Company: LLOBF
Filing Date: 2025-10-23
Form Type: 6-K
Source: 0001654954-25-012079
Chunk: 6

Company: Lloyds Banking Group plc
Filing Date: 2025-10-23
Form: 6-K
Chunk 6
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 car prices. Compared to the second quarter of 2025, operating lease depreciation is 3% higher, in line with the continued growth in fleet size. The Group continues to mitigate used car price movements through a number of market and customer initiatives to improve performance and reduce volatility, including extended used car leasing, remarketing agreements and residual value insurance.

Operating costs of £7,176 million were up 3% reflecting inflationary pressures, strategic investment including planned higher severance front-loaded into the first quarter of 2025 and business growth costs. Excluding increased severance in 2025, operating costs were up 2% year-on-year. This was partially offset by cost savings and continued cost discipline. For 2025, operating costs are expected to be c.£9.7 billion, excluding the acquisition of Schroders Personal Wealth in the fourth quarter of 2025.

A remediation charge of £912 million was recognised by the Group in the first nine months of 2025 (nine months to 30 September 2024: £124 million), with £875 million in the third quarter, including £800 million in relation to the potential impact of motor finance commission arrangements, bringing the total provision for motor finance to £1.95 billion. The FCA published a consultation on an industry wide motor finance redress scheme on 7 October 2025. This provides further detail on its proposed redress approach following the Supreme Court judgment handed down on 1 August 2025, in particular the products in scope, situations where it considers inadequate disclosure would give rise to an unfair relationship, proposed redress methodology, engagement approach and time bar. Based on the FCA proposals in their current form, the potential impact is at the adverse end of the Group’s range of expected outcomes.

As previously stated, in establishing the Group’s previous provision of £1.15 billion, the Group created a range of scenarios to address uncertainties on a number of key inputs. The FCA proposals are subject to consultation and there remain a number of uncertainties. Accordingly, the Group’s approach continues to consider a probability weighted outcome considering a range of scenarios representing sensitivities to the FCA’s current proposals, together resulting in the additional charge of £800 million. This reflects the increased likelihood of a higher number of historical cases, particularly DCA, being eligible for redress, including those dating back to 2007 and also the likelihood of a higher level of redress than previously anticipated, reflecting the FCA’s proposed redress calculation approach, which