
Use of SRT securitisations also act as a risk mitigant in this portfolio, with run-off of these carefully managed and sequenced
LTV – UK Real Estate
At 31 December 20241,2
At 31 December 20231,2
Total
£m
Total
%
Stage 3
£m
Total
£m
Total
%
Investment exposures
Less than 60 per cent
5,726
25
5,751
80.5
6,161
39
6,200
60 per cent to 70 per cent
700
46
746
10.5
986
9
995
70 per cent to 80 per cent
140
4
144
2.0
191
13
204
80 per cent to 100 per cent
26
67
93
96
45
141
1.8
100 per cent to 120 per cent
4
6
10
19
64
83
1.0
120 per cent to 140 per cent
4
4
11
38
49
0.6
Greater than 140 per cent
10
81
91
20
20
40
0.5
Unsecured3
303
303
318
318
4.0
Subtotal
6,913
229
7,142
7,802
228
8,030
100.0
Other4
512
67
579
369
19
388
Total investment
7,425
296
7,721
8,171
247
8,418
Development
731
8
739
776
71
847
Government Supported Lending5
87
2
89
158
Total
8,243
306
8,549
9,105
321
9,426
Stage 1 and 2
£m
Stage 3
£m
Stage 1 and 2
£m
1.3
0.1
0.1
1.3
4.2
77.2
12.4
2.5
100.0
3
161
1
Excludes Commercial Banking UK Real Estate exposures subject to protection through Significant Risk Transfer transactions.
2
Excludes £0.7 billion in Business Banking (31 December 2023: £0.5 billion).
3
Predominantly Investment grade corporate CRE lending where the Group is relying on the corporate covenant.
4
Mainly lower value transactions where LTV not recorded on Commercial Banking UK Real Estate monitoring system.
5
Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) lending to real estate clients, where government guarantees are in place at 100 per cent
and 80 per cent, respectively.
Risk management continued
–
–
–
178
Lloyds Banking Group plc Annual Report and Accounts 2024
Credit quality of other financial assets (audited)
Cash and balances at central banks
Significantly all of the Group’s cash and balances at central banks are due from the Bank of England, the Federal Reserve Bank of New York
or the Deutsche Bundesbank.
Debt securities, treasury and other bills, and contracts held with reinsurers at fair value through profit or loss
Substantially all of the Group’s trading assets and other loans and advances to customers, loans and advances to banks and reverse
repurchase agreements held at fair value through profit or loss have an investment grade rating. The credit quality of the Group’s other
debt securities, treasury and other bills, and contracts held with reinsurers held at fair value through profit or loss is set out below:
2024
2023
Investment
grade1
£m
Other
£m
Total
£m
Investment
grade1
£m
Other
£m
Total
£m
Other financial assets mandatorily at fair value through profit or
loss:
Debt securities:
Government securities
7,093
7,093
8,009
8,009
Other public sector securities
2,286
2
2,288
2,303
7
2,310
Bank and building society certificates of deposit
8,667
8,667
7,504
7,504
Asset-backed securities
641
11
652
506
7
513
13,984
2,899
16,883
17,076
3,049
20,125
Corporate and other debt securities
32,671
2,912
35,583
35,398
3,063
38,461
Treasury and other bills
32
32
51
51
Contracts held with reinsurers
10,527
10,527
11,336
88
11,424
Total other financial assets mandatorily held at fair value
through profit or loss (excluding loans and advances and equity
shares)
43,230
2,912
46,142
46,785
3,151
49,936
1
Credit ratings equal to or better than ‘BBB’.
Credit risk in respect of trading and other financial assets at fair value through profit or loss held within the Group’s unit-linked funds is
borne by the policyholders and credit risk in respect of With-Profits funds is largely borne by the policyholders. Consequently, the Group
has no significant exposure to credit risk for such assets which back those contract liabilities.
Loans and advances to banks
Significantly all of the Group’s loans and advances to banks are assessed as Stage 1.
Reverse repurchase agreement held at amortised cost
All of the Group’s reverse repurchase agreements held at amortised cost are assessed as Stage 1.
Debt securities held at amortised cost
At 31 December 2024 significantly all of the Group’s debt securities held at amortised cost are investment grade.
Debt securities at fair value through other comprehensive income (excluding equity shares)
At 31 December 2024 significantly all of the Group’s debt securities at fair value through other comprehensive income are investment grade.
Derivative assets
The Group reduces exposure to credit risk by using master netting agreements and by obtaining collateral in the form of cash or highly
liquid securities.
2024
2023
Investment
grade1
£m
Other
£m
Total
£m
Investment
grade1
£m
Other
£m
Total
£m
Trading and other
22,684
1,333
24,017
21,297
956
22,253
Hedging
39
9
48
99
4
103
Total derivative financial instruments
22,723
1,342
24,065
21,396
960
22,356
1
Credit ratings equal to or better than ‘BBB’.
Financial guarantees and loan commitments
The level of expected credit loss allowance associated with the Group’s financial guarantees and loan commitments is not significant.
At 31 December 2024, £143,914 million were Stage 1 (2023: £137,109 million), £4,565 million were Stage 2 (2023: £6,002 million),
£101 million were Stage 3 (2023: £150 million) and £39 million was POCI (2023: £58 million). Against these exposures the Group held
an allowance for expected credit losses of £270 million (2023: £322 million).
Further details can be seen in note 21 to the consolidated financial statements on page 274.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
–
–
–
–
–
–
–
179
Lloyds Banking Group plc Annual Report and Accounts 2024
Collateral held as security for other financial assets
The Group does not hold collateral against debt securities which are classified as financial assets held at amortised cost.
Reverse repurchase agreements
The Group enters into reverse repurchase agreements which are accounted for as collateralised loans (see note 16 to the consolidated
financial statements on page 258).
Financial assets at fair value through profit or loss (excluding equity shares)
Included in financial assets at fair value through profit or loss are reverse repurchase agreements, against which the Group holds collateral,
all of which the Group is able to repledge (see note 16 to the consolidated financial statements on page 258). At 31 December 2024,
£10,676 million had been repledged (2023: £9,926 million).
These transactions were generally conducted under terms that are usual and customary for standard secured lending activities.
Derivative assets, after offsetting of amounts under master netting arrangements
The Group reduces exposure to credit risk by using master netting agreements and by obtaining collateral in the form of cash or highly
liquid securities (see note 16 to the consolidated financial statements on page 258).
Irrevocable loan commitments and other credit-related contingencies
The Group holds irrevocable loan commitments and other credit-related contingencies (see note 38 to the consolidated financial
statements on page 297). Collateral is held as security, in the event that lending is drawn down, on £17,181 million (2023: £13,036 million) of
these balances.
Collateral pledged as security
The Group pledges assets primarily for repurchase agreements and securities lending transactions which are generally conducted under
terms that are usual and customary for standard secured borrowing contracts.
Repurchase agreements
The Group enters into repurchase agreements which include amounts due under the Bank of England’s Term Funding Scheme with
additional incentives for SMEs (TFSME) (see note 16 to the consolidated financial statements on page 258).
Financial liabilities at fair value through profit or loss
Included in financial liabilities at fair value through profit or loss are repurchase agreements, against which the Group pledges collateral
(see note 16 to the consolidated financial statements on page 258). The secured party is permitted by contract or custom to repledge
this collateral.
Securities lending transactions
The following on-balance sheet financial assets have been lent to counterparties under securities lending transactions:
2024
£m
2023
£m
Financial assets at fair value through profit or loss
889
633
Financial assets at fair value through other comprehensive income
6,124
5,245
Total
7,013
5,878
In addition, securities held as collateral in the form of stock borrowed amounted to £20,887 million (2023: £17,280 million). Of this amount,
£11,781 million (2023: £9,363 million) had been resold or repledged as collateral for the Group’s own transactions.
These transactions were generally conducted under terms that are usual and customary for standard secured lending activities.
Securitisations and covered bonds
In addition to the assets detailed above, the Group also holds assets that are encumbered through the Group’s asset-backed conduits and
its securitisation and covered bond programmes. Further details of these assets are provided in note 26 to the consolidated financial
statements on page 287.
Risk management continued
80
180
Lloyds Banking Group plc Annual Report and Accounts 2024
Economic crime risk
Definition
Economic crime risk is defined as the risk that the
Group implements ineffective policies, systems,
processes and controls to prevent, detect and
respond to the risk of fraud and/or financial crime
resulting in increased losses, regulatory censure, fines
and/or adverse publicity in the UK or other
jurisdictions in which the Group operates.
Level two risks
Anti-bribery, Anti-money laundering, Fraud, Sanctions
The Risk overview, on page 36, contains a summary of economic crime
risk performance and key mitigating actions.
Exposures
The principal economic crime risks to the Group are:
•
•
•
•
Bribery, including corruption
Money laundering, including terrorist financing, proliferation
financing and the facilitation of tax evasion
Sanctions
Fraud, including intentional acts of deception or omission by
external or internal parties
All of the above could result in customer detriment, financial loss,
regulatory censure and/or reputational damage.
The Group’s economic crime prevention policy requires all
colleagues to complete mandatory economic crime training on at
least an annual basis. The Group’s fraud awareness programme
remains a key component of the fraud control environment.
In addition to its efforts internally, the Group also plays an active
role with other financial institutions, industry bodies and law
enforcement agencies in identifying and combatting economic
crime, including:
•
•
•
•
•
Being an active member of UK Finance, where the Group sits as a
member of the Economic Crime Product and Service Board and
has representation on key economic crime committees and
panels. This includes attending the sanctions and fraud
committees, which are the industries’ primary forums for
considering and responding to issues of mutual interest
Collaborating with peer banks and the National Crime Agency
(NCA) to further develop ‘Data Fusion’, a ground-breaking,
public-private partnership, which brings together targeted bank
transaction data from seven banks and overlays it with NCA
criminal intelligence as a key strategic capability in the UK’s
efforts to disrupt serious and organised crime
Continuing a strategic partnership with City of London Police
and helping fund the Dedicated Card and Payment Crime Unit to
investigate fraud cases, target and where appropriate arrest and
gain prosecution of offenders
Being a member of Cifas, the largest cross-sector fraud
sharing organisation
Chairing the Joint Money Laundering Intelligence Taskforce senior
management team and providing expert resource to the
National Economic Crime Centre’s operational threat cells
Measurement
Economic crime risk is measured using a suite of indicators reported
to the business unit and the Group economic crime risk
management committees. These indicators cover a variety of areas
such as the effectiveness of key controls, breaches and suspicious
activity report (SAR) disclosure rates. All are subject to ongoing
monitoring, including a periodic review of metrics and thresholds to
ensure they remain appropriate.
Monitoring
Monitoring and reporting of economic crime risk is undertaken at
Board, Group, legal entity and business unit and functional
committees. Each committee monitors key risks, control
effectiveness, indicators, events, risk appetite metrics and the
results of independent testing conducted by the Risk function and
Group Audit. Money Laundering Reporting Officer (MLRO) reports
are also presented annually to the relevant legal entity and Group-
level risk committees.
Mitigating actions
The Group adopts a risk-based approach to mitigate the economic
crime risks it faces, reflecting the current and emerging economic
crime risks within the market, and industry best practice.
Group-wide economic crime prevention policies and standards are
maintained to ensure compliance with legal and regulatory
requirements. The completion of a Group-wide risk assessment and
implementation of a comprehensive suite of systems, processes and
controls support the Group to detect and prevent the use of its
banking network for money laundering, bribery, fraud and activities
prohibited by legal and regulatory sanctions.
1
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
81
1
Lloyds Banking Group plc Annual Report and Accounts 2024
Insurance underwriting risk
Definition
Insurance underwriting risk is defined as the risk of
adverse developments in liabilities due to timing,
frequency and severity of claims for insured/
underwritten events, customer behaviour and
expense costs.
The Risk overview, on page 36, contains a summary of insurance
underwriting risk performance and key mitigating actions.
Risk management continued
Financial risk indicators
•
•
Life and Pensions sales (present value of new business premiums):
£18,249 million (2023: £17,449 million)
General Insurance total gross written premium: £737 million
(2023: £579 million)
Exposures
The major source of insurance underwriting risk within the Group
arises from the Insurance business.
Poor persistency is a major risk in the Life and Pensions business,
stemming from customer behaviour that leads to increased
cancellations or stopped contributions. Following the agreed sale of
the bulk annuity business (subject to High Court approval), longevity
risk has reduced but still exists in the individual annuity business and
the Group’s defined benefit pension scheme. Page 248 provides
further information on the defined benefit scheme.
Property insurance risk is a key risk within the General Insurance
business, arising from home insurance. Exposures can arise, for
example, from extreme weather conditions such as flooding, when
property damage claims are higher than expected.
Expenses are incurred in writing all insurance business, with the risk
of costs being higher than expected managed through regular cost
initiatives and operating model reviews.
Measurement
Insurance underwriting risks are measured using a variety of
techniques including stress, reverse stress and scenario testing, as
well as stochastic modelling. Current and potential future insurance
underwriting risk exposures are assessed and aggregated across a
range of stresses with risk measures based on 1-in-200 year stresses
for the Insurance business’ regulatory capital assessments and other
supporting measures where appropriate, including those set out in
note 8 to the consolidated financial statements on page 236.
Mitigating actions
Insurance underwriting risk is mitigated in a number of ways:
•
•
•
•
•
•
Risks are identified, measured, managed, monitored and
reported using the RCSA process
Embedded insurance processes for underwriting, claims
and expense management, pricing, product design and use
of reinsurance
Review and setting of demographic and expense best
estimate assumptions
Exposure by risk type is assessed through the business planning
process and used as a control mechanism to ensure the profile is
within risk appetite
Life Insurance exposure to demographic risks is mitigated
through the use of reinsurance, where there is a clear benefit
that outweighs the value of retaining the risks, or where there are
risks which are less well understood
General Insurance exposure to accumulations of risk and possible
catastrophes is mitigated by reinsurance arrangements spread
over a range of reinsurers. Detailed modelling, including that of
the potential losses under various catastrophe scenarios,
supports the choice of reinsurance arrangements
Monitoring
Insurance underwriting risks are monitored by Insurance senior
executive committees and ultimately the Insurance Board.
Significant risks from the Insurance business and the defined benefit
pension schemes are reviewed by the Group Executive and Group
Risk Committees and Board.
Insurance underwriting risk exposures are monitored against risk
appetite with persistency, expenses and GI claims analysed
monthly. The Insurance business compares actual experience to
expectations, for example business volumes and mix, claims,
expenses and persistency experience. The effectiveness of controls
that manage insurance underwriting risk is evaluated and significant
divergences from experience or movements in risk exposures are
investigated and remedial action taken.
The Group's critical accounting judgements and key sources of
estimation uncertainty for its Insurance business are set out in
note 8 to the consolidated financial statements on page 236.
182
Lloyds Banking Group plc Annual Report and Accounts 2024
Financial risk indicators
•
•
•
Liquidity coverage ratio: 146 per cent (2023: 142 per cent)
Net stable funding ratio: 129 per cent (2023: 130 per cent)
Loan to deposit ratio: 95 per cent (2023: 95 per cent)
Exposure
Liquidity exposure represents the potential stressed outflows in any
future period less expected inflows. The Group considers liquidity
exposure from both an internal and a regulatory perspective.
Measurement
Liquidity risk is managed through a series of measures, tests and
reports that are primarily based on contractual maturities with
behavioural overlays as appropriate. The Group undertakes
quantitative and qualitative analysis of the behavioural aspects
of its assets and liabilities in order to reflect their expected
behaviour.
Mitigating actions
The Group manages and monitors liquidity risks and ensures that
liquidity risk management systems and arrangements are
adequate with regard to the internal risk appetite, Group
strategy and regulatory requirements. Liquidity policies and
procedures are subject to independent internal oversight by Risk.
Overseas branches and subsidiaries of the Group may also be
required to meet the liquidity requirements of the entity’s
domestic country. Management of liquidity requirements is
performed by the overseas branch or subsidiary in line with
Group policy. Liquidity risk of the Insurance business is actively
managed and monitored within the Insurance business. The
Group plans funding requirements over its planning period,
combining business as usual and stressed conditions. The Group
manages its liquidity position paying regard to its internal risk
appetite, Liquidity Coverage Ratio (LCR) and Net Stable Funding
Ratio (NSFR) as required by the PRA, the Capital Requirements
Directive (CRD V) and the Capital Requirements Regulation (UK
CRR) liquidity requirements.
To assist in managing the balance sheet, the Group operates a
Liquidity Transfer Pricing (LTP) process which: allocates relevant
interest expenses from the centre to the Group’s banking businesses
within the internal management accounts; helps drive the correct
inputs to customer pricing; and is consistent with regulatory
requirements. LTP makes extensive use of behavioural maturity
profiles, taking account of expected customer loan prepayments
and stability of customer deposits, modelled on historic data.
The Group can monetise liquid assets quickly, either through the
repurchase agreements (repo) market or through outright sale. In
addition, the Group has pre-positioned a substantial amount of
assets at the Bank of England’s Discount Window Facility which can
be used to access additional liquidity in a time of stress. The Group
considers diversification across geography, currency, markets and
tenor when assessing appropriate holdings of liquid assets. The
Group’s liquid asset buffer is available for deployment at immediate
notice, subject to complying with regulatory requirements.
Liquidity risk within the Insurance business may result from: the
inability to sell financial assets quickly at fair value; an insurance
liability falling due for payment earlier than expected; the inability
to generate cash inflows as anticipated; an unexpected large
operational event; or from a general insurance catastrophe, for
example, a significant weather event. Liquidity risk is actively
managed and monitored within the Insurance business to ensure
that it remains within approved risk appetite, so that even under
stress conditions, there is sufficient liquidity to meet obligations.
Monitoring
Daily monitoring and control processes are in place to address
internal and regulatory liquidity requirements. The Group monitors
a range of market and internal early warning indicators on a daily
basis for early signs of liquidity risk in the market or specific to the
Group. This captures regulatory metrics as well as metrics the Group
considers relevant for its liquidity profile. These are a mixture of
quantitative and qualitative measures, including: daily variation
of customer balances; changes in maturity profiles; funding
concentrations; changes in LCR outflows; credit default swap (CDS)
spreads; and basis risks.
The Group’s liquidity and funding position is underpinned by its
significant customer deposit base and is supported by strong
relationships across customer segments. The Group has consistently
observed that, in aggregate, the retail deposit base provides a stable
source of funding. Funding concentration by counterparty, currency
and tenor is monitored on an ongoing basis and, where
concentrations do exist, these are managed as part of the planning
process and limited by the internal liquidity and funding risk
monitoring framework, with analysis regularly provided to
senior management.
The Group carries out internal stress testing of its liquidity and
potential cash flow mismatch position over both short (up to one
month) and longer-term horizons against a range of scenarios
forming an important part of the internal risk appetite. The
scenarios and assumptions are reviewed at least annually to ensure
that they continue to be relevant to the nature of the business,
including reflecting emerging horizon risks to the Group. For further
information on the Group’s 2024 liquidity stress testing results refer
to page 186.
The Group maintains a Liquidity Contingency Framework as part of
the wider Recovery Plan which is reviewed and tested regularly and
is designed to identify emerging liquidity concerns at an early stage,
so that mitigating actions can be taken to avoid a more serious crisis
developing. The Liquidity Contingency Framework has a foundation
of robust and regular monitoring and reporting of key performance
indicators, early warning indicators and risk appetite by both Group
Corporate Treasury (GCT) and Risk up to and including Board level.
Where movements in any of these metrics and indicator suites point
to a potential issue, SME teams and their directors will escalate this
information as appropriate.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Liquidity risk
Definition
Liquidity risk is the risk that the Group does
not have sufficient financial resources to meet
its commitments when they fall due or can only
secure them at excessive cost.
Level two risks
Funding, Liquidity.
The Risk overview, on page 36, contains a summary of liquidity risk
performance and key mitigating actions.
183
Lloyds Banking Group plc Annual Report and Accounts 2024
Measurement
Liquidity risk is managed through a series of measures, tests and
reports that are primarily based on contractual maturities with
behavioural overlays as appropriate. The Group undertakes
quantitative and qualitative analysis of the behavioural aspects
of its assets and liabilities in order to reflect their expected
behaviour.
The Group manages and monitors liquidity risks and ensures that
liquidity risk management systems and arrangements are
adequate with regard to the internal risk appetite, Group
strategy and regulatory requirements. Liquidity policies and
procedures are subject to independent internal oversight by Risk.
Overseas branches and subsidiaries of the Group may also be
required to meet the liquidity requirements of the entity’s
domestic country. Management of liquidity requirements is
performed by the overseas branch or subsidiary in line with
Group policy. Liquidity risk of the Insurance business is actively
managed and monitored within the Insurance business. The
Group plans funding requirements over its planning period,
combining business as usual and stressed conditions. The Group
manages its liquidity position paying regard to its internal risk
appetite, Liquidity Coverage Ratio (LCR) and Net Stable Funding
Ratio (NSFR) as required by the PRA, the Capital Requirements
Directive (CRD V) and the Capital Requirements Regulation (UK
CRR) liquidity requirements.
Liquidity and Funding management in 2024
The Group has maintained its strong funding and liquidity position
with a loan to deposit ratio of 95 per cent as at 31 December 2024
(31 December 2023: 95 per cent). Total wholesale funding
decreased to £92.5 billion as at 31 December 2024 (31 December
2023: £98.7 billion) driven by a reduction in Money Market
funding. The Group maintains access to diverse sources and tenors
of funding.
The Group’s liquid assets continue to exceed the regulatory
minimum and internal risk appetite, with a liquidity coverage ratio
(LCR) of 146 per cent (based on a monthly simple average over the
previous 12 months) as at 31 December 2024 (31 December 2023:
142 per cent) calculated on a Group consolidated basis based on the
PRA rulebook. The increase in the LCR resulted from a reduction in
net cash outflows, primarily from a reduction in wholesale funding.
All assets within the liquid asset portfolio are hedged for interest
rate risk. Following the implementation of structural reform,
liquidity risk is managed at a legal entity level with the Group
consolidated LCR representing the composite of the Ring-Fenced
Bank and Non-Ring-Fenced Bank entities.
LCR eligible assets have reduced to £134.4 billion (31 December
2023: £136.0 billion), driven by a reduction in wholesale funding.
In addition to the Group’s reported LCR eligible assets, the Group
maintains borrowing capacity at central banks which averaged
£72 billion in the 12 months to 31 December 2024. The net stable
funding ratio remains strong at 129 per cent (based on a quarterly
simple average over the previous four quarters) as at 31 December
2024 (31 December 2023: 130 per cent).
During 2024, the Group accessed wholesale funding across a
range of currencies and markets with term issuance volumes
totalling £13.9 billion. The Group expects full-year wholesale
issuance requirements of less than £10.0 billion for 2025. The
total outstanding amount of drawings from the Bank of England’s
Term Funding Scheme with additional incentives for SMEs
(TFSME) has reduced to £21.9 billion at 31 December 2024
(31 December 2023: £30.0 billion), with maturities in 2025, 2027
and beyond. The repayment of TFSME has been factored into
the Group’s funding plans.
The Group’s credit ratings are well positioned and continue to
reflect the strength of the Group’s management and franchise,
along with its robust financial performance, capital and funding
position. In November 2024, Fitch upgraded the Group’s ratings by
one notch.
Group funding requirements and sources
At 31 Dec
2024
£bn
At 31 Dec
2023
£bn
Change
%
Group funding position
Cash and balances at central banks
62.7
78.1
(20)
Loans and advances to banks1
7.9
10.7
(26)
Loans and advances to customers
459.9
449.7
2
Reverse repurchase agreements – non-trading
49.5
38.8
28
Debt securities at amortised cost
14.5
15.4
(6)
Financial assets at fair value through other comprehensive income
30.7
27.6
11
Other assets2
281.5
261.2
8
Total Group assets
906.7
881.5
3
Less other liabilities2
(247.8)
(226.3)
10
Funding requirements
658.9
655.2
1
Wholesale funding3
92.5
98.7
(6)
Customer deposits
482.7
471.4
2
Repurchase agreements – non-trading
15.9
7.7
Term Funding Scheme with additional incentives for SMEs (TFSME)
21.9
30.0
(27)
Total equity
45.9
47.4
(3)
Funding sources
658.9
655.2
1
1
Loans and advances to banks at 31 December 2023 excludes £0.1 billion within the Insurance business (31 December 2024: £nil).
2
Other assets and other liabilities primarily include balances in the Group’s Insurance business and the fair value of derivative assets and liabilities.
3
The Group’s definition of wholesale funding aligns with that used by other international market participants; including bank deposits, debt securities in issue and subordinated
liabilities. Excludes balances relating to margins of £2.8 billion (31 December 2023: £2.4 billion).
Risk management continued
184
Lloyds Banking Group plc Annual Report and Accounts 2024
Reconciliation of Group funding to the balance sheet (audited)
At 31 December 2024
At 31 December 2023
Fair value
and other
accounting
methods2
£bn
Fair value
and other
accounting
methods2
£bn
Cash
collateral
received1
£bn
Included in
funding
analysis
£bn
Cash
collateral
received1
£bn
Included in
funding
analysis
£bn
Balance
sheet
£bn
Balance
sheet
£bn
At 31 December 2024
3.1
3.2
6.2
3.7
2.9
(0.4)
6.2
Deposits from banks
(0.1)
77.2
70.8
82.9
(7.3)
75.6
Debt securities in issue
(6.4)
12.2
10.1
12.1
(1.8)
10.3
(2.1)
Subordinated liabilities
Total wholesale funding
3.2
98.7
2.9
92.5
Customer deposits
482.7
471.4
471.4
482.7
Total
3.2
570.1
2.9
575.2
1
Repurchase agreements, previously reported within deposits from banks and customer deposits, are excluded
2
Includes the unamortised HBOS acquisition adjustments on subordinated liabilities, the fair value movements on liabilities held at fair value through profit or loss, and hedge
accounting adjustments that impact the accounting carrying value of the liabilities.
Analysis of 2024 total wholesale funding by residual maturity
Up to 1
month
£bn
1 to 3
months
£bn
3 to 6
months
£bn
6 to 9
months
£bn
9 to 12
months
£bn
1 to 2
years
£bn
2 to 5
years
£bn
Over
five years
£bn
Total
at 31 Dec
2024
£bn
Total
at 31 Dec
2023
£bn
Deposits from banks
1.5
0.7
0.5
0.2
0.2
3.1
3.7
Debt securities in issue:
Certificates of deposit
issued
0.7
1.3
1.7
1.0
0.8
5.5
7.8
Commercial paper
0.4
2.9
2.2
1.7
1.1
8.3
12.3
Senior unsecured notes
issued
2.4
4.1
1.8
1.7
0.3
5.2
18.8
12.2
46.5
44.5
Covered bonds
2.0
0.1
2.7
6.5
0.3
11.6
14.1
Securitisation notes
0.7
4.0
0.6
5.3
4.2
3.5
10.3
5.8
4.4
2.2
8.6
29.3
13.1
77.2
82.9
Subordinated liabilities
0.6
0.3
1.1
1.7
2.2
6.3
12.2
12.1
Total wholesale funding1
5.0
11.6
6.6
4.6
3.5
10.3
31.5
19.4
92.5
98.7
1
The Group’s definition of wholesale funding aligns with that used by other international market participants; including bank deposits, debt securities in issue and subordinated
liabilities. Excludes balances relating to margins of £2.8 billion (31 December 2023: £2.4 billion).
Total wholesale funding by currency (audited)
Sterling
£bn
US dollar
£bn
Euro
£bn
Other
currencies
£bn
Total
£bn
At 31 December 2024
21.0
41.5
22.6
7.4
92.5
At 31 December 2023
26.0
39.7
25.1
7.9
98.7
Analysis of 2024 term issuance (audited)
Sterling
£bn
US dollar
£bn
Euro
£bn
Other
currencies
£bn
Total
£bn
Securitisation1
1.3
0.4
1.7
Covered bonds
0.4
0.4
Senior unsecured notes
0.5
6.7
2.4
0.6
10.2
Subordinated liabilities
0.4
0.4
0.8
Additional tier 1
0.8
0.8
Total issuance
1.8
7.5
3.6
1.0
13.9
1
Includes significant risk transfer securitisations.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
185
Lloyds Banking Group plc Annual Report and Accounts 2024
Liquidity portfolio
At 31 December 2024, the Group had £134.4 billion of highly liquid unencumbered LCR eligible assets, based on a monthly simple average
over the previous 12 months post any liquidity haircuts (31 December 2023: £136.0 billion), of which £128.5 billion was LCR level 1 eligible
(31 December 2023: £131.3 billion) and £5.9 billion was LCR level 2 eligible (31 December 2023: £4.7 billion). These assets are available to
meet cash and collateral outflows and regulatory requirements. The Insurance business manages a separate liquidity portfolio to mitigate
insurance liquidity risk.
LCR eligible assets
Average1
2024
£bn
2023
£bn
Change
%
Cash and central bank reserves
62.0
83.9
(26)
High quality government/MDB/agency bonds2
63.6
44.7
42
High quality covered bonds
2.9
2.7
7
Level 1
128.5
131.3
(2)
Level 23
5.9
4.7
26
Total LCR eligible assets
134.4
136.0
(1)
1
Eligible assets are calculated as an average of month-end observations over the previous 12 months post any liquidity haircuts.
2
Designated multilateral development banks (MDB).
3
Includes Level 2A and Level 2B.
LCR eligible assets by currency
Sterling
£bn
US dollar
£bn
Euro
£bn
Other
currencies
£bn
Total
£bn
At 31 December 2024
Level 1
89.8
21.0
17.7
128.5
Level 2
2.6
1.7
1.1
0.5
5.9
Total1
92.4
22.7
18.8
0.5
134.4
At 31 December 2023
Level 1
87.9
18.7
24.7
131.3
Level 2
2.0
1.9
0.5
0.3
4.7
Total1
89.9
20.6
25.2
0.3
136.0
1
Eligible assets are calculated as an average of month-end observations over the previous 12 months post any liquidity haircuts.
The Group also has a significant amount of non-LCR eligible liquid assets which are eligible for use in a range of central bank or similar
facilities. Future use of such facilities will be based on prudent liquidity management and economic considerations, having regard to
external market conditions.
Stress testing results
Internal liquidity stress testing results at 31 December 2024 (based on a monthly simple average over the previous 12 months) showed that
the Group had liquidity resources representing 136 per cent of modelled outflows under the Group’s most severe liquidity stress scenario
(31 December 2023: 136 per cent).
This scenario includes a two notch downgrade of the Group’s current long-term debt rating and accompanying one notch short-term
downgrade implemented instantaneously by all major rating agencies.
Encumbered assets
This disclosure provides further detail on the availability of assets that could be used to support potential future funding requirements of
the Group.
The disclosure is not designed to identify assets that would be available in the event of a resolution or bankruptcy.
The Group Asset and Liability Committee (GALCO) monitors and manages total balance sheet encumbrance, including via a defined risk
appetite. At 31 December 2024, the Group had £35.1 billion (31 December 2023: £38.0 billion) of externally encumbered on-balance sheet
assets with counterparties other than central banks. The decrease in encumbered assets was primarily driven by redemptions across
securitisations and covered bonds. The Group also had £747.2 billion (31 December 2023: £704.5 billion) of unencumbered on-balance
sheet assets, and £124.4 billion (31 December 2023: £139.0 billion) of pre-positioned and encumbered assets held with central banks; the
decrease in the latter was primarily driven by amortisation to the underlying loan pools already pre-positioned at the Bank of England.
Primarily, the Group encumbers mortgages, unsecured lending, credit card receivables and car loans through the issuance programmes and
tradable securities through securities financing activity. The Group mainly pre-positions mortgage assets at central banks.
Risk management continued
–
–
Lloyds Banking Group plc Annu al Rep ort and Accounts 2 024
186
On balance sheet encumbered and unencumbered assets
Encumbered with
counterparties other
than central banks
Unencumbered assets
not pre-positioned
with central banks
Securitisations
and covered
bonds
£m
Other
£m
Total
£m
Pre-
positioned
and
encumbered
assets
held with
central banks
£m
Readily
realisable1
£m
Other
realisable
assets2
£m
Cannot
be used3
£m
Total
£m
Total
£m
At 31 December 2024
Cash and balances at central banks
–
–
–
–
58,346
–
4,359
62,705
62,705
Financial assets at fair value through
profit or loss4
32
2,091
2,123
813
2,949
–
210,040
212,989
215,925
Derivative financial instruments
–
–
–
–
–
24,065
24,065
24,065
Loans and advances to banks
–
1
1
–
1,170
4,483
2,246
7,899
7,900
Loans and advances to customers
16,852
5,420
22,272
122,426
14,910
244,310
55,939
315,159
459,857
Reverse repurchase agreements
–
–
–
–
–
–
49,476
49,476
49,476
Debt securities
–
1,541
1,541
–
7,494
–
5,509
13,003
14,544
Financial assets at amortised cost
16,852
6,962
23,814
122,426
23,574
248,793
113,170
385,537
531,777
Financial assets at fair value through
other comprehensive income
–
9,161
9,161
1,112
19,838
–
579
20,417
30,690
Other5
–
–
–
–
–
442
41,093
41,535
41,535
Total assets
16,884
18,214
35,098
124,351
104,707
249,235
393,306
747,248
906,697
At 31 December 20236
Cash and balances at central banks
–
–
–
–
71,717
–
6,393
78,110
78,110
Financial assets at fair value through
profit or loss4
35
2,818
2,853
–
1,321
–
199,144
200,465
203,318
Derivative financial instruments
–
–
–
–
–
–
22,356
22,356
22,356
Loans and advances to banks
–
–
–
–
1,612
7,423
1,729
10,764
10,764
Loans and advances to customers
18,354
3,857
22,211
139,004
14,651
215,145
58,734
288,530
449,745
Reverse repurchase agreements
–
–
–
–
–
–
38,771
38,771
38,771
Debt securities
–
1,635
1,635
–
5,756
–
7,964
13,720
15,355
Financial assets at amortised cost
18,354
5,492
23,846
139,004
22,019
222,568
107,198
351,785
514,635
Financial assets at fair value through
other comprehensive income
–
11,268
11,268
–
15,888
–
436
16,324
27,592
Other5
–
–
–
–
–
419
35,023
35,442
35,442
Total assets
18,389
19,578
37,967
139,004
110,945
222,987
370,550
704,482
881,453
1
Assets regarded by the Group to be readily realisable in the normal course of business, to secure funding, meet collateral needs, or be sold to reduce potential future funding
requirements, and are not subject to any restrictions on their use for these purposes.
2
Assets where there are no restrictions on their use to secure funding, meet collateral needs, or be sold to reduce potential future funding requirements, but are not readily realisable in
the normal course of business in their current form.
3
The following assets are classified as unencumbered – c annot be used: assets held within the Group’s Insurance businesses which are generally held to either back liabilities to
policyholders or to support the solvency of the Insurance subsidiaries; assets held within consolidated limited liability partnerships which provide security for the Group’s obligations to
its pension schemes; assets segregated in order to meet the Financial Resilience requirements of the PRA’s Supervisory Statement 9/6 ‘Operational Continuity in Resolution’; assets
pledged to facilitate the use of intra-day payment and settlement systems; Bank of England Sterling Monetary Framework non-eligible collateral; reverse repos and derivatives balance
sheet ledger items.
4
Contains assets measured at fair value through profit or loss arising from contracts held with reinsurers, previously included within other assets; comparatives have been restated.
5
Other comprises: items in the course of collection from banks; investment properties; goodwill; value of in-force business; other intangible assets; tangible fixed assets; current tax
recoverable; deferred tax assets; retirement benefit assets; investments in joint ventures and associates and other assets; comparatives have been restated.
The above table sets out the carrying value of the Group’s encumbered and unencumbered assets, separately identifying those that are
available to support the Group’s funding needs. The table does not include collateral received by the Group that is not recognised on its
balance sheet, the vast majority of which the Group is permitted to repledge.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
187
Lloyds Banking Group plc Annual Report and Accounts 2024
Maturities of financial instrument liabilities (audited)
The table below analyses financial instrument liabilities of the Group, excluding those arising from insurance and participating investment
contracts, on an undiscounted future cash flow basis according to contractual maturity, into relevant maturity groupings based on the
remaining period at the balance sheet date; balances with no fixed maturity are included in the over 5 years category.
Up to 1
month
£m
1 to 3
months
£m
3 to 12
months
£m
1 to 5
years
£m
Over 5
years
£m
Total
£m
At 31 December 2024
Deposits from banks
1,809
673
904
2,775
105
6,266
Customer deposits
437,693
14,873
24,811
6,127
256
483,760
Repurchase agreements at amortised cost
8,974
5,169
15,300
9,416
38,859
Financial liabilities at fair value through profit or loss
15,208
3,965
1,803
2,102
7,078
30,156
Debt securities in issue at amortised cost
3,704
10,367
13,624
38,973
8,519
75,187
Liabilities arising from non-participating investment contracts
51,228
51,228
Lease liabilities
28
65
241
574
461
1,369
Subordinated liabilities
26
698
1,676
4,207
6,705
13,312
Total non-derivative financial liabilities
518,670
35,810
58,359
64,174
23,124
700,137
Derivative financial liabilities
Gross settled derivatives – outflows
100,432
61,356
43,231
34,795
22,505
262,319
Gross settled derivatives – inflows
(97,653)
(59,238)
(41,319)
(32,333)
(18,950)
(249,493)
Gross settled derivatives – net flows
2,779
2,118
1,912
2,462
3,555
12,826
Net settled derivative liabilities
10,432
92
109
404
1,557
12,594
Total derivative financial liabilities
13,211
2,210
2,021
2,866
5,112
25,420
Up to 1
month
£m
1 to 3
months
£m
3 to 12
months
£m
1 to 5
years
£m
Over 5
years
£m
Total
£m
At 31 December 2023
Deposits from banks
2,093
1,073
623
2,394
6,183
Customer deposits
427,695
11,133
22,572
10,767
325
472,492
Repurchase agreements at amortised cost
3,627
4,092
1,085
31,399
40,203
Financial liabilities at fair value through profit or loss
8,801
4,157
5,694
1,808
5,845
26,305
Debt securities in issue at amortised cost
2,334
8,492
21,111
40,741
8,085
80,763
Liabilities arising from non-participating investment contracts
44,978
44,978
Lease liabilities
18
70
247
779
666
1,780
Subordinated liabilities
32
80
1,274
6,627
7,822
15,835
Total non-derivative financial liabilities
489,578
29,097
52,606
94,515
22,743
688,539
Derivative financial liabilities
Gross settled derivatives – outflows
Gross settled derivatives – inflows
Gross settled derivatives – net flows
Net settled derivative liabilities
Total derivative financial liabilities
14,212
1,763
1,363
456
1,476
19,270
80,148
46,874
(78,031)
(45,249)
(46,575)
(35,753)
(20,327)
(225,935)
47,777
35,807
20,302
230,908
12,095
138
2,117
1,625
1,202
54
161
402
(25)
4,973
1,501
14,297
The majority of the Group’s non-participating investment contract liabilities are unit-linked. These unit-linked products are invested in
accordance with unit fund mandates. Clauses are included in policyholder contracts to permit the deferral of sales, where necessary, so
that linked assets can be realised without being a forced seller.
The principal amount for undated subordinated liabilities with no redemption option is included within the over 5 years column; interest of
£16 million (2023: £16 million) per annum which is payable in respect of those instruments for as long as they remain in issue is not included
beyond 5 years.
An analysis of the Group’s total wholesale funding by residual maturity and by currency is set out on page 183.
Risk management continued
–
–
–
–
–
–
–
–
–
–
–
188
Lloyds Banking Group plc Annual Report and Accounts 2024
Cash flows arising from insurance liabilities (audited)
The following table presents the estimated amount and timing of the remaining contractual discounted cash flows arising from insurance
liabilities. The amounts presented do not include those relating to the liability for remaining coverage of contracts that are measured under
the premium allocation approach.
Less than 1
year
£m
1 to 2
years
£m
2 to 3
years
£m
3 to 4
years
£m
4 to 5
years
£m
Over 5
years
£m
Total
£m
At 31 December 2024
Liabilities arising from insurance and participating
investment contracts
(1,038)
(1,292)
(1,951)
(2,453)
(2,992)
(112,055)
(121,781)
Reinsurance contract liabilities
3
3
3
3
2
13
27
Total
(1,035)
(1,289)
(1,948)
(2,450)
(2,990)
(112,042)
(121,754)
At 31 December 2023
Liabilities arising from insurance and participating
investment contracts
(843)
(2,112)
(3,035)
(3,537)
(3,667)
(101,354)
(114,548)
Reinsurance contract liabilities
(13)
(13)
Total
(843)
(2,112)
(3,035)
(3,537)
(3,667)
(101,367)
(114,561)
For insurance contracts which are neither unit-linked nor in the Group’s with-profit funds, in particular annuity liabilities, the aim is to invest
in assets such that the cash flows on investments match those on the projected future liabilities.
Insurance and participating investment contract liabilities payable on demand (audited)
Some of the Group’s insurance and participating investment contract liabilities are payable on demand as shown in the table below:
2024
2023
Amounts
payable on
demand
£m
Carrying
amount
£m
Amounts
payable on
demand
£m
Carrying
amount
£m
Life
110,402
107,909
102,396
99,799
Non-life
Total
110,402
107,909
102,396
99,799
The amounts payable on demand represent contract surrender values and incurred claims.
Maturities of contingent liabilities, commitments and guarantees (audited)
The table below shows the contractual maturity of the Group’s contingents, commitments and guarantees. Commitments are shown in the
time band containing the earliest date the commitment can be drawn down. For financial guarantee contracts, the maximum amount of
the guarantee is allocated to the earliest period in which the guarantee could be called.
Up to 1
month
£m
1 to 3
months
£m
3 to 6
months
£m
6 to 9
months
£m
9 to 12
months
£m
1 to 3
years
£m
3 to 5
years
£m
Over 5
years
£m
Total
£m
At 31 December 2024
Acceptances and endorsements
24
11
3
1
–
–
–
–
39
Other contingent liabilities
208
357
225
115
370
547
211
533
2,566
Total contingent liabilities
232
368
228
116
370
547
211
533
2,605
Lending commitments and guarantees
134,283
1,416
1,729
1,562
3,367
2,755
3,140
256 148,508
Other commitments
94
6
11
–
–
–
–
–
111
Total commitments and guarantees
134,377
1,422
1,740
1,562
3,367
2,755
3,140
256
148,619
Total contingents, commitments and guarantees
134,609
1,790
1,968
1,678
3,737
3,302
3,351
789
151,224
At 31 December 2023
Acceptances and endorsements
7
10
166
–
8
–
–
–
191
Other contingent liabilities
214
558
157
148
200
598
190
593
2,658
Total contingent liabilities
221
568
323
148
208
598
190
593
2,849
Lending commitments and guarantees
69,932
4,767
17,384
4,212
6,528
23,269
14,142
2,983
143,217
Other commitments
–
–
–
–
–
38
41
23
102
Total commitments and guarantees
69,932
4,767
17,384
4,212
6,528
23,307
14,183
3,006
143,319
Total contingents, commitments and guarantees
70,153
5,335
17,707
4,360
6,736
23,905
14,373
3,599
146,168
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
–
–
–
–
–
–
–
–
–
189
Lloyds Banking Group plc Annual Report and Accounts 2024
Market risk
Definition
Market risk is defined as the risk that the Group’s
capital or earnings profile are adversely affected by
changes in market rates or prices, including, but not
limited to, interest rates, foreign exchange, equity
prices and credit spreads.
Level two risks
Banking book (page 191), Pension (page 193), Insurance (page 194),
Trading book (page 194)
The Risk overview, on page 37, contains a summary of market risk
performance and key mitigating actions.
Risk management continued
Financial risk indicators
•
•
Structural hedge: £242 billion (2023: £247 billion)
Average 95 per cent 1-day trading VaR: £2.4 million (2023:
£2.3 million)
Balance sheet linkages
The information provided in the table below aims to facilitate the
understanding of linkages between banking, trading and insurance
balance sheet items and the positions disclosed in the Group’s
market risk disclosures.
Market risk linkage to the balance sheet
Banking
2024
Total
£m
Assets
Cash and balances at central banks
62,705
Financial assets at fair value through profit
or loss
215,925
Derivative financial instruments
24,065
Financial assets at amortised cost
Loans and advances to banks
7,900
Loans and advances to customers
459,857
Reverse repurchase agreements
49,476
Debt securities
14,544
Financial assets at amortised cost
531,777
Financial assets at fair value through other
comprehensive income
30,690
Other assets
41,535
Total assets
906,697
Liabilities
Deposit from banks
Customer deposits
Repurchase agreements at amortised cost
Financial liabilities at fair value through
profit or loss
Derivative financial instruments
Debt securities in issue at amortised cost
Liabilities arising from insurance and
investment contracts
Subordinated liabilities
Other liabilities
Total liabilities
6,158
482,745
37,760
27,611
21,676
70,834
173,292
10,089
30,644
860,809
Trading book1
£m
Non-
trading
£m
Insurance
£m
Primary market risk factor
–
62,705
–
25,450
5,274
185,201
20,182
3,172
711
–
7,799
101
–
459,857
–
–
49,476
–
–
14,544
–
–
531,676
101
–
30,690
–
–
30,413
11,122
45,632
663,930
197,135
–
6,158
–
–
482,745
–
–
37,760
–
22,981
4,630
–
15,205
5,132
1,339
–
70,034
800
–
–
173,292
–
9,581
508
–
12,727
17,917
38,186
628,767
193,856
Interest rate
Interest rate, foreign exchange, credit spread,
equity
Interest rate, foreign exchange, credit spread
Interest rate
Interest rate
Interest rate
Interest rate, credit spread
Interest rate, foreign exchange, credit spread
Interest rate, credit spread
Interest rate
Interest rate
Interest rate
Interest rate, foreign exchange
Interest rate, foreign exchange, credit spread
Interest rate, credit spread
Interest rate, credit spread, equity
Interest rate, foreign exchange
Interest rate, credit spread
1
Assets and liabilities are classified as trading book if they meet the requirements as set out in the Capital Requirements Regulation, article 104.
The defined benefit pension schemes’ assets and liabilities are
included under other assets and other liabilities in this table and
note 12 to the consolidated financial statements on page 248
provides further information.
The Group’s trading book assets and liabilities are originated
within the Commercial Banking business units. Within the
Group’s balance sheet these fall under the trading assets and
liabilities and derivative financial instruments. The assets and
liabilities are classified as trading book if they meet the
requirements as set out in the Capital Requirements Regulation,
article 104. Further information on these activities can be found
under the Trading portfolios section on page 194.
Derivative assets and liabilities are held by the Group for three main
purposes: to provide risk management solutions for clients, to
manage portfolio risks arising from client business and to manage
and hedge the Group’s own risks.
Insurance business assets and liabilities relate to policyholder funds,
as well as shareholder invested assets, including annuity funds.
The Group ensures that it has adequate cash and balances at
central banks and stocks of high quality liquid assets (for example,
gilts or US Treasury securities) that can be converted easily into cash
to meet liquidity requirements. The majority of these assets are
asset swapped and held at fair value through other comprehensive
income. For further information see Liquidity risk page 183.
0
190
Lloyds Banking Group plc Annual Report and Accounts 2024
The majority of debt issuance originates from the Group’s capital
and funding activities and the interest rate risk of the debt issued is
hedged by swapping them into a floating rate.
The non-trading book primarily consists of customer on-balance
sheet activities and the Group’s capital and funding activities, which
expose it to the risk of adverse movements in market rates or prices,
predominantly interest rates, credit spreads, exchange rates and
equity prices, as described in further detail within the Banking
activities section on page 191.
Measurement
Group risk appetite is calibrated primarily to a number of multi-risk
Group economic scenarios, and is supplemented with sensitivity-
based measures. The scenarios assess the impact of unlikely, but
plausible, adverse stresses on income with the worst case for
banking activities, defined benefit pensions, insurance and trading
portfolios reported against independently, and across the Group as
a whole.
The Group risk appetite is cascaded first to the Group Asset and
Liability Committee (GALCO), chaired by the Chief Financial
Officer, where risk appetite is approved and monitored by risk type,
and then to the Group Market Risk Committee (GMRC) where risk
appetite is sub-allocated by business unit. These metrics are
reviewed regularly by senior management to inform effective
decision making.
Mitigating actions
GALCO is responsible for approving and monitoring market risk
management techniques, market risk measures, behavioural
assumptions, and the market risk policy. Various mitigation activities
are assessed and undertaken across the Group to manage portfolios
and seek to ensure they remain within approved limits. The
mitigation actions will vary dependent on exposure but will, in
general, look to reduce risk in a cost effective manner by offsetting
balance sheet exposures and externalising to the financial markets
dependent on market liquidity. The market risk policy is owned
by Group Corporate Treasury (GCT) and refreshed annually.
The policy is underpinned by supplementary market risk
procedures, which define specific market risk management
and oversight requirements.
Monitoring
GALCO and GMRC regularly review high level market risk exposures
as part of the wider risk management framework. They also make
recommendations to the Board concerning overall market risk
appetite and market risk policy. Exposures at lower levels of
delegation are monitored at various intervals according to their
volatility, from daily in the case of trading portfolios to monthly or
quarterly in the case of less volatile portfolios. Levels of exposures
compared to approved limits and triggers are monitored by Risk and
appropriate escalation procedures are in place.
How market risks arise and are managed across the Group’s
activities is considered in more detail below.
Banking activities
Exposures
The Group’s banking activities expose it to the risk of adverse
movements in market rates or prices, predominantly interest rates,
credit spreads, exchange rates and equity prices. The volatility of
market rates or prices can be affected by both the transparency of
prices and the amount of liquidity in the market for the relevant
asset, liability or instrument.
Interest rate risk
Yield curve risk in the Group’s divisional portfolios, and in the
Group’s capital and funding activities, arises from the different
repricing characteristics of the Group’s non-trading assets, liabilities
and off-balance sheet positions.
Basis risk arises from the potential changes in spreads between
indices, for example where the bank lends with reference to a
central bank rate but funds with reference to a market rate, for
example, SONIA, and the spread between these two rates widens
or tightens.
Optionality risk arises predominantly from embedded optionality
within assets, liabilities or off-balance sheet items where either the
Group or the customer can affect the size or timing of cash flows.
One example of this is mortgage prepayment risk where the
customer owns an option allowing them to prepay when it is
economical to do so. This can result in customer balances
amortising more quickly or slowly than anticipated due to
customers’ response to changes in economic conditions.
Foreign exchange risk
Economic foreign exchange exposure arises from the Group’s
investment in its overseas operations. In addition, the Group incurs
foreign exchange risk through non-functional currency flows from
services provided by customer-facing divisions, the Group’s debt
and capital management programmes and is exposed to volatility in
its CET1 ratio, due to the impact of changes in foreign exchange
rates on the retranslation of non-sterling-denominated risk-
weighted assets.
Equity risk
Equity risk arises primarily from three different sources:
•
•
•
The Group’s private equity exposure from investments held by
Lloyds Development Capital and its stake in BGF, both within
the Equities sub-group
A small number of legacy strategic equity holdings and
recently acquired minority fintech stakes, all held in the Equities
sub-group
A small exposure to Lloyds Banking Group share price through
deferred shares and deferred options granted to employees as
part of their benefits package
Credit spread risk
Credit spread risk arises largely from: (i) the liquid asset portfolio
held in the management of Group liquidity, comprising government,
supranational and other eligible assets; (ii) the Credit Valuation
Adjustment (CVA) and Debit Valuation Adjustment (DVA)
sensitivity to credit spreads; (iii) a number of the Group’s structured
medium-term notes where the Group has elected to fair value the
notes through the profit and loss account; and (iv) banking book
assets in Commercial Banking held at fair value under IFRS 9.
Measurement
Interest rate risk exposure is monitored monthly using, primarily:
Market value sensitivity: this methodology considers all repricing
mismatches (behaviourally adjusted where appropriate) in the
current balance sheet and calculates the change in market value
that would result from an instantaneous 25, 100 and 200 basis
points parallel rise or fall in the yield curve. The market value
sensitivities are calculated on a static balance sheet using principal
cash flows excluding interest, commercial margins and other spread
components and are discounted at the risk-free rate.
Interest income sensitivity: this measures the impact on future net
interest income arising from various economic scenarios. These
include instantaneous 25, 100 and 200 basis point parallel shifts in
all yield curves and the Group economic scenarios. These scenarios
are reviewed every year and are designed to replicate severe but
plausible economic events, capturing risks that would not be
evident through the use of parallel shocks alone such as basis risk
and steepening or flattening of the yield curve.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
191
Lloyds Banking Group plc Annual Report and Accounts 2024
Unlike the market value sensitivities, the interest income sensitivities incorporate additional behavioural assumptions as to how and when
individual products would reprice in response to changing rates.
Reported sensitivities are not necessarily predictive of future performance as they do not capture additional management actions that
would likely be taken in response to an immediate, large, movement in interest rates. These actions could reduce the net interest income
sensitivity, help mitigate any adverse impacts or they may result in changes to total income that are not captured in the net
interest income.
Structural hedge: the structural hedging programme managing interest rate risk in the banking book relies on assumptions made around
customer behaviour. A number of metrics are in place to monitor the risks within the portfolio. The Group has an integrated Asset and
Liability Management (ALM) system which supports non-traded asset and liability management of the Group. This provides a single
consolidated tool to measure and manage interest rate repricing profiles (including behavioural assumptions), perform stress testing and
produce forecast outputs. The Group is aware that any assumptions-based model is open to challenge.
A full behavioural review is performed annually, or in response to changing market conditions, to ensure the assumptions remain
appropriate and the model itself is subject to annual re-validation, as required under the Group model governance policy. The key
behavioural assumptions are:
•
•
•
Embedded optionality within products
The duration of balances that are contractually repayable on demand, such as current accounts and overdrafts, together with net free
reserves of the Group
The re-pricing behaviour of managed rate liabilities, such as variable rate savings
The table below shows, split by material currency, the Group’s market value sensitivities to an instantaneous parallel up and down 25 and
100 basis points change to all interest rates.
Group Banking activities: market value sensitivity (audited)
2024
2023
Up
25bps
£m
Down
25bps
£m
Up
100bps
£m
Down
100bps
£m
Up
25bps
£m
Down
25bps
£m
Up
100bps
£m
Down
100bps
£m
Sterling
4.7
(4.7)
17.9
(19.5)
9.4
(9.9)
35.3
(42.2)
US dollar
(1.4)
1.4
(5.4)
5.7
(1.7)
1.8
(6.9)
7.4
Euro
(1.4)
(2.3)
(5.1)
(9.4)
(2.7)
0.6
(10.1)
2.6
Other
(1.0)
1.0
(3.6)
4.3
(0.2)
0.2
(0.6)
0.6
Total
0.9
(4.6)
3.8
(18.9)
4.8
(7.3)
17.7
(31.6)
This is a risk-based disclosure and the amounts shown would be amortised in the income statement over the duration of the portfolio.
The market value sensitivity has decreased year-on-year as a result of small changes in the hedging profile of fixed mortgages.
The table below shows supplementary value sensitivity to a steepening and flattening (c.100 basis points around the three-year point) in
the yield curve. This ensures there are no unintended consequences to managing risk to parallel shifts in rates.
Group Banking activities: market value sensitivity to a steepening and flattening of the yield curve (audited)
2024
2023
Steepener
£m
Flattener
£m
Steepener
£m
Flattener
£m
Sterling
(1.4)
0.3
23.1
(27.2)
US dollar
(0.6)
0.5
(3.0)
3.0
Euro
(12.8)
3.2
(4.2)
(0.7)
Other
(2.4)
3.1
0.6
(0.6)
Total
(17.2)
7.1
16.5
(25.5)
The table below shows the banking book net interest income sensitivity on a one to three year forward-looking basis to an instantaneous
parallel up 25, down 25, up 50 and down 50 basis points change to all interest rates.
Group Banking activities: three year net interest income sensitivity (audited)
2024
2023
Year 1
£m
Year 2
£m
Year 3
£m
Year 1
£m
Year 2
£m
Year 3
£m
Up 50bps
234
357
591
250
421
614
Up 25 bps
117
179
296
125
211
307
Down 25bps
(150)
(181)
(297)
(155)
(209)
(303)
Down 50bps
(302)
(364)
(595)
(311)
(417)
(606)
Year 1 net interest income sensitivity, to both up and down shocks, has decreased slightly year-on-year mostly as a result of changing
customer deposit behaviour and structural hedge activity.
The overall three year net interest income sensitivity to up and down 25 basis points and 50 basis points shocks is largely due to
reinvestment of structural hedge maturities in years two and three.
The sensitivities are illustrative and do not reflect new business margin implications and/or pricing actions, other than as outlined.
The following assumptions have been applied:
•
•
•
Instantaneous parallel shift in interest rate curve, including bank base rate
Balance sheet remains constant
Illustrative 50 per cent pass-through on deposits and 100 per cent pass-through on assets, which could be different in practice
Risk management continued
2
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Basis risk, foreign exchange, equity and credit spread risks are
measured primarily through scenario analysis by assessing the
impact on profit before tax over a 12-month horizon arising from a
change in market rates, and reported within the Board risk appetite
on a monthly basis. Supplementary measures such as sensitivity and
exposure limits are applied where they provide greater insight into
risk positions. Frequency of reporting supplementary measures
varies from daily to quarterly appropriate to each risk type.
Mitigating actions
The Group’s policy is to optimise reward while managing its
market risk exposures within the risk appetite defined by the
Board. The Group market risk policy and procedures outlines the
hedging process, and the centralisation of risk from divisions into
Group Corporate Treasury (GCT), for example via the transfer
pricing framework. GCT is responsible for managing the
centralised risk and does this through natural offsets of matching
assets and liabilities, and appropriate hedging activity of the
residual exposures, subject to the authorisation and mandate
of GALCO within the Board risk appetite. The hedges are
externalised to the market by derivative desks within GCT
and the Commercial Bank. The Group mitigates income
statement volatility through hedge accounting. This reduces
the accounting volatility arising from the Group’s economic
hedging activities and any hedge accounting ineffectiveness
is continuously monitored.
The Group establishes hedge accounting relationships for
interest rate risk components using cash flow hedges and fair
value hedges. The Group is exposed to cash flow interest rate risk
on its variable rate loans and deposits together with its floating
rate subordinated debt. The derivatives used to manage the
structural hedge may be designated into cash flow hedges to
manage income statement volatility. The economic items related
to the structural hedge, for example current accounts, are not
eligible hedged items under IAS 39 for inclusion into accounting
hedge relationships. The Group is exposed to fair value interest
rate risk on its fixed rate customer loans, its fixed rate customer
deposits and the majority of its subordinated debt.
Hedge ineffectiveness arises during the management of interest
rate risk due to residual unhedged risk. Sources of
ineffectiveness, which the Group may decide to not fully
mitigate, can include basis differences, timing differences and
notional amount differences. The effectiveness of accounting
hedge relationships is assessed between the hedging derivatives
and the documented hedged item, which can differ to the
underlying economically hedged item.
The largest residual risk exposure arises from balances that are
deemed to be insensitive to changes in market rates (including
current accounts, a portion of variable rate deposits and investable
equity), and is managed through the Group structural hedge.
Consistent with the Group’s strategy to deliver stable returns,
GALCO seeks to minimise large reinvestment risk, and to smooth
earnings over a range of investment tenors. The structural hedge
consists of longer-term fixed rate assets or interest rate swaps and
the amount and duration of the hedging activity is reviewed
regularly by GALCO.
While the Group faces uncertainty in customer behaviour due to
an elevated rate environment, its exposure to increased pipeline
and prepayment risks are managed through hedging in line
with expected customer behaviour. These are appropriately
monitored and controlled through divisional Asset and Liability
Committees (ALCOs).
Economic foreign exchange exposures arising from non-functional
currency flows are identified by divisions and transferred and
managed centrally. The Group also has a policy of forward hedging
its forecasted currency profit and loss to year end.
The Group’s structural foreign currency exposure is represented
by its investments in overseas subsidiaries and branches which
create capital resources denominated in foreign currencies,
principally USD and EUR. Gains or losses on structural foreign
currency exposures are taken to reserves, resulting in a
movement in CET1 capital. The Group’s main overseas operations
are in America and Europe and do not represent a significant
proportion on its overall portfolio.
The Group makes use of both accounting and economic foreign
exchange exposures, as an offset against the impact of changes in
foreign exchange rates on the value of non-sterling-denominated
risk-weighted assets. This involves the holding of a structurally open
currency position; sensitivity is minimised where, for a given
currency, the ratio of the structural open position to risk-weighted
assets equals the CET1 ratio. Continually evaluating this structural
open currency position against evolving non-sterling-denominated
risk-weighted assets mitigates volatility in the Group’s CET1 ratio.
The Group manages foreign currency accounting exposure via
cash flow hedge accounting, utilising currency swaps and
forward foreign exchange trades. All non-structural foreign
exchange exposures in the non-trading book are managed
centrally within allocated exposure limits.
Monitoring
The appropriate limits and triggers are monitored by senior
executive committees within the Banking divisions. Banking assets,
liabilities and associated hedging are actively monitored and if
necessary rebalanced to be within agreed tolerances.
Defined benefit pension schemes
Exposures
The Group’s defined benefit pension schemes are exposed to risks
that impact their assets and liabilities, that could adversely impact
the Group.
•
•
•
•
The liability discount rate exposes the Group to interest rate risk
and credit spread risk, which is partially offset by fixed interest
assets, such as government and corporate bonds and swaps
Increases to pensions in deferment and in payment expose the
Group to inflation risk, which is partially offset by real assets,
such as index-linked gilts and swaps
The schemes’ asset holdings expose the Group to investment
risk. Assets are invested in a diversified portfolio of debt
securities, equities and other return-seeking assets
The schemes’ membership exposes the Group to longevity risk
For further information on defined benefit pension scheme assets
and liabilities please refer to note 12 to the consolidated financial
statements on page 248.
Measurement
The schemes are assessed on a number of different measures for
differing purposes, including but not limited to, the IAS 19
accounting basis for annual reporting and accounts, and the
Trustees’ Technical Provisions funding basis for agreeing
contributions into the schemes.
Management of the schemes’ assets is primarily the responsibility of
the Trustees of the schemes, who are responsible for setting the
investment strategy in consultation with the Group, and, for
agreeing funding requirements with the Group as part of the
triennial valuation process.
Pension scheme risks are measured and monitored using a number
of different metrics and use a range of techniques including scenario
analysis and stress testing.
193
Lloyds Banking Group plc Annual Report and Accounts 2024
Mitigating actions
The Group takes an active involvement in agreeing risk mitigation
strategies with the schemes’ Trustees. An interest rate and inflation
hedging programme is in place to reduce liability risk. The schemes
have also reduced equity allocations and invested the proceeds in
credit assets. The Trustees have put in place longevity swaps to
mitigate longevity risk. The merits of longevity risk transfer and
hedging solutions are reviewed regularly.
Monitoring
In addition to the wider risk management framework, governance
of the schemes includes a specialist Group Pension Committee.
The surplus, or deficit, in the schemes is tracked monthly along with
various single factor and scenario stresses which consider the risks
to the assets and liabilities holistically. Key metrics are monitored
monthly including the Group’s capital resources of the schemes, the
performance against risk appetite metrics and triggers, and the
performance of the hedged asset and liability matching positions.
The costs and benefits of market risk mitigation are considered in
strategy and business planning decisions, with consideration given
to the impacts to various metrics.
Monitoring
Market risks in the Insurance business are monitored by Insurance
senior executive committees and ultimately the Insurance Board.
Monitoring includes the progression of market risk capital against
risk appetite limits, as well as the sensitivity of profit before tax to
combined market risk stress scenarios and in-year market
movements. Asset and liability matching positions and hedges in
place are actively monitored and if necessary rebalanced to be
within agreed tolerances. In addition, market risk is controlled via
approved investment policies and mandates.
Insurance business
Exposures
The main elements of market risk to which the Group is exposed
through the Insurance business are equity, credit default spread,
interest rate and inflation.
•
•
•
•
Equity risk arises indirectly through the value of future
management charges on policyholder funds
Credit default spread risk mainly arises from annuities where
policyholders’ future cash flows are guaranteed at retirement.
Exposure arises if the market value of the assets moves
differently to the liabilities they back. This exposure arises from
credit downgrades and defaults
Interest rate risk arises through credit and interest assets
which are mainly held to cover the annuity and general
insurance liabilities
Inflation exposure arises from inflation-linked policyholder
benefits and future expenses
Trading portfolios
Exposures
The Group’s trading activity is small relative to its peers. The Group’s
trading activity is undertaken primarily to meet the financial
requirements of commercial and retail customers for foreign
exchange, credit, interest rate and inflation products. These
activities support customer flow and market making activities.
All trading activities are performed within the Commercial Banking
division. While the trading positions taken are generally small, any
extreme moves in the main risk factors and other related risk factors
could cause significant losses in the trading book depending on the
positions at the time. The average 95 per cent 1-day trading VaR
(Value at Risk; diversified across risk factors) was stable in 2024 at
£2.4 million (31 December 2023: £2.3 million).
Trading market risk measures are applied to all of the Group’s
regulatory trading books and they include daily VaR (see trading
portfolios: VaR table), sensitivity-based measures, and stress
testing calculations.
Measurement
Current and potential future market risk exposures within Insurance
are assessed using a range of techniques including stress, reverse
stress and scenario testing, as well as stochastic modelling.
Risk measures include 1-in-200 year stresses for the Insurance
business’ regulatory capital assessments and other supporting
measures where appropriate, including those set out in note 8(I) of
the consolidated financial statements on page 242.
Mitigating actions
Equity and credit spread risks are closely monitored. Asset liability
matching, hedging and unit matching are all used to reduce the
sensitivity of equity movements.
Interest rate risk in the annuity book is monitored and mitigated by
investing in assets whose cash flows closely match those on the
projected future liabilities. It is not possible to eliminate the risk
completely as the timing of insured events is uncertain and bonds
are not available for all required maturities. Other market risks
(e.g. interest rate exposure outside the annuity book and inflation)
are also closely monitored and where considered appropriate,
hedges are put in place to reduce exposure.
Measurement
The Group internally uses VaR as the primary risk measure for all
trading book positions.
The trading portfolios: VaR table shows some relevant statistics for
the Group’s 1-day 95 per cent confidence level VaR that are based
on 300 historical consecutive business days to year-end 2024 and
year-end 2023.
The risk of loss measured by the VaR model is the loss in earnings
which is not expected to be exceeded with 95 per cent confidence.
The total and average trading VaR numbers reported below have
been obtained after the application of the diversification benefits
across the five risk types, but do not reflect any diversification
between Lloyds Bank Corporate Markets plc and any other entities.
The maximum and minimum VaR reported for each risk category
did not necessarily occur on the same day as the maximum and
minimum VaR reported at Group level.
The market risk for the trading book continues to be low relative to
the size of the Group and in comparison to peers. This reflects the
fact that the Group’s trading operations are customer-centric and
focused on hedging and recycling client risks.
Trading portfolios: VaR (1-day 95 per cent confidence level) (audited)
At 31 December 2024
At 31 December 2023
Close
£m
Average
£m
Maximum
£m
Minimum
£m
Close
£m
Average
£m
Maximum
£m
Minimum
£m
Foreign exchange risk
0.1
0.2
0.7
0.1
0.1
0.3
0.9
0.1
Equity risk
–
–
–
–
–
–
–
–
Credit spread risk
0.2
0.3
0.4
0.2
0.2
0.3
0.5
0.1
Inflation risk
0.1
0.3
0.7
0.1
0.5
0.5
1.0
0.2
Interest rate risk
4.0
2.4
5.5
1.2
1.7
2.0
3.8
1.0
All risk factors before diversification
4.4
3.2
6.2
2.0
2.5
3.1
5.1
1.9
Portfolio diversification
(0.6)
(0.8)
(0.9)
(0.8)
Total VaR
3.8
2.4
5.1
1.3
1.6
2.3
1.2
4.1
Risk management continued
19
4
19
Lloyds Banking Group plc Annual Report and Accounts 2024
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Although it is an important market standard measure of risk, VaR
has limitations. One of them is the use of a limited historical data
sample which influences the output by the implicit assumption that
future market behaviour will not differ greatly from the historically
observed period. Another known limitation is the use of defined
holding periods which assumes that the risk can be liquidated or
hedged within that holding period. Also calculating the VaR at the
chosen confidence interval does not give enough information about
potential losses which may occur if this level is exceeded. The Group
fully recognises these limitations and supplements the use of VaR
with a variety of other measurements which reflect the nature of
the business activity. These include detailed sensitivity analysis,
position reporting and a stress testing programme.
Trading book VaR (1-day 99 per cent) is compared daily against
both hypothetical and actual profit and loss. The 1-day 99 per cent
VaR chart can be found in the Group’s Pillar 3 disclosures →.
Mitigating actions
The level of exposure is controlled by establishing and
communicating the approved risk limits and controls through
policies and procedures that define the responsibility and authority
for risk taking. Market risk limits are clearly and consistently
communicated to the business. Any new or emerging risks are
brought within risk reporting and defined limits.
Monitoring
Trading risk is monitored daily against 1-day 95 per cent VaR and
stress testing limits. These limits are complemented with position
level action triggers and profit and loss referrals. Risk and position
limits are set and managed at both desk and overall trading book
levels. They are reviewed at least annually and can be changed as
required within the overall Group risk appetite framework.
Model risk
Definition
Model risk is the potential for adverse consequences
from model errors or the inappropriate use of
modelled outputs to inform business decisions.
Adverse consequences could lead to a deterioration
in the prudential position, non-compliance with
applicable laws and/or regulations, or damage to the
Group’s reputation. Model risk can also lead to
financial loss, as well as qualitative limitations such
as the imposition of restrictions on business
activities.
The Risk overview, on page 37, contains a summary of model risk
performance and key mitigating actions.
Exposures
The Group uses models to support a broad range of activity,
including:
•
•
•
•
•
•
•
•
•
Capital adequacy calculation
Formulating business strategies
Informing business decisions
Identifying and measuring risks
Credit decisioning, including fraud
Pricing models
Impairment calculation
Stress testing and forecasting
Market risk measurement
These models use quantitative methods to process input data into
quantitative or qualitative outputs which have a quantitative
measure associated with them. They use simplifications of complex
real-world systems and processes, the use of models therefore
creates model risk.
As a result of the wide scope and breadth of coverage,
there is exposure to model risk across a number of the Group’s
principal activities.
Significant events such as global conflicts and pandemics can
weaken the relationship between model inputs and subsequent
outputs due to the uncertainty these events cause. A stable
economy allows models to operate in a much steadier environment,
more typical to those used to build the models.
The evolution of GenAI will support the Group in increasing
productivity and reimagining the customer experience through
innovative solutions. However, these advancements introduce
unique risks. To address these risks, additional controls are being
developed to support the safe and controlled use of the Group’s
GenAI aspirations.
The control environment for model risk continues to be
strengthened to meet revised internal and regulatory requirements.
In addition, in common with the rest of the industry, changes
required to capital models following new regulations have created a
temporary increase in the risk relating to these models during the
period of transition. Further information on capital impacts are
detailed in the capital risk section on pages 144 to 150.
Measurement
The Board risk appetite metrics are the key components for
measuring the Group’s most material models; model performance
and compliance is reported regularly to the Group and Board
Risk Committees.
Mitigating actions
The model risk management framework, established by and with
continued oversight from an independent team in the Risk function,
provides the foundation for managing and mitigating model risk
within the Group. Accountability is cascaded from the Board
and senior management via the Group enterprise risk
management framework.
This provides the basis for the Group’s model risk management
policy, which defines the mandatory requirements for models across
the Group, including:
•
•
•
•
The scope of quantitative methods covered by the policy
Classification of risk of models using materiality and complexity
Roles and responsibilities, including ownership, independent
oversight and approval
Key principles and controls regarding model development,
implementation, model use, ongoing monitoring and periodic
revalidation, independent validation, model risk mitigants, and
the process for non-compliance
All models have an owner who takes responsibility for the fitness for
purpose of the model and, where appropriate, are supported and
challenged by the independent specialist Group function.
