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Member of Lloyds Banking Group
Lloyds Bank plc
Annual Report and Accounts 2024
Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England No. 2065
Contents
1
Lloyds Bank plc Annual Report and Accounts 2024
Strategic report
Principal activities
Lloyds Bank plc (the Bank) and its subsidiary undertakings (the Group) provide a wide range of banking and financial services through branches
and offices in the UK and in certain locations overseas.
The Group’s revenue is earned through interest and fees on a broad range of financial services products including current accounts, savings,
mortgages, credit cards, motor finance and unsecured loans to personal and business banking customers; and lending, transactional banking,
working capital management, risk management and debt capital markets services to commercial customers.
Business review
Income statement
The Group’s profit before tax for 2024 was £4,688 million (2023: £7,056 million). This was driven by lower total income, higher operating
expenses and a higher impairment charge. Profit after tax was £3,486 million (2023: £5,207 million).
Total income for 2024 was £17,071 million, a decrease of 7 per cent (2023: £18,367 million). Within this, net interest income of £12,592 million
was down 8 per cent on the prior year, driven by a lower margin. The margin performance over the year reflected anticipated headwinds due to
deposit churn and asset margin compression, particularly in the mortgage book as it refinances in a lower margin environment. These factors
were partially offset by benefits from higher structural hedge earnings as balances are reinvested in the higher rate environment.
Other income of £4,479 million was 4 per cent lower (2023: £4,658 million). Within this, net fee and commission income decreased by 31 per
cent to £938 million (2023: £1,352 million) due to a write off in 2024 relating to changes in commission arrangements with Scottish Widows,
partially offset by improved performance in UK Motor Finance, with growth following the acquisition of Tusker in 2023 and higher average
vehicle rental values.
Operating expenses of £11,927 million were 9 per cent higher (2023: £10,968 million). This reflects higher operating lease depreciation, as a
result of fleet growth, the depreciation of higher value vehicles and declines in used electric car prices, primarily in the
first half, alongside inflationary pressures, business growth costs and ongoing strategic investments including severance. It also includes c.
£100 million relating to the sector-wide change in the charging approach for the Bank of England Levy taken in the first quarter, largely offset
across the year in net interest income. The Group has maintained its cost discipline with cost efficiencies partly offsetting these items.
In 2024, the Group recognised remediation costs of £880 million (2023: £661 million), including a £700 million provision in relation to the
potential impact of motor finance commission arrangements, alongside £180 million of charges in relation to pre-existing programmes.
The impairment charge was £456 million compared to a £343 million charge in 2023 (which benefitted from a significant write-back following
the full repayment of debt from a single name client). The charge in 2024 includes a credit from an improved economic outlook, notably house
price growth and changes in the first half of the year to the severe downside scenario methodology. The charge also benefitted from strong
portfolio performance and the release of judgemental adjustments for inflation and interest rate risks in 2024, as well as a release in
Commercial Banking from loss rates used in the model in the first half of the year and a debt sale write back in Retail in the third quarter. Asset
quality remains strong with improved credit performance in the year.
The Lloyds Bank Group’s post-tax return on average total assets decreased to 0.57 per cent compared to 0.85 per cent in the year ended
31 December 2023.
Balance sheet
Total assets were £5,808 million higher at £611,213 million at 31 December 2024 (31 December 2023: £605,405 million). Financial assets at
amortised cost were £16,826 million higher at £504,897 million with increases in reverse repurchase agreements of £11,392 million and loans
and advances to customers of £8,783 million, partly offset by a reduction in loans and advances to banks of £2,377 million. The increase in
reverse repurchase agreements and the decrease in cash and balances at central banks by £15,513 million to £42,396 million reflected a change
in the mix of liquidity holdings. The increase in loans and advances to customers included growth in UK mortgages, UK Retail unsecured loans,
credit cards and the European retail business, partly offset by government-backed lending repayments in Commercial Banking. Financial assets
at fair value through other comprehensive income were £3,007 million higher reflecting a further adjustment in the mix of liquidity holdings.
Other assets increased by £1,127 million to £13,065 million, with higher settlement balances and higher operating lease assets, reflecting
continued motor finance growth.
Total liabilities were £6,492 million higher at £571,466 million (31 December 2023: £564,974 million). Customer deposits increased by £9,841
million to £451,794 million, driven by inflows to limited withdrawal and fixed term deposits, partly offset by a reduction in current account
balances and an expected outflow in Commercial Banking. Debt securities in issue at amortised cost decreased by £7,168 million to £45,281
million. Amounts due to fellow Lloyds Banking Group undertakings increased by £1,117 million to £4,049 million. Other liabilities increased by
£951 million to £7,211 million, due to higher settlement balances and a continuing involvement liability following the partial derecognition of a
component of the Group's finance lease book via a securitisation in the third quarter of 2024.
Total equity was £39,747 million at 31 December 2024, marginally lower compared to £40,431 million at 31 December 2023, with the profit for
the year and issuance of other equity instruments offset by dividends paid of £4.0 billion and redemptions of other equity instruments.
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Lloyds Bank plc Annual Report and Accounts 2024
Strategic report continued
Capital
The Group’s common equity tier 1 (CET1) capital ratio decreased to 13.7 per cent at 31 December 2024 compared to 14.4 per cent at
31 December 2023. Profit for the year, including the provision charge for motor finance commission arrangements, was more than offset by the
ordinary dividends paid during the year, distributions on other equity instruments and an increase in risk-weighted assets.
Risk-weighted assets increased by £4,436 million, or 2 per cent, from £182,560 million at 31 December 2023 to £186,996 million at 31 December
2024. This includes the impact of lending growth, Retail secured CRD IV increases and other movements, partly offset by optimisation
including capital efficient, net present value positive securitisation activity.
The Group’s total capital ratio reduced to 19.9 per cent at 31 December 2024 compared to 20.5 per cent at 31 December 2023. The issuance of
AT1 and Tier 2 capital instruments was more than offset by the increase in risk-weighted assets, the reduction in CET1 capital, the redemption
of an AT1 capital instrument and the impact of interest rate movements, regulatory amortisation and a reduction in eligible provisions on Tier 2
capital.
The UK leverage ratio reduced to 5.4 per cent at 31 December 2024 compared to 5.6 per cent at 31 December 2023, reflecting the increase in
the leverage exposure measure following lending growth and increases across securities financing transactions and other assets (excluding
central bank claims).
Future developments
Information about future developments is provided within the Principal risks and uncertainties section below.
Section 172(1) Statement
This section (pages 2 to 4) is our Section 172(1) statement for the purposes of the Companies Act 2006 (the Act), describing how the directors
have had regard to the matters set out in section 172(1) (a) to (f) of the Act when performing their duty to promote the success of the Bank
under section 172. Further detail on key stakeholder interaction is also contained within the directors’ report on pages 10 to 14.
The directors remain mindful in all their deliberations of the long-term consequences of their decisions, as well as the importance of the Bank
maintaining a reputation for high standards of business conduct and the Board engaging with, and taking account of the views of, key
stakeholders.
Stakeholder Engagement
The Board recognises the vital importance of engaging with all its stakeholders. The Closer to Customers, Clients and Colleagues Programme is
a key method by which non-executive directors hear directly from key stakeholders.
The programme was designed to help the directors better understand the important issues for our customers, clients and colleagues, the role
the Bank plays in supporting them and how the Bank is performing in this respect, helping to inform the directors’ decision making.
A number of activities took place under the programme, which included meetings with customers and clients and conversations with
colleagues. The non-executive directors continue to find these sessions beneficial, providing valuable insight which helps in their consideration
of the proposals reviewed by the Board during the year.
Below is a description of how the Board engages with all its stakeholders and examples of decision making by the Board which had particular
stakeholder relevance can be found on pages 3 to 4.
Our Stakeholders
Customers and clients
The Bank’s customer-centric approach means the Board has an ongoing commitment to understanding and addressing customer and client
needs, which remains central to achieving the Bank’s strategic ambitions.
Relevant engagement included:
Non-executive directors attended events to provide deeper insight into the issues which customers and clients have faced during the year.
In 2024, Board members actively participated in customer sessions to gain a deeper understanding of the daily challenges the Bank’s
customers encounter. These sessions covered a wide range of topics, including the financial resilience of customers, family finances, the
challenges of starting out in life, managing home finances, planning for later life and the challenges of running a small business in the current
climate
The Board took the opportunity to meet with clients when visiting sites in Leeds and Birmingham
Dedicated updates to the Board from across the organisation, which identified areas of customer and client concern and covered a range of
internal and external performance measures; in addition, concerns relevant to customers and clients were identified for consideration in
wider proposals put to the Board
Regular updates to the Board giving insight into the Bank’s performance in delivering on its customer and client-related objectives and
commitments, which assisted in determining where further action was required to meet these objectives.
The Chair and the Group Chief Executive attended customer and client engagement events across various regions of the UK, providing an
important opportunity for customers and clients to raise their concerns directly with these Board members
Shareholders
The Bank is a wholly owned subsidiary within the Lloyds Banking Group group of companies. The directors ensure that the strategy, priorities,
processes and practices of the Bank are fully aligned where required to those of Lloyds Banking Group, ensuring that the interests of Lloyds
Banking Group plc as the Bank’s sole shareholder are duly acknowledged. Further information in respect of the relationship of Lloyds Banking
Group plc with its shareholders is included within the Lloyds Banking Group plc Annual Report and Accounts for 2024, available on the Lloyds
Banking Group website.
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Lloyds Bank plc Annual Report and Accounts 2024
Strategic report continued
Colleagues
Colleagues remain central to the delivery of the Bank’s strategic ambitions and the Board continues to recognise this in its engagement activity.
Engagement this year included a variety of sessions across the Bank to discuss topical issues relating to challenges both at and outside of work.
As in 2023, the Board’s Responsible Business Committee has been the designated body for workforce engagement, providing focus, but with
the Board retaining a commitment for individual Board members to engage with colleagues directly throughout the year. The Responsible
Business Committee reports regularly to the Board on all of its activities, including on its colleague engagement agenda. The Board considers
these arrangements to be effective as they enable a broader range of colleague engagement activities, as described in this section. In
continuing to consider its arrangements for engaging with the Bank’s workforce, the Board approved in 2024 a new approach to colleague
engagement, to be implemented during 2025. This new approach builds on existing colleague listening activity and will introduce three forums
to better represent colleagues particularly at grades where trade union membership is low. The forums will include the People Forum, the
People Consultation Forum, and the Management Advisory Forum.
Relevant engagement included:
Review by the Responsible Business Committee of the findings of surveys of colleague sentiment, including annual and ad hoc surveys.
Regular review by the Responsible Business Committee of other workforce engagement reports, covering key issues raised, trends on people
matters and updates on colleague sentiment
Reports summarising colleague engagement activity, including key themes and issues which colleagues have raised during the year
Non-executive directors attended a number of colleague focus groups, allowing colleagues to share their perspective on matters on the
Board’s agenda and discuss the Bank’s progress against its strategic objectives
Members of the Board visited a number of the Bank’s sites, including Leeds and Birmingham, where they met with colleagues, and visited a
number of branches
Sessions were hosted by both the Chair and the Group Chief Executive, complemented by engagement sessions led by other senior leaders
with feedback shared with the wider Board
Board members attended a range of other events held for the Bank’s senior leaders and other colleague network events
During the year Lloyds Banking Group communicated directly with colleagues detailing Bank performance, changes in the economic and
financial environment and updates on key strategic initiatives. Meetings were held throughout the year with our recognised unions.
For 2024, the Remuneration Committee approved Group Performance Share awards for colleagues, and colleagues are eligible to participate in
HMRC approved share plans which promote share ownership by giving employees an opportunity to invest in Lloyds Banking Group plc shares.
