Lloyds Banking Group plc

Good morning everyone and thank you for joining our 2025 full year results presentation. It's great that the move to prelims has allowed us to update you earlier than prior years. This means our organisation can make a fast start and increase our focus on the year ahead as we enter the final stage of the strategy that we laid out in early 2022. I'm very pleased with our ongoing strategic transformation and 2025 was another strong year for the group. we're building significant momentum that sets us up well to deliver upgraded 2026 commitments and stronger sustainable returns for the period. I'm very excited about the plans we're developing for our next strategic phase, and you'll hear more about this in July alongside our half-year results. As usual, following my opening remarks, I'll hand over to William who'll run through the financials in detail. We'll then have plenty of time to take questions. Let me begin on slide three. I'd like to start by highlighting the following key messages. Firstly, our strategic delivery is accelerating and building momentum across the business. We're on track to meet or exceed our 2026 strategic targeted outcomes, delivering clear benefits for all stakeholders. Secondly, our continued strategic execution underpins sustained strength in financial performance and growth in shareholder distributions. we've announced a 15% increase in the ordinary dividend alongside a share back of up to 1.75 billion pounds. And finally, we're confident in our outlook. We are upgrading our guidance for 2026 and are committed to further improvements in financial performance beyond this. Turning now to a performance overview on slide four. We delivered strong outcomes for all stakeholders in 2025. Our clear purpose of helping Britain prosper continues to drive attractive growth opportunities. This includes supporting our customers during a record ISA season and funding the growth ambitions of businesses that create opportunities across the UK. These actions drive healthy franchise momentum, delivering growth across both sides of the balance sheet and market share gains in key focus areas such as personal current accounts. Taken together, the group is delivering sustained strength in financial performance. We returned to top-line revenue growth during 2025 with increases in both NII and OOI, the latter up 9%. This supports a return on tangible equity of 14.8% and 178 basis points of capital generation, excluding the motor finance provision taken earlier in the year. On slide 5, I'll provide a brief update on our outlook for the UK economy. As you've heard from me previously, we're constructive on our outlook for the UK. We continue to forecast a resilient but slower growth economy, with interest rates falling gradually in 2026. In addition, the financial position of both households and businesses continues to strengthen, with emerging signs of growing capacity to spend and invest. Combined with the government's focus on regulatory reform and driving growth in key sectors, we believe the economy has the potential to move to a higher medium-term growth trajectory than is forecast today. We are well positioned against this backdrop, with our strategy focused on faster-growing, high-potential sectors such as housing, pensions, investments and infrastructure. We are already driving growth in these areas, leveraging our competitive advantages as the UK's only integrated financial services provider. As a result, we expect the group to continue to grow faster than the wider economy over the coming years. I'll now turn to highlight our strategic progress, starting on slide six. We continue to successfully deliver a significant transformation Over the last four years, we have meaningfully grown the balance sheet, driven diversified revenue growth, improved our cost and capital efficiency while significantly de-risking the business, and established a digital and AI leadership position. These actions have both enhanced the franchise and delivered attractive returns to our shareholders, including total capital distributions of around £15 billion. We're now entering the final phase of our five-year strategic plan, with delivery accelerating and momentum growing. This is translating into significant financial benefits. We've generated £1.4 billion of additional revenues from strategic initiatives to date, and are today upgrading our 2026 target to circa £2 billion. As part of this, we expect the other income contribution to be circa £0.9 billion, ahead of our original 2026 guidance. At the same time, we've now realised circa £1.9 billion of gross cost savings, having met our upgraded 2024 target of £1.2 billion last year. As you'd expect, we remain committed to driving further improvements in operating leverage. To bring this to life, I'll now spend a few minutes discussing our progress in more detail. Let me begin with