Lloyds Banking Group PLC Earnings - Q4 2025 Analysis & Highlights
Lloyds Banking Group PLC's Q4 2025 earnings call highlighted strong financial performance, strategic transformation, and an optimistic outlook for 2026 and beyond, with a focus on increased shareholder distributions and continued growth in key business segments.
Key Financial Results
Statutory profit after tax was £4.8 billion in 2025.
Return on tangible equity was 12.9%, or 14.8% excluding the Q3 Motor provision.
Net income for the full year was £18.3 billion, up 7% versus 2024.
Net interest income (NII) increased by 6% and other operating income (OOI) increased by 9%.
Operating costs for 2025 were £9.76 billion, up 3% year-on-year.
Remediation charge for the full year was £968 million, with £800 million related to the additional Motor Finance charge in Q3.
Impairment charge was £795 million, equating to an asset quality ratio of 17 basis points.
Tangible net asset value per share ended the year at £0.57, up £0.046 in 2025.
Capital generation was 147 basis points, or 178 basis points excluding the Motor provision.
Business Segment Results
Lending balances closed the year at £481 billion, up £22 billion or 5%.
Retail mortgages grew by £2.1 billion in Q4.
Credit cards grew by £0.5 billion with continued market share gains.
European Retail was up £0.5 billion in Q4.
Commercial lending was £0.2 billion higher in Q4.
Total deposits increased by £13.8 billion, or 3% in the year.
Retail deposits were up £5.5 billion, or 2% in the year.
Current account balances grew by £1.5 billion.
Retail savings grew by £4.3 billion, or 2%.
Commercial deposits grew strongly by £8.5 billion, or 5%.
Insurance, Pensions and Investments (IP&I) saw open book net new money flows of £7.9 billion for the year, including £4.2 billion in Q4.
Retail OOI was up 12% with strength in motor leasing, cards, and banking fees.
Commercial OOI was up 1%, with solid growth in markets and transaction banking businesses.
IP&I OOI grew by 11%, driven by strong performance in general insurance and workplace.
Equity investments OOI was up 15%, particularly driven by Lloyds Living more than doubling its OOI.
Capital Allocation
Ordinary dividend increased by 15%.
Share buyback of up to £1.75 billion was announced.
Total capital return of up to £3.9 billion, up 8% on 2024.
Dividends have grown consistently over the strategic plan, with the 2025 dividend up more than 80% versus 2021.
Consecutive buybacks have reduced share count by more than 17%.
The group aims to maintain a 13.2% CET1 ratio.
Excess capital distributions will be reviewed every half year.
Industry Trends and Dynamics
The mortgage market remains competitive, with Q4 completion margins around 70 basis points and a further 1 or 2 basis points of tightening.
The pensions market sees about 2% of workplace pensions switching.
Competitive Landscape
The group is the leading provider across key products in Retail.
The group has achieved market share gains in key focus areas such as personal current accounts.
Credit cards saw continued market share gains.
The group has increased its share of direct mortgages to 26% of the market last year.
The group increased its share of mass affluent mortgages from 9% to over 20%.
The competitive environment is increasing in intensity, with competition from fintech challengers.
The group's competitive position is strengthening due to enhanced capabilities, propositional improvements, and competitive pricing.
Macroeconomic Environment
The outlook for the UK economy is constructive, with resilient but slower growth.
Interest rates are expected to fall gradually in 2026.
The financial position of households and businesses continues to strengthen, with emerging signs of growing capacity to spend and invest.
GDP growth is forecast at around 1.2% in 2026.
Unemployment is forecast to peak at 5.3% in the first half of 2026.
Easing inflation allows for 225 basis point reductions in the bank base rate during 2026, to 3.25%.
House prices are assumed to grow by around 2% in 2026 and 2027.
Growth Opportunities and Strategies
The group is building significant momentum to deliver upgraded 2026 commitments and stronger sustainable returns.
Plans for the next strategic phase will be announced in July.
Strategic delivery is accelerating, aiming to meet or exceed 2026 strategic targeted outcomes.
Additional revenues of £1.4 billion have been generated from strategic initiatives to date, with the 2026 target upgraded to circa £2 billion.
Other income contribution is expected to be circa £0.9 billion, ahead of original 2026 guidance.
Gross cost savings of circa £1.9 billion have been realized since 2021.
The strategy focuses on faster-growing, high-potential sectors such as housing, pensions, investments, and infrastructure.
Mobile app users are up circa 45% since 2021, with in-app AI agents to be rolled out in 2026.
IP&I is deepening relationships as an integrated bancassurance provider and expanding product offerings through partnerships.
The acquisition of Schroders Personal Wealth (to be rebranded as Lloyds Wealth) is a key enabler for a market-leading end-to-end wealth offering.
Commercial Banking is building a digitally led relationship bank and driving revenue diversification.
Lloyds Living has grown to nearly 8,000 homes since launching in 2021.
LDC generated more than £600 million of exit proceeds during the year.
Digital and AI initiatives contribute around 70% of the upgraded strategic initiatives revenue target and over 60% of total gross cost savings since 2021.
50 Gen AI use cases were scaled into full production in 2025, generating £50 million of in-year P&L benefit.
The group intends to increase the number of Gen AI use cases in 2026, focusing on high-value Agentic opportunities, to deliver more than £100 million of P&L benefit.
Financial Guidance and Outlook
Return on tangible equity target upgraded to greater than 16% for 2026.
Net interest income (NII) is guided to be around £14.9 billion for 2026.
Margin expansion and continued healthy balance sheet growth are expected in 2026.
Hedge income uplift of circa £1.5 billion is incorporated into 2026 guidance, reaching around £7 billion.
Hedge income is expected to reach around £8 billion in 2027 and continue growing to the end of the decade.
Cost income ratio is expected to be below 50% in 2026.
Operating expenses are expected to be less than £9.9 billion in 2026.
Asset quality ratio is expected to be circa 25 basis points for 2026.
Capital generation is expected to be more than 200 basis points in 2026.
Basel 3.1 implementation is scheduled for January 1, 2027, expected to result in an RWA reduction of around £6 billion to £8 billion.
The group is committed to continuing income growth, improving operating leverage, and stronger sustainable returns beyond 2026.