The vast majority of colleagues hold shares in Lloyds Banking Group plc.
Communities and environment
The Board places great importance on engagement and action to help the communities in which the Bank operates prosper, while helping to
build a more sustainable and inclusive future.
Relevant engagement included:
Updates on climate, environmental and social matters, covering aspects of the Bank’s business, where the Board reviewed progress made
against its stated ambitions in these areas and agreed any further action it considered was required
The Board continues to be supported in environmental matters by its Responsible Business Committee. The Committee considers
stakeholder views on all matters relating to the Bank’s ambition to be a trusted, sustainable, inclusive and responsible business
Regulators and government
The Board continues to maintain strong and open relationships with the Bank’s regulators and with government authorities, including key
stakeholders such as the Financial Conduct Authority (FCA), the Prudential Regulation Authority (PRA), HM Treasury and HMRC.
Relevant engagement included:
The Chair and individual directors, including Chairs of the Board’s Committees, held continuing discussions with the FCA and PRA on a
number of aspects relevant to the regulatory agenda
The Board reviewed updates on wider Bank regulatory interaction, providing a view of key areas of focus and also progress made in
addressing key regulatory priorities
At a meeting of the July Board, the outcomes and progress of action relevant to the PRA’s Periodic Summary Meeting letter and the FCA’s
Firm Evaluation Letter were discussed with the PRA and the FCA respectively
The Chair and individual directors had a number of meetings with the regulators to discuss the Board’s oversight of the Bank, key risks and
strategic priorities
Suppliers
The Bank has a number of partners it relies on for important aspects of our operations and customer service provision and the Board recognises
the importance of these supplier relationships in achieving the Bank’s wider ambitions.
Relevant engagement included:
The Board’s Audit Committee considered reports from Sourcing and Finance teams on the efficiency of supplier payment practices,
including those relating to the Bank’s key suppliers, ensuring our approach continued to meet wider industry standards
The Board continued to oversee resilience in the supply chain, ensuring our most important supplier relationships were not impacted by
potential material events
Key Decisions
Stakeholder engagement takes place at all levels within the Bank and is an important part of how we are delivering on our purpose of Helping
Britain Prosper. Read more about the engagement of Board members with stakeholders on pages 2 and 3.
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Lloyds Bank plc Annual Report and Accounts 2024
Strategic report continued
The Board recognises that engaging with its stakeholders is key to achieving the strategy and long-term objectives of the Bank. Managing and
understanding their interests forms a key part of the Board’s ongoing activities and training and the Board delegates day-to-day engagement
with stakeholders to senior management as part of running the business. 
The Board considers its stakeholders when making decisions. To gain an understanding of their perspectives, the Board receives feedback from
stakeholders through engagement both inside and outside of the board room. Senior management supports Board decision making by
addressing stakeholder implications in proposals submitted to the Board and routinely provides the Board with details of stakeholder
interactions.
The three key Board decisions outlined below (Customer-focused Strategy, Consumer Duty and Operational Resilience) illustrate how the
Board is engaged in key decisions.
Customer-focused Strategy
Customers & Clients, Communities & Environment, Shareholders, Suppliers, Colleagues
The Board has an ongoing commitment to understanding and addressing customer needs which is central to achieving the Bank’s strategic
ambitions.
In February, the Board approved targets for an enhanced Group Customer Dashboard (GCD) which reflects the Bank’s strategy, consists of a
set of measures to evaluate and monitor customer experience, and includes increasing focus on the customer view of the Bank, customer
experience and customer insights. The Board supported steps taken by the executive to simplify customer journeys including in connection
with its digital transformation. In May, the Board considered the Bank’s focus to deepen customer relationships.
The Board will continue to put the customer at the heart of its decision-making and remain focused on how the Bank can best support its
customers and enhance the customer experience.
Consumer Duty
Customers & Clients, Shareholder, Regulators & Government
In 2024 the Board and its Responsible Business Committee considered the Bank’s progressive approach to implementation of the FCA’s
Consumer Duty (the Duty) requirements to deliver good outcomes for customers in line with the Bank’s customer-centric strategy.
The Board and its Responsible Business Committee received updates during 2024 regarding the Bank’s approach to the second implementation
period regarding closed products and services and on the transition to embedding the Duty further into the Bank’s culture. In June the Board
approved an assessment that the Bank is delivering good outcomes for its customers consistent with the Duty as well as a tripartite approach
to oversight of the Duty as between the Board, its Board Risk Committee and its Responsible Business Committee.
The Board is aware that the Bank’s approach to Consumer Duty compliance will evolve over time and the Board will continue to be updated on
progress in 2025. Regular engagement with customers will continue to be a priority for the Board.
Operational Resilience
Customers & Clients, Communities & Environment, Shareholders, Suppliers, Colleagues, Regulators & Government
The Board considers operational resilience and sound risk management to be fundamental to the strength of the Bank and to its long-term
success. In 2024 the Board approved significant investment in the Bank’s operational resilience including new investment relating to people,
processes, data and technology.
In March deep dives on operational resilience were undertaken by the Information Technology and Cyber Advisory Forum, the Board Risk
Committee and the Board approved the Ring-Fenced Bank Operational Resilience Self-Assessment. In September the Board considered a
review of the Board Risk Appetite Metrics (BRAMs) relating to operational resilience and approved the inclusion of ten operational resilience
BRAMs in the Q1 2025 BRAMs refresh.
The Board will continue to monitor operational resilience capabilities in 2025 and will maintain focus on response, recovery and remediation
plans until 2027.
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Lloyds Bank plc Annual Report and Accounts 2024
Strategic report continued
Risk overview
Lloyds Bank Group’s approach to risk
Risk management is integral to our business model and strategy,
taking advantage of appropriate opportunities and ensuring
sustainable growth for the Group. A strong risk management culture is
crucial to keep the Group, our colleagues and our customers safe and
secure from existing and emerging risks.
Lloyds Banking Group’s enterprise risk management framework
(ERMF) is the foundation for the delivery of effective and consistent
risk control across the whole Group, and is regularly updated to
ensure it remains in line with regulatory expectations, corporate
governance and industry good practice. The ERMF enables proactive
identification, active management and monitoring of the Group’s
risks, and enables a consistent approach.
Enhancements to the ERMF have been introduced during 2024 to
further define the Group’s proportionate and materiality-based
approach to risk management.
During 2024, the Group reviewed its three lines of defence model to
provide greater clarity to roles and responsibilities and further
strengthen the Group’s risk management capabilities.
Activity to deliver further improvements to the ERMF and its
supporting risk management methodologies will continue into 2025.
Further information on the changes can be found on page 15.
Enterprise risk management framework
Role of the Board and senior management
The Board and senior management are responsible for the
approval of the ERMF, together with Group-wide principles and
policies
The Board delegates executive authorities to ensure there is
effective oversight of risk management
Risk culture and the customer
Lloyds Banking Group’s Code of Ethics and Responsibility helps
foster the appropriate culture, which ensures performance, risk
and reward are aligned and good customer outcomes are
consistently delivered
Risk appetite
Risk appetite is approved by the Board annually and is defined as
the type and aggregate level of risk that the Group is willing to
take or accept in pursuit of its strategic aims and business plans
Board-level risk appetite metrics are augmented further by lower-
level measures to facilitate the management of Board risk appetite
Risk and control self-assessment
The Group adopts a continuous risk management approach from
identifying the risks through risk and control self-assessment, and
managing the risks through to producing appropriate, accurate and
focused risk reporting
Further details regarding the Group’s risk and control cycle can be
found on page 18, with a summary of the changes to principal risk
categories on page 15
Risk governance
The governance framework supports a consistent approach to
enterprise-wide behaviour and decision making
Senior executives are supported by a committee-based structure,
which is designed to ensure open challenge and enable effective
Board engagement and decision making
Three lines of defence
The three lines of defence model defines the responsibilities and
accountabilities for risk management, with effective independent
oversight and assurance
Enhancements have been made to the model during 2024. The
Risk management section on page 16 provides further information
Risk profile and performance in 2024
The Group is committed to maintaining support for its customers
during continued economic uncertainties in both global and domestic
markets.
The Group’s credit performance improved in the year. The Group’s
loan portfolio continues to be well positioned and is closely
monitored to identify signs of stress.
Potential impacts to customers, shareholders and the Group’s risk and
control profile following the Court of Appeal decision on motor
finance commissions continue to be closely monitored and assessed.
As part of the Group’s strategy, there will be continued investment in
technology and infrastructure. The Group’s operational risks continue
to be a key area of focus, particularly relating to information, cyber
and physical security risk and supply chain management.
The management of financial crime risks and consumer fraud remains
a key priority for the Group. The economic crime prevention strategy
has been reviewed, with funding allocated to deliver improved
systems and controls.
Model risk and the use of artificial intelligence are also areas of
significant internal and external focus.
The Risk overview provides a summary of the Group’s principal risk
performance and current emerging and topical risks.
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Lloyds Bank plc Annual Report and Accounts 2024
Strategic report continued
Principal risks
The principal risks outlined in this section are used to monitor and
report the risk exposures posing the greatest potential impact to the
Group. 
All principal risks are Board-approved enterprise-wide risk categories
which are reported to the Board Risk Committee and the Board
regularly.
The Group has undertaken a detailed review of its risk categories
during 2024 and implemented an events-based risk management
framework. This has resulted in a reclassification and reduction in the
number of principal risk types, and the simplification of level two risk
categories. Further information on these changes can be found on
page 15.
The risk management section on pages 21 to 62 provides a detailed
review of these risks, including definitions and how they are
identified, managed, mitigated and monitored.
Risk trends: 4  Stable risk  5  Elevated risk  6  Improving risk
Capital risk 4: Unchanged risk
Link to strategy: Focus
Risk performance and key developments in 2024:
The Group continued to maintain its strong capital position in 2024
with a CET1 capital ratio of 13.7 (2023: 14.4 per cent). This remains
ahead of minimum capital requirements. Profit for the year, partially
offset by risk-weighted asset (RWA) increases, has enabled capacity
for the payment of dividends during the year.
Downside risks arising from economic and regulatory challenges,
including in relation to Retail secured CRD IV RWA increases, along
with the potential impact of the Court of Appeal decision on motor
finance commission arrangements are being closely monitored.
Key mitigating actions:
Capital management framework is in place, which includes the
setting of capital risk appetite, capital planning and stress testing
activities
Regular refresh and monitoring of a suite of early warning
indicators and maintenance of a Capital Contingency Framework,
designed to identify and act on emerging capital concerns at an
early stage
Derisking the business through prudent underwriting standards
and continual portfolio management, and enhancing capital
efficiency through optimisation initiatives including net present
value positive securitisation activity
Climate risk 4: Unchanged risk
Link to strategy: Grow, Focus, Change
Risk performance and key developments in 2024:
The Group is continuing to develop and embed its capabilities for
measuring and managing key climate risks within its risk management
approach, including cross-cutting impacts on other principal risks.
The Group has monitored its progress against net zero ambitions,
however the external landscape presents increasing challenges, both
in relation to the policy changes required to support the transition to
net zero, as well as increasing regulatory expectations.
Key mitigating actions:
Progress against our net zero ambitions and targets monitored
through the Group Net Zero Committee
Enhanced transition risk assessments across commercial lending,
expanding into key net zero sectors, such as commercial and
residential real estate and agriculture
Incorporating quantification of climate impact into the calculation
of expected credit losses
Horizon scanning and tracking regulatory compliance requirements
Compliance risk 4: Reclassified risk
Link to strategy: Focus
Risk performance and key developments in 2024:
The compliance risk profile has remained stable in 2024, however it
continues to be closely monitored given the pace of regulatory and
legislative change and an increasing volume of regulatory data
requests.