As a result of the above, all models in scope of policy, including
those involved in regulatory capital calculation, are developed
consistently and are of sufficient quality to support business
decisions and meet regulatory requirements.
Monitoring
The Group Model Governance Committee is the primary body
for overseeing model risk. Policy requires that key performance
indicators are monitored for every model such that all issues are
escalated appropriately. Material model issues are reported to the
Group and Board Risk Committees regularly, with focus on any
key issues.
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Lloyds Banking Group plc Annual Report and Accounts 2024
Operational risk
Definition
Operational risk is defined as the risk of actual or
potential impact to the Group (financial and/or non-
financial) resulting from inadequate or failed internal
processes, people and systems or from external events.
Resilience is core to the management of operational
risk within Lloyds Banking Group to ensure that
business processes (including those that are
outsourced) can withstand operational risks and can
respond to and meet customer and stakeholder needs
when continuity of operations is compromised.
Level two risks
Business continuity, Change execution, Cyber and physical security,
Data and privacy, Financial reporting (including Tax), Health and
safety and premises, Information, Internal and external supplier risk,
IT systems, People, Transaction processing.
The Risk overview, on page 37, contains a summary of operational risk
performance and key mitigating actions.
Exposures
The principal operational risk to the Group covers a number of level
two operational risks, which could result in customer harm, unfair
outcomes, colleague detriment, financial loss, regulatory censure
and/or reputational damage.
A number of these risks could increase where there is a reliance
on third party suppliers to provide services to the Group
or its customers.
Measurement
Operational risk is managed across the Group through an
operational risk framework and policies. This framework includes
a risk and control self-assessment process, risk impact likelihood
matrix, risk and control indicators, risk appetite setting, a robust
operational loss event management and escalation process,
and a scenario analysis and operational loss forecasting process
that feed into capital planning. This is supplemented by Group level
and local management information and reporting across a suite
of governed metrics.
The operational risk events by risk category table below shows high
level loss and event trends for the Group using Basel II categories.
Based on data captured on the Group’s RCSA, in 2024 the highest
frequency of events occurred in external fraud with 85 per cent of
the total volume. External fraud also accounted for the highest
losses by value at 41 per cent.
Operational risk losses and scenario analysis is used to inform the
Internal Capital Adequacy Assessment Process (ICAAP). The Group
calculates its minimum (Pillar I) operational risk capital
requirements using The Standardised Approach (TSA). Pillar II is
calculated using internal and external loss data and severe but
plausible scenarios that may occur in the next 12 months.
Mitigating actions
The Group continues to focus on risk management requirements
and developing the processes, systems and people skills and
capabilities needed to mitigate risks. Risks are reported and
discussed at local governance forums and escalated to executive
management and the Board as appropriate to ensure the correct
level of visibility and engagement. The Group employs a range of risk
management strategies, including: avoidance, mitigation, transfer
(including insurance) and acceptance within appetite or tolerance.
Where there is a reliance on third party suppliers to provide services,
including the areas of IT systems and information security, the
Group’s sourcing policy ensures that outsourcing initiatives follow a
defined process including due diligence, risk evaluation and ongoing
assurance. Business management uses issues and action-tracking
management to address identified risk exposure weaknesses in the
control environment in a consistent manner.
Specific mitigating actions for level two operational level risks are:
Business continuity
The Group remains committed to managing operational resilience
risks and ensuring lessons are learned from internal and external
events of disruption, which may have an impact on the Group’s
ability to continue operations. The Group’s priority is centred on
minimising any potential impacts to the Group and its customers, as
well as the wider financial sector and UK economy, such as through
scenario analysis and testing, business continuity, supplier exit
planning and implementation of ‘resilience by design’.
Change execution
The Group takes a range of mitigating actions with respect to
change execution risk. These include the following:
•
•
•
•
•
Ensuring there are sufficient, appropriately skilled colleagues to
support the safe delivery of the Group’s current and future
change portfolio
Businesses assess the potential impacts of undertaking any
change activity on their ability to execute effectively, on
customers and colleagues and on the potential consequences for
existing business risk profiles
Ensuring compliance with the change policy and associated
policies and procedures, which set out the principles and key
controls that apply across the business and are aligned to the
Group’s risk appetite
The implementation of effective governance and control
frameworks to ensure adequate controls are in place to manage
change activity and act to mitigate the change execution risks
identified. These controls, such as testing, are monitored in line
with the change policy and ERMF
Events and incidents related to change activities are escalated
and managed appropriately in line with risk framework guidance
Operational risk events by risk category (losses greater than or equal to £10,000)1
% of total volume
% of total losses
2024
2023
2024
2023
Business disruption and system failures
1.14
0.64
3.40
0.90
Clients, products and business practices
1.89
2.15
25.49
74.61
Damage to physical assets
0.14
0.06
0.05
0.03
Employee practices and workplace safety
0.39
0.32
0.55
0.16
Execution, delivery and process management
10.87
9.56
28.99
14.08
External fraud2
85.32
86.85
41.50
10.14
Internal fraud2
0.25
0.42
0.02
0.08
Total
100.00
100.00
100.00
100.00
1
Excludes losses related to Insurance. 2023 breakdowns have been updated to reflect the reinstatement of PPI and provisions, and due to the nature of the risk events which can evolve
over time, such as the lag in operational losses.
2
Fraud level two risk is explained in further detail within the economic crime risk, as per the updated enterprise risk management framework.
Risk management continued
196
Lloyds Banking Group plc Annual Report and Accounts 2024
Data and privacy
The Group continues to invest to reduce data risk exposure, by:
•
Delivering a strategy focused on data management and culture,
data-driven insights, platforms, tooling and AI-enablement
•
Enhancing data quality and capability, such as standardised
controls implemented across critical data elements
•
Embedding data privacy impact assessments in the processing of
high-risk data
Internal and external supplier
The threat landscape associated with third party suppliers and the
critical services they provide continues to receive a significant
amount of attention. The Group acknowledges the importance of
control and responsibility for critical business services and processes,
which could cause significant harm to the Group’s customers.
Financial reporting (including tax)
The Group maintains risk management systems and internal
controls relating to the financial reporting process ensuring:
•
•
•
•
The consistent and appropriate application of accounting
policies, the accurate recording of transactions, which are
undertaken in accordance with delegated authorities, and
safeguarding of assets with liabilities properly stated
The calculation, preparation and reporting of financial,
prudential regulatory and tax outcomes in accordance with
applicable International Financial Reporting Standards, statutory
and regulatory requirements, such as the UK Finance Code for
Financial Reporting Disclosure and the US Sarbanes-Oxley Act
Ongoing monitoring to assess the impact of emerging regulation
and legislation on financial, prudential regulatory and
tax reporting
An accurate view of the Group’s performance to allow the Board
and senior management to appropriately manage the affairs and
strategy of the business and each of its entities and sub-groups
The Group segments its suppliers by criticality and has processes in
place to support ongoing supplier management, including:
•
•
•
Policy expectations are underpinned by standards, notably the
sourcing and supply chain management framework
All material arrangements are set out in written agreements and
based on Group standard terms, which comply with regulations,
including the expectation that all sub-outsourcing is managed in
line with the supplier’s contractual obligations to the Group
A risk-proportionate process exists for onboarding and managing
third party arrangements through the life cycle
Health and safety and premises
The Group strives to ensure compliance with legal and regulatory
requirements, embedding compliant and appropriate colleague
behaviours in line with its policies, values and people risk priorities.
The Group continues to monitor horizon scanning, risk assessments
and any incident information to continually improve its health,
safety and premises risk management. Colleagues also regularly
complete health and safety training to ensure that policies,
standards, procedures, processes and practices are understood and
implemented effectively.
•
•
Pre-outsourcing and ongoing risk assessments to identify key
operational and financial risks, including on-site or virtual
assurance for suppliers with a higher criticality assessment
Assessments drive the level of ongoing supplier governance,
assurance and monitoring. For example, the Group provides
training and other resources to its suppliers to support IT systems
and information security resilience in its supply chain
Information, cyber and physical security
The Group adopts a risk-based approach to mitigate cyber threats it
faces. Specifically, the Group continues to undertake remediation
activity to address deficiencies in its access controls across certain
business applications and associated IT infrastructure. The effective
operation of the Group’s estate is supported by an IT and Cyber
Security Governance framework, guided by a threat-based strategy
which underpins investment decisions. The ongoing protection of
the estate and confidentiality of material information is ensured
through adherence to the Group Security Policy which has been
aligned to industry good practice including the NIST Cyber Security
Framework; and material laws and regulations. The Group engages a
specialist third party consultancy on a periodic basis, to assess the
maturity of its cyber security programme, in assessing, identifying
and managing material risks from cyber security threats. Thresholds
have been set that, once triggered, will bring the information
security risk owning business representatives, legal and compliance
teams together as a subcommittee. The sub-committee will
own the invocation of crisis management, Board and/or
regulatory notification and the drafting of any wider
stakeholder communications.
IT systems
The Group continues its journey to simplify its technology estate, in
line with its strategy, through the targeted simplification of legacy
applications, infrastructure platforms and on-premise data centres.
The Group has controls in place to manage legacy technology,
IT change and monitoring, incident management and recovery.
IT disaster recovery is a key capability to recover from multiple
scenarios, ranging from likely and medium impact (such as
infrastructure failure for a single application), to low likelihood with
severe or material impact scenarios, such as the loss of a data centre
or cloud region.
People
The Group takes many mitigating actions with respect to people
risk. Key areas of focus include:
•
•
•
•
•
•
Focusing on leadership and colleague engagement, through
delivery of strategies to attract, retain and develop high calibre
people together with a focus on creating a strong and resilient
talent pipeline
Continued focus on the Group’s culture and inclusivity strategy
by developing and delivering initiatives that reinforce the
appropriate behaviours which generate the best possible long-
term outcomes for customers and colleagues
Managing organisational capability and capacity through
divisional people strategies to ensure there are the right skills and
resources to meet customers’ needs and deliver the Group’s
strategic plan
Ensuring colleague wellbeing strategies and support are in place
to meet colleague needs, alongside skills and capability growth
required to maximise the potential of our people
Ensuring compliance with legal and regulatory requirements,
embedding compliant and appropriate colleague behaviours in
line with Group policies, values and its people risk priorities
Reviewing and enhancing people processes to ensure they are fit
for purpose and operationally resilient
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
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Lloyds Banking Group plc Annual Report and Accounts 2024
Transaction processing
The Group adopts a robust approach to minimising transaction
processing risks. This includes processing and execution failures
relating to clients and products, such as errors in payment
processing or management of payments and claims, including those
where a third party is operating on the Group’s behalf.
Monitoring
Monitoring and reporting of operational risk is undertaken at Board,
Group, legal entity and business unit and functional committees.
Each committee monitors key risks, control effectiveness,
indicators, events, operational losses, risk appetite metrics and the
results of independent review conducted by the Risk function and/
or Group Audit. Additionally, the Group’s IT and information
security processes are validated and audited by internal experts
within the Risk function and Group Audit.
The Group maintains a formal approach to operational risk event
escalation, whereby events are identified, captured and escalated,
where appropriate based on materiality. Root causes of events are
determined, and action plans put in place to ensure an optimum
level of control to keep customers and the business safe and
improve efficiency.
The insurance policies are monitored and reviewed regularly, with
recommendations being made to the Group’s senior management
annually prior to each renewal. Insurers are monitored on an
ongoing basis, to ensure counterparty risk is minimised. A process is
in place to manage any insurer rating changes or insolvencies.
Risk management continued
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Lloyds Banking Group plc Annual Report and Accounts 2024
Financial
statements
In this section
Independent auditors’ report
200
Consolidated income statement
212
Consolidated statement of
comprehensive income
213
Consolidated balance sheet
214
Consolidated statement of changes in equity
215
Consolidated cash flow statement
218
Notes to the consolidated
financial statements
1.
Basis of preparation
219
2.
Accounting policies
219
3.
Critical accounting judgements and
key sources of estimation
uncertainty
228
4.
Segmental analysis
229
5.
Net interest income
234
6.
Net fee and commission income
234
7.
Net trading income (losses)
235
8.
Insurance business
236
9.
Other operating income
244
10.
Operating expenses
244
11.
Share-based payments
245
12.
Retirement benefit obligations
248
13.
Auditors’ remuneration
253
14.
Impairment
254
15.
Tax
255
16.
Measurement basis of financial
assets and liabilities
258
17.
Fair values of financial assets and
liabilities
260
18.
Maturities of assets and liabilities
269
19.
Derivative financial instruments
271
20.
Loans and advances to customers
274
21.
Allowance for expected credit
losses
274
22.
Finance lease receivables
284
23.
Goodwill and other intangible
assets
284
24.
Other assets
286
25.
Lessee disclosures
287
26.
Debt securities in issue
287
27.
Other liabilities
288
28.
Provisions
288
29.
Subordinated liabilities
290
30.
Share capital
291
31.
Earnings per share
292
32.
Share premium account
293
33.
Other reserves
293
34.
Retained profits
294
35.
Other equity instruments
295
36.
Dividends on ordinary shares
295
37.
Related party transactions
296
38.
Contingent liabilities, commitments
and guarantees
297
39.
Structured entities
298
40.
Transfers of financial assets
299
41.
Financial risk management
300
42.
Cash flow statement
301
43.
Events since the balance sheet date
302
Parent company balance sheet
303
Parent company statement of changes in
equity
304
Parent company cash flow statement
305
Notes to the parent company financial
statements
1.
Basis of preparation and accounting
policies
306
2.
Measurement basis of financial
assets and liabilities
306
3.
Fair values of financial assets and
liabilities
307
4.
Deferred tax
307
5.
Debt securities in issue at
amortised cost
307
6.
Subordinated liabilities
308
7.
Share capital, share premium
account and other equity
instruments
308
8.
Merger reserve and capital
redemption reserve
308
9.
Retained profits
309
10.
Related party transactions
309
11.
Financial risk management
310
12.
Other information
310
The Group has adopted the UK Finance Code
for Financial Reporting Disclosure and these
2024 financial statements have been prepared
in compliance with its principles.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
Lloyds Banking Group plc Annual Report and Accounts 2024
199
Independent auditors’ report to the members of Lloyds Banking Group plc
Report on the audit of the financial statements
1.
Opinion
In our opinion:
•
•
•
•
the financial statements of Lloyds Banking Group plc (the ‘Parent company’) and its subsidiaries (the ‘Group’ or ‘LBG’) give a true and
fair view of the state of the Group’s and of the Parent company’s affairs as at 31 December 2024 and of the Group’s profit for the year
then ended;
the Group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting
standards and IFRS® Accounting Standards as issued by the International Accounting Standards Board (IASB);
the Parent company financial statements have been properly prepared in accordance with United Kingdom adopted international
accounting standards and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise the:
Group
•
•
•
•
•
•
•
•
Consolidated balance sheet as at 31 December 2024;
Consolidated income statement for the year then ended;
Consolidated statement of comprehensive income for the year
then ended;
Consolidated statement of changes in equity for the year then
ended;
Consolidated cash flow statement for the year then ended;
Notes 1 to 43 to the financial statements, which include the
accounting principles and policies;
Directors’ remuneration report identified as ‘audited’; and
Risk management section identified as ‘audited’.
Parent company
•
•
•
•
Balance sheet as at 31 December 2024;
Statement of changes in equity for the year then ended;
Cash flow statement for the year then ended; and
Notes 1 to 12 to the financial statements, which include the
accounting principles and policies.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom adopted international
accounting standards, and as regards the Parent company financial statements, as applied in accordance with the provisions of the
Companies Act 2006.
2. Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditors’ responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Parent company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services
provided to the Group and Parent company for the year are disclosed in note 13 to the financial statements. We confirm that we have not
provided any non-audit services prohibited by the FRC’s Ethical Standard to the Group or the Parent company.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3. Summary of our Audit approach
Key audit matters
The key audit matters that we identified in the current year were:
•
•
•
•
•
Expected credit losses (‘ECL’) (Group)
Regulatory and litigation matters (Group)
IT systems that impact financial reporting (Group and Parent company)
Defined benefit obligations (Group)
Valuation of certain complex and illiquid financial instruments held at fair value (Group)
In 2023, we identified the first time adoption of IFRS 17 ‘Insurance contracts’ as a key matter. Post implementation
we no longer consider this a key audit matter.
Our assessment of the level of risk for all other areas has remained consistent with the prior year.
Materiality
Overall materiality used for the Group consolidated financial statements was £320 million, which was determined
on the basis of pre-tax profits, normalised for non-recurring items.
Overall materiality used for the Parent company financial statements was £320 million, which was determined on
the basis of net assets and capped at Group materiality.
Scoping
Our audit scope covers 95 per cent of the Group’s total assets, 94 per cent of the Group’s total liabilities, 89 per
cent of the Group’s income and 95 per cent of the Group’s expenses.
Our audit approach
We structured our approach to the audit to reflect how the Group is organised as well as ensuring it was both effective and risk focused. It
can be summarised into the following key activities through which we obtained sufficient audit evidence required to form our opinion on
the Group and Parent company financial statements:
• Audit planning and risk assessment
Our audit team has been structured in line with the Group’s three main operating divisions: Retail, Commercial Banking and Insurance,
Pensions and Investments. Our audit planning procedures considered the impact of internal and external factors affecting the Group’s
profitability and operations, key audit matters most relevant to the users of the financial statements, the appropriate scope of audit work
performed as well as the expectations and requirements of the Group’s investors and regulators.
Independent auditors’ report
200
Lloyds Banking Group plc Annual Report and Accounts 2024
In performing our audit risk assessments, we considered the impact of macroeconomic factors on the Group’s key accounting judgements
and sources of estimation uncertainty. The key factors considered in our risk assessments were:
the impact of uncertainty in the current economic climate and ongoing geopolitical tensions on the Group’s ECL and valuation of
certain illiquid and complex financial instruments; and
changes to the regulatory and litigation environment affecting the Group’s financial reporting.
We obtained the knowledge and information required to inform our audit planning and risk assessment decision making through regular
meetings with Group and Divisional Finance and the extensive use of data and technology;
• Execution of audit work
Our audit is comprised of two distinct component audit teams covering the Group’s three operating segments, which are:
the UK Banking component auditing the Group’s Retail and Commercial Banking operating segments; and
the Insurance component auditing the Group’s Insurance, Pensions and Investments operations.
The component performance materiality allocated across both components ranged between £210 million and £120 million (2023: £228
million and £132 million).
The group audit team met regularly and was in active dialogue with each component audit team throughout the audit to ensure
appropriate oversight over audit activities performed within each audit component. Oversight activities included determining whether the
planned work was performed in accordance with the overall Group audit strategy and in line with the Group audit instructions provided to
the components. We were able to satisfy ourselves that our oversight and supervision was appropriate through in-person meetings,
videoconferencing, direct reviews of work as well as through attending planning and clearance meetings with divisional management;
• Audit procedures undertaken at both Group and Parent company level
We performed audit procedures over the Group and Parent company financial statements including the consolidation of the Group’s
results, the preparation of the financial statements, certain disclosures within the Directors’ Remuneration report, litigation provisions and
exposures, as well as the Group’s entity level and oversight controls relevant to financial reporting. Entities not covered by our audit scope
are subject to analytical procedures to confirm our conclusion that there were no significant risks of material misstatement in the
aggregated financial information;
• Internal controls testing approach
Our internal controls testing approach was informed by our scoping and risk assessment activities. We have assessed the Group’s end-to-
end financial reporting processes supporting all in-scope financial statement balances and identified relevant controls to test for these
balances. This included the testing of general IT controls, process level controls and entity level controls at the Group level; and
• The impact of climate change on our audit
In planning our audit, we have considered the impact of climate change on the Group’s operations and any subsequent impact on its
financial statements. The Group sets out its assessment of the potential impact on page 150 of the Risk Management section of the Annual
Report.
In conjunction with our climate risk specialists, we have held discussions with the Group to understand their:
Our audit work has involved:
evaluating climate as a factor in risk assessments for potentially affected balances;
challenging the completeness of the physical and transition risks identified and considered in the Group’s climate risk assessment and
the conclusion that there continues to be no material impact of climate change risk on financial reporting;
reviewing the Group’s qualitative loan portfolio analysis, and challenging the key assumptions used by the Group with reference to
our own understanding of the portfolios and publicly available documentation; and
assessing disclosures in the Annual Report and challenging the consistency between the financial statements and the remainder of
the Annual Report.
We have not identified any material inconsistencies or issues as a result of these procedures.
The Group’s progress on their Environmental, Social and Governance (‘ESG’) targets is not included within the scope of this audit.
We were engaged separately to provide independent limited assurance under International Standard on Assurance Engagements (‘ISAE’)
3000 (Revised) and ISAE 3410 to the directors regarding the following ESG metrics and targets:
•
•
•
•
•
•
LBG’s own operations’ Scope 1, 2 and 3 energy consumption and GHG emissions data for the 12 months ended 30 September 2024
(pages 59 to 60);
Supply chain GHG emissions for the 12 months ended 30 September 2022 and 30 September 2024 (page 58);
On-balance sheet financed emissions for 9 sectors for the year ended 31 December 2023 and for the defined baseline year for selected
sectors (page 55);
On and off-balance sheet financed emissions for Scottish Widows’ investment portfolio for the year ended 31 December 2024 (page 55);
Off-balance sheet facilitated emissions, excluding green bonds, for a subset of capital markets activities for the year ended 31 December
2023 (page 84 of the Sustainability Report)
Diversity and Inclusion metrics disclosing the proportion of women, Minority Ethnic and Black Heritage colleagues in senior roles (page
55);
•
•
Selected requirements from the Group’s Principles of Responsible Banking Reporting and Self-Assessment Template (pages 3 to 24 of
the Sustainability Reporting Framework Index); and
The Group’s progress against five specific Sustainable Lending and Investment targets (page 57).
The procedures performed for a limited assurance engagement is substantially less than the work performed for a financial audit, which
provides reasonable assurance. The Sustainability Report and our independent assurance report can be found at
www.lloydsbankinggroup.com/who-we-are/sustainability.html
where we explain the scope of work and procedures performed.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
process for identifying affected operations including the governance and controls over this process, and the subsequent effect on the
financial reporting for the Group; and
long-term strategy to respond to climate change risks and how this is factored into the Group’s forecasts, considering publicly
announced climate change commitments and any costs associated with the Group’s net zero targets.
–
–
–
–
201
Lloyds Banking Group plc Annual Report and Accounts 2024
4. Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and Parent company’s ability to continue to adopt the going concern basis of
accounting included:
•
•
•
•
•
•
•
•
using our knowledge of the Group and Parent company, the financial services industry, the financial services regulatory environment and
the general economic environment including, macroeconomic pressures affecting the Group’s operations, to identify inherent risks in the
business model and how such risks might affect the financial resources or ability to continue operations over the going concern period;
making enquiries of Group management about the assumptions, including climate risk considerations, used in their going concern
models, and assessing the reasonableness of those assumptions and historical forecasting accuracy;
evaluating the Group’s strategic plans in light of the changing macroeconomic environment, short and longer term financial budgets,
funding, liquidity and capital adequacy plans including internal stress tests;
considering the Group’s operational resilience;
reading analyst reports, industry data, Bank of England reports and other external information to determine if it provided corroborative
or contradictory evidence in relation to the Group’s assumptions;
reviewing correspondence and meeting with prudential and conduct regulators to assess whether there are any matters that may
impact the going concern assessment;
testing the underlying data generated to prepare the forecast scenarios and determining whether there was adequate support for the
assumptions underlying the forecasts; and
evaluating the Group’s disclosures on going concern against the requirements of IAS 1.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually
or collectively, may cast significant doubt on the Group’s and Parent company’s ability to continue as a going concern for a period of at
least twelve months from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code, we have nothing material to add or draw
attention to in relation to the directors’ statement in the financial statements about whether the directors considered it appropriate to
adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this
report.
5. Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements
of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we
identified. These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the
audit, and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and
we do not provide a separate opinion on these matters.
Independent auditors’ report continued
202
Lloyds Banking Group plc Annual Report and Accounts 2024
Expected credit losses (Group)
Key audit matter description
How the scope of our audit responded to the key audit matter
Refer to notes 2, 14, 20, 21 and 41 in the financial statements
The Group has recognised £3.5 billion of expected credit
losses (‘ECL’) as at 31 December 2024. The valuation and
allocation of ECL consists of a number of assumptions that
are inherently uncertain and require a high degree of complex
and subjective auditor judgement, specialised skills and
knowledge, and complex impairment modelling. The
increasing economic uncertainty resulting from geopolitical
risks and recent changes in government policy in the United
Kingdom (‘UK’) has further heightened the levels of
judgement required, especially in the development of the
base case economic scenario and alternative economic
scenarios. As a consequence, we have determined ECL as a
key audit matter.
The key areas we identified as having the most significant
level of management judgement were in respect of:
•
•
•
•
Multiple economic scenarios;
Collectively assessed ECL;
Individually assessed ECL; and
ECL model adjustments.
Multiple economic scenarios
The Group’s economics team develops the future economic
scenarios by developing a base case forecast based on a set of
conditioning assumptions, with the three outer economic
scenarios (upside, downside and severe downside) derived
using a Monte Carlo simulation around the base case. The
modelled severe downside scenario is then adjusted to
capture supply-side risks not contemplated by the Monte
Carlo model. The upside, the base case and the downside
scenarios are weighted at a 30 per cent probability and the
severe downside at a 10 per cent probability. The
development of the base case scenario, including the
conditioning assumptions, is inherently highly complex and
requires significant judgement.
This key audit matter is discussed in the Audit Committee’s
report on page 101.
We performed the following procedures:
•
•
–
–
–
–
•
•
•
tested the controls over the generation of the multiple economic
scenarios including those over the Group’s governance processes to
approve the base case, different scenarios and the weightings applied
to each scenario;
Working with our internal economic specialists:
challenged and evaluated economic forecasts in the base scenario
such as the unemployment rate, House Price Index, Commercial
Real Estate prices, inflation and forecasted interest rates, and
Gross Domestic Product through comparison to independent
economic outlooks, other external analyses and market data;
challenged and evaluated the appropriateness of changes in
assumptions and/or the model, including changes to the non-
modelled severe downside approach;
challenged and evaluated the appropriateness of the methodology
applied to generate alternative macroeconomic scenarios,
including associated weightings and assumptions within the
model; and
independently replicated the multiple economic scenario model
and compared the outputs of our independent model to the
Group’s output to test scenario generation;
tested the completeness and accuracy of the data used by the model;
performed a stand back assessment of the appropriateness of the
weightings applied to each of the scenarios based on publicly
available data; and
evaluated the appropriateness of disclosures in respect of significant
judgements and sources of estimation uncertainty including
macroeconomic scenarios.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
203
Lloyds Banking Group plc Annual Report and Accounts 2024
Key audit matter description
How the scope of our audit responded to the key audit matter
Collectively assessed ECL
The ECL for the Retail and Commercial Banking divisions,
except for individually assessed stage 3 commercial loans, is
determined on a collective basis using impairment models.
These models use a number of significant judgements to
calculate a probability-weighted estimate by applying a
probability of default, exposure at default and a loss given
default, taking account of collateral held or other loss
mitigants, discounted using the effective interest rate.
The key judgements and estimates in determining the ECL
include:
•
•
•
•
•
•
•
•
•
–
–
–
–
–
•
–
–
–
•
•
•
•
–
–
–
modelling approach, modelling simplifications and
judgements, and selection of modelling data;
behavioural lives of products in the Retail division;
credit risk ratings for the Commercial Banking division,
which are performed on a counterparty basis for larger
exposures by a credit officer; and
the appropriate allocation of assets into the correct
staging taking into account any significant deterioration in
credit risk since inception of the loan.
This key audit matter is discussed in the Audit Committee’s
report on page 101.
We tested controls across the process to estimate the ECL provisions
including:
model governance including model validation and monitoring;
model assumptions;
allocation of assets into stages, including those to determine the
credit risk rating in the Commercial Banking division; and
completeness and accuracy of the data used by the model.
Working with our internal modelling specialists, our audit procedures
over the key areas of estimation in the valuation and allocation of the
ECL covered the following:
Model estimations, where we:
evaluated the appropriateness of the modelling approach and
assumptions used;
independently replicated a sample of the models for all in-scope
portfolios and compared the outputs of our independent models
to the Group’s outputs;
assessed model performance by evaluating variations between
observed data and model predictions;
developed an understanding of model limitations and assessed
these and remedial actions; and
tested the completeness and accuracy of the data used in model
execution and calibration.
Allocation of assets into stages, where we:
evaluated the appropriateness of quantitative and qualitative
criteria used for allocation into IFRS 9 stages, including
independently assessing the credit rating of a sample of loans in
the Commercial Banking division;
tested the appropriateness of the stage allocation for a sample of
exposures; and
tested the data used by models in assigning IFRS 9 stages and
evaluated the appropriateness of the model logic used.
Individually assessed ECL
For individual provision assessments of larger exposures in
stage 3 in the Commercial Banking division, complex and
subjective auditor judgement including specialised knowledge
is required in evaluating the methodology, models and inputs
that are inherently uncertain in determining the ECL. The
significant judgements in estimating provisions are the:
completeness and appropriateness of the potential
workout scenarios identified;
probability of default assigned to each identified potential
workout scenario; and
valuation assumptions used in determining the expected
recovery strategies.
This key audit matter is discussed in the Audit Committee’s
report on page 101.
For expected credit losses assessed individually we have:
selected senior team members with extensive IFRS 9 knowledge
and expertise to design and lead the execution of the audit of ECL;
tested the controls over individually assessed provisions including
assumptions and inputs into workout and recovery scenarios, as
well as valuation assumptions used; and
evaluated the appropriateness of workout and recovery scenarios
identified, including the judgements to determine the timing and
value of associated cash flows as well as consideration of climate
risk.
Independent auditors’ report continued
204
Lloyds Banking Group plc Annual Report and Accounts 2024
Key audit matter description
How the scope of our audit responded to the key audit matter
ECL model adjustments
Where impairment models do not incorporate all factors
relevant to estimating the ECL, adjustments are made to
address known model limitations and data limitations,
emerging or non-modelled risks and the impact of economic
uncertainty on different industry sectors. The identification of
model limitations is highly judgemental and inherently
uncertain. The adjustments made to address these limitations
require specialist auditor judgement when evaluating the:
•
•
completeness of adjustments; and
methodology, assumptions, models and inputs.
This key audit matter is discussed in the Audit Committee’s
report on page 101.
In respect of the adjustments to models, we performed the following
procedures in conjunction with our specialists:
•
•
•
•
•
•
tested the controls over the valuation of in-model and post-model
adjustments;
evaluated the methodology, approach and assumptions in developing
the adjustments, and evaluated the Group’s selection of approach;
tested the completeness and accuracy of the data used in
formulating the judgements;
performed a recalculation of adjustments;
evaluated the completeness of adjustments based on our
understanding of both model and data limitations, including those
related to cost of living and high inflation pressures; and
assessed the appropriateness of the disclosures and whether the
disclosures appropriately address the uncertainty which exists in
determining the ECL.
Key observations communicated to the Audit Committee
We are satisfied that the ECL provisions are reasonable and recognised in accordance with the requirements of IFRS 9. Calculations of the
multiple economic scenarios, in-model adjustments and post-model adjustments are made using appropriate methodologies and
reasonable modelled assumptions. Overall ECL levels are reasonable compared to peer benchmarking information.
Regulatory and litigation matters (Group)
Key audit matter description
Refer to notes 2 and 28 in the financial statements.
How the scope of our audit responded to the key audit matter
The Group operates in an environment where it is subject to
regulatory investigations, litigation and customer
remediation, including allegations of fraud and misconduct.
The Group is currently exposed to a number of regulatory and
litigation matters. The Group’s provision for these matters is
£1.6 billion as at 31 December 2024. In the current year, the
Group recognised a further provision of £700 million relating
to motor finance commission arrangements.
Significant judgement is required by the Group in determining
whether, under IAS 37 Provisions, Contingent Liabilities and
Contingent Assets:
•
•
the amount recorded is representative of the Group’s best
estimate to settle the obligation based on the information
available to the Group, including in respect of motor
finance commission arrangements where there is
significant uncertainty around the final outcome as a result
of the recent Court of Appeal decisions, appeal to the
Supreme Court and the impact of the on-going review by
the Financial Conduct Authority (‘FCA’); and
any contingent liabilities and underlying significant
estimation uncertainties are adequately disclosed.
This key audit matter is discussed in the Audit Committee’s
report on page 102.
We performed the following audit procedures:
•
•
•
•
•
•
•
tested the Group’s controls over the completeness of provisions, the
review of the assessment of the provision against the requirements of
IAS 37, the review of the appropriateness of judgements used to
determine a best estimate and the completeness and accuracy of
data used in the process;
evaluated the assessment of the provisions, associated probabilities,
and potential outcomes in accordance with IAS 37;
verified and evaluated whether the methodology, data and
significant judgements and assumptions used in the valuation of the
provisions are appropriate in the context of the applicable financial
reporting framework;
inspected correspondence and, where appropriate, made direct
inquiry with the Group’s regulators and internal and external legal
counsel;
critically evaluated the Group’s conclusion in the context of the
requirements of IAS 37 where no provision was made;
evaluated whether the disclosures made in the financial statements
appropriately reflect the facts and key sources of estimation
uncertainty, including in respect of motor finance commission
arrangements;
specifically in respect of motor finance commission arrangements,
we:
–
–
–
–
–
–
–
tested the governance control operating over the choice of
assumptions used, including agreement to previous redress
experience where applicable;
engaged with our internal modelling specialists to review relevant
aspects of the code used to extract commission data used within
the model;
tested the mathematical accuracy of the model including the
completeness and accuracy of data used in the model;
inspected information available for the historical complaints, both
supportive and contradictory, the view of independent analysts
and the decisions made by the courts;
reviewed correspondence with external legal counsel to support
the probability weighting applied;
inspected correspondence and made direct inquiry with the
Group’s regulators; and
tested the methodology and assumptions applied to determine
the provision.
Key observations communicated to the Audit Committee
While there is significant judgement required in estimating the timing and value of future settlements, we are satisfied that the approach
to the recognition, estimation and disclosures of these provisions and contingent liabilities is consistent with the requirements of IFRS
Accounting Standards
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
205
Lloyds Banking Group plc Annual Report and Accounts 2024
IT systems that impact financial reporting (Group and Parent company)
Key audit matter description
How the scope of our audit responded to the key audit matter
The Group’s IT environment is inherently complex due to the
number of systems it operates and its reliance on automated
and IT dependent manual controls. Together, these support a
broad range of banking and insurance products as well as the
processing of the Group’s significant volume of transactions,
which impact all account balances.
As such, IT systems within the Group form a critical
component of the Group’s financial reporting activities. Due
to the significant reliance on IT systems, effective General IT
Controls (‘GITCs’) are critical to allow reliance to be placed
on the completeness and accuracy of financial data and the
integrity of automated system functionality, such as system
calculations.
We identified the IT systems that impact financial reporting
as a key audit matter because of the:
•
•
•
Pervasive reliance on complex technology that is integral
to the operation of key business processes and financial
reporting;
Reliance on technology which continues to develop in line
with the business strategy, such as the increase in the use
of automation across the Group and increasing reliance on
third parties; and
Importance of the IT controls in maintaining an effective
control environment. A key interdependency exists
between the ability to rely on IT controls and the ability to
rely on financial data, system configured automated
controls and system reports.
IT controls, in the context of our audit scope, primarily relate
to privileged access at the infrastructure level, user access
security at the application level and change control.
IT systems which impact financial reporting are discussed in
the Audit Committee report on page 102.
Our IT audit scope covered the Group’s IT controls over information
systems deemed relevant to the audit based on the financial data,
system configured automated controls and/or key financial reports that
reside within it.
We used IT specialists to support our evaluation of the risks associated
with IT in the following areas:
•
•
•
General IT Controls, including user access and change management
controls;
Key financial reports and system configured automated controls; and
Cyber security risk assessment.
Where deficiencies in the IT control environment were identified, our risk
assessment procedures included an assessment of those deficiencies to
determine the impact on our audit plan. Where relevant, the audit plan
was adjusted to mitigate the unaddressed IT risk.
Where we were able to identify and test appropriate mitigating controls
over affected financial statement line items, our testing approach
remained unchanged.
In a limited number of areas, we adopted a non-controls reliance
approach and we therefore performed additional substantive
procedures.
Key observations communicated to the Audit Committee
We are satisfied that the Group’s overall IT control environment appropriately supports the financial reporting process and control
deficiencies identified in respect of privileged user access to IT infrastructure and in application user access management were mitigated
by compensating business controls.
Defined benefit obligations (Group)
Key audit matter description
How the scope of our audit responded to the key audit matter
Refer to notes 2 and 12 in the financial statements
The Group operates a number of defined benefit retirement
schemes, the obligations for which totalled £27.1 billion as at
31 December 2024. Their valuation is determined with
reference to key actuarial assumptions including mortality
assumptions, discount rates and inflation rates. Due to the
size of these schemes, small changes in these assumptions can
have a material impact on the value of the defined benefit
obligation and therefore, the determination of these
assumptions requires significant auditor judgement.
This key audit matter is discussed in the Audit Committee’s
report on page 101.
We performed the following audit procedures:
•
•
tested the Group’s controls over the valuation of the defined benefit
obligations, including controls over the assumptions setting process;
and
challenged and evaluated the key actuarial assumptions against the
compiled expected ranges, determined by our internal actuarial
experts, based on observable market indices and market experience.
Key observations communicated to the Audit Committee
We are satisfied that the Group's judgements in relation to the defined benefit obligations are reasonable.
Independent auditors’ report continued
206
Lloyds Banking Group plc Annual Report and Accounts 2024
Valuation of certain complex and illiquid financial instruments held at fair value (Group)
Key audit matter description
How the scope of our audit responded to the key audit matter
Refer to notes 2, 16, 17 and 41 in the financial statements
We tested the controls over the valuation of financial instruments
including controls over significant assumptions used in the valuation of
these financial assets, and model review controls.
We involved our valuation specialists in our audit of the valuation
of the level 3 portfolio loans and we performed the following
procedures:
•
•
•
•
•
evaluated the appropriateness of loan valuation methodologies;
calculated a range of comparable values for a sample of modelled
illiquid financial instruments using an independent valuation model
and considered reasonable alternative key assumptions based on
comparable securities and compared results;
evaluated the appropriateness of the internal credit ratings
methodology and tested the appropriateness of the ratings for a
sample of loan counterparties;
evaluated the consistency and appropriateness of inputs and
assumptions over time, challenging both significant movements and
non-movements where we expected change; and
assessed the appropriateness of disclosures and sensitivity analysis.
Key observations communicated to the Audit Committee
We are satisfied that the valuation of these certain complex and illiquid financial instruments is reasonable and in accordance with IFRS 13.
Financial instruments are classified as level 1, 2 or 3 in
accordance with IFRS 13 Fair value measurement.
The fair value of complex and illiquid financial instruments
involves significant judgement. The extent of judgement
applied by the Group in valuing the Group’s financial
investments varies with the nature of assets held, the markets
in which they are traded, and the valuation methodology
applied.
The Group holds several portfolios of level 3 illiquid
investments totalling £6.0 billion, the largest of which is held
within the Insurance, Pensions and Investments division, and
includes loans in the commercial real estate, social housing,
infrastructure, and education sectors. The valuation of these
loans uses complex valuation models as they are without
readily determinable market values and were valued using
significant unobservable inputs, such as loan-to-bond
premium and calibration spread that involved considerable
judgement by management.
This key audit matter is discussed in the Audit Committee’s
report on page 102.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
207
Lloyds Banking Group plc Annual Report and Accounts 2024
6. Our application of materiality
6.1 Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of
a reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and
in evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent company financial statements
£320 million (2023: £344 million)
£320 million (2023: £344 million)
In determining our benchmark for materiality, we
have considered the metrics used by investors
and other users of the financial statements. We
have determined pre-tax profits, normalised for
non-recurring items to be the most relevant to
users of the financial statements. This approach is
broadly consistent with the prior year.
Materiality
Basis for determining
materiality
The determined materiality represents 5 per cent
of normalised pre-tax profit and 0.7 per cent of
net assets.
Parent company materiality represents 0.6 per cent of net
assets and is capped at Group materiality.
Rationale for the
benchmark applied
Given the importance of these measures to
investors and users of the financial statements,
we have used pre-tax profits, normalised for non-
recurring items as the primary benchmark for our
determination of materiality.
The Parent company holds the Group’s investments and is
not profit driven. The balance sheet is the key measure of
financial health that is important to shareholders since the
primary concern for the Parent company is the receipt and
payment of dividends. However, given the size of the
entity’s balance sheet, we have capped materiality at
Group’s materiality.
6.2 Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a whole.
Group financial statements
Parent company financial statements
Performance
materiality
70 per cent of Group materiality at £220 million
(2023: 70 per cent at £240 million)
70 per cent of Parent company materiality at £220 million
(2023: 70 per cent at £240 million)
Basis and rationale for
determining
performance
materiality
In determining performance materiality, we considered the following factors:
a. The quality of the control environment and whether we were able to rely on controls;
b. The degree of centralisation and commonality of controls and processes;
c. The uncertain economic environment;
d. The nature, volume and size of uncorrected misstatements arising in the previous audit; and
e. The nature, volume and size of uncorrected misstatements that remain uncorrected in the current period.
6.3 Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £16 million (2023:
£17 million), as well as any differences below this threshold, which in our view, warranted reporting on qualitative grounds. We also report
to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
7. Other information
The other information comprises the information included in the Annual Report, other than the financial
statements and our auditors’ report thereon. The directors are responsible for the other information
contained within the Annual Report. Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our report, we do not express any form
of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or
otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to
determine whether this gives rise to a material misstatement in the financial statements themselves. If, based
on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact.
We have nothing to
report in this regard.
Independent auditors’ report continued
208
Lloyds Banking Group plc Annual Report and Accounts 2024
We summarise below our work in relation to areas of the other information including those areas upon which we are specifically required to
report:
Our responsibility
Our report
Matters we are specifically required to report
Principal risks and
viability statement
Review the confirmation and description in the light
of the knowledge gathered during the audit, such as
through considering the directors’ processes to
support the statements made, challenging the
Group’s key judgements and estimates, consideration
of historical forecasting accuracy and evaluating
macro-economic assumptions.
Consider if the statements are aligned with the
relevant provisions of the Code.
As set out in the section ‘Corporate governance
statement’, we have nothing material to report, add
or draw attention to in respect of these matters.
Directors’
Remuneration report
Report whether the part of the directors’
remuneration report to be audited is properly
prepared and the disclosures specified by the
Companies Act have been made.
As set out in the section ‘Opinions on other matters
prescribed by the Companies Act 2006’, in our
opinion, the part of the directors’ remuneration report
to be audited has been prepared in accordance with
the Companies Act 2006.
Strategic report and
directors’ report
Report whether they are consistent with the audited
financial statements and are prepared in accordance
with applicable legal requirements.
Report if we have identified any material
misstatements in either report in the light of the
knowledge and understanding of the Group and of
the Parent company and their environment obtained
in the course of the audit.
As set out in the section ‘Opinions on other matters
prescribed by the Companies Act 2006’, in our
opinion, based on the work undertaken in the course
of the audit, the information in these reports is
consistent with the audited financial statements and
has been prepared in accordance with applicable legal
requirements.
As referenced on page 201, we have provided limited
assurance in accordance with ISAE 3000 (Revised)
and ISAE 3410 over selected metrics.
Other reporting on other information
Alternative
Performance
Measures (‘APMs’)
APMs are measures that are not defined by generally
accepted accounting practice (‘GAAP’) and therefore
are not typically included in the financial statement
part of the Annual Report. The Group use APMs, such
as adjusted profit, and banking net interest margin in
its quarterly and annual reporting of financial
performance.
We have reviewed and assessed the Group’s
calculation and reporting of these metrics to assess
consistency with the Group’s published definitions
and policies for these items.
We have also considered and assessed whether the
use of APMs in the Group’s reporting results is
consistent with the guidelines produced by regulators
such as the European Securities and Markets
Authority (‘ESMA’) guidelines on the use of APMs and
the FRC Alternative Performance Measures Thematic
Review.
We also considered whether there was an appropriate
balance between the use of statutory metrics and
APMs, in addition to whether clear definitions and
reconciliation for APMs used in financial reporting
have been provided.
In our opinion:
•
•
•
the use, calculation and disclosure of APMs is
consistent with the Group’s published definitions
and policies;
the use of APMs in the Group’s reporting results is
consistent with the guidelines produced by ESMA
and FRC; and
there is an appropriate balance between the use of
statutory metrics and APMs, together with clear
definitions and reconciliation for APMs used in
financial reporting.
Dividends and
distribution policy
Consider whether the disclosures in the strategic
report are consistent with the dividends policy and
that the dividends paid are in line with the policy.
In our opinion the disclosures in the strategic report
and dividends paid are consistent with the policy.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
209
Lloyds Banking Group plc Annual Report and Accounts 2024
8. Responsibilities of directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to
enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent company’s ability to continue
as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the
directors either intend to liquidate the Group or the Parent company or to cease operations, or have no realistic alternative but to do so.
9. Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance,
but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities
. This description forms part of our auditors’ report.
10. Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our
responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our
procedures are capable of detecting irregularities, including fraud is detailed below.
Identifying and assessing potential risks related to irregularities
In identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
•
•
•
–
–
–
•
•
•
•
•
•
•
•
•
the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration
policies, key drivers for directors’ remuneration, bonus levels and performance targets;
the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error that was discussed by the Audit
Committee including on 18 February 2025;
results of our inquiries of management, in-house legal counsel, internal audit and the Audit Committee about their own identification
and assessment of the risk of irregularities, including those that are specific to the financial services sector, and review of supporting
documentation, concerning the Group’s policies and procedures relating to:
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and
the internal controls established to mitigate risks related to fraud or non compliance with laws and regulations;
the discussion among the audit engagement team including significant component audit teams and relevant internal specialists,
including tax, valuations, pensions, credit modelling, actuarial, IT and industry specialists regarding how and where fraud might occur in
the financial statements and any potential indicators of fraud; and
obtaining an understanding of the legal and regulatory frameworks that the Group operates in, focusing on those laws and regulations
that had a direct effect on the financial statements, such as provisions of the UK Companies Act, pensions legislation and tax legislation
or that had a fundamental effect on the operations of the Group, including regulation and supervisory requirements of the Prudential
Regulation Authority, Financial Reporting Council and Financial Conduct Authority.
Audit response to risks identified
As a result of performing the above, we identified the Group’s determination of ‘Expected credit losses’ as a key audit matter related to the
potential risk of fraud. The key audit matters section of our report explains the matter in more detail and also describes the specific
procedures in response to the key audit matter. In common with all audits under ISAs (UK), we are also required to perform specific
procedures to respond to the risk of management override.
In addition to the above, our procedures to respond to risks identified included the following:
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant
laws and regulations described as having a direct effect on the financial statements;
enquiring of management, the Audit Committee and in-house and external legal counsel concerning actual and potential litigation and
claims;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement
due to fraud;
reading minutes of meetings of those charged with governance, reviewing internal audit reports and correspondence with regulators;
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments;
assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including
specialists, and component audit teams, and remained alert to any indications of fraud or non-compliance with laws and regulations
throughout the audit.
Independent auditors’ report continued
210
Lloyds Banking Group plc Annual Report and Accounts 2024
Report on other legal and regulatory requirements
11. Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the Directors’ Remuneration report to be audited has been properly prepared in accordance with the Companies
Act 2006.
In our opinion, based on the work undertaken in the course of the audit:
•
The information given in the strategic report and the directors’ report for the financial year for which the financial statements are
prepared is consistent with the financial statements; and
•
The strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and of the Parent company and their environment obtained in the course of
the audit, we have not identified any material misstatements in the strategic report or the directors’ report.
12. Corporate Governance Statement
The Listing Rules require us to review the directors’ statement in relation to going concern, longer-term viability and that part of the
corporate governance statement relating to the Group’s compliance with the provisions of the UK corporate governance code specified for
our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
•
•
•
•
•
•
the directors’ statement with regards to the appropriateness of adopting the going concern basis of accounting and any material
uncertainties identified set out on page 39;
the directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is
appropriate is set out on page 39;
the directors’ statement on fair, balanced and understandable set out on page 136;
the Board’s confirmation that it has carried out a robust assessment of the emerging and principal risks set out on page 136;
the section of the Annual Report that describes the review of effectiveness of risk management and internal control systems set out on
page 102; and
the section describing the work of the Audit Committee set out on pages 100 to 103.
13. Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
•
•
•
We have not received all the information and explanations we require for our audit; or
Adequate accounting records have not been kept by the Parent company, or returns adequate for
our audit have not been received from branches not visited by us; or
The Parent company financial statements are not in agreement with the accounting records and
returns.
We have nothing to report in
respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of
directors’ remuneration have not been made or the part of the Directors’ Remuneration report to be
audited is not in agreement with the accounting records and returns.
We have nothing to report in
respect of this matter.
14. Other matters which we are required to address
Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by shareholders at its annual general meeting on 16 May 2024
to audit the financial statements of Lloyds Banking Group plc for the year ended 31 December 2024 and subsequent financial periods. The
period of total uninterrupted engagement of the firm is four years.
Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
15. Use of our report
This report is made solely to the Parent company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state to the Parent company’s members those matters we are required to
state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Parent company and the Parent company’s members as a body, for our audit work, for this report,
or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.15R – DTR 4.1.18R, these
financial statements will form part of the Electronic Format Annual Financial Report filed on the National Storage Mechanism of the FCA in
accordance with DTR 4.1.15R – DTR 4.1.18R. This auditors’ report provides no assurance over whether the Electronic Format Annual
Financial Report has been prepared in compliance with DTR 4.1.15R – DTR 4.1.18R.
Michael Lloyd (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
19 February 2025
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
211
Lloyds Banking Group plc Annual Report and Accounts 2024
Consolidated income statement
for the year ended 31 December
Note
2024
£m
2023
£m
2022
£m
Interest income
31,288
28,051
17,645
Interest expense
(19,011)
(14,753)
(4,723)
Net interest income
5
12,277
13,298
12,922
Fee and commission income
2,943
2,926
2,790
Fee and commission expense
(1,184)
(1,095)
(1,070)
Net fee and commission income
6
1,759
1,831
1,720
Net trading income (losses)
7
17,825
18,049
(19,987)
Insurance revenue
3,291
3,008
2,461
Insurance service expense
(2,733)
(2,414)
(3,863)
Net (expense) income from reinsurance contracts held
(72)
2
62
Insurance service result
8
486
596
(1,340)
Other operating income
9
1,934
1,631
1,339
Other income
22,004
22,107
(18,268)
Total income
34,281
35,405
(5,346)
Net finance (expense) income from insurance, participating investment and reinsurance
contracts
(10,341)
(11,684)
15,893
Movement in third party interests in consolidated funds
(1,059)
(1,109)
1,035
Change in non-participating investment contracts
(4,878)
(3,983)
3,959
Net finance (expense) income in respect of insurance and investment contracts
8
(16,278)
(16,776)
20,887
Total income, after net finance expense in respect of insurance and investment contracts
18,003
18,629
15,541
Operating expenses
10
(11,601)
(10,823)
(9,237)
Impairment
14
(431)
(303)
(1,522)
Profit before tax
5,971
7,503
4,782
Tax expense
15
(1,494)
(1,985)
(859)
Profit for the year
4,477
5,518
3,923
Profit attributable to ordinary shareholders
3,923
4,933
3,389
Profit attributable to other equity holders
498
527
438
Profit attributable to equity holders
4,421
5,460
3,827
Profit attributable to non-controlling interests
56
58
96
Profit for the year
4,477
5,518
3,923
Basic earnings per share
31
6.3p
7.6p
4.9p
Diluted earnings per share
31
6.2p
7.5p
4.9p
The accompanying notes are an integral part of the consolidated financial statements.
212
Lloyds Banking Group plc Annual Report and Accounts 2024
2024
£m
2023
£m
2022
£m
–
–
–
Profit for the year
4,477
5,518
3,923
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements:
Remeasurements before tax
(768)
(1,633)
(3,012)
Current tax
50
376
577
Deferred tax
154
52
283
(564)
(1,205)
(2,152)
Movements in revaluation reserve in respect of equity shares held at fair value through other comprehensive
income:
Change in fair value
93
(54)
44
Deferred tax
(3)
3
93
(57)
47
Gains and losses attributable to own credit risk:
(Losses) gains before tax
(78)
(234)
519
Deferred tax
22
66
(155)
(56)
(168)
364
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of debt securities held at fair value through other
comprehensive income:
Change in fair value
(53)
(40)
(133)
Income statement transfers in respect of disposals
(7)
(122)
(92)
Income statement transfers in respect of impairment
(3)
(2)
6
Current tax
1
1
8
Deferred tax
16
46
54
(46)
(117)
(157)
Movements in cash flow hedging reserve:
Effective portion of changes in fair value taken to other comprehensive income
(2,577)
545
(6,990)
Net income statement transfers
2,597
1,838
43
Deferred tax
(9)
(673)
1,928
11
1,710
(5,019)
Movements in foreign currency translation reserve:
Currency translation differences (tax: £nil)
(73)
(53)
116
Transfers to income statement (tax: £nil)
(31)
(73)
(53)
85
Total other comprehensive (loss) income for the year, net of tax
(635)
110
(6,832)
Total comprehensive income (loss) for the year
3,842
5,628
(2,909)
Total comprehensive income (loss) attributable to ordinary shareholders
3,288
5,043
(3,443)
Total comprehensive income attributable to other equity holders
498
527
438
Total comprehensive income (loss) attributable to equity holders
3,786
5,570
(3,005)
Total comprehensive income attributable to non-controlling interests
56
58
96
Total comprehensive income (loss) for the year
3,842
5,628
(2,909)
for the year ended 31 December
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated statement of comprehensive income
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
213
Lloyds Banking Group plc Annual Report and Accounts 2024
Note
2024
£m
2023
£m
Assets
Cash and balances at central banks
62,705
78,110
Financial assets at fair value through profit or loss
17
215,925
203,318
Derivative financial instruments
19
24,065
22,356
Loans and advances to banks
7,900
10,764
Loans and advances to customers
20
459,857
449,745
Reverse repurchase agreements
49,476
38,771
Debt securities
14,544
15,355
Financial assets at amortised cost
531,777
514,635
Financial assets at fair value through other comprehensive income
17
30,690
27,592
Goodwill and other intangible assets
23
8,188
8,306
Current tax recoverable
526
1,183
Deferred tax assets
15
5,005
5,185
Retirement benefit assets
12
3,028
3,624
Other assets
24
24,788
17,144
Total assets
906,697
881,453
Liabilities
Deposits from banks
6,158
6,153
Customer deposits
482,745
471,396
Repurchase agreements at amortised cost
37,760
37,703
Financial liabilities at fair value through profit or loss
17
27,611
24,914
Derivative financial instruments
19
21,676
20,149
Notes in circulation
2,121
1,392
Debt securities in issue at amortised cost
26
70,834
75,592
Liabilities arising from insurance and participating investment contracts
8
122,064
120,123
Liabilities arising from non-participating investment contracts
51,228
44,978
Other liabilities
27
25,918
19,026
Retirement benefit obligations
12
122
136
Current tax liabilities
45
39
Deferred tax liabilities
15
125
157
Provisions
28
2,313
2,077
Subordinated liabilities
29
10,089
10,253
Total liabilities
860,809
834,088
Equity
Share capital
30
6,062
6,358
Share premium account
32
18,720
18,568
Other reserves
33
8,827
8,508
Retained profits
34
5,912
6,790
Ordinary shareholders’ equity
39,521
40,224
Other equity instruments
35
6,195
6,940
Total equity excluding non-controlling interests
45,716
47,164
Non-controlling interests
172
201
Total equity
45,888
47,365
Total equity and liabilities
906,697
881,453
The accompanying notes are an integral part of the consolidated financial statements.
The directors approved the consolidated financial statements on 19 February 2025.
at 31 December
Charlie Nunn
Group Chief Executive
William Chalmers
Chief Financial Officer
Sir Robin Budenberg
Chair
4
214
Consolidated balance sheet
214
14
Lloyds Banking Group plc Annual Report and Accounts 2024
Attributable to ordinary shareholders
Share
capital and
premium
£m
Other
reserves
£m
Retained
profits
£m
Total
£m
Other
equity
instruments
£m
Non-
controlling
interests
£m
Total
£m
At 1 January 2024
24,926
8,508
6,790
40,224
6,940
201
47,365
Comprehensive income
Profit for the year
–
–
3,923
3,923
498
56
4,477
Other comprehensive income
Post-retirement defined benefit scheme
remeasurements, net of tax
–
–
(564)
(564)
–
–
(564)
Movements in revaluation reserve in respect of
financial assets held at fair value through other
comprehensive income, net of tax:
Debt securities
–
(46)
–
(46)
–
–
(46)
Equity shares
–
93
–
93
–
–
93
Gains and losses attributable to own credit risk,
net of tax
–
–
(56)
(56)
–
–
(56)
Movements in cash flow hedging reserve, net of
tax
–
11
–
11
–
–
11
Movements in foreign currency translation
reserve, net of tax
–
(73)
–
(73)
–
–
(73)
Total other comprehensive loss
–
(15)
(620)
(635)
–
–
(635)
Total comprehensive (loss) income1
–
(15)
3,303
3,288
498
56
3,842
Transactions with owners
Dividends (note 36)
–
–
(1,828)
(1,828)
–
(83)
(1,911)
Distributions on other equity instruments
–
–
–
–
(498)
–
(498)
Issue of ordinary shares
190
–
–
190
–
–
190
Share buyback (note 33)
(369)
369
(2,011)
(2,011)
–
–
(2,011)
Redemption of preference shares
35
(35)
–
–
–
–
–
Issue of other equity instruments (note 35)
–
–
(6)
(6)
763
–
757
Repurchases and redemptions of other equity
instruments (note 35)
–
–
(316)
(316)
(1,508)
–
(1,824)
Movement in treasury shares
–
–
(173)
(173)
–
–
(173)
Value of employee services
–
–
153
153
–
–
153
Changes in non-controlling interests
–
–
–
–
–
(2)
(2)
Total transactions with owners
(144)
334
(4,181)
(3,991)
(1,243)
(85)
(5,319)
Realised gains and losses on equity shares held at
fair value through other comprehensive income
–
–
–
–
–
–
–
At 31 December 2024
24,782
8,827
5,912
39,521
6,195
172
45,888
for the year ended 31 December
1
Total comprehensive income attributable to owners of the parent was a surplus of £3,786 million (2023: surplus of £5,570 million; 2022: loss of £3,005 million).
Further details of movements in the Group’s share capital, reserves and other equity instruments are provided in notes 30 and 32 to 35.
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated statement of changes in equity
5
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
215
Lloyds Banking Group plc Annual Report and Accounts 2024
Attributable to ordinary shareholders
Share
capital and
premium
£m
Other
reserves
£m
Retained
profits
£m
Total
£m
Other
equity
instruments
£m
Non-
controlling
interests
£m
Total
£m
At 1 January 2023
25,233
6,587
6,550
38,370
5,297
244
43,911
Comprehensive income
Profit for the year
–
–
4,933
4,933
527
58
5,518
Other comprehensive income
Post-retirement defined benefit scheme
remeasurements, net of tax
–
–
(1,205)
(1,205)
–
–
(1,205)
Movements in revaluation reserve in respect of
financial assets held at fair value through other
comprehensive income, net of tax:
Debt securities
–
(117)
–
(117)
–
–
(117)
Equity shares
–
(57)
–
(57)
–
–
(57)
Gains and losses attributable to own credit risk,
net of tax
–
–
(168)
(168)
–
–
(168)
Movements in cash flow hedging reserve, net of
tax
–
1,710
–
1,710
–
–
1,710
Movements in foreign currency translation
reserve, net of tax
–
(53)
–
(53)
–
–
(53)
Total other comprehensive income (loss)
–
1,483
(1,373)
110
–
–
110
Total comprehensive income
–
1,483
3,560
5,043
527
58
5,628
Transactions with owners
Dividends (note 36)
–
–
(1,651)
(1,651)
–
(101)
(1,752)
Distributions on other equity instruments
–
–
–
–
(527)
–
(527)
Issue of ordinary shares
131
–
–
131
–
–
131
Share buyback
(438)
438
(1,993)
(1,993)
–
–
(1,993)
Issue of other equity instruments (note 35)
–
–
(6)
(6)
1,778
–
1,772
Repurchases and redemptions of other equity
instruments (note 35)
–
–
–
–
(135)
–
(135)
Movement in treasury shares
–
–
103
103
–
–
103
Value of employee services
–
–
227
227
–
–
227
Changes in non-controlling interests
–
–
–
–
–
–
–
Total transactions with owners
(307)
438
(3,320)
(3,189)
1,116
(101)
(2,174)
Realised gains and losses on equity shares held at
fair value through other comprehensive income
–
–
–
–
–
–
–
At 31 December 2023
24,926
8,508
6,790
40,224
6,940
201
47,365
for the year ended 31 December
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated statement of changes in equity continued
6
216
Lloyds Banking Group plc Annual Report and Accounts 2024
Attributable to ordinary shareholders
Share
capital and
premium
£m
Other
reserves
£m
Retained
profits
£m
Total
£m
Other
equity
instruments
£m
Non-
controlling
interests
£m
Total
£m
At 1 January 2022
25,581
11,177
8,318
45,076
5,906
235
51,217
Comprehensive income
Profit for the year
–
–
3,389
3,389
438
96
3,923
Other comprehensive income
Post-retirement defined benefit scheme
remeasurements, net of tax
–
–
(2,152)
(2,152)
–
–
(2,152)
Movements in revaluation reserve in respect of
financial assets held at fair value through other
comprehensive income, net of tax:
Debt securities
–
(157)
–
(157)
–
–
(157)
Equity shares
–
47
–
47
–
–
47
Gains and losses attributable to own credit risk,
net of tax
–
–
364
364
–
–
364
Movements in cash flow hedging reserve, net of
tax
–
(5,019)
–
(5,019)
–
–
(5,019)
Movements in foreign currency translation
reserve, net of tax
–
85
–
85
–
–
85
Total other comprehensive (loss) income
–
(5,044)
(1,788)
(6,832)
–
–
(6,832)
Total comprehensive (loss) income
–
(5,044)
1,601
(3,443)
438
96
(2,909)
Transactions with owners
Dividends (note 36)
–
–
(1,475)
(1,475)
–
(92)
(1,567)
Distributions on other equity instruments
–
–
–
(438)
–
(438)
Issue of ordinary shares
105
–
–
105
–
–
105
Share buyback
(453)
453
(2,013)
(2,013)
–
–
(2,013)
Issue of other equity instruments (note 35)
–
–
(5)
(5)
750
–
745
Repurchases and redemptions of other equity
instruments (note 35)
–
–
(36)
(36)
(1,359)
–
(1,395)
Movement in treasury shares
–
–
(60)
(60)
–
–
(60)
Value of employee services
–
–
224
224
–
–
224
Changes in non-controlling interests
–
–
(3)
(3)
–
5
2
Total transactions with owners
(348)
453
(3,368)
(3,263)
(1,047)
(87)
(4,397)
Realised gains and losses on equity shares held at
fair value through other comprehensive income
–
1
(1)
–
–
–
–
At 31 December 2022
25,233
6,587
6,550
38,370
5,297
244
43,911
–
The accompanying notes are an integral part of the consolidated financial statements.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
217
Lloyds Banking Group plc Annual Report and Accounts 2024
Note
2024
£m
2023
£m
2022
£m
Cash flows (used in) provided by operating activities
Profit before tax
5,971
7,503
4,782
Adjustments for:
Change in operating assets
42(A)
(39,622)
(9,110)
16,735
Change in operating liabilities
42(B)
23,603
4,232
1,481
Non-cash and other items
42(C)
5,990
5,622
(244)
Tax paid1
15
(1,305)
(1,437)
(764)
Tax refunded1
15
970
–
21
Net cash (used in) provided by operating activities
(4,393)
6,810
22,011
Cash flows (used in) provided by investing activities
Purchase of financial assets
(10,518)
(10,311)
(7,984)
Proceeds from sale and maturity of financial assets
7,062
5,298
11,172
Purchase of fixed assets1
(4,364)
(3,961)
(2,432)
Purchase of other intangible assets1
(1,259)
(1,494)
(1,423)
Proceeds from sale of fixed assets1
1,505
1,027
1,550
Proceeds from sale of goodwill and other intangible assets1
62
–
–
Repayment of capital by joint ventures and associates
–
–
36
Acquisition of businesses and joint ventures, net of cash acquired
42(D)
(179)
(380)
(409)
Net cash (used in) provided by investing activities
(7,691)
(9,821)
510
Cash flows used in financing activities
Dividends paid to ordinary shareholders
36
(1,828)
(1,651)
(1,475)
Distributions in respect of other equity instruments
(498)
(527)
(438)
Distributions in respect of non-controlling interests
(83)
(101)
(92)
Interest paid on subordinated liabilities
(622)
(623)
(603)
Proceeds from issue of subordinated liabilities
812
1,417
838
Proceeds from issue of other equity instruments
757
1,772
745
Proceeds from issue of ordinary shares
187
86
31
Share buyback
(2,011)
(1,993)
(2,013)
Repayment of subordinated liabilities
(819)
(1,745)
(2,216)
Repurchases and redemptions of other equity instruments
(1,824)
(135)
(1,395)
Change in stake of non-controlling interests
(2)
–
5
Net cash used in financing activities
(5,931)
(3,500)
(6,613)
Effects of exchange rate changes on cash and cash equivalents
(7)
(480)
727
Change in cash and cash equivalents
(18,022)
(6,991)
16,635
Cash and cash equivalents at beginning of year
88,838
95,829
79,194
Cash and cash equivalents at end of year
42(E)
70,816
88,838
95,829
for the year ended 31 December
1
Previously presented in aggregate.
Interest received was £29,721 million (2023: £26,461 million; 2022: £16,074 million) and interest paid was £17,840 million (2023: £11,100
million; 2022: £3,320 million).
The accompanying notes are an integral part of the consolidated financial statements.
Consolidated cash flow statement
8
218
Lloyds Banking Group plc Annual Report and Accounts 2024
for the year ended 31 December
Note 1: Basis of preparation
The consolidated financial statements of Lloyds Banking Group plc and its subsidiary undertakings (the Group) have been prepared in
accordance with international accounting standards in conformity with the requirements of the Companies Act 2006. The financial
statements have also been prepared in accordance with IFRS® Accounting Standards as issued by the International Accounting Standards
Board (IASB).
The financial information has been prepared under the historical cost convention, as modified by the revaluation of investment properties,
insurance and reinsurance contract assets and liabilities measured at their fulfilment values in accordance with IFRS 17, financial assets
measured at fair value through other comprehensive income, trading securities and certain other financial assets and liabilities at fair value
through profit or loss and all derivative contracts. The directors consider that it is appropriate to continue to adopt the going concern basis
in preparing the financial statements. In reaching this assessment, the directors have considered the Group’s capital and funding position,
the impact of climate change upon the Group’s future performance and the results from stress testing scenarios.
The Group’s accounting policies are consistent with those applied by the Group in its financial statements for the year ended 31 December
2023 and there have been no changes in the Group’s methods of computation.
The IASB has issued a number of minor amendments to the IFRS Accounting Standards effective 1 January 2024, including IFRS 16 Lease
Liability in a Sale and Leaseback, IAS 1 Non-current Liabilities with Covenants, and IAS 1 Classification of Liabilities as Current or Non-
current. These amendments do not have a significant impact on the Group.
Future accounting developments
There are a number of new accounting pronouncements issued by the IASB with an effective date of 1 January 2027. This includes IFRS 18
Presentation and Disclosure in Financial Statements which replaces IAS 1 Presentation of Financial Statements and IFRS 19 Subsidiaries
without Public Accountability: Disclosures. The impact of these standards is being assessed and they have not yet been endorsed for use in
the UK.
The IASB has issued its annual improvements and a number of amendments to the IFRS Accounting Standards effective on or after
1 January 2025, including Amendments to IFRS 9 Financial Instruments (effective 1 January 2026) and Amendments to IFRS 7 Financial
Instruments Disclosure (effective 1 January 2026) and IAS 21 The Effects of Changes in Foreign Exchange Rates (effective 1 January 2025).
These improvements and amendments are not expected to have a significant impact on the Group.
Note 2: Accounting policies
The Group’s accounting policies are set out below. These accounting policies have been applied consistently.
(A) Consolidation
The assets, liabilities and results of Group undertakings (including structured entities) are included in the financial statements on the basis
of accounts made up to the reporting date. Group undertakings include subsidiaries, associates and joint ventures. Details of the Group’s
subsidiaries and related undertakings are given on pages 318 to 331.
Subsidiaries are entities controlled by the Group. The Group controls an entity when it has power over the entity, is exposed to, or has
rights to, variable returns from its involvement with the entity, and has the ability to affect those returns through the exercise of its power.
This generally accompanies a shareholding of more than one half of the voting rights although in certain circumstances a holding of less
than one half of the voting rights may still result in the ability of the Group to exercise control. The existence and effect of potential voting
rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group
reassesses whether or not it controls an entity if facts and circumstances indicate that there have been changes to any of the above
elements. Subsidiaries are fully consolidated from the date on which control is transferred to the Group; they are deconsolidated from the
date that control ceases.
The Group consolidates collective investment vehicles if its beneficial ownership interests give it substantive rights to remove the external
fund manager of the investment activities of the fund. Where a subsidiary of the Group is the fund manager of a collective investment
vehicle, the Group considers a number of factors in determining whether it acts as principal, and therefore controls the collective
investment vehicle, including: an assessment of the scope of the Group’s decision-making authority over the investment vehicle; the rights
held by other parties including substantive removal rights without cause over the Group acting as fund manager; the remuneration to
which the Group is entitled in its capacity as decision-maker; and the Group’s exposure to variable returns from the beneficial interest that
it holds in the investment vehicle. Consolidation may be appropriate in circumstances where the Group has less than a majority beneficial
interest. Where a collective investment vehicle is consolidated the interests of parties other than the Group are reported in other liabilities
and the movement in those interests in movement in third party interests in consolidated funds.
Structured entities are entities that are designed so that their activities are not governed by way of voting rights. In assessing whether the
Group has power over such entities in which it has an interest, the Group considers factors such as the purpose and design of the entity; its
practical ability to direct the relevant activities of the entity; the nature of the relationship with the entity; and the size of its exposure to
the variability of returns of the entity.
The treatment of transactions with non-controlling interests depends on whether, as a result of the transaction, the Group loses control of
the subsidiary. Changes in the parent’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions; any difference between the amount by which the non-controlling interests are adjusted and the fair value of the
consideration paid or received is recognised directly in equity and attributed to the owners of the parent entity. Where the Group loses
control of the subsidiary, at the date when control is lost the amount of any non-controlling interest in that former subsidiary is
derecognised and any investment retained in the former subsidiary is remeasured to its fair value; the gain or loss that is recognised in profit
or loss on the partial disposal of the subsidiary includes the gain or loss on the remeasurement of the retained interest.
Intercompany transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated.
The acquisition method of accounting is used to account for business combinations by the Group. The consideration for the acquisition of a
subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration
includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are
expensed as incurred except those relating to the issuance of debt instruments (see (E)(4) below) or share capital (see (P) below).
Identifiable assets acquired and liabilities assumed in a business combination are measured initially at their fair value at the
acquisition date.
Notes to the consolidated financial statements
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
219
Lloyds Banking Group plc Annual Report and Accounts 2024
for the year ended 31 December
Note 2: Accounting policies continued
(B) Goodwill
Goodwill arises on business combinations and represents the excess of the cost of an acquisition over the fair value of the Group’s share of
the identifiable assets, liabilities and contingent liabilities acquired. Where the fair value of the Group’s share of the identifiable assets,
liabilities and contingent liabilities of the acquired entity is greater than the cost of acquisition, the excess is recognised immediately in the
income statement.