our growth areas, starting with retail and IP&I on slide 7. In retail, we are the leading provider across key products in our own and third-party channels. We further strengthened our position through growth in high value areas and continue to develop our product range and capabilities to meet more customer needs. Mobile app users are now up circa 45% since 2021. In 26, we'll roll out in-app AI agents for these customers with these currently in colleague beta testing. In IP&I, we're deepening relationships as an integrated bank assurance provider, expanding our product offering through exciting partnerships. We're also transforming engagement through our Scottish Widows app, with further growth expected in 2026, as we launch to the open market. Complementing our strategic delivery, we announced the acquisition of Schroders Personal Wealth in the second half of last year. It's early days, but we're really pleased with our progress, and we'll rebrand the business to Lloyds Wealth in the coming months. The acquisition is an important enabler to delivering our ambition for a market-leading end-to-end wealth offering, providing us with an opportunity to deepen relationships with our mass affluent customers and workplace clients. Let me continue on slide eight. Our commercial banking division captures both BCB and CIB businesses. In BCB, we're building the best digitally-led relationship bank, building upon our strong deposit franchise and rolling out new mobile-first journeys to support growth in targeted sectors. Our BCB gross net lending increased by 15% in 2025, and we're committed to further growth this year. And in CIB, we're driving revenue diversification through growth opportunities aligned to our simple cash, debt and risk management model. For example, FX volumes increased by over 20% in the year, supported by the launch of a market-leading algorithmic trading solution. We were also awarded a landmark UK government banking services contract, testament to the investment we've made in our award-winning cash management and payments platform. Finally, Equity Investments is a growing contributor to the group, now representing nearly 10% of Group OOI. Lloyd's Living has now grown to nearly 8,000 homes since launching in 2021, whilst LDC generated more than 600 million pounds of exit proceeds during the year. On slide nine, I'll now talk about the ongoing drivers of OOI more broadly. Since 2021, we've delivered strong OOI growth across each of our business units, reflecting a resilient and diversified portfolio. For example, our retail business has benefited from growth in our motor franchise, whilst commercial banking has been supported by renewed focus in our markets business. We've also realised the benefits from improved cross-group collaboration, such as increasing protection take-up rates across mortgage journeys and leveraging the full breadth of the group to meet the ancillary needs of commercial clients. We delivered 9% growth in 2025, consistent with prior years, and are confident in our outlook. Going forward, other income will also benefit from the full impact of the Lloyds wealth acquisition, and we expect to unlock more value from this business over time. Turning now to cost and capital efficiency on slide 10. We remain focused on delivering an organisation that drives continued improvements in cost efficiency and capital intensity. As I mentioned earlier, we've now delivered circa £1.9 billion of gross cost savings since 2021. This has been supported by the ongoing shift to mobile first and consequent refinement of our physical footprint, as well as actions to take in to reduce both the size and complexity of our legacy technology estate. These savings reinforce our confidence in delivering a cost income ratio of below 50% in 2026. On capital efficiency, we've now delivered £24 billion of gross RWA optimisation since 2021. we continue to target more than 200 basis points of capital generation in 2026 and will now consider excess capital distributions every half year reflective of our increasing confidence i'll now move to slide 11 and focus on our enablers of people technology and data as you heard in our digital and ai seminar in november we're making strong progress against our clear strategic priorities We've significantly enhanced our infrastructure, actively managing our legacy estate and increasingly building on modern technology. The ongoing investment in our people is critical to our success with circa 9,000 technology and data hires since 2021. These actions have created the platform for increased innovation. Digital first propositions such as your credit score are driving clear benefits for both customers and the group. Our strong execution to this point means we're well positioned to take advantage of future opportunities. We're innovating and leading across new and emerging technologies, launching industry-first