Lloyds Banking Group reported a robust 2025 performance with a 12% rise in statutory profit before tax and upgraded its 2026 guidance, underpinned by strong loan growth and digital innovation. The Group also announced significant shareholder returns totalling £3.9 billion, including dividends and a share buyback programme.
- Statutory profit before tax up 12% to £6.7 billion in 2025
- Underlying profit increased 7% to £6.8 billion
- Loans and advances grew 5% to £481.1 billion
- Customer deposits rose 3% to £496.5 billion
- £3.9 billion total shareholder distributions including £1.75 billion share buyback
Strong Financial Performance in 2025
Lloyds Banking Group delivered a solid set of results for the full year 2025, with statutory profit before tax rising 12% to £6.7 billion and underlying profit increasing 7% to £6.8 billion. The Group’s net interest income grew 6% to £13.6 billion, supported by a higher banking net interest margin of 3.06% and increased average interest-earning assets of £462.9 billion. Other income also strengthened by 9%, driven by higher customer activity and strategic initiatives.
Operating costs rose modestly by 3% to £9.8 billion, reflecting strategic investments, inflationary pressures, and business growth, partially offset by cost savings. The impairment charge increased to £795 million but remained low relative to the size of the loan book, reflecting strong credit quality and stable asset performance.
Growth Across Core Franchises and Digital Innovation
The Group’s customer lending expanded by £22 billion (5%) to £481.1 billion, with notable growth in UK mortgages, retail unsecured loans, credit cards, and the European retail business. Customer deposits increased by £13.8 billion (3%) to £496.5 billion, supported by strength in retail savings and commercial banking sectors.
Lloyds continued to advance its digital capabilities, maintaining its position as the UK’s largest digital bank with approximately 21.5 million active mobile app users. The planned acquisition of Curve, a digital wallet provider, aims to enhance the Group’s digital wallet and payment offerings. The Group also highlighted progress in emerging technologies such as Generative AI, targeting over £100 million incremental profit benefit from AI initiatives in 2026.
Capital Strength and Shareholder Returns
Capital generation remained robust, with a pro forma Common Equity Tier 1 (CET1) ratio of 13.2% after accounting for dividends and share buybacks. The Board recommended a final dividend of 2.43 pence per share, bringing the total ordinary dividend for 2025 to 3.65 pence per share, a 15% increase year-on-year. Additionally, the Group announced an ordinary share buyback programme of up to £1.75 billion, expected to complete by the end of 2026, reflecting confidence in ongoing capital generation.
Navigating Regulatory and Legal Challenges
The Group recognised a £1.95 billion provision related to motor finance commission redress following the Financial Conduct Authority’s (FCA) consultation on a redress scheme. While the final financial impact remains uncertain pending FCA’s final rules, Lloyds has made representations to the regulator and continues to monitor developments closely.
Other ongoing legal and regulatory matters include interchange fee litigation involving Visa and Mastercard, tax appeals, and legacy fraud claims. The Group maintains prudent provisions and continues to engage with regulators and courts as appropriate.
Upgraded 2026 Guidance and Strategic Outlook
Building on its strong 2025 momentum, Lloyds upgraded its 2026 guidance, targeting underlying net interest income of approximately £14.9 billion, a cost – income ratio below 50%, an asset quality ratio around 25 basis points, and a return on tangible equity exceeding 16%. Capital generation is expected to exceed 200 basis points, with the CET1 ratio targeted to reduce to around 13.0% by year-end 2026.
Chief Executive Charlie Nunn emphasised the Group’s purpose of Helping Britain Prosper and highlighted the acceleration of strategic transformation, including sustainable financing exceeding £21 billion in 2025 and enhanced wealth management capabilities following the full acquisition of Schroders Personal Wealth.
Bottom Line?
Lloyds Banking Group’s upgraded guidance and shareholder returns signal confidence, but regulatory provisions and economic uncertainties warrant close watch.
Questions in the middle?
- How will the final FCA motor finance redress scheme impact Lloyds’ financials beyond current provisions?
- What strategic initiatives will Lloyds unveil in July to sustain growth beyond the current five-year plan?
- How might evolving macroeconomic conditions affect Lloyds’ credit quality and impairment outlook in 2026?