In 2024, the Group dedicated investment to enhance coverage of our
regulatory and legal obligations to ensure risk owners obtain prompt
access to skilled compliance risk specialists.
This risk was previously named regulatory and legal risk.
Key mitigating actions:
Policies and procedures setting out clear requirements and key
controls that apply across the business, which are aligned to the
Group’s risk appetite
The identification, assessment and implementation of regulatory
and legal requirements by risk specialists, with the involvement of
legal colleagues as required
The establishment of local controls, processes, procedures and
resources to ensure appropriate governance and compliance by
business units
Conduct risk 5: Reclassified risk
Link to strategy: Grow, Focus
Risk performance and key developments in 2024:
Conduct risk has been elevated in 2024, with several areas of ongoing
focus driven by legal decisions, regulatory changes and geopolitical
influences.
The Group continues to monitor impacts to customers and its risk and
control profile, liaising closely with regulatory bodies regarding the
review into motor finance commission arrangements.
The Group continues to enhance its control environment, with
mitigating actions and controls in place to deliver good outcomes for
customers, protect market integrity, prevent colleague misconduct
and ensure effective management of concerns raised through
whistleblowing.
Key mitigating actions:
Robust policies in place to support good customer outcomes, with
ongoing focus on utilising root cause insights, to support the
management and mitigation of complaint volumes
Active engagement with regulatory bodies and key stakeholders to
ensure that the Group’s strategic conduct focus continues to meet
evolving stakeholder expectations
Continued focus on strengthening policies, controls and reporting
capabilities to demonstrate good customer outcomes
Credit risk 6: Unchanged risk
Link to strategy: Grow, Focus
Risk performance and key developments in 2024:
Asset quality remains strong with improved credit performance in the
year. In UK mortgages and unsecured portfolios, reductions in new to
arrears and flows to default have been observed in 2024.
Securitisations in primarily legacy Retail mortgages during 2024 will
help mitigate credit risks. The Group’s commercial portfolio remains
broadly stable and resilient. Impairment charge of £456 million,
increasing from a charge of £343 million in 2023, which benefitted
from a significant write-back following the full repayment of debt
from a single name client. The Group's expected credit loss
allowances have decreased in the year to £3,453 million (2023:
£4,021 million).
Key mitigating actions:
Extensive and thorough credit processes, strategies and controls to
ensure effective risk identification, management and oversight
Significant monitoring in place, including early warning indicators
Selective credit tightening reflective of forecast changes in the
macroeconomic environment, including updates to affordability
lending controls for forward-looking costs
7
Lloyds Bank plc Annual Report and Accounts 2024
Strategic report continued
Economic crime risk 4: New principal risk
Link to strategy: Focus
Risk performance and key developments in 2024:
Economic crime has been promoted to a principal risk during 2024.
This is a result of increased inherent risks seen across the industry, to
which the Group is also exposed, driven by the continued geopolitical
instability and ever-evolving economic crime threat landscape.
An effective framework is in place to manage risks associated to
bribery and corruption, fraud, money laundering and sanctions, with
business units continuing to deliver action plans to strengthen the
control environment, lower residual risk and respond to changes in
regulatory expectations.
Key mitigating actions:
Robust economic crime policy, standard and framework
Implementation of the new Group-wide economic crime
prevention strategy
Continued enhancements of our industry-leading fraud detection
capabilities to respond to evolving threats
Liquidity risk 4: Reclassified risk
Link to strategy: Focus
Risk performance and key developments in 2024:
The Group maintained its strong liquidity and funding position with a
loan to deposit ratio of 98 per cent (2023: 98 per cent). The Group’s
liquid assets continue to exceed the regulatory minimum and internal
risk appetite, with a monthly simple average over the previous 12-
months’ liquidity coverage ratio (LCR) of 137 per cent (2023: 133 per
cent). The Group maintains access to diverse sources and tenors of
funding.
This risk was previously named liquidity and funding risk.
Key mitigating actions:
Management and monitoring of liquidity risks and ensuring that
management systems and arrangements are adequate with regard
to the internal risk appetite, Group strategy and regulatory
requirements
Significant customer deposit base, driven by inflows to trusted
brands
Participation in term issuance programmes
Market risk 4: Unchanged risk
Link to strategy: Focus
Risk performance and key developments in 2024:
Market conditions in 2024 have stabilised. The Group remains well
hedged, ensuring near-term interest rate exposure is appropriately
managed. The Group's structural hedge has reduced to £237 billion in
2024 (2023: £242 billion) mainly due to the changing mix of customer
deposits.
The Group completed the triennial valuation of its main defined
benefit pension schemes as at 31 December 2022. There will be no
further deficit contributions for this triennial period (to 31 December
2025). The IAS 19 accounting surplus reduced to £2.9 billion (2023:
£3.5 billion).
Key mitigating actions:
Structural hedge programmes to stabilise earnings
Close monitoring of market risks and where appropriate,
undertaking of asset and liability matching and hedging
Monitoring of the credit allocation in the defined benefit pension
schemes, as well as the hedges in place against adverse
movements in nominal rates, inflation and longevity
Model risk 4: Reclassified risk
Link to strategy: Change, Focus
Risk performance and key developments in 2024:
Model risk has been stable in 2024, despite changes to the regulatory
environment, such as implementation of the PRA’s model risk
management principles for banks (SS1/23) and continued regulatory
scrutiny of model risk across the industry.
Improvements to Lloyds Banking Group’s model risk operating
framework have been made during 2024, focusing on developing CRD
IV models, strengthening capabilities of our people through effective
training and resources, and continued proactive regulatory
engagement.
The control environment for model risk continues to be enhanced to
meet both internal and regulatory requirements, as well as industry-
wide challenges. Investment in model risk management remains a
priority for the Group to further improve risk management and act as
an enabler to drive strategic developments of AI and machine learning
in a safe way.
Key mitigating actions:
Enhancement of the model risk management framework for
managing and mitigating model risk within the Group
Establishment of an AI assurance framework
Implementation of new model risk management policy and
supporting standards to further increase ownership and
accountability
Initiation of model risk training for key stakeholders, including
Board and GEC members
Development of the process for the identification of quantitative
methods, including models, and cascade across the Group
Operational risk 4: Reclassified risk
Link to strategy: Focus, Change
Risk performance and key developments in 2024:
Operational risk has been stable in 2024, with key risks relating to
data and privacy, supplier risk, information, cyber and physical
security risk. Operational loss event volumes are historically low, with
the majority relating to transaction processing, IT systems and change
execution.
Whilst there has been continued safe delivery of change, some IT
outages in the supply chain have occurred. No material security
breaches took place in 2024, though some events at third-party
suppliers reinforces the need for vigilance.
Balancing people-related transformation and other strategic
initiatives remains key to the success of the Group’s transformation
activity, with ongoing focus on evolving the operational risk
framework and ensuring the appropriate resource and capabilities are
in place.
Key mitigating actions:
Deployment of a range of risk management strategies, such as
avoidance, mitigation, transfer (including insurance) and
acceptance
Three-year control enhancement plans reviewed annually by Board
Risk Committee to monitor progress against commitments
Lloyds Banking Group continues to invest strategically to mitigate
operational risks, strengthen controls and to meet future
operational resilience regulatory requirements
Following IT outages, post-incident reviews undertaken to assess
future mitigating actions for the Group and its suppliers
Enhancement of skills, capabilities and reporting to strengthen
supplier management practices
8
Lloyds Bank plc Annual Report and Accounts 2024
Strategic report continued
Emerging and topical risks
Emerging and topical risks are a key component of Lloyds Banking
Group’s approach to risk management, adopted by Lloyds Bank
Group.
During 2024, the Group has continued to evolve and strengthen its
methodology to identify, assess and prioritise emerging risks. Horizon
scanning remains a key element in understanding and adapting to the
changing risk landscape.
In order to better reflect the persistent nature of these risks and
recognise the potential for changing impacts on the Group and its
customers, the Group has shifted its focus from horizon risks to
topical risks.
The Group has also refined its emerging and topical risk themes in
2024, enabling a deeper understanding of the underlying drivers and
stronger management focus on the most pertinent emerging risks. An
overview of these themes is shown below, with more information on
the changes provided on page 20.
Emerging and topical risks remain an area of ongoing focus for the
Group’s Board and senior management. During the year, a series of
deep dives on the emerging risk themes reported at year end 2023
have taken place at key executive and board-level committees,
including the Board Risk Committee, with actions assigned to monitor
more closely their future manifestation, potential business growth
and opportunities to reduce risk.
The emerging risk themes were also considered as part of the annual
strategic planning cycle. Geopolitical risks, and how these may
generate second order impacts for the Group, have been a focus.
Many emerging and topical risk topics are reviewed on a recurring
basis, alongside ongoing activity addressing their impacts. However, it
is acknowledged that the nature of the emerging risks will evolve and
could drive future trends in the long term, which the Group will need
to prepare for.
Looking ahead to 2025, the Group will continue to develop its
strategy to proactively identify and monitor internal and external
trends and consider effective measures to best protect its customers,
colleagues and shareholders.
For further details on how the Group is managing, monitoring and
mitigating key emerging and topical risks, see page 20.
Emerging and topical risk themes
Consumer expectations and market dynamics
Consumer expectations: Customers are increasingly seeking
personalised, transparent and digitally enhanced experiences, coupled
with reduced loyalty, which elevates the risk of failing to meet
expectations and delivering poor outcomes. The role social media is
increasingly playing in influencing consumers’ finance decisions further
increases this. Consideration also needs to be made to a large section
of society that are not digitally literate that are potentially being left
behind and balancing the cost of enhancing the digital services and
supporting customers that wish to be served in a traditional way.
Market dynamics: The rapid proliferation of new, often loss-leading
financial products in the market intensifies competition. Consumers
may be attracted in the short term. This can create long-term
sustainability challenges for providers and increase the risk of mis-
selling or unsuitable offerings.
Evolution of operating model
Failure to adequately prepare for disruption of service, third or fourth
party supplier failure, technology outages, severe data loss, whilst
evolving the structure and skillset of a dynamic workforce in line with
the Group’s strategy, alongside maintaining pace with the industry
and delivering strong customer outcomes.
Evolution of technology, AI and cybercrime
Failure to keep pace with, or choosing not to participate in,
technological advancements including AI, migration to cloud platform
and blockchain solutions whilst balancing the competing
requirements to:
Maximise customer opportunities through adoption
Maintain trust and confidence in customer data privacy
Protect our customers from fraud, cyber and economic crime
Ensure transparency on data ethics practices
Adhere to evolving data protection regulations
Prepare for potential business model disruption caused by
adoption of the technology
Global economic and geopolitical environment
Inability to navigate changing international regulations, including
sanction and trade compliance, economic fragmentation,
deglobalisation, global health shifts and geopolitical events that may
impact operations, customers and suppliers.
Regulatory agendas and expectations
The impact of:
Potential political demands for tighter consumer protections
Market interventions, leading to sudden regulatory shifts
Evolving expectations on regulatory bodies and impact on financial
services
New entrants in the market benefitting from regulatory arbitrage
Environmental, social and governance expectations associated
with its operations and investments
UK economic and political environment
Failure to anticipate the longer-term impacts of a weak UK economy,
quantitative tightening, change in government and resulting policy,
regulatory shifts and the consequences of the UK becoming less
attractive to external investors.
9
Lloyds Bank plc Annual Report and Accounts 2024
Strategic report continued
Financial risk management objectives and policies
Information regarding the financial risk management objectives and policies of the Group, in relation to the use of financial instruments, is
given in notes 15 and 37 to the accounts. The Group’s approach to risk management including risk policies, risk appetite, measurement bases
and sensitivities, in particular for credit risk, market risk and liquidity risk, is aligned to those of Lloyds Banking Group plc, the Bank’s ultimate
parent. Further information can be found in the Lloyds Banking Group plc Annual Report and Accounts.