use cases at scale in the UK. These areas will be critical to driving further enhancements to operating leverage in the future. I was incredibly proud to see that our efforts were recognised across the industry during the year. But importantly, we're not done. I see further significant potential in the coming years. Now turning to slide 12, where I'll provide more detail on how we're thinking about AI specifically. In 2025, we scaled 50 GenAI use cases into full production, demonstrating significant potential and generating 50 million pounds of in-year P&L benefit. It should be stressed that this is based on a narrow definition of the latest technology with the full spectrum of digital and AI initiatives contributing around 70% of our upgraded strategic initiatives revenue target and over 60% of the total gross cost savings realized since 2021. This represents a strong foundation for us to accelerate our progress in 26 where we intend to increase the number of use cases with a particular focus on high value agentic opportunities. This will deliver more than £100 million of P&L benefit in 2026, capturing both revenues and costs, with significant upside beyond this as use cases are scaled and mature. This is just the start of the journey, and we will of course talk more about our plans in this space as part of our strategic update in July. I'll now turn to slide 13 and bring this together with a view on how we're building operating leverage in 2026. We've increased our net income by £3 billion over the last four years. During this period, we have mitigated several headwinds, including those from the mortgage book and deposit churn, with these partially offset by the structural hedge earnings growth of more than £3 billion. As a result, the majority of this growth has been linked to management of the BAU business and the £1.4 billion of strategic initiatives revenue, including a significant OOI contribution. We expect to deliver continued improvements in net income in 2026. Whilst headwinds will persist, these will be more than offset by an additional £1.5 billion of structural hedge earnings and continued growth within the core franchise. This accelerating income growth, combined with flattening costs, will further improve operating leverage and underpin the delivery of a cost-income ratio below 50% in 2026. Let me now close on slide 14. So, as you've heard, we are successfully executing our strategy. This is reinforcing our competitive advantages and underpinning the delivery of strong, shelter outcomes. Indeed, reflective of our momentum, we are today upgrading our return on tangible equity target to be greater than 16% for 2026. Our confidence extends beyond this, and we're excited about sharing our updated strategic plan with you in July. We'll provide more details on the actions we'll be taking to further strengthen and grow the core franchise, address new diversified growth opportunities, and deliver continued improvements in productivity enabled by our leadership position across new and emerging technologies. We will, of course, share more detail on our medium-term financials at that stage too. Beyond 2026, we are committed to continuing income growth, improving operating leverage, and stronger sustainable returns. Thanks for listening. I'll now return briefly at the end, but for now I'll hand over to William to cover the financials.

Thank you, Charlie. Good morning, everybody, and thank you again for joining. As usual, I'll provide an overview of the group's financial performance, starting on slide 16. Lloyds Bank Group delivered sustained strength in its financial performance in 2025, in line with guidance. Statutory profit after tax was £4.8 billion, equating to a return on tangible equity of 12.9% or 14.8%, excluding the Q3 motor provision. Within this, we delivered a robust net income for the full year of £18.3 billion, up 7% versus 2024. This was driven by sustained growth across NII and other income, up 6% and 9% respectively. In the fourth quarter, net income was 2% higher versus Q3. This was driven by a four basis point increase in the net interest margin, continued balance sheet growth and further momentum in other income. Operating costs for 2025 were 9.76 billion, up 3% year on year. as continued investment, business growth and inflationary pressures were partly mitigated by further efficiency savings. The remediation charge for the full year was £968 million. £800 million of this relates to the additional motor finance charge in Q3. Credit performance, meanwhile, remained strong, with an impairment charge of £795 million for the full year, equating to an asset quality ratio of 17 basis points. Tangible net asset value per share ended the year at 57 pence, up 4.6 pence in 2025. Our performance for the year included capital generation of 147 basis points, or 178 basis points, excluding the motor provision. This enabled a 