Goodwill is recognised as an asset at cost and is tested at least annually for impairment. For impairment testing, goodwill is allocated to the
cash-generating unit (CGU) or groups of CGUs that are expected to benefit from the business combination. The Group’s CGUs are largely
product based for its Retail and Insurance businesses and client based for its Commercial Banking business. An impairment loss is
recognised if the carrying amount of a CGU is determined to be greater than its recoverable amount. The recoverable amount of a CGU is
the higher of its fair value less costs to sell and its value in use. If an impairment is identified the carrying value of the goodwill is written
down immediately through the income statement and this is not subsequently reversed. At the date of disposal of a subsidiary, the carrying
value of attributable goodwill is included in the calculation of the profit or loss on disposal.
(C) Other intangible assets
Intangible assets which have been determined to have a finite useful life are amortised on a straight-line basis over their estimated useful
life as follows: up to seven years for capitalised software; 10 to 15 years for brands and other intangible assets.
Intangible assets with finite useful lives are reviewed at each reporting date to assess whether there is any indication that they are
impaired. If any such indication exists the recoverable amount of the asset is determined and in the event that the asset’s carrying amount
is greater than its recoverable amount, it is written down immediately. Certain brands have been determined to have an indefinite useful
life and are not amortised. Such intangible assets are assessed annually to determine whether the asset is impaired and to reconfirm that
an indefinite useful life remains appropriate. In the event that an indefinite life is inappropriate, a finite life is determined and a further
impairment review is performed on the asset.
(D) Revenue recognition
(1) Net interest income
Interest income and expense are recognised in the income statement using the effective interest method for all interest-bearing financial
instruments, except for those classified at fair value through profit or loss. The effective interest method is a method of calculating the
amortised cost of a financial asset or liability and of allocating the interest income or interest expense over the expected life of the financial
instrument. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life
of the financial instrument to the gross carrying amount of the financial asset (before adjusting for expected credit losses) or to the amortised
cost of the financial liability, including early redemption fees, other fees, and premiums and discounts that are an integral part of the overall
return. In the case of financial assets that are purchased or originated credit-impaired, the effective interest rate is the rate that discounts the
estimated future cash flows to the amortised cost of the instrument. Direct incremental transaction costs related to the acquisition, issue or
disposal of a financial instrument are also taken into account. Interest income from non-credit-impaired financial assets is recognised by
applying the effective interest rate to the gross carrying amount of the asset; for credit-impaired financial assets, the effective interest rate is
applied to the net carrying amount after deducting the allowance for expected credit losses. Impairment policies are set out in (H) below.
(2) Fee and commission income and expense
Fees and commissions receivable which are not an integral part of the effective interest rate are recognised as income as the Group fulfils
its performance obligations. The Group’s principal performance obligations arising from contracts with customers are in respect of value
added current accounts, credit cards and debit cards. These fees are received, and the Group provides the service, monthly; the fees are
recognised in income on this basis. The Group also receives certain fees in respect of its asset finance business where the performance
obligations are typically fulfilled towards the end of the customer contract; these fees are recognised in income on this basis. Where it is
unlikely that the loan commitments will be drawn, loan commitment fees are recognised in fee and commission income over the life of the
facility, rather than as an adjustment to the effective interest rate for the lending expected to be drawn. Incremental costs incurred to
generate fee and commission income are charged to fee and commission expense as they are incurred.
(3) Other
Dividend income is recognised when the right to receive payment is established.
Revenue recognition policies specific to trading income are set out in (E)(3) below, those relating to leases are set out in (J)(1) below and
those relating to life insurance and general insurance business are set out in (M) below.
(E) Financial assets and liabilities
On initial recognition, financial assets are classified as measured at amortised cost, fair value through other comprehensive income or fair
value through profit or loss, depending on the Group’s business model for managing those financial assets and whether the resultant cash
flows represent solely payments of principal and interest on principal outstanding. The Group assesses its business models at a portfolio
level based on its objectives for the relevant portfolio, how the performance of the portfolio is managed and reported, and the frequency
of asset sales. Financial assets with embedded derivatives are considered in their entirety when considering their cash flow characteristics.
The Group reclassifies financial assets only when its business model for managing those assets changes. A reclassification will only take
place when the change is significant to the Group’s operations and will occur at a portfolio level and not for individual instruments;
reclassifications are expected to be rare. Equity investments are measured at fair value through profit or loss unless the Group elects at
initial recognition to account for the instruments at fair value through other comprehensive income. For these instruments, principally
strategic investments, dividends are recognised in profit or loss but fair value gains and losses are not subsequently reclassified to profit or
loss following derecognition of the investment.
The Group initially recognises loans and advances, deposits, debt securities in issue and subordinated liabilities when the Group becomes a
party to the contractual provisions of the instrument. Regular way purchases and sales of securities and other financial assets and trading
liabilities are recognised on trade date, being the date that the Group is committed to purchase or sell an asset.
Financial assets are derecognised when the contractual right to receive cash flows from those assets has expired or when the Group has
transferred its contractual right to receive the cash flows from the assets and either: substantially all of the risks and rewards of ownership
have been transferred; or the Group has neither retained nor transferred substantially all of the risks and rewards, but has transferred
control. Financial liabilities are derecognised when the obligation is discharged, cancelled or expires.
Notes to the consolidated financial statements continued
220
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 2: Accounting policies continued
(1) Financial instruments measured at amortised cost
Financial assets that are held to collect contractual cash flows where those cash flows represent solely payments of principal and interest
are measured at amortised cost. A basic lending arrangement results in contractual cash flows that are solely payments of principal and
interest on the principal amount outstanding. Where the contractual cash flows introduce exposure to risks or volatility unrelated to a basic
lending arrangement such as changes in equity prices or commodity prices, the payments do not comprise solely principal and interest.
Financial assets measured at amortised cost are predominantly loans and advances to customers and banks, reverse repurchase
agreements and certain debt securities used by the Group to manage its liquidity. Loans and advances and reverse repurchase agreements
are initially recognised when cash is advanced to the borrower at fair value inclusive of transaction costs. Interest income is accounted for
using the effective interest method (see (D) above).
Financial liabilities are measured at amortised cost, except for trading liabilities and other financial liabilities designated at fair value
through profit or loss on initial recognition which are held at fair value.
(2) Financial assets measured at fair value through other comprehensive income
Financial assets that are held to collect contractual cash flows and for subsequent sale where those cash flows represent solely payments of
principal and interest are recognised in the balance sheet at their fair value, inclusive of transaction costs. Interest calculated using the
effective interest method and foreign exchange gains and losses on assets denominated in foreign currencies are recognised in the income
statement. All other gains and losses arising from changes in fair value are recognised directly in other comprehensive income, until the
financial asset is either sold or matures, at which time, other than in respect of equity shares, the cumulative gain or loss previously
recognised in other comprehensive income is recognised in the income statement. The cumulative revaluation amount in respect of equity
shares is transferred directly to retained profits. The Group recognises a charge for expected credit losses in the income statement (see (H)
below). As the asset is measured at fair value, the charge does not adjust the carrying value of the asset, and this is reflected in other
comprehensive income.
(3) Financial instruments measured at fair value through profit or loss
Financial assets are classified at fair value through profit or loss where they do not meet the criteria to be measured at amortised cost or
fair value through other comprehensive income or where they are designated at fair value through profit or loss to reduce an accounting
mismatch. All derivatives are carried at fair value through profit or loss, other than those in effective cash flow hedging relationships.
Derivatives are carried on the balance sheet as assets when their fair value is positive and as liabilities when their fair value is negative. Refer
to note 17 (Fair values of financial assets and liabilities) for details of valuation techniques and significant inputs to valuation models.
Derivatives embedded in a financial asset are not considered separately; the financial asset is considered in its entirety when determining
whether its cash flows are solely payments of principal and interest. Derivatives embedded in financial liabilities and insurance contracts
(unless the embedded derivative is itself an insurance contract) are treated as separate derivatives when their economic characteristics and
risks are not closely related to those of the host contract and the host contract is not carried at fair value through profit or loss. These
embedded derivatives are measured at fair value with changes in fair value recognised in the income statement.
The assets backing the insurance and investment contracts issued by the Group do not meet the criteria to be measured at amortised cost
or fair value through other comprehensive income as they are managed on a fair value basis and accordingly are measured at fair value
through profit or loss. Similarly, trading securities, which are debt securities and equity shares acquired principally for the purpose of selling
in the short term or which are part of a portfolio which is managed for short-term gains, do not meet these criteria and are also measured
at fair value through profit or loss. Financial assets measured at fair value through profit or loss are recognised in the balance sheet at their
fair value. Fair value gains and losses together with interest coupons and dividend income are recognised in the income statement within
net trading income.
Financial liabilities are measured at fair value through profit or loss where they are trading liabilities or where they are designated at fair
value through profit or loss in order to reduce an accounting mismatch; where the liabilities are part of a group of liabilities (or assets and
liabilities) which is managed, and its performance evaluated, on a fair value basis; or where the liabilities contain one or more embedded
derivatives that significantly modify the cash flows arising under the contract and would otherwise need to be separately accounted for.
Financial liabilities measured at fair value through profit or loss are recognised in the balance sheet at their fair value. Fair value gains and
losses are recognised in the income statement within net trading income in the period in which they occur, except in the case of financial
liabilities designated at fair value through profit or loss where gains and losses attributable to changes in own credit risk are recognised in
other comprehensive income.
The fair values of assets and liabilities traded in active markets are based on current bid and offer prices, respectively, which include the
expected effects of potential changes to laws and regulations, risks associated with climate change and other factors. If the market is not
active the Group establishes a fair value by using valuation techniques. The fair values of derivative financial instruments are adjusted
where appropriate to reflect credit risk (via credit valuation adjustments (CVAs), debit valuation adjustments (DVAs) and funding valuation
adjustments (FVAs)), market liquidity and other risks.
(4) Borrowings
Borrowings (which include deposits from banks, customer deposits, repurchase agreements, debt securities in issue and subordinated
liabilities) are recognised initially at fair value, being their issue proceeds net of transaction costs incurred. These instruments are
subsequently stated at amortised cost using the effective interest method.
Preference shares and other instruments which carry a mandatory coupon or are redeemable on a specific date are classified as financial
liabilities. The coupon on these instruments is recognised in the income statement as interest expense. Securities which carry a
discretionary coupon and have no fixed maturity or redemption date are classified as other equity instruments. Interest payments on these
securities are recognised as distributions from equity in the period in which they are paid.
An exchange of financial liabilities on substantially different terms is accounted for as an extinguishment of the original financial liability
and the recognition of a new financial liability. The difference between the carrying amount of a financial liability extinguished and the new
financial liability is recognised in profit or loss together with any related costs or fees incurred. When a financial liability is exchanged for an
equity instrument, the new equity instrument is recognised at fair value and any difference between the carrying value of the liability and
the fair value of the new equity instrument is recognised in profit or loss.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
221
Lloyds Banking Group plc Annual Report and Accounts 2024
for the year ended 31 December
Note 2: Accounting policies continued
(5) Sale and repurchase agreements (including securities lending and borrowing)
Securities sold subject to repurchase agreements (repos) continue to be recognised on the balance sheet where substantially all of the risks
and rewards are retained. Funds received for repos carried at fair value are included within trading liabilities.
Securities purchased under agreements to resell (reverse repos), where the Group does not acquire substantially all of the risks and rewards
of ownership, are measured at amortised cost or at fair value. Those measured at fair value are recognised within trading securities.
The difference between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective
interest method.
Securities borrowing and lending transactions are typically secured; collateral takes the form of securities or cash advanced or received.
Securities lent to counterparties are retained on the balance sheet. Securities borrowed are not recognised on the balance sheet, unless
these are sold to third parties, in which case the obligation to return them is recorded at fair value as a trading liability. Cash collateral given
or received is treated as a loan and advance measured at amortised cost or customer deposit.
(F) Hedge accounting
As permitted by IFRS 9, the Group continues to apply the requirements of IAS 39 to its hedging relationships.
Changes in the fair value of all derivative instruments, other than those in effective cash flow hedging relationships, are recognised
immediately in the income statement. As noted in (2) below, the change in fair value of a derivative in an effective cash flow hedging
relationship is allocated between the income statement and other comprehensive income.
Hedge accounting allows one financial instrument, generally a derivative such as a swap, to be designated as a hedge of another financial
instrument such as a loan or deposit or a portfolio of such instruments. At the inception of the hedge relationship, formal documentation is
drawn up specifying the hedging strategy, the hedged item, the hedging instrument and the methodology that will be used to measure the
effectiveness of the hedge relationship in offsetting changes in the fair value or cash flow of the hedged risk. The effectiveness of the
hedging relationship is tested both at inception and throughout its life and if at any point it is concluded that it is no longer highly effective
in achieving its documented objective, hedge accounting is discontinued. Note 19 provides details of the types of derivatives held by the
Group and presents separately those designated in hedge relationships.
(1) Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together
with the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk; this also applies if the hedged
asset is classified as a financial asset at fair value through other comprehensive income. If the hedge no longer meets the criteria for hedge
accounting, changes in the fair value of the hedged item attributable to the hedged risk are no longer recognised in the income statement.
The cumulative adjustment that has been made to the carrying amount of the hedged item is amortised to the income statement using the
effective interest method over the period to maturity.
(2) Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income in the cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the
income statement. Amounts accumulated in equity are reclassified to the income statement in the periods in which the hedged item
affects profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognised in the income statement when the forecast
transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative
gain or loss that was reported in equity is immediately transferred to the income statement.
(G) Offset
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right of offset
and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Cash collateral on exchange
traded derivative transactions is presented gross unless the collateral cash flows are always settled net with the derivative cash flows. In
certain situations, even though master netting agreements exist, the lack of management intention to settle on a net basis results in the
financial assets and liabilities being reported gross on the balance sheet.
(H) Impairment of financial assets
The impairment charge in the income statement reflects the change in expected credit losses, including those arising from fraud. Expected
credit losses are recognised for loans and advances to customers and banks, other financial assets held at amortised cost, financial assets
(other than equity investments) measured at fair value through other comprehensive income, and certain loan commitments and financial
guarantee contracts. Expected credit losses are calculated as an unbiased and probability-weighted estimate using an appropriate
probability of default, adjusted to take into account a range of possible future economic scenarios, and applying this to the estimated
exposure of the Group at the point of default after taking into account the value of any collateral held, repayments, or other mitigants of
loss and including the impact of discounting using the effective interest rate.
At initial recognition, allowance (or provision in the case of some loan commitments and financial guarantees) is made for expected credit
losses resulting from default events that are possible within the next 12 months (12-month expected credit losses). In the event of a
significant increase in credit risk since origination, allowance (or provision) is made for expected credit losses resulting from all possible
default events over the expected life of the financial instrument (lifetime expected credit losses). Financial assets where 12-month
expected credit losses are recognised are considered to be Stage 1; financial assets which are considered to have experienced a significant
increase in credit risk since initial recognition are in Stage 2; and financial assets which have defaulted or are otherwise considered to be
credit-impaired are allocated to Stage 3. Some Stage 3 assets, mainly in Commercial Banking, are subject to individual rather than
collective assessment. Such cases are subject to a risk-based impairment sanctioning process, and these are reviewed and updated at least
quarterly, or more frequently if there is a significant change in the credit profile. The collective assessment of impairment aggregates
financial instruments with similar risk characteristics, such as whether the facility is revolving in nature or secured and the type of security
held against financial assets.
Notes to the consolidated financial statements continued
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Lloyds Banking Group plc Annual Report and Accounts 2024
Note 2: Accounting policies continued
An assessment of whether credit risk has increased significantly since initial recognition considers the change in the risk of default occurring
over the remaining expected life of the financial instrument. In determining whether there has been a significant increase in credit risk, the
Group uses quantitative tests based on relative and absolute probability of default (PD) movements linked to internal credit ratings
together with qualitative indicators such as watchlists and other indicators of historical delinquency, credit weakness or financial difficulty.
The use of internal credit ratings and qualitative indicators ensures alignment between the assessment of staging and the Group’s
management of credit risk which utilises these internal metrics within distinct retail and commercial portfolio risk management practices.
However, unless identified at an earlier stage, the credit risk of financial assets is deemed to have increased significantly when more than
30 days past due. The use of a payment holiday in and of itself has not been judged to indicate a significant increase in credit risk, with the
underlying long-term credit risk deemed to be driven by economic conditions and captured through the use of forward-looking models.
These portfolio-level models are capturing the anticipated volume of increased defaults and therefore an appropriate assessment of staging
and expected credit loss. Where the credit risk subsequently improves such that it no longer represents a significant increase in credit risk
since initial recognition, the asset is transferred back to Stage 1.
Assets are transferred to Stage 3 when they have defaulted or are otherwise considered to be credit-impaired. Default is considered to
have occurred when there is evidence that the customer is experiencing financial difficulty which is likely to affect significantly the ability to
repay the amount due. IFRS 9 contains a rebuttable presumption that default occurs no later than when a payment is 90 days past due
which the Group uses for all its products. In addition, other indicators of mortgage default are added including end-of-term payments on
past due interest-only accounts and loans considered non-performing due to recent arrears or forbearance. The use of payment holidays is
not considered to be an automatic trigger of regulatory default and therefore does not automatically trigger Stage 3. Days past due will also
not accumulate on any accounts that have taken a payment holiday including those already past due.
In certain circumstances, the Group will renegotiate the original terms of a customer’s loan, either as part of an ongoing customer
relationship or in response to adverse changes in the circumstances of the borrower. In the latter circumstances, the loan will remain
classified as either Stage 2 or Stage 3 until the credit risk has improved such that it no longer represents a significant increase since
origination (for a return to Stage 1), or the loan is no longer credit-impaired (for a return to Stage 2). On renegotiation the gross carrying
amount of the loan is recalculated as the present value of the renegotiated or modified contractual cash flows, which are discounted at the
original effective interest rate. Renegotiation may also lead to the loan and associated allowance being derecognised and a new loan being
recognised initially at fair value.
Purchased or originated credit-impaired financial assets (POCI) include financial assets that are purchased or originated at a deep discount
that reflects incurred credit losses. At initial recognition, POCI assets do not carry an impairment allowance; instead, lifetime expected
credit losses are incorporated into the calculation of the effective interest rate. All changes in lifetime expected credit losses subsequent to
the assets’ initial recognition are recognised as an impairment charge.
A loan or advance is normally written off, either partially or in full, against the related allowance when the proceeds from realising any
available security have been received or there is no realistic prospect of recovery and the amount of the loss has been determined.
Subsequent recoveries of amounts previously written off decrease the amount of impairment losses recorded in the income statement.
For both secured and unsecured retail balances, the write-off takes place only once an extensive set of collections processes has been
completed, or the status of the account reaches a point where policy dictates that continuing attempts to recover are no longer
appropriate. For commercial lending, a write-off occurs if the loan facility with the customer is restructured, the asset is under
administration and the only monies that can be received are the amounts estimated by the administrator, the underlying assets are
disposed and a decision is made that no further settlement monies will be received, or external evidence (for example, third party
valuations) is available that there has been an irreversible decline in expected cash flows.
(I) Property, plant and equipment
Property, plant and equipment (other than investment property) is included at cost less accumulated depreciation. The value of land
(included in premises) is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate the difference
between the cost and the residual value over their estimated useful lives, as follows: the shorter of 50 years and the remaining period of the
lease for freehold/long and short leasehold premises; the shorter of 10 years and, if lease renewal is not likely, the remaining period of the lease
for leasehold improvements; 10 to 20 years for fixtures and furnishings; and 2 to 8 years for other equipment and motor vehicles.
The assets’ residual values and useful lives are reviewed and, if appropriate, revised at each balance sheet date.
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. In assessing the recoverable amount of assets the Group considers the effects of potential or actual changes in legislation,
customer behaviour, climate-related risks and other factors on the asset’s cash-generating unit (CGU). In the event that an asset’s CGU
carrying amount is determined to be greater than its recoverable amount the asset is written down immediately.
Investment property comprises freehold and long leasehold land and buildings that are held either to earn rental income or for capital
accretion or both, primarily within the life insurance funds. Investment property is carried at fair value based on current prices for similar
properties, adjusted for the specific characteristics of the property (such as location or condition). If this information is not available, the
Group uses alternative valuation methods such as discounted cash flow projections or recent prices in less active markets. These valuations
are reviewed at least annually by independent professionally qualified valuers. Investment property being redeveloped for continuing use as
investment property, or for which the market has become less active, continues to be valued at fair value.
(J) Leases
Under IFRS 16, a lessor is required to determine if a lease is a finance or operating lease. A lessee is not required to make this determination.
(1) As lessor
Assets leased to customers are classified as finance leases if the lease agreements transfer substantially all of the risks and rewards of
ownership to the lessee but not necessarily legal title. All other leases are classified as operating leases. When assets are subject to finance
leases, the present value of the lease payments, together with any unguaranteed residual value, is recognised as a receivable, net of
allowances for expected credit losses and residual value impairment, within loans and advances to banks and customers. The difference
between the gross receivable and the present value of the receivable is recognised as unearned finance lease income. Finance lease income
is recognised in interest income over the term of the lease using the net investment method (before tax) so as to give a constant rate of
return on the net investment in the lease. Unguaranteed residual values are reviewed regularly to identify any impairment.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
223
Lloyds Banking Group plc Annual Report and Accounts 2024
for the year ended 31 December
Note 2: Accounting policies continued
Operating lease assets are included within other assets at cost and depreciated over their estimated useful lives. The depreciation charge is
based on the asset’s residual value and the life of the lease. Operating lease rental income is recognised on a straight-line basis over the life
of the lease.
The Group evaluates non-lease arrangements such as outsourcing and similar contracts to determine if they contain a lease which is then
accounted for separately.
(2) As lessee
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the
Group. Assets and liabilities arising from a lease are initially measured on a present value basis. The lease payments are discounted using the
interest rate implicit in the lease, if that rate can be determined, or the Group’s incremental borrowing rate appropriate for the right-of-use
asset arising from the lease, and the liability recognised within other liabilities.
Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as
to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is
depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit
or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of
office furniture.
(K) Employee benefits
Short-term employee benefits, such as salaries, paid absences, performance-based cash awards and social security costs, are recognised
over the period in which the employees provide the related services.
(1) Pension schemes
The Group operates a number of post-retirement benefit schemes for its employees including both defined benefit and defined
contribution pension plans. A defined benefit scheme is a pension plan that defines an amount of pension benefit that an employee will
receive on retirement, dependent on one or more factors such as age, years of pensionable service and pensionable salary. A defined
contribution plan is a pension plan into which the Group pays fixed contributions; there is no legal or constructive obligation to pay further
contributions.
(i) Defined benefit schemes
Scheme assets are included at their fair value and scheme liabilities are measured on an actuarial basis using the projected unit credit
method. The defined benefit scheme liabilities are discounted using rates equivalent to the market yields at the balance sheet date on high
quality corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension liability. The Group’s income statement charge includes the current service cost of
providing pension benefits, past service costs, net interest expense (income), and plan administration costs that are not deducted from the
return on plan assets. Past service costs, which represents the change in the present value of the defined benefit obligation resulting from a
plan amendment or curtailment, are recognised when the plan amendment or curtailment occurs. Net interest expense (income) is
calculated by applying the discount rate at the beginning of the period to the net defined benefit liability or asset.
Remeasurements, comprising actuarial gains and losses, the return on plan assets (excluding amounts included in net interest expense
(income) and net of the cost of managing the plan assets), and the effect of changes to the asset ceiling (if applicable) are reflected
immediately in the balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur.
Remeasurements recognised in other comprehensive income are reflected immediately in retained profits and will not subsequently be
reclassified to profit or loss.
The Group’s balance sheet includes the net surplus or deficit, being the difference between the fair value of scheme assets and the
discounted value of scheme liabilities at the balance sheet date. Surpluses are only recognised to the extent that they are recoverable
through reduced contributions in the future or through refunds from the schemes. In assessing whether a surplus is recoverable, the Group
considers (i) its current right to obtain a refund or a reduction in future contributions and (ii) the rights of other parties existing at the
balance sheet date. In determining the rights of third parties existing at the balance sheet date, the Group does not anticipate any future
acts by other parties.
(ii) Defined contribution schemes
The costs of the Group’s defined contribution plans are charged to the income statement in the period in which they fall due.
(2) Share-based compensation
The Group operates a number of equity-settled, share-based compensation plans in respect of services received from certain of its
employees. The value of the employee services received in exchange for equity instruments granted under these plans is recognised as an
expense over the vesting period of the instruments, with a corresponding increase in equity. This expense is determined by reference to the
fair value of the number of equity instruments that are expected to vest. The fair value of equity instruments granted is based on market
prices, if available, at the date of grant. In the absence of market prices, the fair value of the instruments at the date of grant is estimated
using an appropriate valuation technique, such as a Black-Scholes option pricing model or a Monte Carlo simulation. The determination of
fair values excludes the impact of any non-market vesting conditions, which are included in the assumptions used to estimate the number
of options that are expected to vest. At each balance sheet date, this estimate is reassessed and if necessary revised. Any revision of the
original estimate is recognised in the income statement, together with a corresponding adjustment to equity. Cancellations by employees
of contributions to the Group’s Save As You Earn plans are treated as non-vesting conditions and the Group recognises, in the year of
cancellation, the amount of the expense that would have otherwise been recognised over the remainder of the vesting period.
Modifications are assessed at the date of modification and any incremental charges are charged to the income statement.
Notes to the consolidated financial statements continued
224
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 2: Accounting policies continued
(L) Taxation
Tax expense comprises current and deferred tax. Current and deferred tax are charged or credited in the income statement except to the
extent that the tax arises from a transaction or event which is recognised, in the same or a different period, outside the income statement
(either in other comprehensive income, directly in equity, or through a business combination), in which case the tax appears in the same
statement as the transaction that gave rise to it. The tax consequences of the Group’s dividend payments (including distributions on other
equity instruments), if any, are charged or credited to the statement in which the profit distributed originally arose.
Current tax is the amount of corporate income taxes expected to be payable or recoverable based on the profit for the period as adjusted
for items that are not taxable or not deductible, and is calculated using tax rates and laws that were enacted or substantively enacted at
the balance sheet date.
Current tax includes amounts provided in respect of uncertain tax positions when management expects that, upon examination of the
uncertainty by His Majesty’s Revenue and Customs (HMRC) or other relevant tax authority, it is more likely than not that an economic
outflow will occur. Provisions reflect management’s best estimate of the ultimate liability based on their interpretation of tax law,
precedent and guidance, informed by external tax advice as necessary. Changes in facts and circumstances underlying these provisions are
reassessed at each balance sheet date, and the provisions are remeasured as required to reflect current information.
For the Group’s long-term insurance businesses, the tax expense is analysed between tax that is payable in respect of policyholders’ returns
and tax that is payable on the shareholders’ returns. This allocation is based on an assessment of the rates of tax which will be applied to
the returns under the current UK tax rules.
Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the
balance sheet. Deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted at the balance sheet
date, and which are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax liabilities are generally recognised for all taxable temporary differences but not recognised for taxable temporary differences
arising on investments in subsidiaries where the reversal of the temporary difference can be controlled and it is probable that the difference
will not reverse in the foreseeable future. Deferred tax liabilities are not recognised on temporary differences that arise from goodwill which
is not deductible for tax purposes.
Deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which the deductible temporary
differences can be utilised, and are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that
sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognised in respect of temporary differences that arise on initial recognition of assets and
liabilities acquired other than in a business combination, or where at the time of the transaction they give rise to equal taxable and
deductible temporary differences. Deferred tax is not discounted.
The Group has applied the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar 2
income taxes currently required by IAS 12 Income Taxes.
(M)Insurance
The Group undertakes both life insurance and general insurance business. Insurance and participating investment contracts, and
reinsurance contracts issued and held, are accounted for under IFRS 17 Insurance Contracts.
Products sold by the life insurance business are classified into three categories:
•
•
•
Insurance contracts are contracts that transfer significant insurance risk and may also transfer financial risk. The Group defines
significant insurance risk as the possibility of having to pay benefits on the occurrence of an insured event which are significantly higher
than the benefits payable if the insured event were not to occur. Once a contract has been classified as an insurance contract, it remains
an insurance contract until all obligations are extinguished unless that contract is derecognised due to a contract modification. These
contracts are classified as either direct participating contracts or contracts without direct participation features. Contracts without
direct participation features are accounted for using the general measurement model (GMM) for life contracts or the premium
allocation approach (PAA) for general insurance contracts. Direct participating contracts are contracts for which, at inception, the
contractual terms specify the policyholders participate in a clearly identified pool of underlying items. Under the terms of these
contracts the policyholders are entitled to a substantial share of the returns and change in fair value of the underlying items. These
contracts are accounted for under the variable fee approach (VFA)
Participating investment contracts are investment contracts that contain a discretionary participation feature (DPF). They do not
transfer significant insurance risk, but contain a contractual right to receive, as a supplement to an amount not subject to the discretion
of the Group, additional amounts that are expected to be a significant portion of the total contractual benefits. The timing or amount
of these additional amounts are at the discretion of the Group and are contractually based on the returns on a specified pool of
contracts or type of contract, returns on a specified pool of assets held by the Group or profit or loss of a fund
For certain insurance and investment contracts, the contract can be partly invested in units which contain a DPF and partly in units
without. In these circumstances, where the contract also contains features that transfer significant insurance risk, they are classified as
insurance contracts. Where this is not the case, and the discretionary cash flows are expected to be a significant portion of the total
contractual benefits, they are classified as participating investment contracts. Where the discretionary cash flows are not expected to
be a significant portion of the total contractual benefits, they are classified as financial instruments. An investment component is
defined as the amount that an insurance contract requires the entity to repay to a policyholder in all circumstances, regardless of
whether an insured event occurs. The investment component of the insurance and participating investment contract is non-distinct and
is not separated. The Group applies judgement to determine the investment component for each contract considering the extent to
which insurance and investment components are highly interrelated or not applying factors such as: whether the policyholder is able to
benefit from one component unless the other component is present; and whether the value of the investment component is dependent
on the timing of the insured event. The value of the non-distinct investment component is determined on the following bases: for
immediate annuities, full claim amount when within the guaranteed period; for unit-linked and With-Profits contracts, policyholder’s
account value
The general insurance business issues only insurance contracts.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
225
Lloyds Banking Group plc Annual Report and Accounts 2024
for the year ended 31 December
Note 2: Accounting policies continued
(1) Life insurance business
(i) Accounting for insurance and participating investment contracts
Recognition
The Group aggregates insurance and participating investment contracts into portfolios of contracts subject to similar risks and managed
together. Each portfolio of insurance contracts is divided into annual cohorts (by year of issue). Annual cohorts are divided into groups of
insurance and participating investment contracts based on profitability expectations at initial recognition. The directly attributable costs of
selling, underwriting and starting a group of insurance and participating investment contracts are allocated to the group of insurance and
participating investment contracts using a systematic and rational method.
On initial recognition, a group of insurance and participating investment contracts is measured as the total of the fulfilment cash flows and
the contractual service margin (CSM). The measurement includes all future cash flows that are within the contract boundary of each
contract in the group. The fulfilment cash flows comprise unbiased and probability-weighted estimates of future cash flows, discounted to
present value to reflect the time value of money and financial risks, plus an explicit risk adjustment for non-financial risk. The discount rate
applied reflects the time value of money, the characteristics of the cash flows, the liquidity characteristics of the insurance and
participating investment contracts and, where appropriate, is consistent with observable current market prices. The risk adjustment for
non-financial risk for a group of insurance and participating investment contracts is the compensation required for bearing the uncertainty
about the amount and timing of the cash flows that arises from non-financial risk. Diversification benefit is calculated based on Group level
diversification of risks. To determine the risk adjustments for non-financial risk for reinsurance contracts, the Group applies these
techniques both gross and net of excess of loss reinsurance and derives the amount of risk being transferred to the reinsurer as the
difference between the two results. The CSM of a group of insurance and participating investment contracts represents the unearned profit
that the Group expects to recognise as it provides insurance contract services under those contracts in the future.
Contract boundaries
The measurement of a group of contracts includes all future cash flows within the boundary of each contract in the group.
Cash flows are within the contract boundary:
•
•
For an insurance contract, if arising from substantive rights and obligations that exist during the reporting period in which the Group can
compel the policyholder to pay premiums or has a substantive obligation to provide insurance contract services
For a participating investment contract, if resulting from a substantive obligation of the Group to deliver cash at a present or future date
A substantive obligation to provide insurance contract services ends when the Group has the practical ability to reassess the risks of the
particular policyholder, and can set a price or level of benefits that fully reflects those reassessed risks; or the Group has the practical ability
to reassess the risks of the portfolio that contains the contract and can set a price or level of benefits that fully reflects the risks of that
portfolio, and the pricing of the premiums up to the reassessment date does not take into account risks that relate to periods after the
reassessment date.
For certain unitised With-Profits and unit-linked policies, a guaranteed minimum pension is payable at a vesting date. For certain
conventional With-Profits pensions, policyholders have the option to convert to an annuity on guaranteed terms. There is no contract
boundary at the vesting date of these policies; the pre and post vesting date phases are treated as a single insurance contract.
The contract boundary of each group is reassessed at the end of each reporting period.
Measurement
The carrying amount of a group of insurance and participating investment contracts at each reporting date is the sum of the liability for
remaining coverage (LRC) and the liability for incurred claims (LIC). The LRC comprises the fulfilment cash flows that relate to services that
will be provided under the contracts in future periods and any remaining CSM at that date. The LIC includes the fulfilment cash flows for
incurred claims and expenses that have not yet been paid, including claims that have been incurred but not yet reported. The fulfilment
cash flows of groups of insurance and participating investment contracts are measured at the reporting date using current estimates of
future cash flows, current discount rates and current estimates of the risk adjustment for non-financial risk. Changes in fulfilment cash flows
are recognised as follows:
•
•
•
Changes related to future service are adjusted against the CSM unless the group is onerous in which case such changes are recognised in
the insurance service result in profit or loss
Changes related to past or current service are recognised in the insurance service result in profit or loss
The effects of the time value of money and financial risk are recognised as net finance income or expense from insurance, participating
investment and reinsurance contracts in profit or loss
The carrying amount of the CSM is remeasured at the end of each reporting period. For contracts measured under the GMM, interest is
accreted on the carrying amount of the CSM using the discount rate curve determined at the date of initial recognition of the group of
contracts. The CSM is also adjusted for the changes in fulfilment cash flows relating to future service at the locked-in discount rates
determined at initial recognition, unless the increases in fulfilment cash flows cause a group of contracts to become onerous or decreases in
fulfilment cash flows are allocated to the loss component of the liability for remaining coverage.
The majority of the Group’s With-Profits and unit-linked insurance and participating investment contracts are direct participating contracts
under which the Group’s obligation to the policyholder is the payment of an amount equal to the fair value of the underlying items, less a
variable fee. On subsequent remeasurement of a group of direct participating contracts (measured under VFA), changes to the fulfilment
cash flows, discounted at current rates, reflecting changes in the obligation to pay the policyholder an amount equal to the fair value of the
underlying items are recognised in the income statement, within net finance income or expense from insurance, participating investment
and reinsurance contracts. The CSM is adjusted for changes in the amount of the Group’s share of the fair value of the underlying items,
which relate to future services, except where such changes result in recognition or reversal of the loss component for onerous groups, or
where the Group applies the risk mitigation option. For certain contracts with direct participation features, the Group mitigates financial
risks using equity and currency hedges. The Group does not adjust the CSM for changes in the fulfilment cash flows and/or entity’s share of
the underlying items that reflect some of the changes in the effect of time value of money and financial risk. These amounts are instead
reflected in profit or loss. The CSM is also adjusted for those fulfilment cash flows that do not vary based on the returns on underlying items
that relate to future service (including the effect of time value of money and financial risks not arising from underlying items, such as the
impact of minimum return guarantees), except where such changes result in recognition or reversal of the loss component for onerous
groups. Changes in fulfilment cash flows relating to future service adjust the CSM using current discount rates.
Notes to the consolidated financial statements continued
226
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 2: Accounting policies continued
For contracts measured under the GMM or VFA at the end of each reporting period the appropriate proportion of the CSM is recognised in
the income statement to reflect the amount of profit related to the insurance contract services provided in the period. This is calculated
using coverage units, a measure used to determine the allocation of the CSM over the remaining coverage periods. The number of coverage
units in a group is the quantity of insurance contract services provided by the contracts in the group, determined by considering for each
contract the quantity of the benefits provided and its expected coverage period.
Derecognition
The Group derecognises an insurance and participating investment contract when it is extinguished (that is, when the obligation specified
in the contract expires or is discharged or cancelled) or if its terms are modified in a way that would have changed the accounting for the
contract significantly had the new terms always existed.
If a contract is derecognised, then the fulfilment cash flows of the group are adjusted to eliminate the present value of the future cash flows
and risk adjustment of the contract derecognised from the group, and the CSM of the group is adjusted for the change in fulfilment cash
flows, except where such changes are allocated to the loss component.
If a contract is derecognised because its terms are modified, then the CSM of the existing group is also adjusted for the premium that
would have been charged had the Group entered into a contract with the new contract’s terms at the date of modification, less any
additional premium charged for the modification. A new modified contract is recognised assuming the Group received the premium that
would have been charged had the Group entered into a contract with the new contract’s terms at the date of the modification.
Where the adjustments to CSM result in the CSM being reduced to nil, any further adjustments are recognised in the income statement in
insurance service expense.
(2) General insurance contracts
General insurance contracts issued by the Group are presented on the balance sheet within liabilities arising from insurance and
participating investment contracts. The Group applies the PAA to the measurement of general insurance contracts, which either have a
coverage period of each contract in the group of one year or less or have an annual re-pricing option.
For a group of general insurance contracts that is not onerous at initial recognition, the Group measures the LRC as any premium received
at initial recognition, less any insurance acquisition cash flows at that date, plus any other asset or liability previously recognised for cash
flows related to the group of contracts that the Group pays or receives before the group of insurance contracts is recognised.
The Group estimates the LIC using the methodology described in the Measurement section for life insurance contracts above.
Where, during the coverage period, facts and circumstances indicate that a group of insurance contracts is onerous, the Group recognises a
loss in the income statement for the net outflow, resulting in the carrying amount of the liability for the group being equal to the fulfilment
cash flows. A loss component is established by the Group within the LRC for such onerous group.
On subsequent measurement, the Group measures the carrying amount of the LRC at the end of each reporting period as the LRC at the
beginning of the period plus premiums received in the period, less insurance acquisition cash flows, plus any amounts relating to the
amortisation of the insurance acquisition cash flows recognised as an expense in the reporting period for the group, less the amount
recognised as insurance revenue for the services provided in the period. For onerous groups, the LRC is also adjusted for the remeasurement
of the loss component.
(3) Reinsurance
(i) Reinsurance contracts issued
Reinsurance contracts issued by the Group (where insurance risk is transferred to the Group) are accounted for under the GMM
as insurance contracts. These contracts are presented within other assets or liabilities arising from insurance and participating
investment contracts.
(ii) Reinsurance contracts held
The classification of contracts entered into by the Group with reinsurers under which the Group is compensated for amounts payable on
one or more other contracts issued by the Group is dependent on whether the contract with the reinsurer transfers significant insurance
risk to the reinsurer. Where the reinsurance contract transfers significant insurance risk (reinsurance contracts held), it is accounted for
under the GMM, as modified for reinsurance contracts held. The Group adjusts the CSM of the group to which a reinsurance contract held
belongs and as a result recognises income, when it recognises a loss on initial recognition of onerous underlying contracts.
Contracts that do not transfer significant insurance risk to the reinsurer are recognised within financial assets at fair value through profit or
loss as they are within a portfolio of financial assets that is managed, and whose performance is evaluated, on a fair value basis. These
contracts, while legally reinsurance contracts, do not meet the definition of a reinsurance contract under IFRS Accounting Standards.
Investment returns (including movements in fair value and investment income) allocated to these contracts are recognised on the face of
the income statement within net trading income.
(4) Non-participating investment contracts
The Group’s non-participating investment contracts are primarily unit-linked. These contracts are accounted for under IFRS 9 as financial
liabilities whose value is contractually linked to the fair values of financial assets within the Group’s unitised investment funds. The value of
the unit-linked financial liabilities is determined using current unit prices multiplied by the number of units attributed to the contract
holders at the balance sheet date. Their value is never less than the amount payable on surrender, discounted for the required notice period
where applicable. Investment returns (including movements in fair value and investment income) allocated to those contracts are
recognised in the income statement through change in non-participating investment contracts.
Deposits and withdrawals are not accounted for through the income statement but are accounted for directly in the balance sheet as
adjustments to the non-participating investment contract liability.
The Group receives investment management fees in the form of an initial adjustment or charge to the amount invested. These fees are in
respect of services rendered in conjunction with the issue and management of investment contracts where the Group actively manages the
consideration received from its customers to fund a return that is based on the investment profile that the customer selected on
origination of the contract. These services comprise an indeterminate number of acts over the lives of the individual contracts and,
therefore, the Group defers these fees and recognises them over the estimated lives of the contracts, in line with the provision of
investment management services.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
227
Lloyds Banking Group plc Annual Report and Accounts 2024
for the year ended 31 December
Note 2: Accounting policies continued
Costs which are directly attributable and incremental to securing new non-participating investment contracts are deferred. This asset is
subsequently amortised over the period of the provision of investment management services and its recoverability is reviewed in
circumstances where its carrying amount may not be recoverable. If the asset is greater than its recoverable amount it is written down
immediately through fee and commission expense in the income statement. All other costs are recognised as expenses when incurred.
(N) Foreign currency translation
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The results and financial position of all Group entities that have a functional currency different from the presentation currency are
translated into the presentation currency as follows: the assets and liabilities of foreign operations, including goodwill and fair value
adjustments arising on the acquisition of a foreign entity, are translated into sterling at foreign exchange rates ruling at the balance sheet
date; and the income and expenses of foreign operations are translated into sterling at average exchange rates unless these do not
approximate to the foreign exchange rates ruling at the dates of the transactions, in which case income and expenses are translated at the
dates of the transactions.
Foreign exchange differences arising on the translation of a foreign operation are recognised in other comprehensive income and
accumulated in a separate component of equity together with exchange differences arising from the translation of borrowings and other
currency instruments designated as hedges of such investments. On disposal or liquidation of a foreign operation, the cumulative amount
of exchange differences relating to that foreign operation is reclassified from equity and included in determining the profit or loss arising on
disposal or liquidation.
(O) Provisions and contingent liabilities
Provisions are recognised in respect of present obligations arising from past events where it is probable that outflows of resources will be
required to settle the obligations and they can be reliably estimated.
Contingent liabilities are possible obligations whose existence depends on the outcome of uncertain future events or those present
obligations where the outflows of resources are uncertain or cannot be measured reliably. Contingent liabilities are not recognised in the
financial statements but are disclosed unless they are remote.
Provision is made for expected credit losses in respect of irrevocable undrawn loan commitments and financial guarantee contracts
(see (H) above).
(P) Share capital
Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as a
deduction, net of tax, from the proceeds. Dividends paid on the Group’s ordinary shares are recognised as a reduction in equity in the
period in which they are paid.
Where the Company or any member of the Group purchases the Company’s share capital, the consideration paid is deducted from
shareholders’ equity as treasury shares until they are cancelled; if these shares are subsequently sold or reissued, any consideration received
is included in shareholders’ equity.
(Q) Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise cash and non-mandatory deposits held with central
banks, mandatory deposits held with central banks in demand accounts and amounts due from banks with an original maturity of less than
three months that are available to finance the Group’s day-to-day operations.
Note 3: Critical accounting judgements and key sources of estimation uncertainty
The preparation of the Group’s financial statements in accordance with IFRS Accounting Standards requires management to make
judgements, estimates and assumptions in applying the accounting policies that affect the reported amounts of assets, liabilities, income
and expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may be based upon amounts
which differ from those estimates. Estimates, judgements and assumptions are continually evaluated and are based on historical
experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In
preparing the financial statements, the Group has considered the impact of climate-related risks on its financial position and performance.
While the effects of climate change represent a source of uncertainty, the Group does not consider there to be a material impact on its
judgements and estimates from the physical, transition and other climate-related risks in the short term.
The significant judgements, apart from those involving estimation, made by management in applying the Group’s accounting policies in
these financial statements (critical judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a
material adjustment to the carrying amount of assets and liabilities within the next financial year (key sources of estimation uncertainty),
which together are considered critical to the Group’s results and financial position, are as follows:
•
•
•
•
•
•
Valuation of liabilities arising from insurance business (note 8(I))
Retirement benefit obligations (note 12)
Uncertain tax positions (note 15)
Fair value of financial instruments (note 17(D))
Allowance for expected credit losses (note 21)
Regulatory and legal provisions (note 28)
Notes to the consolidated financial statements continued
228
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 3: Critical accounting judgements and key sources of estimation uncertainty
Consideration of climate change
continued
Financial statement preparation includes the consideration of the impact of climate change on the Group’s financial statements. There has
been no material impact identified on the financial reporting judgements and estimates. In particular, the directors considered the impact
of climate change in respect of the:
•
•
•
•
•
•
Going concern of the Group for a period of at least 12 months from the date of approval of the financial statements
Assessment of impairment of non-financial assets including goodwill
Carrying value and useful economic lives of property, plant and equipment
Fair value of financial assets and liabilities. These are generally based on market indicators which include the market’s assessment of
climate risk
Assessments on expected credit loss, focusing on specific climate-related macroeconomic, physical and transition risk impacts on credit
quality at a sector and segment level
Forecasting of the Group’s future UK taxable profits, which impacts deferred tax recognition
Whilst there is currently no material short-term impact of climate change expected, the Group acknowledges the long-term nature of
climate risk and continues to monitor and assess climate risks highlighted in the risk management section on pages 150 to 153.
Note 4: Segmental analysis
Lloyds Banking Group provides a wide range of banking and financial services in the UK and in certain locations overseas.
The Group Executive Committee (GEC) has been determined to be the chief operating decision-maker, as defined by IFRS 8 Operating
Segments, for the Group. The Group’s operating segments reflect its organisational and management structures. The GEC reviews the
Group’s internal reporting based around these segments in order to assess performance and allocate resources. It considers interest income
and expense on a net basis and consequently the total interest income and expense for all reportable segments is presented net. The
segments are differentiated by the type of products provided and by whether the customers are individuals or corporate entities.
The segmental results and comparatives are presented on an underlying basis (pre-tax), the basis reviewed by the chief operating decision-
maker. The underlying basis is derived from the recognition and measurement principles of the IFRS Accounting Standards with the effects
of the following excluded in arriving at underlying profit:
•
•
•
Restructuring costs relating to merger, acquisition, integration and disposal activities
Volatility and other items, which includes the effects of certain asset sales, the volatility relating to the Group’s hedging arrangements
and that arising in the insurance businesses, the unwind of acquisition-related fair value adjustments and the amortisation of purchased
intangible assets
Losses from insurance and participating investment contract modifications relating to the enhancement to the Group’s longstanding
and workplace pension business through the addition of a drawdown feature
For the purposes of the underlying income statement, operating lease depreciation (net of gains on disposal of operating lease assets) is
shown as an adjustment to total income.
The Group has three operating and reportable segments: Retail; Commercial Banking; and Insurance, Pensions and Investments:
•
•
•
Retail offers a broad range of financial services products to personal customers, including current accounts, savings, mortgages, credit
cards, unsecured loans, motor finance and leasing solutions. Its aim is to build enduring relationships that meet more of its customers’
financial needs and improves their financial resilience throughout their lifetime
Commercial Banking serves small and medium businesses and corporate and institutional clients, providing lending, transactional
banking, working capital management, debt financing and risk management services whilst connecting the whole Group to clients
Insurance, Pensions and Investments offers insurance, investment and pension management products and services
Other comprises income and expenditure not attributed to the Group’s operating segments. These amounts include those arising from the
Group’s equities business, residual net interest income after transfer pricing (which includes the central recovery of the Group’s
distributions on other equity instruments), in period gains from gilt sales and the unwind of associated hedging costs.
Inter-segment services are generally recharged at cost, although some attract a margin. Inter-segment lending and deposits are generally
entered into at market rates, except that non-interest bearing balances are priced at a rate that reflects the external yield that could be
earned on such funds.
For the majority of those derivative contracts entered into by business units for risk management purposes, the business unit recognises the
net interest income or expense on an accrual accounting basis and transfers the remainder of the movement in the fair value of the
derivative to the central function where the resulting accounting volatility is managed where possible through the establishment of hedge
accounting relationships. Any change in fair value of the hedged instrument attributable to the hedged risk is also recorded within the
central function. This allocation of the fair value of the derivative and change in fair value of the hedged instrument attributable to the
hedged risk avoids accounting asymmetry in segmental results and leads to accounting volatility, which is managed centrally and reported
within Other.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
229
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 4: Segmental analysis continued
Year ended 31 December 2024
Retail
£m
Commercial
Banking
£m
Insurance,
Pensions and
Investments
£m
Other
£m
Total
£m
Underlying net interest income
8,930
3,434
(136)
617
12,845
Underlying other income
2,384
1,825
1,292
96
5,597
Total underlying income, net of net finance income in respect of insurance
and investment contracts
11,314
5,259
1,156
713
18,442
Operating lease depreciation1
(1,319)
(6)
(1,325)
Net income
9,995
5,253
1,156
713
17,117
Operating costs
(5,596)
(2,762)
(924)
(160)
(9,442)
Remediation
(750)
(104)
(19)
(26)
(899)
Total costs
(6,346)
(2,866)
(943)
(186)
(10,341)
Underlying impairment (charge) credit
(457)
14
7
3
(433)
Underlying profit before tax
3,192
2,401
220
530
6,343
External income
13,596
3,991
1,292
(437)
18,442
External operating lease depreciation1
(1,319)
(6)
(1,325)
Inter-segment (expense) income
(2,282)
1,268
(136)
1,150
Net income
9,995
5,253
1,156
713
17,117
Loans and advances to customers2
372,250
87,602
5
459,857
External assets3
387,322
148,548
197,309
173,518
906,697
Customer deposits
319,726
162,645
374
482,745
External liabilities3
324,730
207,066
193,519
135,494
860,809
Analysis of underlying other income:
Consumer lending
1,810
1,810
Consumer relationships
574
574
Business and Commercial Banking
539
539
Corporate and Institutional Banking
1,286
1,286
Life, Pensions and Investments
979
979
General insurance
229
229
Venture capital
457
457
Other
84
(361)
(277)
Underlying other income
2,384
1,825
1,292
96
5,597
Other items reflected in income statement above:
Depreciation and amortisation
2,303
338
229
556
3,426
Defined benefit scheme charge (credit)
7
2
3
(23)
(11)
Non-income statement items:
Additions to fixed assets
3,485
107
75
1,956
5,623
Investments in joint ventures and associates at end of year
542
542
for the year ended 31 December
1
Net of profits on disposal of operating lease assets of £59 million.
2
Other includes centralised fair value hedge accounting adjustments.
3
The Insurance, Pensions and Investments operating segment external assets includes £5,122 million included in disposal group assets and external liabilities includes £5,268 million in
disposal group liabilities. Further details are provided in note 24 and note 27.
Notes to the consolidated financial statements continued
–
–
–
–
–
–
–
–
–
–
Lloyds Banking Group plc Annu al Rep ort and Accounts 2 024
230
Note 4: Segmental analysis continued
Year ended 31 December 2023
Retail
£m
Commercial
Banking
£m
Insurance,
Pensions and
Investments
£m
Other
£m
Total
£m
Underlying net interest income
9,647
3,799
(132)
451
13,765
Underlying other income
2,159
1,691
1,209
64
5,123
Total underlying income, net of net finance income in respect of insurance
and investment contracts
11,806
5,490
1,077
515
18,888
Operating lease depreciation1
(948)
(8)
(956)
Net income
10,858
5,482
1,077
515
17,932
Operating costs
(5,469)
(2,647)
(880)
(144)
(9,140)
Remediation
(515)
(127)
(14)
(19)
(675)
Total costs
(5,984)
(2,774)
(894)
(163)
(9,815)
Underlying impairment (charge) credit
(831)
511
7
5
(308)
Underlying profit before tax
4,043
3,219
190
357
7,809
External income
12,803
4,570
1,221
294
18,888
External operating lease depreciation1
(948)
(8)
(956)
Inter-segment (expense) income
(997)
920
(144)
221
Net income
10,858
5,482
1,077
515
17,932
Loans and advances to customers2
361,181
88,606
(42)
449,745
External assets
376,789
150,834
184,267
169,563
881,453
Customer deposits
308,441
162,752
203
471,396
External liabilities
313,244
204,815
179,962
136,067
834,088
Analysis of underlying other income:3
Consumer lending
1,553
1,553
Consumer relationships
606
606
Business and Commercial Banking
514
514
Corporate and Institutional Banking
1,177
1,177
Life, Pensions and Investments
966
966
General insurance
171
171
Venture capital
448
448
Other
72
(384)
(312)
Underlying other income
2,159
1,691
1,209
64
5,123
Other items reflected in income statement above:
Depreciation and amortisation
1,927
410
201
367
2,905
Defined benefit scheme charge (credit)
53
21
6
(159)
(79)
Non-income statement items:
Additions to fixed assets
3,294
88
80
1,993
5,455
Investments in joint ventures and associates at end of year
401
401
1
Net of profits on disposal of operating lease assets of £93 million.
2
Other includes centralised fair value hedge accounting adjustments.
3
Categories of analysis have been updated for 2024. Comparatives have been updated accordingly.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
–
–
–
–
231
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 4: Segmental analysis continued
Year ended 31 December 2022
Retail
£m
Commercial
Banking
£m
Insurance,
Pensions and
Investments
£m
Other
£m
Total
£m
Underlying net interest income
9,774
3,447
(101)
52
13,172
Underlying other income
1,731
1,565
960
410
4,666
Total underlying income, net of net finance income in respect of insurance
and investment contracts
11,505
5,012
859
462
17,838
Operating lease depreciation1
(368)
(5)
(373)
Net income
11,137
5,007
859
462
17,465
Operating costs
(5,175)
(2,496)
(879)
(122)
(8,672)
Remediation
(92)
(133)
(30)
(255)
Total costs
(5,267)
(2,629)
(909)
(122)
(8,927)
Underlying impairment (charge) credit
(1,373)
(517)
(12)
392
(1,510)
Underlying profit (loss) before tax
4,497
1,861
(62)
732
7,028
External income
12,055
4,330
910
543
17,838
External operating lease depreciation1
(368)
(5)
(373)
Inter-segment (expense) income
(550)
682
(51)
(81)
Net income
11,137
5,007
859
462
17,465
Loans and advances to customers2
364,194
93,675
(2,970)
454,899
External assets
372,485
147,477
170,777
182,655
873,394
Customer deposits
310,765
163,828
738
475,331
External liabilities
314,091
202,070
168,357
144,965
829,483
Analysis of underlying other income:3
Consumer lending
1,176
1,176
Consumer relationships
555
555
Business and Commercial Banking
555
555
Corporate and Institutional Banking
1,010
1,010
Life, Pensions and Investments
773
773
General insurance
114
114
Venture capital
469
469
Other
73
(59)
14
Underlying other income
1,731
1,565
960
410
4,666
Other items reflected in income statement above:
Depreciation and amortisation
1,216
207
142
831
2,396
Defined benefit scheme charge
72
28
7
18
125
Non-income statement items:
Additions to fixed assets
2,146
101
151
1,457
3,855
Investments in joint ventures and associates at end of year
4
381
385
for the year ended 31 December
1
Net of profits on disposal of operating lease assets of £197 million.
2
Other includes centralised fair value hedge accounting adjustments.
3
Categories of analysis have been updated for 2024. Comparatives have been updated accordingly.
Geographical areas
The Group’s operations are predominantly UK-based and as a result an analysis between UK and non-UK activities is not provided.
Notes to the consolidated financial statements continued
–
–
–
–
–
–
–
–
–
–
232
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 4: Segmental analysis continued
Reconciliation of underlying basis to statutory basis
The underlying basis is the basis on which financial information is presented to the chief operating decision-maker which excludes certain
items included in the statutory results. The table below reconciles the statutory results to the underlying basis.
Removal of:
Year ended 31 December 2024
Lloyds
Banking Group
statutory basis
£m
Volatility,
and other
items1
£m
Insurance
gross up2
£m
Underlying
basis
£m
Net interest income
12,277
578
(10)
12,845
Underlying net interest income
Other income, net of net finance income in respect
of insurance and investment contracts
5,726
(375)
246
5,597
Underlying other income
of
Tot
insurance
al income
and inve
, net of
st
ne
me
t finance
nt contract
income
s
in respect
18,003
(1,325)
(1,325)
Operating lease depreciation3
Total income, net of net finance income in respect
of insurance and investment contracts
18,003
(1,122)
236
17,117
Net income
Operating expenses
(11,601)
1,496
(236)
(10,341)
Total costs
Impairment charge
(431)
(2)
(433)
Underlying impairment charge
Profit before tax
5,971
372
6,343
Underlying profit
Removal of:
Year ended 31 December 2023
Lloyds
Banking Group
statutory basis
£m
Volatility,
and other
items4
£m
Insurance
gross up2
£m
Underlying
basis
£m
Net interest income
13,298
479
(12)
13,765
Underlying net interest income
Other income, net of net finance income in respect
of insurance and investment contracts
5,331
(447)
239
5,123
Underlying other income
Total income, net of net finance income in respect
of insurance and investment contracts
18,629
(956)
(956)
Operating lease depreciation3
Total income, net of net finance income in respect
of insurance and investment contracts
18,629
(924)
227
17,932
Net income
Operating expenses
(10,823)
1,235
(227)
(9,815)
Total costs
Impairment charge
(303)
(5)
(308)
Underlying impairment charge
Profit before tax
7,503
306
7,809
Underlying profit
Removal of:
Year ended 31 December 2022
Lloyds
Banking Group
statutory basis
£m
Volatility,
and other
items5
£m
Insurance
gross up2
£m
Underlying
basis
£m
Net interest income
12,922
226
24
13,172
Underlying net interest income
Other income, net of net finance income in respect
of insurance and investment contracts
2,619
1,846
201
4,666
Underlying other income
Total income, net of net finance income in respect
of insurance and investment contracts
15,541
(373)
(373)
Operating lease depreciation3
Total income, net of net finance income in respect
of insurance and investment contracts
15,541
1,699
225
17,465
Net income
Operating expenses
(9,237)
535
(225)
(8,927)
Total costs
Impairment charge
(1,522)
12
(1,510)
Underlying impairment charge
Profit before tax
4,782
2,246
7,028
Underlying profit
1
In the year ended 31 December 2024 this comprises the effects of market volatility and asset sales (losses of £144 million); the amortisation of purchased intangibles (£81 million);
restructuring (£40 million of merger, acquisition and integration costs); and the fair value unwind (losses of £107 million).
2
The Group’s Insurance business statutory income statement includes income and expenses attributable to the policyholders of the Group’s long-term assurance funds, investors in the
Group's non-participating investment contracts and third party interests in consolidated funds. These items have no impact in total upon the profit attributable to equity shareholders
and, in order to provide an alternative representation of the underlying trends within the business, these items are shown net within the underlying results.
3
Net of profits on disposal of operating lease assets of £59 million (2023: £93 million; 2022: £197 million). Statutory operating expenses includes operating lease depreciation. On an
underlying basis operating lease depreciation is included in net income.
4
Comprises the effects of market volatility and asset sales (gain of £35 million); the amortisation of purchased intangibles (£80 million); restructuring (£154 million of merger, acquisition
and integration costs); and the fair value unwind (losses of £107 million).
5
Comprises the effects of market volatility and asset sales (losses of £1,978 million); the amortisation of purchased intangibles (£70 million); restructuring (£80 million of merger,
acquisition and integration costs); and the fair value unwind (losses of £118 million).
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
–
–
–
233
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 5: Net interest income
2024
£m
2023
£m
2022
£m
Interest income:
Loans and advances to banks
3,508
4,172
1,208
Loans and advances to customers
23,242
20,419
14,465
Reverse repurchase agreements
2,685
2,044
857
Debt securities
779
559
168
Financial assets held at amortised cost
30,214
27,194
16,698
Financial assets at fair value through other comprehensive income
1,074
857
947
Total interest income1
31,288
28,051
17,645
Interest expense:
Deposits from banks
(225)
(213)
(148)
Customer deposits
(10,132)
(7,148)
(1,387)
Repurchase agreements at amortised cost
(2,392)
(2,397)
(842)
Debt securities in issue at amortised cost2
(5,493)
(4,253)
(1,636)
Lease liabilities
(31)
(30)
(29)
Subordinated liabilities
(738)
(712)
(681)
Total interest expense
(19,011)
(14,753)
(4,723)
Net interest income
12,277
13,298
12,922
1
Includes £1,104 million (2023: £923 million; 2022: £724 million) in respect of finance lease receivables.
2
The impact of the Group’s hedging arrangements is included on this line.
Net interest income includes a debit of £2,597 million (2023: debit of £1,838 million; 2022: debit of £43 million) transferred from the cash
flow hedging reserve (see note 33).
Note 6: Net fee and commission income
Year ended 31 December 2024
Retail
£m
Commercial
Banking
£m
Insurance,
Pensions and
Investments
£m
Other
£m
Total
£m
Fee and commission income:
Current accounts
423
221
644
Credit and debit card fees
829
457
1,286
Commercial banking and treasury fees
372
1
373
Unit trust and insurance broking
71
71
Factoring
69
69
Other fees and commissions
74
148
261
17
500
Total fee and commission income
1,326
1,267
332
18
2,943
Fee and commission expense
(745)
(334)
(89)
(16)
(1,184)
Net fee and commission income
581
933
243
2
1,759
Year ended 31 December 2023
Retail
£m
Commercial
Banking
£m
Insurance,
Pensions and
Investments
£m
Other
£m
Total
£m
Fee and commission income:
Current accounts
406
218
624
Credit and debit card fees
800
464
1,264
Commercial banking and treasury fees
334
334
Unit trust and insurance broking
69
69
Factoring
75
75
Other fees and commissions
85
186
264
25
560
Total fee and commission income
1,291
1,277
333
25
2,926
Fee and commission expense
(673)
(322)
(84)
(16)
(1,095)
Net fee and commission income
618
955
249
9
1,831
for the year ended 31 December
Notes to the consolidated financial statements continued
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
234
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 6: Net fee and commission income continued
Year ended 31 December 2022
Retail
£m
Commercial
Banking
£m
Insurance,
Pensions and
Investments
£m
Other
£m
Total
£m
Fee and commission income:
Current accounts
421
225
646
Credit and debit card fees
735
460
Commercial banking and treasury fees
310
1
311
Unit trust and insurance broking
78
78
Factoring
79
79
Other fees and commissions
64
169
233
15
Total fee and commission income
1,220
1,243
311
16
2,790
Fee and commission expense
(665)
(315)
(72)
(18)
(1,070)
Net fee and commission income
555
928
239
(2)
1,720
1,195
481
Fees and commissions which are an integral part of the effective interest rate form part of net interest income shown in note 5. Fees and
commissions relating to instruments that are held at fair value through profit or loss are included within net trading income shown in
note 7.
In determining the disaggregation of fees and commissions the Group has considered how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by economic factors, including those that are impacted by climate-related factors. It has determined
that the above disaggregation by product type provides useful information that does not aggregate items that have substantially different
characteristics.
At 31 December 2024, the Group held on its balance sheet £163 million (31 December 2023: £163 million) in respect of services provided to
customers and £75 million (31 December 2023: £69 million) in respect of amounts received from customers for services to be provided after
the balance sheet date. Current unsatisfied performance obligations amount to £195 million (31 December 2023: £172 million); the Group
expects to receive substantially all of this revenue by the end of 2026.
Income recognised during the year included £28 million (2023: £32 million) in respect of amounts included in the contract liability balance
at the start of the year and £nil (2023: £2 million) in respect of amounts from performance obligations satisfied in previous years.
The most significant performance obligations undertaken by the Group are in respect of current accounts, the provision of other banking
services for commercial customers and credit and debit card services.
In respect of current accounts, the Group receives fees for the provision of bank account and transaction services such as ATM services,
fund transfers, overdraft facilities and other value-added offerings.
For commercial customers, alongside its provision of current accounts, the Group provides other corporate banking services including
factoring and commitments to provide loan financing. Loan commitment fees are included in fees and commissions where the loan is not
expected to be drawn down by the customer.
The Group receives interchange and merchant fees, together with fees for overseas use and cash advances, for provision of card services to
cardholders and merchants.
Note 7: Net trading income (losses)
2024
£m
2023
£m
2022
£m
Net gains (losses) on financial assets and liabilities at fair value through profit or loss:
Net (losses) gain on financial instruments held for trading1
(5)
406
(1,049)
Net gains (losses) on other financial instruments mandatorily held at fair value through profit or loss
17,096
16,653
(17,210)
(336)
(341)
(154)
Net losses on financial liabilities designated at fair value through profit or loss2
16,755
16,718
(18,413)
Foreign exchange
1,003
1,418
(1,063)
Investment property gains (losses) (note 24)
67
(87)
(511)
Net trading income (losses)3
17,825
18,049
(19,987)
1
Includes hedge ineffectiveness in respect of fair value hedges (2024: loss of £81 million; 2023: loss of £267 million; 2022: loss of £41 million) and cash flow hedges (2024: loss of
£60 million; 2023: gain of £19 million; 2022: loss of £10 million).
2
Excludes gains and losses arising from non-participating investment contracts, which are presented separately on the face of the income statement.
3
Includes income from the net investment return on assets held to back insurance and investment contracts of £16,013 million (2023: income of £16,742 million; 2022: losses of £20,899
million). See note 8.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
–
–
–
–
–
–
235
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 8: Insurance business
(A) Insurance service result
2024
£m
2023
£m
2022
£m
Insurance revenue
Amounts relating to the changes in liabilities for remaining coverage:
CSM recognised for services provided
449
329
245
Change in risk adjustments for non-financial risk for risk expired
58
84
103
Expected claims and other insurance service expenses
1,916
1,907
1,696
108
87
(228)
Charges (credits) to funds in respect of policyholder tax and other
2,531
2,407
1,816
Recovery of insurance acquisition cash flows
105
87
86
Total life
2,636
2,494
1,902
Total non-life
655
514
559
Total insurance revenue
3,291
3,008
2,461
Insurance service expense
Incurred claims and other insurance service expenses
(1,978)
(1,897)
(1,751)
Changes that relate to past service: adjustment to liabilities for incurred claims
(4)
Changes that relate to future service: (losses) reversal of losses on onerous contracts
(72)
58
(1,486)
Amortisation of insurance acquisition cash flows
(105)
(88)
(85)
Total life excluding net impairment loss on insurance acquisition assets
(2,159)
(1,927)
(3,322)
Net impairment loss on insurance acquisition assets
(9)
(7)
(14)
Total life
(2,168)
(1,934)
(3,336)
Total non-life1
(565)
(480)
(527)
Total insurance service expense
(2,733)
(2,414)
(3,863)
Net (expense) income from reinsurance contracts held
(72)
2
62
Insurance service result
486
596
(1,340)
for the year ended 31 December
1
Includes weather-related claims of £82 million (2023: £57 million; 2022: £116 million), of which £64 million (2023: £51 million; 2022: £108 million) was related to severe weather events.
Notes to the consolidated financial statements continued
36
–
–
236
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 8: Insurance business continued
(B) Net investment return on assets held to back insurance and investment contracts and net insurance finance (expense)
income arising from insurance and investment contracts
The following table shows the net investment return on assets held to back insurance and participating investment contracts and the net
finance expense arising from insurance, participating investment and reinsurance contracts, as required by IFRS 17. For completeness, the
net investment return on assets held to back third party interests in consolidated funds and non-participating investment contracts and
the related finance expense is also shown. These contracts are accounted for under IFRS 9.
2024
Life
£m
Non-life
£m
Total
£m
Net gains on financial assets and liabilities at fair value through profit or loss
10,247
38
10,285
Foreign exchange
196
–
196
Investment property losses
(4)
–
(4)
Net investment return on assets held to back insurance and participating investment contracts
(memorandum item)
10,439
38
10,477
Net investment return on assets held to back third party interests in consolidated funds
1,105
Net investment return on assets held to back non-participating investment contracts
4,431
1
Net investment return on assets held to back insurance and investment contracts
16,013
Changes in fair value of underlying items of direct participating contracts
(10,844)
–
(10,844)
Effects of risk mitigation option
161
–
161
Interest accreted
(839)
(7)
(846)
Effect of changes in interest rates and other financial assumptions
1,001
–
1,001
Effect of changes in fulfilment cash flows at current rates when CSM is unlocked at locked-in rates
140
–
140
Net finance expense from insurance and participating investment contracts
(10,381)
(7)
(10,388)
Net finance income from reinsurance contracts held
47
–
47
Net finance expense from insurance, participating investment and reinsurance contracts
(10,334)
(7)
(10,341)
Movement in third party interests in consolidated funds
(1,059)
Change in non-participating investment contracts
(4,878)
Net finance expense arising from insurance and investment contracts
(16,278)
2023
Life
£m
Non-life
£m
Total
£m
Net gains on financial assets and liabilities at fair value through profit or loss
11,218
35
11,253
Foreign exchange
542
–
542
Investment property losses
(4)
–
(4)
Net investment return on assets held to back insurance and participating investment contracts
(memorandum item)
11,756
35
11,791
Net investment return on assets held to back third party interests in consolidated funds
1,179
Net investment return on assets held to back non-participating investment contracts
3,772
1
Net investment return on assets held to back insurance and investment contracts
16,742
Changes in fair value of underlying items of direct participating contracts
(10,293)
–
(10,293)
Effects of risk mitigation option
172
–
172
Interest accreted
(874)
(6)
(880)
Effect of changes in interest rates and other financial assumptions
(654)
–
(654)
Effect of changes in fulfilment cash flows at current rates when CSM is unlocked at locked-in rates
(80)
–
(80)
Net finance expense from insurance and participating investment contracts
(11,729)
(6)
(11,735)
Net finance income from reinsurance contracts held
51
–
51
Net finance expense from insurance, participating investment and reinsurance contracts
(11,678)
(6)
(11,684)
Movement in third party interests in consolidated funds
(1,109)
Change in non-participating investment contracts
(3,983)
Net finance expense arising from insurance and investment contracts
(16,776)
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
237
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 8: Insurance business continued
2022
Life
£m
Non-life
£m
Total
£m
Net (losses) gains on financial assets and liabilities at fair value through profit or loss
(14,876)
9
(14,867)
Foreign exchange
(1,039)
(1,039)
Investment property losses
(3)
(3)
Net investment return on assets held to back insurance and participating investment contracts
(memorandum item)
(15,918)
9
(15,909)
Net investment return on assets held to back third party interests in consolidated funds
(968)
Net investment return on assets held to back non-participating investment contracts
(4,022)
Net investment return on assets held to back insurance and investment contracts1
(20,899)
Changes in fair value of underlying items of direct participating contracts
11,212
11,212
Effects of risk mitigation option
(118)
(118)
Interest accreted
(350)
(2)
(352)
Effect of changes in interest rates and other financial assumptions
5,226
5,226
Effect of changes in fulfilment cash flows at current rates when CSM is unlocked at locked-in rates
(20)
(20)
Net finance income (expense) from insurance and participating investment contracts
15,950
(2)
15,948
Net finance expense from reinsurance contracts held
(55)
(55)
Net finance income (expense) from insurance, participating investment and reinsurance contracts
15,895
(2)
15,893
Movement in third party interests in consolidated funds
1,035
Change in non-participating investment contracts
3,959
Net finance income arising from insurance and investment contracts
20,887
1
Net investment return on assets held to back insurance and investment contracts is reported within net trading income (losses) on the face of the Group’s income statement; includes
income of £10,688 million (2023: income of £10,200 million; 2022: loss of £11,081 million) in respect of unit-linked and with-profit contracts measured applying the variable fee
approach. The assets generating the investment return held to back insurance and investment contracts are carried at fair value on the Group’s balance sheet.