The Group maintains risk management systems and internal controls relating to the financial reporting processes designed to:
ensure that accounting policies are appropriately and consistently applied;
enable the calculation, preparation and reporting of financial outcomes in line with applicable standards; and
ensure that disclosures are made on a timely basis in accordance with statutory and regulatory requirements.
The 2024 Strategic report has been approved by the Board of Directors.
On behalf of the Board
Sir Robin Budenberg
Chair
Lloyds Bank plc
27 February 2025
10
Lloyds Bank plc Annual Report and Accounts 2024
Directors’ report
Results
The consolidated income statement on page 75 shows a statutory profit before tax for the year ended 31 December 2024 of £4,688 million
(year ended 31 December 2023: £7,056 million).
Dividends
During the year the Bank paid cumulative interim dividends of £3,990 million (2023 : £4,700 million). The directors have not recommended a
final dividend for the year ended 31 December 2024 (2023: £nil).
Post balance sheet events
There were no material post balance sheet events.
Going concern
The going concern of the Bank and the Group is dependent on successfully funding their respective balance sheets and maintaining adequate
levels of capital.
In order to satisfy themselves that the Bank and the Group have adequate resources to continue to operate for the foreseeable future, the
directors have reviewed the Bank and the Group’s operating plan and its funding and capital positions, including a consideration of the
implications of climate change. The directors have also taken into account the impact of further stress scenarios.
Accordingly, the directors conclude that the Bank and the Group have adequate resources to continue in operational existence for a period of
at least 12 months from the date of the approval of the financial statements and therefore it is appropriate to continue to adopt the going
concern basis in preparing the accounts.
Corporate Governance Statement
In accordance with the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended by the
Companies (Miscellaneous Reporting) Regulations 2018) (the Regulations), for the year ended 31 December 2024, the Bank has in its corporate
governance arrangements applied the Wates Corporate Governance Principles for Large Private Companies (the Principles), which are available
at www.frc.org.uk. The following section explains the Bank’s approach to corporate governance, and its application of the Principles.
High standards of corporate governance are central to achieving the strategy which has been set for the Bank. To this end a Corporate
Governance Framework is in place for Lloyds Banking Group plc, the Bank, HBOS plc and Bank of Scotland plc, with all four companies sharing
a common approach to governance. The framework is designed to meet the specific needs of each company, setting the approach and
standards in respect of the Bank’s corporate governance practices, including addressing the matters set out in the Principles and the
governance requirements of the operation of the Bank as part of Lloyds Banking Group’s Ring-Fenced Bank.
This includes the matters reserved to the Board, and the matters the Board has chosen to delegate to management. Governance arrangements,
including the Corporate Governance Framework, are reviewed periodically to ensure they remain fit for purpose, with the current review,
which is nearing completion, aiming to deliver a more proportionate and user friendly governance approach. The Board delegates further
responsibilities to the Group Chief Executive, who is supported by the Group Executive Committee, the composition of which is detailed on
page 81 of the Lloyds Banking Group plc Annual Report and Accounts for 2024. The Corporate Governance Framework of the Bank further
addresses the requirements of the Principles as discussed on pages 10 to 11.
Principle One – Purpose and Leadership
The Board is collectively responsible for the long-term success of the Bank. It achieves this by agreeing the Bank’s strategy, within the wider
strategy of Lloyds Banking Group, and overseeing delivery against it. The Bank’s strategy is discussed further in the Strategic Report on pages 1
to 9. The Board also assumes responsibility for the management of the culture, values and wider standards of the Bank, within the equivalent
standards set by Lloyds Banking Group. The Board’s understanding of stakeholders’ interests is central to these responsibilities and informs key
aspects of Board decision making, as discussed within the statement on pages 3 to 4.
Acknowledging the needs of all stakeholders is fundamental to the way the Bank operates, as is maintaining the highest standards of business
conduct, which is a vital part of the corporate culture. The Bank’s approach is further influenced by our ambition to provide not only
outstanding service to our customers, but also responding to the UK’s social and economic issues. To this end, the Board plays a lead role in
establishing, promoting, and monitoring the Bank’s corporate culture and values, with the Corporate Governance Framework ensuring such
matters receive the level of prominence in Board and Executive decision making which they require. The Bank’s corporate culture and values
align to those of Lloyds Banking Group, which are discussed in more detail within the Strategic and Directors’ Reports of the Lloyds Banking
Group plc Annual Report and Accounts for 2024.
Principle Two – Board Composition
The Bank is led by a Board comprising a non-executive Chair, independent non-executive directors and executive directors, further details of
the directors can be found on page 14. The Board reviews its size and composition regularly and is committed to ensuring it has the right
balance of skills and experience. The Board considers its current size and composition is appropriate to the Bank’s circumstances. New
appointments are made on merit, taking account of the specific skills and experience, independence and knowledge needed to ensure a
rounded board and the diversity benefits each candidate can bring overall.
The Board is supported by its committees, the operation of which are discussed below, which make recommendations to the Board on matters
delegated to them. Each committee has written terms of reference setting out its delegated responsibilities. Each committee comprises non-
executive directors with appropriate skills and experience and is chaired by an experienced chair. The committee Chairs report to the Board at
the next Board meeting. The Board undertakes an annual review of its effectiveness, which provides an opportunity to consider ways of
identifying greater efficiencies, ways to maximise strengths and highlights areas of further development. An internally facilitated evaluation of
the Board’s effectiveness was undertaken during the course of the year, which concluded that the Board is continuing to operate effectively.
Further information on conclusions of the evaluation can be found on pages 93 to 94 of the Lloyds Banking Group plc Annual Report and
Accounts for 2024.
11
Lloyds Bank plc Annual Report and Accounts 2024
Directors’ report continued
Principle Three – Director Responsibilities
The directors assume ultimate responsibility for all matters, and along with senior management are committed to maintaining a robust control
framework as the foundation for the delivery of good governance, including the effective management of delegation through the Corporate
Governance Framework. Policies are also in place in relation to potential conflicts of interest which may arise. All directors have access to the
services of the Company Secretary, and independent professional advice is available to the directors at the expense of Lloyds Banking Group,
where they judge it necessary to discharge their duties as directors.
The Board is supported by its committees which make recommendations on matters delegated to them under the Corporate Governance
Framework. The management of all committees is in keeping with the basis on which meetings of the Board are managed, with open debate,
and adequate time for members to consider proposals which are put forward. The Chair of the Board and each Board committee assumes
responsibility with support from the Company Secretary for the provision to each meeting of accurate and timely information.
Principle Four – Opportunity and Risk
The Board oversees the development and implementation of the Bank’s strategy, within the context of the wider strategy of Lloyds Banking
Group, which includes consideration of all strategic opportunities. The Board is also responsible for the long term sustainable success of the
Bank, generating value for its shareholder and ensuring a positive contribution to society. The Board agrees the Bank’s culture, purpose, values
and strategy, within that of Lloyds Banking Group, and agrees the related standards of the Bank, again within the relevant standards of Lloyds
Banking Group. Further specific aims and objectives of the Board are formalised within the Corporate Governance Framework, which also sets
out the matters reserved for the Board.
Strong risk management is central to the strategy of the Bank, which along with a robust risk control framework acts as the foundation for the
delivery of effective management of risk. The Board agrees the Bank’s risk appetite and ensures the Bank manages risk effectively, delegating
related authorities to individuals through the Corporate Governance Framework and the further management hierarchy. Board level
engagement coupled with the direct involvement of senior management in risk issues ensures that escalated issues are promptly addressed,
and remediation plans are initiated where required. The Bank’s risk appetite, principles, policies, procedures, controls and reporting are
managed in conjunction with those of Lloyds Banking Group, and as such are regularly reviewed to ensure they remain fully in line with
regulations, law, corporate governance and industry best practice. The Bank’s principal risks are discussed further on pages 6 to 7.
Principle Five – Remuneration
The Remuneration Committee of the Board, in conjunction with the Remuneration Committee of Lloyds Banking Group (the Remuneration
Committees), assume responsibility for the Bank’s approach to remuneration. This includes reviewing and making recommendations on
remuneration policy as relevant to the Bank, ranging from the remuneration of directors and members of the Executive to that of all other
colleagues employed by the Bank. This includes colleagues where the regulators require the Bank to implement a specific approach to their
remuneration, such as Senior Managers and other material risk takers. The activities of the Remuneration Committees extend to matters of
remuneration relevant to subsidiaries of the Bank, where such subsidiary does not have its own remuneration committee.
Principle Six – Stakeholders
The Bank as part of Lloyds Banking Group operates under Lloyds Banking Group’s wider approach to responsible business, which acknowledges
that the Bank has a responsibility to help address the economic, social and environmental challenges which the UK faces, and as part of this
understand the needs of the Bank’s external stakeholders, including in the development and implementation of strategy.
Central to this is Lloyds Banking Group’s and the Bank’s purpose of Helping Britain Prosper. During the year the directors took a number of
decisions with the Bank’s purpose and specific stakeholder interest in mind, which are discussed further on pages 3 to 4.
In 2024 the Responsible Business Committee provided further oversight and support of Lloyds Banking Group’s and the Bank’s plans for
embedding responsible business in the Bank’s core purpose. The approach of the Board in respect of its key stakeholders is described further in
a separate statement made in compliance with the Regulations on pages 2 to 4.
Directors
The names of the current directors are shown on page 14. Changes to the composition of the Board since 1 January 2024 up to the date of this
report are shown in the table below.
Joined the Board
Left the Board
Alan Dickinson
16 May 2024
Lord Lupton
16 May 2024
Nathan Bostock
                                          1 August 2024
Directors’ indemnities
The directors of the Bank have entered into individual deeds of indemnity with Lloyds Banking Group which constitute ‘qualifying third party
indemnity provisions’ for the purposes of the Companies Act 2006. The deeds indemnify the directors to the maximum extent permitted by
law and remain in force. The deeds were in force during the whole of the financial year. In addition, Lloyds Banking Group had appropriate
Directors’ and Officers’ liability insurance cover in place throughout 2024. Deeds for existing directors are available for inspection at the Bank’s
registered office.
Lloyds Banking Group has also granted deeds of indemnity by deed poll and by way of entering into individual deeds, which constitute
‘qualifying third party indemnity provisions’ to the directors of the Group’s subsidiary companies, including former directors who retired during
the year, and to colleagues subject to the provisions of the Senior Managers and Certification Regime. Such deeds were in force during the
financial year ended 31 December 2024 and remain in force as at the date of this report. Qualifying pension scheme indemnities have also been
granted to the Trustees of Lloyds Banking Group’s Pension Schemes, including those schemes relevant to the Bank, which were in force for the
whole of the financial year and remain in force as at the date of this report.
12
Lloyds Bank plc Annual Report and Accounts 2024
Directors’ report continued
Information required under DTR 7.2
Certain information is incorporated into this report by reference. Information about internal control and risk management systems relating to
the financial reporting process can be found on page 9.
Information about share capital is shown in note 28 on page 135. The Bank is a wholly owned subsidiary of Lloyds Banking Group plc, which
holds all of the Bank’s issued ordinary share capital.
The directors manage the business of the Bank under the powers set out in the Companies Act 2006 and the Bank’s articles of association,
these powers include those in relation to the issue or buy back of the Bank’s shares.
The appointment and retirement of directors is governed by the Bank’s articles of association and the Companies Act 2006. The Bank’s articles
of association may only be amended by a special resolution of the shareholders in a general meeting.