15% increase in the ordinary dividend and a 1.75 billion buyback, while maintaining a 13.2% CET1 ratio. Let me now turn to slide 17 to look at Q4 growth in lending and deposits. We saw healthy balance sheet momentum in 2025. Lending balances closed the year at £481bn, up £22bn, or 5%. In Q4, lending balances grew by £4bn. Within this, retail saw growth across all of our business lines, Mortgages were up 2.1 billion, strong but slightly slower than Q3, given higher maturities. Highlights elsewhere in retail include credit cards, which grew 0.5 billion with continued market share gains, and European retail also up 0.5 billion in the fourth quarter. Commercial lending was 0.2 billion higher. This represents further growth in targeted areas within CIB, and business-as-usual performance within BCB, partly offset by continued government-backed lending repayments. Turning to the liability franchise, total deposits increased by 13.8 billion, or 3% in the year. Q4 was down slightly by 0.2 billion. The fourth quarter saw growth in retail deposits across both savings and notably PCAs, with deposit churn continuing to ease as we had expected. Commercial deposits, meanwhile, were down 1.5 billion in Q4, driven by actions on low-margin funding, as well as by seasonal outflows in BCB. And alongside these developments, insurance, pensions and investments saw open-book net new money flows of 7.9 billion for the year, including 4.2 billion in Q4. This, of course, now includes inflows from Lloyds Wealth. Let me turn to net interest income on slide 18. Net interest income for the year was $13.6 billion, in line with our guidance. This represents an increase of 6% year-on-year, with Q4 up 2% versus the prior quarter. Across both the year and Q4, strong hedge income and business volume growth were partly offset by mortgage repricing and deposit churn headwinds. Average interest-earning assets of £463 billion for the full year were up 3% compared to 2024. Q4 AIEAs were just over £470 billion, up £4.8 billion. Our net interest margin increased 11 basis points to 306%. This included a Q4 margin of 310% of four basis points on Q3, driven by a significant pickup in hedge income, again, as we had expected. The non-banking NII charge in 2025 was $515 million, up 46 million, or 10% year-on-year, supporting growth in OI. For 2026, we are guiding to NII of around $14.9 billion. Within this, we expect margin expansion alongside continued healthy balance sheet growth across both retail and commercial sectors. Our guidance incorporates further hedge income uplift of circa 1.5 billion, partly offset by mortgage refinancing and easing deposit churn. Alongside, we also expect some growth in non-banking NII charge consistent with associated business growth in OI. Let me turn to mortgages on slide 19. Mortgages grew by 10.8 billion or 3% in 2025 to 323 billion, supported by a growing market and a flow share of around 19%. We've continued to benefit from our strategic investment in the homes ecosystem, enabling us to build customer relationships, including in higher value direct lending and to retain more balances. It remains a competitive market. Q4 completion margins were again around 70 basis points. with a further one or two basis points of tightening during the quarter. We continue to enhance the customer journey by integrating protection and home insurance. In 2025, we saw protection take-up rates in mortgages increase by five percentage points to 20%. There is further to go. I'll now turn to slide 20 to look at developments in consumer and commercial lending. We saw a strong performance across our consumer portfolios in 2025 and a strengthening performance in commercial. Combined, cards, loans and motor grew 4.1 billion or 10% year on year. We are taking market share in all three segments driven by leveraging better data to add personalisation and by launching innovative new products such as Lloyds Ultra within credit cards. Turning to commercial banking, lending was up 2.7 billion in the year, or 4.1 billion, excluding government-backed lending repayments. We saw encouraging progress in CIB, particularly in strategic areas such as infrastructure and project finance. This was partially offset by BCB lending, which held steady when excluding government-backed lending repayments, or down 1.4 billion if they are included. Let me turn to developments in the deposit franchise on slide 21. Our deposit franchise continues to perform well. Total deposits ended the year at 496.5 billion, up 13.8 billion, or 3%. Retail deposits were up 5.5 billion, or 2% in the year. Within this, current account balances grew by 1.5 billion, representing growth in our market share of balances during the period. Retail savings, meanwhile, grew by 4.3 billion, or 2%. This was driven by targeted participation throughout the year, with a strong ISA season in the first half, followed by slower growth in