(C) Insurance and participating investment contracts assets and liabilities
2024
2023
Life
£m
Non-life
£m
Total
£m
Life
£m
Non-life
£m
Total
£m
Insurance contract assets
1
1
Liabilities arising from insurance and participating investment
contracts1
(121,700)
(387)
(122,087)
(119,784)
(364)
(120,148)
Other liabilities2
(5,268)
(5,268)
Net liability
(126,968)
(387)
(127,355)
(119,783)
(364)
(120,147)
Insurance acquisition assets
23
23
8
24
Insurance and participating investment contacts net liability
(126,968)
(364)
(127,332)
(119,775)
(348)
(120,123)
16
for the year ended 31 December
1
Excluding insurance acquisition assets.
2
Liabilities arising from insurance contracts relating to the disposal of the Group's bulk annuity business have been classified as disposal group liabilities and presented in Other liabilities
in note 27. Further information on the disposal group is provided in note 24.
Of the fair value of underlying items in respect of direct participating contracts of £110,045 million (2023: £101,425 million), £111,435 million
(2023: £103,022 million) were financial assets at fair value through profit or loss and £1,125 million (2023: £1,337 million) were derivative
financial liabilities.
Notes to the consolidated financial statements continued
8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
238
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 8: Insurance business continued
(D) Reconciliation of insurance balances for liability for remaining coverage and liability for incurred claims
2024
2023
Liabilities for
remaining coverage
Liabilities for
remaining coverage
Loss
component
£m
Life
Net liability at 1 January1
Excluding loss
component
£m
(118,724)
Loss
component
£m
(466)
Liability for
incurred
claims
£m
(593)
Total
£m
(119,783)
Excluding loss
component
£m
(108,846)
(471)
Liability for
incurred
claims
£m
(603)
Total
£m
(109,920)
Contracts under the modified
retrospective approach
Contracts under the fair value
transition approach
1,498
1,498
1,467
1,467
Other contracts
1,138
1,138
1,027
1,027
Insurance revenue
2,636
2,636
2,494
2,494
Insurance service expenses2
(105)
(44)
(2,010)
(2,159)
(88)
110
(1,949)
(1,927)
Insurance service result
2,531
(44)
(2,010)
477
2,406
110
(1,949)
567
Net finance income (expense)
from insurance and participating
investment contracts
(10,371)
(5)
(5)
(10,381)
(11,576)
(105)
(3)
(11,684)
Exchange differences
80
80
32
32
Total change in profit or loss
(7,760)
(49)
(2,015)
(9,824)
(9,138)
5
(1,952)
(11,085)
Investment components
10,205
(10,205)
8,793
(8,793)
Premiums received
(10,679)
(10,679)
(9,768)
(9,768)
Claims and other insurance
service expenses paid
849
12,214
13,063
10,721
10,721
Insurance acquisition cash flows
265
265
203
203
Cash flows
(9,565)
12,214
2,649
(9,565)
10,721
1,156
Transfer to other items in the
balance sheet
(10)
(10)
32
34
66
Net liability at 31 December1
(125,854)
(515)
(599)
(126,968)
(118,724)
(466)
(593)
(119,783)
1
Excluding insurance acquisition assets.
2
Losses and reversal of losses on onerous contracts amounted to a net loss of £72 million (2023: net reversal of losses of £58 million). Amortisation of insurance acquisition cashflows
amounted to £105 million (2023: £88 million).
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
239
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 8: Insurance business continued
2024
2023
Liabilities for
remaining coverage
Liabilities for
remaining coverage
Liability for
incurred
claims
£m
Liability for
incurred
claims
£m
Excluding loss
component
£m
Loss
component
£m
Excluding loss
component
£m
Loss
component
£m
Total
£m
Total
£m
Non-life
Net liability at 1 January1
(25)
(339)
(364)
(22)
(1)
(357)
(380)
Contracts under the modified
retrospective approach
Contracts under the fair value
transition approach
Other contracts
655
655
514
514
Insurance revenue
655
655
514
514
Insurance service expenses2
(32)
(533)
(565)
(30)
1
(451)
(480)
Insurance service result
623
(533)
90
484
1
(451)
34
Net finance income (expense)
from insurance and participating
investment contracts
(7)
(7)
(6)
(6)
Total change in profit or loss
623
(540)
83
484
1
(457)
28
Premiums received
(659)
(659)
(525)
(525)
Claims and other insurance
service expenses paid
524
524
475
475
Insurance acquisition cash flows
29
29
38
38
Cash flows
(630)
524
(106)
(487)
475
(12)
Net liability at 31 December1
(32)
(355)
(387)
(25)
(339)
(364)
1
Excluding insurance acquisition assets.
2
Losses and reversal of losses on onerous contracts amounted to £nil (2023: net reversal of losses of £1 million). Amortisation of insurance acquisition cashflows amounted to £32 million
(2023: £30 million).
(E) Summary of contractual service margin and risk adjustment
2024
2023
Life
£m
Non-life
£m
Total
£m
Life
£m
Non-life
£m
Total
£m
CSM on insurance and participating investment contracts1
4,646
4,646
4,415
4,415
CSM on reinsurance contracts2
(467)
(467)
(220)
(220)
Total CSM
4,179
4,179
4,195
4,195
Risk adjustment on insurance and participating investment contracts1
891
19
910
1,159
17
1,176
Risk adjustment on reinsurance contracts2
(68)
(1)
(69)
(65)
(1)
(66)
Total risk adjustment
823
18
841
1,094
16
1,110
Total
5,002
18
5,020
5,289
16
5,305
for the year ended 31 December
1
Includes CSM of £544 million (2023: £nil) and risk adjustment of £36 million (2023: £nil) arising from insurance contracts classified as disposal group liabilities and presented in other
liabilities. Further information on the disposal group is provided in note 24.
2
Includes CSM of £(426) million (2023: £nil) and risk adjustment of £(36) million (2023: £nil) on reinsurance contracts classified as disposal group assets and presented in other assets.
Further information on the disposal group is provided in note 24.
Notes to the consolidated financial statements continued
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
240
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 8: Insurance business continued
(F) Reconciliation of measurement components of insurance contract balances
2024
Contractual service margin (CSM)
Present
value of
future
cash
flows
£m
Risk
adjustment
for non-
financial
risk
£m
Contracts
measured
under the
fair value
approach
£m
Other
contracts
£m
Total CSM
£m
Total
£m
Life
Net liability at 1 January1
(114,209)
(1,159)
(1,473)
(2,942)
(4,415)
(119,783)
Relating to current services
46
58
155
294
449
553
Contracts initially recognised in the year
33
(65)
(61)
(61)
(93)
Changes in estimates that adjust the CSM
334
252
(95)
(491)
(586)
Changes in estimates that result in losses and reversal
of losses on onerous contracts
(2)
23
21
Relating to future services
365
210
(95)
(552)
(647)
(72)
Relating to past services
(3)
(1)
(4)
Insurance service result
408
267
60
(258)
(198)
477
Net finance expense from insurance and participating
investment contracts
(10,341)
(9)
(31)
(40)
(10,381)
Exchange differences
72
1
7
7
80
Total change in profit or loss
(9,861)
268
58
(289)
(231)
(9,824)
Premiums received
(10,679)
(10,679)
Claims and other insurance service expenses paid
13,063
13,063
Insurance acquisition cash flows
265
265
Cash flows
2,649
2,649
Transfer to other items in the balance sheet
(10)
(10)
Net liability at 31 December1
(121,431)
(891)
(1,415)
(3,231)
(4,646)
(126,968)
1
Excluding insurance acquisition assets.
2023
Contractual service margin (CSM)
Life
Present
value of
future
cash
flows
£m
Risk
adjustment
for non-
financial
risk
£m
Contracts
measured
under the
fair value
approach
£m
Other
contracts
£m
Total CSM
£m
Total
£m
Net liability at 1 January1
(104,545)
(1,165)
(1,441)
(2,769)
(4,210)
(109,920)
Relating to current services
99
84
129
197
326
509
Contracts initially recognised in the year
107
(86)
–
(92)
(92)
(71)
Changes in estimates that adjust the CSM
390
(12)
(170)
(208)
(378)
–
Changes in estimates that result in losses and reversal
of losses on onerous contracts
109
20
–
–
–
129
Relating to future services
606
(78)
(170)
(300)
(470)
58
Insurance service result
705
6
(41)
(103)
(144)
567
Net finance (expense) income from insurance and
participating investment contracts
(11,621)
–
7
(70)
(63)
(11,684)
Exchange differences
30
–
2
–
2
32
Total change in profit or loss
(10,886)
6
(32)
(173)
(205)
(11,085)
Premiums received
(9,768)
–
–
–
–
(9,768)
Claims and other insurance service expenses paid
10,721
–
–
–
–
10,721
Insurance acquisition cash flows
203
–
–
–
–
203
Cash flows
1,156
–
–
–
–
1,156
Transfer to other items in the balance sheet
66
–
–
–
–
66
Net liability at 31 December 1
(114,209)
(1,159)
(1,473)
(2,942)
(4,415)
(119,783)
1
Excluding insurance acquisition assets.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
241
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 8: Insurance business continued
The Group estimates the Risk adjustment separately from other components of the fulfilment cashflows using an explicit margins
approach. A confidence level scenario, allowing for diversification of risks across the insurance business, is used to determine the margins to
be applied to the best estimate assumptions which are then used to calculate the risk adjustment at a policy level. The risk adjustment
represents the difference in the value of the best estimate cash flows with and without these margins.
The confidence level corresponding to the risk adjustment is 85 per cent (2023: 90 per cent). The risk adjustment is calibrated to the value
at risk over a one-year time horizon at this confidence level for non-financial risks. This is translated, using statistical approximations,
into an equivalent confidence level on a value at risk basis over the expected lifetime of in-force policies of approximately 68 per cent
(2023: 70 per cent) at end of the reporting period.
(G) Impacts of insurance and participating investment contracts recognised in the year
2024
2023
Profitable
contracts
issued
£m
Onerous
contracts
issued
£m
Profitable
contracts
issued
£m
Onerous
contracts
issued
£m
Total
£m
Total
£m
Life
Insurance and participating investment contracts
Insurance acquisition cash flows
56
203
259
87
142
229
Claims and other directly attributable expenses
1,446
4,498
5,944
5,450
447
5,897
Estimates of the present value of future cash outflows
1,502
4,701
6,203
5,537
589
6,126
Estimates of the present value of future cash inflows
(1,577)
(4,659)
(6,236)
(5,708)
(525)
(6,233)
Risk adjustment for non-financial risk
14
51
65
79
7
86
Contractual service margin
61
–
61
92
–
92
Losses recognised on initial recognition
–
93
93
–
71
71
(H) Life business contractual service margin run-off
The following table analyses the expected recognition of the contractual service margin (CSM) in profit or loss.
At 31 December 2024
Less than 1
year
£m
1 to 2
years
£m
2 to 3
years
£m
3 to 4
years
£m
4 to 5
years
£m
5 to 10
years
£m
Over 10
years
£m
Total
£m
Pensions and investments
(240)
(218)
(199)
(164)
(152)
(591)
(1,169)
(2,733)
Annuities, protection and other1
(660)
(106)
(98)
(90)
(83)
(331)
(545)
(1,913)
Insurance and participating
investment contracts
(900)
(324)
(297)
(254)
(235)
(922)
(1,714)
(4,646)
Reinsurance contracts held2
433
5
4
3
3
8
11
467
Total
(467)
(319)
(293)
(251)
(232)
(914)
(1,703)
(4,179)
At 31 December 2023
Less than 1
year
£m
1 to 2
years
£m
2 to 3
years
£m
3 to 4
years
£m
4 to 5
years
£m
5 to 10
years
£m
Over 10
years
£m
Total
£m
Pensions and investments
(186)
(176)
(168)
(157)
(133)
(535)
(1,088)
(2,443)
Annuities, protection and other
(147)
(136)
(125)
(117)
(109)
(444)
(894)
(1,972)
Insurance and participating
investment contracts
(333)
(312)
(293)
(274)
(242)
(979)
(1,982)
(4,415)
Reinsurance contracts held
20
17
15
14
13
48
94
221
Total
(313)
(295)
(278)
(260)
(229)
(931)
(1,888)
(4,194)
1
CSM of £(544) million arising from insurance contracts classified as disposal group liabilities has been included in less than one year. The Group expects the CSM to be derecognised in
2025 upon disposal of the insurance contract liabilities. Further information on the disposal group is provided in note 24.
2
CSM of £426 million arising from reinsurance contracts held classified as disposal group assets has been included in less than one year. The Group expects the CSM to be derecognised
in 2025 upon disposal of the reinsurance contract assets. Further information on the disposal group is provided in note 24.
(I) Life insurance sensitivity analysis
Critical accounting judgements and key sources of estimation uncertainty
Critical judgements:
Determining the characteristics which make a product illiquid, the level of illiquidity premium to apply to
the discount rate of different products and how the illiquidity premium is determined
Key sources of estimation uncertainty:
Increase in illiquidity premia and widening of credit default spreads
for the year ended 31 December
The following table demonstrates the effect of reasonably possible changes in key assumptions on profit before tax and equity disclosed in
these financial statements assuming that the other assumptions remain unchanged. In practice this is unlikely to occur, and changes in
some assumptions may be correlated. With the exception of the 31 December 2024 risk free rate, the sensitivities below are on a gross of
reinsurance basis, which do not differ materially from the sensitivities on a net of reinsurance basis. The 31 December 2024 risk free rate
sensitivity is shown net of reinsurance and reflects the impact of the reinsurance of the Group's bulk annuity business to Rothesay Life plc.
These amounts include movements in liabilities relating to insurance and participating investment contracts and related assets in order to
demonstrate the impacts on shareholder profit and equity. Therefore, these sensitivities have not been applied to the proportion of assets
and liabilities where the risks are borne by the policyholder and where assets and liabilities are well matched so as not to have a significant
impact on shareholder profit.
Notes to the consolidated financial statements continued
242
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 8: Insurance business continued
2024
2023
Change in variable
Increase
(reduction)
in profit
before tax
£m
Increase
(reduction)
in equity
£m
Increase
(reduction)
in profit
before tax
£m
Increase
(reduction)
in equity
£m
1% reduction
(245)
(184)
393
294
Key sources of estimation uncertainty
Risk free rate, including illiquidity premia - gross
1% increase
211
158
(333)
(250)
1% reduction
243
183
Risk free rate, including illiquidity premia - net
1% increase
(203)
(153)
Widening of credit default spreads on corporate bonds
0.25% addition
(174)
(131)
(316)
(237)
Other accounting estimates
5% reduction
49
37
70
52
Annuitant mortality
5% increase
(46)
(34)
(75)
(56)
10% reduction
33
25
29
21
Future maintenance and investment expenses
10% increase
(33)
(25)
(29)
(21)
5% reduction
61
46
63
47
Non-annuitant mortality and morbidity
5% increase
(62)
(46)
(63)
(47)
Lapse rates
10% reduction
(6)
(4)
(11)
(8)
10% increase
4
3
8
6
At each measurement date, the Group estimates, based on information about past events, current conditions and forecasts of future
conditions, the expected value of future cash flows. The calculation uses a range of scenarios that reflect the full range of possible
outcomes. The assumptions used to develop the estimates of future cash flows are reassessed at each reported date to reflect conditions
existing at the measurement date.
Risk free rate, including illiquidity premia
The Group has applied judgement in determining the characteristics which make a product illiquid, the level of illiquidity premium to apply
to the discount rate of different products and how the illiquidity premium is determined, where material.
Due to the illiquid nature of their cash flows, an illiquidity premium has been applied to the discount rate of the Group’s annuity contracts.
At initial recognition, the illiquidity premium is calculated with reference to a strategic portfolio of assets, and subsequently measured to
reflect the mix of actual assets backing annuity contracts. To reflect differences between the characteristics of insurance contracts and a
reference portfolio, adjustments for credit risk are required when determining appropriate discount rates. The Group uses the fundamental
spread to maintain consistency with its Solvency II approach. For protection contracts, the illiquidity premium is based on the spread on a
covered bond index.
The average sterling yield curves that were used to discount the estimates of future cash flows that do not vary based on the returns of the
underlying items are as follows:
1 year
5 year
10 year
20 year
30 year
2024
5.58
5.17
5.66
5.71
5.06
2023
5.37
4.15
4.79
4.72
4.19
The Group determines the quantity of benefits provided under each contract using different bases, depending on the product. For with-
profits and unit linked products, the policyholder account value (or the guaranteed benefits, if higher) is used. For annuities, pre-vesting
date the defined amount payable is used (immediate annuities have no pre-vesting date period) and post-vesting date the annuity payout
is used.
Widening of credit default spreads on corporate bonds
The Group applies a sensitivity showing the impact of an increase in credit default spreads on corporate bonds and the corresponding
reduction in market values. Swap curves, the risk-free rate and illiquidity premia are all assumed to be unchanged and therefore this
sensitivity impacts the related assets. There is no impact in 2024 on the Bulk annuity business as this is now backed by the reinsurance with
Rothesay Life plc.
Mortality
The mortality assumptions for the main classes of business are set with regard to recent Group experience and general industry trends, all
of which are adjusted for smoker status and age/gender specific factors. The base mortality tables used for the annuities business for the
year ended 31 December 2024 and the prior period were selected from the bespoke mortality tables. The mortality improvements adopt
the 100per cent Bespoke tables and CMI 2023_{M/F}_(7.25)_{2.0/1.8}%_{0.5/0.5}A_2013 for the year ended 31 December 2024; and the
100 per cent Bespoke tables and CMI 2022_{M/F}_(7.25)_{2.0/1.8}%_{0.5/0.5}A_2013 for the prior period.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
243
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 8: Insurance business continued
Lapse rates
Lapse rates refer to the rate of policy termination or the rate at which policyholders stop paying regular premiums due under the contract.
Historical persistency experience is analysed using statistical techniques. As experience can vary considerably between different product
types and for contracts that have been in force for different periods, the data is broken down into broadly homogeneous groups for the
purposes of determining the Group’s lapse rate in determining the assumptions, which are set on a best estimates basis, based on
investigations of historical experience with some expert judgement overlays reflecting expectations of future trends and other external
data. The lapse rates for workplace pensions range from 0.8 per cent to 13.8 per cent (2023: 0.8 per cent to 14.6 per cent) and for
longstanding business range from 0.5 per cent to 74.1 per cent (2023: 0.5 per cent to 74.1 per cent), the wide range being a result of the age
and variety of products.
Note 9: Other operating income
2024
£m
2023
£m
2022
£m
Operating lease rental income
1,681
1,383
1,077
Rental income from investment properties (note 24)
172
146
145
Net gains on disposal of financial assets at fair value through other comprehensive income (note 33)
7
122
92
Other
74
(20)
25
Total other operating income
1
,934
1,631
1,339
Note 10: Operating expenses
2024
£m
2023
£m
2022
£m
Staff costs:
Salaries and social security costs1
3,819
3,651
3,310
Pensions and other retirement benefit schemes (note 12)
526
355
455
327
487
307
Restructuring and other staff costs
4,672
4,493
4,072
Premises and equipment costs2
454
449
332
Depreciation and amortisation3
3,426
2,905
2,396
UK bank levy
147
150
148
Regulatory and legal provisions (note 28)
899
675
255
Other
2,594
2,720
2,556
Operating expenses before adjustment for:
12,192
11,392
9,759
Amounts attributable to the acquisition of insurance and participating investment contracts
(182)
(183)
(168)
Amounts reported within insurance service expenses
(409)
(386)
(354)
Total operating expenses
11,601
10,823
9,237
1
Including social security costs of £428 million (2023: £371 million; 2022: £341 million).
2
Net of profits on disposal of operating lease assets of £59 million (2023: £93 million; 2022: £197 million).
3
Including depreciation in respect of premises £96 million (2023: £110 million; 2022: £114 million), equipment £400 million (2023: £388 million; 2022: £561 million), operating lease assets
£1,410 million (2023: £1,070 million; 2022: £570 million) and right-of-use assets £198 million (2023: £209 millio n; 2022: £226 million).
Average headcount
The average number of persons on a headcount basis employed by the Group during the year was as follows:
2024
2023
2022
UK
64,334
65,390
62,587
Overseas
1,895
807
785
Total
66,229
66,197
63,372
Performance-based compensation
The tables below analyse the Group’s performance-based compensation costs between those relating to the current performance year and
those relating to earlier years.
Performance-based
compensation expense
Performance-based compensation expense
deferred until later years
2024
£m
2023
£m
2022
£m
2024
£m
2023
£m
2022
£m
Awards made in respect of the year ended 31 December
300
316
349
90
108
128
96
124
109
34
22
20
Awards made in respect of earlier years
396
440
458
124
130
148
for the year ended 31 December
Performance-based awards expensed in 2024 include cash awards amounting to £162 million (2023: £169 million; 2022: £144 million).
Notes to the consolidated financial statements continued
4
244
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 11: Share-based payments
Charge to the income statement
The charge to the income statement is set out below:
2024
£m
2023
£m
2022
£m
Deferred bonus plan
206
241
289
Options and shares granted in the year
15
20
19
60
67
68
Options and shares granted in prior years
75
87
87
Total charge to the income statement
281
328
376
During the year ended 31 December 2024 the Group operated the following share-based payment schemes, all of which are mainly
equity settled.
Group Performance Share plan
The Group operates a Group Performance Share plan that is part equity settled. Bonuses in respect of employee service in 2024 have been
recognised in the charge in line with the proportion of the deferral period completed.
Save-As-You-Earn schemes
Eligible employees may enter into contracts through the Save-As-You-Earn (SAYE) schemes to save up to £500 per month and, at the
expiry of a fixed term of three years, have the option to use these savings within six months of the expiry of the fixed term to acquire shares
in the Group at a discounted price of no less than 90 per cent of the market price at the start of the invitation period.
Movements in the number of share options outstanding under the SAYE schemes are set out below:
2024
2023
Number
of options
Weighted
average
exercise price
(pence)
Number
of options
Weighted
average
exercise price
(pence)
Outstanding at 1 January
1,311,205,148
31.70
1,256,918,075
31.30
Granted
200,820,157
52.35
287,984,574
38.55
Exercised
(663,187,372)
24.60
(164,709,399)
38.55
Forfeited
(17,375,716)
39.01
(12,862,726)
31.78
Cancelled
(27,852,684)
40.70
(45,807,000)
37.65
Expired
(5,984,747)
35.40
(10,318,376)
38.25
Outstanding at 31 December
797,624,786
42.30
1,311,205,148
31.70
Exercisable at 31 December
955,281
24.25
410,368
39.87
The weighted average share price at the time that the options were exercised during 2024 was £0.47 (2023: £0.48). The weighted average
remaining contractual life of options outstanding at the end of the year was 1.85 years (2023: 1.58 years).
The weighted average fair value of SAYE options granted during 2024 was £0.09 (2023: £0.09). The fair values of the SAYE options have
been determined using a standard Black-Scholes model.
Other share option plans
Executive Share Plans – buyout and retention awards
Share options may be granted to senior employees under the Lloyds Banking Group Executive Share Plan 2003, Lloyds Banking Group
Executive Group Ownership Share Plan and Deferred Bonus Scheme 2021 specifically to facilitate recruitment (to compensate new recruits
for any lost share awards), and also to make grants to key individuals for retention purposes. In some instances, grants may be made
subject to individual performance conditions.
Participants are not entitled to any dividends paid during the vesting period.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
245
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 11: Share-based payments continued
2024
2023
Number
of Options
Weighted
average
exercise price
(pence)
Number
of Options
Weighted
average
exercise price
(pence)
Outstanding at 1 January
26,131,255
Nil
20,466,471
Nil
Granted
768,170
Nil
15,198,717
Nil
Exercised
(10,815,436)
Nil
(8,739,497)
Nil
Vested
Nil
(765,247)
Nil
Forfeited
(488,091)
Nil
(8,216)
Nil
Lapsed
(16,901)
Nil
(20,973)
Nil
Outstanding at 31 December
15,578,997
Nil
26,131,255
Nil
Exercisable at 31 December
988,243
Nil
1,148,770
Nil
The weighted average fair value of options granted in the year was £0.46 (2023: £0.41). The fair values of options granted have been
determined using a standard Black-Scholes model. The weighted average share price at the time that the options were exercised during
2024 was £0.53 (2023: £0.46). The weighted average remaining contractual life of options outstanding at the end of the year was 6.2 years
(2023: 6.3 years).
Included in the above are awards to the Group Chief Executive.
Charlie Nunn joined the Group on 16 August 2021 as Group Chief Executive. He was granted deferred share awards over 8,301,708 shares to
replace unvested awards from his former employer, HSBC, that were forfeited as a result of him joining the Group.
2024
Number
of options
2023
Number
of options
Outstanding at 1 January
5,337,899
6,585,447
Exercised
(1,368,990)
(1,247,548)
Outstanding at 31 December
3,968,909
5,337,899
Other share plans
Lloyds Banking Group Executive Group Ownership Share Plan
The plan, introduced in 2006, is aimed at delivering shareholder value by linking the receipt of shares to an improvement in the
performance of the Group over a three-year period. Awards are made within limits set by the rules of the plan, with the limits determining
the maximum number of shares that can be awarded equating to three times annual salary. In exceptional circumstances this may increase
to four times annual salary.
The Executive Group Ownership awards were replaced by Long Term Share Plan awards in 2021.
2024
Number
of shares
2023
Number
of shares
Outstanding at 1 January
39,804,293
202,394,509
Vested
(18,490,246)
(66,555,435)
Forfeited
(33,055)
(96,034,781)
Dividend award
842,202
Outstanding at 31 December
22,123,194
39,804,293
Lloyds Banking Group Long Term Share Plan
The plan, approved at the 2020 AGM and introduced in 2021, replaced the Executive Group Ownership Share Plan and is intended to
provide alignment to the Group’s aim of delivering sustainable returns to shareholders, supported by its values and behaviours.
The awards in respect of the 2022 grant are due to vest in 2025 at a rate of 100 per cent. Details in relation to the plan are provided in the
directors’ remuneration report.
2024
Number
of shares
2023
Number
of shares
Outstanding at 1 January
262,409,389
171,947,743
Granted
108,551,439
Vested
(53,608,504)
Forfeited
(12,921,590)
(18,089,793)
Outstanding at 31 December
195,879,295
262,409,389
for the year ended 31 December
The weighted average fair value of awards granted in the year was £nil (2023: £0.42).
Notes to the consolidated financial statements continued
24
–
–
–
–
6
24
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 11: Share-based payments continued
Lloyds Banking Group Long Term Incentive Plan
The plan, approved at the 2023 AGM and introduced in 2024, replaced the Long Term Share Plan and is intended to deliver stronger
alignment between variable reward outcomes and the creation of shareholder value through the delivery of our strategy and the deepening
of our relationships with our customers.
The awards in respect of the 2024 grant are due to vest in 2027. Details in relation to the plan are provided in the directors’ remuneration report.
2024
Number
of shares
2023
Number
of shares
Outstanding at 1 January
Granted
75,063,395
Outstanding at 31 December
75,063,395
The weighted average fair value of awards granted in the year was £0.30 (2023: £nil).
Executive Share Plans – buyout and retention awards
Share awards in the form of conditional shares may be granted to senior employees under the Lloyds Banking Group Executive Group
Ownership Share Plan and Deferred Bonus Scheme 2021 specifically to facilitate recruitment (to compensate new recruits for any lost share
awards), and also to make grants to key individuals for retention purposes. In some instances, grants may be made subject to individual
performance conditions.
Participants are not entitled to any dividends paid during the vesting period.
2024
2023
Number
of Shares
Number
of Shares
Outstanding at 1 January
Granted
3,593,397
Vested
(728,370)
Forfeited
Outstanding at 31 December
2,865,027
The weighted average fair value of awards granted in the year was £0.51 (2023: £nil).
Assumptions at 31 December 2024
The fair value calculations at 31 December 2024 for grants made in the year, using Black-Scholes models and Monte Carlo simulation, are
based on the following assumptions:
SAYE
Executive
Option Plans
Executive
Share Plans
Long Term
Share Plan
Weighted average risk-free interest rate
3.58%
4.43%
4.35%
4.07%
Weighted average expected life
3.3 years
1.6 years
1.3 years
4.4 years
Weighted average expected volatility
25%
24%
23%
29%
Weighted average expected dividend yield
6.0%
7.0%
7.0%
7.0%
Weighted average share price
£0.58
£0.52
£0.56
£0.48
Weighted average exercise price
£0.52
Nil
Nil
Nil
Expected volatility is a measure of the amount by which the Group’s shares are expected to fluctuate during the life of an option. The
expected volatility is estimated based on the historical volatility of the closing daily share price over the most recent period that is
commensurate with the expected life of the option. The historical volatility is compared to the implied volatility generated from market
traded options in the Group’s shares to assess the reasonableness of the historical volatility and adjustments made where appropriate.
Share Incentive Plans
Matching shares
The Group undertakes to match shares purchased by employees up to the value of £45 per month; these matching shares are held in trust
for a mandatory period of three years on the employee’s behalf, during which period the employee is entitled to any dividends paid on such
shares. The award is subject to a non-market based condition: if an employee leaves within this three-year period for other than a ‘good’
reason, all of the matching shares are forfeited. Similarly, if the employees sell their purchased shares within three years, their matching
shares are forfeited.
The number of shares awarded relating to matching shares in 2024 was 38,464,042 (2023: 43,945,238), with an average fair value of £0.53
(2023: £0.46), based on market prices at the date of award.
Fixed share awards
Fixed share awards were introduced in 2014 in order to ensure that total fixed remuneration is commensurate with role and to provide a
competitive reward package for certain Lloyds Banking Group employees, with an appropriate balance of fixed and variable remuneration,
in line with regulatory requirements. The fixed share awards are delivered in Lloyds Banking Group plc shares, and are released over three
years with one third being released each year following the year of award. The number of shares purchased in relation to fixed share awards
in 2024 was 1,541,751 (2023: 1,790,243) with an average fair value of £0.55 (2023: £0.46) based on market prices at the date of the award.
The fixed share award is not subject to any performance conditions, performance adjustment or clawback. On an employee leaving the
Group, there is no change to the timeline for which shares will become unrestricted.
Since the beginning of 2023 the number of recipients of these awards has been reduced to the executive directors only.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
–
–
–
–
–
247
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 11: Share-based payments continued
Free shares
An award of shares may be made annually to employees up to a maximum of £3,600. The shares awarded are held in trust for a mandatory
period of three years on the employee’s behalf, during which period the employee is entitled to any dividends paid on such shares. The
award is subject to a non-market based condition. If an employee leaves the Group within this three-year period for other than a ‘good’
reason, all of the shares awarded will be forfeited.
There have not been any awards made since 2021.
Note 12: Retirement benefit obligations
Critical accounting judgements and key sources of estimation uncertainty
Key sources of estimation uncertainty:
Discount rate applied to future cash flows
Expected lifetime of the schemes’ members
Expected rate of future inflationary increases
The net asset recognised in the balance sheet at 31 December 2024 in respect of the Group’s defined benefit pension scheme obligations
was £2,945 million, comprising an asset of £3,028 million and a liability of £83 million (2023: a net asset of £3,532 million comprising an
asset of £3,624 million and a liability of £92 million). The Group’s accounting policy for its defined benefit pension scheme obligations is set
out in note 2(K).
Income statement and balance sheet sensitivities to changes in the key sources of estimation uncertainty and other actuarial assumptions
are provided in part (v).
2024
£m
2023
£m
2022
£m
Charge (credit) to the income statement
Defined benefit pension schemes
(13)
(80)
123
Other retirement benefit schemes
2
1
2
Total defined benefit schemes
(11)
(79)
125
Defined contribution pension schemes
537
434
330
Total charge to the income statement (note 10)
526
355
455
2024
£m
2023
£m
Amounts recognised in the balance sheet
Retirement benefit assets
3,028
3,624
Retirement benefit obligations
(122)
(136)
Total amounts recognised in the balance sheet
2,906
3,488
The total amounts recognised in the balance sheet relate to:
2024
£m
2023
£m
Defined benefit pension schemes
2,945
3,532
Other retirement benefit schemes
(39)
(44)
Total amounts recognised in the balance sheet
2,906
3,488
for the year ended 31 December
Pension schemes
Defined benefit schemes
(i) Characteristics of and risks associated with the Group’s schemes
The Group has established a number of defined benefit pension schemes in the UK and overseas, both funded and unfunded. All significant
schemes are funded and based in the UK, with the three most significant being the main sections of the Lloyds Bank Pension Scheme No. 1,
the Lloyds Bank Pension Scheme No. 2 and the HBOS Final Salary Pension Scheme. At 31 December 2024, these schemes represented
94 per cent of the Group’s total gross defined benefit pension assets (2023: 94 per cent). These schemes provide retirement benefits
calculated as a proportion of final pensionable salary depending upon the length of pensionable service.
All of the UK funded schemes are operated as separate legal entities under trust law, are in compliance with the Pensions Act 2004 and are
managed by a Trustee Board (the Trustee) whose role is to ensure that the schemes are administered in accordance with the scheme rules
and relevant legislation, and to safeguard the assets in the best interests of all members and beneficiaries.
A valuation to determine the funding status of each scheme is carried out at least every three years, whereby scheme assets are measured
at market value and liabilities (technical provisions) are measured using prudent assumptions. If a deficit is identified a recovery plan is
agreed between the employer and the scheme Trustee and sent to the Pensions Regulator for review. The Group does not provide for
these deficit contributions as the future economic benefits arising from these contributions are expected to be available to the Group.
The Group’s overseas defined benefit pension schemes are subject to local regulatory arrangements.
The 31 December 2022 triennial valuation for the main defined benefit schemes was completed in 2023, and following the contributions
paid in 2023, there will be no further deficit contributions for this triennial period (to 31 December 2025).
The Group pays regular contributions to meet benefits accruing over the year, and to cover the expenses of running the schemes.
The Group expects to pay contributions of at least £0.1 billion to its defined benefit schemes in 2025.
Notes to the consolidated financial statements continued
248
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 12: Retirement benefit obligations continued
The Group provides additional security arrangements to a number of the UK schemes for the Group’s obligations to the schemes.
At 31 December 2024 the security arrangements held assets of £4.1 billion. The security arrangements are fully consolidated in the
Group’s balance sheet.
The last funding valuations of other Group schemes were carried out on a number of different dates. In order to report the position under
IAS 19 as at 31 December 2024, the most recent valuation results for all schemes have been updated by qualified independent actuaries.
The funding valuations use a more prudent approach to setting the discount rate and more conservative longevity and inflation
assumptions than the IAS 19 valuations.
In June 2023, the High Court handed down a decision (Virgin Media Limited v NTL Pension Trustees II Limited and others) which potentially
has implications for the validity of amendments made by pension schemes, which were contracted-out on a salary-related basis between
6 April 1997 and the abolition of contracting-out in 2016. The High Court ruled that any amendments made to these pension schemes
during the relevant period would be void unless the scheme actuary had confirmed that the pension scheme would continue to satisfy the
statutory standard for contracted-out schemes. On 25 July 2024, the Court of Appeal upheld the original decision. The Group is carrying
out a review of scheme amendments to decide whether any subsequent actions or amendments to IAS 19 liabilities are required. The
Group has not made any allowance for the possible impact of the ruling as it is currently unclear whether any additional liabilities might
arise, and if they were to arise, how they would be reliably measured. The Group will continue to monitor developments.
(ii) Amounts in the financial statements
2024
£m
2023
£m
Amount included in the balance sheet
Present value of funded obligations
(27,118)
(30,201)
Fair value of scheme assets
30,063
33,733
Net amount recognised in the balance sheet
2,945
3,532
2024
£m
2023
£m
Net amount recognised in the balance sheet
At 1 January
3,532
3,732
Net defined benefit pension (charge) credit
13
80
Actuarial (losses) gains on defined benefit obligation
2,940
(1,304)
Return on plan assets
(3,712)
(318)
Employer contributions
172
1,342
At 31 December
2,945
3,532
2024
£m
2023
£m
Movements in the defined benefit obligation
At 1 January
(30,201)
(28,965)
Current service cost
(85)
(88)
Interest expense
(1,385)
(1,394)
Remeasurements:
Actuarial gains – demographic assumptions
109
153
Actuarial losses – experience
94
(1,067)
Actuarial (losses) gains – financial assumptions
2,737
(390)
Benefits paid
1,638
1,544
Past service cost
(35)
(5)
Settlements
1
–
Exchange and other adjustments
9
11
At 31 December
(27,118)
(30,201)
2024
£m
2023
£m
Analysis of the defined benefit obligation
Active members
(2,463)
(2,955)
Deferred members
(7,080)
(8,438)
Dependants
(1,429)
(1,572)
Pensioners
(16,146)
(17,236)
At 31 December
(27,118)
(30,201)
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
249
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 12: Retirement benefit obligations continued
2024
£m
2023
£m
Changes in the fair value of scheme assets
At 1 January
33,733
32,697
Return on plan assets excluding amounts included in interest income
(3,712)
(318)
Interest income
1,551
1,602
Employer contributions
172
1,342
Benefits paid
(1,638)
(1,544)
Settlements
(1)
Administrative costs paid
(33)
(35)
Exchange and other adjustments
(9)
(11)
At 31 December
30,063
33,733
The (credit) expense recognised in the income statement for the year ended 31 December comprises:
2024
£m
2023
£m
2022
£m
Current service cost
85
88
180
Net interest amount
(166)
(208)
(95)
Past service cost – plan amendments
35
5
4
Plan administration costs incurred during the year
33
35
34
Total defined benefit pension (credit) expense
(13)
(80)
123
(iii) Composition of scheme assets
2024
2023
Quoted
£m
Unquoted
£m
Total
£m
Quoted
£m
Unquoted
£m
Total
£m
Debt instruments1 :
Fixed interest government bonds
6,985
6,985
5,657
5,657
Index-linked government bonds
15,550
15,550
16,105
16,105
Corporate and other debt securities
7,396
7,396
7,305
7,305
4
4
Asset-backed securities
29,931
29,931
29,071
29,071
Pooled investment vehicles
686
7,342
8,028
613
8,361
8,974
Property
130
130
97
97
Equity instruments
23
66
89
23
62
85
Money market instruments, cash, derivatives and other assets
and liabilities
55
(8,170)
(8,115)
466
(4,960)
(4,494)
At 31 December
30,695
(632)
30,063
30,173
3,560
33,733
1
Of the total debt instruments, £27,551 million (2023: £26,777 million) were investment grade (credit ratings equal to or better than ‘BBB’).
The assets of all of the funded plans are held independently of the Group’s assets in separate trustee-administered funds.
The pension schemes’ pooled investment vehicles comprise:
2024
£m
2023
£m
Alternative credit funds
1,793
1,962
Bond and debt funds
449
571
Equity funds
1,553
1,674
Hedge and mutual funds
709
808
Infrastructure funds
1,059
1,147
Liquidity funds
1,449
1,585
Property funds
992
1,227
Other
24
At 31 December
8,028
8,974
for the year ended 31 December
The Trustee’s approach to investment is focused on acting in the members’ best financial interests, with the integration of ESG
(environmental, social and governance) considerations into investment management processes and practices. This policy is reviewed
annually (or more frequently as required) and has been shared with the schemes’ investment managers for implementation.
Climate change is one of the risks the schemes manage given its potential financial impact on valuation of assets.
Notes to the consolidated financial statements continued
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
250
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 12: Retirement benefit obligations continued
(iv) Assumptions
The principal actuarial and financial assumptions used in valuations of the defined benefit pension schemes were as follows:
2024
%
2023
%
Discount rate
5.55
4.70
Rate of inflation:
2.97
2.96
Retail Price Index (RPI)
2.52
2.47
Consumer Price Index (CPI)
0.00
0.00
Rate of salary increases
Weighted average rate of increase for pensions in payment
2.73
2.69
To determine the RPI assumption a term-dependent inflation curve has been used adjusting for an assumed inflation risk premium. A gap of
100 basis points has been assumed between RPI and CPI from 2025 to 2030; thereafter a 20 basis point gap has been assumed.
Men
Women
2024
Years
2023
Years
2024
Years
2023
Years
Life expectancy for average member aged 60, on the valuation date
26.4
26.7
28.5
28.7
Life expectancy for average member aged 60, 15 years after the valuation date
27.3
27.8
29.4
29.8
The mortality assumptions used in the UK scheme valuations are based on standard tables published by the Institute and Faculty of
Actuaries which were adjusted in line with the actual experience of the relevant schemes. The Group uses the CMI mortality projections
model to project future mortality improvements. In line with actuarial industry recommendations no weight is placed on 2020 and 2021
mortality experience and 15 per cent weight on 2022 and 2023 mortality experience.
(v) Amount, timing and uncertainty of future cash flows
Risk exposure of the defined benefit schemes
While the Group is not exposed to any unusual, entity-specific or scheme-specific risks in its defined benefit pension schemes, it is exposed
to a number of significant risks, detailed below:
Inflation rate risk: The majority of the schemes’ benefit obligations are linked to inflation both in deferment and once in payment. Higher
inflation will lead to higher liabilities although this will be materially offset by holdings of inflation-linked gilts and, in most cases, caps on
the level of inflationary increases are in place to protect against extreme inflation.
Interest rate risk: The defined benefit obligation is determined using a discount rate derived from yields on AA-rated corporate bonds. A
decrease in corporate bond yields will increase plan liabilities although this will be materially offset by an increase in the value of bond
holdings and through the use of derivatives.
Longevity risk: The majority of the schemes’ obligations are to provide benefits for the life of the members so increases in life expectancy
will result in an increase in the schemes’ liabilities.
Investment risk: Scheme assets are invested in a diversified portfolio of debt securities, equities and other return-seeking assets. If the
assets underperform the discount rate used to calculate the defined benefit obligation, it will reduce the surplus or increase the deficit.
Volatility in asset values and the discount rate will lead to volatility in the net pension asset on the Group’s balance sheet and in other
comprehensive income. To a lesser extent this will also lead to volatility in the pension expense in the Group’s income statement.
In addition, the schemes themselves are exposed to liquidity risk with the need to ensure that liquid assets held are sufficient to meet
benefit payments as they fall due and there is sufficient collateral available to support their hedging activity.
The ultimate cost of the defined benefit obligations to the Group will depend upon actual future events rather than the assumptions made.
The assumptions made are unlikely to be borne out in practice and as such the cost may be higher or lower than expected.
Sensitivity analysis
The effect of reasonably possible changes in key assumptions on the Group’s income statement and on the net defined benefit pension
scheme asset from the change in value of scheme liabilities is set out below. The sensitivities provided assume that all other assumptions
and the value of the schemes’ assets remain unchanged. The calculations are approximate in nature and full detailed calculations could
lead to a different result. It is unlikely that isolated changes to individual assumptions will be experienced in practice. Due to the correlation
of assumptions, aggregating the effects of these isolated changes may not be a reasonable estimate of the actual effect of simultaneous
changes in multiple assumptions.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
251
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 12: Retirement benefit obligations continued
Effect of reasonably possible alternative assumptions
Increase (decrease) in the income
statement charge
(Increase) decrease in the
net defined benefit
pension scheme surplus
2024
£m
2023
£m
2024
£m
2023
£m
Inflation (including pension increases)1 :
Increase of 0.25 per cent
28
484
Decrease of 0.25 per cent
(27)
(467)
Increase of 0.1 per cent
11
224
Decrease of 0.1 per cent
(12)
(235)
Discount rate2 :
Increase of 0.25 per cent
(51)
(718)
Decrease of 0.25 per cent
49
757
Increase of 0.1 per cent
(22)
(355)
Decrease of 0.1 per cent
21
363
Expected life expectancy of members:
Increase of one year
46
45
806
927
Decrease of one year
(47)
(46)
(830)
(946)
1
At 31 December 2024, the assumed rate of RPI inflation is 2.97 per cent and CPI inflation 2.52 per cent (2023: RPI 2.96 per cent and CPI 2.47 per cent).
2
At 31 December 2024, the assumed discount rate is 5.55 per cent (2023: 4.70 per cent).
Sensitivity analysis method and assumptions
The sensitivity analysis above reflects the impact on the liabilities of the Group’s three most significant schemes which account for over
90 per cent of the Group’s defined benefit obligations. While differences in the underlying liability profiles for the remainder of the Group’s
pension arrangements mean that they may exhibit slightly different sensitivities to variations in these assumptions, the sensitivities
provided above are indicative of the impact across the Group as a whole.
The inflation assumption sensitivity applies to the assumed rate of increase in both the Consumer Price Index (CPI) and the Retail Price
Index (RPI), and includes the impact on the rate of increases to pensions, both before and after retirement. These pension increases are
linked to inflation (either CPI or RPI) subject to certain minimum and maximum limits.
The sensitivity analysis (including the inflation sensitivity) does not include the impact of any change in the rate of salary increases as
pensionable salaries have been frozen since 2 April 2014.
The life expectancy assumption has been applied by allowing for an increase/decrease in life expectation from age 60 of one year, based
upon the approximate weighted average age for each scheme. While this is an approximate approach and will not give the same result as a
one year increase in life expectancy at every age, it provides an appropriate indication of the potential impact on the schemes from
changes in life expectancy.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from the prior year.
Asset-liability matching strategies
The main schemes’ assets are invested in a diversified portfolio which are independently determined by the responsible governance body
for each scheme and in consultation with the employer.
A significant goal of the asset strategies adopted by the schemes is to reduce volatility caused by changes in market expectations of
interest rates and inflation. In the main schemes this is achieved by investing in liability-driven investment (LDI) strategies. The assets in
these LDI strategies represented c.47 per cent of scheme assets at 31 December 2024.
The LDI strategies are actively managed to reflect both changing market conditions and changes to the liability profile. At 31 December
2024 the asset-liability matching strategy mitigated c.116 per cent of the liability sensitivity to interest rate movements and c.131 per cent of
the liability sensitivity to inflation movements. In addition, a small amount of interest rate sensitivity arises through holdings of corporate
and other debt securities. The higher level of hedging provides greater protection to the funding position of the schemes.
The main schemes hold a number of longevity insurance contracts, hedging c.30 per cent of their longevity risk exposure at 31 December
2024. These arrangements form part of the schemes’ investment portfolio and provide income to the schemes in the event that pensions
are paid out for longer than expected. As of 1 January 2025 an additional longevity insurance arrangement was entered into, taking the
total the main schemes have now hedged to c.35 per cent of their longevity risk exposure.
At 31 December 2024 the value of scheme assets included longevity swaps valued at £(175) million (after allowing for the impact of the
revisions to the base mortality assumptions).
Maturity profile of defined benefit obligation
The following table provides information on the weighted average duration of the defined benefit pension obligation and the distribution
and timing of benefit payments:
2024
Years
2023
Years
Duration of the defined benefit obligation
12
13
for the year ended 31 December
Notes to the consolidated financial statements continued
252
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 12: Retirement benefit obligations continued
Maturity analysis of benefits expected to be paid:
2024
£m
2023
£m
Within 12 months
1,800
1,697
Between 1 and 2 years
1,595
1,513
Between 2 and 5 years
5,134
4,886
Between 5 and 10 years
9,318
9,159
Between 10 and 15 years
9,150
9,176
Between 15 and 25 years
16,316
16,882
Between 25 and 35 years
11,294
12,343
Between 35 and 45 years
5,171
6,121
In more than 45 years
1,201
1,595
Maturity analysis method and assumptions
The projected benefit payments are based on the assumptions underlying the assessment of the obligations, including allowance for
expected future inflation. They are shown in their undiscounted form and therefore appear large relative to the discounted assessment of
the defined benefit obligations recognised in the Group’s balance sheet. They are in respect of benefits that have been accrued prior to the
respective year end date only and make no allowance for any benefits that may have been accrued subsequently.
Defined contribution schemes
The Group operates a number of defined contribution pension schemes in the UK and overseas, principally Your Tomorrow and the defined
contribution sections of the Lloyds Bank Pension Scheme No. 1.
During the year ended 31 December 2024 the charge to the income statement in respect of defined contribution schemes was £537 million
(2023: £434 million; 2022: £330 million), representing the contributions payable by the employer in accordance with each scheme’s rules.
Other retirement benefit schemes
The Group operates a number of schemes which provide post-retirement healthcare benefits to certain employees, retired employees and
their dependants. The principal scheme relates to former Lloyds Bank staff and under this scheme the Group has undertaken to meet the
cost of post-retirement healthcare for all eligible former employees (and their dependants) who retired prior to 1 January 1996. The Group
has entered into an insurance contract to provide these benefits and a provision has been made for the estimated cost of future insurance
premiums payable.
For the principal post-retirement healthcare scheme, the latest actuarial valuation of the liability was carried out at 31 December 2024 by
qualified independent actuaries. The principal assumptions used were as set out above in section (iv), except that the rate of increase in
healthcare premiums has been assumed at 10.00 per cent (2023: 10.00 per cent).
Movements in the other retirement benefits obligation:
2024
£m
2023
£m
At 1 January
(44)
(35)
Actuarial (losses) gains
4
(11)
Insurance premiums paid
3
3
Charge for the year
(2)
(1)
At 31 December
(39)
(44)
Note 13: Auditors’ remuneration
Fees payable to the Company’s auditors by the Group are included within other operating expenses and are as follows:
44.2
2024
£m
2023
£m
2022
£m
Fees payable for the:
– audit of the Company’s current year annual report
2.0
2.0
1.9
– audits of the Company’s subsidiaries
31.9
32.3
29.5
– total audit fees in respect of the statutory audit of Group entities1
33.9
34.3
31.4
– services normally provided in connection with statutory and regulatory filings or engagements
6.7
6.6
6.3
Total audit fees2
40.6
40.9
37.7
Other audit-related fees2
1.5
1.3
1.5
All other fees2
1.0
1.2
5.0
Total non-audit services3
2.5
2.5
6.5
Total fees payable to the Company’s auditors by the Group
43.1
43.4
1
As defined by the Financial Reporting Council (FRC).
2
As defined by the Securities and Exchange Commission (SEC).
3
As defined by the SEC. Total non-audit services as defined by the FRC include all fees other than audit fees in respect of the statutory audit of Group entities. These fees totalled
£9.2 million in 2024 (2023: £9.1 million; 2022: £12.8 million).
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
253
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 13: Auditors’ remuneration continued
The following types of services are included in the categories listed above:
Audit fees: This category includes fees in respect of the audit of the Group’s annual financial statements (including work related to the
adoption of new accounting standards) and other services in connection with regulatory filings. Other services supplied pursuant to
legislation relate primarily to costs incurred in connection with client asset assurance and with the Sarbanes-Oxley Act requirements
associated with the audit of the Group’s financial statements filed on its Form 20-F.
Other audit-related fees: This category includes fees in respect of services for assurance and related services that are reasonably related to
the performance of the audit or review of the financial statements, for example acting as reporting accountants in respect of debt
prospectuses required by the Listing Rules.
All other fees: This category includes other assurance services not related to the performance of the audit or review of the financial
statements, for example, the review of controls operated by the Group on behalf of a third party. The auditors are not engaged to provide
tax services.
It is the Group’s policy to use the auditors only on non-audit assignments in cases where their knowledge of the Group means that it is
neither efficient nor cost effective to employ another firm of accountants.
The Group has procedures that are designed to ensure auditor independence, including prohibiting certain non-audit services. All audit and
non-audit assignments must be pre-approved by the Audit Committee on an individual engagement basis; for certain types of non-audit
engagements where the fee is ‘de minimis’ the Audit Committee has pre-approved all assignments subject to confirmation by
management. On a quarterly basis, the Audit Committee receives and reviews a report detailing all pre-approved services and amounts
paid to the auditors for such pre-approved services.
During the year, the auditors also earned fees payable by entities outside the consolidated Lloyds Banking Group in respect of:
2024
£m
2023
£m
2022
£m
Audits of Group pension schemes
0.5
0.5
0.4
Audits of the unconsolidated Open-Ended Investment Companies managed by the Group
0.2
0.2
0.2
Note 14: Impairment
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Year ended 31 December 2024
Loans and advances to banks
(7)
(7)
Loans and advances to customers
(147)
(289)
949
(6)
507
Debt securities
(4)
(2)
(6)
Financial assets at amortised cost
(158)
(291)
949
(6)
494
Financial assets at fair value through other comprehensive income
(3)
(3)
Other assets
(9)
(9)
Loan commitments and financial guarantees
(18)
(33)
(51)
Total impairment charge (credit)
(188)
(324)
949
(6)
431
Year ended 31 December 2023
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Loans and advances to banks
(5)
(2)
(7)
Loans and advances to customers
261
(281)
414
(73)
321
Debt securities
1
1
Financial assets at amortised cost
256
(282)
414
(73)
315
Financial assets at fair value through other comprehensive income
(2)
(2)
Other assets
(10)
(10)
Loan commitments and financial guarantees
27
(25)
(2)
Total impairment charge (credit)
281
(307)
402
(73)
303
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Year ended 31 December 2022
Loans and advances to banks
12
2
14
Loans and advances to customers
(217)
694
883
(9)
1,351
Debt securities
7
7
Financial assets at amortised cost
(198)
696
883
(9)
1,372
Financial assets at fair value through other comprehensive income
6
6
Other assets
22
22
Loan commitments and financial guarantees
24
99
(1)
122
Total impairment (credit) charge
(168)
795
904
(9)
1,522
for the year ended 31 December
The impairment charge includes a £24 million charge (2023: £73 million charge; 2022: £nil) in respect of residual value impairment and
voluntary terminations within the Group’s UK Motor Finance business.
Notes to the consolidated financial statements continued
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
254
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 15: Tax
Analysis of tax expense for the year
2024
£m
2023
£m
2022
£m
UK corporation tax:
Current tax on profit for the year
(1,159)
(1,301)
(1,152)
Adjustments in respect of prior years
89
51
31
Foreign tax:
(1,070)
(1,250)
(1,121)
Current tax on profit for the year
(122)
(101)
(74)
Adjustments in respect of prior years
3
3
(9)
Current tax expense
(1,189)
(1,348)
(1,204)
Deferred tax:
Current year
(307)
(583)
124
Adjustments in respect of prior years
2
(54)
221
Deferred tax (expense) credit
(305)
(637)
345
Tax expense
(1,494)
(1,985)
(859)
(119)
(98)
(83)
The tax expense is made up as follows:
Tax (expense) credit attributable to policyholders
(137)
30
(54)
Shareholder tax expense
(1,357)
(2,015)
(805)
Tax expense
(1,494)
(1,985)
(859)
Factors affecting the tax expense for the year
The UK corporation tax rate for the year was 25.0 per cent (2023: 23.5 per cent; 2022: 19.0 per cent). The increase in applicable tax rate
from 2023 relates to the change in statutory tax rate effective from 1 April 2023. An explanation of the relationship between tax expense
and accounting profit is set out below.
2024
£m
2023
£m
2022
£m
Profit before tax
5,971
7,503
4,782
UK corporation tax thereon
(1,493)
(1,763)
(909)
Impact of surcharge on banking profits
(157)
(305)
(339)
Non-deductible costs: conduct charges
(27)
(29)
(5)
Non-deductible costs: bank levy
(37)
(35)
(28)
Other non-deductible costs
(73)
(106)
(70)
Non-taxable income
78
80
138
Tax relief on coupons on other equity instruments
125
124
83
Tax-exempt gains on disposals
98
35
67
Tax losses where no deferred tax recognised
(7)
(2)
11
Remeasurement of deferred tax due to rate changes
(14)
60
Differences in overseas tax rates
(9)
6
(63)
Policyholder tax
(75)
(61)
(65)
Deferred tax asset in respect of life assurance expenses
(5)
84
21
Adjustments in respect of prior years
94
243
Tax effect of share of results of joint ventures
(1)
1
(3)
Provision for Pillar 2 current income taxes
(5)
Tax expense
(1,494)
(1,985)
(859)
On 11 July 2023, the Government enacted its legislation implementing the G20-OECD Inclusive Framework Pillar 2 rules in the UK, including
a Qualified Domestic Minimum Top-Up Tax rule. This legislation seeks to ensure that UK-headquartered multinational enterprises pay a
minimum tax rate of 15 per cent on UK and overseas profits arising after 31 December 2023. As a result, tax expense for 2024 includes a
current tax charge of £5 million in respect of the Group’s Channel Islands businesses.
The Group paid tax of £1,305 million in the period in respect of current year profits, and received refunds of £970 million relating to tax
overpaid in respect of previous periods. These overpayments had been reflected in the balance sheet as current tax assets pending
finalisation of arrangements for repayment.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
Lloyds Banking Group plc Annual Report and Accounts 2024
255
Note 15: Tax continued
Deferred tax
The Group’s deferred tax assets and liabilities are as follows:
Statutory position
2024
£m
2023
£m
Tax disclosure
2024
£m
2023
£m
Deferred tax assets
5,005
5,185
Deferred tax assets
6,900
7,409
Deferred tax liabilities
(125)
(157)
Deferred tax liabilities
(2,020)
(2,381)
Net deferred tax asset at 31 December
4,880
5,028
Net deferred tax asset at 31 December
4,880
5,028
The statutory position reflects the deferred tax assets and liabilities as disclosed in the consolidated balance sheet and takes into account
the ability of the Group to net assets and liabilities where there is a legally enforceable right of offset. The tax disclosure of deferred tax
assets and liabilities ties to the amounts outlined in the tables below which splits the deferred tax assets and liabilities by type, before
such netting.
Movements in deferred tax assets and liabilities (before taking into consideration the offsetting of balances within the same taxing
jurisdiction) can be summarised as follows:
Deferred tax assets
Tax
losses
£m
Property,
plant and
equipment
£m
Provisions
£m
Long-term
assurance
business
£m
Share-
based
payments
£m
Pension
liabilities
£m
Derivatives
£m
Asset
revaluations1
£m
Other
temporary
differences
£m
Total
£m
At 1 January 2023
5,066
506
260
114
36
47
2,423
8
281
(Charge) credit to the
income statement
(283)
(258)
(39)
119
10
(84)
(179)
(Charge) credit to other
comprehensive income
(672)
42
Other credit to equity
12
At 31 December 2023
4,783
248
221
233
58
47
1,667
50
102
Charge to the income
statement
(133)
(75)
(22)
(167)
(1)
(9)
(63)
(10)
(Charge) credit to other
comprehensive income
(9)
16
Transfer to disposal group
(13)
Other charge to equity
(23)
At 31 December 2024
4,650
173
199
53
34
38
1,595
66
92
8,741
(714)
(630)
12
7,409
(480)
7
(13)
(23)
6,900
Deferred tax assets of £13 million have been reclassified as disposal group assets and presented within other assets (see note 24).
Deferred tax liabilities
Capitalised
software
enhancements
£m
Acquisition
fair value
£m
Pension
assets
£m
Derivatives
£m
Other
temporary
differences
£m
Total
£m
At 1 January 2023
(162)
(332)
(1,019)
(541)
(474)
(2,528)
Credit (charge) to the income statement
70
38
(5)
(167)
141
77
Credit to other comprehensive income
53
66
119
Acquisitions
(58)
(58)
Exchange and other adjustments
9
9
At 31 December 2023
(92)
(352)
(971)
(708)
(258)
(2,381)
(Charge) credit to the income statement
(31)
124
3
164
(85)
175
Credit to other comprehensive income
154
22
176
Exchange and other adjustments
10
10
At 31 December 2024
(123)
(228)
(814)
(544)
(311)
(2,020)
for the year ended 31 December
1
Financial assets at fair value through other comprehensive income.
Notes to the consolidated financial statements continued
56
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
256
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 15: Tax continued
At 31 December 2024 the Group carried deferred tax assets on its balance sheet of £5,005 million (2023: £5,185 million) principally relating
to tax losses carried forward.
Estimation of income taxes includes the assessment of recoverability of deferred tax assets. Deferred tax assets are only recognised to the
extent that they are considered more likely than not to be recoverable based on existing tax laws and forecasts of future taxable profits
against which the underlying tax deductions can be utilised. The Group has recognised a deferred tax asset of £4,650 million (2023:
£4,783 million) in respect of trading losses carried forward. Substantially all of these losses have arisen in Bank of Scotland plc and Lloyds
Bank plc, and they will be utilised as taxable profits arise in those legal entities in future periods.
The Group’s expectations of future UK taxable profits require management judgement, and take into account the Group’s long-term
financial and strategic plans and anticipated future tax-adjusting items. In making this assessment, account is taken of business plans, the
Board-approved operating plan and the expected future economic outlook as set out in the strategic report, as well as the risks associated
with future regulatory, climate-related and other change, in order to produce a base case forecast of future UK taxable profits. Under
current law there is no expiry date for UK trading losses not yet utilised, and given the forecast of future profitability and the Group’s
commitment to the UK market, in management’s judgement it is more likely than not that the value of the losses will be recovered by the
Group while still operating as a going concern. Banking tax losses that arose before 1 April 2015 can only be used against 25 per cent 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 2037 (2023: 2036) in the
base case forecast. The rate of recovery of the Group’s tax loss asset is not a straight line, being affected by the relative profitability of the
different legal entities in future periods, and the relative size of their tax losses carried forward. It is expected in the base case that 85 per
cent of the value will be recovered by 2033, when Bank of Scotland plc will have utilised all of its available tax losses. It is possible that
future tax law changes could materially affect the timing of recovery and the value of these losses ultimately realised by the Group.
A deferred tax asset of £104 million (2023: £118 million) has been recognised in respect of the future tax benefit of certain expenses of the
life assurance business. The decrease is driven by the utilisation of expenses in the year, reducing the maximum deferred tax asset that can
be recognised. The forecast investment returns in the long-term projections for the life insurance business continue to be strong due to high
interest rates which results in utilisation of all expenses in the long term. Therefore, there is no unrecognised deferred tax asset in 2024
(2023: £88 million).
Deferred tax not recognised
Deferred tax assets of £143 million (2023: £160 million) have not been recognised in respect of £570 million of UK tax losses and other
temporary differences which can only be used to offset future capital gains. UK capital losses can be carried forward indefinitely.
No deferred tax has been recognised in respect of foreign trade losses where it is not more likely than not that we will be able to utilise
them in future periods. Of the asset not recognised, £58 million (2023: £51 million) relates to losses that will expire if not used within
20 years, and £8 million (2023: £9 million) relates to losses with no expiry date.
As a result of parent company exemptions on dividends from subsidiaries and on capital gains on disposal there are no significant taxable
temporary differences associated with investments in subsidiaries, branches, associates and joint arrangements.
Critical accounting judgements and key sources of estimation uncertainty
Critical judgement:
The Group believes that its interpretation of the tax rules on group relief are correct
The Group has an open matter in relation to a claim for group relief of losses incurred in its former Irish banking subsidiary, which ceased
trading on 31 December 2010. In 2020, HMRC concluded its enquiry into the matter and issued a closure notice denying the group relief
claim. The Group appealed to the First Tier Tax Tribunal. The hearing took place in May 2023. In January 2025, the First Tier Tribunal
concluded in favour of HMRC. The Group believes it has applied the rules correctly and that the claim for group relief is correct. Having
reviewed the Tribunal’s conclusions and having taken appropriate advice, the Group intends to appeal the decision and does not consider
this to be a case where an additional tax liability will ultimately fall due. If the final determination of the matter by the judicial process is
that HMRC’s position is correct, management believes that this would result in an increase in current tax liabilities of approximately
£975 million (including interest) and a reduction in the Group’s deferred tax asset of approximately £275 million. Following the First Tier
Tax Tribunal outcome, the tax will be paid and recognised as a current tax asset, given the Group’s view that the tax liability will not
ultimately fall due. It is unlikely that any appeal hearing will be held before 2026, and final conclusion of the judicial process may not
be for several years.
There are a number of other open matters on which the Group is in discussions with HMRC (including the tax treatment of certain costs
arising from the divestment of TSB Banking Group plc and the tax treatment of costs relating to HBOS Reading), none of which is expected
to have a material impact on the financial position of the Group.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
257
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 16: Measurement basis of financial assets and liabilities
The accounting policies in note 2 describe how different classes of financial instruments are measured, and how income and expenses,
including fair value gains and losses, are recognised. The following table analyses the carrying amounts of the financial assets a nd liabilities
by category and by balance sheet heading.
Mandatorily held at
fair value through
profit or loss
At 31 December 2024
Derivatives
designated
as hedging
instruments
£m
Held for
trading
£m
Other
£m
Designated
at fair value
through
profit or loss
£m
At fair value
through other
comprehensive
income
£m
Held at
amortised
cost
£m
Insurance-
related
contracts
£m
Total
£m
Financial assets
Cash and balances at central banks
62,705
62,705
Financial assets at fair value through
profit or loss
25,450
190,475
215,925
Derivative financial instruments
48
24,017
24,065
Loans and advances to banks
7,900
7,900
Loans and advances to customers
459,857
459,857
Reverse repurchase agreements
49,476
49,476
Debt securities
14,544
14,544
Financial assets at amortised cost
531,777
531,777
Financial assets at fair value through other
comprehensive income
30,690
30,690
Other
173
5,481
5,654
Total financial assets
48
49,467
190,475
30,690
594,655
5,481
870,816
Financial liabilities
Deposits from banks
6,158
6,158
Customer deposits
482,745
482,745
Repurchase agreements at amortised cost
37,760
37,760
Financial liabilities at fair value through
profit or loss
22,981
4,630
27,611
Derivative financial instruments
355
21,321
21,676
Notes in circulation
2,121
2,121
Debt securities in issue at amortised cost
70,834
70,834
Liabilities arising from insurance and
participating investment contracts
122,064
122,064
Liabilities arising from non-participating
investment contracts
51,228
51,228
Other
1,708
5,278
6,986
Subordinated liabilities
10,089
10,089
Total financial liabilities
355
44,302
55,858
611,415
127,342
839,272
Offsetting of financial assets and liabilities
Related amounts where set off in the balance
sheet not permitted1
Potential
net amounts
if offset
of related
amounts
permitted
£m
At 31 December 2024
Gross
amounts of
assets and
liabilities
£m
Cash
collateral
(received)/
pledged
£m
Non-cash
collateral
(received)/
pledged
£m
Derivative assets
60,118
(36,053)
(4,071)
(4,139)
5,333
Derivative liabilities
(60,150)
38,474
3,853
1,514
(5,787)
Net position
(32)
2,421
(218)
(2,625)
(454)
Reverse repurchase agreements held at fair value
35,463
(14,997)
362
(20,389)
439
Repurchase agreements held at fair value
(35,561)
14,997
31
19,991
(542)
Net position
(98)
393
(398)
(103)
Reverse repurchase agreements held at amortised cost
60,282
(10,806)
257
(49,341)
392
Repurchase agreements held at amortised cost
(48,566)
10,806
8
37,427
(325)
Net position
11,716
265
(11,914)
67
Amount
offset in
the balance
sheet2
£m
Net amounts
presented in
the balance
sheet
£m
Master
netting and
similar
agreements
£m
24,065
(21,676)
(10,522)
10,522
2,389
20,466
(20,564)
(98)
49,476
(37,760)
11,716
for the year ended 31 December
1
The Group enters into derivatives and repurchase and reverse repurchase agreements with various counterparties which are governed by industry standard master netting agreements.
The Group holds and provides cash and securities collateral in respect of derivative transactions covered by these agreements. The right to set off balances under these master netting
agreements or to set off cash and securities collateral only arises in the event of non-payment or default and, as a result, these arrangements do not qualify for offsetting under IAS 32.
2
The amounts offset in the balance sheet as shown above meet the criteria for offsetting under IAS 32.
The format of the table above has been updated to give a clearer view of the net exposures of the Group.
Notes to the consolidated financial statements continued
8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
258
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 16: Measurement basis of financial assets and liabilities continued
Mandatorily held at
fair value through
profit or loss
Derivatives
designated
as hedging
instruments
£m
Held at
amortised
cost
£m
Insurance-
related
contracts
£m
Held for
trading
£m
Other
£m
Total
£m
At 31 December 2023
Financial assets
Cash and balances at central banks
–
–
–
–
–
78,110
–
78,110
Financial assets at fair value through
profit or loss
–
21,638
181,680
–
–
–
–
203,318
Derivative financial instruments
103
22,253
–
–
–
–
–
22,356
Loans and advances to banks
–
–
–
–
–
10,764
–
10,764
Loans and advances to customers
–
–
–
–
–
449,745
–
449,745
Reverse repurchase agreements
–
–
–
–
–
38,771
–
38,771
Debt securities
–
–
–
–
–
15,355
–
15,355
Financial assets at amortised cost
–
–
–
–
–
514,635
–
514,635
Financial assets at fair value through other
comprehensive income
–
–
–
–
27,592
–
–
27,592
Other
–
–
–
–
–
299
443
742
Total financial assets
103
43,891
181,680
–
27,592
593,044
443
846,753
Financial liabilities
Deposits from banks
–
–
–
–
–
6,153
–
6,153
Customer deposits
–
–
–
–
–
471,396
–
471,396
Repurchase agreements at amortised cost
–
–
–
–
–
37,703
–
37,703
Financial liabilities at fair value through
profit or loss
–
19,631
–
5,283
–
–
–
24,914
Derivative financial instruments
505
19,644
–
–
–
–
–
20,149
Notes in circulation
–
–
–
–
–
1,392
–
1,392
Debt securities in issue at amortised cost
–
–
–
–
–
75,592
–
75,592
Liabilities arising from insurance and
participating investment contracts
–
–
–
–
–
–
120,123
120,123
Liabilities arising from non-participating
investment contracts
–
–
–
44,978
–
–
–
44,978
Other
–
–
–
–
–
1,960
8
1,968
Subordinated liabilities
–
–
–
–
–
10,253
–
10,253
Total financial liabilities
505
39,275
–
50,261
–
604,449
120,131
814,621
Designated
at fair value
through
profit or loss
£m
At fair value
through other
comprehensive
income
£m
Offsetting of financial assets and liabilities
Related amounts where set off in the balance
sheet not permitted1
At 31 December 2023
Amount
offset in the
balance
sheet2
£m
Net amounts
presented in
the balance
sheet
£m
Cash
collateral
(received)/
pledged
£m
Non-cash
collateral
(received)/
pledged
£m
Master netting
and similar
agreements
£m
Potential
net amounts
if offset
of related
amounts
permitted
£m
Derivative assets
61,820
(39,464)
22,356
(3,361)
(2,869)
(9,862)
6,264
Derivative liabilities
62,273)
42,124
(20,149)
4,146
2,905
9,862
(3,236)
Net position
(453)
2,660
2,207
785
36
–
3,028
Reverse repurchase agreements held at fair value
29,778
(12,365)
17,413
(75)
(17,226)
–
112
Repurchase agreements held at fair value
30,422)
12,365
(18,057)
(102)
18,043
–
(116)
Net position
(644)
–
(644)
(177)
817
–
(4)
Reverse repurchase agreements held at amortised cost
46,157
(7,386)
38,771
71
(38,581)
–
261
Repurchase agreements held at amortised cost
45,089)
7,386
(37,703)
(60)
37,715
–
(48)
Net position
1,068
–
1,068
11
(866)
–
213
(
(
(
Gross
amounts of
assets and
liabilities
£m
1
The Group enters into derivatives and repurchase and reverse repurchase agreements with various counterparties which are governed by industry standard master netting agreements.
The Group holds and provides cash and securities collateral in respect of derivative transactions covered by these agreements. The right to set off balances under these master netting
agreements or to set off cash and securities collateral only arises in the event of non-payment or default and, as a result, these arrangements do not qualify for offsetting under IAS 32.
2
The amounts offset in the balance sheet as shown above meet the criteria for offsetting under IAS 32.
The format of the table above has been updated to give a clearer view of the net exposures of the Group.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
259
Lloyds Banking Group plc Annual Report and Accounts 2024
for the year ended 31 December
Note 17: Fair values of financial assets and liabilities
At 31 December 2024, the carrying value of the Group’s financial instrument assets held at fair value was £270,680 million
(2023: £253,266 million), and its financial instrument liabilities held at fair value was £100,515 million (2023: £90,041 million).
(1) Fair value measurement
Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. It is a measure as at a specific date and may be significantly different from the amount which will
actually be paid or received on maturity or settlement date.