Conflicts of interest
The Board has a comprehensive procedure for reviewing, and as permitted by the Companies Act 2006 and the Bank’s articles of association,
approving actual and potential conflicts of interest. Directors have a duty to notify the Chair and Company Secretary as soon as they become
aware of actual or potential conflict situations. Changes to commitments of all directors are reported to the Board and a register of directors'
interests is regularly reviewed and authorised by the Board to ensure the authorisation status remains appropriate.
Branches, future developments and financial risk management objectives and policies
The Bank provides a wide range of banking and financial services through branches and offices in the UK and overseas. Information regarding
future developments and financial risk management objectives and policies of the Group in relation to the use of financial instruments that
would otherwise be required to be disclosed in the directors’ report, and which is incorporated into this report by reference, can be found in
the strategic report.
Share capital
Information about share capital is shown in note 28 on page 135. This information is incorporated into this report by reference. The Bank did
not repurchase any of its shares during 2024 (2023: none). There are no restrictions on the transfer of shares in the Bank other than as set out
in the articles of association and certain restrictions which may from time to time be imposed by law and regulations.
Change of control
The Bank is not party to any significant agreements which take effect, alter or terminate upon a change of control of the Bank following a
takeover bid. There are no agreements between the Bank and its directors or employees providing compensation for loss of office or
employment that occurs because of a takeover bid.
Research and development activities
During the ordinary course of business the Bank develops new products and services within the business units.
Supporting disability
In April 2023, Lloyds Banking Group set a public goal to double the representation of senior management colleagues with disabilities to 12 per
cent by 2025. Alongside this goal there was a commitment to improve the working environment and experience for colleagues with disabilities,
including making recruitment processes more accessible and inclusive; supporting career development; improving the accessibility of
workspaces and technology; upskilling colleagues to reduce stigma; and taking work beyond our own organisation to champion the disability
community. As of the end of 2024, 16.1 per cent of senior management colleagues shared that they had a disability, meaning the original target
was exceeded earlier than anticipated. Since launching this goal, there has been significant uplift in the number of colleagues sharing their
disability data – rising from 24.7 per cent in March 2023 to 60.5 per cent at the end of 2024. Aspiration is for 80 per cent of colleagues to have
shared their data by the end of 2025.
Information incorporated by reference
The following additional information forms part of the directors’ report, and is incorporated by reference.
Content
Pages
Disclosures required under the Large and Medium-sized Companies and
Groups (Accounts and Reports) Regulations 2008
Statement of employee engagement
2 to 4
Statement of other stakeholder engagement
2 to 4
Significant contracts
Details of related party transactions are set out in note 33 on pages 138 to 139.
Streamlined Energy and Carbon Reporting
The Bank has taken advantage of the exemption from Streamlined Energy and Carbon Reporting (SECR) reporting requirements in its own
directors’ report as it is covered by the Lloyds Banking Group SECR report given in the Lloyds Banking Group plc 2024 Annual Report and
Accounts, available at www.lloydsbankinggroup.com/investors/financial-downloads.html.
13
Lloyds Bank plc Annual Report and Accounts 2024
Directors’ report continued
Statement of directors’ responsibilities
The directors are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulations.
Company law requires the directors to prepare financial statements for each financial year. Under that law, the directors are required to
prepare the Bank’s and the Group’s financial statements in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006. Under company law, the directors must not approve the financial statements unless they are
satisfied that they give a true and fair view of the state of affairs of the Bank and the Group, and of the profit or loss of the Bank and the Group
for that period. In preparing these financial statements, the directors are required to properly select and apply accounting policies; present
information, including accounting policies, in a manner that provides relevant, reliable, comparable and understandable information; provide
additional disclosures when compliance with the specific requirements in international accounting standards in conformity with the
requirements of the Companies Act 2006 are insufficient to enable users to understand the impact of particular transactions, other events and
conditions on the entity’s financial position and financial performance; and make an assessment of the Bank’s ability to continue as a going
concern.
The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Bank’s transactions and
disclose with reasonable accuracy at any time the financial position of the Bank and the Group, and enable them to ensure that the financial
statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Bank and the Group, and hence
for taking reasonable steps for the prevention and detection of fraud and other irregularities. A copy of the financial statements is placed on
the website www.lloydsbankinggroup.com/investors/financial-downloads.html. The directors are responsible for the maintenance and
integrity of all information relating to the Bank on that website. Legislation in the UK governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Each of the current directors who are in office as at the date of this report, and whose names and functions are listed on page 14 of this annual
report, confirm that, to the best of his or her knowledge:
The Bank’s and the Group’s financial statements, which have been prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 give a true and fair view of the assets, liabilities, financial position and profit
or loss of the Bank and the Group
The management report contained in the strategic report and the directors’ report includes a fair review of the development and
performance of the business and the position of the Bank and the Group together with a description of the principal risks and uncertainties
they face
The Annual Report and Accounts, taken as a whole, are fair, balanced and understandable and provides the information necessary for
shareholders to assess the Bank’s and the Group’s position, performance, business model and strategy. The directors have also separately
reviewed and approved the strategic report
Independent auditor and audit information
Each person who is a director at the date of approval of this report confirms that, so far as the director is aware, there is no relevant audit
information of which the Bank’s auditor is unaware and each director has taken all the steps that he or she ought to have taken as a director to
make himself or herself aware of any relevant audit information and to establish that the Bank’s auditor is aware of that information. This
confirmation is given and should be interpreted in accordance with the provisions of the Companies Act 2006.
On behalf of the Board
Kate Cheetham.jpg
Kate Cheetham
Company Secretary
27 February 2025
Lloyds Bank plc
Registered in England & Wales
Company Number 2065
14
Lloyds Bank plc Annual Report and Accounts 2024
Current directors
Executive directors:
Charlie Nunn, Group Chief Executive
William Chalmers, Chief Financial Officer
Non-executive directors:
Sir Robin Budenberg CBE, Chair
Sarah Bentley
Nathan Bostock
Brendan Gilligan
Nigel Hinshelwood, Senior Independent Director
Sarah Legg
Amanda Mackenzie LVO OBE
Harmeen Mehta
Cathy Turner
Scott Wheway
Catherine Woods
15
Lloyds Bank plc Annual Report and Accounts 2024
Risk management
Risk management is at the heart of Helping
Britain Prosper and creating a more
sustainable and inclusive future for people
and businesses.
Our mission is to protect our customers,
shareholders, colleagues and the Group, while
enabling sustainable growth. This is achieved
through informed risk decisions and robust risk
management, supported by a consistent risk-
focused culture.
The Risk overview (pages 5 to 8) provides a summary of risk
management within the Group and the key focus areas for 2024.
This full risk management section provides a more in-depth view of
how risk is managed within the Group including key developments in
2024, and the framework by which risks are identified, managed,
mitigated and monitored.
All narrative and quantitative tables within the risk management
section are unaudited unless otherwise stated. The audited
information is required to comply with the requirements of relevant
IFRS Accounting Standards.
Lloyds Bank Group’s approach to risk
The Group operates a prudent approach to risk, with rigorous
management controls, supporting sustainable business growth within
the Group’s risk appetite and minimising losses. Through a strong and
independent risk function, a robust control framework is maintained
to identify and escalate current and emerging risks, and drive and
inform good risk-reward decision making.
To comply with UK-specific ring-fencing requirements, core banking
services are ring-fenced from other activities within the overall Lloyds
Banking Group. The Group has adopted the enterprise risk
management framework (ERMF) of Lloyds Banking Group and
supplemented with additional tailored practices to address the ring-
fencing requirements.
Lloyds Banking Group’s ERMF is structured to align with the industry-
accepted internal control framework standards and applies to every
area of the business, covering all types of risk. In 2024, the framework
was reviewed and updated to align more closely to the changing
nature of risks within the industry and the Group, along with evolving
regulatory expectations.
The ERMF provides the Group with an effective mechanism for
developing and embedding risk policies and risk management
strategies which are aligned with the risks faced by its businesses. It
also seeks to facilitate effective communication on these matters
across the Group.
Updates to the enterprise risk management framework
Lloyds Banking Group has transformed its approach to risk
management to support its strategic ambition and purpose of Helping
Britain Prosper, and has conducted a comprehensive review of its
ERMF. This has resulted in a reduction in the number of principal risk
types (or level one risk categories) from 14 to 10, and the
simplification of level two risk categories.
Compliance risk supersedes the previous regulatory and legal risk
Economic crime is now a principal risk, recognising the increased
focus on topics such as fraud
Previous change and execution, data and people risks are now
classified as level two risks within the principal operational risk
Operational resilience and strategic risk are no longer individual
risks, but are addressed throughout the updated framework
New definitions for conduct, model and operational risks
This change better aligns to the Basel Committee on Banking
Supervision’s event categories which will benefit the Group for
scenario activities and regulatory reporting. This review will continue
in 2025, with further focus on level three risks.
Further details of each principal risk, including level two risks, are
provided on pages 21 to 62.
Risk appetite
The Group’s approach to setting, and the ongoing management of risk
appetite is detailed in the risk appetite framework, which is an
integral component of Lloyds Banking Group’s ERMF.
The Group defines risk appetite as the type and aggregate level of risk
the Group is willing to take or accept in pursuit of its strategic
objectives and business plans.
Risk appetite aligns to organisational objectives, defined through
consideration of how it enables the Group to achieve its strategic
aims. It reinforces our purpose, strategy and objectives by driving
behaviour and setting boundaries around risk taking, to monitor
changes in risk exposure, enabling the delivery of business plans.
The Board is responsible for approving the Group’s Board risk appetite
at least annually. Group Board-level risk appetite metrics are
augmented further by lower-level measures to facilitate the
management of Board risk appetite.
Risk culture
Guided by the Board, the senior management articulates and role
models the core risk values to which the Group aspires. Lloyds
Banking Group’s senior management establishes a strong focus on
building and sustaining long-term relationships with customers,
through the economic cycle. The Group’s Code of Ethics and
Responsibility reinforces colleagues’ accountability for the risks they
take and supports better decision making to meet their customers’
needs.
Risk skills and capabilities
To support a strong risk culture across the Group, all colleagues
complete risk training as part of their annual mandatory training. A
library of risk management learning resources is available, which all
colleagues who have specific risk management roles can access to
build their skills and capabilities.
There is ongoing investment in risk systems and models alongside the
Group’s focus on customer and product systems and processes. This
drives improvements in risk data quality, aggregation and reporting,
enabling effective and efficient risk decisions.
Risk governance
Governance frameworks
The Group’s approach to risk is based on a robust control framework
and strong risk management culture, enabling the delivery of effective
risk management, guiding the way all employees approach their work,
behave and make decisions.
Authority is delegated from the Board to individuals through the
management hierarchy. Senior management are supported by a
committee-based structure, ensuring open challenge and effective
decision making.
The Group’s risk appetite, principles, policies, procedures, controls,
and reporting are regularly reviewed and updated as required, to
ensure they remain in line with evolving regulation, law, corporate
governance and industry good practice.
The Board and senior management encourage a culture of
transparency which supports the interaction of the executive and
non-executive governance structure.
Board-level engagement, combined with senior management in
Group-wide risk issues at Group Executive Committee level, ensure
that any escalated issues are addressed promptly and that necessary
remediation plans are initiated as required.
Line managers are accountable for identifying and managing risks in
their individual businesses, ensuring that business decisions balance
risk and reward, and are consistent with the Group’s risk appetite.
The risk committee governance framework is explained on page 17.
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Risk governance structure
The risk governance structure below is integral to effective risk
management across Lloyds Banking Group, including Lloyds Bank
Group. To meet ring-fencing requirements, the Boards and Board
Committees of Lloyds Banking Group and the Ring-Fenced Banks
(Lloyds Bank plc and Bank of Scotland plc), as well as relevant
Committees of Lloyds Banking Group and the Ring-Fenced Banks, will
sit concurrently and referred to as the Aligned Board Model.
