Lloyds Banking Group plc (LSE:LLOY) reported a robust set of unaudited results for 2025, reflecting continued progress through the second phase of its five-year strategic plan and prompting higher shareholder distributions alongside upgraded guidance.
Statutory profit before tax increased to £6.7bn from £6.0bn, supported by a 7% rise in net income to £18.3bn. Growth was driven by higher net interest income and other income streams, as well as disciplined cost management, although this was partly offset by higher operating expenses, increased impairments and remediation charges, including an £800m provision related to motor finance commission issues. Lending expanded by 5% to £481.1bn, while deposits grew 3% to £496.5bn, with credit quality remaining resilient and the asset quality ratio at 17 basis points.
Capital generation remained strong during the year. On a pro forma basis, the CET1 ratio stood at 13.2% after accounting for a higher ordinary dividend and a planned £1.75bn share buyback, taking total capital returns for 2025 to around £3.9bn. Tangible net asset value per share increased to 57.0p, underlining balance sheet strength. Management also highlighted £1.4bn of annualised additional revenue delivered from strategic initiatives in 2025 and raised its target to around £2bn by the end of 2026. Since 2021, the group has achieved £1.9bn of cost savings through transformation programmes and scale benefits.
Looking ahead, Lloyds upgraded its 2026 guidance, now expecting underlying net interest income of around £14.9bn, a cost-to-income ratio below 50%, a return on tangible equity above 16% and capital generation in excess of 200 basis points. Management said these targets reflect confidence in the delivery of its current strategy and reinforce Lloyds’ position as a well-capitalised UK banking leader with the capacity to sustain attractive shareholder returns.
Overall, the outlook is supported by strong trading momentum, positive management commentary and favourable technical indicators. These strengths are partially offset by ongoing considerations around cash flow dynamics and leverage, while valuation appears fair, with a reasonable earnings multiple and an attractive dividend yield.
More about Lloyds Banking Group
Lloyds Banking Group is one of the UK’s largest financial services providers, with leading positions in retail and commercial banking as well as insurance, pensions and investment products. The group is focused on serving UK households and businesses, with a strategy centred on deepening customer relationships, growing higher-value activities and using digital and AI capabilities to improve efficiency and competitiveness.
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