Wherever possible, fair values have been calculated using unadjusted quoted market prices in active markets for identical instruments to
those held by the Group. Where quoted market prices are not available, or are unreliable because of poor liquidity, fair values have been
determined using valuation techniques which, to the extent possible, use market observable inputs, but in some cases use non-market
observable inputs. Valuation techniques used include discounted cash flow analysis and pricing models and, where appropriate,
comparison to instruments with characteristics similar to those of the instruments held by the Group. The Group measures valuation
adjustments for its derivative exposures on the same basis as the derivatives are managed.
The carrying amount of the following financial instruments is a reasonable approximation of fair value: cash and balances at central banks,
items in the course of collection from banks, items in course of transmission to banks and notes in circulation. Liabilities arising from non-
participating investment contracts are carried at fair value.
Because a variety of estimation techniques are employed and significant estimates made, comparisons of fair values between financial
institutions may not be meaningful. Readers of these financial statements are thus advised to use caution when using this data to evaluate
the Group’s financial position.
Fair value information is not provided for items that are not financial instruments or for other assets and liabilities which are not carried at
fair value in the Group’s consolidated balance sheet. These items include intangible assets, property, plant and equipment, and
shareholders’ equity. These items are material and accordingly the Group believes that any fair value information presented would not
represent the underlying value of the Group.
Valuation control framework
The key elements of the control framework for the valuation of financial instruments include model validation, product implementation
review and independent price verification. These functions are carried out by appropriately skilled risk and finance teams, independent of
the business area responsible for the products.
Model validation covers both qualitative and quantitative elements relating to new models. In respect of new products, a product
implementation review is conducted pre and post-trading. Pre-trade testing ensures that the new model is integrated into the Group’s
systems and that the profit and loss and risk reporting are consistent throughout the trade lifecycle. Post-trade testing examines the
explanatory power of the implemented model, actively monitoring model parameters and comparing in-house pricing to external sources.
Independent price verification procedures cover financial instruments carried at fair value and are performed at a minimum on a monthly
basis. Valuation differences in breach of established thresholds are escalated to senior management. The results from independent pricing
and valuation reserves are reviewed monthly by senior management.
Formal committees, consisting of senior risk, finance and business management, meet at least quarterly to discuss and approve valuations
in more judgemental areas, in particular for unquoted equities, structured credit, derivatives and the credit valuation adjustment (CVA),
funding valuation adjustment (FVA) and other valuation adjustments.
Valuation of financial assets and liabilities
Assets and liabilities carried at fair value or for which fair values are disclosed have been classified into three levels according to the quality
and reliability of information used to determine the fair values.
Level 1
Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities.
Products classified as level 1 predominantly comprise listed equity shares, treasury bills and other government securities.
Level 2
Level 2 valuations are those where quoted market prices are not available, for example where the instrument is traded in a market that is
not considered to be active or valuation techniques are used to determine fair value and where these techniques use inputs that are based
significantly on observable market data. Examples of such financial instruments include most over-the-counter derivatives, financial
institution issued securities, certificates of deposit and certain asset-backed securities.
Level 3
Level 3 portfolios are those where at least one input which could have a significant effect on the instrument’s valuation is not based on
observable market data. Such instruments would include the Group’s venture capital and unlisted equity investments which are valued
using various valuation techniques that require significant management judgement in determining appropriate assumptions, including
earnings multiples and estimated future cash flows. Certain of the Group’s asset-backed securities, loans and advances recognised at fair
value and derivatives are also classified as level 3.
Transfers in or out of the level 3 portfolio arise when inputs that could have a significant impact on the instrument’s valuation become
unobservable or observable, or where an unobservable input becomes significant or insignificant to an instrument’s value.
Notes to the consolidated financial statements continued
260
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 17: Fair values of financial assets and liabilities continued
(2) Financial assets and liabilities carried at fair value
(A) Financial assets (excluding derivatives)
Valuation hierarchy
At 31 December 2024, the Group’s financial assets (excluding derivatives) carried at fair value totalled £246,615 million (2023:
£230,910 million). The table below analyses these financial assets by balance sheet classification, asset type and valuation methodology
(level 1, 2 or 3, as described above). The fair value measurement approach is recurring in nature. There were no significant transfers between
level 1 and 2 during the year. For amounts included below which are subject to repurchase and reverse repurchase agreements see
page 180.
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
At 31 December 2024
Trading assets
Loans and advances to customers
621
621
Reverse repurchase agreements
20,466
20,466
Debt securities:
Government securities
3,473
3,473
Asset-backed securities
149
149
Corporate and other debt securities
741
741
3,473
890
4,363
Total trading assets
3,473
21,977
25,450
Other financial assets mandatorily held at fair value through profit or loss
Loans and advances to banks
2,787
2,787
Loans and advances to customers
2,418
6,010
8,428
Debt securities:
Government securities
7,091
2
7,093
Other public sector securities
2,288
2,288
Bank and building society certificates of deposit
8,667
8,667
Asset-backed securities
285
367
652
Corporate and other debt securities
14,722
2,161
16,883
7,091
25,964
2,528
35,583
Treasury and other bills
32
32
Equity shares
131,767
1,351
133,118
Contracts held with reinsurers
10,527
10,527
Total other financial assets mandatorily held at fair value through profit or loss1
138,890
41,696
9,889
190,475
Total financial assets at fair value through profit or loss
142,363
63,673
9,889
215,925
Financial assets at fair value through other comprehensive income
Debt securities:
Government securities
15,146
115
15,261
Asset-backed securities
149
48
197
Corporate and other debt securities
1,152
13,755
14,907
16,298
14,019
48
30,365
Equity shares
325
325
Total financial assets at fair value through other comprehensive income
16,298
14,019
373
30,690
Total financial assets (excluding derivatives) at fair value
158,661
77,692
10,262
246,615
1
Other financial assets mandatorily at fair value through profit or loss include assets backing insurance contracts and investment contracts of £185,201 million. Included within these
assets are investments in unconsolidated structured entities of £86,630 million; see note 39.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
261
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 17: Fair values of financial assets and liabilities continued
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
At 31 December 2023
Trading assets
Loans and advances to customers
23
23
Reverse repurchase agreements
17,413
17,413
Debt securities:
Government securities
3,596
3,596
Asset-backed securities
77
77
Corporate and other debt securities
529
529
3,596
606
4,202
Total trading assets
3,596
18,042
21,638
Other financial assets mandatorily held at fair value through profit or loss
Loans and advances to banks
3,127
3,127
Loans and advances to customers
1,992
7,890
9,882
Debt securities:
Government securities
8,005
4
8,009
Other public sector securities
10
2,300
2,310
Bank and building society certificates of deposit
7,504
7,504
Asset-backed securities
327
186
513
Corporate and other debt securities
18,061
2,064
20,125
8,015
28,196
2,250
38,461
Treasury and other bills
51
51
Equity shares
117,194
1,541
118,735
Contracts held with reinsurers
11,424
11,424
Total other financial assets mandatorily held at fair value through profit or loss1
125,260
44,739
11,681
181,680
Total financial assets at fair value through profit or loss
128,856
62,781
11,681
203,318
Financial assets at fair value through other comprehensive income
Debt securities:
Government securities
14,093
48
14,141
Asset-backed securities
121
52
173
Corporate and other debt securities
956
12,090
13,046
15,049
12,259
52
27,360
Equity shares
232
232
Total financial assets at fair value through other comprehensive income
15,049
12,259
284
27,592
Total financial assets (excluding derivatives) at fair value
143,905
75,040
11,965
230,910
for the year ended 31 December
1
Other financial assets mandatorily at fair value through profit or loss include assets backing insurance contracts and investment contracts of £176,475 million. Included within these
assets are investments in unconsolidated structured entities of £76,426 million; see note 39.
Notes to the consolidated financial statements continued
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
262
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 17: Fair values of financial assets and liabilities continued
Movements in level 3 portfolio
The table below analyses movements in level 3 financial assets (excluding derivatives) at fair value, recurring basis.
2024
2023
Financial
assets at
fair value
through
profit or loss
£m
Financial
assets at
fair value
through other
comprehensive
income
£m
Total level 3
financial assets
(excluding
derivatives)
at fair value,
recurring basis
£m
Financial
assets at
fair value
through
profit or loss
£m
Financial
assets at
fair value
through other
comprehensive
income
£m
Total level 3
financial assets
(excluding
derivatives)
at fair value,
recurring basis
£m
At 1 January
11,681
284
11,965
11,304
342
11,646
Exchange and other adjustments
1
(3)
(2)
(4)
(1)
(5)
Gains (losses) recognised in the income statement
within other income
352
3
355
723
6
729
Gains (losses) recognised in other comprehensive
income within the revaluation reserve in respect of
financial assets at fair value through other
comprehensive income
92
92
(54)
(54)
Purchases/increases to customer loans
1,080
1,080
744
3
747
Sales/repayments of customer loans
(3,266)
(3)
(3,269)
(1,140)
(12)
(1,152)
Transfers into the level 3 portfolio
84
84
136
136
Transfers out of the level 3 portfolio
(43)
(43)
(82)
(82)
At 31 December
9,889
373
10,262
11,681
284
11,965
Gains (losses) recognised in the income statement,
within other income, relating to the change in fair
value of those assets held at 31 December
186
(1)
185
654
654
Valuation methodology for financial assets (excluding derivatives)
Loans and advances to banks and customers
The fair value of these assets is determined using discounted cash flow techniques. The discount rates are derived from market observable
interest rates, a risk margin that reflects loan credit ratings and an incremental illiquidity premium based on historical spreads at origination
on similar loans.
Reverse repurchase agreements
The fair value of these assets is determined using discounted cash flow techniques. The discount rates are derived from observable
repurchase agreement rate curves specific to the type of security sold under the reverse repurchase agreement.
Debt securities
Debt securities measured at fair value and classified as level 2 are valued by discounting expected cash flows using an observable credit
spread applicable to the particular instrument.
Where there is limited trading activity in debt securities, the Group uses valuation models, consensus pricing information from third party
pricing services and broker or lead manager quotes to determine an appropriate valuation. Debt securities are classified as level 3 if there is
a significant valuation input that cannot be corroborated through market sources or where there are materially inconsistent values for an
input. Asset classes classified as level 3 mainly comprise venture capital investments.
Equity investments
Unlisted equity and fund investments are valued using different techniques in accordance with the Group’s valuation policy and
International Private Equity and Venture Capital Guidelines.
Depending on the business sector and the circumstances of the investment, unlisted equity valuations are based on earnings multiples, net
asset values or discounted cash flows.
•
•
•
A number of earnings multiples are used in valuing the portfolio including price earnings, earnings before interest and tax and earnings
before interest, tax, depreciation and amortisation. The particular multiple selected is appropriate for the size and type of business
being valued and is derived by reference to the current market-based multiple. Consideration is given to the risk attributes, growth
prospects and financial gearing of comparable businesses when selecting the appropriate multiple
Discounted cash flow valuations use estimated future cash flows, usually based on management forecasts, with the application of
appropriate exit yields or terminal multiples and discounted using rates appropriate to the specific investment, business sector or recent
economic rates of return. Recent transactions involving the sale of similar businesses may sometimes be used as a frame of reference in
deriving an appropriate multiple
For fund investments the most recent capital account value calculated by the fund manager is used as the basis for the valuation and
adjusted, if necessary, to align valuation techniques with the Group’s valuation policy
Unlisted equity investments and investments in property partnerships held in the life assurance funds are valued using third party
valuations. Management take account of any pertinent information, such as recent transactions and information received on particular
investments, to adjust the third party valuations where necessary.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
–
–
263
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 17: Fair values of financial assets and liabilities continued
(B) Financial liabilities (excluding derivatives)
Valuation hierarchy
At 31 December 2024, the Group’s financial liabilities (excluding derivatives) carried at fair value, comprised its financial liabilities at fair
value through profit or loss and totalled £27,611 million (2023: £24,914 million). The table below analyses these financial liabilities by
balance sheet classification and valuation methodology (level 1, 2 or 3, as described on page 260). The fair value measurement approach is
recurring in nature. There were no significant transfers between level 1 and 2 during the year.
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
At 31 December 2024
Trading liabilities
Liabilities in respect of securities sold under repurchase agreements
20,564
20,564
Short positions in securities
2,400
17
2,417
Total trading liabilities
2,400
20,581
22,981
Liabilities designated at fair value through profit or loss
Debt securities in issue
4,608
22
4,630
Other
Total liabilities designated at fair value through profit or loss
4,608
22
4,630
Total financial liabilities (excluding derivatives) at fair value
2,400
25,189
22
27,611
At 31 December 2023
Trading liabilities
Liabilities in respect of securities sold under repurchase agreements
18,057
18,057
Short positions in securities
1,569
5
1,574
Total trading liabilities
1,569
18,062
19,631
Liabilities designated at fair value through profit or loss
Debt securities in issue
5,223
42
5,265
Other
18
18
Total liabilities designated at fair value through profit or loss
5,241
42
5,283
Total financial liabilities (excluding derivatives) at fair value
1,569
23,303
42
24,914
Liabilities designated at fair value through profit or loss primarily represent debt securities in issue which either contain substantive
embedded derivatives which would otherwise need to be recognised and measured at fair value separately from the related debt
securities, or which are accounted for at fair value to significantly reduce an accounting mismatch.
The amount contractually payable on maturity of the debt securities held at fair value through profit or loss at 31 December 2024 was
£9,863 million, which was £5,233 million higher than the balance sheet carrying value (2023: £10,433 million, which was £5,167 million
higher than the balance sheet carrying value). At 31 December 2024 there was a cumulative £12 million decrease in the fair value of these
liabilities attributable to changes in credit spread risk; this is determined by reference to the quoted credit spreads of Lloyds Bank plc, the
issuing entity within the Group. Of the cumulative amount, an increase of £78 million arose in 2024 and an increase of £234 million arose
in 2023.
For the fair value of collateral pledged in respect of repurchase agreements see page 180.
In addition to the liabilities above, the Group’s non-participating investment contracts are held at fair value through profit or loss and were
all categorised as level 2.
Movements in level 3 portfolio
The table below analyses movements in the level 3 financial liabilities (excluding derivatives) at fair value portfolio.
2024
£m
2023
£m
At 1 January
42
45
Gains recognised in the income statement within other income
2
(1)
Redemptions
(3)
(1)
Transfers out of the level 3 portfolio
(19)
(1)
At 31 December
22
42
Gains recognised in the income statement, within other income, relating to the change in fair value of those liabilities held
at 31 December
3
(1)
for the year ended 31 December
Notes to the consolidated financial statements continued
26
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4
26
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 17: Fair values of financial assets and liabilities continued
Valuation methodology for financial liabilities (excluding derivatives)
Liabilities held at fair value through profit or loss
These principally comprise debt securities in issue which are classified as level 2 and their fair value is determined using techniques whose
inputs are based on observable market data. The carrying amount of the securities is adjusted to reflect the effect of changes in own credit
spreads and the resulting gain or loss is recognised in other comprehensive income.
In the year ended 31 December 2024, the own credit adjustment arising from the fair valuation of £4,630 million (2023: £5,265 million) of
the Group’s debt securities in issue designated at fair value through profit or loss resulted in a loss of £78 million (2023: loss of £234 million),
before tax, recognised in other comprehensive income.
Trading liabilities in respect of securities sold under repurchase agreements
The fair value of these liabilities is determined using discounted cash flow techniques. The discount rates are derived from observable
repurchase agreement rate curves specific to the type of security sold under the repurchase agreement.
(C) Derivatives
Valuation hierarchy
All of the Group’s derivative assets and liabilities are carried at fair value. At 31 December 2024, such assets totalled £24,065 million
(2023: £22,356 million) and liabilities totalled £21,676 million (2023: £20,149 million). The table below analyses these derivative balances by
valuation methodology (level 1, 2 or 3, as described on page 260). The fair value measurement approach is recurring in nature. There were
no significant transfers between level 1 and level 2 during the year.
2024
2023
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Derivative assets
103
23,221
741
24,065
77
21,857
422
22,356
Derivative liabilities
(79)
(21,175)
(422)
(21,676)
(116)
(19,589)
(444)
(20,149)
Movements in level 3 portfolio
The table below analyses movements in level 3 derivative assets and liabilities carried at fair value.
2024
2023
Derivative
assets
£m
Derivative
liabilities
£m
Derivative
assets
£m
Derivative
liabilities
£m
At 1 January
422
(444)
553
(608)
Exchange and other adjustments
(15)
7
(8)
5
Gains (losses) recognised in the income statement within other income
11
(7)
(104)
111
Purchases (additions)
5
(4)
19
(15)
(Sales) redemptions
(29)
53
(38)
63
Transfers into the level 3 portfolio
347
(27)
At 31 December
741
(422)
422
(444)
Gains (losses) recognised in the income statement, within other income, relating to the
change in fair value of those assets or liabilities held at 31 December
12
(7)
(72)
76
Valuation methodology for derivatives
The Group’s derivatives are valued using techniques including discounted cash flow and options pricing models, as appropriate. The types
of derivatives classified as level 2 and the valuation techniques used include:
•
•
•
•
Interest rate swaps which are valued using discounted cash flow models; the most significant inputs into those models are interest rate
yield curves which are developed from publicly quoted rates
Foreign exchange derivatives that do not contain options which are priced using rates available from publicly quoted sources
Credit derivatives are valued using standard models with observable inputs, including publicly available yield and credit default swap
(CDS) curves
Less complex interest rate and foreign exchange option products which are valued using volatility surfaces developed from publicly
available interest rate cap, interest rate swaption and other option volatilities; option volatility skew information is derived from a
market standard consensus pricing service
Complex interest rate products where inputs to the valuation are significant and unobservable are classified as level 3.
Derivatives where the counterparty becomes distressed from a credit perspective are generally reclassified to level 3 given limited
observability in all traded levels.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
265
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 17: Fair values of financial assets and liabilities continued
(D) Sensitivity of level 3 valuations
Critical accounting judgements and key sources of estimation uncertainty
Key sources of estimation uncertainty:
Interest rate spreads, credit spreads, earnings multiples, interest rate volatility and recovery rates
The Group’s valuation control framework and a description of level 1, 2 and 3 financial assets and liabilities is set out in section (1) above.
The valuation techniques for level 3 financial instruments involve management judgement and estimates, the extent of which depends
on the complexity of the instrument and the availability of market observable information. In addition, in line with market practice,
the Group applies credit, debit and funding valuation adjustments in determining the fair value of its uncollateralised derivative positions.
A description of these adjustments is set out in section (C) above. A quantitative analysis of the sensitivities to market risk arising from
the Group’s trading portfolios is set out in the tables marked audited on page 194.
2024
2023
Effect of reasonably possible
alternative assumptions1
Effect of reasonably possible
alternative assumptions1
Valuation techniques
Significant
unobservable inputs2
Carrying
value
£m
Favourable
changes
£m
Unfavourable
changes
£m
Carrying
value
£m
Favourable
changes
£m
Unfavourable
changes
£m
Financial assets at fair value through profit or loss
Loans and
advances to
customers
Discounted cash flows Interest rate
spreads
(-241bps/
+131bps)4
6,022
245
(231)
7,890
369
(351)
Debt securities
Discounted cash flows Credit spreads
(+/- 17%)5
621
35
(55)
445
39
(41)
Equity and
venture capital
investments
Market approach
Earnings multiple
(3.5/15.0)6
2,267
150
(150)
2,228
131
(131)
Underlying asset/net
asset value (incl.
property prices)3
n/a
773
80
(84)
809
77
(99)
Unlisted equities,
debt securities
and property
partnerships in
the life funds
Underlying asset/net
asset value (incl.
property prices),
broker quotes or
discounted cash
flows3
n/a
206
(7)
309
7
(6)
9,889
11,681
Financial assets at fair value through other comprehensive income
Asset-backed
securities
Lead manager or
broker quote/
consensus pricing
n/a
48
2
(2)
52
2
(2)
Equity and
venture capital
investments
Underlying asset/net
asset value (incl.
property prices)3
n/a
325
33
(33)
232
22
(22)
373
284
Derivative financial assets
Interest rate
options
Option pricing
model
Interest rate
volatility
(11%/183%)7
394
4
(6)
422
6
(3)
Interest rate
derivatives
Discounted cash flows (+/- 8%)
uncertainty of
recovery rates
347
21
(21)
741
422
Level 3 financial assets carried at fair value
11,003
12,387
Financial liabilities at fair value through profit or loss
Securitisation
notes and other
Discounted cash flows Interest rate
spreads
(+/– 50bps)8
22
1
(1)
42
1
(1)
Derivative financial liabilities
Interest rate
derivatives
Option pricing model
Interest rate
volatility
(11%/183%)7
422
17
(15)
444
10
(7)
Level 3 financial liabilities carried at fair value
444
486
for the year ended 31 December
1
Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.
2
Ranges are shown where appropriate and represent the highest and lowest inputs used in the level 3 valuations.
3
Underlying asset/net asset values represent fair value.
4
2023: -50bps/+272bps.
5
2023: +/- 6%.
6
2023: 1.6/17.8.
7
2023: 13%/200%.
8
2023: +/- 50bps.
Notes to the consolidated financial statements continued
–
–
–
–
266
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 17: Fair values of financial assets and liabilities continued
Unobservable inputs
Significant unobservable inputs affecting the valuation of debt securities, unlisted equity investments and derivatives are as follows:
•
•
•
Credit spreads represent the premium above the benchmark reference instrument required to compensate for lower credit quality;
higher spreads lead to a lower fair value
Volatility parameters represent key attributes of option behaviour; higher volatilities typically denote a wider range of
possible outcomes
Earnings multiples are used to value certain unlisted equity investments. The earnings multiples used are derived from those of listed
entities operating in the same sector with adjustments made for factors such as the size of the company and the quality of its earnings.
The majority of the Group’s venture capital investments are valued using an estimate of the company’s maintainable earnings before
interest, tax, depreciation and amortisation and in accordance with the International Private Equity and Venture Capital Valuation
Guidelines. A higher earnings multiple will result in a higher fair value
Reasonably possible alternative assumptions
Valuation techniques applied to many of the Group’s level 3 instruments often involve the use of two or more inputs whose relationship is
interdependent. The calculation of the effect of reasonably possible alternative assumptions included in the table above reflects such
relationships.
Debt securities
Reasonably possible alternative assumptions have been determined in respect of the Group’s structured credit investments by flexing
credit spreads.
Derivatives
Reasonably possible alternative assumptions have been determined in respect of swaptions in the Group’s derivative portfolios which are
priced using industry standard option pricing models. Such models require interest rate volatilities which may be unobservable at longer
maturities. To derive reasonably possible alternative valuations these volatility parameters have been flexed within a range of 11 per cent to
183 per cent (2023: 13 per cent to 200 per cent).
Further reasonably possible alternative assumptions have been determined in respect of the recovery rate on distressed derivatives, with
recovery rates flexed by 8 per cent in order to determine possible alternative valuations.
Unlisted equity, venture capital investments and investments in property partnerships
The valuation techniques used for unlisted equity and venture capital investments vary depending on the nature of the investment.
Reasonably possible alternative valuations for these investments have been calculated by reference to the approach taken, as appropriate
to the business sector and investment circumstances and as such the following inputs have been considered:
•
•
•
For valuations derived from earnings multiples, consideration is given to the risk attributes, growth prospects and financial gearing of
comparable businesses when selecting an appropriate multiple
The discount rates used in discounted cash flow valuations
In line with International Private Equity and Venture Capital Guidelines, the values of underlying investments in fund investment portfolios
(3) Financial assets and liabilities carried at amortised cost
(A) Financial assets
Valuation hierarchy
The table below analyses the fair values of those financial assets of the Group which are carried at amortised cost by valuation
methodology (level 1, 2 or 3, as described on page 260). Financial assets carried at amortised cost are mainly classified as level 3 due to
significant unobservable inputs used in the valuation models. Where inputs are observable, debt securities are classified as level 1 or 2.
Valuation hierarchy
Carrying
value
£m
Fair
value
£m
Level 1
£m
Level 2
£m
Level 3
£m
At 31 December 2024
Loans and advances to banks
7,900
7,892
7,892
Loans and advances to customers
459,857
455,846
455,846
Reverse repurchase agreements
49,476
49,476
49,476
Debt securities
14,544
14,380
11,980
2,400
At 31 December 2023
Loans and advances to banks
10,764
10,764
10,764
Loans and advances to customers
449,745
439,449
439,449
Reverse repurchase agreements
38,771
38,771
38,771
Debt securities
15,355
15,139
10,939
4,200
The carrying amount of the following financial instruments is a reasonable approximation of fair value: cash and balances at central banks,
items in the course of collection from banks, items in course of transmission to banks and notes in circulation.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
–
–
–
–
–
–
–
–
267
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 17: Fair values of financial assets and liabilities continued
Valuation methodology
Loans and advances to banks
The carrying value of short-dated loans and advances to banks is assumed to be their fair value. The fair value of other loans and advances
to banks is estimated by discounting the anticipated cash flows at a market discount rate adjusted for the credit spread of the obligor or,
where not observable, the credit spread of borrowers of similar credit quality.
Loans and advances to customers
The Group provides loans and advances to commercial, corporate and personal customers at both fixed and variable rates.
To determine the fair value of loans and advances to customers, loans are segregated into portfolios of similar characteristics. A number of
techniques are used to estimate the fair value of fixed rate lending; these take account of expected credit losses based on historic trends,
prevailing market interest rates and expected future cash flows. For retail exposures, fair value is usually estimated by discounting
anticipated cash flows (including interest at contractual rates) at market rates for similar loans offered by the Group and other financial
institutions. Certain loans secured on residential properties are made at a fixed rate for a limited period, typically two to five years, after
which the loans revert to the relevant variable rate. The fair value of such loans is estimated by reference to market rates for similar loans of
maturity equal to the remaining fixed interest rate period. The fair value of commercial loans is estimated by discounting anticipated cash
flows at a rate which reflects the effects of interest rate changes, adjusted for changes in credit risk.
Reverse repurchase agreements
The carrying amount is deemed a reasonable approximation of fair value given the short-term nature of these instruments.
Debt securities
The fair values of debt securities are determined predominantly from lead manager quotes and, where these are not available, by
alternative techniques including reference to credit spreads on similar assets with the same obligor, market standard consensus pricing
services, broker quotes and other research data.
(B) Financial liabilities
Valuation hierarchy
The table below analyses the fair values of those financial liabilities of the Group which are carried at amortised cost by valuation
methodology (level 1, 2 or 3, as described on page 260).
Valuation hierarchy
Carrying
value
£m
Fair
value
£m
Level 1
£m
Level 2
£m
Level 3
£m
At 31 December 2024
Deposits from banks
6,158
6,158
6,158
Customer deposits
482,745
483,568
483,568
Repurchase agreements at amortised cost
37,760
37,760
37,760
Debt securities in issue at amortised cost
70,834
70,894
70,894
Subordinated liabilities
10,089
10,419
10,419
At 31 December 2023
Deposits from banks
6,153
6,153
6,153
Customer deposits
471,396
471,857
471,857
Repurchase agreements at amortised cost
37,703
37,703
37,703
Debt securities in issue at amortised cost
75,592
75,021
75,021
Subordinated liabilities
10,253
10,345
10,345
for the year ended 31 December
Valuation methodology
Deposits from banks and customer deposits
The fair value of bank and customer deposits repayable on demand is assumed to be equal to their carrying value.
The fair value for all other deposits is estimated using discounted cash flows applying either market rates, where applicable, or current rates
for deposits of similar remaining maturities.
Repurchase agreements at amortised cost
The carrying amount is deemed a reasonable approximation of fair value given the short-term nature of these instruments.
Debt securities in issue at amortised cost
The fair value of short-term debt securities in issue is approximately equal to their carrying value. Fair value for other debt securities in issue
is calculated based on quoted market prices where available. Where quoted market prices are not available, fair value is estimated using
discounted cash flow techniques at a rate which reflects market rates of interest and the Group’s own credit spread.
Subordinated liabilities
The fair value of subordinated liabilities is determined by reference to quoted market prices where available or by reference to quoted
market prices of similar instruments. Subordinated liabilities are classified as level 2, since the inputs used to determine their fair value are
largely observable.
(4) Reclassifications of financial assets
There have been no reclassifications of financial assets in 2023 or 2024.
Notes to the consolidated financial statements continued
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
268
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 18: Maturities of assets and liabilities
The table below analyses assets and liabilities of the Group, other than liabilities arising from insurance and investment contracts (including
those classified as disposal group liabilities), into relevant maturity groupings based on the remaining contractual period at the balance
sheet date; balances with no fixed maturity such as goodwill, other intangible assets and property, plant and equipment are included in the
over 5 years category. Liabilities arising from insurance and investment contracts are analysed on a behavioural basis. Certain deposit
balances, included in the table below on the basis of their residual maturity, are repayable on demand upon payment of a penalty.
The table is provided on a contractual basis. The Group’s assets and liabilities may be repaid or otherwise mature earlier or later than
implied by their contractual terms and readers are, therefore, advised to use caution when using this data to evaluate the Group’s liquidity
position. In particular, amounts in respect of customer deposits are usually contractually payable on demand or at short notice. However, in
practice, these deposits are not usually withdrawn on their contractual maturity.
Up to 1
month
£m
1 to 3
months
£m
3 to 6
months
£m
6 to 9
months
£m
9 to 12
months
£m
1 to 2
years
£m
2 to 5
years
£m
Over 5
years
£m
Total
£m
At 31 December 2024
Assets
Cash and balances at central banks
62,705
–
–
–
–
–
–
–
62,705
Financial assets at fair value through profit or loss
13,096
6,843
6,680
3,675
2,837
4,244
11,030
167,520
215,925
Derivative financial instruments
2,405
2,302
1,079
774
659
1,237
3,062
12,547
24,065
Loans and advances to banks
2,842
1,350
903
452
187
583
1,579
4
7,900
Loans and advances to customers
18,748
12,747
15,375
12,271
11,010
34,790
67,901
287,015
459,857
Reverse repurchase agreements
22,793
13,356
6,945
2,764
1,524
1,355
739
–
49,476
Debt securities
40
1,439
232
358
273
4,128
2,183
5,891
14,544
Financial assets at amortised cost
44,423
28,892
23,455
15,845
12,994
40,856
72,402
292,910
531,777
Financial assets at fair value through other
comprehensive income
8
178
39
140
728
3,908
11,746
13,943
30,690
Other assets
3,231
1,015
157
1,030
106
295
643
35,058
41,535
Total assets
125,868
39,230
31,410
21,464
17,324
50,540
98,883
521,978
906,697
Liabilities
Deposits from banks
1,783
669
540
171
171
350
2,413
61
6,158
Customer deposits
392,403
27,489
18,009
18,650
18,327
4,153
3,456
258
482,745
Repurchase agreements at amortised cost
8,698
5,140
1,660
–
13,227
93
8,942
–
37,760
Financial liabilities at fair value through profit or
loss
15,443
3,677
774
131
1,048
402
1,466
4,670
27,611
Derivative financial instruments
2,409
2,218
1,054
781
588
1,207
3,407
10,012
21,676
Debt securities in issue at amortised cost
3,222
10,190
6,074
4,265
2,089
8,190
26,525
10,279
70,834
Liabilities arising from insurance and participating
investment contracts
478
436
51
102
224
1,510
7,992
111,271
122,064
Liabilities arising from non-participating
investment contracts
419
646
1,058
1,211
1,165
4,362
9,807
32,560
51,228
Other liabilities
7,519
1,711
351
684
446
1,548
2,237
16,148
30,644
Subordinated liabilities
–
638
277
–
1,070
1,706
2,219
4,179
10,089
Total liabilities
432,374
52,814
29,848
25,995
38,355
23,521
68,464
189,438
860,809
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
269
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 18: Maturities of assets and liabilities continued
Up to 1
month
£m
1 to 3
months
£m
3 to 6
months
£m
6 to 9
months
£m
9 to 12
months
£m
1 to 2
years
£m
2 to 5
years
£m
Over 5
years
£m
Total
£m
At 31 December 2023
Assets
Cash and balances at central banks
78,110
–
–
–
–
–
–
–
78,110
Financial assets at fair value through profit or loss
13,286
8,279
6,192
1,999
1,499
3,403
9,420
159,240
203,318
Derivative financial instruments
2,747
1,380
907
693
448
1,094
2,448
12,639
22,356
Loans and advances to banks
5,768
1,213
873
413
228
579
1,686
4
10,764
Loans and advances to customers
19,148
11,274
13,310
11,555
10,326
32,667
72,029
279,436
449,745
Reverse repurchase agreements
19,475
10,242
5,002
1,969
620
754
709
–
38,771
Debt securities
427
185
7
93
297
2,588
5,742
6,016
15,355
Financial assets at amortised cost
44,818
22,914
19,192
14,030
11,471
36,588
80,166
285,456
514,635
Financial assets at fair value through other
comprehensive income
276
428
221
272
617
1,663
11,587
12,528
27,592
Other assets
1,901
1,024
71
777
65
137
160
31,307
35,442
Total assets
141,138
34,025
26,583
17,771
14,100
42,885
103,781
501,170
881,453
Liabilities
Deposits from banks
2,092
1,065
201
218
184
349
2,044
–
6,153
Customer deposits
427,657
11,052
9,138
6,925
6,093
7,685
2,520
326
471,396
Repurchase agreements at amortised cost
3,222
4,057
23
2
–
21,448
8,951
–
37,703
Financial liabilities at fair value through profit or
loss
8,971
4,115
4,883
479
169
658
926
4,713
24,914
Derivative financial instruments
2,821
1,381
814
660
526
1,420
2,829
9,698
20,149
Debt securities in issue at amortised cost
1,954
8,057
9,260
5,873
4,554
12,489
24,418
8,987
75,592
Liabilities arising from insurance and participating
investment contracts
456
324
12
178
287
2,485
11,235
105,146
120,123
Liabilities arising from non-participating
investment contracts
348
527
789
787
776
4,280
9,517
27,954
44,978
Other liabilities
5,846
1,169
372
1,532
469
639
876
11,924
22,827
Subordinated liabilities
–
–
15
47
789
1,943
3,130
4,329
10,253
Total liabilities
453,367
31,747
25,507
16,701
13,847
53,396
66,446
173,077
834,088
for the year ended 31 December
Notes to the consolidated financial statements continued
270
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 19: Derivative financial instruments
The fair values and notional amounts of derivative instruments are set out in the following table:
2024
2023
Contract/
notional
amount
£m
Fair value
Changes in fair
value used for
calculating
hedge
ineffectiveness
£m
Contract/
notional
amount
£m
Fair value
Changes in fair
value used for
calculating
hedge
ineffectiveness
£m
Assets
£m
Liabilities
£m
Trading and other
Exchange rate contracts
707,329
10,247
9,172
572,858
6,631
6,222
Interest rate contracts
12,8
64,265
13,436
11,644
7,654,512
15,116
12,724
Credit derivatives
6,103
87
172
5,349
51
118
Equity, commodity and other contracts
8,678
247
333
9,463
455
580
Total derivative assets/liabilities –
trading and other
13,58
6,375
24,017
21,321
8,242,182
22,253
19,644
Hedging
Interest rate
Currency swaps
43
2
–
–
35
3
–
2
Interest rate swaps
231,064
6
337
1,336
153,639
80
425
(2,665)
Designated as fair value hedges
231,107
8
337
1,336
153,674
83
425
(2,663)
Foreign exchange
Currency swaps
1,963
30
14
61
2,684
11
72
(138)
Interest rate
Interest rate swaps
484,996
10
4
(600)
463,660
9
8
2,541
Designated as cash flow hedges
486,959
40
18
(539)
466,344
20
80
2,403
Total derivative assets/liabilities –
hedging
718,066
48
355
797
620,018
103
505
(260)
Total recognised derivative assets/
liabilities
14,304,441
24,065
21,676
8,862,200
22,356
20,149
Assets
£m
Liabilities
£m
The notional amount of the contract does not represent the Group’s exposure to credit risk, which is limited to the current cost of replacing
contracts with a positive value to the Group should the counterparty default. To reduce credit risk the Group uses a variety of credit
enhancement techniques such as netting and collateralisation, where security is provided against the exposure; a large proportion of the
Group’s derivatives are held through exchanges such as London Clearing House and are collateralised through those exchanges.
The Group holds derivatives as part of the following strategies:
•
•
•
Customer driven, where derivatives are held as part of the provision of risk management products to Group customers
To manage and hedge the Group’s interest rate and foreign exchange risk arising from normal banking business. The hedge accounting
strategy adopted by the Group is to utilise a combination of fair value and cash flow hedge approaches
Derivatives held in policyholder funds as permitted by the investment strategies of those funds
The principal derivatives used by the Group are as follows:
•
•
•
•
Interest rate related contracts include interest rate swaps, forward rate agreements and options. An interest rate swap is an agreement
between two parties to exchange fixed and floating interest payments, based upon interest rates defined in the contract, without the
exchange of the underlying principal amounts. Forward rate agreements are contracts for the payment of the difference between a
specified rate of interest and a reference rate, applied to a notional principal amount at a specific date in the future. An interest rate
option gives the buyer, on payment of a premium, the right, but not the obligation, to fix the rate of interest on a future loan or deposit,
for a specified period and commencing on a specified future date
Exchange rate related contracts include forward foreign exchange contracts, currency swaps and options. A forward foreign exchange
contract is an agreement to buy or sell a specified amount of foreign currency on a specified future date at an agreed rate. Currency
swaps generally involve the exchange of interest payment obligations denominated in different currencies; the exchange of principal can
be notional or actual. A currency option gives the buyer, on payment of a premium, the right, but not the obligation, to sell specified
amounts of currency at agreed rates of exchange on or before a specified future date
Credit derivatives, principally credit default swaps, are used by the Group as part of its trading activity and to manage its own exposure
to credit risk. A credit default swap is a swap in which one counterparty receives a premium at pre-set intervals in consideration for
guaranteeing to make a specific payment should a negative credit event take place
Equity, commodity and other contracts include commodity swaps and options
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
271
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 19: Derivative financial instruments continued
Details of the Group’s hedging instruments are set out below:
Maturity
Fair value hedges
Up to 1 month
£m
1 to 3 months
£m
3 to 12 months
£m
1 to 5 years
£m
Over 5 years
£m
Total
£m
At 31 December 2024
Interest rate
Cross currency swap
Notional
43
43
Average fixed interest rate
1.28%
Average EUR/GBP exchange rate
1.38
Interest rate swap
Notional
5,236
13,781
55,607
111,300
45,140
231,064
Average fixed interest rate
3.04%
3.68%
3.36%
2.27%
231,107
At 31 December 2023
Cross currency swap
Notional
35
35
Average fixed interest rate
1.28%
Average EUR/GBP exchange rate
1.38
Interest rate swap
Notional
1,908
5,778
19,353
87,119
39,481
153,639
0.95%
1.72%
2.03%
2.90%
2.00%
Average fixed interest rate
153,674
4.04%
Interest rate
Maturity
Cash flow hedges
Up to 1 month
£m
1 to 3 months
£m
3 to 12 months
£m
Over 5 years
£m
Total
£m
At 31 December 2024
Foreign exchange
Currency swap
Notional
107
441
763
6
1,963
Average EUR/GBP exchange rate
1.17
1.16
1.15
1.10
1.06
Average USD/GBP exchange rate
1.30
1.27
1.27
1.27
1.30
Interest rate
Interest rate swap
Notional
9,195
21,010
129,436
262,387
62,968
484,996
Average fixed interest rate
4.32%
4.36%
3.84%
3.34%
3.01%
486,959
At 31 December 2023
Foreign exchange
Currency swap
Notional
18
470
1,648
541
7
2,684
Average EUR/GBP exchange rate
1.15
1.14
1.14
1.08
1.07
Average USD/GBP exchange rate
1.25
1.23
1.25
1.24
Interest rate
Interest rate swap
Notional
9,501
23,015
76,439
284,969
69,736
463,660
4.13%
4.14%
3.82%
3.35%
2.58%
Average fixed interest rate
466,344
1 to 5 years
£m
646
for the year ended 31 December
Notes to the consolidated financial statements continued
722
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
272
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 19: Derivative financial instruments continued
The Group’s hedged items are as follows:
Carrying amount of
the hedged item
Accumulated amount of
fair value adjustment on
the hedged item
Fair value hedges
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Change in fair
value of hedged
item for
ineffectiveness
assessment
£m
At 31 December 2024
Interest rate
Fixed rate mortgages1
124,013
(890)
(184)
Fixed rate issuance2
51,499
1,340
(75)
Fixed rate bonds3
29,264
(1,070)
(1,158)
At 31 December 2023
Interest rate
Fixed rate mortgages1
75,871
25
2,544
Fixed rate issuance2
50,466
1,365
(1,110)
Fixed rate bonds3
24,146
(331)
962
1
Included within loans and advances to customers.
2
Included within debt securities in issue at amortised cost and subordinated liabilities.
3
Included within financial assets at amortised cost and financial assets at fair value through other comprehensive income.
At 31 December 2024
At 31 December 2023
Cash flow hedging reserve
Cash flow hedging reserve
Cash flow hedges
Change in fair
value of hedged
item for
ineffectiveness
assessment
£m
Continuing
hedges
£m
Discontinued
hedges
£m
Change in fair
value of hedged
item for
ineffectiveness
assessment
£m
Continuing
hedges
£m
Discontinued
hedges
£m
Foreign exchange
Foreign currency issuance1
(60)
75
59
138
8
69
Customer deposits2
5
3
Interest rate
Customer loans3
982
(3,470)
(1,590)
(1,796)
(2,934)
(1,885)
Central bank balances4
384
(1,012)
(917)
(648)
(624)
(1,462)
Customer deposits2
(51)
1,592
42
262
1,591
(3)
1
Included within debt securities in issue at amortised cost and subordinated liabilities.
2
Included within customer deposits.
3
Included within loans and advances to customers.
4
Included within cash and balances at central banks.
The accumulated amount of fair value hedge adjustments remaining on the balance sheet for hedged items that have ceased to be
adjusted for hedging gains and losses is a liability of £980 million relating to fixed rate issuances of £582 million and mortgages of
£398 million (2023: liability of £1,446 million relating to fixed rate issuances of £656 million and mortgages of £790 million).
Gains and losses arising from hedge accounting are summarised as follows:
Hedge ineffectiveness
recognised in the
income statement1
Fair value hedges
2024
£m
2023
£m
Interest rate
Fixed rate mortgages
(52)
(264)
Fixed rate issuance
(11)
(17)
Fixed rate bonds
(18)
14
1
Hedge ineffectiveness is included in the income statement within net trading income.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
273
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 19: Derivative financial instruments continued
Amounts reclassified from
reserves to net interest income as:
Cash flow hedges
Gain (loss)
recognised
in other
comprehensive
income
£m
Hedge
ineffectiveness
recognised in
the income
statement1
£m
Hedged cash
flows will no
longer occur
£m
Hedged item
affected income
statement
£m
At 31 December 2024
Foreign exchange
Foreign currency issuance
61
(4)
Interest rate
Customer loans
(2,700)
(61)
2,458
Central bank balances
(780)
(7)
937
Customer deposits
842
8
(794)
At 31 December 2023
Foreign exchange
Foreign currency issuance
(138)
(9)
Interest rate
Customer loans
(37)
20
1,674
Central bank balances
284
2
725
Customer deposits
436
(3)
(552)
1
Hedge ineffectiveness is included in the income statement within net trading income.
There was no gain or loss in either 2024 or 2023 reclassified from the cash flow hedging reserve for which hedge accounting had previously
been used but for which the hedged future cash flows are no longer expected to occur.
Note 20: Loans and advances to customers
Tables showing the movement of loans advances to customers, compiled by comparing the position at the end of the year to that at the
beginning of the year, are shown in the Credit Risk section.
Note 21: Allowance for expected credit losses
The Group recognises an allowance for expected credit losses (ECLs) for loans and advances to customers and banks, other financial assets
held at amortised cost, financial assets (other than equity investments) measured at fair value through other comprehensive income and
certain loan commitment and financial guarantee contracts. At 31 December 2024, the Group’s expected credit loss allowance was
£3,481 million (2023: £4,084 million), of which £3,211 million (2023: £3,762 million) was in respect of drawn balances.
The Group’s total expected credit loss allowances were as follows:
At 31 December 2024
At 31 December 2023
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Allowance for expected credit losses
In respect of:
Loans and advances to banks
1
–
–
–
1
8
–
–
–
8
UK mortgages
53
273
335
187
848
161
374
357
213
1,105
Credit cards
149
297
133
–
579
168
401
130
–
699
Other
329
326
227
–
882
339
320
228
–
887
Retail
531
896
695
187
2,309
668
1,095
715
213
2,691
Commercial Banking
205
264
413
–
882
232
372
418
–
1,022
Other
–
–
–
–
–
–
–
4
–
4
Loans and advances to customers
736
1,160
1,108
187
3,191
900
1,467
1,137
213
3,717
Debt securities
3
–
1
–
4
7
2
2
–
11
Financial assets at amortised cost
740
1,160
1,109
187
3,196
915
1,469
1,139
213
3,736
Other assets
7
–
8
–
15
16
–
10
–
26
Provisions in relation to loan
commitments and financial guarantees
142
126
2
–
270
160
160
2
–
322
Total
889
1,286
1,119
187
3,481
1,091
1,629
1,151
213
4,084
Expected credit loss in respect of
financial assets at fair value through
other comprehensive income
(memorandum item)
4
–
–
–
4
7
–
–
–
7
for the year ended 31 December
The calculation of the Group’s expected credit loss allowances and provisions against loan commitments and guarantees, which are set out
above, requires the Group to make a number of judgements, assumptions and estimates. The most significant are set out below:
Notes to the consolidated financial statements continued
274
–
–
–
–
–
–
–
–
–
–
274
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 21: Allowance for expected credit losses continued
Critical accounting judgements and key sources of estimation uncertainty
Critical judgements:
Determining an appropriate definition of default against which a probability of default, exposure at default
and loss given default parameter can be evaluated
Establishing the criteria for a significant increase in credit risk (SICR)
The individual assessment of material cases and the use of judgemental adjustments made to impairment
modelling processes that adjust inputs, parameters and outputs to reflect risks not captured by models
Key source of estimation uncertainty:
Base case and multiple economic scenarios (MES) assumptions, including the rate of unemployment and the
rate of change of house prices, required for creation of MES scenarios and forward-looking credit parameters
Definition of default
The probability of default (PD) of an exposure, both over a 12-month period and over its lifetime, is a key input to the measurement of the
ECL allowance. Default has occurred when there is evidence that the customer is experiencing significant financial difficulty which is likely
to affect the ability to repay amounts due. The definition of default adopted by the Group is described in note 2(H) Impairment of financial
assets. A Stage 3 asset that is no longer credit-impaired is transferred back to Stage 2 as no general probation period is applied to assets in
Stage 3. UK mortgages is an exception to this rule where a probation period is enforced for non-performing forborne and defaulted
exposures in accordance with prudential regulation.
Significant increase in credit risk
An ECL allowance equivalent to 12 months’ expected losses is established against assets in Stage 1; assets classified as Stage 2 carry an ECL
allowance equivalent to lifetime expected losses. Assets are transferred from Stage 1 to Stage 2 when there has been a significant increase
in credit risk (SICR) since initial recognition. Credit-impaired assets are transferred to Stage 3 with a lifetime expected losses allowance. If
an exposure that is classified as Stage 2 no longer meets the SICR criteria, which in some cases capture customer behaviour in previous
periods, it is moved back to Stage 1.
The Group uses both quantitative and qualitative indicators to determine whether there has been a SICR for an asset. The setting of
precise trigger points combined with risk indicators requires judgement and the use of different trigger points may have a material impact
upon the ECL allowance. The Group monitors the effectiveness of SICR criteria on an ongoing basis.
For UK mortgages a reassessment of the SICR criteria was performed following redevelopment of the ECL model in the period, in order to
maintain SICR effectiveness. At 31 December 2024 a doubling of PD since origination was set as a quantitative SICR trigger. All originations
post IFRS 9 adoption incorporate forward looking information, and for recent Interest Only accounts the likelihood of default occurring at
the end of term. This is supplemented by qualitative triggers including where customers have surpassed their original contractual term
through use of term extensions, where fraud is evident, or where an account is in arrears.
For credit cards, loans and overdrafts an increase of three PD grades since origination on the retail master scale (RMS) shown below is set
as a quantitative SICR trigger. Assets are also assumed to have suffered a SICR if they have either been in arrears on three occasions, or in
default once, in the past 12 months.
RMS grade
1
2
3
4
5
6
7
8
9
10
11
12
13
14
PD boundary1 (%)
0.
10
0.40
0.
80
1. 20
2 .50
4.
50
7 .50
10.00
14.
00
2 0.00
3 0.00
45.
00
99.99
100.
00
1
Probability-weighted annualised lifetime probability of default.
For Commercial Banking a doubling of PD with a minimum increase in PD of 1 per cent since origination is treated as a SICR. This is
complemented with the use of internal credit risk classifications and ratings as qualitative indicators to identify a SICR.
The Group does not use the low credit risk exemption in its staging assessments, though more simplistic SICR criteria are applied for
portfolios not listed above. All financial assets are assumed to have suffered a SICR if they are more than 30 days past due.
Individual assessments and application of judgement in adjustments to modelled ECL
The table below analyses total ECL allowances by portfolio, separately identifying the amounts that have been modelled, those that have
been individually assessed and those arising through the application of judgemental adjustments.
At 31 December 2024
At 31 December 2023
Judgements due to:
Judgements due to:
Modelled
ECL
£m
Individually
assessed
£m
Inflationary
and interest
rate risk
£m
Other
£m
Total
£m
Modelled
ECL
£m
Individually
assessed
£m
Inflationary
and interest
rate risk
£m
Other
£m
Total
£m
UK mortgages
720
132
852
991
61
63
1,115
Credit cards
681
(7)
674
703
92
15
810
Other Retail
860
90
950
866
33
46
945
Commercial Banking
894
354
(259)
989
1,124
340
(282)
1,182
Other
16
16
32
32
Total
3,171
354
(44)
3,481
3,716
340
186
(158)
4,084
Individually assessed ECL
Stage 3 ECL in Commercial Banking is largely assessed on an individual basis by the Business Support Unit using bespoke assessment of loss
for each specific client based on potential recovery strategies. While these assessments are based on the Group’s latest economic view, the
use of Group-wide multiple economic scenarios and weightings is not considered appropriate for these cases due to their individual
characteristics. In place of this, a range of case-specific outcomes are considered with any alternative better or worse outcomes that carry
a 25 per cent likelihood taken into account in establishing a probability-weighted ECL. At 31 December 2024, individually assessed
provisions for Commercial Banking were £354 million (2023: £340 million) which reflected a range of £309 million to £437 million (2023:
£291 million to £413 million), based on the range of alternative outcomes considered.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
275
Lloyds Banking Group plc Annual Report and Accounts 2024
for the year ended 31 December
Note 21: Allowance for expected credit losses continued
Application of judgement in adjustments to modelled ECL
Impairment models fall within the Group’s model risk framework with model monitoring, periodic validation and back testing performed on
model components, such as probability of default. Limitations in the models or data inputs may be identified through these assessments
and review of model outputs, which may require appropriate judgemental adjustments to the ECL. These adjustments are determined by
considering the particular attributes of exposures which have not been adequately captured by the impairment models and range from
changes to model inputs and parameters, at account level (in-model adjustments), through to more qualitative post-model adjustments.
Judgements due to inflationary and interest rate risk
During 2022 and 2023 the intensifying inflationary pressures, alongside rising interest rates created further risks not deemed to be fully
captured by ECL models which meant judgemental adjustments were required. Throughout 2024 these risks subsided with inflation back
at around 2 per cent, base rates reducing and credit performance proving resilient. As a result, the judgements held in respect of
inflationary and interest rate risks have been removed (2023: £186 million). Other judgements continue to be applied for broader data and
model limitations, both increasing and decreasing ECL where deemed necessary.
Other judgements
UK mortgages: £132 million (2023: £63 million)
These adjustments principally comprise:
Repossession risk1 : £110 million (2023: £106 million)
The Group’s repossession activity and respective data associated with the UK mortgage portfolio has been distorted for a number of years
following pauses in litigation activity both before and during COVID-19. This has seen a larger number of customers in default for a longer
period than would typically be expected resulting in a risk that ECL calculated on these accounts is understated. Judgemental adjustments
to mitigate this risk have been in place for several years, although the approach has been revisited in 2024. An assessment of recent cure
trends indicated that the overall possession rates used in the model appeared adequate; however, the assessment identified a potential
recovery risk on specific subsets of long-term defaulted cases (greater than five years), as well as a continued risk from a longer duration
between default and repossession than model assumptions used on existing and future defaults.
1
Previously reported as Increase in time to repossession.
Adjustment for specific segments: £13 million (2023: £23 million)
The Group monitors risks across specific segments of its portfolios which may not be fully captured through collective models. The
judgement for fire safety and cladding uncertainty reduced in the period following methodology refinement. Though experience remains
limited the risk is considered sufficiently material to address, given evidence of cases having defective cladding, or other fire safety issues.
Credit cards: £(7) million (2023: £15 million) and Other Retail: £90 million (2023: £46 million)
These adjustments principally comprise:
Lifetime extension: Credit cards: £55 million (2023: £67 million) and Other Retail: £10 million (2023: £10 million)
An adjustment is required to extend the lifetime used for Stage 2 exposures on Retail revolving products from a three-year modelled
lifetime, which reflected the outcome data available when the ECL models were developed. Incremental defaults beyond year three are
calculated through the extrapolation of the default trajectory observed throughout the three years and beyond. The Credit cards
judgement has reduced slightly in the period reflecting portfolio movement.
Adjustments to loss rates: Credit cards: £(57) million (2023: £(50) million) and Other Retail: £47 million (2023: £37 million)
A number of adjustments have been made to the loss given default (LGD) assumptions used within unsecured and motor credit models.
For unsecured portfolios, the adjustments reflect the impact of changes in collection debt sale strategy on the Group’s LGD models,
incorporating up to date customer performance and forward flow debt sale pricing. For UK Motor Finance, within Other Retail,
the adjustment is used to incorporate the latest outlook on used car prices.
Commercial Banking: £(259) million (2023: £(282) million)
These adjustments principally comprise:
Corporate insolvency rates: £(253) million (2023: £(292) million)
The volume of UK corporate insolvencies continues to exhibit an elevated trend beyond December 2019 levels, revealing a marked
misalignment between observed UK corporate insolvencies and the Group’s equivalent credit performance. This dislocation gives rise to
uncertainty over the drivers of the observed trends in the metric and the appropriateness of the Group’s Commercial Banking model
response which uses observed UK corporate insolvencies data to anchor future loss estimates to. Given the Group’s asset quality remains
strong with low defaults, a negative adjustment is applied by reverting judgementally to the long-term average of the insolvency rate.
Adjustments to loss given defaults (LGDs): £(80) million (2023: £(105) million)
Following a review of the loss given default approach for commercial exposures, management continues to judge that ECL should be
adjusted to mitigate limitations identified in the approach which are causing loss given defaults to be inflated. These include the benefit
from amortisation of exposures relative to collateral values at default and a move to an exposure-weighted approach being adopted.
These temporary adjustments will be addressed through future model development.
Corporate income gearing (CIG) adjustment: £37 million (2023: £nil)
An adjustment was raised, based upon the assessment of Corporate Income Gearing (CIG), a model parameter for affordability used in
Commercial Banking. The modelled ECL release resulting from updating CIG drivers (interest rates) was judgmentally reversed, with interest
rates having reached a plateau which has translated into a slower year-on-year increase in CIG. This slowdown gave a release in modelled
ECL which is not judged representative of the continued pressure on borrowers and business margins.
Commercial Real Estate (CRE) price reduction: £35 million (2023: £67 million)
The material fall in CRE prices observed in late 2022, previously required a judgemental reinstatement within ECL model assumptions
at 31 December 2023, given the materially reduced level in CRE prices could still trigger additional losses. At 31 December 2024 the
adjustment remains in place only for loss rates on a small proportion of accounts still to be reassessed following this fall. This is alongside a
more material adjustment for the potential impact on loss rates from valuations on specific CRE sectors where evidence suggests valuations
may lag achievable levels, notably in cases of stressed sale.
Notes to the consolidated financial statements continued
276
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 21: Allowance for expected credit losses continued
Generation of multiple economic scenarios
The estimate of expected credit losses is required to be based on an unbiased expectation of future economic scenarios. The approach
used to generate the range of future economic scenarios depends on the methodology and judgements adopted. The Group’s approach is
to start from a defined base case scenario, used for planning purposes, and to generate alternative economic scenarios around this base
case. The base case scenario is a conditional forecast underpinned by a number of conditioning assumptions that reflect the Group’s best
view of key future developments. If circumstances appear likely to materially deviate from the conditioning assumptions, then the base
case scenario is updated.
The base case scenario is central to a range of future economic scenarios generated by simulation of an economic model, for which the
same conditioning assumptions apply as in the base case scenario. These scenarios are ranked by using estimated relationships with
industry-wide historical loss data. With the base case already pre-defined, three other scenarios are identified as averages of constituent
scenarios located around the 15th, 75th and 95th percentiles of the distribution. The full distribution is therefore summarised by a practical
number of scenarios to run through ECL models representing an upside, the base case, and a downside scenario weighted at 30 per cent
each, together with a severe downside scenario weighted at 10 per cent. The scenario weights represent the distribution of economic
scenarios and not subjective views on likelihood. The inclusion of a severe downside scenario with a smaller weighting ensures that the non-
linearity of losses in the tail of the distribution is adequately captured. Macroeconomic projections may employ reversionary techniques to
adjust the paths of economic drivers towards long-run equilibria after a reasonable forecast horizon. The Group does not use such
techniques to force the MES scenarios to revert to the base case planning view. Utilising such techniques would be expected to be
immaterial for expected credit losses since loss sensitivity is minimal after the initial five years of the projections.
A forum under the chairmanship of the Chief Economist meets at least quarterly to review and, if appropriate, recommend changes to the
method by which economic scenarios are generated, for approval by the Chief Financial Officer and Chief Risk Officer. The Group
continues to judge it appropriate to include a non-modelled severe downside scenario for Group ECL calculations. The scenario is
generated as a simple average of a fully modelled severe scenario, better representing shocks to demand, and a scenario with higher paths
for UK Bank Rate and CPI inflation, as a representation of shocks to supply. The combined ‘adjusted’ scenario used in ECL modelling is
considered to better reflect the risks around the Group’s base case view in an economic environment where demand and supply shocks are
more balanced.
Base case and MES economic assumptions
The Group’s base case economic scenario has been updated to reflect ongoing geopolitical developments and changes in domestic
economic policy. The Group’s updated base case scenario has three conditioning assumptions. First, cross-border conflicts do not lead to
major disruptions in commodity prices or global trade. Second, the US pursues a more isolationist economic agenda, with policies including
trade tariffs; immigration cuts; and unfunded tax cuts. China, EU and UK are assumed to retaliate to US tariffs imposed on them. Third, UK
Budget public investment plans are assumed to have a small but positive impact on trend productivity growth, subject to further review as
more specific policy detail emerges.
Based on these assumptions and incorporating the economic data published in the fourth quarter, the Group’s base case scenario is for a
slow expansion in GDP and a rise in the unemployment rate alongside modest changes in residential and commercial property prices.
Against a backdrop of some persistence in inflationary pressures, UK Bank Rate is expected to be lowered gradually during 2025. Risks
around this base case economic view lie in both directions and are largely captured by the generation of alternative economic scenarios.
The Group has accommodated the latest available information at the reporting date in defining its base case scenario and generating
alternative economic scenarios. The scenarios include forecasts for key variables in the fourth quarter of 2024, for which actuals may have
since emerged prior to publication.
Scenarios by year
The key UK economic assumptions made by the Group are shown in the following tables across a number of measures explained below.
Annual assumptions
Gross domestic product (GDP) growth and Consumer Price Index (CPI) inflation are presented as an annual change, house price growth
and commercial real estate price growth are presented as the growth in the respective indices over each year. Unemployment rate and
UK Bank Rate are averages over the year.
Five-year average
The five-year average reflects the average annual growth rate, or level, over the five-year period. It includes movements within the current
reporting year, such that the position as at 31 December 2024 covers the five years 2024 to 2028. The inclusion of the reporting year
within the five-year period reflects the need to predict variables which remain unpublished at the reporting date and recognises that
credit models utilise both level and annual changes. The use of calendar years maintains a comparability between the annual
assumptions presented.
Five-year start to peak and trough
The peak or trough for any metric may occur intra year and therefore not be identifiable from the annual assumptions, so they are also
disclosed. For GDP, house price growth and commercial real estate price growth, the peak, or trough, reflects the highest, or lowest
cumulative quarterly position reached relative to the start of the five-year period, which as at 31 December 2024 is 1 January 2024. Given
these metrics may exhibit increases followed by greater falls, the start to trough movements quoted may be smaller than the equivalent
‘peak to trough’ movement (and vice versa for start to peak). Unemployment, UK Bank Rate and CPI inflation reflect the highest, or lowest,
quarterly level reached in the five-year period.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
277
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 21: Allowance for expected credit losses continued
Start to
peak
%
Start to
trough
%
2024
%
2025
%
2026
%
2027
%
2028
%
At 31 December 2024
2024 to 2028
average
%
Upside
Gross domestic product growth
0.8
1.9
2.2
1.5
1.4
1.6
8 .9
0.7
Unemployment rate
4.3
3.5
2.8
2.7
2.8
3.2
4.4
2.7
House price growth
3.4
3.7
6.5
6.6
5.4
5.1
28.2
0.4
Commercial real estate price growth
0.7
7.8
6.7
3.2
0.5
3.7
20.0
(0.8)
UK Bank Rate
5.06
4.71
5.02
5.19
5.42
5.08
5.50
4.50
CPI inflation
2.6
2.8
2.6
2.9
3.0
2.8
3.5
2.0
Base case
Gross domestic product growth
0.8
1.0
1.4
1.5
1.5
1.2
7.0
0.7
Unemployment rate
4.3
4.7
4.7
4.5
4.5
4.5
4.8
4.2
House price growth
3.4
2.1
1.0
1.4
2.4
2.0
10.5
0.4
Commercial real estate price growth
0.7
0.3
2.5
1.9
0.0
1.1
5.4
(0.8)
UK Bank Rate
5.06
4.19
3.63
3.50
3.50
3.98
5.25
3.50
CPI inflation
2.6
2.8
2.4
2.4
2.2
2.5
3.5
2.0
Downside
Gross domestic product growth
0.8
(0.5)
(0.4)
1.0
1.5
0.5
3.2
0.0
Unemployment rate
4.3
6.0
7.4
7.4
7.1
6.4
7.5
4.2
House price growth
3.4
0.6
(5.5)
(6.6)
(3.4)
(2.4)
4.0
(11.4)
Commercial real estate price growth
0.7
(7.8)
(3.1)
(0.9)
(2.3)
(2.7)
0.7
(12.9)
UK Bank Rate
5.06
3.53
1.56
0.96
0.68
2.36
5.25
0.59
CPI inflation
2.6
2.8
2.3
1.8
1.2
2.1
3.5
0.9
Severe downside
Gross domestic product growth
0.8
(1.9)
(1.5)
0.7
1.3
(0.1)
1.2
(2.4)
Unemployment rate
4.3
7.7
10.0
10.0
9.7
8.4
10.2
4.2
House price growth
3.4
(0.8)
(12.4)
(13.6)
(8.8)
(6.7)
3.4
(29.2)
Commercial real estate price growth
0.7
(17.4)
(8.5)
(5.5)
(5.7)
(7.5)
0.7
(32.3)
UK Bank Rate – modelled
5.06
2.68
0.28
0.08
0.02
1.62
5.25
0.02
UK Bank Rate – adjusted1
5.06
4.03
2.70
2.23
1.95
3.19
5.25
1.88
CPI inflation – modelled
2.6
2.8
1.9
1.0
0.1
1.7
3.5
(0.2)
CPI inflation – adjusted1
2.6
3.6
2.1
1.4
0.8
2.1
3.9
0.7
Probability-weighted
Gross domestic product growth
0.8
0.5
0.8
1.2
1.4
1.0
5.7
0.7
Unemployment rate
4.3
5.0
5.5
5.4
5.3
5.1
5.5
4.2
House price growth
3.4
1.8
(0.7)
(1.0)
0.4
0.8
5.3
0.4
Commercial real estate price growth
0.7
(1.7)
1.0
0.7
(1.1)
(0.1)
0.7
(1.3)
UK Bank Rate – modelled
5.06
4.00
3.09
2.90
2.88
3.59
5.25
2.88
UK Bank Rate – adjusted1
5.06
4.13
3.33
3.12
3.08
3.74
5.25
3.06
CPI inflation – modelled
2.6
2.8
2.4
2.2
1.9
2.4
3.5
1.8
CPI inflation – adjusted1
2.6
2.9
2.4
2.3
2.0
2.4
3.5
1.9
1
The adjustment to UK Bank Rate and CPI inflation in the severe downside is considered to better reflect the risks around the Group’s base case view in an economic environment
where the risks of supply and demand shocks are more balanced.
First
quarter
2024
%
Second
quarter
2024
%
Third
quarter
2024
%
Fourth
quarter
2024
%
First
quarter
2025
%
Second
quarter
2025
%
Third
quarter
2025
%
Fourth
quarter
2025
%
1
Base case scenario by quarter
At 31 December 2024
Gross domestic product growth
0.7
0.4
0.0
0.1
0.2
0.3
0.3
0.3
Unemployment rate
4.3
4.2
4.3
4.4
4.5
4.6
4.7
4.8
House price growth
0.4
1.8
4.6
3.4
3.6
4.0
3.0
2.1
Commercial real estate price growth
(5.3)
(4.7)
(2.8)
0.7
1.8
1.4
0.9
0.3
UK Bank Rate
5.25
5.25
5.00
4.7
5
4.50
4.25
4.00
4.00
CPI inflation
3.5
2.1
2.0
2.5
2.4
3.0
2.9
2.7
for the year ended 31 December
1
Gross domestic product growth is presented quarter-on-quarter. House price growth, commercial real estate growth and CPI inflation are presented year-on-year, i.e. from the
equivalent quarter in the previous year. Unemployment rate and UK Bank Rate are presented as at the end of each quarter.
Notes to the consolidated financial statements continued
278
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 21: Allowance for expected credit losses continued
2023 to 2027
average
%
Start to
peak
%
Start to
trough
%
2023
%
2024
%
2025
%
2026
%
2027
%
At 31 December 2023
Upside
Gross domestic product
0 .3
1 .5
1.7
1 .7
1 .9
1 .4
8.1
0 .2
Unemployment rate
4 .0
3.3
3.1
3.1
3.1
3.3
4 .2
3.0
House price growth
1 .9
0 .8
6.9
7.2
6.8
4 .7
25
.7
(1 .2)
Commercial real estate price growth
(3.9)
9.0
3.8
1 .3
1 .3
2.2
1 1.5
(3.9)
UK Bank Rate
4 .94
5 .72
5 .61
5 .38
5 .18
5 .37
5 .79
4 .25
CPI inflation
7.3
2.7
3.1
3.2
3.1
3.9
1 0.2
2.1
Base case
Gross domestic product
0 .3
0 .5
1 .2
1 .7
1 .9
1 .1
6.4
0 .2
Unemployment rate
4 .2
4 .9
5 .2
5 .2
5 .0
4 .9
5 .2
3.9
House price growth
1 .4
(2.2)
0 .5
1 .6
3.5
1 .0
4 .8
(1 .2)
Commercial real estate price growth
(5
.1)
(0
.2)
0 .1
0 .0
0 .8
(0
.9)
(1 .2)
(5
.3)
UK Bank Rate
4 .94
4 .88
4 .00
3.5
0
3.0
6
4 .08
5 .25
3.0
0
CPI inflation
7.3
2.7
2.9
2.5
2.2
3.5
1 0.2
2.1
Downside
Gross domestic product
0 .2
(1 .0)
(0
.1)
1 .5
2.0
0 .5
3.4
(1 .2)
Unemployment rate
4 .3
6.5
7.8
7.9
7.6
6.8
8.0
3.9
House price growth
1 .3
(4
.5)
(6.0
)
(5
.6)
(1 .7)
(3.4
)
2.0
(1 5.7)
Commercial real estate price growth
(6.0
)
(8.7)
(4
.0)
(2.1
)
(1 .2)
(4
.4)
(1 .2)
(20
.4)
UK Bank Rate
4 .94
3.95
1 .96
1 .13
0 .55
2.5
1
5 .25
0 .43
CPI inflation
7.3
2.8
2.7
1 .8
1 .1
3.2
1 0.2
1 .0
Severe downside
Gross domestic product
0 .1
(2.3)
(0
.5)
1 .3
1 .8
0 .1
1 .0
(2.9)
Unemployment rate
4.
5
8 .7
10.
4
10.
5
10.
1
8 .8
10.
5
3 .9
House price growth
0 .6
(7.6)
(1 3.3)
(1 2.7)
(7.5
)
(8.2)
2.0
(35
.0)
Commercial real estate price growth
(7.7)
(1 9.5)
(1 0.6)
(7.7)
(5
.2)
(1 0.3)
(1 .2)
(4
1.8)
UK Bank Rate – modelled
4 .94
2.75
0 .49
0 .13
0 .03
1 .67
5 .25
0 .02
UK Bank Rate – adjusted1
4 .94
6.5
6
4 .56
3.63
3.1
3
4 .56
6.75
3.0
0
CPI inflation – modelled
7.3
2.7
2.2
0 .9
(0
.2)
2.6
1 0.2
(0
.3)
CPI inflation – adjusted1
7.6
7.5
3.5
1 .3
1 .0
4 .2
1 0.2
0 .9
Probability-weighted
Gross domestic product
0 .3
0 .1
0 .8
1 .6
1 .9
0 .9
5 .4
0.1
Unemployment rate
4.2
5.3
5.9
5.9
5.7
5.4
6.0
3.9
House price growth
1.4
(2.5)
(0.9)
(0.3)
1.8
(0.1)
2.0
(2.8)
Commercial real estate price growth
(5.3)
(1.9)
(1.1)
(1.0)
(0.2)
(1.9)
(1.2)
(9.9)
UK Bank Rate – modelled
4.94
4.64
3.52
3.02
2.64
3.75
5.25
2.59
UK Bank Rate – adjusted1
4.94
5.02
3.93
3.37
2.95
4.04
5.42
2.89
CPI inflation – modelled
7.3
2.7
2.8
2.3
1.9
3.4
10.2
1.9
CPI inflation – adjusted1
7.4
3.2
3.0
2.4
2.0
3.6
10.2
2.0
1
The adjustment to UK Bank Rate and CPI inflation in the severe downside is considered to better reflect the risks around the Group’s base case view in an economic environment
where supply shocks are the principal concern.
First
quarter
2023
%
Second
quarter
2023
%
Third
quarter
2023
%
Fourth
quarter
2023
%
First
quarter
2024
%
Second
quarter
2024
%
Third
quarter
2024
%
Fourth
quarter
2024
%
1
Base case scenario by quarter
At 31 December 2023
Gross domestic product growth
0.3
0.0
(0.1)
0.0
0.1
0.2
0.3
0.3
Unemployment rate
3.9
4.2
4.2
4.3
4.5
4.8
5.0
5.2
House price growth
1.6
(2.6)
(4.5)
1.4
(1.1)
(1.5)
0.5
(2.2)
Commercial real estate price growth
(18.8)
(21
.2)
(1 8.2)
(5
.1)
(4
.1)
(3.8)
(2.2)
(0
.2)
UK Bank Rate
4.
25
5.00
5.25
5.25
5.25
5.00
4.75
4.50
CPI inflation
1 0.2
8.4
6.7
4 .0
3.8
2.1
2.3
2.8
1
Gross domestic product growth is presented quarter-on-quarter. House price growth, commercial real estate growth and CPI inflation are presented year-on-year, i.e. from the
equivalent quarter in the previous year. Unemployment rate and UK Bank Rate are presented as at the end of each quarter.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
279
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 21: Allowance for expected credit losses continued
ECL sensitivity to economic assumptions
The following table shows the Group’s ECL for the probability-weighted, upside, base case, downside and severe downside scenarios, with
the severe downside scenario incorporating adjustments made to CPI inflation and UK Bank Rate paths. The stage allocation for an asset is
based on the overall scenario probability-weighted probability of default and hence the staging of assets is constant across all the
scenarios. In each economic scenario the ECL for individual assessments is held constant reflecting the basis on which they are evaluated.