Three lines of defence model
The Lloyds Banking Group ERMF is implemented through a 'three lines
of defence' model, which has been enhanced during 2024 to ensure
more clearly defined responsibilities and accountabilities across the
business, and drive further consistency across the Group's oversight
and assurance activities.
The Lloyds Banking Group three lines of defence model distinguishes
between risk management, risk oversight and risk assurance, with
continued focus on ensuring appropriate risk resource and capabilities
is in place within each area:
Senior management within the business areas (first line of defence)
have primary responsibility for risk decisions within Group risk
appetite parameters set and approved by the Board. They have
end-to-end accountability for all risks within their end-to-end
business processes. They must ensure effective controls are in
place both within the business and at third parties to manage risk
appropriately within risk appetite. They are responsible for
managing the direct and consequential risk by identifying,
assessing, mitigating, monitoring and reporting risks. They are also
responsible for complying with relevant laws and regulations
Risk image LB version jpg.jpg
The Risk function (second line of defence) is independent from the
first line of defence. It advises on, monitors, challenges, approves,
escalates where required, and reports on the risk-taking activities
undertaken by the first line, ensuring these are within the
constraints of the ERMF and risk appetite set by the Board. It
provides oversight of governance, risk management and controls
across the Group to ensure risks are identified and reported
appropriately to the Board and the Group Chief Executive. The
Risk function also provides regulatory advice, supports
interpretation of regulatory requirements and provides oversight of
first line compliance
Group Audit (third line of defence) provide independent assurance
to the Group Audit Committee, Board Risk Committee and the
Board on the effectiveness of control and governance processes in
place across the first and second lines. It exercises its role as a
single independent internal audit function through the delivery of
reviews and insights, identifying the most significant risks facing
the Group. The function provides opinion and challenge on the
Group’s control environment to the Audit Committee, Board and
Board Audit Committees
The Company Secretariat supports senior and Board level
committees and supports agenda planning. This gives a further line
of escalation outside the three lines of defence
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Risk governance structure
Board, Executive and Risk Committees
The Group’s risk governance structure strengthens risk evaluation and management, while also positioning the Group to manage the changing
regulatory environment in an efficient and effective manner.
Assisted by the Board Risk and Audit Committees, the Board approves the Group’s overall governance, risk and control frameworks and risk
appetite. Refer to the corporate governance section on pages 10 to 13, for further information on Board Committees.
The sub-group, business unit (where appropriate) and functional risk committees review and recommend relevant risk appetite and monitor
local risk profile and adherence to appetite.
Executive and Risk Committees
The Group Chief Executive is supported by the following:
Committees
Risk focus
Lloyds Banking Group and Ring-Fenced
Banks Executive Committee (GEC)
Assists the Group Chief Executive in exercising their authority in relation to material matters which have
strategic, cross-business unit, cross-function or Group-wide implications.
Lloyds Banking Group and Ring-Fenced
Banks Risk Committees (GRC)
Responsible for the development, implementation and effectiveness of Lloyds Banking Group’s enterprise risk
management framework, the clear articulation of the Group’s risk appetite and monitoring and reviewing of the
Group’s aggregate risk exposures, control environment and concentrations of risk.
Lloyds Banking Group and Ring-Fenced
Banks Asset and Liability Committees
(GALCO)
Responsible for the strategic direction of the Group’s assets and liabilities and the profit and loss implications
of balance sheet management actions. The Committee reviews and determines the appropriate allocation of
capital, liquidity and funding, and market risk resources and makes appropriate trade-offs between risk and
reward.
Lloyds Banking Group and Ring-Fenced
Banks Cost Management Committees
Leads and shapes the Group’s approach to cost management, ensuring appropriate governance and process
over Group-wide cost management activities and effective control of the Group’s cost base.
Lloyds Banking Group and Ring-Fenced
Banks Contentious Regulatory
Committees
Provides senior management oversight, challenge and accountability in connection with the Group’s
engagement with contentious regulatory matters as agreed by the Group Chief Executive.
Lloyds Banking Group and Ring-Fenced
Banks Strategic Delivery Committees
Responsible for driving the execution of the Group’s investment portfolio and strategic transformation agenda
as agreed by the Group Chief Executive. Monitors execution performance and progress against strategic
objectives. Assists in resolving issues on individual project areas and prioritisation across the Group. Seeks to
resolve challenges that require cross-Group support, ensuring appropriate funding is available. Ensures that
project performance provides value for money for the Group, and that autonomy is maintained alongside
accountability for projects and platforms.
Lloyds Banking Group and Ring-Fenced
Banks Disclosure Committee
Provides oversight of the accuracy, completeness and timeliness of disclosures made to the market and/or
prospective investors.
Lloyds Banking Group and Ring-Fenced
Banks Net Zero Committees
Provides direction and oversight of the Group’s environmental sustainability strategy, with particular focus on
the net zero transition and nature strategy. Oversight of the Group’s approach to meeting external
environmental commitments and targets, including the Net Zero Banking Alliance (NZBA). Recommend all
external material commitments and targets in relation to environmental sustainability.
Lloyds Banking Group and Ring-Fenced
Banks Conduct Investigations
Committee
Protects and promotes the Group’s conduct, values and behaviours by taking action to rectify the most serious
cases of misconduct within the Group. The Committee makes decisions and recommendations (including
sanctions) on investigations which have been referred from the triage process, and oversees regular reviews to
identify thematic outcomes and lessons learned, which are shared with the business.
The Lloyds Banking Group and Ring-Fenced Banks Risk Committee is supported by business unit risk committees, cross-business unit
committees addressing specific matters of Group-wide significance, and the following second line of defence Risk committees which ensure
oversight of risk management:
Lloyds Banking Group and Ring-Fenced
Banks Market Risk Committee
Responsible for monitoring, oversight and challenge of market risk exposures across the Group. Reviews and
proposes changes to the market risk management framework, and reviews the adequacy of data quality
needed for managing market risks. Issues of Group-level significance are escalated to GALCO or GFRC as
required.
Lloyds Banking Group and Ring-Fenced
Banks Economic Crime Prevention
Committee
Ensures that the Group’s economic crime risk management complies with its strategic aims, corporate
responsibility, risk appetite and economic crime prevention policy. The Committee provides direction and
appropriate focus on priorities to enhance the Group’s economic crime risk management capabilities in line
with business and customer objectives, whilst aligning to the Group’s target operating model.
Lloyds Banking Group and Ring-Fenced
Banks Financial Risk Committee (GFRC)
Responsible for overseeing, reviewing, challenging and, where relevant, making recommendations to GALCO,
GEC and/or BRC for the following matters: internal capital stress tests; all PRA and any other regulatory stress
tests; reverse stress tests; ICAAP; Pillar 3; recovery plans and resolution; sign-off of level one models; annual
refresh of through the cycle loss rates; Resolvability Assessment Framework; and relevant ad-hoc stress tests or
other analysis as and when required by the Committee.
Lloyds Banking Group and Ring-Fenced
Banks Capital Risk Committee
Provides oversight and challenge over holistic capital risk matters, focusing on Lloyds Banking Group and the
Ring-Fenced Bank. Reviews latest capital positions and plans, capital risk appetite proposals, early warning
indicators, Capital Contingency Framework assessment and regulatory developments specific to capital. Issues
of Group-level significance are escalated to GALCO or GFRC as required.
Lloyds Banking Group and Ring-Fenced
Banks Model Governance Committee
Provides debate, challenge and support of decisions relating to Lloyds Banking Group’s model risk management
policy. Facilitating the approval of models, model changes and model-related items as required by model policy,
including items related to the governance framework as a whole and its application.
Lloyds Banking Group and Ring-Fenced
Banks Liquidity Risk Committee
Provides oversight, monitoring, challenge, and approval for liquidity and funding risks across the Ring-Fenced
Bank and Lloyds Banking Group. Reviews and proposes changes to the liquidity and funding risk management
framework, including the ILAAP, liquidity risk appetite and internal liquidity stress testing. Issues of Group-level
significance are escalated to GALCO or GFRC as required.
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Risk decision making and reporting
Risk analysis and reporting enables better understanding of risks and
returns, supporting the identification of opportunities as well as
better management of risks.
An aggregate view of the Group’s overall risk profile, key risks and
management actions, and performance against risk appetite,
including the Group Control and Risk Environment report, is reported
to and discussed regularly at Group Risk Committee and Board Risk
Committee.
Risk and control cycle from identification to reporting
To allow senior management to make informed risk decisions, the
business follows a continuous risk management approach. This risk
and control cycle, from identification to reporting, ensures that there
is consistency in the approach to managing and mitigating risks
impacting the Group.
The risk and control self-assessment (RCSA) process is used to
identify, measure and manage operational risks across the Group.
Risks are identified and measured on an inherent basis, using a
consistent quantification methodology.
Risk and Control LB.jpg
Financial reporting risk management systems and internal controls
Following the updated enterprise risk management framework,
financial reporting (including tax) is now recognised as a level two risk
within the principal operational risk. Please see pages 61 and 62 for
further detail.
The Audit Committee reviews the quality and acceptability of Lloyds
Bank Group’s financial disclosures. In addition, the Lloyds Banking
Group Disclosure Committee assists the Lloyds Bank Group Chief
Executive and Chief Financial Officer in fulfilling their disclosure
responsibilities under relevant listing and other regulatory and legal
requirements.
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Stress testing
Overview
Stress testing is recognised as an important risk management tool by
the Boards, senior management, the businesses and the Risk and
Finance functions of all parts of the Group and its legal entities. It is
fully embedded in the planning process of the Group and its key legal
entities as a key activity in medium-term planning, and senior
management is actively involved in stress testing activities.
Scenario stress testing is used to support:
Risk identification:
Understanding key vulnerabilities of the Group and its key legal
entities under adverse economic conditions
Risk appetite:
Assessing the results of the stress test against the risk appetite of
all parts of the Group to ensure the Group and its legal entities are
managed within their risk parameters
Setting of risk appetite by assessing the underlying risks under
stress conditions
Strategic and capital planning:
Senior management and the Boards of the Group and its key legal
entities to adjust strategies if the plan does not meet risk appetite
in a stressed scenario
The ICAAP, by demonstrating capital adequacy and meeting the
requirements of regulatory stress tests that are used to inform the
setting of the PRA and management buffers (see capital risk on
pages 21 to 25) of the Group and its separately regulated legal
entities
The capital allocation process which feeds into business unit
performance management
Risk mitigation:
The development of potential actions and contingency plans to
mitigate the impact of adverse scenarios. Stress testing also links
directly to the recovery and resolution planning process of the
Group and its legal entities
Internal stress tests
On at least an annual basis, the Group conducts macroeconomic
stress tests to highlight and understand the key vulnerabilities of the
Group’s and its legal entities’ business plans to adverse changes in the
economic environment, to evaluate mitigating actions and ensure
that there are adequate financial resources in the event of a
downturn.
Reverse stress testing
Reverse stress testing is used to explore the vulnerabilities of the
Group’s and its key legal entities’ strategies and plans for extreme
adverse events that would cause the businesses to fail. Where this
identifies plausible scenarios with an unacceptably high risk, the
Group or its entities will adopt measures to prevent or mitigate that
and reflect these in strategic plans.
Other stress testing activity
The Group’s stress testing programme also involves undertaking
assessments of liquidity scenarios, market risk sensitivities and
scenarios, and business-specific scenarios. If required, ad hoc stress
testing exercises are also undertaken to assess emerging risks, as well
as in response to regulatory requests. This wide-ranging programme
provides a comprehensive view of the potential impacts arising from
the risks to which the Group is exposed and reflects the nature, scale
and complexity of the Group. In 2024, Lloyds Banking Group also
participated in the Bank of England’s System-wide exploratory
scenario (SWES), to improve understanding of the behaviours of
banks and non-bank financial institutions during stressed financial
market conditions. The results were published at a sectorial level; for
the banking sector, this stress had minimal impact.