H2 as we managed our portfolios. In commercial, deposits grew strongly by 8.5 billion, or 5%, on the back of growth in our targeted sectors. Notably, non-interest-bearing deposits stabilised and indeed grew a little in the second half. The performance and stability of our deposits are what underpin the structural hedge, which I will now talk to on slide 22. The structural hedge is a strengthening tailwind to NII. The hedge notional stood at £244 billion at the year end, up £2 billion over the year, supported by our high-quality deposit franchise. Hedge income in 2025 was around £5.5 billion, a material step up from last year and a little above our guidance. During Q4, the weighted average life increased to about 3.75 years, built off continued strength in our deposit balance system. And as previously guided, we expect a roughly 1.5 billion step up in hedge income to circa 7 billion in 2026. We then expect hedge income to reach around 8 billion in 2027 and to continue growing to the end of the decade as yields converge with market rates and as the notional slowly builds. Let's now turn to other income on slide 23. Other operating income performance in 2025 was once again strong. OI was 6.1 billion in the year, up 9% versus 2024, and up 2% in Q4 versus Q3. The latter was supported, of course, by the full acquisition of Lloyds Wealth. Growth over 2025 has been broad-based. Retail is up 12%, with strength in motor leasing, as well as growth in cards and banking fees. Commercial was up 1%, with solid growth in our markets and transaction banking businesses, offset by lower loan markets activity. Insurance, pensions and investments, meanwhile, grew by 11%, driven by strong performance in general insurance and workplace, as we continue to focus on our strategic choices in this area. And our equity investments business was up 15%. This was particularly driven by Lloyds Living, more than doubling its OOI during the year. Operating lease depreciation was 1.45 billion in the year, up 10% versus 2024. This was driven by fleet growth, higher value vehicles, and to an extent, electric vehicle price movements, all together essentially in line with the OOI growth generated by the vehicle leasing business. Moving to costs on site 24. Cost discipline remains critical to the group. Operating costs were £9.76 billion in 2025, in line with guidance excluding the impact of the Lloyds wealth acquisition in Q4. Year-on-year cost growth of 3% is on the back of continued strategic investment, volume growth and inflationary pressures, partly offset by further efficiencies. As Charlie highlighted earlier, since 2021, we have now delivered cumulative growth cost savings of circa £1.9 billion, thereby creating capacity for strategic investment across the business. The 2025 cost-income ratio was 58.6%, or 53.3%, excluding remediation. And looking ahead, as you know, we remain committed to delivering a 2026 cost-income ratio of less than 50%. Based on our current plan, that implies operating expenses of less than £9.9 billion, This is in line with the flattening cost trajectory that we have previously indicated, as our investment in this strategic cycle culminates. On top of that, inflation moderates and cost benefits are fully realised. Remediation for 2025 was £968 million, including the £800 million motor provision taken in Q3. There is no update on motor in Q4. We wait to see the detail of the FCA's final proposals post their consultation in the next couple of months. Let me turn to credit performance on slide 25. Credit performance remains strong, reflecting our prime customer base, prudent approach to risk, and healthy customer behaviours. Across retail, neutral arrears remain low and stable. Early warning indicators, likewise, are also benign. In commercial, after some idiosyncratic cases in H1, the H2 picture has been very constructive. The 2025 impairment charge was 795 million, equating to an asset quality ratio of 17 basis points. This incorporates a small MES charge, but also benefits from model calibrations and refinements. Indeed, we consider the underlying charge to be just below 25 basis points. The Q4 impairment charge is £177 million, or 14 basis points, including a £47 million MES charge to reflect a slightly higher unemployment peak. Our stock of ECLs on the balance sheet now stands at £3.4 billion. That's around £0.4 billion in excess of our base case, and leaving us well covered. Looking forward, we expect the asset quality ratio to be circa 25 basis points for 2026, similar to the underlying run rate that we've seen during 2025. I'll now turn briefly to our macroeconomic outlook on slide 26. The macroeconomic outlook remains resilient. In the fourth quarter, we've made only minor changes to our base case versus Q3. We now forecast GDP growth of around 1.2% in 2026. Against this backdrop, our unemployment forecast increases marginally, now peaking