Judgemental adjustments applied through changes to model inputs or parameters, or more qualitative post model adjustments, are
apportioned across the scenarios in proportion to modelled ECL where this better reflects the sensitivity of these adjustments to each
scenario. The probability-weighted view shows the extent to which a higher ECL allowance has been recognised to take account of
multiple economic scenarios relative to the base case; the uplift on a statutory basis being £445 million compared to £678 million at
31 December 2023.
At 31 December 2024
At 31 December 2023
Probability-
weighted
£m
Upside
£m
Base case
£m
Downside
£m
Severe
downside
£m
Probability-
weighted
£m
Upside
£m
Base case
£m
Downside
£m
Severe
downside
£m
UK mortgages
852
345
567
1,064
2,596
1,115
395
670
1,155
4,485
Credit cards
674
518
641
773
945
810
600
771
918
1,235
Other Retail
950
843
923
1,010
1,172
945
850
920
981
1,200
Commercial Banking
989
745
889
1,125
1,608
1,182
793
1,013
1,383
2,250
Other
16
16
16
16
17
32
32
32
32
32
ECL allowance
3,481
2,467
3,036
3,988
6,338
4,084
2,670
3,406
4,469
9,202
The impact of isolated changes in the UK unemployment rate and House Price Index (HPI) has been assessed on a univariate basis.
Although such changes would not be observed in isolation, as economic indicators tend to be correlated in a coherent scenario, this gives
insight into the sensitivity of the Group’s ECL to gradual changes in these two critical economic factors.
The impacts are assessed as changes to base case modelled ECL only (at 100 per cent weighting) with staging held flat to the reported
view. The probability weighted ECL impact of applying the changes to all four scenarios, including the impact on staging and post model
adjustments, would be greater.
The table below shows the impact on the Group’s ECL resulting from a 1 percentage point increase or decrease in the UK unemployment
rate. The increase or decrease is presented based on the adjustment phased evenly over the first 10 quarters of the base case scenario. A
more immediate increase or decrease would drive a more material ECL impact as it would be fully reflected in both 12-month and lifetime
probability of defaults.
At 31 December 2024
At 31 December 2023
1pp increase in
unemployment
£m
1pp decrease in
unemployment
£m
1pp increase in
unemployment
£m
1pp decrease in
unemployment
£m
UK mortgages1
4
(3)
33
(32)
Credit cards
40
(41)
38
(38)
Other Retail
18
(20)
19
(19)
Commercial Banking
71
(67)
88
(83)
ECL impact
(131)
178
(172)
133
1
2024 calculated using updated models.
The table below shows the impact on the Group’s ECL in respect of UK mortgages of an increase or decrease in loss given default for a
10 percentage point increase or decrease in HPI. The increase or decrease is presented based on the adjust ment phased evenly over the first
10 quarters of the base case scenario.
At 31 December 2024
At 31 December 2023
10pp increase
in HPI
£m
10pp decrease
in HPI
£m
10pp increase
in HPI
£m
10pp decrease
in HPI
£m
ECL impact1
(127)
182
(201)
305
for the year ended 31 December
1
2024 calculated using updated models.
Notes to the consolidated financial statements continued
0
280
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 21: Allowance for expected credit losses continued
The table below shows the Group’s ECL and drawn balances for the upside, base case, downside and severe downside scenarios, with
staging of assets based on each specific scenario probability of default. In each economic scenario the ECL for individual assessments is held
constant reflecting the basis on which they are evaluated. Judgemental adjustments applied through changes to model inputs or parameters,
or more qualitative post-model adjustments, are apportioned across the scenarios in proportion to modelled ECL where this better reflects
the sensitivity of these adjustments to each scenario. A probability-weighted scenario is not shown as this view does not reflect the basis on
which ECL is calculated. Comparing the probability-weighted ECL in the table above to the base case ECL with base case scenario specific
staging, as shown in the table below, results in an uplift of £468 million compared to £596 million at 31 December 2023.
Drawn balances1
ECL allowance
Coverage ratio2
At 31 December 2024
Stage 1
UK mortgages 3
271,370 271,903
271,391 253,639
13
29
66
203
–
–
–
0.1
Credit cards
14,261
13,714
13,065
12,226
152
196
238
290
1.1
1.4
1.8
2.4
Other Retail
43,746
43,435
42,955
42,046
333
356
374
408
0.8
0.8
0.9
1.0
Commercial Banking
95,068
94,800
92,924
84,598
139
209
294
334
0.1
0.2
0.3
0.4
Other
11,252
11,252
11,252
11,252
7
7
7
7
0.1
0.1
0.1
0.1
Total
435,697 435,104
431,587 403,761
644
797
979
1,242
0.1
0.2
0.2
0.3
Stage 2
UK mortgages3
31,385
30,852
31,364
49,116
86
144
321
1,272
0.3
0.5
1.0
2.6
Credit cards
1,714
2,261
2,910
3,749
207
304
431
613
12.1
13.5
14.8
16.3
Other Retail
4,038
4,349
4,829
5,738
293
350
420
547
7 .3
8 .0
8 .7
9 .5
Commercial Banking
3,391
3,659
5,535
13,861
174
246
444
1,449
5.1
6 .7
8 .0
10.5
Other
–
–
–
–
–
–
–
–
–
–
–
–
Total
40,528
41,121
44,638
72,464
760
1,044
1,616
3,881
1.9
2.5
3.6
5.4
Stage 3
UK mortgages3
4,166
4,166
4,166
4,166
201
274
410
691
4.8
6.6
9.8
16.6
Credit cards
265
265
265
265
133
133
133
133
50.2
50.2
50.2
50.2
Other Retail
446
446
446
446
217
222
233
257
48.7
49.8
52.3
57.7
Commercial Banking
1,839
1,839
1,839
1,839
415
415
415
415
22.6
22.6
22.6
22.6
Other
36
36
36
36
9
9
9
9
25.0
25.0
25.0
25.0
Total
6,752
6,752
6,752
6,752
975
1,053
1,200
1,505
14.4
15.6
17.8
22.3
POCI
UK mortgages3
6,207
6,207
6,207
6,207
45
119
264
575
0.7
1.9
4.3
9 .3
Total
UK mortgages
313,128
313,128
313,128
313,128
345
566
1,061
2,741
0.1
0.2
0.3
0.9
Credit cards
16,240
16,240
16,240
16,240
492
633
802
1,036
3.0
3.9
4.9
6 .4
Other Retail
48,230
48,230
48,230
48,230
843
928
1,027
1,212
1.7
1.9
2.1
2.5
Commercial Banking
100,298 100,298 100,298 100,298
728
870
1,153
2,198
0.7
0.9
1.1
2.2
Other
11,288
11,288
11,288
11,288
16
16
16
16
0.1
0.1
0.1
0.1
Total
489,184 489,184 489,184 489,184
2,424
3,013
4,059
7,203
0.5
0.6
0.8
1.5
Upside
£m
Base case
£m
Downside
£m
Severe
downside
£m
Upside
£m
Base case
£m
Downside
£m
Upside
%
Base case
%
Downside
%
Severe
downside
%
Severe
downside
£m
1
Includes loans and advances to banks, loans and advances to customers, debt securities and items identified as other assets in note 24.
2
Coverage ratio is ECL allowance shown as a percentage of drawn balances.
3
Calculated using updated models.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
281
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 21: Allowance for expected credit losses continued
ECL allowance
Drawn balances1
Coverage ratio2
Severe
downside
£m
Upside
£m
Base case
£m
Downside
£m
Upside
£m
Base case
£m
Downside
£m
Upside
%
Base case
%
Downside
%
At 31 December 2023
Stage 1
UK mortgages
270,131 269,581 266,388
129,736
20
40
84
153
–
–
–
0 .1
Credit cards
13,338
12,668
12,109
10,966
169
211
242
298
1 .3
1 .7
2.0
2.7
Other Retail
39,260
38,939
38,373
30,202
360
384
404
448
0 .9
1 .0
1 .1
1 .5
Commercial Banking
98,202
97,394
92,919
78,781
165
260
376
431
0 .2
0 .3
0 .4
0 .6
Other
7,632
7,632
7,632
7,632
14
16
17
20
0 .2
0 .2
0 .2
0 .3
Total
428,563 426,214
417,421
257,317
728
911
1,123
1,350
0 .2
0 .2
0 .3
0 .5
Stage 2
UK mortgages
24,998
25,548
28,741
165,393
73
139
316
4,074
0 .3
0 .6
1 .1
2.5
Credit cards
2,195
2,865
3,424
4,567
302
437
567
859
1 3.7
1 5.3
1 6.6
1 8.8
Other Retail
5,711
6,032
6,598
14,769
325
378
424
619
5 .7
6.3
6.4
4 .2
Commercial Banking
4,487
5,295
9,770
23,908
259
379
722
2,466
5 .8
7.2
7.4
1 0.3
Other
–
–
–
–
–
–
–
–
–
–
–
–
Total
37,391
39,740
48,533 208,637
959
1,333
2,029
8,018
2.6
3.4
4 .2
3.8
Stage 3
UK mortgages
4,337
4,337
4,337
4,337
78
225
457
963
1 .8
5 .2
1 0.5
22.2
Credit cards
284
284
284
284
122
122
122
122
4 3.0
4 3.0
4 3.0
4 3.0
Other Retail
452
452
452
452
238
242
248
261
5 2.7
5 3.5
5 4.9
5 7.7
Commercial Banking
2,068
2,068
2,068
2,068
426
426
426
426
20
.6
20
.6
20
.6
20
.6
Other
39
39
39
39
16
16
16
16
41.
0
41.
0
41.
0
41.
0
Total
7,180
7,180
7,180
7,180
880
1,031
1,269
1,788
1 2.3
1 4.4
1 7.7
24
.9
POCI
UK mortgages3
7,854
7,854
7,854
7,854
213
213
213
213
2.7
2.7
2.7
2.7
Total
UK mortgages
307,320 307,320 307,320 307,320
384
617
1,070
5,403
0 .1
0 .2
0 .4
1 .8
Credit cards
15,817
15,817
15,817
15,817
593
770
931
1,279
3.8
4 .9
5 .9
8.1
Other Retail
45,423
45,423
45,423
45,423
923
1,004
1,076
1,328
2.0
2.2
2.4
2.9
Commercial Banking
104,757
104,757
104,757
104,757
850
1,065
1,524
3,323
0 .8
1 .0
1 .5
3.2
Other
7,671
7,671
7,671
7,671
30
32
33
36
0 .4
0 .4
0 .4
0 .5
Total
4 80,988 480,988 480,988 480,988
2,780
3,488
4,634
11,369
0 .6
0.7
1 .0
2.4
Severe
downside
£m
Severe
downside
%
for the year ended 31 December
1
Includes loans and advances to banks, loans and advances to customers, debt securities and items identified as other assets in note 24.
2
Coverage ratio is ECL allowance shown as a percentage of drawn balances.
3
POCI ECL has been presented on a probability-weighted basis. The sensitivity is captured within the UK mortgages total.
Assessment of climate risk impacts on ECL
The Group continues to develop capabilities to quantify the potential impact of climate risks on ECL. This includes identifying the climate-
related risk drivers that could influence future credit losses for loan portfolios that have the highest sensitivity to climate risks and
commencing the use of more quantitative analysis on the impact of these risk drivers on ECL. The approach leverages the Group’s climate
scenario analysis, to identify the potential physical and transition risk impacts on credit quality. UK mortgages and Commercial Banking
portfolios are judged to have the highest sensitivity to climate risk, with both physical and transition risk drivers assessed.
UK mortgages physical and transition risks – additional costs arising from regulatory obligations of increased energy efficiency standards to
reduce carbon emissions and increased flood risk and coastal erosion, through property repair or rebuild and/or increased insurance premia.
This can result in affordability pressure, as well as decrease in property valuation, for borrowers owning low EPC rated properties or those in
areas prone to flooding or coastal erosion.
Commercial Banking physical and transition risks – increased costs or revenue disruption, or both, arising from chronic and acute physical
hazards from rising temperatures. Companies adapting to a sudden transition scenario could potentially lead to increased transition costs
in operations, direct carbon costs, and deteriorating financial performance due to changing consumer perspectives.
Notes to the consolidated financial statements continued
2
82
2
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 21: Allowance for expected credit losses continued
Macroeconomic and sector scenario risk assessments
Assessments were performed on the Group’s internally generated economic scenarios used in the measurement of expected credit losses
against external scenarios published by the Network for Greening the Financial System (NGFS).
The potential incremental impact of climate factors on key economic drivers was isolated from the Phase V NGFS Delayed Transition
scenario, which management judged the most plausible. The incremental risk to ECL was then quantified by overlaying the specific climate
impact of this scenario onto macroeconomic drivers within the Group’s base case and MES scenarios. The results from the most material
Retail portfolios, UK mortgages and consumer lending allowed management to conclude on an immaterial ECL impact for Retail of below
£5 million (31 December 2023: below £5 million), and in Commercial Banking a separate climate assessment performed at sector level,
resulted in an ECL impact of below £15 million (31 December 2023: below £15 million).
The Group’s MES downside and severe downside scenarios, together comprising a 40 per cent weighting in ECL calculations, are generally
more severe than the most adverse NGFS scenario (‘Net Zero 2050’). MES downsides were also comparable in severity to the most adverse
part of the ‘Late Action’ scenario of the 2021 Climate Biennial Exploratory Scenario (CBES). The assessment suggests that no material
changes are required to the Group’s existing suite of economic scenarios used within the ECL calculation.
In Commercial Banking, an exploratory top-down analysis using sectoral modelling was adopted to estimate the specific ECL impact of
climate risk on commercial credit conditions. This assessment specifically targets agriculture, automotive, transport, oil and gas, real estate
and utilities sectors where climate impacts were judged to be more significant. Resulting sector-specific, climate-adjusted credit cycle
indices (CCI) were used to calculate probability of default and resulting ECL. These adjusted CCI model inputs combined external NGFS
phase IV scenarios with client level valuation impacts where available, alongside historic impairment data. Considering methodological
limitations, the additional ECL required was shown to be immaterial.
Physical and transition risk assessments
The Group has enhanced its assessment of transition risk on the UK mortgage portfolio by extending the scope from buy-to-let (BTL) to
also include Mainstream and Specialist Residential property portfolios. The assessment is now also performed with an account level
assessment of affordability and valuation impacts, with a more nuanced view of the potential of government to legislate a minimum EPC
requirement. Finally, the time period observed extends to 2050 with multiple transition points across multiple economic scenarios.
An affordability stress for customers was applied by considering multiple scenarios for home retrofitting taking place when changes in
regulation lead to higher minimum EPC rating requirements. The provision impact was assessed by transforming the account level
assessment of affordability and valuation impacts of each climate scenario to adjust inputs used in existing Probability of Default (PD)
parameters. As at 31 December 2024, the impact on ECL has been estimated to be less than £5 million (31 December 2023: less than
£5 million) in BTL properties and less than £5 million (31 December 2023: not assessed) in Mainstream and Specialist portfolios.
The physical risk assessment on the UK mortgage portfolio in 2024 included both flooding and coastal erosion risk. The impacts were based
on a internally defined delayed transition outlook, out to 2050, aligned with the Group’s transition methodology. The assessment showed
that over 80 per cent of the book was not exposed to flood risk damage and over 99 per cent had no risk to coastal erosion damage. The
impact on ECL to customers exposed to the affordability risk from flood and coastal erosion damage has been estimated to be immaterial.
Whilst this supports no judgemental adjustment to ECL being required, where a top-down approach has been used it may not fully capture
the impact on loss rates emanating from being located in a high-risk area. Similarly the current assessment excludes the potential
affordability shocks or reduced insurance coverage that could occur due to possible changes to insurance policy initiatives in this area.
Assessment
Nature of risk assessed
Portfolios assessed
ECL impact
At 31 December 2024
ECL impact
At 31 December 2023
Macroeconomic impact from climate scenario Scenario risk – macro level Retail
< £5 million
< £5 million
Sector level impacts from climate scenario
Scenario risk – sector level Commercial Banking
(excluding Business Banking)
< £15 million
< £15 million
Retrofitting cost to meet EPC regulation
Transition risk
UK mortgages
< £10 million (BTL,
Mainstream and
Specialist)
< £5 million (BTL)
Flood and coastal erosion risk
Physical risk
UK mortgages
< £5 million (Flood
and coastal erosion)
< £5 million (Flood)
The climate risk assessments above remain limited due to the degree of uncertainty underpinning key assumptions used, as well as the
continuing developmental nature of the data, approach and models used in the quantification. These include, but are not limited to, the
analyses being restricted to PD impacts only; considering only the most material hazards for UK mortgages (flood and coastal erosion);
client valuation impacts not incorporating climate transition plans; the physical risk modelling for corporates currently excluding broader
components such as supply chain impacts, and more broadly the political landscape; future climate data enhancements and further
model development.
The ECL impacts resulting from these climate risk assessments remain immaterial. This continues to support management’s view that there
is a low residual risk of material error or omission in the Group’s financial statements due to climate-related risks and as a result no
adjustments have been made to ECL measured as at 31 December 2024. The current behavioural lives of the Group’s lending reduces the
potential exposure to the later emergence of potential physical climate impacts, with the incorporation of climate risk, in credit policy, as a
qualitative underwriting assessment within the Commercial Banking credit process and the origination process for mortgages providing
further mitigation on more recent originations.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
283
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 22: Finance lease receivables
The Group’s finance lease receivables are classified as loans and advances to customers and accounted for at amortised cost. These
balances are analysed as follows:
2024
£m
2023
£m
Not later than 1 year
6,202
5,950
Later than 1 year and not later than 2 years
5,251
4,851
Later than 2 years and not later than 3 years
4,297
4,609
Later than 3 years and not later than 4 years
2,868
3,074
Later than 4 years and not later than 5 years
516
631
Later than 5 years
475
545
Gross investment
19,609
19,660
Unearned future finance income
(2,447)
(2,272)
Rentals received in advance
(18)
(14)
Net investment
17,144
17,374
Equipment leased to customers under finance lease receivables relates to financing transactions to fund the purchase of aircraft, ships,
motor vehicles and other items. There was an allowance for uncollectable finance lease receivables included in the allowance for
impairment losses of £368 million (2023: £360 million).
The Group’s finance lease assets are comprised as follows:
2024
£m
2023
£m
Electric vehicles
1,001
1,339
Internal combustion engine vehicles
11,557
11,465
Self-charging hybrid vehicles
347
238
Plug-in hybrid vehicles
1,306
908
Other
2,933
3,424
Net investment
17,144
17,374
Note 23: Goodwill and other intangible assets
Goodwill
£m
Brands
£m
Purchased
credit card
relationships
£m
Customer-
related
intangibles
£m
Acquired
value of
in-force
business
£m
Capitalised
software
enhancements
£m
Total
£m
Cost1 :
At 1 January 2023
2,999
589
1,002
572
834
7,716
13,712
Exchange and other adjustments
–
–
–
–
–
–
–
Additions and acquisitions
143
2
–
180
–
1,494
1,819
Disposals and write-offs
–
–
–
(70)
–
(292)
(362)
At 31 December 2023
3,142
591
1,002
682
834
8,918
15,169
Exchange and other adjustments
–
–
–
3
–
(5)
(2)
Additions and acquisitions
–
–
–
–
–
1,259
1,259
Disposals and write-offs2
(50)
–
–
(423)
–
(216)
(689)
At 31 December 2024
3,092
591
1,002
262
834
9,956
15,737
Accumulated amortisation:
At 1 January 2023
344
204
692
541
660
3,656
6,097
Exchange and other adjustments
–
–
–
3
–
(3)
–
3
Charge for the year
–
1
70
9
20
1,028
1,128
Disposals and write-offs
–
–
–
(70)
–
(292)
(362)
At 31 December 2023
344
205
762
483
680
4,389
6,863
Exchange and other adjustments
–
–
–
3
–
(12)
(9)
3
Charge for the year
–
1
70
13
17
1,221
1,322
Disposals and write-offs
–
–
–
(422)
–
(205)
(627)
At 31 December 2024
344
206
832
77
697
5,393
7,549
Balance sheet amount at 31 December 2024
2,748
385
170
185
137
4,563
8,188
Balance sheet amount at 31 December 2023
2,798
386
240
199
154
4,529
8,306
for the year ended 31 December
1
For acquisitions made prior to 1 January 2004, the date of transition to IFRS Accounting Standards, cost is included net of amounts amortised up to 31 December 2003.
2
Disposals and write-offs includes goodwill of £50 million that has been classified as disposal group assets and presented within other assets in note 24. Further information on the
disposal group is provided in note 24.
3
The charge for the year is recognised in operating expenses (note 10).
Notes to the consolidated financial statements continued
284
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 23: Goodwill and other intangible assets continued
Goodwill
The goodwill held in the Group’s balance sheet is tested at least annually for impairment. For the purposes of impairment testing the
goodwill is allocated to the appropriate cash-generating unit; of the total balance of £2,748 million (2023: £2,798 million), £2,121 million, or
77 per cent (2023: £2,171 million, 78 per cent) has been allocated to the Life and pensions cash-generating unit; £302 million, or 11 per cent
(2023: £302 million, 11 per cent) has been allocated to the Credit card cash-generating unit in the Group’s Retail division; and £310 million,
or 11 per cent (2023: £309 million, 11 per cent) to the Motor business cash-generating units, both in the Group’s Retail division.
The recoverable amount of the goodwill relating to Scottish Widows, in the Life and pensions business, is based on a value-in-use
calculation. The calculation uses pre-tax projections of future cash flows based upon budgets and plans approved by management covering
a four-year period, the related run-off of existing business in-force and a discount rate (pre-tax) of 11.0 per cent. The budgets and plans are
based upon past experience adjusted to take into account anticipated changes in sales volumes, product mix and margins having regard to
expected market conditions (which will reflect current and future risks, such as climate and expected economic activity conditions) and
competitor activity. The discount rate is determined with reference to internal measures and available industry information. New business
cash flows beyond the four-year period have been extrapolated using a reducing balance growth rate that falls from 3.5 per cent to 2.0 per
cent after 20 years, which does not exceed the long-term average growth rate for the life assurance market. Management believes that any
reasonably possible change in the key assumptions above would not cause the recoverable amount of the goodwill relating to Scottish
Widows to fall below its balance sheet carrying value.
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 four-year period and a discount rate (post-tax) of
10.5 per cent, based on the Group’s cost of equity. This is equivalent to a pre-tax rate of 14.0 per cent. The budgets and plans are based
upon past experience adjusted to take into account anticipated changes in sales volumes having regard to expected market conditions and
competitor activity. The cash flows beyond the four-year period are extrapolated using a growth rate of 3.5 per cent which does not
exceed the long-term average growth rates for the markets in which the Motor business participates. Management believes that any
reasonably possible change in the key assumptions, including from the impacts of climate change or climate-related legislation, would not
cause the recoverable amount of the goodwill relating to the Motor business to fall below the balance sheet carrying value.
The recoverable amount of the goodwill relating to Credit cards has been based on a value-in-use calculation using post-tax cash flow
projections based on financial budgets and plans approved by management covering a four-year period and a discount rate (post-tax) of
10.5 per cent, based on the Group’s cost of equity. This is equivalent to a pre-tax rate of 14.0 per cent. The budgets and plans are based
upon past experience adjusted to take into account anticipated changes in credit card volumes having regard to expected market
conditions and competitor activity. The cash flows beyond the four-year period assume 3.5 per cent growth, which does not exceed the
long-term average growth rates for the markets in which the Cards business participates. Management believes that any reasonably
possible change in the key assumptions above would not cause the recoverable amount of the goodwill relating to Credit cards to fall
below the balance sheet carrying value.
Other intangible assets
The brand arising from the acquisition of Bank of Scotland in 2009 is recognised on the Group’s balance sheet and has been determined to
have an indefinite useful life. The carrying value at 31 December 2024 was £380 million (2023: £380 million). The Bank of Scotland name
has been in existence for over 300 years and there are no indications that the brand should not have an indefinite useful life. The
recoverable amount has been based on a value-in-use calculation. The calculation uses post-tax projections for a four-year period of the
income generated by the Bank of Scotland cash-generating unit, a discount rate of 10.5 per cent and a future growth rate of 3.5 per cent.
Management believes that any reasonably possible change in the key assumptions would not cause the recoverable amount of the Bank of
Scotland brand to fall below its balance sheet carrying value.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
285
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 24: Other assets
2024
£m
2023
£m
Insurance contract assets
1
Reinsurance contract assets2
422
442
Investment in joint ventures and associates
542
401
Property, plant and equipment:
Investment properties (see below)
3,281
2,862
Premises
1,100
920
Equipment
879
1,170
Operating lease assets (see below)
7,265
6,523
872
1,055
Right-of-use assets (note 25)
13,397
12,530
Prepayments
1,634
1,455
Disposal group assets1 :
Deferred tax assets
13
Goodwill
50
Reinsurance contract assets2
5,059
5,122
–
Other assets
3,671
2,315
Total other assets
24,788
17,144
1
On 13 March 2024, the Group entered into a business transfer agreement with Rothesay Life plc for the sale of the Group’s bulk annuity business and to pursue the transfer of
associated business assets and assumed liabilities under Part VII of the Financial Services and Markets Act 2000. A reinsurance agreement between the Group and Rothesay Life plc
was signed on 30 April 2024 to materially de-risk the Group’s bulk annuity portfolio. The Part VII process is subject to approval by the High Court, through a process in which regulators
and policyholders are given the opportunity to object. The Group expects the Part VII to take place in June 2025. During the year the assets and liabilities the Group expects to
derecognise as a result of the Part VII transfer were reclassified to disposal group assets and disposal group liabilities. Disposal group assets are presented within other assets, and
disposal group liabilities are presented within other liabilities in note 27. Disposal group assets and disposal group liabilities are included in the Insurance, Pensions and Investments
operating segment.
2
The Group’s reinsurance contract assets have increased by £5,039 million from £442 million to £5,481 million predominantly as a result of entering into the reinsurance agreement with
Rothesay Life plc in relation to the Group’s bulk annuity business. At 30 April 2024 the Group recognised a reinsurance contract asset of £5,418 million (comprised of present value of
future cash flows of £5,087 million, risk adjustment for non-financial risk of £35 million and contractual service margin of £296 million). The balance of all reinsurance contract assets at
31 December 2024 of £5,481 million (2023: £442 million) held comprises the following: asset for remaining coverage (excluding loss-recovery component) of £5,060 million (2023:
£57 million), asset for remaining coverage loss-recovery component of £278 million (2023: £271 million) and asset for incurred claims of £143 million (2023: £114 million); the
measurement components insurance contract assets being present value of future cash flows of £4,910 million (2023: £162 million), risk adjustment for non-financial risk of £71 million
(2023: £70 million) and contractual service margin of £500 million (2023: £210 million).
Investment properties
The Group’s investment properties are predominantly held by the Insurance, Pensions and Investments business where they back
policyholder liabilities. They are valued by external Chartered Surveyors using industry standard techniques based on guidance from the
Royal Institute of Chartered Surveyors. The valuation methodology includes an assessment of general market conditions and sector level
transactions and takes account of expectations of occupancy rates, rental income and growth. Property valuations undergo individual
scrutiny using cash flow analysis to factor in the timing of rental reviews, capital expenditure, lease incentives, dilapidation and operating
expenses; these reviews utilise both observable and unobservable inputs. Within the fair value hierarchy, all of the Group’s investment
properties are categorised as level 3 (see note 17 for details of levels in the fair value hierarchy). The table below analyses movements in
level 3 investment properties, which are carried at fair value.
2024
£m
2023
£m
At 1 January
2,862
2,532
Acquisition of new properties
640
450
Additional expenditure on existing properties
26
19
Change in fair value (note 7)
67
(87)
Disposals
(314)
(52)
At 31 December
3,281
2,862
Rental income of £172 million (2023: £146 million) and direct operating expenses of £44 million (2023: £16 million) arising from investment
properties that generate rental income have been recognised in the income statement.
Capital expenditure in respect of investment properties which had been contracted for but not recognised in the financial statements was
£236 million (2023: £488 million).
Operating lease assets where the Group is lessor
Equipment leased to customers under operating leases primarily relates to vehicle contract hire arrangements. At 31 December the future
minimum rentals receivable under non-cancellable operating leases were as follows:
Within 1 year
£m
1 to 2 years
£m
2 to 3 years
£m
3 to 4 years
£m
4 to 5 years
£m
Over 5 years
£m
Total
£m
At 31 December 2024
1,577
956
821
365
85
6
3,810
At 31 December 2023
1,336
857
680
309
70
4
3,256
for the year ended 31 December
Notes to the consolidated financial statements continued
–
–
–
–
286
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 24: Other assets continued
Equipment leased to customers under operating leases primarily relates to vehicle contract hire arrangements. Operating lease assets are
comprised as follows:
2024
£m
2023
£m
Electric vehicles
3,894
3,259
Internal combustion engine vehicles
1,630
1,815
Self-charging hybrid vehicles
166
186
Plug-in hybrid vehicles
1,575
1,258
Other
–
5
Total operating lease assets
7,265
6,523
Note 25: Lessee disclosures
The table below sets out the movement in the Group’s right-of-use assets, which are primarily in respect of premises, and are recognised
within other assets (note 24).
2024
£m
2023
£m
At 1 January
1,055
1,156
Exchange and other adjustments
2
3
Additions
128
136
Disposals
(115)
(31)
Depreciation charge for the year
(198)
(209)
At 31 December
872
1,055
The Group’s lease liabilities are recognised within other liabilities (note 27). The maturity analysis of the Group’s lease liabilities on an
undiscounted basis is set out in the liquidity risk section.
The total cash outflow for leases in the year ended 31 December 2024 was £202 million (2023: £215 million). The amount recognised within
interest expense in respect of lease liabilities is disclosed in note 5.
Note 26: Debt securities in issue
2024
2023
At fair value
through profit
or loss
£m
At
amortised
cost
£m
Total
£m
At fair value
through profit
or loss
£m
At
amortised
cost
£m
Total
£m
Senior unsecured notes issued
4,608
40,019
44,627
5,242
37,038
42,280
Covered bonds
–
11,764
11,764
–
14,243
14,243
Certificates of deposit issued
–
5,776
5,776
–
8,059
8,059
Securitisation notes
22
5,185
5,207
23
4,211
4,234
Commercial paper
–
8,090
8,090
–
12,041
12,041
Total debt securities in issue
4,630
70,834
75,464
5,265
75,592
80,857
Covered bonds and securitisation programmes
At 31 December 2024, the covered bonds held by external parties and those held internally, were secured on certain loans and advances to
customers amounting to £26,202 million (2023: £27,019 million) which have been assigned to bankruptcy remote limited liability
partnerships to provide security for issues of covered bonds by the Group. The Group retains all of the risks and rewards associated with
these loans and the partnerships are consolidated fully with the loans retained on the Group’s balance sheet.
The Group has two covered bond programmes, which have ring-fence asset pools and guarantee the covered bonds issued by the Group.
At the reporting date the Group had over-collateralised these programmes to meet the terms of the programmes, to secure the rating of
the covered bonds and to provide operational flexibility. From time to time, the obligations of the Group to provide collateral may increase
due to the formal requirements of the programmes. The Group may also voluntarily contribute collateral to support the ratings of the
covered bonds.
Covered bonds includes Pfandbriefe, which the Group issued for the first time in 2024.
The Group’s securitisation vehicles issue notes that are held both externally and internally, and are secured on loans and advances to
customers amounting to £27,657 million at 31 December 2024 (2023: £30,716 million), the majority of which have been sold by subsidiary
companies to bankruptcy remote structured entities. As the structured entities are funded by the issue of debt on terms whereby the
majority of the risks and rewards of the portfolio are retained by the subsidiary, the structured entities are consolidated fully and all of
these loans are retained on the Group’s balance sheet.
Certain loans and advances to customers have been assigned to bankruptcy remote limited liability partnerships.
Cash deposits of £3,256 million (2023: £3,794 million) which support the debt securities issued by the structured entities, the term
advances related to covered bonds and other legal obligations, are held by the Group. Additionally, the Group has certain contractual
arrangements to provide liquidity facilities to some of these structured entities. At 31 December 2024 these obligations had not been
triggered; the maximum exposure under these facilities was £11 million (2023: £29 million).
Other information
Financial statements
Risk management
Sustainability review
Strategic report
Governance
Financial results
287
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 26: Debt securities in issue continued
The Group recognises the full liabilities associated with its securitisation and covered bond programmes within debt securities in issue,
although the obligations of the Group in respect of its securitisation issuances are limited to the cash flows generated from the underlying
assets. The Group could be required to provide additional support to a number of the securitisation programmes to support the credit
ratings of the debt securities issued, in the form of increased cash reserves and the holding of subordinated notes. Further, certain
programmes contain contractual obligations that require the Group to repurchase assets should they become credit-impaired or as
otherwise required by the transaction documents. The Group has not provided financial or other support by voluntarily offering to
repurchase assets from any of its public securitisation programmes during 2024 (2023: none).
Note 27: Other liabilities
2024
£m
2023
£m
Third party interests in consolidated funds1
10,706
10,518
Lease liabilities
1,261
1,632
Disposal group liabilities2 :
Liabilities arising from insurance contracts
5,268
–
Other creditors and accruals
8,683
6,876
Total other liabilities
25,918
19,026
1
Where a collective investment vehicle is consolidated, the interests of parties other than the Group are reported at fair value in other liabilities.
2
Further information on the disposal group is provided in note 24.
The maturity analysis of the Group’s lease liabilities on an undiscounted basis is set out in the liquidity risk section on page 188.
Note 28: Provisions
Critical accounting judgements and key sources of estimation uncertainty
Critical judgement:
Determining whether a present obligation exists and whether it is more likely than not that an outflow of
resources will be required to settle that obligation
Key sources of estimation uncertainty:
Populations impacted, level of remediation and response rates
Determining the amount of the provisions, which represent management’s best estimate of the cost of settling these issues, requires the
exercise of significant judgement and estimation. It will often be necessary to form a view on matters which are inherently uncertain, such
as the scope of reviews required by regulators, and to estimate the number of future complaints, the extent to which they will be upheld,
the average cost of redress and the impact of decisions reached by legal and other review processes that may be relevant to claims
received. Consequently, the continued appropriateness of the underlying assumptions is reviewed on a regular basis against actual
experience and other relevant evidence and adjustments made to the provisions where appropriate.
Provisions
for financial
commitments
and guarantees
£m
Regulatory
and legal
provisions
£m
Other
£m
Total
£m
At 1 January 2024
322
1,105
650
2,077
Exchange and other adjustments
(1)
(3)
(1)
(5)
Provisions applied
–
(401)
(488)
(889)
Charge (release) for the year
(51)
899
282
1,130
At 31 December 2024
270
1,600
443
2,313
for the year ended 31 December
Provisions for financial commitments and guarantees
Provisions are recognised for expected credit losses on undrawn loan commitments and financial guarantees.
Regulatory and legal provisions
In the course of its business, the Group is engaged on a regular basis in discussions with UK and overseas regulators and other governmental
authorities on a range of matters, including legal and regulatory reviews and, from time to time, enforcement investigations (including in
relation to compliance with applicable laws and regulations, such as those relating to prudential regulation, consumer protection,
investment advice, employment, business conduct, systems and controls, environmental, sustainability, competition/anti-trust, tax, anti-
bribery, anti-money laundering and sanctions). Any matters discussed or identified during such discussions and inquiries may result in,
among other things, further inquiry or investigation, other action being taken by governmental and/or regulatory authorities, increased
costs being incurred by the Group, remediation of systems and controls, public or private censure, restriction of the Group’s business
activities and/or fines. The Group also receives complaints in connection with its past conduct and claims brought by or on behalf of
current and former employees, customers (including their appointed representatives), investors and other third parties and is subject to
legal proceedings and other legal actions from time to time. Any events or circumstances disclosed could have a material adverse effect on
the Group’s financial position, operations or cash flows. Provisions are held where the Group can reliably estimate a probable outflow of
economic resources. The ultimate liability of the Group may be significantly more, or less, than the amount of any provision recognised. If
the Group is unable to determine a reliable estimate, a contingent liability is disclosed. The recognition of a provision does not amount to
an admission of liability or wrongdoing on the part of the Group. During the year ended 31 December 2024 the Group charged a further
£899 million in respect of legal actions and other regulatory matters and the unutilised balance at 31 December 2024 was £1,600 million
(31 December 2023: £1,105 million). The most significant items are outlined below.
Notes to the consolidated financial statements continued
288
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 28: Provisions continued
Motor commission review
The Group recognised a £450 million provision in 2023 for the potential impact of the FCA review into historical motor finance commission
arrangements and sales announced in January 2024. In the fourth quarter of 2024, a further £700 million provision has been recognised in
relation to motor finance commission arrangements, in light of the Court of Appeal (CoA) decisions handed down in their judgment in
Wrench, Johnson and Hopcraft (WJH) in October 2024, which goes beyond the scope of the original FCA motor finance commissions review.
The CoA judgment in WJH, determined that motor dealers acting as credit brokers owe certain duties to disclose to their customers
commission payable to them by lenders, and that lenders will be liable for dealers’ non-disclosures. This sets a higher bar for the disclosure
of and consent to the existence, nature, and quantum of any commission paid than had been understood to be required or applied across
the motor finance industry prior to the decision. The Group’s understanding of compliant disclosure was built on FCA and other regulatory
guidance and previous legal authorities. These CoA decisions relate to commission disclosure and consent obligations which go beyond the
scope of the current FCA motor finance commissions review. The Supreme Court granted the relevant lenders permission to appeal the
WJH judgment and the substantive hearing is scheduled to be heard on 1 April to 3 April 2025.
Following the WJH decision, the FCA extended their temporary complaint handling rules in relation to discretionary commission
arrangements (DCA) complaints to include non-DCA commission complaints until December 2025. The FCA has also announced that it
intends to set out next steps in its review into DCAs in May 2025 and hopes to provide an update on motor finance non-DCA complaints at
the same time, but its next steps in relation to both types of complaint will depend on the progress of the appeal to the Supreme Court of
WJH and the timing and nature of any decision. In addition, there are a number of other relevant judicial proceedings which may influence
the eventual outcome, including a judicial review (which is now subject to appeal) of a final decision by the Financial Ombudsman Service
(FOS) against another lender that was heard in October 2024.
The Group continues to receive complaints as well as claims in the County Courts in respect of motor finance commissions. A large number
of those claims have been stayed, as has a claim in the Competition Appeal Tribunal.
In establishing the provision estimate, the Group has created a number of scenarios to address uncertainties around a number of key
assumptions. These include the potential outcomes of the Supreme Court appeal, any steps that the FCA may take and outcomes in
relation to the extent of harm and remedies. Other key assumptions include applicable commission models, commission rates, time
periods, response rates, uphold rates, levels of redress / interest applied and costs to deliver. The Group will continue to assess
developments and potential impacts, including the outcome of the appeals, any announcement by the FCA of their next steps, and any
action by other regulators or government bodies. Given that there is a significant level of uncertainty in terms of the eventual outcome, the
ultimate financial impact could materially differ from the amount provided.
HBOS Reading – review
The Group continues to apply the recommendations from Sir Ross Cranston’s review, issued in December 2019, including a reassessment of
direct and consequential losses by an independent panel (the Foskett Panel), an extension of debt relief and a wider definition of de facto
directors. The Foskett Panel’s full scope and methodology was published on 7 July 2020. The Foskett Panel’s stated objective is to consider
cases via a non-legalistic and fair process and to make its decisions in a generous, fair and common sense manner, assessing claims against
an expanded definition of the fraud and on a lower evidential basis.
In June 2022, the Foskett Panel announced an alternative option, in the form of a fixed sum award which could be accepted as an
alternative to participation in the full re-review process, to support earlier resolution of claims for those deemed by the Foskett Panel to be
victims of the fraud.
Virtually all of the population have now had decisions via the Fixed Sum Award process, with operational costs, redress and tax costs
associated with the re-reviews recognised within the amount provided.
Notwithstanding the settled claims and the increase in outcomes which builds confidence in the full estimated cost, uncertainties remain
and the final outcome could be different. There is no confirmed timeline for the completion of the re-review process nor the review by
Dame Linda Dobbs. The Group remains committed to implementing the recommendations in full.
Payment protection insurance (PPI)
The Group continues to challenge PPI litigation cases, with mainly operational costs and legal fees associated with litigation activity
recognised within regulatory and legal provisions.
Customer claims in relation to insurance branch business in Germany
The Group continues to receive claims from customers in Germany relating to policies issued by Clerical Medical Investment Group Limited
(subsequently renamed Scottish Widows Limited), with smaller numbers of claims received from customers in Austria and Italy.
Operational costs, redress and legal fees associated with the claims are recognised within regulatory and legal provisions.
Other
The Group carries provisions of £154 million (31 December 2023: £137 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 2024 provisions of £135 million (31 December 2023: £245 million) were held.
The Group carries provisions of £35 million (31 December 2023: £46 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.
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
289
Lloyds Banking Group plc Annual Report and Accounts 2024
for the year ended 31 December
Note 29: Subordinated liabilities
The movement in subordinated liabilities during the year was as follows:
Preference
shares
£m
Undated
£m
Dated
£m
Total
£m
At 1 January 2023
470
150
10,110
10,730
Issued during the year1 :
6.625% Fixed Rate Reset Dated Subordinated Notes 2033 (£750 million)
–
–
747
747
5.25% Fixed Rate Reset Dated Subordinated Notes 2033 (S$500 million)
–
–
288
288
Fixed-to-Floating Rate Dated Subordinated Notes 2033 (A$750 million)
–
–
382
382
–
–
1,417
1,417
Repurchases and redemptions during the year1 :
9.625% Subordinated Bonds 2023 (£300 million)
–
–
(92)
(92)
7.07% Subordinated Fixed Rate Notes 2023 (€175 million)
–
–
(155)
(155)
5.5% Dated Subordinated Notes 2023 (£850 million)
–
–
(850)
(850)
Dated Subordinated Fixed Rate Reset Notes 2028 (€750 million)
–
–
(643)
(643)
8.75% Perpetual Subordinated Bonds (£100 million)
–
(5)
–
(5)
7.375% Subordinated Undated Instruments (£150 million)
–
–
–
–
8% Undated Subordinated Step-up Notes 2023 (£200 million)
–
–
–
–
–
(5)
(1,740)
(1,745)
Foreign exchange movements
(2)
–
(379)
(381)
Other movements (cash and non-cash)2
(2)
(1)
235
232
At 31 December 2023
466
144
9,643
10,253
Issued during the year1 :
4.375% Fixed Rate Reset Dated Subordinated Notes 2034 (€500 million)
–
–
427
427
5.788% Fixed-to-Floating Rate Dated Subordinated Notes 2034 (A$250 million)
–
–
128
128
Floating Rate Dated Subordinated Notes 2034 (A$500 million)
–
–
257
257
–
–
812
812
Repurchases and redemptions during the year1 :
6.475% Non-cumulative Preference Shares callable 2024 (£186 million)
(47)
–
–
(47)
4.5% Dated Subordinated Notes 2024 ($1,000 million)
–
–
(772)
(772)
(47)
–
(772)
(819)
Foreign exchange movements
(1)
–
(24)
(25)
Other movements (cash and non-cash)2
(5)
1
(128)
(132)
At 31 December 2024
413
145
9,531
10,089
1
Issuances in the year generated cash inflows of £812 million (2023: £1,417 million); the repurchases and redemptions resulted in cash outflows of £819 million (2023: £1,745 million).
2
Other movements include hedge accounting movements and cash payments in respect of interest on subordinated liabilities in the year amounting to £622 million (2023: £623 million)
offset by the interest expense in respect of subordinated liabilities of £738 million (2023: £712 million).
These securities will, in the event of the winding-up of the issuer, be subordinated to the claims of depositors and all other creditors of the
issuer, other than creditors whose claims rank equally with, or are junior to, the claims of the holders of the subordinated liabilities. The
subordination of specific subordinated liabilities is determined in respect of the issuer and any guarantors of that liability. The claims of
holders of preference shares and preferred securities are generally junior to those of the holders of undated subordinated liabilities, which in
turn are junior to the claims of holders of the dated subordinated liabilities.
Preference shares
The Company has in issue various classes of preference shares, with a nominal value of £74 million (296,227,449 shares), which are all
classified as liabilities under IFRS accounting standards and are shown below. This represents 0.49 per cent of the total issued share capital
(60,913,240,420 shares) of the Group.
Number of shares
2024
2023
2022
6% Non-cumulative Redeemable Preference shares of GBP0.25
400
400
400
6.475% Non-cumulative Preference shares of GBP0.25
–
47,273,816
47,273,816
9.25% Non-cumulative Irredeemable Preference shares of GBP0.25
252,510,147
252,510,147
252,510,147
9.75% Non-cumulative Irredeemable Preference shares of GBP0.25
43,630,285
43,630,285
43,630,285
6.413% Non-cumulative Fixed/Floating Rate Callable Preference shares of USD0.25
48,990
48,990
48,990
6.657% Non-cumulative Fixed/Floating Rate Callable Preference shares of USD0.25
37,627
37,627
37,627
Total
296,227,449
343,501,265
343,501,265
Notes to the consolidated financial statements continued
90
290
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 29: Subordinated liabilities continued
2024
2023
2022
£m
% of
share
capital
£m
% of
share
capital
£m
% of
share
capital
6% Non-cumulative Redeemable Preference shares of GBP0.25
–
–
–
–
–
–
6.475% Non-cumulative Preference shares of GBP0.25
–
–
12
0.
07
12
0.
07
9.25% Non-cumulative Irredeemable Preference shares of
GBP0.25
63
0.42
63
0 .40
63
0.37
9.75% Non-cumulative Irredeemable Preference shares of
GBP0.25
11
0.07
11
0.
07
11
0.
06
6.413% Non-cumulative Fixed/Floating Rate Callable Preference
shares of USD0.25
–
–
–
–
–
–
6.657% Non-cumulative Fixed/Floating Rate Callable Preference
shares of USD0.25
–
–
–
–
–
–
Total
74
0.49
86
0.
54
86
0.
50
In any general meeting of the Company which is held as a physical general meeting, a resolution put to the vote of the meeting shall be
decided by a poll unless the chair of the meeting determines that such resolution shall be decided on a show of hands, although in certain
circumstances such decision may be overridden by a sufficient number of shareholders demanding a poll. At a general meeting of the
Company, every holder of shares (whether ordinary or preference shares) who is present in person or by proxy and entitled to vote, shall
have one vote per share in relation to the resolutions on which they are entitled, respectively, to vote, whether such vote is held on a poll or
a show of hands.
100 per cent of preference shares have voting rights. The preference shares represent 0.49 per cent of the total voting rights of the
Company, the remainder being represented by the ordinary shares.
The rights and obligations attaching to the preference shares are set out in:
i.
ii.
iii.
the Company’s articles of association, a copy of which can be obtained from Companies House or from our website
(www.lloydsbankinggroup.com/who-we-are/group-overview/corporate-governance.html
);
in respect of the 6 per cent Non-cumulative Redeemable Preference shares, in Companies House form 128(1) filed at Companies
House on 12 January 2005, a copy of which is available from Companies House (www.companieshouse.gov.uk
); and
in respect of the other classes of preference shares, in the prospectus dated 20 November 2008 and published on the
National Storage Mechanism on that date, a copy of which prospectus is available on the National Storage Mechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism
).
None of the preference shares have any multiple or unequal voting rights.
As at 31 December 2024, the free float percentage of all of the Company’s ordinary and preference listed shares in issue was over 99.99 per
cent, by both number of shares and nominal value. The balance was comprised of the 400 unlisted 6 per cent Non-cumulative Redeemable
Preference shares of GBP0.25 each referred to above (£100 in total).
Note 30: Share capital
Issued and fully paid ordinary share capital
Number of shares
Ordinary shares of 10p (formerly 25p) each
2024
2023
2022
At 1 January
63,569,225,662
67,287,852,204
71,022,593,135
Issued under employee share schemes
734,265,017
667,636,165
793,990,660
Share buyback programme (note 33)
(3,686,477,708)
(4,386,262,707)
(4,528,731,591)
At 31 December
60,617,012,971
63,569,225,662
67,287,852,204
2024
2023
2022
Ordinary shares of 10p (formerly 25p) each
£m
% of
share
capital
£m
% of
share
capital
£m
% of
share
capital
At 1 January
6,358
6,729
7,102
Issued under employee share schemes
73
67
80
Share buyback programme (note 33)
(369)
(438)
(453)
At 31 December
6,062
99.52
6,358
99.4
6
6,729
99.50
Strategic report
Sustainability review
Financial results
Governance
Risk management
Financial statements
Other information
291
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 30: Share capital continued
Ordinary shares
As permitted by the Companies Act 2006, the Company removed references to authorised share capital from its articles of association at
the annual general meeting on 5 June 2009. This change took effect from 1 October 2009. There are no restrictions on the transfer of shares
in the Company other than as set out in the articles of association and:
•
Certain restrictions which may from time to time be imposed by law and regulations (for example, insider trading laws)
•
Where directors and certain employees of the Company require the approval of the Company to deal in the Company’s shares
•
Pursuant to the rules of some of the Company’s employee share plans where certain restrictions may apply while the shares are subject
to the plans
Where, under an employee share plan operated by the Company, participants are the beneficial owners of shares but not the registered
owners, the voting rights are normally exercised by the registered owner at the direction of the participant. Outstanding awards and
options would normally vest and become exercisable on a change of control, subject to the satisfaction of any performance conditions at
that time.
All of the Company’s issued ordinary share capital is listed (i.e. the free float percentage of the ordinary shares is 100 per cent) and none of
the shares have any multiple or unequal voting rights; each share carries one vote. In addition, the Company is not aware of any agreements
between shareholders that may result in restrictions on the transfer of securities and/or voting rights.
The directors have authority to allot and issue ordinary and preference shares and to make market purchases of ordinary and preference
shares as granted at the annual general meeting on 16 May 2024. The authority to issue shares and the authority to make market
purchases of shares will expire at the next annual general meeting. Shareholders will be asked, at the annual general meeting, to give
similar authorities.
Subject to any rights or restrictions attached to any shares, on a show of hands at a general meeting of the Company every holder of shares
present in person or by proxy and entitled to vote has one vote and on a poll every member present and entitled to vote has one vote for
every share held. The special rights attached to any class of shares (including preference shares) in the Company may, subject to the
statutory provisions, be varied or abrogated either with the consent in writing of the holders of three-quarters in nominal value of the
issued shares of the class or with the sanction of a special resolution passed at a separate meeting of the holders of the shares of the class
(but not otherwise).
The holders of ordinary shares, who held 100 per cent of the total ordinary share capital at 31 December 2024, are entitled to receive the
Company’s report and accounts, attend, speak and vote at general meetings and appoint proxies to exercise voting rights. Holders of
ordinary shares may also receive a dividend (subject to the provisions of the Company’s articles of association) and in the event of a
winding-up, may share in the assets of the Company.
The rights and obligations attached to the Company’s ordinary shares are set out in the Company’s articles of association, a copy of which
can be found at www.lloydsbankinggroup.com/who-we-are/group-overview/corporate-governance.html →.
Preference shares
The Company has in issue various classes of preference shares which are all classified as liabilities under IFRS accounting standards and
which are included in note 29. The statement above (under the heading ‘Ordinary shares’) in relation to the variation of special rights
attaching to any shares is also applicable to preference shares.
Note 31: Earnings per share
2024
£m
2023
£m
2022
£m
Profit attributable to ordinary shareholders – basic and diluted
3,923
4,933
3,389
2024
million
2023
million
2022
million
Weighted average number of ordinary shares in issue – basic
62,413
64,953
68,847
Adjustment for share options and awards
661
807
835
Weighted average number of ordinary shares in issue – diluted
63,074
65,760
69,682
Basic earnings per share
6.3p
7.6p
4.9p
Diluted earnings per share
6.2p
7.5p
4.9p
for the year ended 31 December
Basic earnings per share are calculated by dividing the net profit attributable to equity shareholders by the weighted average number of
ordinary shares in issue during the year, which has been calculated after deducting 71 million (2023: 180 million; 2022: 198 million) ordinary
shares representing the Group’s holdings of own shares in respect of employee share schemes.
For the calculation of diluted earnings per share the weighted average number of ordinary shares in issue is adjusted to assume conversion
of all dilutive potential ordinary shares that arise in respect of share options and awards granted to employees. The number of shares that
could have been acquired at the annual average price of the Company’s shares based on the monetary value of the subscription rights
attached to outstanding share options and awards is determined. This is deducted from the number of shares issuable under such options
and awards to leave a residual bonus amount of shares which are added to the weighted average number of ordinary shares in issue, but no
adjustment is made to the profit attributable to equity shareholders.
There were 16 million anti-dilutive share options and awards excluded from the calculation of diluted earnings per share (2023: 41 million;
2022: 63 million).
Notes to the consolidated financial statements continued
2
92
2
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 32: Share premium account
2024
£m
2023
£m
2022
£m
At 1 January
18,568
18,504
18,479
Issued under employee share schemes
117
64
25
Redemption of preference shares1
35
–
–
At 31 December
18,720
18,568
18,504
1
During the year ended 31 December 2024, the Group redeemed all of its outstanding 6.475% Non-cumulative Preference Shares at their combined sterling value of £47 million. These
preference shares had been accounted for as subordinated liabilities. On redemption an amount of £35 million was transferred from the distributable merger reserve to the share
premium account.
Note 33: Other reserves
2024
£m
2023
£m
2022
£m
Merger reserve
7,102
7,149
7,149
Capital redemption reserve
5,751
5,370
4,932
Revaluation reserve in respect of debt securities held at fair value through other comprehensive income
(113)
(67)
50
Revaluation reserve in respect of equity shares held at fair value through other comprehensive income
93
–
57
Cash flow hedging reserve
(3,755)
(3,766)
(5,476)
Foreign currency translation reserve
(251)
(178)
(125)
At 31 December
8,827
8,508
6,587
The merger reserve primarily comprises the premium on shares issued in January 2009 as part of the recapitalisation of the Group and the
acquisition of HBOS plc.
The capital redemption reserve represents transfers from distributable reserves in accordance with companies’ legislation upon the
redemption of ordinary and preference share capital.
The revaluation reserves in respect of debt securities and equity shares held at fair value through other comprehensive income represent
the cumulative after-tax unrealised change in the fair value of financial assets so classified since initial recognition; or in the case of financial
assets obtained on acquisitions of businesses, since the date of acquisition.
The cash flow hedging reserve represents the cumulative after-tax gains and losses on effective cash flow hedging instruments that will be
reclassified to the income statement in the periods in which the hedged item affects profit or loss.
The foreign currency translation reserve represents the cumulative after-tax gains and losses on the translation of foreign operations and
exchange differences arising on financial instruments designated as hedges of the Group’s net investment in foreign operations.
Merger reserve
2024
£m
2023
£m
2022
£m
At 1 January
7,149
7,149
7,149
Redemption of preference shares (note 29)
(47)
–
–
At 31 December
7,102
7,149
7,149
Capital redemption reserve
2024
£m
2023
£m
2022
£m
At 1 January
5,370
4,932
4,479
Redemption of preference shares (note 29)
12
–
–
Shares cancelled under share buyback programme (see below)
369
438
453
At 31 December
5,751
5,370
4,932
In 2024, 2023 and 2022 the Group commenced and completed share buyback programmes to repurchase outstanding ordinary shares. In
2024 the Group bought back and cancelled 3,686 million shares under the programme (2023: 4,386 million shares; 2022: 4,529 million
shares), for a total consideration, including expenses, of £2,011 million (2023: £1,993 million; 2022: £2,013 million). Upon cancellation,
£369 million (2023: £438 million; 2022: £453 million), being the nominal value of the shares repurchased, was transferred to the capital
redemption reserve.
Revaluation reserve in respect of debt securities held at fair value through other comprehensive income
2024
£m
2023
£m
2022
£m
At 1 January
(67)
50
207
Change in fair value
(53)
(40)
(133)
Deferred tax
14
11
31
Current tax
1
1
8
(38)
(28)
(94)
Income statement transfers in respect of disposals (note 9)
(7)
(122)
(92)
Deferred tax
2
35
23
(5)
(87)
(69)
Impairment recognised in the income statement
(3)
(2)
6
At 31 December
(113)
(67)
50
293
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 33: Other reserves continued
Revaluation reserve in respect of equity shares held at fair value through other comprehensive income
2024
£m
2023
£m
2022
£m
At 1 January
–
57
9
Change in fair value
93
(54)
44
Deferred tax
–
(3)
3
93
(57)
47
Realised gains and losses transferred to retained profits
–
–
–
Deferred tax
–
–
1
–
–
1
At 31 December
93
–
57
Cash flow hedging reserve
2024
£m
2023
£m
2022
£m
At 1 January
(3,766)
(5,476)
(457)
Change in fair value of hedging derivatives
(2,577)
545
(6,990)
Deferred tax
719
(160)
1,940
(1,858)
385
(5,050)
Net income statement transfers
2,597
1,838
43
Deferred tax
(728)
(513)
(12)
At 31 December
1,869
1,325
31
(3,755)
(3,766)
(5,476)
Foreign currency translation reserve
2024
£m
2023
£m
2022
£m
At 1 January
(178)
(125)
(210)
Currency translation differences arising in the year
(73)
(53)
116
Income statement transfers
–
–
(31)
At 31 December
(251)
(178)
(125)
Note 34: Retained profits
2024
£m
2023
£m
2022
£m
At 1 January
6,790
6,550
8,318
Profit attributable to ordinary shareholders
3,923
4,933
3,389
Post-retirement defined benefit scheme remeasurements (net of tax)
(564)
(1,205)
(2,152)
Gains and losses attributable to own credit risk (net of tax)
(56)
(168)
364
Dividends paid (note 36)
(1,828)
(1,651)
(1,475)
Share buyback programme (note 33)
(2,011)
(1,993)
(2,013)
Issue costs of other equity instruments (net of tax)
(6)
(6)
(5)
Repurchase and redemption costs of other equity instruments
(316)
–
(36)
Movement in treasury shares
(173)
103
(60)
Value of employee services
153
227
224
Change in non-controlling interests
–
–
(3)
Realised gains and losses on equity shares held at fair value through other comprehensive income
–
–
(1)
At 31 December
5,912
6,790
6,550
for the year ended 31 December
Retained profits are stated after deducting £47 million (2023: £10 million; 2022: £196 million) representing 126 million (2023: 61 million;
2022: 688 million) treasury shares held.
The payment of dividends by subsidiaries and the ability of members of the Group to lend money to other members of the Group may be
subject to regulatory or legal restrictions, the availability of reserves and the financial and operating performance of the entity. A number of
Group subsidiaries, principally those with banking and insurance activities, are subject to regulatory capital requirements which require
minimum amounts of capital to be maintained relative to their size and risk. The Group actively manages the capital of its subsidiaries,
which includes monitoring the regulatory capital ratios for its banking and insurance subsidiaries and, on a consolidated basis, the Ring-
Fenced Bank sub-group, against approved risk appetite levels.
Notes to the consolidated financial statements continued
294
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 35: Other equity instruments
2024
£m
2023
£m
2022
£m
At 1 January
6,940
5,297
5,906
Issued during the year:
$1,000 million 6.75% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible
Securities Callable 2031
763
–
–
$1,250 million 8% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible
Securities Callable 2029
–
1,028
–
£750 million 8.5% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible
Securities Callable 2028
–
750
–
£750 million 8.5% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible
Securities Callable 2027
–
–
750
763
1,778
750
Repurchases and redemptions during the year:
$1,675 million 7.5% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible
Securities
(1,008)
–
–
£500 million 5.125% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible
Securities Callable 2024
(500)
–
–
£1,494 million 7.625% Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Contingent Convertible
Securities Callable 2023
–
(135)
(1,359)
(1,508)
(135)
(1,359)
Profit for the year attributable to other equity holders
498
527
438
Distributions on other equity instruments
(498)
(527)
(438)
At 31 December
6,195
6,940
5,297
The AT1 securities are Fixed Rate Resetting Perpetual Subordinated Contingent Convertible Securities with no fixed maturity or
redemption date. The principal terms of the AT1 securities are described below:
•
The securities rank behind the claims against Lloyds Banking Group plc of (a) unsubordinated creditors, (b) claims which are, or are
expressed to be, subordinated to the claims of unsubordinated creditors of Lloyds Banking Group plc but not further or otherwise, or (c)
whose claims are, or are expressed to be, junior to the claims of other creditors of Lloyds Banking Group, whether subordinated or
unsubordinated, other than those whose claims rank, or are expressed to rank, pari passu with, or junior to, the claims of the holders of
the AT1 securities in a winding-up occurring prior to a conversion event being triggered
•
The securities bear a fixed rate of interest until the first reset date. After the first reset date or any reset date thereafter, in the event
that they are not redeemed, the AT1 securities will bear interest at rates fixed periodically in advance for five-year periods based on
market rates
•
Interest on the securities will be due and payable only at the sole discretion of Lloyds Banking Group plc, and Lloyds Banking Group plc
may at any time elect to cancel any interest payment (or any part thereof) which would otherwise be payable on any interest payment
date. There are also certain restrictions on the payment of interest as specified in the terms
•
The securities are undated and are repayable, at the option of Lloyds Banking Group plc, in whole at the first call date or period, or on
any fifth anniversary after the first call date or period. In addition, the AT1 securities are repayable, at the option of Lloyds Banking
Group plc, in whole for certain regulatory or tax reasons. Any repayments require the prior consent of the PRA
•
The securities convert into ordinary shares of Lloyds Banking Group plc, at a pre-determined price, should the CET1 ratio of the Group
fall below 7.0 per cent
Note 36: Dividends on ordinary shares
The directors have recommended a final dividend, which is subject to approval by the shareholders at the annual general meeting on
15 May 2025, of 2.11 pence per ordinary share (2023: 1.84 pence per ordinary share), equivalent to £1,276 million, before the impact of any
cancellations of shares under the Company’s buyback programme (2023: £1,169 million, following cancellations of shares under the
Company’s 2024 buyback programme up to the record date), which will be paid on 20 May 2025. These financial statements do not reflect
the recommended dividend.
Dividends paid during the year were as follows:
2024
pence per
share
2023
pence per
share
2022
pence per
share
2024
£m
2023
£m
2022
£m
Final dividend recommended by directors at previous year end
1.84
1.60
1.33
1,169
1,059
930
Interim dividend paid in the year
1.06
0.92
0.80
659
592
545
2.90
2.52
2.13
1,828
1,651
1,475
The trustees of the following holdings of Lloyds Banking Group plc shares in relation to employee share schemes retain the right to receive
dividends but have chosen to waive their entitlement to the dividends on those shares as indicated: the Lloyds Banking Group Share
Incentive Plan (holding at 31 December 2024: 590,670 shares, 31 December 2023: 3,280,207 shares, waived rights to all dividends) and the
Lloyds Banking Group Employee Share Ownership Trust (holding at 31 December 2024: 125,361,633 shares, 31 December 2023:
57,736,111 shares, waived rights to all dividends).
295
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 37: Related party transactions
Key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of an
entity; the Group’s key management personnel are the members of the Lloyds Banking Group plc Group Executive Committee together
with its non-executive directors.
The table below details, on an aggregated basis, key management personnel compensation:
Compensation
2024
£m
2023
£m
2022
£m
Salaries and other short-term benefits
14
16
12
Post-employment benefits
–
–
–
Share-based payments
20
22
16
Total compensation
34
38
28
There were no aggregate contributions in respect of key management personnel to defined contribution pension schemes (2023 and 2022:
none).
2024
million
2023
million
2022
million
At 1 January
55
72
74
Granted, including certain adjustments (includes entitlements of appointed key management personnel)
78
27
29
Exercised/lapsed (includes entitlements of former key management personnel)
(10)
(44)
(31)
123
55
72
Share plans
At 31 December
The tables below detail, on an aggregated basis, balances outstanding at the year end and related income and expense, together with
information relating to other transactions between the Group and its key management personnel:
2024
£m
2023
£m
2022
£m
Loans
At 1 January
1
2
3
Advanced (includes loans to appointed key management personnel)
1
–
1
Repayments (includes loans to former key management personnel)
(1)
(1)
(2)
At 31 December
1
1
2
The loans are on both a secured and unsecured basis and are expected to be settled in cash. The loans attracted interest rates of between
2.03 per cent and 32.40 per cent in 2024 (2023: 1.09 per cent and 32.40 per cent; 2022: 1.01 per cent and 30.15 per cent).
No provisions have been recognised in respect of loans given to key management personnel (2023 and 2022: £nil).
2024
£m
2023
£m
2022
£m
Deposits
At 1 January
14
10
11
Placed (includes deposits of appointed key management personnel)
31
44
37
Withdrawn (includes deposits of former key management personnel)
(37)
(40)
(38)
8
14
10
At 31 December
for the year ended 31 December
Deposits placed by key management personnel attracted interest rates of up to 6.25 per cent (2023: 6.25 per cent; 2022: 5.0 per cent).
At 31 December 2024, the Group did not provide any guarantees in respect of key management personnel (2023 and 2022: none).
At 31 December 2024, transactions, arrangements and agreements entered into by the Group’s banking subsidiaries with directors and
connected persons included amounts outstanding in respect of loans and credit card transactions of £29.0 thousand with five directors and
one connected persons (2023: £23.4 thousand with five directors and no connected persons; 2022: £2.0 thousand with two directors and
no connected persons).
Subsidiaries
Details of the Group’s subsidiaries and related undertakings are given on pages 318 to 331. In accordance with IFRS 10 Consolidated
Financial Statements, transactions and balances with subsidiaries have been eliminated on consolidation.
Pension funds
The Group provides banking and some investment management services to certain of its pension funds. At 31 December 2024, customer
deposits of £113 million (2023: £133 million) related to the Group’s pension funds. As disclosed in note 12, the Group’s main pension funds
have entered into a longevity insurance arrangement that was structured as a pass-through involving Scottish Widows.
Collective investment vehicles
The Group manages 88 (2023: 129) collective investment vehicles, such as Open-Ended Investment Companies (OEICs) and of these
50 (2023: 68) are consolidated. The Group invested £142 million (2023: £55 million) and redeemed £513 million (2023: £210 million) in the
unconsolidated collective investment vehicles during the year and had investments, at fair value, of £1,461 million (2023: £1,448 million) at
31 December. The Group earned fees of £82 million from the unconsolidated collective investment vehicles during 2024 (2023: £72 million).
Notes to the consolidated financial statements continued
296
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 37: Related party transactions continued
Joint ventures and associates
At 31 December 2024 there were loans and advances to customers of £45 million (2023: £47 million) outstanding and balances within
customer deposits of £13 million (2023: £6 million) relating to joint ventures and associates.
During the year the Group paid fees of £4 million (2023: £4 million) to its Schroders Personal Wealth joint venture.
In addition to the above balances, the Group has a number of other associates held by its venture capital business that it accounts for at
fair value through profit or loss. At 31 December 2024, these companies had total assets of £7,635 million (2023: £7,519 million), total
liabilities of £6,436 million (2023: £5,927 million) and for the year ended 31 December 2024 had turnover of £3,630 million (2023:
£3,381 million) and made a net loss of £328 million (2023: net loss of £293 million). In addition, the Group has provided £1,651 million
(2023: £1,574 million) of financing to these companies on which it received £116 million (2023: £120 million) of interest income in the year.
Note 38: Contingent liabilities, commitments and guarantees
Contingent liabilities, commitments and guarantees arising from the banking business
At 31 December 2024 contingent liabilities, such as performance bonds and letters of credit, arising from the banking business were
£2,605 million (31 December 2023: £2,849 million).
The contingent liabilities of the Group arise in the normal course of its banking business and it is not practicable to quantify their future
financial effect. Total commitments and guarantees were £148,619 million (31 December 2023: £143,319 million), of which in respect of
undrawn formal standby facilities, credit lines and other commitments to lend, £79,518 million (31 December 2023: £75,080 million)
was irrevocable.
Capital commitments
Excluding commitments in respect of investment property (note 24), capital expenditure contracted but not provided for at 31 December
2024 amounted to £640 million (2023: £1,240 million) and related to assets to be leased to customers under operating leases. The Group’s
management is confident that future net revenues and funding will be sufficient to cover these commitments.
Interchange fees
With respect to multi-lateral interchange fees (MIFs), the Group is not a party in the ongoing or threatened litigation which involves the
card schemes Visa and Mastercard or any settlements of such litigation. However, the Group is a member/licensee of Visa and Mastercard
and other card schemes. The litigation in question is as follows:
•
Litigation brought by or on behalf of retailers against both Visa and Mastercard in the English Courts, in which retailers are seeking
damages on grounds that Visa and Mastercard’s MIFs breached competition law (this includes a judgment of the Supreme Court in June
2020 upholding the Court of Appeal’s finding in 2018 that certain historic interchange arrangements of Mastercard and Visa infringed
competition law)
•
Litigation brought on behalf of UK consumers in the English Courts against Mastercard
Any impact on the Group of the litigation against Visa and Mastercard remains uncertain at this time, such that it is not practicable for the
Group to provide an estimate of any potential financial effect. Insofar as Visa is required to pay damages to retailers for interchange fees set
prior to June 2016, contractual arrangements to allocate liability have been agreed between various UK banks (including the Group) and
Visa Inc, as part of Visa Inc’s acquisition of Visa Europe in 2016. These arrangements cap the maximum amount of liability to which the
Group may be subject and this cap is set at the cash consideration received by the Group for the sale of its stake in Visa Europe to Visa Inc
in 2016. In 2016, the Group received Visa preference shares as part of the consideration for the sale of its shares in Visa Europe. A release
assessment is carried out by Visa on certain anniversaries of the sale (in line with the Visa Europe sale documentation) and as a result, some
Visa preference shares may be converted into Visa Inc Class A common stock from time to time. Any such release and any subsequent sale
of Visa common stock does not impact the contingent liability.
LIBOR and other trading rates
Certain Group companies, together with other panel banks, have been named as defendants in ongoing private lawsuits, including
purported class action suits, in the US in connection with their roles as panel banks contributing to the setting of US dollar, Japanese yen
and Sterling London Interbank Offered Rate.
Certain Group companies are also named as defendants in (i) UK-based claims, and (ii) two Dutch class actions, raising LIBOR manipulation
allegations. A number of claims against the Group in the UK relating to the alleged mis-sale of interest rate hedging products also include
allegations of LIBOR manipulation.
It is currently not possible to predict the scope and ultimate outcome on the Group of any private lawsuits or ongoing related challenges to
the interpretation or validity of any of the Group’s contractual arrangements, including their timing and scale. As such, it is not practicable
to provide an estimate of any potential financial effect.
Tax authorities
The Group has an open matter in relation to a claim for group relief of losses incurred in its former Irish banking subsidiary, which ceased
trading on 31 December 2010. In 2020, HMRC concluded its enquiry into the matter and issued a closure notice denying the group relief
claim. The Group appealed to the First Tier Tax Tribunal. The hearing took place in May 2023. In January 2025, the First Tier Tribunal
concluded in favour of HMRC. The Group believes it has applied the rules correctly and that the claim for group relief is correct. Having
reviewed the Tribunal’s conclusions and having taken appropriate advice, the Group intends to appeal the decision and does not consider
this to be a case where an additional tax liability will ultimately fall due. If the final determination of the matter by the judicial process is
that HMRC’s position is correct, management believes that this would result in an increase in current tax liabilities of approximately
£975 million (including interest) and a reduction in the Group’s deferred tax asset of approximately £275 million. Following the First Tier
Tax Tribunal outcome, the tax will be paid and recognised as a current tax asset, given the Group’s view that the tax liability will not
ultimately fall due. It is unlikely that any appeal hearing will be held before 2026, and final conclusion of the judicial process may not
be for several years.
There are a number of other open matters on which the Group is in discussions with HMRC (including the tax treatment of certain costs
arising from the divestment of TSB Banking Group plc and the tax treatment of costs relating to HBOS Reading), none of which is expected
to have a material impact on the financial position of the Group.