Detailed stress testing information can be found within each relevant
risk in the Risk management section (capital risk page 21, liquidity risk
page 51 and market risk page 57).
Methodology
The stress tests process must comply with all regulatory requirements,
which is achieved through comprehensive scenarios and a rigorous
divisional, functional, risk and executive review and challenge process,
supported by analysis and insight into impacts on customers and
business drivers.
All relevant business, Risk and Finance teams are involved in the
delivery of analysis, and ensure the sensitivity of the business plan
to each risk is well understood. The methodologies and modelling
approach used for stress testing embed direct links between the
macroeconomic scenarios and the drivers for each business area to
give appropriate stress sensitivities. All material assumptions used in
modelling are documented and justified, with a clearly
communicated review and sign-off process. Modelling is supported
by expert judgement and is subject to Lloyds Banking Group’s model
governance policy.
Governance
Clear accountabilities and responsibilities for stress testing are
assigned to senior management and the Risk and Finance functions
throughout the Group and its key legal entities. This is formalised
through the Lloyds Banking Group business planning and stress testing
policy and procedure, which are reviewed at least annually.
The Group Financial Risk Committee (GFRC), chaired by the Chief
Risk Officer and attended by the Chief Financial Officer and other
senior Risk and Finance colleagues, has primary responsibility for
overseeing the development and execution of the Group’s stress tests.
The review and challenge of the Group’s detailed stress forecasts, the
key assumptions behind these, and the methodology used to translate
the economic assumptions into stressed outputs conclude with the
appropriate Finance and Risk sign-off. The outputs are then presented
to the GFRC and the Board Risk Committee for review and challenge.
With regulatory exercises being approved at Board Risk Committee
and Board where appropriate.
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Emerging and topical risks
Background and framework
Recognising emerging risks is a crucial part of the Group’s risk
management strategy. It allows the Group to pinpoint key risks and
opportunities, enabling proactive responses through strategic
planning and effective risk mitigation. Although emerging risks are not
classified as principal risks, they require strong focus to prevent
potentially adverse impacts or missed opportunities.
Impacts from emerging risks on the Group’s principal risks can
materialise in two ways:
Emerging risks can impact the Group’s principal risks directly in the
absence of an appropriate strategic response
Emerging risks can be a source of new risks, dependent on the
chosen response and the underlying assumptions on how given
emerging risks may manifest
Risk identification
The basis for risk identification is underpinned by horizon scanning,
external research and insights, supported by collaboration between
functions across the Group. The Group works closely with regulatory
authorities and industry bodies to ensure that it can monitor external
developments and identify and respond to the evolving landscape,
particularly in relation to compliance risk. In addition, the Group
engages with external experts to gain external insight and context.
This activity complements and builds upon the annual strategic
planning cycle and is used to identify key external trends, risks and
opportunities for the Group.
The Group is continually enhancing its methods for identifying and
prioritising emerging and topical risks. Throughout 2024, the Group
enhanced its emerging risk methodology, further allowing greater
focus on the underlying risk drivers and enabling a more granular level
of assessment alongside targeted planning and mitigation activity.
These improvements reflect the Group’s strategic transformation
journey, and the planned investments outlined in its business plans.
The 2024 assessment has refined the emerging and topical risk
themes from eight to six.
The emerging risk themes detailed in the Risk overview section on
page 8 align to the current principal risks the Group is managing,
many of which are continuous areas of focus. The nature of emerging
risks is expected to evolve and may require different solutions to
mitigate from the measures used today. The risks also correlate, for
example consumer expectations and market dynamics will be
influenced by the UK economic and political environment.
Risk mitigation and monitoring
Emerging risk themes have been discussed at executive-level
committees throughout 2024, with key actions assigned to closely
monitor their manifestation and potential opportunities, and in some
cases, also forming part of the business planning process. Deep dives
on selected emerging risk themes are also planned for 2025.
The following table details how the Group is monitoring and
mitigating against each of its emerging risk themes.
Emerging and
topical risk theme
Mitigating actions
Consumer
expectations
and market
dynamics
Regular reviews into:
Impacts caused by cost-of-living challenges
Customer proposition by business area
The Group’s strategy, including performance,
key risks and external environment
Evolution of
operating
model
Implementation of playbooks in the event
significant disruptive events occur, for example
a pandemic or system outages, which are
refreshed at least annually
Strengthened measures to ensure that the
Group is prepared for significant disruption to
supply chains
Enhanced business continuity plans ahead of
the March 2025 operational resilience
regulatory deadline
Review of the Group’s strategic workforce
planning to ensure the required skills
composition
Evolution of
technology, AI
and cybercrime
Continued transformation and modernisation
of our technology and infrastructure
Deep dives completed on Generative AI, cyber
risk, IT systems risk and economic crime
prevention at Board-level committees
Implementation of a data ethics and AI
framework within Lloyds Banking Group’s data
and model risk policies
Global
economic and
geopolitical
environment
Evaluation of the Group’s economic
assumptions in response to the macroeconomic
environment
Intelligence scanning to detect and identify
triggers and events that may impact the Group
and its operations
Regulatory
agenda and
expectations
Monitoring of regulatory developments through
horizon scanning activity
Engagement with regulators on key areas of
focus
Oversight of the Group’s climate strategy and
external sector statements
UK economic
and political
environment
Evaluation of the Group’s base case economic
assumptions in response to the macroeconomic
environment
Undertake stress tests to assess the impact of
various economic scenarios on the Group’s
performance
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Full analysis of principal risk categories
The Group’s risk framework covers all types of risk which affect the
Group and could impact on the achievement of its strategic
objectives.
Detailed information relating to each principal risk is included over
the following pages 21 to 62.
Capital risk
Definition
Capital risk is defined as the risk that an insufficient quantity or
quality of capital is held to meet regulatory requirements or to
support business strategy, an inefficient level of capital is held or that
capital is inefficiently deployed across the Group.
Exposures
A capital risk event arises when the Group has insufficient capital
resources to support its strategic objectives and plans, and to meet
both regulatory and external stakeholder requirements and
expectations. This could arise due to a depletion of the Group’s
capital resources as a result of the crystallisation of any of the risks to
which it is exposed, or through a significant increase in risk-weighted
assets as a result of rule changes or economic deterioration.
Alternatively a shortage of capital could arise from an increase in the
minimum requirements for capital or leverage or the minimum
requirement for own funds and eligible liabilities (MREL) either at
Group level or regulated entity level. The Group’s capital management
approach is focused on maintaining sufficient and appropriate capital
resources across all regulated levels of its structure in order to prevent
such exposures.
Measurement
In accordance with UK ring-fencing legislation, the Group was
appointed as the Ring-Fenced Bank sub-group (‘RFB sub-group’)
under Lloyds Banking Group plc. As a result the Group is subject to
separate supervision by the UK Prudential Regulation Authority (PRA)
on a sub-consolidated basis (as the RFB sub-group) in addition to the
supervision applied to Lloyds Bank plc on an individual basis.
The Group maintains capital levels on a consolidated and individual
basis commensurate with a prudent level of solvency to achieve
financial resilience and market confidence. To support this, capital risk
appetite on both a consolidated and individual basis is calibrated by
taking into consideration both an internal view of the amount of capital
to hold as well as external regulatory requirements.
The Group assesses both its regulatory capital requirements and the
quantity and quality of capital resources it holds to meet those
requirements in accordance with the relevant provisions of the Capital
Requirements Directive (CRD V) and Capital Requirements Regulation
(UK CRR). This is supplemented through additional regulation set out
under the PRA Rulebook and through associated statements of policy,
supervisory statements and other regulatory guidance.
Further details of the regulatory capital and leverage frameworks to
which the Group is subject, including the means by which its capital
and leverage requirements and capital resources are calculated, are
provided in the Group’s Pillar 3 disclosures.
The minimum amount of total capital, under Pillar 1 of the regulatory
capital framework, is set at 8 per cent of total risk-weighted assets.
At least 4.5 per cent of risk-weighted assets are required to be met
with common equity tier 1 (CET1) capital and at least 6 per cent of
risk-weighted assets are required to be met with tier 1 capital.
Minimum Pillar 1 requirements are supplemented by both additional
minimum requirements under Pillar 2A of the regulatory capital
framework, the aggregate of which is referred to as the Group’s Total
Capital Requirement (TCR), and by a number of regulatory capital
buffers as described below.
Additional minimum capital requirements under Pillar 2A are set by
the PRA as a firm-specific Individual Capital Requirement (ICR)
reflecting a point in time estimate, which may change over time, of
the minimum amount of capital to cover risks that are not fully
covered by Pillar 1, such as concentration risk, residual value risk and
operational risk, and those risks not covered at all by Pillar 1, such as
pension obligation risk and interest rate risk in the banking book
(IRRBB). This is set as a variable amount for Pillar 2A (being a set
percentage of risk-weighted assets), with fixed add-ons for certain
risk types. The Group’s Pillar 2A capital requirement at 31 December
2024 is the equivalent of around 3.0 per cent of risk-weighted assets,
of which the minimum amount to be met by CET1 capital is the
equivalent of around 1.7 per cent of risk-weighted assets.
A range of additional regulatory capital buffers apply under the
capital rules, which are required to be met with CET1 capital. These
include a capital conservation buffer (2.5 per cent of risk-weighted
assets) and a time-varying countercyclical capital buffer (CCyB) which
was around 1.9 per cent of risk-weighted assets at 31 December 2024.
In addition, the Group in its capacity as the RFB sub-group is subject
to an other systemically important institution (O-SII) buffer of 2.0 per
cent of risk-weighted assets which is designed to hold systemically
important banks to higher capital standards, so that they can
withstand a greater level of stress before requiring resolution. The
latest review point under the Financial Policy Committee’s framework
occurred during November 2024 (based upon the average of the RFB
sub-group’s quarter-end UK leverage exposure measures over 2023)
which resulted in no change to the buffer.
As part of the Group’s capital planning process, forecast capital
positions are subjected to stress testing to determine the adequacy of
the Group’s capital resources against minimum requirements,
including the Pillar 2A requirement. The PRA considers outputs from
both the Group’s internal stress tests and Bank of England (BoE)
stress tests, in conjunction with other information, as part of the
process for informing the setting of a bank-specific capital buffer for
the Group, known as the PRA Buffer. The PRA requires this buffer to
remain confidential.
Usage of the PRA Buffer would trigger a dialogue between the Group
and the PRA to agree what action is required whereas a breach of the
combined buffer (all other regulatory buffers, as referenced above)
would give rise to mandatory restrictions upon any discretionary
capital distributions. The PRA has previously communicated its
expectation that banks’ capital and liquidity buffers can be drawn
down as necessary to support the real economy through a shock and
that sufficient time would be made available to restore buffers in a
gradual manner.
In addition to the risk-based capital framework outlined above, the
Group is also subject to minimum capital requirements under the UK
Leverage Ratio Framework. The leverage ratio is calculated by dividing
tier 1 capital resources by the leverage exposure which is a defined
measure of on-balance sheet assets and off-balance sheet items.
The minimum tier 1 leverage ratio requirement under the UK Leverage
Ratio Framework is 3.25 per cent. At 31 December 2024, this is
supplemented by a time-varying countercyclical leverage buffer
(CCLB) requirement, which is 0.7 per cent of the leverage exposure
measure and an additional leverage ratio buffer (ALRB) requirement
of 0.7 per cent of the leverage exposure measure which reflects the
application of the Group’s O-SII buffer.
