Company: LLOBF
Filing Date: 2025-05-01
Form Type: 6-K
Source: 0001654954-25-004952
Chunk: 6

Company: Lloyds Banking Group plc
Filing Date: 2025-05-01
Form: 6-K
Chunk 6
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 2025, including the impact of increased severance and changes to National Insurance contributions (c.£0.1 billion).

No net remediation charge was recognised by the Group in the first three months of 2025 (three months to 31 March 2024: £25 million). There have been no further charges relating to motor finance commission arrangements. The Supreme Court heard the appeal of the Wrench, Johnson and Hopcraft decision in early April and has stated that it is likely to produce its judgment in July. The FCA has indicated that the decision will inform its next steps in the discretionary commission arrangements (DCA) review and that it will confirm within six weeks of the decision if it is proposing a redress scheme and if so, how it will take that forward. The FCA has also noted that its next steps on non-DCA complaints will be informed by the decision.

The Group’s cost:income ratio including remediation for the first quarter was 58.1%, impacted by the Bank of England supervisory charge and higher severance costs. This compares to 57.2% in the first three months of 2024 and 73.7% in the fourth quarter of 2024, which was impacted by the provision charge for the potential impacts of motor finance commission arrangements and the Bank Levy.

Asset quality remained resilient in the quarter. The underlying impairment charge was £309 million (three months to 31 March 2024: £57 million), resulting in an asset quality ratio of 27 basis points. Within this, updated multiple economic scenarios (MES) resulted in a £35 million net charge (three months to 31 March 2024: £192 million credit). This included a £100 million central adjustment to address downside risks to the base case related to the potential impact from US tariff policies announced at the start of April. These were becoming apparent around the balance sheet date and were determined to not be fully captured within the modelled divisional ECL allowances. This is partially offset by benefits to the MES from small increases to house price and wage growth expectations.

The pre-updated MES charge of £274 million is equivalent to an asset quality ratio of 24 basis points. The higher pre-updated MES charge compared to prior year is driven by the non-recurrence of a one-off release from loss rates used in the model in Commercial Banking in the first quarter of 2024. Excluding this one-off impact, the pre-updated MES charge is favourable to the prior year with strong portfolio