at 5.3% in the first half of the year. Easing inflation, meanwhile, allows for two 25 basis point reductions in the bank base rate during the year to 3.25%. This reflects a slightly lower rate than we previously expected, albeit we still expect a modest pickup later on in the forecast period. And in housing, we assume growth in house prices of around 2% in 2026 and 2027. That is supported by the slightly lower interest rate environment. Let me now turn to our returns and TNAV on slide 27. In 2025, our return on tangible equity was 12.9%, or a robust 14.8%, excluding the motor provisions. Within this, restructuring costs were low at £46 million, including £30 million in Q4, with integration costs relating to Lloyd's wealth and to Curve. The volatility in other items charged was £70 million. This includes an £87 million benefit in the final three months, incorporating a fair value uplift from the Lloyd's wealth acquisition. Tangible net asset value per share, meanwhile, increased to 57 pence, up 4.6 pence, or 9% in 2025. The increase was driven by profits, cash flow hedge reserve unwind, and the reduced share count from our buyback programmes, offset by shareholder distributions. And looking forward, we continue to expect TNO per share to grow materially, driven by these same factors. Given the momentum across the business, as Charlie said, we are upgrading our expectation for 2026 return on tangible equity to greater than 16%. Turning now to capital generation on slide 28. The group remains highly capital generative and will become more so. In 2025, we generated capital of 147 basis points, or 178 basis points, excluding the motor provision, in line with our guidance. Within this, risk-weighted assets closed the year at $235.5 billion, up $10.9 billion. This was driven by strong lending growth, as well as $2 billion related to the implementation of CRD4 taken in Q4. This reflects our model outcomes, which are subject to PRA approval, and therefore, of course, risk of modification. As planned, we paid down to a CET1 ratio of 13.2% at the end of 2025. Looking forward, we continue to expect 2026 capital generation to be more than 200 basis points. Beyond that, as you know, Valsory 0.1 implementation is now scheduled for the 1st of January 2027. We expect this to result in a day one RWA reduction of around 6 to 8 billion on implementation. Our strong capital generation supports healthy and indeed growing shareholder distributions. So let me talk to that on slide 29. We continue to grow our shareholder distributions at an attractive pace. 2025, the Board intends to recommend a final ordinary dividend of 2.43 pence per share, taking the total dividend to 3.65 pence, up approximately 15% year-on-year. In addition, we've announced a share buyback of up to 1.75 billion, and together this represents a total capital return of up to 3.9 billion, up 8% on 2024, and equivalent to around 6% of our current market capitalisations. Dividends have grown consistently over our strategic plan, with the 2025 dividend now up more than 80% versus 2021. They remain at a payout ratio that allows for continued strong growth. Over the same period, our consecutive buybacks have also reduced share count by more than 17%. We remain committed to paying down to our target CET1 ratio of around 13% by the end of 2026. In addition, given our confidence in growing capital generation, we will now review excess capital distributions in addition to ordinary dividends every half year going forward. Let me wrap up on slide 30. To summarise, in 2025, the group's financial performance showed sustained strength. Strategic execution and business momentum delivered continued balance sheet and income growth alongside cost discipline and asset quality, allowing for growth in shareholder distributions. As we look ahead to 2026 and the culmination of our current strategic plan, we are confident in delivering on the financial guidance you can see set out in this slide. Beyond 2026, we are committed to continuing income growth, improving operating leverage, and stronger, sustainable returns. That concludes my comments for this morning. Thank you for listening. I'll now hand back to Charlie for closing remarks.

Thank you, William. So, as you can see, our strategic delivery is accelerating and we're building significant momentum. We're creating a stronger, more diversified, more efficient and more capital generative group. This in turn supports increasing shareholder distributions. We have today upgraded our return on tangible equity guidance for 2026 to be greater than 16% and are confident in the outlook beyond this. I look forward to providing much more detail on the next stage of our strategy and the associated medium-term financial plan in July. Thank you for listening this morning. We're now very happy to take your questions and I'll hand over to Douglas who will manage the Q&A. Douglas.