Company: LLOBF
Filing Date: 2025-10-23
Form Type: 6-K
Source: 0001654954-25-012079
Chunk: 7

Company: Lloyds Banking Group plc
Filing Date: 2025-10-23
Form: 6-K
Chunk 7
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 is less closely linked to actual customer loss than anticipated.

The Group remains committed to ensuring customers receive appropriate redress where they suffered loss. The current FCA proposals remain a consultation. Given that the Group has concerns, including relating to the approach to unfairness and proposed redress methodology, representations will be made to the FCA. The ultimate outcome of the motor finance commission issue for the Group may evolve as a result of representations made by various parties as well as further legal proceedings. However, the total £1.95 billion provision, including both redress and operational costs, represents the Group’s best estimate of the potential impact of the motor finance issue.

Total costs, including remediation, of £8,088 million were 14% higher than the prior year and the cost:income ratio was 59.7% (nine months to 30 September 2024: 55.9%), with net income up 6%. The cost:income ratio excluding remediation for the first nine months of the year was 52.9%, and for the third quarter was 49.6%.

REVIEW OF PERFORMANCE (continued)

Income statement A (continued)

Asset quality has remained strong in the first nine months of 2025. The underlying impairment charge was £618 million (nine months to 30 September 2024: £273 million), resulting in an asset quality ratio of 18 basis points. The higher charge includes a £27 million net charge from updated multiple economic scenarios (MES), compared to a credit of £324 million in the prior year. The pre-updated MES charge of £591 million for the first nine months of 2025 is equivalent to an asset quality ratio of 17 basis points, broadly unchanged from the prior year. In Commercial Banking, higher charges in the first half of the year driven by a small number of individual cases were offset by lower expected losses recognised given observed resilient performance and improved expectations for accounts in recoveries. Retail portfolios continued to perform strongly, contributing to a stable year-on-year charge for the Group.

The impairment charge in the third quarter of £176 million (or 15 basis points) includes an updated MES charge of £36 million reflecting lower house price growth forecasts over the near term. This was alongside a pre-updated MES charge of £140 million, which included some one-off benefits primarily from model calibrations. The Group now expects the asset quality ratio to be c.20 basis points in 2025, below the original guidance of c.25 basis points.

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