Company: LLOBF
Filing Date: 2025-07-24
Form Type: 6-K
Source: 0001160106-25-000034
Chunk: 54

Company: Lloyds Banking Group plc
Filing Date: 2025-07-24
Form: 6-K
Chunk 54
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LOYDS BANKING GROUP PLC | 2025HALF-YEAR RESULTS |

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued) Note 12: Allowance for expected credit losses (continued) Adjustments to loss rates: Credit cards: £ ( 45) million (31 December 2024: £ ( 57) million) and Other Retail: £ 53 million (31 December 2024: £ 47 million) A number of adjustments are 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 captures the latest outlook on used car prices. Commercial Banking: £ ( 51) million (31 December 2024: £ ( 259) million) These adjustments principally comprise: Corporate insolvency rates: £ ( 153) million (31 December 2024: £ ( 253) 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 robust with low defaults, a negative adjustment is applied by reverting judgementally to the long-term average of the insolvency rate. The scale of the negative adjustment reduced in the period reflecting both the reduction in observed actual UK corporate insolvencies rates, narrowing the gap of the misalignment, as well from a one-off change due to the interaction with the implementation of loss rate model enhancements in the period. Adjustments for loss given defaults (LGDs): £ 40 million (31 December 2024: £ ( 80) million) In preceding years, adjustments have been required to mitigate limitations identified in the modelling approach which were causing loss given defaults to be inflated. These included the lack of benefit from amortisation of exposures relative to collateral values at default, and the need to reflect an exposure-weighted calculation. These two adjustments have been released following respective enhancements to models.