297
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 38: Contingent liabilities, commitments and guarantees continued
Arena and Sentinel litigation claims
The Group is facing claims alleging breach of duty and/or mandate in the context of an underlying external fraud matter involving Arena
Television. The Group is defending the claims, which are at an early stage. As such, it is not practicable to estimate the final outcome of the
matter and its financial impact (if any) to the Group.
FCA investigation into the Group’s anti-money laundering control framework
As previously disclosed, the FCA had opened an investigation into the Group’s compliance with domestic UK money laundering regulations
and the FCA’s rules and Principles for Businesses, with a focus on aspects of its anti-money laundering control framework. This investigation
has now been closed by the FCA without any enforcement action taken.
Other legal actions and regulatory matters
In addition, in the course of its business the Group is subject to other complaints and threatened or actual legal proceedings (including class
or group action claims) brought by or on behalf of current or former employees, customers (including their appointed representatives),
investors or other third parties, as well as legal and regulatory reviews, enquiries and examinations, requests for information, audits,
challenges, investigations and enforcement actions, which could relate to a number of issues. This includes matters in relation to
compliance with applicable laws and regulations, such as those relating to prudential regulation, employment, consumer protection,
investment advice, business conduct, systems and controls, environmental, sustainability, competition/anti-trust, tax, anti-bribery, anti-
money laundering and sanctions, some of which may be beyond the Group’s control, both in the UK and overseas. Where material, such
matters are periodically reassessed, with the assistance of external professional advisers where appropriate, to determine the likelihood of
the Group incurring a liability. The Group does not currently expect the final outcome of any such case to have a material adverse effect on
its financial position, operations or cash flows. Where there is a contingent liability related to an existing provision the relevant disclosures
are included within note 28.
Note 39: Structured entities
The Group’s interests in structured entities are both consolidated and unconsolidated. Details of the Group’s interests in consolidated
structured entities are set out in note 26 for securitisations and covered bond vehicles, note 12 for structured entities associated with the
Group’s pension schemes, and below in part (A) and (B). Details of the Group’s interests in unconsolidated structured entities are included
below in part (C).
(A) Asset-backed conduits
In addition to the structured entities discussed in note 26, which are used for securitisation and covered bond programmes, the Group
sponsors an active asset-backed conduit, Cancara, which invests in client receivables and debt securities. The total consolidated exposure
of Cancara at 31 December 2024 was £2,272 million (2023: £2,808 million), comprising £1,155 million of loans and advances (2023:
£1,521 million), £559 million of debt securities (2023: £698 million) and £558 million of financial assets at fair value through profit or loss
(2023: £589 million).
All lending assets and debt securities held by the Group in Cancara are restricted in use, as they are held by the collateral agent for the
benefit of the commercial paper investors and the liquidity providers only. The Group provides liquidity facilities to Cancara under terms
that are usual and customary for standard lending activities in the normal course of the Group’s banking activities. During 2024 there have
continued to be planned drawdowns on certain liquidity facilities for balance sheet management purposes, supporting the programme to
provide funding alongside the proceeds of the asset-backed commercial paper issuance. The Group could be asked to provide support
under the contractual terms of these arrangements including, for example, if Cancara experienced a shortfall in external funding, which
may occur in the event of market disruption. The external assets in Cancara are consolidated in the Group’s financial statements.
(B) Consolidated collective investment vehicles and limited partnerships
The assets of the Insurance business held in consolidated collective investment vehicles, such as Open-Ended Investment Companies and
limited partnerships, are not directly available for use by the Group. However, the Group’s investment in the majority of these collective
investment vehicles is readily realisable. As at 31 December 2024, the total carrying value of these consolidated collective investment
vehicle assets and liabilities held by the Group was £59,999 million (2023: £58,351 million).
The Group has no contractual arrangements (such as liquidity facilities) that would require it to provide financial or other support to the
consolidated collective investment vehicles; the Group has not previously provided such support and has no current intentions to provide
such support.
(C) Unconsolidated structured entities
The Group considers itself the sponsor of a structured entity where it is primarily involved in the design and establishment of the structured
entity and further where the Group transfers assets to the structured entity, markets products associated with the structured entity in its
own name and/or provides guarantees regarding the structured entity’s performance.
The Group sponsors a range of diverse investment funds and limited partnerships where it acts as the fund manager or equivalent decision-
maker and markets the funds under one of the Group’s brands. The following table describes the types of structured entities that the
Group does not consolidate but in which it holds an interest.
Total assets of
structured entities
Type of entity
Nature and purpose of structured entities
Interest held by the Group
2024
£bn
2023
£bn
Collective investment
vehicles and limited
partnerships
These vehicles are primarily financed by
investments from investors in the vehicles and
are matched by policyholder liabilities in the
Insurance division.
• Interests in units issued by the vehicles
• Fees from management of vehicles
2,434
2,184
Securitisation vehicles
These vehicles issue asset-backed notes to
investors and facilitate the management of
the Group’s balance sheet.
• Interest in notes issued by the vehicles
• Fees for loan servicing
5
5
for the year ended 31 December
Notes to the consolidated financial statements continued
298
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 39: Structured entities continued
The following table sets out an analysis of the carrying amount of interest held by the Group in the unconsolidated structured entities. The
maximum exposure to loss is the carrying amounts of the assets held.
Carrying amount
Recognised within;
2024
£m
2023
£m
Collective investment vehicles and limited partnerships
Financial assets at fair value through profit or loss
86,630
76,426
Notes held in securitisation vehicles
Financial assets at fair value through profit or loss; and
Financial assets at amortised cost
2,403
4,127
Interest rate derivatives provided to securitisation vehicles
Derivative financial instruments (assets); and
Derivative financial instruments (liabilities)
22
(17)
During the year the Group has not provided any non-contractual financial or other support to these entities and has no current intention of
providing any non-contractual financial or other support in the future.
The fee income earned from unconsolidated structured entities that the Group sponsors but does not have an interest in was £82 million
(2023: £72 million) for collective investment vehicles and £1 million (2023: £nil) for securitisation vehicles. The carrying amount of assets
transferred to securitisation vehicles at the time of transfer was £2,004 million (2023: £5,625 million) and the Group recognised a gain of
£11 million on transfer (2023: gain of £31 million).
Continuing involvement in financial assets that have been derecognised
The Group has derecognised financial assets in their entirety following transactions with securitisation vehicles, as noted above. The
continuing involvement largely arises from funding provided to the vehicles through the purchase of issued notes. The majority of these
notes are recognised as debt securities held at amortised cost. The remaining notes held by the Group, together with interest rate
derivatives transacted with the vehicles, are recognised at fair value through profit or loss. The carrying amount of these interests and the
maximum exposure to loss is included in the table above. At 31 December 2024 the fair value of the retained notes was £2,401 million
(2023: £4,142 million). The income from the Group’s interest in these structures for the year ended 31 December 2024 was £226 million and
cumulatively for the lifetime was £359 million.
Note 40: Transfers of financial assets
Transferred financial assets derecognised in their entirety with ongoing exposure
Through asset securitisations, the Group has transferred financial assets which were derecognised in their entirety, with some continuing
involvement. Further details are available in note 39.
Transferred financial assets that continue to be recognised
Details of transferred financial assets that continue to be recognised in full are as follows.
The Group enters into repurchase and securities lending transactions in the normal course of business that do not result in derecognition of
the financial assets as substantially all of the risks and rewards, including credit, interest rate, prepayment and other price risks are retained
by the Group. In all cases, the transferee has the right to sell or repledge the assets concerned.
As set out in note 26, included within financial assets measured at amortised cost are loans transferred under the Group’s securitisation and
covered bond programmes. As the Group retains all or a majority of the risks and rewards associated with these loans, including credit,
interest rate, prepayment and liquidity risk, they remain on the Group’s balance sheet. Assets transferred into the Group’s securitisation
and covered bond programmes are not available to be used by the Group while the assets are within the programmes. However, the Group
retains the right to remove loans from the covered bond programmes where they are in excess of the programme’s requirements. In
addition, where the Group has retained some of the notes issued by securitisation and covered bond programmes, the Group has the
ability to sell or pledge these retained notes.
In 2024, the Group securitised a portfolio of £1.25 billion of finance lease receivables. This transaction resulted in a partial derecognition of
the leases, as the Group neither retained nor transferred substantially all risks and rewards. As of 31 December 2024, the Group continues
to recognise £798 million of these lease receivables with a gross up of the same amount in finance lease receivables and other liabilities for
the continuing involvement asset and liability required to be recognised under IFRS 9.
The table below sets out the carrying values of the transferred assets and the associated liabilities. For repurchase and securities lending
transactions, the associated liabilities represent the Group’s obligation to repurchase the transferred assets. For securitisation programmes,
the associated liabilities represent the external notes in issue (note 26). The liabilities shown in the table below have recourse to the
transferred assets.
2024
2023
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Repurchase and securities lending transactions
Financial assets at fair value through profit or loss
2,340
1,089
2,716
1,990
Debt securities held at amortised cost
1,210
–
1,189
–
Financial assets at fair value through other comprehensive income
12,483
4,465
10,928
5,526
Securitisation programmes
Financial assets at amortised cost:
Loans and advances to customers1
27,657
5,207
30,716
4,234
1
The carrying value of associated liabilities excludes securitisation notes held by the Group of £17,079 million (31 December 2023: £20,150 million).
299
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Lloyds Banking Group plc Annual Report and Accounts 2024
for the year ended 31 December
Note 41: Financial risk management
Financial instruments are fundamental to the Group’s activities and the associated risks represent a significant component of the overall
risks faced by the Group.
The primary risks affecting the Group through its use of financial instruments are: market risk, credit risk, liquidity risk, capital risk and
insurance underwriting risk.
Market risk
The Group’s largest residual interest rate risk exposure arises from balances that are deemed to be insensitive to changes in market rates
(including current accounts, a portion of variable rate deposits and investable equity). The risk is managed through the Group’s structural
hedge which consists of longer-term fixed rate assets and interest rate swaps. The notional balance and duration of the structural hedge is
reviewed regularly by the Group Asset and Liability Committee. More information is set out on pages 190 to 195.
Credit risk
The Group’s credit risk exposure arises in respect of the instruments below and predominantly in the United Kingdom. Credit risk appetite
is set at Board level and is described and reported through a suite of metrics devised from a combination of accounting and credit portfolio
performance measures, which include the use of various credit risk rating systems as inputs and assess credit risk at a counterparty level
using three components: (i) the probability of default by the counterparty on its contractual obligations; (ii) the current exposures to the
counterparty and their likely future development, from which the Group derives the exposure at default; and (iii) the likely loss ratio on the
defaulted obligations, the loss given default. The Group uses a range of approaches to mitigate credit risk, including internal control policies,
obtaining collateral, using master netting agreements and other credit risk transfers, such as asset sales and credit derivatives based
transactions. More information is set out on pages 155 to 180.
Liquidity risk
Liquidity risk is defined as the risk that the Group has insufficient financial resources to meet its commitments as they fall due, or can only
secure them at excessive cost. Liquidity risk is managed through a series of measures, tests and reports that are primarily based on
contractual maturity. The Group carries out monthly stress testing of its liquidity position against a range of scenarios, including those
prescribed by the PRA. The Group’s liquidity risk appetite is also calibrated against a number of stressed liquidity metrics. More information
is set out on pages 183 to 189.
Capital risk
Capital is actively managed on an ongoing basis for both the Group and its regulated banking subsidiaries, with associated capital policies
and procedures subjected to regular review. The Group assesses both its regulatory capital requirements and the quantity and quality of
capital resources it holds to meet those requirements in accordance with the relevant provisions of the Capital Requirements Directive
(CRD V) and Capital Requirements Regulation (UK CRR). This is supplemented through additional regulation set out under the PRA
Rulebook and through associated statements of policy, supervisory statements and other regulatory guidance. Regulatory capital ratios are
considered a key part of the budgeting and planning processes. Target capital levels take account of current and future regulatory
requirements, capacity for growth and to cover uncertainties. At 31 December 2024, the Group’s common equity tier 1 capital was
£31,979 million (31 December 2023: £31,897 million). Further details of the Group’s capital resources are provided in the table marked
audited on page 147.
The insurance business (the Scottish Widows Group) and each of the constituent UK insurance companies within it are regulated by the
PRA. The insurance businesses are required to calculate solvency capital requirements and available capital in accordance with Solvency II.
The Group complied with these requirements in 2024 and 2023. The Insurance business of the Group calculates regulatory capital on the
basis of an internal model, which was approved by the PRA on 5 December 2015, with the latest major change to the model approved in
November 2024. The capital position of the Group’s insurance businesses is reviewed on a regular basis by the Insurance, Pensions and
Investments Executive Committee. More information is set out on page 150.
Insurance underwriting risk
Insurance underwriting risk is the risk of adverse developments in the timing, frequency and severity of claims for insured/underwritten
events and in customer behaviour, leading to reductions in earnings and/or value and arises within the Group’s Insurance business.
Insurance underwriting risk is measured using a variety of techniques including stress, reverse stress and scenario testing, as well as
stochastic modelling. Current and potential future insurance underwriting risk exposures are assessed and aggregated on a range of stresses
including risk measures based on 1-in-200 year stresses for the Insurance business’s regulatory capital assessments and other supporting
measures where appropriate. The Group also mitigates insurance underwriting risk via the use of reinsurance arrangements. More
information is set out on page 182. The Group's critical accounting judgements and key sources of estimation uncertainty for its Insurance
business are set out in note 8.
Notes to the consolidated financial statements continued
300
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 42: Cash flow statement
(A) Change in operating assets
2024
£m
2023
£m
2022
£m
Change in financial assets held at amortised cost
(21,106)
12,311
(1,639)
Change in financial assets at fair value through profit or loss
(9,872)
(22,539)
26,219
Change in derivative financial instruments
(4,082)
1,805
(7,704)
Change in other operating assets
(4,562)
(687)
(141)
Change in operating assets
(39,622)
(9,110)
16,735
(B) Change in operating liabilities
2024
£m
2023
£m
2022
£m
Change in deposits from banks
4
(1,110)
(388)
Change in customer deposits
11,324
(3,850)
(1,207)
Change in repurchase agreements
57
(10,893)
17,471
Change in financial liabilities at fair value through profit or loss
2,619
6,925
(4,849)
Change in derivative financial instruments
1,524
(3,893)
5,982
Change in debt securities in issue at amortised cost
(4,824)
2,094
1,651
Change in insurance contracts1
1,941
9,845
(14,901)
Change in investment contract liabilities
6,250
5,502
(1,414)
Change in other operating liabilities2
4,708
(388)
(864)
Change in operating liabilities
23,603
4,232
1,481
1
Includes insurance contracts presented within disposal group liabilities.
2
Includes a decrease of £371 million (2023: increase of £315 million; 2022: decrease of £158 million) in respect of lease liabilities.
(C) Non-cash and other items
2024
£m
2023
£m
2022
£m
Interest expense on subordinated liabilities
742
720
697
Hedging valuation adjustments on subordinated debt
(271)
141
(1,871)
Accretion of discounts and amortisation of premiums and issue costs
195
1,259
462
Revaluation of investment properties
(67)
87
511
Net gain on sale of financial assets at fair value through other comprehensive income
(7)
(122)
(92)
Share of post-tax results of associates and joint ventures
13
16
(10)
Profit on disposal of tangible fixed assets
(36)
(61)
(121)
Net (credit) charge in respect of defined benefit schemes
(11)
(79)
125
Depreciation and amortisation
3,426
2,905
2,396
Regulatory and legal provisions
899
675
255
Other provision movements
(206)
(30)
(74)
Allowance for loan losses
494
315
1,372
Write-off of allowance for loan losses, net of recoveries
(1,029)
(1,115)
(759)
Impairment (credit) charge on undrawn balances
(51)
–
122
Impairment (credit) charge on financial assets at fair value through other comprehensive income
(3)
(2)
6
Transactions in own shares
(173)
103
(60)
Transfers to income statement from reserves
2,597
1,838
43
Foreign exchange impact on balance sheet1
1
502
(286)
Other non-cash items
42
176
185
Total non-cash items
6,555
7,328
2,901
Contributions to defined benefit schemes
(175)
(1,345)
Payments in respect of regulatory and legal provisions
(401)
(378)
(625)
Other
11
17
13
Total other items
(565)
(1,706)
(3,145)
Non-cash and other items
5,990
5,622
(244)
(2,533)
1
When considering the movement on each line of the balance sheet, the impact of foreign exchange rate movements is removed in order to show the underlying cash impact.
301
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Lloyds Banking Group plc Annual Report and Accounts 2024
Note 42: Cash flow statement continued
(D) Acquisition of Group undertakings, businesses and joint ventures
2024
£m
2023
£m
2022
£m
Net assets acquired:
Cash and cash equivalents
–
38
–
Intangible assets
–
182
68
Other assets
–
672
131
Deferred tax
–
(58)
–
Other liabilities
–
(646)
(146)
Goodwill arising on acquisition
–
143
335
Cash consideration
–
331
388
Less cash and cash equivalents acquired
–
(38)
(74)
Net cash outflow arising from acquisition of subsidiaries and businesses
–
293
314
Acquisition of and additional investment in joint ventures
179
87
95
Net cash outflow from acquisitions in the year
179
380
409
(E) Analysis of cash and cash equivalents as shown in the balance sheet
2024
£m
2023
£m
2022
£m
Cash and balances at central banks
62,705
78,110
91,388
Less mandatory reserve deposits1
(21)
(1,930)
(2,111)
62,684
76,180
89,277
Loans and advances to banks and reverse repurchase agreements
15,175
19,048
14,418
Less amounts with a maturity of three months or more
(7,043)
(6,390)
(7,866)
8,132
12,658
6,552
Total cash and cash equivalents
70,816
88,838
95,829
for the year ended 31 December
1
Mandatory reserve deposits are held with local central banks in accordance with statutory requirements. Where these deposits are not held in demand accounts and are not available
to finance the Group’s day-to-day operations they are excluded from cash and cash equivalents.
Included within cash and cash equivalents at 31 December 2024 is £23 million (2023: £31 million; 2022: £37 million) of restricted cash and
cash equivalents held within the Group’s long-term insurance and investments operations, which is not immediately available for use in
the business.
Note 43: Events since the balance sheet date
Share buyback
The Board has announced its intention to implement an ordinary share buyback of up to £1.7 billion. This represents the return to
shareholders of capital, surplus to that required to provide capacity to grow the business, meet current and future regulatory requirements
and cover uncertainties. The share buyback programme will commence as soon as is practicable and is expected to be completed, subject
to continued authority from the PRA, by 31 December 2025.
Notes to the consolidated financial statements continued
302
Lloyds Banking Group plc Annual Report and Accounts 2024
Note
2024
£m
2023
£m
Assets
Cash and cash equivalents
22
17
Financial assets at fair value through profit or loss
3
23,370
21,453
Derivative financial instruments
3
519
552
Debt securities
2,354
2,429
Loans to subsidiaries
10
17,068
14,742
Investment in subsidiaries
10
51,334
50,826
Current tax recoverable
75
114
Deferred tax assets
4
23
74
Other assets
14
6
Total assets
94,779
90,213
Liabilities
Due to subsidiaries
3
3
Financial liabilities at fair value through profit or loss
3
24,896
18,473
Derivative financial instruments
3
939
1,129
Debt securities in issue at amortised cost
5
8,310
10,211
Other liabilities
142
141
Subordinated liabilities
6
9,720
9,707
Total liabilities
44,010
39,664
Equity
Share capital
7
6,062
6,358
Share premium account
7
18,720
18,568
Merger reserve
8
6,759
6,806
Capital redemption reserve
8
5,751
5,370
Retained profits1
9
7,282
6,507
Shareholders’ equity
44,574
43,609
Other equity instruments
7
6,195
6,940
Total equity
50,769
50,549
Total equity and liabilities
94,779
90,213
1
The parent company recorded a profit after tax for the year of £5,488 million (2023: £5,139 million).
No income statement or statement of comprehensive income has been shown for the parent company, as permitted by section 408 of the
Companies Act 2006.
The accompanying notes are an integral part of the parent company financial statements.
The directors approved the parent company financial statements on 19 February 2025.
Charlie Nunn
Group Chief Executive
William Chalmers
Chief Financial Officer
Sir Robin Budenberg
Chair
Parent company balance sheet
at 31 December
303
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Lloyds Banking Group plc Annual Report and Accounts 2024
Attributable to ordinary shareholders
Share
capital and
premium
£m
Capital
redemption
reserve
£m
Merger
reserve
£m
Retained
profits
£m
Total
£m
Other
equity
instruments
£m
Total
£m
At 1 January 2022
25,581
6,806
4,479
7,626
44,492
5,906
50,398
Total comprehensive income1
–
–
–
961
961
438
1,399
Transactions with owners
Dividends
–
–
–
(1,475)
(1,475)
–
(1,475)
Distributions on other equity instruments
–
–
–
–
–
(438)
(438)
Issue of ordinary shares
105
–
–
–
105
–
105
Share buyback
(453)
–
453
(2,013)
(2,013)
–
(2,013)
Issue of other equity instruments
–
–
–
(5)
(5)
750
745
Repurchase and redemptions of other equity
instruments
–
–
–
(37)
(37)
(1,359)
(1,396)
Movement in treasury shares
–
–
–
(59)
(59)
–
(59)
Value of employee services
–
–
–
224
224
–
224
Total transactions with owners
(348)
–
453
(3,365)
(3,260)
(1,047)
(4,307)
At 31 December 2022
25,233
6,806
4,932
5,222
42,193
5,297
47,490
Total comprehensive income1
–
–
–
4,612
4,612
527
5,139
Transactions with owners
Dividends
–
–
–
(1,651)
(1,651)
–
(1,651)
Distributions on other equity instruments
–
–
–
–
–
(527)
(527)
Issue of ordinary shares
131
–
–
–
131
–
131
Share buyback
(438)
–
438
(1,993)
(1,993)
–
(1,993)
Issue of other equity instruments
–
–
–
(13)
(13)
1,778
1,765
Repurchase and redemptions of other equity
instruments
–
–
–
–
–
(135)
(135)
Movement in treasury shares
–
–
–
103
103
–
103
Value of employee services
–
–
–
227
227
–
227
Total transactions with owners
(307)
–
438
(3,327)
(3,196)
1,116
(2,080)
At 31 December 2023
24,926
6,806
5,370
6,507
43,609
6,940
50,549
Total comprehensive income1
–
–
–
4,990
4,990
498
5,488
Transactions with owners
Dividends
–
–
–
(1,828)
(1,828)
–
(1,828)
Distributions on other equity instruments
–
–
–
–
–
(498)
(498)
Issue of ordinary shares
190
–
–
–
190
–
190
Share buyback
(369)
–
369
(2,011)
(2,011)
–
(2,011)
Redemption of preference shares
35
(47)
12
–
–
–
–
Issue of other equity instruments
–
–
–
(6)
(6)
763
757
Repurchase and redemptions of other equity
instruments
–
–
–
(316)
(316)
(1,508)
(1,824)
Movement in treasury shares
–
–
–
(173)
(173)
–
(173)
Value of employee services
–
–
–
119
119
–
119
Total transactions with owners
(144)
(47)
381
(4,215)
(4,025)
(1,243)
(5,268)
24,782
6,759
5,751
7,282
44,574
6,195
50,769
At 31 December 2024
1
No income statement or statement of comprehensive income has been shown for the parent company, as permitted by section 408 of the Companies Act 2006. Total comprehensive
income comprises only the profit for the year.
The accompanying notes are an integral part of the parent company financial statements.
Parent company statement of changes in equity
for the year ended 31 December
304
Lloyds Banking Group plc Annual Report and Accounts 2024
2024
£m
2023
£m
2022
£m
Cash flows from operating activities
Profit before tax
5,440
5,055
1,331
Adjustments for:
Fair value and exchange adjustments and other non-cash items
(83)
744
21
Change in other assets
(1,850)
(1,317)
(177)
Change in other liabilities and other items
4,523
(555)
1,626
Dividends received
(5,187)
(5,024)
(1,120)
Distributions on other equity instruments received
(541)
(505)
(338)
Tax refunded
115
4
27
Net cash provided by (used in) operating activities
2,417
(1,598)
1,370
Cash flows from investing activities
Return of capital contribution
1
1
4
Dividends received
5,187
5,024
1,120
Distributions on other equity instruments received
541
505
338
Acquisitions of and capital injections to subsidiaries
(1,309)
(1,496)
(250)
Return of capital by subsidiaries
800
278
–
Amounts advanced to subsidiaries
(4,340)
(4,563)
(3,148)
Repayment of loans to subsidiaries
2,055
3,556
4,234
Interest received on loans to subsidiaries
386
410
408
Net cash provided by investing activities
3,321
3,715
2,706
Cash flows from financing activities
Dividends paid to ordinary shareholders
(1,828)
(1,651)
(1,475)
Distributions on other equity instruments
(498)
(527)
(438)
Interest paid on subordinated liabilities
(509)
(466)
(370)
Proceeds from issue of subordinated liabilities
812
1,416
838
Proceeds from issue of other equity instruments
757
1,765
745
Proceeds from issue of ordinary shares
187
86
31
Share buyback
(2,011)
(1,993)
(2,013)
Repayment of subordinated liabilities
(819)
(643)
–
Repurchase and redemptions of other equity instruments
(1,824)
(135)
(1,396)
Net cash used in financing activities
(5,733)
(2,148)
(4,078)
Change in cash and cash equivalents
5
(31)
(2)
Cash and cash equivalents at beginning of year
17
48
50
Cash and cash equivalents at end of year
22
17
48
The accompanying notes are an integral part of the parent company financial statements.
Parent company cash flow statement
for the year ended 31 December
305
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Lloyds Banking Group plc Annual Report and Accounts 2024
Note 1: Basis of preparation and accounting policies
The financial statements of Lloyds Banking Group plc have been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006. The financial statements have also been prepared in accordance with IFRS®
Accounting Standards as issued by the International Accounting Standards Board (IASB).
The financial information has been prepared under the historical cost convention, as modified by the revaluation of certain financial assets
and liabilities at fair value through profit or loss and all derivative contracts. The accounting policies of the Company are the same as those
of the Group, which are set out in note 2 to the consolidated financial statements. Investments in subsidiaries are carried at historical cost,
less any provisions for impairment. Fees payable to the Company’s auditors by the Group are set out in note 13 to the consolidated
financial statements.
Note 2: Measurement basis of financial assets and liabilities
The accounting policies in note 2 to the consolidated financial statements describe how different classes of financial instruments are
measured, and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the carrying
amounts of the Company’s financial assets and liabilities by category and by balance sheet heading.
Mandatorily held at fair value
through profit or loss
Derivatives
designated
as hedging
instruments
£m
Held for
trading
£m
Other
£m
Designated
at fair value
through profit
or loss
£m
Held at
amortised
cost
£m
Total
£m
At 31 December 2024
Financial assets
Cash and cash equivalents
–
–
–
–
22
22
Financial assets at fair value through profit or loss
–
–
23,370
–
–
23,370
Derivative financial instruments
38
481
–
–
–
519
Debt securities
–
–
–
–
2,354
2,354
Loans to subsidiaries
–
–
–
–
17,068
17,068
Total financial assets
38
481
23,370
–
19,444
43,333
Financial liabilities
Due to subsidiaries
–
–
–
–
3
3
Financial liabilities at fair value through profit or loss
–
–
–
24,896
–
24,896
Derivative financial instruments
442
497
–
–
–
939
Debt securities in issue at amortised cost
–
–
–
–
8,310
8,310
Subordinated liabilities
–
–
–
–
9,720
9,720
Total financial liabilities
442
497
–
24,896
18,033
43,868
At 31 December 2023
Financial assets
Cash and cash equivalents
–
–
–
–
17
17
Financial assets at fair value through profit or loss
–
–
21,453
–
–
21,453
Derivative financial instruments
38
514
–
–
–
552
Debt securities
–
–
–
–
2,429
2,429
Loans to subsidiaries
–
–
–
–
14,742
14,742
Total financial assets
38
514
21,453
–
17,188
39,193
Financial liabilities
Due to subsidiaries
–
–
–
–
3
3
Financial liabilities at fair value through profit or loss
–
–
–
18,473
–
18,473
Derivative financial instruments
542
587
–
–
–
1,129
Debt securities in issue at amortised cost
–
–
–
–
10,211
10,211
Subordinated liabilities
–
–
–
–
9,707
9,707
Total financial liabilities
542
587
–
18,473
19,921
39,523
for the year ended 31 December
Note 17 to the consolidated financial statements outlines the valuation hierarchy into which financial instruments measured at fair value
are categorised.
The assets held at fair value through profit or loss represent holdings of debt securities issued by subsidiaries. The contractual terms of such
instruments contain certain write-down and conversion features and so are not considered to satisfy the solely payments of principal and
interest test.
Financial liabilities designated at fair value through profit or loss represent debt securities in issue which are accounted for at fair value to
significantly reduce an accounting mismatch. The changes in the credit risk of these liabilities are linked to the changes in credit risk on
corresponding assets that the Company holds at fair value through profit or loss, representing debt securities issued by subsidiaries. Given
the economic relationship between these assets and liabilities, the Company presents changes in the credit risk of its liabilities in profit or
loss in order to avoid creating or enlarging an accounting mismatch.
Notes to the parent company financial statements
30
6
30
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 2: Measurement basis of financial assets and liabilities continued
The amount contractually payable on maturity of the debt securities held at fair value through profit or loss at 31 December 2024 was
£24,488 million, which was £408 million lower than the balance sheet carrying value (2023: £18,397 million, which was £76 million lower
than the balance sheet carrying value). At 31 December 2024 there was a cumulative £845 million increase in the fair value of these
liabilities attributable to changes in credit risk (2023: increase of £756 million), of which a £89 million increase arose in 2024 and a
£331 million increase arose in 2023; this is determined by reference to the quoted credit spreads of the Company.
Note 3: Fair values of financial assets and liabilities
The valuation techniques for the Company’s financial instruments are as discussed in note 17 to the consolidated financial statements.
Valuation hierarchy
The table below analyses the assets and liabilities of the Company. With the exception of derivatives and those financial assets and
liabilities carried at fair value through profit or loss, all assets and liabilities are held at amortised cost. They are categorised into levels 1 to 3
based on the degree to which their fair value is observable. No assets or liabilities were categorised as level 1 (2023: none).
2024
2023
Valuation hierarchy
Valuation hierarchy
Carrying
value
£m
Fair
value
£m
Carrying
value
£m
Fair
value
£m
Level 2
£m
Level 3
£m
Level 2
£m
Level 3
£m
Financial assets at fair value through profit or loss
23,370
23,370
23,370
–
21,453
21,453
21,453
–
Derivative financial instruments
519
519
519
–
552
552
552
–
Debt securities
2,354
2,240
2,240
–
2,429
2,259
2,259
–
Loans to subsidiaries
17,068
17,068
17,068
–
14,742
14,742
14,742
–
Total financial assets
43,311
43,197
43,197
–
39,176
39,006
39,006
–
Due to subsidiaries
3
3
3
–
3
3
3
–
Financial liabilities at fair value through profit or loss
24,896
24,896
24,896
–
18,473
18,473
18,473
–
Derivative financial instruments
939
939
939
–
1,129
1,129
1,129
–
Debt securities in issue at amortised cost
8,310
8,140
8,140
–
10,211
9,948
9,948
–
Subordinated liabilities
9,720
10,038
10,038
–
9,707
9,515
9,515
–
Total financial liabilities
43,868
44,016
44,016
–
39,523
39,068
39,068
–
The carrying amount of cash and cash equivalents (2024: £22 million; 2023: £17 million) is a reasonable approximation of fair value.
At 31 December 2024 £18,915 million of financial assets at fair value through profit or loss, £287 million of derivative financial assets,
£1,736 million of debt securities and £11,876 million of loans to subsidiaries included in total financial assets had maturities greater than one
year (2023: £16,281 million, £370 million, £1,736 million and £11,827 million). Of the balances included in total financial liabilities,
£20,237 million of financial liabilities at fair value through profit or loss, £633 million of derivative financial liabilities, £6,082 million of debt
securities in issue at amortised cost and £8,371 million of subordinated liabilities had maturities greater than one year at 31 December 2024
(2023: £15,134 million, £855 million, £8,584 million and £8,871 million).
Note 4: Deferred tax
As at 31 December 2024 the Company carried a deferred tax asset of £23 million (2023: £74 million). There was no deferred tax liability at
31 December 2024 or 31 December 2023. The movement in the deferred tax asset during 2024 primarily related to financial liabilities at fair
value through profit and loss (giving rise to a £20 million charge to the income statement) and shared-based payments (giving rise to a
£23 million charge in equity).
Note 5: Debt securities in issue at amortised cost
These comprise notes issued by the Company in a number of currencies, although predominantly US dollars and euros, with maturity dates
ranging up to 2049.
307
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 6: Subordinated liabilities
These liabilities will, in the event of the winding-up of the issuer, be subordinated to the claims of depositors and all other creditors of the
issuer. Any repayments of subordinated liabilities require the consent of the Prudential Regulation Authority.
Preference
shares
£m
Undated
£m
Dated
£m
Total
£m
At 1 January 2023
325
10
8,883
9,218
1
Issued in the year :
6.625% Fixed Rate Reset Dated Subordinated Notes 2033 (£750 million)
–
–
746
746
5.25% Fixed Rate Reset Dated Subordinated Notes 2033 (S$500 million)
–
–
288
288
Fixed-to-Floating Rate Dated Subordinated Notes 2033 (A$750 million)
–
–
382
382
–
–
1,416
1,416
1
Repurchases and redemptions during the year :
Dated Subordinated Fixed Rate Reset Notes 2028 (€750 million)
–
–
(643)
(643)
Foreign exchange and other movements (cash and non-cash)
4
–
(288)
(284)
At 31 December 2023
329
10
9,368
9,707
1
Issued in the year :
4.375% Fixed Rate Reset Dated Subordinated Notes 2034 (€500 million)
–
–
427
427
5.788% Fixed-to-Floating Rate Dated Subordinated Notes 2034 (A$250 million)
–
–
128
128
Floating Rate Dated Subordinated Notes 2034 (A$500 million)
–
–
257
257
–
–
812
812
1
Repurchases and redemptions during the year :
6.475% Non-cumulative Preference Shares callable 2024 (£186 million)
(47)
–
–
(47)
4.5% Dated Subordinated Notes 2024 ($1,000 million)
–
–
(772)
(772)
(47)
–
(772)
(819)
Foreign exchange and other movements (cash and non-cash)
1
–
19
20
At 31 December 2024
283
10
9,427
9,720
1
Issuances in the year generated cash inflows of £812 million (2023: £1,416 million); the repurchases and redemptions resulted in cash outflows of £819 million (2023: £643 million). Cash
payments in respect of interest on subordinated liabilities in the year amounted to £509 million (2023: £466 million).
Note 7: Share capital, share premium account and other equity instruments
Details of the Company’s share capital, share premium account and other equity instruments are as set out in notes 30, 32 and 35 to the
consolidated financial statements.
Note 8: Merger reserve and capital redemption reserve
The merger reserve comprises the premium on shares issued on 13 January 2009 under the placing and open offer and shares issued on
16 January 2009 on the acquisition of HBOS plc, offset by adjustments on the redemption of preference shares. Substantially all of the
Company’s merger reserve is available for distribution.
The movements in merger reserve were as follows:
2024
£m
2023
£m
2022
£m
At 1 January
6,806
6,806
6,806
Redemption of preference shares
(47)
–
–
At 31 December
6,759
6,806
6,806
The capital redemption reserve represents transfers from the merger reserve in accordance with companies’ legislation and amounts
transferred from share capital following the cancellation of shares.
Movements in the capital redemption reserve were as follows:
2024
£m
2023
£m
2022
£m
At 1 January
5,370
4,932
4,479
Redemption of preference shares
12
–
–
Shares cancelled under share buyback programme1
369
438
453
At 31 December
5,751
5,370
4,932
for the year ended 31 December
1
See note 33 to the consolidated financial statements.
Notes to the parent company financial statements continued
308
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 9: Retained profits
2024
£m
2023
£m
2022
£m
At 1 January
6,507
5,222
7,626
Profit attributable to ordinary shareholders
4,990
4,612
961
Dividends paid1
(1,828)
(1,651)
(1,475)
Issue costs of other equity instruments (net of tax)
(6)
(13)
(5)
Repurchase and redemption costs of other equity instruments
(316)
–
(37)
Share buyback programme
(2,011)
(1,993)
(2,013)
Movement in treasury shares
(173)
103
(59)
Value of employee services
119
227
224
7,282
6,507
5,222
At 31 December
1
Details of the Company’s dividends are as set out in note 36 to the consolidated financial statements.
Note 10: Related party transactions
Key management personnel
The key management personnel of the Group and the Company are the same. The relevant disclosures are given in note 37 to the
consolidated financial statements.
The Company has no employees (2023: nil).
As discussed in note 2 to the consolidated financial statements, the Group provides share-based compensation to employees through a
number of schemes; these are all in relation to shares in the Company and the costs of providing those benefits are treated as capital
contributions to the employing companies in the Group.
Investment in subsidiaries
2024
£m
2023
£m
At 1 January
50,826
49,609
Additions and capital injections
1,167
1,280
Capital contributions
142
216
Return of capital contributions
(1)
(1)
Capital repayments and redemptions
(800)
(278)
At 31 December
51,334
50,826
Details of the subsidiaries and related undertakings are given on pages 318 to 331 and are incorporated by reference.
Certain subsidiary companies currently have insufficient distributable reserves to make dividend payments; however, there were no further
significant restrictions on any of the Company’s subsidiaries in paying dividends or repaying loans and advances. All regulated banking and
insurance subsidiaries are required to maintain capital at levels agreed with the regulators; this may impact the ability of those subsidiaries
to make distributions.
Loans to subsidiaries
2024
£m
2023
£m
At 1 January
14,742
14,119
Exchange and other adjustments
41
(384)
New advances
4,340
4,563
Repayments
(2,055)
(3,556)
At 31 December
17,068
14,742
Related party information in respect of other related party transactions is given in note 37 to the consolidated financial statements.
At 31 December 2024 the Company had £3 million (2023: £3 million) which was due to subsidiaries. In addition, at 31 December 2024 the
Company had interest rate and currency swaps with Lloyds Bank Corporate Markets plc with an aggregate notional principal amount of
£47,895 million and a net negative fair value of £420 million (2023: notional principal amount of £50,809 million and a net negative fair
value of £577 million). Of this amount an aggregate notional principal amount of £12,862 million and a net negative fair value of
£404 million (2023: notional principal amount of £11,773 million and a net negative fair value of £504 million) were designated as fair value
hedges to predominantly manage the Company’s issuance of subordinated liabilities.
Guarantees
As part of the Group’s participation in the Bank of England’s Sterling Monetary Framework, the Company guarantees certain of its
subsidiaries’ liabilities to the Bank of England. These guarantees have no fixed term.
Other related party transactions
309
Other information
Financial statements
Risk management
Financial results
Sustainability review
Strategic report
Governance
Lloyds Banking Group plc Annual Report and Accounts 2024
Note 11: Financial risk management
Market risk
The Company is exposed to interest rate risk and currency risk on its debt securities in issue and its subordinated debt.
As discussed in note 10, the Company has entered into interest rate and currency swaps with its subsidiary, Lloyds Bank Corporate Markets
plc, to manage these risks.
Credit risk
The majority of the Company’s credit risk arises from amounts due from its wholly owned subsidiaries, principally Lloyds Bank plc.
Liquidity risk
The table below analyses financial instrument liabilities of the Company on an undiscounted future cash flow basis according to
contractual maturity, into relevant maturity groupings based on the remaining period at the balance sheet date; balances with no fixed
maturity are included in the over 5 years category.
Up to 1
month
£m
1 to 3
months
£m
3 to 12
months
£m
1 to 5
years
£m
Over
5 years
£m
Total
£m
At 31 December 2024
Financial liabilities at fair value through profit or loss
874
1,786
2,958
17,090
6,149
28,857
Debt securities in issue at amortised cost
22
1,076
1,369
6,375
75
8,917
Subordinated liabilities
25
324
1,344
3,990
6,070
11,753
Total non-derivative financial liabilities
921
3,186
5,671
27,455
12,294
49,527
Derivative financial liabilities
Gross settled derivatives – outflows
2,213
2,675
5,543
2,194
267
12,892
Gross settled derivatives – inflows
(2,164)
(2,530)
(5,302)
(1,950)
–
(11,946)
Gross settled derivatives – net flows
49
145
241
244
267
946
Net settled derivative liabilities
175
–
–
–
–
175
Total derivative financial liabilities
224
145
241
244
267
1,121
Up to 1
month
£m
1 to 3
months
£m
3 to 12
months
£m
1 to 5
years
£m
Over
5 years
£m
Total
£m
At 31 December 2023
Financial liabilities at fair value through profit or loss
66
971
2,950
13,513
3,262
20,762
Debt securities in issue at amortised cost
21
74
2,086
8,879
92
11,152
Subordinated liabilities
26
63
1,190
5,781
6,991
14,051
Total non-derivative financial liabilities
113
1,108
6,226
28,173
10,345
45,965
Derivative financial liabilities
Gross settled derivatives – outflows
29
3,441
7,411
2,695
203
13,779
Gross settled derivatives – inflows
(14)
(3,305)
(7,091)
(2,491)
–
(12,901)
Gross settled derivatives – net flows
15
136
320
204
203
878
Net settled derivative liabilities
307
–
–
–
–
307
Total derivative financial liabilities
322
136
320
204
203
1,185
for the year ended 31 December
The principal amount for undated subordinated liabilities with no redemption option is included within the over 5 years column; interest of
£1 million (2023: £1 million) per annum which is payable in respect of those instruments for as long as they remain in issue is not included
beyond 5 years.
Note 12: Other information
Lloyds Banking Group plc was incorporated as a public limited company and registered in Scotland under the UK Companies Act 1985 on
21 October 1985 with the registered number SC095000. Lloyds Banking Group plc’s registered office is Lloyds Banking Group plc, The
Mound, Edinburgh EH1 1YZ, Scotland, and its principal executive offices in the UK are located at Lloyds Banking Group plc, 25 Gresham
Street, London EC2V 7HN.
Notes to the parent company financial statements continued
310
Lloyds Banking Group plc Annual Report and Accounts 2024
Other information
In this section
Shareholder information
312
Alternative performance measures
314
Subsidiaries and related undertakings
318
Forward-looking statements
332
Driven by
our purpose
Our purpose is what drives us, what makes us different
and defines how we profitably grow for all our stakeholders
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Lloyds Banking Group plc Annual Report and Accounts 2024
311
Annual general meeting (AGM)
The annual general meeting will be held at the Edinburgh International Conference Centre, The Exchange, Edinburgh EH3 8EE on Thursday
15 May 2025 at 11am. Further details about the meeting, including the proposed resolutions and where shareholders can stream the meeting
live, can be found in our Notice of AGM which will be available shortly on our website
.
Reports and communications
The Group issues regulatory announcements through the Regulatory News Service (RNS); shareholders can subscribe for free via the
Investors section of our website
, where our statutory reports and shareholder communications are available. A summary of the
scheduled reports and communications to be issued in 2025 is set out below:
Available format
Report/Communication
Month
Online
Email
RNS
Paper
Preliminary results and publication of annual report and accounts
Feb
ü
ü
ü
Pillar 3 report
Mar/Aug
ü
Group Chief Executive update to shareholders
Mar
ü
ü
ü
Mailing of annual report and accounts, annual review or performance
summary
Mar
ü
ü
ü
Notice of AGM and voting materials
Mar
ü
ü
ü
Q1 interim management statement
Apr
ü
ü
ü
Country analysis1
May
ü
Half-year results
Jul
ü
ü
ü
Q3 interim management statement
Oct
ü
ü
ü
1
To be published on the Group’s website by 31 May 2025 in accordance with the Capital Requirements (Country-by-Country Reporting) Regulations 2013.
Share dealing facilities
We offer a choice of four share dealing services for our UK shareholders and customers. Please search for ‘share dealing’ within the website
links provided below, where you can also view the full range of services available. Alternatively, please use the additional contact details
below.
Service Provider
Telephone Dealing
Internet Dealing
Bank of Scotland Share Dealing
0345 606 1188
www.bankofscotland.co.uk/sharedealing
Halifax Share Dealing
03457 22 55 25
www.halifax.co.uk/sharedealing
Lloyds Bank Direct Investments
0345 60 60 560
www.lloydsbank.com/share-dealing.asp
IWeb Share Dealing
03450 707 129
www.iweb-sharedealing.co.uk/
Note:
All internet services are available 24/7. Telephone dealing services are available between 8am and 9pm, Monday to Friday, excluding English and Welsh public holidays. To open a share
dealing account with any of these services, you must be 18 years of age or over and be resident in the UK, Jersey, Guernsey or the Isle of Man.
Share dealing for the Lloyds Banking Group shareholder account
Share dealing services for the Lloyds Banking Group shareholder account are provided by Equiniti Shareview Dealing, operated by Equiniti
Financial Services Limited. Details of the services provided can be found either on the shareholder information page of our website
or by
contacting Equiniti using the contact details provided on the next page.
Share price information
Shareholders can access both the latest and historical share prices via our website
as well as listings in most national newspapers. For a
real time buying or selling price, you will need to contact a stockbroker, or you can contact the share dealing providers detailed above.
Individual Saving Accounts (ISAs)
There are a number of options for investing in Lloyds Banking Group shares through an ISA. For details of services and products provided by
the Group please contact Bank of Scotland Share Dealing, Halifax Share Dealing or Lloyds Bank Direct Investments using the contact
details above.
Key dates
10 April 2025
Shares quoted ex-dividend
11 April 2025
Record date
29 April 2025
Final date for joining or leaving the dividend reinvestment plan
1 May 2025
Q1 interim management statement
15 May 2025
Annual general meeting
20 May 2025
Dividend paid
24 July 2025
Half-year results
23 October 2025
Q3 interim management statement
Shareholder information
312
Lloyds Banking Group plc Annual Report and Accounts 2024
Analysis of shareholders
Balance ranges
Total number of
holdings
Percentage of
holders
Total number of
shares
Percentage issued
capital
1–999
1,721,373
81.76%
504,984,826
0.83%
1,000–9,999
329,113
15.63%
879,859,025
1.45%
10,000–99,999
51,770
2.46%
1,333,135,906
2.19%
100,000–999,999
2,264
0.11%
518,038,748
0.85%
1,000,000–4,999,999
415
0.02%
1,049,892,973
1.73%
5,000,000–9,999,999
136
0.01%
964,880,040
1.59%
10,000,000–49,999,999
249
0.01%
5,822,770,615
9.58%
50,000,000–99,999,999
69
0.00%
4,707,856,272
7.75%
100,000,000–499,999,999
65
0.00%
13,397,009,925
22.05%
500,000,000–999,999,999
11
0.00%
7,760,601,531
12.77%
1,000,000,000–99,999,999,999
12
0.00%
23,814,472,933
39.20%
Totals
2,105,477
100.00%
60,753,502,794
100.00%
American Depositary Receipts (ADRs)
Our shares are traded in the USA through a New York Stock Exchange-listed sponsored ADR facility with The Bank of New York Mellon as
the depositary. The ADRs are traded on the New York Stock Exchange under the symbol LYG. The CUSIP number is 539439109 and the
ratio of ADRs to ordinary shares is 1:4.
For details contact:
BNY Shareowner Services, 150 Royall St., Suite 101 Canton, MA 02021. Telephone: 1-866-259-0336 (US toll free),
international callers: +1 201-680-6825. Alternatively visit www.adrbny.com
or email shrrelations@cpushareownerservices.com.
Security – share fraud and scams
Shareholders should exercise caution when unsolicited callers offer the chance to buy or sell shares with promises of huge returns. If it
sounds too good to be true, it usually is and we would ask that shareholders take steps to protect themselves. We strongly recommend
seeking advice from an independent financial adviser authorised by the Financial Conduct Authority (FCA). Shareholders can verify
whether a firm is authorised via the Financial Services Register which is available at www.fca.org.uk
.
If a shareholder is concerned that they may have been targeted by such a scheme, please contact the FCA Consumer Helpline on
0800 111 6768 or use the online ‘Share Fraud Reporting Form’ available from their website (see above). We would also recommend
contacting the Police through Action Fraud on 0300 123 2040 or visiting www.actionfraud.org.uk
for further information.
Important shareholder and registrar information
Company website
www.lloydsbankinggroup.com
Shareholder information
help.shareview.co.uk
(from here you will be able to email your query securely)
Registrar
Equiniti Limited, Aspect House, Spencer Road, Lancing,
West Sussex BN99 6DA
Shareholder helpline
+44 (0) 371 384 2990* (please use the country code when
contacting Equiniti Limited from outside the UK)
*
Lines are open 8:30am to 5:30pm (UK time), Monday to
Friday (excluding public holidays in England and Wales).
For deaf and speech impaired customers, we welcome calls
via Relay UK. See www.relayuk.bt.com
for more
information.
The company registrar is Equiniti Limited. They provide a
shareholder service, including a telephone helpline and
shareview which is a free secure portfolio service.
Your communications,
your choice – go digital!
•
Receive company communications
like this by email
•
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•
Manage your shareholding online
Step 1
Register at
www.shareview.co.uk/info/register
or by scanning the QR code
Step 2
Follow the on-screen instructions
to complete your registration
Step 3
Log on and update your
communications choice
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
313
Lloyds Banking Group plc Annual Report and Accounts 2024
The statutory results are supplemented with those presented on an underlying basis and also with other alternative performance measures.
This is to enable a comprehensive understanding of the Group and facilitate comparison with peers. The Group Executive Committee,
which is the ‘chief operating decision maker’ (as defined by IFRS 8 Operating Segments) for the Group, reviews the Group’s results on an
underlying basis in order to assess performance and allocate resources. Management uses underlying profit before tax, an alternative
performance measure, as a measure of performance and believes that it provides important information for investors. This is because it
allows for a comparable representation of the Group’s performance by removing the impact of items such as volatility caused by market
movements outside the control of management.
In arriving at underlying profit, statutory profit before tax is adjusted for the items below, to allow a comparison of the Group’s
underlying performance:
•
Restructuring costs relating to merger, acquisition, integration and disposal activities
•
Volatility and other items, which includes the effects of certain asset sales, the volatility relating to the Group’s hedging arrangements
and that arising in the Insurance business, the unwind of acquisition-related fair value adjustments and the amortisation of purchased
intangible assets
The analysis of lending and expected credit loss (ECL) allowances is presented on both a statutory and an underlying basis and a
reconciliation between the two is shown on page 163. On a statutory basis, purchased or originated credit-impaired (POCI) assets include a
fixed pool of mortgages that were purchased as part of the HBOS acquisition at a deep discount to face value reflecting credit losses
incurred from the point of origination to the date of acquisition. Over time, these POCI assets will run off as the loans redeem, pay down or
losses crystallise. The underlying basis assumes that the lending assets acquired as part of a business combination were originated by the
Group and are classified as either Stage 1, 2 or 3 according to the change in credit risk over the period since origination. Underlying ECL
allowances have been calculated accordingly. The Group uses the underlying basis to monitor the creditworthiness of the lending portfolio
and related ECL allowances. The statutory basis also includes an accounting adjustment within UK Motor Finance required under IFRS 9 to
recognise a continuing involvement asset following the partial derecognition of a component of the Group's finance lease book via a
securitisation in the third quarter of 2024.
The Group calculates a number of metrics that are used throughout the banking and insurance industries on an underlying basis. These
metrics are not necessarily comparable to similarly titled measures presented by other companies and are not any more authoritative than
measures presented in the financial statements, however management believes that they are useful in assessing the performance of the
Group and in drawing comparisons between years. A description of these measures and their calculation, is given below. Alternative
performance measures are used internally in the Group’s Monthly Management Report.
Asset quality ratio
The underlying impairment charge or credit for the period in respect of loans and advances to customers, both drawn and
undrawn, expressed as a percentage of average gross loans and advances to customers for the period. This measure is useful in
assessing the credit quality of the loan book.
Banking net interest
margin
Banking net interest income on customer and product balances in the banking businesses as a percentage of average gross
interest-earning banking assets for the period. This measure is useful in assessing the profitability of the banking business.
Cost:income ratio
Total costs as a percentage of net income calculated on an underlying basis. This measure is useful in assessing the profitability
of the Group’s operations before the effects of the underlying impairment credit or charge.
Gross written premiums Gross written premiums is a measure of the volume of General Insurance business written during the period. This measure is
useful for assessing the growth of the General Insurance business.
Life and pensions sales
(present value of new
business premiums)
Present value of regular premiums plus single premiums from new business written in the current period. This measure is
useful for assessing sales in the Group’s life, pensions and investments insurance business.
Loan to deposit ratio
Underlying loans and advances to customers divided by customer deposits.
Operating costs
Operating expenses adjusted to remove the impact of operating lease depreciation, remediation, restructuring costs, the
amortisation of purchased intangibles, the insurance gross up and other statutory items.
New business value
This represents the value added to the contractual service margin and risk adjustment at the initial recognition of new
contracts, net of acquisition expenses (derived from the statutory balance sheet movements) and any loss component on
onerous contracts (which is recognised directly in the income statement) but does not include existing business increments.
Pro forma CET1 ratio
CET1 ratio adjusted for the effects of the dividend paid up by the Insurance business in the subsequent quarter and the full
impact of the announced ordinary share buyback programme.
Return on tangible
equity
Profit attributable to ordinary shareholders, divided by average tangible net assets. This measure is useful in providing a
consistent basis with which to measure the Group’s performance.
Tangible net assets per
share
Net assets excluding intangible assets such as goodwill and acquisition-related intangibles divided by the number of ordinary
shares in issue. This measure is useful in assessing shareholder value.
Underlying profit before
impairment
Underlying profit adjusted to remove the underlying impairment credit or charge. This measure is useful in allowing for a
comparable representation of the Group’s performance before the effects of the forward-looking underlying impairment
credit or charge.
Underlying profit
Statutory profit before tax adjusted for certain items as detailed above. This measure allows for a comparable representation
of the Group’s performance by removing the impact of certain items including volatility caused by market movements outside
the control of management.
Alternative performance measures
4
314
Lloyds Banking Group plc Annual Report and Accounts 2024
Reconciliation between statutory and underlying basis financial information
Statutory basis
Removal of:
Underlying basisA
2024
£m
Volatility and
other items1,2
£m
Insurance
gross up3
£m
£m
Net interest income
12,277
578
(10)
12,845
Underlying net interest income
Other income, net of net finance income
(expense) in respect of insurance
and investment contracts
5,726
(375)
246
5,597
Underlying other income
(1,325)
–
(1,325)
Operating lease depreciation
Total income, after net finance income
(expense) in respect of insurance and
investment contracts
18,003
(1,122)
236
17,117
Net income
Operating expenses4
(11,601)
1,496
(236)
(10,341)
Total costs
Impairment charge
(431)
(2)
–
(433)
Underlying impairment charge
Profit before tax
5,971
372
–
6,343
Underlying profit
2023
Net interest income
13,298
479
(12)
13,765
Underlying net interest income
Other income, net of net finance
income in respect of insurance
and investment contracts
5,331
(447)
239
5,123
Underlying other income
(956)
–
(956)
Operating lease depreciation
Total income, after net finance income in
respect of insurance and investment
contracts
18,629
(924)
227
17,932
Net income
Operating expenses4
(10,823)
1,235
(227)
(9,815)
Total costs
Impairment (charge) credit
(303)
(5)
–
(308)
Underlying impairment charge
Profit before tax
7,503
306
–
7,809
Underlying profit
1
In the year ended 31 December 2024 this comprised the effects of market volatility and asset sales (losses of £144 million); the amortisation of purchased intangibles (£81 million);
restructuring costs (£40 million); and fair value unwind (losses of £107 million).
2
In the year ended 31 December 2023 this comprised the effects of market volatility and asset sales (gains of £35 million); the amortisation of purchased intangibles (£80 million);
restructuring costs (£154 million); and fair value unwind (losses of £107 million).
3
Under IFRS 17, expenses which are directly associated with the fulfilment of insurance contracts are reported as part of the insurance service result within statutory other income. On
an underlying basis these expenses remain within costs.
4
Statutory operating expenses includes operating lease depreciation. On an underlying basis operating lease depreciation is included in net income.
Asset quality ratioA
2024
2023
Underlying impairment charge (£m)
(433)
(308)
Remove non-customer underlying impairment (£m)
(23)
(13)
Underlying customer related impairment charge (£m) (a)
(456)
(321)
Loans and advances to customers (£bn)
459.9
449.7
Remove finance lease gross-up1 (£bn)
(0.8)
–
Underlying loans and advances to customers (£bn)
459.1
449.7
Expected credit loss allowance (drawn) (£bn)
3.2
3.7
Acquisition related fair value adjustments (£bn)
0.1
0.3
Underlying gross loans and advances to customers (£bn)
462.4
453.7
Averaging (£bn)
(3.5)
3.1
Average underlying gross loans and advances to customers (£bn) (b)
458.9
456.8
Asset quality ratioA = (a) / (b)
0.10
%
0.07 %
1
The finance lease gross up represents a statutory accounting adjustment required under IFRS 9 to recognise a continuing involvement asset following the partial derecognition of a
component of the Group's finance lease book via a securitisation in the third quarter of 2024.
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
315
Lloyds Banking Group plc Annual Report and Accounts 2024
Banking net interest marginA
2024
2023
Underlying net interest income (£m)
12,845
13,765
Remove non-banking underlying net interest expense (£m)
469
311
Banking underlying net interest income (£m) (a)
13,314
14,076
Underlying gross loans and advances to customers (£bn)
462.4
453.7
Adjustment for non-banking and other items:
Fee-based loans and advances (£bn)
(10.0)
(8.9)
Other (£bn)
2.0
4.2
Interest-earning banking assets (£bn)
454.4
449.0
Averaging (£bn)
(3.2)
4.3
Average interest-earning banking assetsA (£bn) (b)
451.2
453.3
Banking net interest marginA (%) = (a) / (b)
2.95%
3.11%
Cost:income ratioA
2024
£m
2023
£m
Operating costsA
9,442
9,140
Remediation
899
675
Total costs (a)
10,341
9,815
Net income (b)
17,117
17,932
Cost:income ratioA = (a) / (b)
60.4 %
54.7 %
Loan to deposit ratioA
At 31 Dec
2024
£bn
At 31 Dec
2023
£bn
Loans and advances to customers (a)
459.1
449.7
Customer deposits (b)
482.7
471.4
Loan to deposit ratioA = (a) / (b)
95 %
95 %
Life and pension sales (present value of new business premiums)A
2024
£m
2023
£m
Premiums received
10,679
9,768
Investment sales
10,986
10,615
Effect of capitalisation factor
3,609
3,426
Effect of annualisation
401
455
Gross premiums from existing long-term business
(7,426)
(6,815)
Life and pensions sales (present value of new business premiums)A
18,249
17,449
New business value of insurance and participating investment contracts recognised in the yearA
2024
£m
2023
£m
Contractual service margin
61
92
Risk adjustment for non-financial risk
65
86
Losses recognised on initial recognition
(93)
(71)
33
107
Impacts of reinsurance contracts recognised in the year
39
29
Increments, single premiums and transfers received on workplace pension contracts initially recognised in the year
35
17
Amounts relating to contracts modified to add a drawdown feature and recognised as new contracts
4
–
A
New business value of insurance and participating investment contracts recognised in the year
111
153
Alternative performance measures continued
316
Lloyds Banking Group plc Annual Report and Accounts 2024
Operating costsA
2024
£m
2023
£m
Operating expenses
11,601
10,823
Adjustment for:
Operating lease depreciation
(1,325)
(956)
Remediation
(899)
(675)
Restructuring
(40)
(154)
Amortisation of purchased intangibles
(81)
(80)
Insurance gross up
236
227
Other statutory items
(50)
(45)
A
Operating costs
9,442
9,140
Pro forma CET1 ratioA
At 31 Dec
2024
%
At 31 Dec
2023
%
CET1 ratio
14.2%
14.6%
Insurance dividend and share buyback accrual1
(0.7)%
(0.9)%
Pro forma CET1 ratioA
13.5%
13.7%
1
Dividend paid up by the Insurance business in the subsequent quarter (added) and the impact of the announced ordinary share buyback programme (deducted).
Return on tangible equityA
2024
2023
Profit attributable to ordinary shareholders (£m) (a)
3,923
4,933
Average shareholders’ equity (£bn)
40.0
38.9
Average goodwill and other intangible assets (£bn)
(8.0)
(7.7)
Average tangible equity (£bn) (b)
32.0
31.2
Return on tangible equity (%)A = (a) / (b)
12.3%
15.8%
Tangible net assets per shareA
At 31 Dec
2024
£m
At 31 Dec
2023
£m
Ordinary shareholders’ equity
39,521
40,224
Remove goodwill and other intangible assets
(8,188)
(8,306)
Deferred tax and other adjustments
350
352
Tangible net assets (a)
31,683
32,270
Ordinary shares in issue, excluding own shares (b)
60,491 m
63,508 m
Tangible net assets per shareA = (a) / (b)
52.4 p
50.8p
Underlying profit before impairmentA
2024
£m
2023
£m
Statutory profit before tax
5,971
7,503
Remove impairment charge
431
303
Remove volatility and other items including restructuring
374
311
Underlying profit before impairmentA
6,776
8,117
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
317
Lloyds Banking Group plc Annual Report and Accounts 2024
In compliance with section 409 of the Companies Act 2006, the
following comprises a list of all related undertakings of the Group, as
at 31 December 2024. The list includes each undertaking’s registered
office and the percentage of the class(es) of shares held by the
Group. All shares held are ordinary shares unless indicated otherwise
in the notes.
Subsidiary undertakings
The Group directly or indirectly holds 100 per cent of the share class
or a majority of voting rights (including where the undertaking does
not have share capital as indicated) in the following undertakings.
All material subsidiary undertakings are consolidated by Lloyds
Banking Group.
Name of undertaking
Notes
A G Finance Ltd
20 ii iii
A.C.L. Ltd
1 i
ACL Autolease Holdings Ltd
1 i
ADF No.1 Pty Ltd
8 i §
Alex Lawrie Factors Ltd
9 i
Alex. Lawrie Receivables Financing Ltd
9 i
Alpha Trustees Ltd
20 i
Amberdate Ltd
1 i v
Anglo Scottish Utilities Partnership 1
+ *
Aquilus Ltd
13 i ‡
Automobile Association Personal Finance Ltd
4 i
Avalon Investment Services (Nominees) Ltd
20 i
Avalon SIPP Trustees Ltd
20 i
Bank of Scotland (B G S) Nominees Ltd
5 *
Bank of Scotland Branch Nominees Ltd
5 i
Bank of Scotland Central Nominees Ltd
5 *
Bank of Scotland Edinburgh Nominees Ltd
5 *
Bank of Scotland Equipment Finance Ltd
13 i ‡
Bank of Scotland plc
5 i v
Bank of Scotland Structured Asset Finance Ltd
1 i
Bank of Scotland Transport Finance 1 Ltd
13 i ‡
Bank of Wales Ltd
47 i
Barents Leasing Ltd
1 i
Birchcrown Finance Ltd
1 v xiii
Black Horse (TRF) Ltd
1 i
Black Horse Finance Holdings Ltd
1 ii iii
Black Horse Finance Management Ltd
13 i ‡
Black Horse Group Ltd
1 i v
Black Horse Ltd
1 i
Black Horse Offshore Ltd
7 i
Boltro Nominees Ltd
1 i
BOS (Ireland) Property Services 2 Ltd
16 i ‡
BOS (Shared Appreciation Mortgages (Scotland)) Ltd
4 i
BOS (Shared Appreciation Mortgages (Scotland) No. 2) Ltd
4 i
BOS (Shared Appreciation Mortgages (Scotland) No. 3) Ltd
4 i
BOS (Shared Appreciation Mortgages) No. 1 plc
4 # i
BOS (Shared Appreciation Mortgages) No. 2 plc
4 # i
BOS (Shared Appreciation Mortgages) No. 3 plc
4 # i
BOS (Shared Appreciation Mortgages) No. 4 plc
4 # i
BOS (Shared Appreciation Mortgages) No. 5 plc
4 i
BOS (Shared Appreciation Mortgages) No. 6 plc
4 i
BOS (USA) Fund Investments Inc.
11 xiv
BOS (USA) Inc.
11 i
BOS Personal Lending Ltd
4 ii iii
BOSSAF Rail Ltd
1 i
British Linen Leasing (London) Ltd
5 i
British Linen Leasing Ltd
5 i
Name of undertaking
Notes
British Linen Shipping Ltd
5 i
Capital 1945 Ltd
13 i ‡
Capital Bank Leasing 12 Ltd
5 i
Capital Bank Leasing 3 Ltd
13 i ‡
Capital Bank Leasing 5 Ltd
47 i
Capital Bank Property Investments (3) Ltd
47 i
Capital Personal Finance Ltd
4 i
Cardnet Merchant Services Ltd
1 # ^ iii iv
Cashfriday Ltd
9 i
Caveminster Ltd
13 i ‡
Cavendish Online Ltd
21 ii iii viii xxii
xxiii xxiv xxv
xxvi xxvii
xxviii
Cawley (Chester) Ltd
47 ii iii viii
CF Asset Finance Ltd
13 i ‡
Charterhall Nominees Ltd
20 i
Cheltenham & Gloucester plc
12 i
Citra Development Company (No. 1) Ltd
1 i
Citra Development Company (No. 2) Ltd
1 i
Citra Living Broadside Limited
50 i
Citra Living Investments Ltd
1 i
Citra Living Ltd
1 i
Citra Living Nexus Ltd
1 i
Citra Living Oldham Road Ltd
50 i
Citra Living Operating Company (No. 1) Ltd
1 i
Citra Living Properties (No. 1) Ltd
1 i
Citra Living Properties (No. 2) Ltd
1 i
Citra Living The Rise Cardiff Ltd
1 i
Citra Pathways Ltd
1 i
Clerical Medical Finance plc
20 i
Clerical Medical Financial Services Ltd
13 i ‡
Clerical Medical Investment Fund Managers Ltd
4 i
Clerical Medical Non Sterling Property Company Sàrl
22 i
Cloak Lane Funding Sàrl
23 i
Cloak Lane Investments Sàrl
23 i
Conquest Securities Ltd
1 v xiii
Corbiere Asset Investments Ltd
1 ii iii
Dalkeith Corporation
24 i ‡
Dunstan Investments (UK) Ltd
1 i
E.B.S. Pensioneer Trustees Ltd
20 i
EBS Pensions Ltd
20 i
EBS Self-Administered Personal Pension Plan Trustees Ltd
20 i
Embark Corporate Services Ltd
20 ii
Embark Group Ltd
20 ii iii
Embark Investment Services Ltd
20 i
Embark Investment Services Nominees Ltd
20 i
Embark Investments Ltd
20 i
Embark Pensions Trustees Ltd
20 i
Embark Services Ltd
20 i
Embark Trustees Ltd
20 i
Eurolead Services Holdings Ltd
9 i
First Retail Finance (Chester) Ltd
4 i
Forthright Finance Ltd
47 i
France Industrial Premises Holding Company
28 i
General Leasing (No. 12) Ltd
13 i ‡
General Reversionary and Investment Company
20 i #
Gresham Nominee 1 Ltd
1 i
Gresham Nominee 2 Ltd
1 i
Subsidiaries and related undertakings
8
318
Lloyds Banking Group plc Annual Report and Accounts 2024
Name of undertaking
Notes
Halifax Financial Brokers Ltd
4 i
Halifax Financial Services (Holdings) Ltd
4 i
Halifax Financial Services Ltd
4 i
Halifax General Insurance Services Ltd
4 i
Halifax Group Ltd
13 i ‡
Halifax Leasing (March No.2) Ltd
1 i
Halifax Leasing (September) Ltd
1 i
Halifax Life Ltd
4 i
Halifax Ltd
13 i ‡
Halifax Loans Ltd
4 i
Halifax Pension Nominees Ltd
1 i
Halifax Share Dealing Ltd
4 i
Halifax Vehicle Leasing (1998) Ltd
4 i
Hamsard 3352 Ltd
14 ii iii xxii
xxiii xxix xxx
Hamsard 3353 Ltd
14 i
HBOS Covered Bonds LLP
13 * ‡
HBOS Financial Services Ltd
20 i
HBOS International Financial Services Holdings Ltd
13 i ‡
HBOS Investment Fund Managers Ltd
4 ii
HBOS plc
5 i v vi
HBOS Social Housing Covered Bonds LLP
47 *
HBOS UK Ltd
5 i
Heidi Finance Holdings (UK) Ltd
1 i
HGP III Ltd
1 i
Hill Samuel Bank Ltd
13 i ‡
Hill Samuel Finance Ltd
1 v xx
Hill Samuel Leasing Co. Ltd
1 i
Home Shopping Personal Finance Ltd
4 i
Horizon Capital 2000 Ltd
5 i
Hornbuckle Mitchell Trustees Ltd
20 i
Housing Growth Partnership GP LLP
1 *
Housing Growth Partnership II GP LLP
1 *
Housing Growth Partnership III GP LLP
1 *
Housing Growth Partnership III LP
1 *
Housing Growth Partnership Manager Ltd
1 i
HSDL Nominees Ltd
4 i
HVF Ltd
1 i
Hyundai Car Finance Ltd
20 ii iii
IBOS Finance Ltd
13 i ‡
International Motors Finance Ltd
20 ii #
Katrine Leasing Ltd
39 i ‡
Landau Finance Ltd
52 i
LB Healthcare Trustee Ltd
1 i
LBCF Ltd
9 i
LBG Brasil Administração LTDA
38 i
LBG Equity Investments Ltd
1 i ^
LBI Leasing Ltd
1 i
LDC (General Partner) Ltd
40 i
LDC (Managers) Ltd
40 i
LDC (Nominees) Ltd
40 i
LDC GP LLP
41 *
LDC I LP
41 *
LDC II LP
41 *
LDC III LP
41 *
LDC IV LP
41 *
LDC V LP
41 *
LDC VI LP
41 *
LDC VII LP
41 *
Name of undertaking
Notes
LDC VIII LP
40 *
LDC IX LP
40 *
LDC Parallel (Nominees) Ltd
40 i
LDC Parallel XIV LP
40 *
LDC X LP
40 *
LDC XI LP
40 *
LDC XII LP
40 *
LDC XIII LP
41 *
LDC XIV LP
41 *
Legacy Renewal Company Ltd
5 i
LEIL Virgo Holdco Ltd
1 i
Lex Autolease (CH) Ltd
1 i
Lex Autolease (VC) Ltd
1 i
Lex Autolease Carselect Ltd
1 i
Lex Autolease Ltd
1 i
Lex Vehicle Leasing (Holdings) Ltd
13 ii iii xi ‡
Lex Vehicle Leasing Ltd
13 i ‡
Lime Street (Funding) Ltd
13 i ‡
Lloyds (Gresham) Ltd
13 i xi ‡
Lloyds (Nimrod) Specialist Finance Ltd
1 i
Lloyds America Securities Corporation
11 i
Lloyds Asset Leasing Ltd
1 i
Lloyds Bank (Colonial & Foreign) Nominees Ltd
1 i
Lloyds Bank (I.D.) Nominees Ltd
1 i
Lloyds Bank Asset Finance Ltd
1 i
Lloyds Bank Commercial Finance Ltd
9 i
Lloyds Bank Commercial Finance Scotland Ltd
43 i
Lloyds Bank Corporate Asset Finance (HP) Ltd
1 i
Lloyds Bank Corporate Asset Finance (No.1) Ltd
1 i
Lloyds Bank Corporate Asset Finance (No.2) Ltd
1 i
Lloyds Bank Corporate Asset Finance (No.3) Ltd
1 i
Lloyds Bank Corporate Asset Finance (No.4) Ltd
1 i
Lloyds Bank Corporate Markets plc
1 i ^
Lloyds Bank Corporate Markets Wertpapierhandelsbank
GmbH
17 i
Lloyds Bank Covered Bonds (LM) Ltd
26 i
Lloyds Bank Covered Bonds LLP
26 *
Lloyds Bank Equipment Leasing (No. 1) Ltd
13 i ‡
Lloyds Bank Equipment Leasing (No. 7) Ltd
13 i ‡
Lloyds Bank Equipment Leasing (No. 9) Ltd
1 i
Lloyds Bank Financial Services (Holdings) Ltd
1 i v
Lloyds Bank General Insurance Holdings Ltd
1 i
Lloyds Bank General Insurance Ltd
1 i
Lloyds Bank General Leasing (No. 3) Ltd
13 i ‡
Lloyds Bank General Leasing (No. 5) Ltd
13 i ‡
Lloyds Bank General Leasing (No. 11) Ltd
13 i ‡
Lloyds Bank GmbH
29 i
Lloyds Bank Insurance Services Ltd
1 i
Lloyds Bank Leasing (No. 6) Ltd
1 i
Lloyds Bank Leasing Ltd
1 i
Lloyds Bank Maritime Leasing (No. 10) Ltd
1 i
Lloyds Bank MTCH Ltd
1 i
Lloyds Bank Nominees Ltd
1 i
Lloyds Bank Offshore Pension Trust Ltd
33 i
Lloyds Bank Pension ABCS (No. 1) LLP
1 *
Lloyds Bank Pension ABCS (No. 2) LLP
1 *
Lloyds Bank Pensions Property (Guernsey) Ltd
34 ii iii
Lloyds Bank plc
1 ^ i vii
Lloyds Bank Property Company Ltd
1 i
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
319
Lloyds Banking Group plc Annual Report and Accounts 2024
Subsidiary undertakings continued
Name of undertaking
Notes
Lloyds Bank S.F. Nominees Ltd
1 i
Lloyds Bank Subsidiaries Ltd
1 i
Lloyds Bank Trustee Services Ltd
1 i
Lloyds Banking Group Pensions Trustees Ltd
1 i
Lloyds Development Capital (Holdings) Ltd
40 i
Lloyds Engine Capital (No.1) U.S LLC
11 *
Lloyds Far East Sàrl
23 i
Lloyds General Leasing Ltd
1 i
Lloyds Hypotheken B.V.
37 i
Lloyds Industrial Leasing Ltd
1 i
Lloyds International Management Services (Jersey) Ltd
7 i
Lloyds International Pty Ltd
8 i
Lloyds Investment Securities No.5 Ltd
13 i ‡
Lloyds Leasing (North Sea Transport) Ltd
1 i
Lloyds Leasing Developments Ltd
13 i ‡
Lloyds Offshore Global Services Private Ltd
48 i
Lloyds Plant Leasing Ltd
1 i
Lloyds Portfolio Leasing Ltd
1 i
Lloyds Project Leasing Ltd
1 i
Lloyds Property Investment Company No. 4 Ltd
13 i ‡
Lloyds Secretaries Ltd
1 i
Lloyds Securities Inc.
11 i
Lloyds TSB Pacific Ltd
51 i
Lloyds UDT Asset Rentals Ltd
13 i ‡
Lloyds UDT Leasing Ltd
1 i
Lloyds UDT Ltd
13 i ‡
Loans.co.uk Ltd
47 i
London Taxi Finance Ltd
1 ii iii
Lotus Finance Ltd
20 ii iii
LTGP Limited Partnership Incorporated
34 *
Maritime Leasing (No. 19) Ltd
13 i ‡
MBNA Europe Finance Ltd
46 i
MBNA Europe Holdings Ltd
47 i
MBNA Ltd
47 i
MBNA R & L Sàrl
49 i
MBNA Receivables Ltd
32 i
Membership Services Finance Ltd
4 i
Mitre Street Funding Sàrl
23 i
NWS Trust Ltd
5 i
Pacific Leasing Ltd
13 i ‡
Pensions Management (S.W.F.) Ltd
5 *
Perry Nominees Ltd
1 i
PIPS Asset Investments Ltd
1 ii iii
Prestonfield Investments Ltd
5 i
Proton Finance Ltd
20 ii iii
R.F. Spencer and Company Ltd
9 i
Raleigh Street (Walsall) Management Company Ltd
1 *
Ranelagh Nominees Ltd
1 i
Retail Revival (Burgess Hill) Investments Ltd
1 i
Saint Michel Holding Company No1
28 i
Saint Michel Investment Property
28 i
Saint Witz 2 Holding Company No1
28 i
Saint Witz 2 Investment Property
28 i
Savban Leasing Ltd
1 i
Scotland International Finance B.V.
35 i
Scottish Widows Administration Services (Nominees) Ltd
5 i
Name of undertaking
Notes
Scottish Widows Administration Services Ltd
1 i
Scottish Widows Auto Enrolment Services Ltd
1 i
Scottish Widows Europe
27 i
Scottish Widows Financial Services Holdings
5 i
Scottish Widows’ Fund and Life Assurance Society
5 *
Scottish Widows Group Ltd
5 ii ^
Scottish Widows Industrial Properties Europe B.V.
18 i
Scottish Widows Ltd
1 i
Scottish Widows Services Ltd
5 i
Scottish Widows Trustees Ltd
5 i
Scottish Widows Unit Funds Ltd
5 i
Scottish Widows Unit Trust Managers Ltd
1 i
Seabreeze Leasing Ltd
13 i ‡
Seaspirit Leasing Ltd
1 i
Share Dealing Nominees Ltd
4 i
Shogun Finance Ltd
20 i
St Andrew’s Group Ltd
20 i
St Andrew’s Insurance plc
20 i
St Andrew’s Life Assurance plc
20 i
St. Mary’s Court Investments
13 i ‡
Standard Property Investment (1987) Ltd
5 ii #
Sterling ISA Managers (Nominees) Ltd
20 i
Sterling ISA Managers Ltd
20 i
Sussex County Homes Ltd
4 i
Suzuki Financial Services Ltd
20 ii #
SW Funding plc
5 i #
SW No.1 Ltd
31 i ‡
The Adviser Centre Ltd
20 i
The Agricultural Mortgage Corporation plc
45 i
The British Linen Company Ltd
5 i
The Mortgage Business plc
4 i
Thistle Leasing
+ *
Tower Hill Property Investments (7) Ltd
13 i # ‡
Tower Hill Property Investments (10) Ltd
13 i # ‡
Tranquility Leasing Ltd
1 i
TuskerDirect Ltd
14 i
Uberior (Glasgow) Limited
5 ii iii
Uberior (Moorfield) Ltd
5 i
Uberior (West) Limited
5 ii iii
Uberior Co-Investments Ltd
31 i ‡
Uberior ENA Ltd
5 i
Uberior Equity Ltd
5 i
Uberior Europe Ltd
5 i
Uberior Fund Investments Ltd
5 i
Uberior Infrastructure Investments Ltd
31 i ‡
Uberior Infrastructure Investments (No 2) Ltd
1 i
Uberior Investments Ltd
5 i
Uberior Trading Ltd
5 i
Uberior Ventures Australia Pty Ltd
8 i §
Uberior Ventures Ltd
31 i ‡
UDT Budget Leasing Ltd
13 i ‡
UK Prime Student LP
53 *
UK PRS (Jersey) Properties I Ltd
36 i
UK PRS Lettings I LLP
1 *
UK PRS Member Limited
1 i
United Dominions Leasing Ltd
1 i
United Dominions Trust Ltd
1 i
Vine Street XIV LLP
41 *
Subsidiaries and related undertakings continued
320
Lloyds Banking Group plc Annual Report and Accounts 2024
Name of undertaking
Notes
Ward Nominees (Abingdon) Ltd
1 i
Waymark Asset Investments Ltd
1 ii iii
West Craigs Ltd
5 i
Wood Street Leasing Ltd
1 i
Subsidiary undertakings continued
The Group has determined that it has the power to exercise control
over the following entities without having the majority of the
voting rights of the undertakings. Unless otherwise stated, the
undertakings do not have share capital or the Group does not hold
any shares.
Name of undertaking
Notes
Addison Social Housing Holdings Ltd
36
Cancara Asset Securitisation Ltd
32
Candide Financing 2021-1 B.V.
19
Candide Financing 2024-1 B.V
19
Cardiff Auto Receivables Securitisation 2022-1 plc
26
Cardiff Auto Receivables Securitisation 2024-1 plc
6
Cardiff Auto Receivables Securitisation Holdings Ltd
26
Cardiff Auto Receivables Securitisation Holdings No. 2 Ltd
6
Celsius European Lux 2 Sàrl
30
Elland RMBS 2018 plc
26
Elland RMBS Holdings Ltd
26
Fontwell II Securities 2020 DAC
42
Fontwell Securities 2016 Ltd
36
Gresham Receivables (No. 3) Ltd
32
Gresham Receivables (No. 10) Ltd
32
Gresham Receivables (No. 13) UK Ltd
25
Gresham Receivables (No. 15) UK Ltd
10 ‡
Gresham Receivables (No. 16) UK Ltd
10 ‡
Gresham Receivables (No. 20) Ltd
32
Gresham Receivables (No. 24) Ltd
32
Gresham Receivables (No.27) UK Ltd
25
Gresham Receivables (No. 32) UK Ltd
25
Gresham Receivables (No. 34) UK Ltd
25
Gresham Receivables (No.35) Ltd
32
Gresham Receivables (No.36) UK Ltd
25
Gresham Receivables (No.37) UK Ltd
25
Gresham Receivables (No.38) UK Ltd
25
Gresham Receivables (No.39) UK Ltd
25
Gresham Receivables (No.40) UK Ltd
25
Gresham Receivables (No.41) UK Ltd
25
Gresham Receivables (No.44) UK Ltd
25
Gresham Receivables (No.45) UK Ltd
25
Gresham Receivables (No.46) UK Ltd
25
Gresham Receivables (No.47) UK Ltd
25
Gresham Receivables (No.48) UK Ltd
25
Guildhall Asset Purchasing Company (No.11) UK Ltd
25
Housing Association Risk Transfer 2019 DAC
42
Lloyds Bank Covered Bonds (Holdings) Ltd
26
Molineux RMBS 2016-1 plc
26
Molineux RMBS Holdings Ltd
26
Otium Lifetime Funding (No. 1) Ltd
26
Penarth Asset Securitisation Holdings Ltd
26
Penarth Funding 1 Ltd
26
Penarth Funding 2 Ltd
26
Penarth Master Issuer plc
26
Penarth Receivables Trustee Ltd
26
Permanent Funding (No. 1) Ltd
26
Name of undertaking
Notes
Permanent Funding (No. 2) Ltd
26
Permanent Holdings Ltd
26
Permanent Master Issuer plc
26
Permanent Mortgages Trustee Ltd
26
Permanent PECOH Holdings Ltd
26
Permanent PECOH Ltd
26
Salisbury Securities 2015 Ltd
36
Salisbury II Securities 2016 Ltd
36
Salisbury II-A Securities 2017 Ltd
36
Salisbury III Securities 2019 DAC
42
Sàrl Hiram
44
Stichting Holding Candide Financing
19
Stichting Holding Candide Financing 2024-1
19
Stichting Security Trustee Candide Financing 2021-1 B.V.
19
Stichting Security Trustee Candide Financing 2024-1
19
Syon Securities 2019 DAC
42
Syon Securities 2020 DAC
42
Syon Securities 2020-2 DAC
42
Thistle Investments (AMC) Ltd
26
Wetherby II Securities 2018 DAC
3 ‡
Wetherby III Securities 2019 DAC
42
Wilmington Cards 2021-1 plc
26
Wilmington Cards Holdings Ltd
26
Wilmington Receivables Trustee Ltd
26
Bank of Scotland Foundation •
5
Lloyds Bank Foundation for England & Wales •
2
Lloyds Bank Foundation for the Channel Islands •
2
MBNA General Foundation •
47
The Halifax Foundation for Northern Ireland •
15
•
A charitable foundation funded but not owned or controlled by Lloyds Banking Group
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
321
Lloyds Banking Group plc Annual Report and Accounts 2024
Associated undertakings
The Group has a participating interest in the following undertakings.
Name of undertaking
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Registered office address
Notes
00SC Ltd
50%
Kingsnorth House, Blenheim Way, Birmingham, West Midlands,
United Kingdom, B44 8LS
ii
239 Kingsway Hove Ltd
50%
Cayuga House, 2a Addison Road, Hove, East Sussex,
United Kingdom, BN3 1TN
ii
4755AS Ltd
50%
Kingsnorth House, Blenheim Way, Birmingham, West Midlands,
England, B44 8LS
ii
Addison Social Housing Ltd
20%
1 Bartholomew Lane, London, EC2N 2AX
i
Airline Services And Components Group Ltd
94.45%
Squire Patton Boggs (UK) LLP (Ref: Csu), Rutland House,
148 Edmund Street, Birmingham, B3 2JR
ii &
Albany Bidco Ltd
75.32%
Acora House, Albert Drive, Burgess Hill, West Sussex, United Kingdom,
RH15 9TN
ii
Aldreth Developments Ltd
50%
No 1 Railshead Road, St Margarets, Isleworth, Middlesex, United Kingdom,
TW7 7EP
ii ∞
Alfred Homes Properties LLP
n/a
64 Parchment Street, Winchester, England, SO23 8AT
*
Alfred Investment Properties Ltd
50%
64 Parchment Street, Winchester, England, SO23 8AT
i
Alfred Investments LLP
n/a
64 Parchment Street, Winchester, England, SO23 8AT
*
Alfreton Road JV Ltd
100%
85 Buckingham Gate, London, England, SW1E 6PD
ii
Allan Water Homes (Chryston) Ltd
50%
24B Kenilworth Road, Bridge Of Allan, Stirling, Scotland, FK9 4DU
ii
Alphabet Bidco Ltd
99.25%
Phoenix House, Smeaton Close, Rabans Lane, Industrial Area, Aylesbury,
Buckinghamshire, United Kingdom, HP19 8UW
ii &
Angus International Safety Group Ltd
88.93%
88.93%
Station Road, High Bentham, Near Lancaster, LA2 7NA
xvii
xviii &
Aquavista Watersides Topco Ltd
92.69%
Sawley Marina, Long Eaton, Nottinghamshire, United Kingdom, NG10 3AE
ii &
Artisan Blythswood Quarter Ltd
53%
7 Cliffe Park Way, Bruntcliffe Road, Morley, Leeds, England, LS27 0RY
ii
Ashtons Group Holdings Ltd
99%
Unit 4, 74 Dyke Road Mews, Brighton, BN1 3JD
ii &
Aspire Technology Enterprise Ltd
99.25%
Pipewell Quay, Pipewellgate, Gateshead, Tyne And Wear,
United Kingdom, NE8 2BJ
ii &
Avantis Education Group Ltd
99.25%
Unit 2 And 3, Jessop Court, Waterwells Business Park, Quedgeley,
Gloucester, United Kingdom, GL2 2AP
xviii &
Azul Holdco Ltd
99.25%
Cannon Green, 1 Suffolk Lane, London, United Kingdom, EC4R 0AX
xviii &
Bacchus Newco Ltd
89.25%
Teneo Financial Advisory Limited, The Colmore Building,
20 Colmore Circus, Queensway, Birmingham, B4 6AT
ii & ∞
Backhouse (Castle Cary) JV Ltd
50%
c/o DAC Beachcroft LLP, Portwall Place, Portwall Lane, Bristol,
United Kingdom, BS1 9HS
ii
Backhouse (Westbury) JV Ltd
50%
c/o DAC Beachcroft LLP, Portwall Place, Portwall Lane, Bristol,
United Kingdom, BS1 9HS
ii
Balia Ltd
50%
85 Buckingham Gate, London, England, SW1E 6PD
i
Bar Bidco Ltd
99.25%
Equity House, Blackbrook Park Avenue, Taunton, England, TA1 2PX
ii &
BCIS Holdings Ltd
99.25%
Royal House 110 Station Parade, Harrogate, HG1 1EP
ii &
Beckstones (Rheda Park) Ltd
50%
Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith, CA11 9BN
ii
Bergamot Ventures Ltd
100%
C/O Milsted Langdon Llp Winchester House, Deane Gate Avenue,
Taunton, United Kingdom, TA1 2UH
iii ~
BH Stoke Golding Property LLP
n/a
Grovelands Business Park, West Haddon Road, East Haddon,
Northampton, NN6 8FB
*
BH Sutton Ltd
50%
Grovelands Business Park, West Haddon Road, East Haddon,
Northampton, NN6 8FB
ii
BH Woodville Ltd
50%
Grovelands Business Park, West Haddon Road, East Haddon,
Northampton, NN6 8FB
ii
Biozone Scientific Group Ltd
99.25%
Unit 5a, Compass Business Park, Pacific Road, Cardiff, CF24 5HL
ii &
BLIS Holdco Ltd
81.15%
85 Great Portland Street, London, W1W 7LT
ii &
Blue Bay Travel Group Ltd
99.17%
A4 Bellringer Road, Trentham Business Quarter, Stoke-On-Trent, ST4 8GB
xviii &
BoS Mezzanine Partners Fund LP
n/a
Fourth Floor, 7 Castle Street, Edinburgh, EH2 3AH
*
Bowbridge Homes (Frisby) Ltd
50%
Unit 4, Shieling Court, Corby, England, NN18 9QD
ii
Subsidiaries and related undertakings continued
322
Lloyds Banking Group plc Annual Report and Accounts 2024
Name of undertaking
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Registered office address
Notes
Bowland Fold (Halton) Ltd
25%
Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith,
England, CA11 9BN
i
Bramble Foods Group Ltd
99.25%
99.25%
Crosby Road, Market Harborough, Leicestershire, England, LE16 9EE
ii &
xxii
Briar Homes (Barrhead) Ltd
50%
Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU
i
Briar Homes (Gladsmuir) Ltd
50%
Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU
i
Briar Homes (Howwood) Ltd
50%
Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU
ii
Briar Homes (Investments) Ltd
100%
Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU
ii
Briar Homes (Kennoway) Ltd
50%
Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU
i
Briar Homes (Newmains) Ltd
50%
Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU
ii
Briar Homes (Tillycairn) Ltd
50%
Radleigh House, 1 Golf Road, Clarkston, Glasgow, G76 7HU
i
Bunnyhomes Church Lane at Cheriton Bishop Ltd 25%
22 Chancery Lane, London, England, WC2A 1LS
i
Bunnyhomes Primrose Fields At Appledore Ltd
25%
22 Chancery Lane, London, England, WC2A 1LS
i
Burnham SPV Ltd
50%
Weir House, Hurst Road, East Molesey, Surrey, KT8 9AY
ii
BRICS (Earnley) LLP
n/a
3rd Floor 22 Old Bond Street, London, W1S 4PY
*
Caedmon Homes (St Johns Mews) Ltd
50%
1st Floor, 34 Falcon Court, Preston Farm Business Park,
Stockton-on-Tees, TS18 3TX
ii ‡
Caedmon Homes Kirby Hill Ltd
50%
1st Floor, 34 Falcon Court, Preston Farm Business Park,
Stockton-on-Tees, TS18 3TX
ii ‡
Caedmon Homes Ltd
50%
1st Floor, 34 Falcon Court, Preston Farm Business Park,
Stockton-on-Tees, TS18 3TX
ii ‡
Cayuga 013 LLP
n/a
Cayuga House, 2a Addison Road, Hove, England, BN3 1TN
*
Cayuga 018 LLP
n/a
Cayuga House, 2a Addison Road, Hove, England, BN3 1TN
*
Cheriton Bishop Holding Ltd
50%
22 Chancery Lane, London, England, WC2A 1LS
ii
City & General Securities Ltd
100%
10 Upper Berkeley Street, London, W1H 7PE
iii &
Columbus UK Holdings Ltd
99%
1 Fore Street Avenue, Moorgate, London, UK, EC2Y 9DT
ii &
Connect Health Group Ltd
99%
99%
The Light Box, Quorum Business Park, Benton Lane,
Newcastle Upon Tyne, United Kingdom, NE12 8EU
ii &
xvii
Crossco (1462) Ltd
99.25%
99.25%
23a Falcon Court, Preston Farm Industrial Estate, Stockton-On-Tees,
United Kingdom, TS18 3TX
ii &
xviii
Crossco (1468) Ltd
99.25%
The Light Box, Quorum Business Park, Benton Lane,
Newcastle Upon Tyne, United Kingdom, NE12 8EU
ii &
Cruden Homes (Aberlady) Ltd
50%
16 Walker Street, Edinburgh, EH3 7LP
ii
Cruden Homes (Barnton Avenue) Ltd
50%
16 Walker Street, Edinburgh, EH3 7LP
i
Cruden Homes (Longniddry South) Ltd
50%
16 Walker Street, Edinburgh, EH3 7LP
i
Cruden Homes (West Craigs) Ltd
50%
16 Walker Street, Edinburgh, EH3 7LP
i
Cruden Ventures Ltd
100%
16 Walker Street, Edinburgh, EH3 7LP
ii
D.U.K.E. Real Estate Ltd
100%
Cromwell Property Group Spaces, Lochrin Square, 1 Lochrin Square,
92-98 Fountainbridge, Edinburgh, United Kingdom, EH3 9QA
iii ~
Derwent Rise (Seaton) Ltd
25%
Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith,
England, CA11 9BN
i
Devonshire Homes (Halwill) Ltd
25%
Gotham House, Hammett Square, Phoenix Lane, Tiverton,
Devon, EX16 6LT
ii
Devonshire Homes (Ilfracombe) Ltd
100%
Gotham House, Hammett Square, Phoenix Lane, Tiverton,
Devon, EX16 6LT
ii
Devonshire Homes (RGI) Ltd
50%
Gotham House, Hammett Square, Phoenix Lane, Tiverton,
Devon, EX16 6LT
ii
Devonshire Homes (St Austell) Ltd
50%
Gotham House, Hammett Square, Phoenix Lane, Tiverton,
Devon, EX16 6LT
ii
Devonshire Homes (Wincanton) Ltd
25%
Gotham House, Hammett Square, Phoenix Lane, Tiverton,
Devon, EX16 6LT
ii
Downtown Manchester BTR Ltd
100%
1 St. Georges Court, Altrincham Business Park, Altrincham,
England, WA14 5UA
ii
Downtown Manchester Opco Ltd
50%
1 St. Georges Court, Altrincham Business Park, Altrincham,
England, WA14 5UA
i
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
323
Lloyds Banking Group plc Annual Report and Accounts 2024
Associated undertakings continued
Name of undertaking
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Registered office address
Notes
Downtown Manchester Propco Ltd
50%
1 St. Georges Court, Altrincham Business Park, Altrincham,
England, WA14 5UA
i
Duchy Homes (Chapelgarth) Ltd
50%
3125 Century Way, Thorpe Park, Leeds, LS15 8ZB
ii
Duchy Homes (Elwick) Ltd
50%
Middleton House, Westland Road, Leeds, United Kingdom, LS11 5UH
ii
Duncan and Todd Holdings Ltd
89.25%
Unit 4 Kirkhill Commercial Park, Dyce Avenue, Dyce, Aberdeen, AB21 0LQ
ii &
Dundashill 4A Ltd
50%
305 Gray’s Inn Road, London, United Kingdom, WC1X 8QR
i
Durkan (Onslow) Ltd
25%
Unit 4, Elstree Way, Borehamwood, England, WD6 1JD
i
Durkan Growth Ltd
50%
Unit 4, Elstree Way, Borehamwood, England, WD6 1JD
ii
Eamont Chase (Penrith) Ltd
25%
Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith,
England, CA11 9BN
i
Eden Gardens (Etterby) Ltd
25%
Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith,
England, CA11 9BN
i
Edwards Homes (Hollybrook Park) Ltd
50%
Edwards House Lakeside Business Village, St. Davids Park, Ewloe,
United Kingdom, CH5 3XA
ii
EFG Holdco (CW) Ltd
50%
9th Floor, 80 Mosley Street, Manchester, M2 3FX
ii
Eiger Bidco Ltd
99.25%
4 Webster Court, Carina Park, Westbrook, Warrington,
United Kingdom, WA5 8WD
ii &
Elovate Group Ltd
100%
York House, Wetherby Road, Long Marston, YO26 7NH
xviii &
Ensco 1322 Ltd
99%
Newbury House, 20 Kings Road West, Newbury, Berkshire, RG14 5XR
ii &
Ensco 1327 Ltd
99%
First Floor, 65 Gresham Street, London, England, EC2V 7NQ
ii &
Ensco 1337 Ltd
99%
41 Churchill Way, Lomeshaye Industrial Estate, Nelson,
Lancashire, BB9 6RT
ii &
Ensco 1506 Ltd
73.08%
2 Leman Street, London, United Kingdom, E1W 9US
ii &
Ettrickhaugh Development Company Ltd
100%
Priorwood House, High Road, Melrose, Scottish Borders,
Scotland, TD6 9EF
ii
Eudoros Bidco Ltd
99.25%
5 Soho Street, London, England, W1D 3DG
xviii &
Europa Property Company (Northern) Ltd
100%
Europa House, 20 Esplanade, Scarborough, North Yorkshire, YO11 2AQ
viii
Eutopia Exeter 4 Ltd
50%
The Stables, Little Coldharbour Farm, Tong Lane, Lamberhurst,
Tunbridge Wells, Kent, England, TN3 8AD
ii
Eutopia Exeter Gateway Ltd
50%
The Stables, Little Coldharbour Farm, Tong Lane, Lamberhurst,
Tunbridge Wells, Kent, England, TN3 8AD
ii
Express Engineering (Group) Ltd
99%
99%
99%
99.35%
Kingsway North, Team Valley Trading Estate, Gateshead, NE11 0EG
ii
xvii
xviii &
xxi
Farries Field (Stainburn) Ltd
50%
Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith,
Cumbria, CA11 9BN
ii
FDL Salterns Ltd
50%
2 Poole Road, Bournemouth, BH2 5QY
ii
Generate Topco Ltd
99.25%
Boxpark 3rd Floor, 60 Worship Street, London,
United Kingdom, EC2A 2EZ
xviii &
Global Autocare Holding Ltd
99%
The Hub, Gelderd Lane, Leeds, England, LS12 6AL
ii &
GPSEC LLP
n/a
Cayuga House, 2a Addison Road, Hove, England, BN3 1TN
*
Grove Crescent Stratford Ltd
50%
3 Llys Y Bont, Parc Menai, Bangor, United Kingdom, LL57 4BN
i
Hamsard 3667 Ltd
99.25%
Park House, Clifton Park, York, North Yorkshire, YO30 5PB
ii &
Hamsard 3731 Ltd
85.21%
55 Whitefriargate, Hull, HU1 2HU
ii &
Hamsard 3751 Ltd
99.25%
Unit 17-20 Glacier Buildings, Harrington Road, Brunswick Business Park,
Liverpool, England, L3 4BH
ii &
Hamsard 3796 Ltd
99.25%
The Harley Building, 77-79 New Cavendish Street,
London, England, W1W 6XB
ii &
Hartfell Developments (Harker) Ltd
100%
3 Lowgate, Kirkby Lonsdale, Carnforth, Lancashire,
United Kingdom, LA6 2FY
ii
Hazel Newco Ltd
99.25%
Bradwood Court, St Crispin Way, Haslingden, Rossendale, Lancashire,
United Kingdom, BB4 4PW
xviii &
HB Developments (NW) Ltd
50%
116 Duke Street, Liverpool, Merseyside, England, L1 5JW
ii
Subsidiaries and related undertakings continued
4
324
Lloyds Banking Group plc Annual Report and Accounts 2024
Name of undertaking
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Registered office address
Notes
Hercules Topco Ltd
99.25%
5th Floor, The Grange, 100 High Street, Southgate, London, N14 6BN
ii &
HG Developments (NW) Ltd
45%
116 Duke Street, Liverpool, Merseyside, England, L1 5JW
ii &
HGP II Ltd
50%
25 Gresham Street, London, EC2V 7HN
i
HGP Torsion Holdco Ltd
50%
1280 Century Way, Thorpe Park, Leeds, West Yorkshire,
United Kingdom, LS15 8ZB
ii
HH (AG) Ltd
100%
17 Mann Island, Liverpool, England, L3 1BP
ii
Highcross Street Holdings Ltd
50%
Pinnacle House, 1 Pinnacle Way, Derby, Derbyshire, England, DE24 8ZS
ii
Highlands Bidco Ltd
99%
Commsworld House, Queen Anne Drive, Newbridge, EH28 8LH
ii &
Hollins Homes (Bartle) Ltd
25%
Suite 4, 1 King Street, Manchester, United Kingdom, M2 6AW
i ‡
Hollins Homes (Galgates) Ltd
25%
Riverside House, Irwell Street, Manchester, M3 5EN
i Δ
Hollins Homes (Loveclough) Ltd
50%
C/O Grant Thornton Uk Llp 11th Floor, Landmark St Peter's Square,
1 Oxford Street, Manchester, M1 4PB
ii Δ
Hollins Homes (Utopia) Ltd
50%
Riverside House, Irwell Street, Manchester, M3 5EN
ii Δ
Homes By Carlton (MSTG1) Ltd
50%
Carlton House, 15 Parsons Court, Welbury Way, Newton Aycliffe,
County Durham, DL5 6ZE
ii
Horse Health Wessex Holdings Ltd
99.25%
Copied Hall Farm Winsor Road, Winsor, Southampton, Hampshire,
United Kingdom, SO40 2HE
ii &
Housing Growth Partnership II LP
n/a
25 Gresham Street, London, EC2V 7HN
*
Housing Growth Partnership Ltd
50%
50%
25 Gresham Street, London, EC2V 7HN
ii
iii
Housing Growth Partnership LP
n/a
25 Gresham Street, London, EC2V 7HN
*
HPD (Conwy) Ltd
100%
20 George Street, Alderley Edge, England, SK9 7EJ
ii
HSL Compliance Group Ltd
99%
31.24%
Alton House, Alton Business Park, Alton Road, Ross-on-Wye, HR9 5BP
ii &
iii
Hylyfe Leicester Ltd
50%
2 Pemberton Street, Nottingham, England, NG1 1GS
i
IEG Group Ltd
99.25%
Queens Court, Wilmslow Road, Alderley Edge, England, SK9 7QD
ii &
Iglufastnet Ltd
89.25%
55.49%
2nd Floor, 165 The Broadway, Wimbledon, London,
United Kingdom, SW19 1NE
ii
xxiii &
IPE Roundway Ltd
100%
22 Gilbert Street, London, England, W1K 5HD
ii
Indigo 123 Ltd
99.25%
1 Caspian Way, Cardiff, Wales, CF10 4DQ
ii &
James Taylor Homes (Brighton) Ltd
25%
James Taylor House, St. Albans Road East, Hatfield, United Kingdom,
AL10 0HE
i
James Taylor Homes (Investment) Ltd
50%
James Taylor House, St. Albans Road East, Hatfield, United Kingdom,
AL10 0HE
ii
James Taylor Homes (Newton Longville) Ltd
50%
James Taylor House, St. Albans Road East, Hatfield, United Kingdom,
AL10 0HE
ii
James Taylor Homes (Verulamium) Ltd
25%
James Taylor House, St. Albans Road East, Hatfield, United Kingdom,
AL10 0HE
i
Kenmore Capital 3 Ltd
100%
Grant Thornton UK LLP, 110 Queen Street, Glasgow, G1 3BX
Kier HGP Devco 2 LLP
n/a
2nd Floor, Optimum House, Clippers Quay, Salford, England, M50 3XP
iii ~ ∞
*
Kier HGP Holdings LLP
n/a
2nd Floor, Optimum House, Clippers Quay, Salford, England, M50 3XP
*
Kier HGP Holdings 2 Ltd
50%
2nd Floor, Optimum House, Clippers Quay, Salford, England, M50 3XP
i
Kier HGP Tunbridge Wells LLP
n/a
2nd Floor, Optimum House, Clippers Quay, Salford, England, M50 3XP
*
Kingmead Homes (Warwick) Ltd
50%
50%
50%
50%
168 Church Road, Hove, East Sussex, United Kingdom, BN3 2DL
ii
iii
viii
xxii
Kingmead Homes Housing Growth LLP
n/a
168 Church Road, Hove, East Sussex, United Kingdom, BN3 2DL
*
Kingswood Mobility Group Ltd
99.25%
Browne Jacobson Llp (Cs) Mowbray House, Castle Meadow Road,
Nottingham, England, NG2 1BJ
xviii &
Kite Topco Ltd
89.25%
22.13%
Floor 7, The Future Works, Brunel Way, Slough, Berkshire, England, SL1 1FQ
xvii &
xxii
Kruger Topco Ltd
99.25%
Rhino House, Deans Road, Ellesmere Port, United Kingdom, CH65 4DR
ii &
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
325
Lloyds Banking Group plc Annual Report and Accounts 2024
Associated undertakings continued
Name of undertaking
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Registered office address
Notes
L-L-O Orpington Ltd
50%
1st Floor, Arthur Stanley House, 40-50 Tottenham Street, London,
W1T 4RN
ii
LMX Holdco Ltd
99.25%
1650 Parkway, Whiteley, Fareham, England, PO15 7AH
xviii
Loyalty Angels Ltd
49.9%
21.34%
Frp Advisory Trading Limited, 4 Beaconsfield Road, St. Albans,
Hertfordshire, AL1 3RD
ii
iii ‡
Lucida Broking Holdings Ltd
89.25%
89.25%
St James House, 27-43 Eastern Road, Romford, Essex,
United Kingdom, RM1 3NH
ii &
ix
Lunesdale Rise (Kirkby Lonsdale) Ltd
25%
Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith,
England, CA11 9BN
i
M&GP (No. 2) Ltd
50%
6 Lancaster Way, Ermine Business Park, Huntingdon, Cambridgeshire,
United Kingdom, PE29 6XU
ii
Mableford Ltd
50%
Lindum Business Park, Station Road, North Hykeham, Lincoln,
United Kingdom, LN6 3QX
ii
MADE Partnership LLP
n/a
Barratt House, Cartwright Way, Forest Business Park, Bardon Hill,
Coalville, Leicestershire, United Kingdom, LE67 1UF
*
Meadow Rigg (Burneside Road) Ltd
25%
Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith,
Cumbria CA11 9BN
i
Measured Identity Hub Ltd
97.92%
3 Long Acre Willow Farm Business Park, Castle Donington, Derbyshire,
England, DE74 2UG
ii &
Montague Centre (GPSEC) Ltd
50%
Cayuga House, 2a Addison Road, Hove, England, BN3 1TN
i
Mortgage Brain Holdings Ltd
16.67%
20%
6 The Courtyard, Buntsford Gate, Buntsford Drive, Bromsgrove,
Worcestershire, B60 3DJ
ii
iii
Motability Operations Group plc
39.98%
40%
22 Bishopsgate, Level 6, 22 Bishopsgate, London, EC2N 4BQ
i
v
Neilson Active Holidays Group Ltd
89.25%
Locksview, Brighton Marina, Brighton, BN2 5HA
ii &
Newday JVCO Ltd
100%
27 Esplanade, St. Helier, Jersey, JE1 1SG
x
North Kensington Gate HGP Ltd
100%
Regina House, 124 Finchley Road, London, United Kingdom, NW3 5JS
ii
North Kensington Gate Ltd
50%
Regina House, 124 Finchley Road, London, United Kingdom, NW3 5JS
i
Northern Edge Ltd
39.4%
Titanium, 1 King's Inch Place, Renfrew, Glasgow, PA4 8WF
iii &
Octagon (Watling Street) Ltd
50%
Weir House, Hurst Road, East Molesey, Surrey, KT8 9AY
ii
Omniplex Learning Group Ltd
100%
Omniplex Learning, 45 Grosvenor Road, St Albans, Hertfordshire,
United Kingdom, AL1 3AW
xviii &
Onapp (Topco) II Ltd
82.5%
100%
3MC Middlemarch Business Park, Siskin Drive, Coventry,
United Kingdom, CV3 4FJ
ii &
v
Onapp (Topco) Ltd
82.5%
82.5%
3MC Middlemarch Business Park, Siskin Drive, Coventry,
United Kingdom, CV3 4FJ
xvii &
xviii
Origin (Topco) Ltd
50%
Agricola House, 5 Cowper Road, Gilwilly Industrial Estate, Penrith,
Cumbria, CA11 9BN
ii
Orwell (Basildon) JV Ltd
50%
1st Floor, 73-81 Southwark Bridge Road, London, SE1 0NQ
ii
Orwell (Basildon) Ltd
50%
1st Floor, 73-81 Southwark Bridge Road, London, SE1 0NQ
i
Osprey Aviation Services (UK) Ltd
89.25%
89.25%
Blackwood House, Union Grove Lane, Aberdeen, AB10 6XU
xvii &
xviii &
PACE Group Holding Ltd
97.19%
Building 29 Pensnett Trading Estate, Dandy Bank Road, Kingswinford,
United Kingdom, DY6 7TU
ii &
PAM Healthcare Ltd
99.25%
Holly House, 73-75 Sankey Street, Warrington, WA1 1SL
ii &
Park Bidco Ltd
99%
Rhosili Road, Brackmills Industrial Estate, Northampton, England, NN4 7JE
ii &
Pennine View (Calthwaite) Ltd
25%
5 Cowper Road, Gilwilly Industrial Estate, Penrith, Cumbria, CA11 9BN
i
PFP-Igloo Developments Ltd
100%
305 Gray’s Inn Road, London, United Kingdom, WC1X 8QR
ii
PIHL Equity Administration Ltd
100%
C/O Interpath Limited, 10 Fleet Place, London, EC4M 7RB
iii ‡
PL & HGP Ltd
50%
3rd Floor, Tower House, 10 Southampton Street, London,
United Kingdom, WC2E 7HA
ii
Platform Leeds BTR1 OPCO Ltd
50%
Marble Arch House, 66 Seymour Street, London,
United Kingdom, W1H 5BT
i
Platform Leeds BTR1 PROPCO Ltd
50%
Marble Arch House, 66 Seymour Street, London,
United Kingdom, W1H 5BT
i
Subsidiaries and related undertakings continued
6
326
Lloyds Banking Group plc Annual Report and Accounts 2024
Name of undertaking
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Registered office address
Notes
Platform Leeds Commercial Inn PROPCO Ltd
50%
Marble Arch House, 66 Seymour Street, London,
United Kingdom, W1H 5BT
i
Platform Leeds P1 DEVCO Ltd
50%
Marble Arch House, 66 Seymour Street, London,
United Kingdom, W1H 5BT
i
Platform Leeds P1 JVCO Ltd
50%
Marble Arch House, 66 Seymour Street, London,
United Kingdom, W1H 5BT
ii
Primrose Fields Holding Ltd
50%
22 Chancery Lane, London, England, WC2A 1LS
ii
Project Airscope Bidco Ltd
99.25%
Express Networks 2, 3 George Leigh Street, Manchester,
United Kingdom, M4 5DL
xviii &
Project Bridgerton Bidco Ltd
99.25%
33 Charlotte Street, London, England, W1T 1RR
ii &
Project Bridgetown Ltd
99.25%
Xyz Building, 3 Hardman Boulevard, Spinningfields, Manchester,
United Kingdom, M3 3AQ
ii &
Project Drive Topco Ltd
99.25%
Unit 1, Chalfont House Boundary Way, Hemel Hempstead Industrial
Estate, Hemel Hempstead, Hertfordshire, United Kingdom, HP2 7SJ
xviii &
Project Fusion Bidco Ltd
99.25%
46 – 48 Queen Charlotte Street, Bristol, BS1 4HX
xviii &
Project Galaxy UK Topco Ltd
99.25%
3rd Floor, Q5 Quorum Business Park, Benton Lane, Newcastle Upon Tyne,
United Kingdom, NE12 8BS
ii &
Project Penny Ltd
99.25%
115 Victoria Road, Ferndown, United Kingdom, BH22 9HU
ii &
Project Sketch Ltd
88.3%
11 Vantage Way, Erdington, Birmingham, B24 9GZ
ii &
Project Stratos Topco Ltd
99.25%
Birchin Court, 20 Birchin Lane, London, United Kingdom, EC3V 9DU
xviii &
Project Sutton Bidco Ltd
99.25%
Chawston House, Chawston Lane, Chawston, Bedford, Bedfordshire,
United Kingdom, MK44 3BH
ii &
Project Vale Bidco Ltd
99.25%
Magma House, 16 Davy Court, Castle Mound Way, Rugby, Warwickshire,
United Kingdom, CV23 0UZ
ii &
Project Venus Ltd
99.25%
Lyndean House, 43-46 Queens Road, Brighton, East Sussex, BN1 3XB
ii &
Project Volta Topco Ltd
99.25%
99.25%
Units 1 – 7 Dukeries Court, Medenside, Meden Vale, Mansfield,
Nottinghamshire, United Kingdom, NG20 9QU
xviii
xxxi
Ramco Acquisition Ltd
88.74%
88.74%
0.17%
c/o Alvarez & Marsal Europe Llp, Sutherland House, 149 St Vincent Street,
Glasgow, Scotland, G2 5NW
xii
xvi &
xix Δ
Ramco Pipetech Holdings Ltd
99.35%
Brodies House, 31-33 Union Grove, Aberdeen, Scotland, AB10 6SD
ii &
RDIL 2021 Ltd
99.25%
Old Printers Yard, 156 South Street, Dorking, Surrey,
United Kingdom, RH4 2HF
xviii &
ROK Group (Exeter) Ltd
100%
26a Old Elvet, Durham, DH1 3HN
ii
Rocket Science Holdings Ltd
99.17%
20 St. Andrew Street, London, EC4A 3AG
xviii & ‡
Safari Bidco Ltd
99.25%
Upper Floor, The Granary, Stanley Grange, Ormskirk Road, Knowsley,
Prescot, Merseyside, England, L34 4AT
ii &
Satago Financial Solutions Ltd
24.15%
88 Kingsway, London, England, WC2B 6AA
i
ScarlettAbbott (Topco) Ltd
99.25%
The Old Chapel, 27a Main Street, Fulford, York, North Yorkshire,
United Kingdom, YO10 4PJ
ii &
Scenic Topco Ltd
89.25%
Unit 1B, Pentwyn Business Centre, Wharfedale Road, Cardiff,
Wales, CF23 7HB
ii &
Scotia (Brechin) Ltd
100%
Ca’D’Oro Building, 45 Gordon Street, Glasgow, Scotland, G1 3PE
ii
Scottish Widows Schroder Personal Wealth
(ACD) Ltd
100%
25 Gresham Street, London, EC2V 7HN
i
Scottish Widows Schroder Personal Wealth Ltd 100%
25 Gresham Street, London, EC2V 7HN
i
Scottish Widows Schroder Wealth Holdings Ltd 50.10%
25 Gresham Street, London, EC2V 7HN
ii
Seahawk Bidco Ltd
89.25%
Unit 2, Springfield Court, Summerfield Road, Bolton, United Kingdom,
BL3 2NT
xviii &
Sedex Information Exchange Ltd
99.25%
99.25%
5 Old Bailey, London, England, EC4M 7BA
iii &
xv
Shaken Udder Group Ltd
99.25%
Heathwell Farm, Simpsons Lane, Tiptree, Colchester,
United Kingdom, CO5 0PP
ii &
Snowdon Homes (Melton Mowbray) Ltd
50%
Artemis House, 4a Bramley Road, Mount Farm, Milton Keynes, MK1 1PT
ii
Solais Topco Ltd
99.25%
Solais House, 19 Phoenix Crescent, Strathclyde Business Park, Bellshill,
United Kingdom, ML4 3NJ
ii &
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
327
Lloyds Banking Group plc Annual Report and Accounts 2024
Associated undertakings continued
Name of undertaking
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Registered office address
Notes
SOLO Topco Ltd
99%
Onecom House, 4400 Parkway, Whiteley, Fareham, Hampshire, PO15 7FJ
ii &
Southwark Estates (One) Ltd
100%
Brock House, 19 Langham Street, London, W1W 6BP
ii
SSP Topco Ltd
89.25%
12 Wellington Place, Leeds, LS1 4AP
ii & ‡
Stancliffe Homes (Bentley) Ltd
50%
Office 3, Markham Lane, Markham Vale, Chesterfield, England, S44 5HY
ii
Star Live TopCo Ltd
99.25%
Star Live Milton Road, Thurleigh, Bedford, United Kingdom, MK44 2DF
xviii &
Stratus (Holdings) Ltd
82.5%
82.5%
3MC Middlemarch Business Park, Siskin Drive, Coventry, West Midlands,
England, CV3 4FJ
xvii
xviii &
The EMS Group Ltd
99.25%
The Refinery, South Road, Ellesmere Port, United Kingdom, CH65 4LE
xviii &
The Exceed Partnership LP
n/a
C/O DWF Company Secretarial Services Limited, 1 Scott Place, 2 Hardman
Street, Manchester, United Kingdom, M3 3AA
*
The Woodlands (Carlisle) Ltd
25%
Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith,
Cumbria, CA11 9BN
i
Tolia Bidco Ltd
99.25%
First Floor, 6 Dowgate Hill, London, England, EC4R 2SU
ii &
Topco Coffee Ltd
99.25%
Lodge Farm Barn, Elvetham Park Estate, Hartley Wintney, Hampshire,
United Kingdom, RG27 8AS
xviii &
Torsion Developments Ltd
50%
1280 Century Way Thorpe Park, Leeds, West Yorkshire,
United Kingdom, LS15 8ZB
ii
Two (PBSA) Holding LLP
n/a
22b Court Street, Haddington, EH41 3JA
*
Unihomes Group Ltd
99.25%
Floor 6, 1 New Era Square, Sheffield, England, S2 4RB
ii &
United House Group Holdings Ltd
81.5%
26 Kings Hill Avenue, Kings Hill, West Malling, Kent, ME19 4AE
ii &
Urban Centric (KC) Ltd
50%
35 Southernhay East, Exeter, England, EX1 1NX
i
Urban Centric (Knox Court) Holdings Ltd
100%
35 Southernhay East, Exeter, England, EX1 1NX
ii
Villafont (Herne Bay) Ltd
100%
1 St. Georges Court, Altrincham Business Park, Altrincham,
United Kingdom, WA14 5UA
ii
Wakefield Gardens (Lazonby) Ltd
25%
Agricola House, Cowper Road, Gilwilly Industrial Estate, Penrith,
Cumbria, CA11 9BN
i
Walker Warwick Land Ltd
50%
168 Church Road, Hove, England, BN3 2DL
i
Walker Warwick Ltd
50%
168 Church Road, Hove, England, BN3 2DL
i
Walnut Newco Ltd
99.25%
c/o Roxburgh Milkins Limited, Merchants House North, Wapping Road,
Bristol, United Kingdom, BS1 4RW
ii &
Water Sustainability Ltd
99.25%
Dominican House, St John's Street, Chichester, United Kingdom, PO19 1TU
ii &
Watford Way Developments Ltd
100%
Lynton House, 7-12 Tavistock Square, London, United Kingdom, WC1H 9LT
ii
Watkin Jones (Grove Crescent) Holdings Ltd
100%
3 Llys Y Bont, Parc Menai, Bangor, Wales, LL57 4BN
ii
WCCTV Group Ltd
99.25%
Charles Babbage House, Kingsway Business Park, Rochdale,
United Kingdom, OL16 4NW
ii &
Whiteburn March Street Ltd
50%
1 Jackson's Entry, Edinburgh, Scotland, EH8 8PJ
i
Whiteburn Residential (March Street) Ltd
50%
1 Jackson's Entry, Edinburgh, Scotland, EH8 8PJ
i
Whiteburn Residential Ltd
100%
1 Jackson's Entry, Edinburgh, Scotland, EH8 8PJ
ii
Whiteburn Viewforth Development Ltd
100%
1 Jackson's Entry, Edinburgh, Scotland, EH8 8PJ
ii
Whittington Facilities Ltd
100%
c/o Teneo Financial Advisory Limited, The Colmore Building,
20 Colmore Circus Queensway, Birmingham, B4 6AT
xv Δ
Wind Bidco Ltd
99.25%
Westcott House, Hesslewood Office Park, Ferriby Road, Hessle East,
Yorkshire, HU13 0LH
ii &
ZWPV Ltd
89.25%
Zip World Base Camp, Denbigh Street, Llanrwst, LL26 0LL
ii &
Subsidiaries and related undertakings continued
8
328
Lloyds Banking Group plc Annual Report and Accounts 2024
Collective investment vehicles
The following comprises a list of the Group’s and other external
collective investment vehicles (CIV’s), where the shareholding is
greater than or equal to 20 per cent of the nominal value of any
class of shares, or a book value greater than 20 per cent of the CIV’s
assets.
Name of undertaking
% of fund held by
immediate parent
(or by the Group
where this varies)
Notes
ABRDN OEIC I
1
abrdn European Real Estate Share Fund
41.14%
ABRDN OEIC IV
1
abrdn Global Corporate Bond Tracker
Fund
89.76%
ABRDN OEIC VI
1
abrdn Emerging Markets Equity
Enhanced Index Fund
66.03%
ABSOLUTE INSIGHT FUNDS PLC
2
Insight Broad Opportunities Fund
27.28%
ACS POOLED PROPERTY
3
Scottish Widows Pooled Property ACS
Fund 1
100%
Scottish Widows Pooled Property ACS
Fund 2
100%
BAILLIE GIFFORD INVESTMENT FUNDS
ICVC
4
Baillie Gifford Diversified Growth Fund
26.37%
BLACKROCK AUTHORISED
CONTRACTUAL SCHEME I
5
ACS Climate Transition World Equity
Fund
96.18%
ACS Japan Equity Tracker Fund
81.41%
ACS UK Equity Tracker Fund
64.76%
ACS World Multifactor Equity Tracker
Fund
59.62%
ACS 60:40 Global Equity Tracker Fund
36.05%
ACS 30:70 Global Equity Tracker Fund
22.89%
BlackRock ACS US Equity Tracker Fund
82.53%
BLACKROCK COLLECTIVE INVESTMENT
FUNDS
5
BlackRock Global Corporate ESG Insights
Bond Fund
50.44%
iShares Global Property Securities Equity
Index Fund
36.28%
BLACKROCK FIXED INCOME DUBLIN
FUNDS
5
iShares Emerging Markets Government
Bond Index Fund (IE)
99.51%
iShares Emerging Markets Local
Government Bond Index Fund (IE)
75.41%
BNY MELLON GLOBAL FUNDS
6
BNY Mellon Global Leaders Fund
68.12%
BNY MELLON INVESTMENT FUNDS
7
BNY Mellon Global Absolute Return Fund 73.62%
BNY Mellon Global Dynamic Bond Fund
29.01%
BNY Mellon Global Equity Fund
27.54%
BNY Mellon Global Multi-Strategy Fund
42.97%
Name of undertaking
% of fund held by
immediate parent
(or by the Group
where this varies)
Notes
BNY Mellon Responsible Horizons
Strategic Bond Fund
40.66%
BNY Mellon Sustainable UK
Opportunities Fund
68.9%
BNY Mellon UK Income Fund
21.65%
HBOS INTERNATIONAL INVESTMENT
FUNDS ICVC
8
International Growth Fund
64.62%
HBOS PROPERTY INVESTMENT FUNDS
ICVC
8
UK Property Fund
48.35%
HBOS SPECIALISED INVESTMENT FUNDS
ICVC
8
Cautious Managed Fund
49.17%
HBOS UK INVESTMENT FUNDS ICVC
8
UK Equity Tracker Fund
54.81%
HLE ACTIVE MANAGED PORTFOLIO
AUSGEWOGEN
9
HLE Active Managed Portfolio
Ausgewogen
49.68%
HLE ACTIVE MANAGED PORTFOLIO
DYNAMISCH
9
HLE Active Managed Portfolio
Dynamisch
37.79%
HLE ACTIVE MANAGED PORTFOLIO
KONSERVATIV
9
HLE Active Managed Portfolio
Konservativ
36.71%
INVESCO AMERICAN INVESTMENT SERIES
10
Invesco US Equity Fund
33.21%
INVESCO FUND MANAGERS LIMITED
10
Invesco Global Bond Fund
23.78%
LAZARD INVESTMENT FUNDS
11
Lazard Developing Markets Fund
96.66%
LEGG MASON GLOBAL FUNDS
12
Legg Mason Western Asset Multi-Asset
Credit Fund
38.09%
MGI FUNDS PLC
13
Mercer Diversified Retirement Fund
71.03%
Mercer Multi Asset Defensive Fund
30.22%
Mercer Multi Asset Growth Fund
59.2%
Mercer Multi Asset High Growth Fund
33.27%
Mercer Multi Asset Moderate Growth
Fund
51.23%
Mercer Passive Sustainable Global Equity
Feeder Fund
64.22%
Mercer Long Term Growth Fund
30.17%
MORGAN STANLEY INVESTMENT FUNDS
14
Global Credit Fund
37.94%
NORDEA 1, SICAV
15
Nordea 1 – GBP Diversified Return Fund
29.48%
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
329
Lloyds Banking Group plc Annual Report and Accounts 2024
Collective investment vehicles continued
% of fund held by
immediate parent (or
by the Group where
Name of undertaking
this varies)
Notes
RETAIL AUTHORISED UNIT TRUSTS
5
BlackRock Balanced Growth Portfolio
Fund
39.66%
ROYAL LONDON EQUITY FUNDS ICVC
16
Royal London UK Equity Income Fund
20.42%
SCHRODER FUNDS ICAV
17
Schroder Sterling Liquidity Fund
96.13%
Schroder Sterling Short Duration Bond
Fund
98.29%
SCHRODER INTERNATIONAL SELECTION
FUND
18
Emerging Market Bond
71.06%
Multi Asset Total Return
76.92%
SCOTTISH WIDOWS INCOME AND
GROWTH FUNDS ICVC
3
Balanced Growth Fund
29.4%
Corporate Bond PPF Fund
100%
Corporate Bond 1 Fund
83.12%
ESG Sterling Corporate Bond Tracker
Fund
100%
Global Tactical Asset Allocation 1 Fund
85.11%
Progressive Growth Fund
42.95%
UK Index Linked Gilt Fund
100%
SCOTTISH WIDOWS INVESTMENT
SOLUTIONS FUNDS ICVC
3
Corporate Bond Fund
68.12%
Developed Asia Pacific (ex Japan ex
Korea) Equity Tracker Fund
98.45%
Developed Europe (ex UK) Equity
Tracker Fund
95.04%
Developed World Paris-Aligned Index
Equity Tracker Fund
97.61%
Emerging Markets Paris-Aligned Index
Equity Tracker Fund
95.99%
Fundamental Index Emerging Markets
Equity Fund
90.62%
Fundamental Index Global Equity Fund
93.31%
Global Environmental Solutions Fund
94.59%
Gilt Fund
95.93%
UK Climate Transition Index Equity
Tracker Fund
91.28%
High Income Bond Fund
65.18%
International Bond Fund
76.22%
Japan Equity Fund
93.16%
Managed Growth Fund 3
100%
Managed Growth Fund 5
100%
Strategic Income Fund
66.73%
US Equity Fund
93.27%
SCOTTISH WIDOWS MANAGED
INVESTMENT FUNDS ICVC
3
Balanced Growth Portfolio
25.49%
% of fund held by
immediate parent (or
by the Group where
Name of undertaking
this varies)
Notes
Cash Fund
99.55%
International Equity Tracker Fund
84.07%
Progressive Growth Portfolio 1
44.81%
SCOTTISH WIDOWS OVERSEAS
GROWTH INVESTMENT FUNDS ICVC
3
Global Select Growth Fund
51.84%
SCOTTISH WIDOWS TRACKER AND
SPECIALIST INVESTMENT FUNDS ICVC
3
Emerging Markets Fund
80.35%
UK Equity Tracker Fund
68.98%
UK Fixed Interest Tracker Fund
93.73%
UK Index-Linked Tracker Fund
99.21%
UK Tracker Fund
43.52%
SCOTTISH WIDOWS UK AND INCOME
INVESTMENT FUNDS ICVC
3
Environmental Investor Fund
76.01%
SEI GLOBAL ASSETS FUND PLC
19
The SEI Core Fund
44.15%
The SEI Defensive Fund
26.21%
The SEI Moderate Fund
54.32%
SEI GLOBAL MASTER FUND PLC
19
The SEI Factor Allocation Global Equity
Fund
94.34%
SPW INVESTMENT PORTFOLIO ICVC
20
Schroders Personal Wealth IPS Growth
Portfolio
48.74%
Schroders Personal Wealth IPS Income
Portfolio
54.02%
SSGA
21
State Street AUT Asia Pacific Ex-Japan
Screened Index Equity Fund
97.96%
State Street AUT Emerging Market
Screened Index Equity Fund
100%
State Street AUT Europe ex UK Screened
Index Equity Fund
97.41%
THE SVS LEVITAS FUNDS
22
SVS Levitas A Fund
85.06%
SVS Levitas B Fund
79.59%
UNIVERSE, THE CMI GLOBAL NETWORK
FUND
23
CMIG Access 80%
100%
CMIG Focus Euro Bond
100%
CMIG Access 70% Flexible
100%
CMIG Access 80% Flexible
100%
CMIG Access 90% Flexible
100%
CMI Continental European Equity
97.69%
CMI Pacific Basin Enhanced Equity
79.15%
CMI UK Equity
74.42%
CMI US Enhanced Equity
90.62%
CMI US Equity Index Tracking
44.18%
Subsidiaries and related undertakings continued
330
Lloyds Banking Group plc Annual Report and Accounts 2024
Name of undertaking
% of fund held by
immediate parent (or
WS RUFFER MANAGED FUNDS
24
WS Ruffer Diversified Return Fund
22.38%
by the Group where
this varies)
Notes
Principal place of business for Collective Investment Vehicles
(1)
abrdn Fund Managers Limited, 280 Bishopsgate, London, EC2M 4AG
(2)
Absolute Insight Funds Plc, Riverside Two, Sir John Rogerson's Quay, Dublin 2, D02
KV60, Ireland
(3)
69 Morrison Street, Edinburgh, United Kingdom, EH3 8BW
(4)
Carlton Square, 1 Greenside Row, Edinburgh, EH1 3AN
(5)
BlackRock Fund Managers Limited, 12 Throgmorton Avenue, London, EC2N 2DL
(6)
1 Dockland Central, Guild Street, IFS Dublin 1
(7)
BNY Mellon Investment Funds, BNY Mellon Centre, 160 Queen Victoria Street,
London, EC4V 4LA
(8)
Trinity Road, Halifax, West Yorkshire, HX1 2RG
(9)
Oppenheim Asset Management Services Sàrl. 2, Boulevard Konrad Adenauer, L-1115
Luxembourg
(10)
Invesco Fund Managers Limited, Perpetual Park, Perpetual Park Drive, Henley-on-
Thames, Oxfordshire, RG9 1HH
(11)
50 Stratton Street, London, W1J 8LL
(12)
Riverside Two, Sir John Rogerson’s Quay, Grand Canal Dock, Dublin 2, Ireland
(13)
70 Sir John Rogerson's Quay, Dublin 2, Ireland
(14)
MSIM Fund Management (Ireland) Limited, The Observatory, 7-11 Sir John
Rogerson's Quay, Dublin 2, D02 VC42, Ireland
(15)
Nordea 1, SICAV, 562, Rue de Neudorf, L-2220 Luxembourg
(16)
80 Fenchurch Street, London, EC3M 4BY
(17)
Schroder Investment Management (Ireland) Limited, Georges Court, 54-62
Townsend Street, Dublin 2, D02 R156
(18)
5, Rue Höhenhof, L-1736, Senningerberg, Luxembourg
(19)
SEI Investments Global Limited, Styne House, Upper Hatch Street, Dublin 2, Ireland
(20)
Schroders Personal Wealth (ACD) Limited, Floor 6, 1 London Wall Place, London,
EX2Y 5AU
(21)
20 Churchill Place, Canary Wharf, London E14 5HJ
(22)
St Vincent St Fund Administration, 45 Gresham Street, London, EC2V 7BG
(23)
LEMANIK ASSET MANAGEMENT S.A. 106, route d’Arlon, L-8210 Mamer, Grand
Duchy of Luxembourg
(24)
3rd Floor Central Square, 29 Wellington Street, Leeds, LS1 4DL
Notes
*
The undertaking does not have share capital
+
The undertaking does not have a registered office
#
In relation to Subsidiary Undertakings, an undertaking external to the Group holds
shares
^
Shares held directly by Lloyds Banking Group plc
&
The Group holds voting rights of between 20% and 49.9%
~
The Group holds voting rights of 50%
‡
The undertaking is in Liquidation
∞
The undertaking is in Administrative Receivership
Δ
The undertaking is in Administration
§
The undertaking has applied for Strike Off
(i)
Ordinary Shares
(ii)
A Ordinary Shares
(iii)
B Ordinary Shares
(iv)
Deferred Shares
(v)
Preference Shares
(vi)
Non-Voting Deferred Shares
(vii)
6% Non-Cumulative Redeemable Preference Shares
(viii)
C Ordinary Shares
(ix)
Growth 2 Shares
(x)
L Ordinary Shares
(xi)
Redeemable Preference Shares
(xii)
A4 Ordinary Shares
(xiii)
Ordinary Non-Voting Shares
(xiv)
Common Stock
(xv)
Preferred B Ordinary Shares
(xvi)
A3 Ordinary Shares
(xvii)
A2 Ordinary Shares
(xviii)
A1 Ordinary Shares
(xix)
Z Ordinary Shares
(xx)
Ordinary Limited Voting Shares
(xxi)
LN Deferred Shares
(xxii)
D Ordinary Shares
(xxiii)
E Ordinary Shares
(xxiv)
F Ordinary Shares
(xxv)
G Ordinary Shares
(xxvi)
H Ordinary Shares
(xxvii) I Ordinary Shares
(xxviii) J Ordinary Shares
(xxix)
C1 Ordinary Shares
(xxx)
C2 Ordinary Shares
(xxxi)
A1 Preferred Ordinary Shares
Registered office addresses
(1)
25 Gresham Street, London, EC2V 7HN
(2)
Society Building, 8 All Saints Street, London, England, N1 9RL
(3)
13-18 City Quay, Dublin 2, DO2 ED70
(4)
Trinity Road, Halifax, West Yorkshire, HX1 2RG
(5)
The Mound, Edinburgh, EH1 1YZ
(6)
10th Floor, 5 Churchill Place, London, United Kingdom, E14 5HU
(7)
9 Broad Street, St Helier, Jersey, JE2 3RR
(8)
Minter Ellison, Governor Macquarie Tower, Level 40, 1 Farrer Place, Sydney, NSW
2000, Australia
(9)
1 Brookhill Way, Banbury, Oxon, OX16 3EL
(10)
7th Floor, 21 Lombard Street, London, EC3V 9AH
(11)
The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street,
Wilmington, Delaware 19801, USA
(12)
Barnett Way, Gloucester, GL4 3RL
(13)
1 More London Place, London, SE1 2AF
(14)
Building 4 Hatters Lane, Croxley Green Business Park, Watford, Hertfordshire,
WD18 8YF
(15)
2 North Queen Street, Belfast, Northern Ireland, BT15 1ES
(16)
McStay Luby, Dargan House, 21-23 Fenian Street, Dublin 2, DO2 HC63, Ireland.
(17)
Thurn-Und-Taxis-Platz 6, 60313, Frankfurt am Main, Germany
(18)
Hoogoorddreef, 151101BA, Amsterdam, Netherlands
(19)
Basisweg 10, Amsterdam, 1043AP, Netherlands
(20)
33 Old Broad Street, London, EC2N 1HZ
(21)
234 High Street, Exeter, EX4 3NL
(22)
Citco REIF Services (Luxembourg) S.A., Carré Bonn, 20 Rue de la Poste, L-2346
Luxembourg
(23)
17 Boulevard F.W. Raiffeisen, L-2411 Luxembourg
(24)
Corporation Service Company, 251 Little Falls Drive, Wilmington, DE 19808, USA
(25)
Wilmington Trust SP Services (London) Limited, Third Floor, 1 King’s Arms Yard,
London, EC2R 7AF
(26)
1 Bartholomew Lane, London, EC2N 2AX, United Kingdom
(27)
1, Avenue du Bois, L-1251 Luxembourg
(28)
SAB Formalities, 23 Rue de Roule 75001, Paris, France
(29)
Karl-Liebknecht-STR. 5, D-10178 Berlin, Germany
(30)
20 Rue de la Poste, L-2346 Luxembourg
(31)
Atria One, 144 Morrison Street, Edinburgh, EH3 8EX
(32)
26 New Street, St. Helier, Jersey, JE2 3RA
(33)
3rd Floor, IFC5, Castle Street, St Helier, JE2 3BY, Jersey
(34)
P O Box 186, Royal Chambers, St Julian’s Avenue, St. Peter Port, GY1 4HP, Guernsey
(35)
De Entrée 254, 1101 EE, Amsterdam, Netherlands
(36)
44 Esplanade, St. Helier, Jersey, JE4 9WG
(37)
Fascinatio Boulevard 1302, 2909VA Capelle aan den IJssel, Netherlands
(38)
Avenida Dr. Chucri Zaidan, n° 296, cj 231, Bairro Vila Cordeiro, Cidade de São Paulo,
Estado de São Paulo, Cep 04583-110 Brazil
(39)
2nd Floor, Liberation House, Castle Street, St. Helier, JE1 1EY, Jersey
(40)
One Vine Street, London, W1J 0AH
(41)
50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
(42)
5th Floor, The Exchange, George’s Dock, IFSC, Dublin 1, Ireland
(43)
110 St. Vincent Street, Glasgow, G2 4QR
(44)
8 Avenue Hoche, 75008, Paris, France
(45)
Keens House, Anton Mill Road, Andover, Hampshire, SP10 2NQ
(46)
Glategny Court, Glategny Esplanade, St. Peter Port, GY1 1WR, Guernsey
(47)
Cawley House, Chester Business Park, Chester, CH4 9FB, United Kingdom
(48)
6/12, Primrose Road, Bangalore, 560025, India
(49)
1A Heienhaff, Senningerberg, L-1736 Luxembourg
(50)
28 Esplande, St. Helier, Jersey, JE2 3QA
(51)
43/F, One Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong
(52)
Building 4 Hatters Lane, Croxley Green Business Park, Watford, Hertfordshire,
WS18 8YF
(53)
1st Floor Unit 16, Manor Court Business Park, Scarborough, YO11 3TU
Other information
Risk management
Financial results
Sustainability review
Strategic report
Governance
Financial statements
Lloyds Banking Group plc Annual Report and Accounts 2024
331
This document contains certain forward-looking statements within
the meaning of Section 21E of the US Securities Exchange Act of
1934, as amended, and section 27A of the US Securities Act of 1933,
as amended, with respect to the business, strategy, plans and/or
results of Lloyds Banking Group plc together with its subsidiaries
(the Group) and its current goals and expectations. Statements that
are not historical or current facts, including statements about the
Group’s or its directors’ and/or management’s beliefs and
expectations, are forward-looking statements. Words such as,
without limitation, ‘believes’, ‘achieves’, ‘anticipates’, ‘estimates’,
‘expects’, ‘targets’, ‘should’, ‘intends’, ‘aims’, ‘projects’, ‘plans’,
‘potential’, ‘will’, ‘would’, ‘could’, ‘considered’, ‘likely’, ‘may’, ‘seek’,
‘estimate’, ‘probability’, ‘goal’, ‘objective’, ‘deliver’, ‘endeavour’,
‘prospects’, ‘optimistic’ and similar expressions or variations on
these expressions are intended to identify forward-looking
statements. These statements concern or may affect future
matters, including but not limited to: projections or expectations of
the Group’s future financial position, including profit attributable to
shareholders, provisions, economic profit, dividends, capital
structure, portfolios, net interest margin, capital ratios, liquidity,
risk-weighted assets (RWAs), expenditures or any other financial
items or ratios; litigation, regulatory and governmental
investigations; the Group’s future financial performance; the level
and extent of future impairments and write-downs; the Group’s
ESG targets and/or commitments; statements of plans, objectives
or goals of the Group or its management and other statements that
are not historical fact and statements of assumptions underlying
such statements. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events and
depend upon circumstances that will or may occur in the future.
Factors that could cause actual business, strategy, targets, plans
and/or results (including but not limited to the payment of
dividends) to differ materially from forward-looking statements
include, but are not limited to: general economic and business
conditions in the UK and internationally (including in relation to
tariffs); acts of hostility or terrorism and responses to those acts, or
other such events; geopolitical unpredictability; the war between
Russia and Ukraine; the conflicts in the Middle East; the tensions
between China and Taiwan; political instability including as a result
of any UK general election; market related risks, trends and
developments; changes in client and consumer behaviour and
demand; exposure to counterparty risk; the ability to access
sufficient sources of capital, liquidity and funding when required;
changes to the Group’s credit ratings; fluctuations in interest rates,
inflation, exchange rates, stock markets and currencies; volatility in
credit markets; volatility in the price of the Group’s securities;
natural pandemic and other disasters; risks concerning borrower
and counterparty credit quality; risks affecting insurance business
and defined benefit pension schemes; changes in laws, regulations,
practices and accounting standards or taxation; changes to
regulatory capital or liquidity requirements and similar
contingencies; the policies and actions of governmental or
regulatory authorities or courts together with any resulting impact
on the future structure of the Group; risks associated with the
Group’s compliance with a wide range of laws and regulations;
assessment related to resolution planning requirements; risks
related to regulatory actions which may be taken in the event of a
bank or Group failure; exposure to legal, regulatory or competition
proceedings, investigations or complaints; failure to comply with
anti-money laundering, counter terrorist financing, anti-bribery and
sanctions regulations; failure to prevent or detect any illegal or
improper activities; operational risks including risks as a result of the
failure of third party suppliers; conduct risk; technological changes
and risks to the security of IT and operational infrastructure,
systems, data and information resulting from increased threat of
cyber and other attacks; technological failure; inadequate or failed
internal or external processes or systems; risks relating to ESG
matters, such as climate change (and achieving climate change
ambitions) and decarbonisation, including the Group’s ability along
with the government and other stakeholders to measure, manage
and mitigate the impacts of climate change effectively, and human
rights issues; the impact of competitive conditions; failure to
attract, retain and develop high calibre talent; the ability to achieve
strategic objectives; the ability to derive cost savings and other
benefits including, but without limitation, as a result of any
acquisitions, disposals and other strategic transactions; inability to
capture accurately the expected value from acquisitions;
assumptions and estimates that form the basis of the Group’s
financial statements; and potential changes in dividend policy. A
number of these influences and factors are beyond the Group’s
control. Please refer to the latest Annual Report on Form 20-F filed
by Lloyds Banking Group plc with the US Securities and Exchange
Commission (the SEC), which is available on the SEC’s website at
www.sec.gov, for a discussion of certain factors and risks. Lloyds
Banking Group plc may also make or disclose written and/or oral
forward-looking statements in other written materials and in oral
statements made by the directors, officers or employees of Lloyds
Banking Group plc to third parties, including financial analysts.
Except as required by any applicable law or regulation, the forward-
looking statements contained in this document are made as of
today’s date, and the Group expressly disclaims any obligation or
undertaking to release publicly any updates or revisions to any
forward-looking statements contained in this document whether as
a result of new information, future events or otherwise. The
information, statements and opinions contained in this document
do not constitute a public offer under any applicable law or an offer
to sell any securities or financial instruments or any advice or
recommendation with respect to such securities or financial
instruments.
This report is printed on Amadeus Silk paper and board, Forest Stewardship Council® (FSC®) certified and sourced from well managed
forests and other controlled sources. The paper is Elemental Chlorine Free (ECF). The manufacturing mill holds ISO14001 (EMAS) and
EU Ecolabel certificated for environmental management. The paper is carbon balanced with the World Land Trust, an international
conservation charity, who offset carbon emissions through the preservation of high conservation land. The inks used are vegetable oil based
and 100 per cent of the dry waste created during manufacturing is diverted from landfill.
Printed in the UK by Pureprint Group, CarbonNeutral®, ISO 14001 and FSC® certified.
Forward-looking statements
3
32
3
Lloyds Banking Group plc Annual Report and Accounts 2024
Head office
25 Gresham Street, London EC2V 7HN
+44 (0)20 7626 1500
www.lloydsbankinggroup.com
Registered office
The Mound, Edinburgh EH1 1YZ
Registered in Scotland no. SC095000