At least 75 per cent of the 3.25 per cent minimum leverage ratio
requirement as well as 100 per cent of regulatory leverage buffers
must be met by CET1 capital.
As at 31 December 2024 the leverage ratio framework did not give rise
to higher regulatory capital requirements for the Group than the risk-
based capital framework.
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Mitigating actions
The Group’s capital management framework is part of a
comprehensive framework within Lloyds Banking Group that includes
the setting of capital risk appetite and capital planning and stress
testing activities. Close monitoring of capital, leverage and MREL
ratios is undertaken to ensure the Group meets regulatory
requirements and risk appetite levels and deploys its capital resources
efficiently.
The Group regularly refreshes and monitors its suite of early warning
indicators and maintains a Capital Contingency Framework as part of
the Lloyds Banking Group Recovery Plan, which is designed to identify
and escalate emerging capital concerns at an early stage, so that
mitigating actions can be taken, if needed. The Recovery Plan sets out
a range of potential mitigating actions that the Group could take in
response to a stress, including as part of the wider Lloyds Banking
Group response. For example the Group is able to accumulate
additional capital through the retention of profits over time, which
can be enhanced through reducing or cancelling dividend payments
upstreamed to its parent (Lloyds Banking Group plc), by raising new
equity via an injection of capital from its parent and by issuing
additional tier 1 or tier 2 capital securities to its parent. The cost and
availability of additional capital from its parent is dependent upon
market conditions and perceptions at the time.
The Group is also able to manage the demand for capital through
management actions including adjusting its lending strategy, business
disposals and through the efficient use of securitisations and other
optimisation activity.
Capital policies and procedures are well established and subject to
independent oversight.
Monitoring
The Group’s capital is actively managed and monitoring capital ratios
is a key factor in the Group’s planning processes and stress testing.
Multi-year base case forecasts of the Group’s capital position, based
upon the Group’s operating plan, are produced at least annually to
inform the Group capital plan whilst shorter-term forecasts are
undertaken to understand and respond to variations of the Group’s
actual performance against the plan. The Group’s capital plan is
tested for capital adequacy using relevant stress scenarios and
sensitivities covering adverse economic conditions as well as other
adverse factors that could impact the Group.
Regular monitoring of the capital position for the Group and its key
regulated entities is undertaken by a range of Lloyds Banking Group
and Ring-Fenced Banks committees, including Group Capital Risk
Committee (GCRC), Group Financial Risk Committee (GFRC), Group
Asset and Liability Committees (GALCO) and Group Risk Committees
(GRC), in addition to the Board Risk Committee (BRC) and the Board.
This includes reporting of actual ratios against risk appetite, base case
and stress scenario projected ratios, and review of early warning
indicators and assessment against the Capital Contingency
Framework.
The regulatory capital framework within which the Group operates
continues to evolve and further detail on this is provided in the
Group’s Pillar 3 disclosures. The Group continues to monitor
prudential developments very closely, analysing the potential capital
impacts to ensure that, through organic capital generation and
management actions, the Group continues to maintain a strong
capital position that exceeds both minimum regulatory requirements
and the Group’s risk appetite and is consistent with market
expectations.
Minimum requirement for own funds and eligible liabilities (MREL)
Global systemically important banks (G-SIBs) are subject to an
international standard on total loss absorbing capacity (TLAC). The
standard is designed to enhance the resilience of the global financial
system by ensuring that failing G-SIBs have sufficient capital to absorb
losses and recapitalise under resolution, whilst continuing to provide
critical banking services.
In the UK, the Bank of England has implemented the requirements of
the international TLAC standard through the establishment of a
framework which sets out minimum requirements for own funds and
MREL. The purpose of MREL is to require firms to maintain sufficient
own funds and eligible liabilities that are capable of credibly bearing
losses or recapitalising a bank whilst in resolution. MREL can be
satisfied by a combination of regulatory capital and certain unsecured
liabilities (which must be subordinate to a firm’s operating liabilities).
The Bank of England’s MREL statement of policy (MREL SoP) sets out
its approach to setting external MREL and the distribution of MREL
resources internally within groups. Internal MREL resources are
intended to enable a material subsidiary to be recapitalised as part of
a group resolution strategy without the need for the Bank of England
to apply its resolution powers directly to the subsidiary itself.
The Group’s parent, Lloyds Banking Group plc, is subject to the Bank
of England’s MREL SoP and must therefore maintain a minimum level
of external MREL resources. Lloyds Banking Group plc operates a
single point of entry (SPE) resolution strategy, with Lloyds Banking
Group plc as the designated resolution entity. Under this strategy, the
Group has been identified as a material subsidiary of Lloyds Banking
Group plc and must therefore maintain a minimum level of internal
MREL resources. As at 31 December 2024, the Group’s internal MREL
resources exceeded the minimum required.
Analysis of CET1 capital position
The Group’s common equity tier 1 (CET1) capital ratio decreased to
13.7 per cent at 31 December 2024 compared to 14.4 per cent at
31 December 2023. Profit for the year, including the provision charge
for motor finance commission arrangements, was more than offset by
the ordinary dividends paid during the year, distributions on other
equity instruments and an increase in risk-weighted assets.
23
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Capital resources
The table below summarises the consolidated capital position of the Group. This reflects the application of the transitional arrangements for
IFRS 9. The Group’s Pillar 3 disclosures provide a comprehensive analysis of the own funds of the Group.
At 31 Dec
2024
£m
At 31 Dec
2023
£m
Common equity tier 1
Shareholders’ equity per balance sheet
33,975
35,355
Adjustment to retained earnings for foreseeable dividends
(490)
Cash flow hedging reserve
3,568
3,554
Other adjustments
(15)
73
37,528
38,492
less: deductions from common equity tier 1
Goodwill and other intangible assets
(5,494)
(5,531)
Prudent valuation adjustment
(92)
(117)
Excess of expected losses over impairment provisions and value adjustments
(75)
Removal of defined benefit pension surplus
(2,215)
(2,653)
Deferred tax assets
(4,042)
(3,971)
Common equity tier 1 capital
25,610
26,220
Additional tier 1
Additional tier 1 instruments
5,695
5,018
Total tier 1 capital
31,305
31,238
Tier 2
Tier 2 instruments
5,826
5,747
Eligible provisions
83
417
Total tier 2 capital
5,909
6,164
Total capital resources
37,214
37,402
Risk-weighted assets
186,996
182,560
Common equity tier 1 capital ratio
13.7%
14.4%
Tier 1 capital ratio
16.7%
17.1%
Total capital ratio
19.9%
20.5%
Total capital requirement
The Group’s total capital requirement (TCR) as at 31 December 2024, being the aggregate of the Group’s Pillar 1 and Pillar 2A capital
requirements, was £20,479 million (31 December 2023: £20,004 million).
24
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Movements in CET1 capital resources
The key movements are set out in the table below.
Common
equity
tier 1
£m
At 31 December 2023
26,220
Profit for the year
3,486
Movement in foreseeable dividends1
490
Dividends paid out on ordinary shares during the year
(3,990)
IFRS 9 transitional adjustment to retained earnings
(144)
Distributions on other equity instruments
(363)
Other movements
(89)
At 31 December 2024
25,610
1Reflects the reversal of the brought forward accrual from 31 December 2023.
CET1 capital resources have decreased by £610 million during the year, with profit for the year more than offset by the payment of ordinary
dividends during the year and distributions on other equity instruments.
The IFRS 9 transitional arrangements for dynamic relief amounted to £4 million (31 December 2023: £155 million) through CET1 capital. The
transitional arrangements ended on 1 January 2025.
Movements in total capital
The Group’s total capital ratio reduced to 19.9 per cent at 31 December 2024 compared to 20.5 per cent at 31 December 2023. The issuance of
AT1 and Tier 2 capital instruments was more than offset by the increase in risk-weighted assets, the reduction in CET1 capital, the redemption
of an AT1 capital instrument and the impact of interest rate movements, regulatory amortisation and a reduction in eligible provisions on Tier 2
capital.
Risk-weighted assets
At 31 Dec
2024
£m
At 31 Dec
2023
£m
Foundation Internal Ratings Based (IRB) Approach
35,359
36,478
Retail IRB Approach
90,548
85,436
Other IRB Approach
6,327
6,126
IRB Approach
132,234
128,040
Standardised (STA) Approach1
19,380
19,021
Credit risk
151,614
147,061
Securitisation
7,648
8,246
Counterparty credit risk
1,119
875
Credit valuation adjustment risk
244
454
Operational risk
26,079
25,605
Market risk
292
319
Risk-weighted assets
186,996
182,560
of which: threshold risk-weighted assets2
1,211
1,424
1 Threshold risk-weighted assets are included within the Standardised (STA) Approach.
2 Threshold risk-weighted assets reflect the element of deferred tax assets that are permitted to be risk-weighted instead of being deducted from CET1 capital.
Risk-weighted assets increased by £4,436 million, or 2 per cent, from £182,560 million at 31 December 2023 to £186,996 million at 31 December
2024. This includes the impact of lending growth, Retail secured CRD IV increases and other movements, partly offset by optimisation
including capital efficient, net present value positive securitisation activity.
25
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Leverage ratio
The table below summarises the component parts of the Group’s leverage ratio.
At 31 Dec
2024
£m
At 31 Dec
2023
£m
Total tier 1 capital
31,305
31,238
Exposure measure
Statutory balance sheet assets
Derivative financial instruments
4,235
3,165
Securities financing transactions
44,143
32,796
Loans and advances and other assets
562,835
569,444
Total assets
611,213
605,405
Qualifying central bank claims
(42,098)
(57,430)
Derivatives adjustments
(3,648)
(1,737)
Securities financing transactions adjustments
1,892
1,431
Off-balance sheet items
30,849
31,494
Amounts already deducted from Tier 1 capital
(11,864)
(12,060)
Other regulatory adjustments1
(4,012)
(4,950)
Total exposure measure
582,332
562,153
Average exposure measure2
597,279
UK leverage ratio
5.4%
5.6%
Average UK leverage ratio2
5.3%
Leverage exposure measure (including central bank claims)
624,430
619,583
Leverage ratio (including central bank claims)
5.0%
5.0%
1 Includes deconsolidation adjustments that relate to the deconsolidation of certain Group entities that fall outside the scope of the Group’s regulatory capital consolidation and
adjustments to exclude lending under the UK Government’s Bounce Back Loan Scheme (BBLS).
2 The average UK leverage ratio is based on the average of the month end tier 1 capital position and average exposure measure over the quarter (1 October 2024 to 31 December
2024). The average of 5.3 per cent compares to 5.3 per cent at the start and 5.4 per cent at the end of the quarter.
Analysis of leverage movements
The UK leverage ratio reduced to 5.4 per cent at 31 December 2024 compared to 5.6 per cent at 31 December 2023, reflecting the increase in
the leverage exposure measure following lending growth and increases across securities financing transactions and other assets (excluding
central bank claims). The average leverage exposure measure reflected higher levels of securities financing transactions during the quarter.
26
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Climate risk
Definition
The Group defines climate risk as the risk from the impacts of climate
change and the transition to net zero (‘inbound risk’), or a result of
the Group’s response to tackling climate change and supporting the
transition to net zero (‘outbound risk’).
Embedding
Climate risk continues to be a principal risk, recognising the
importance of the topic as it progresses toward being fully embedded.
However, the approach is less mature compared to the Group’s other
principal risks and continues to evolve. Climate risk also differs from
other risks, as it can materialise through inbound risk, outbound risk
or potentially both:
Inbound risk: impacts of a risk on the Group’s balance sheet,
which can lead to a financial loss. Managing inbound risks is
critical to mitigate this potential impact, including supporting
customers to be aware of potential risks. Examples include
property devaluation, relied on as collateral, from physical and
transition risks and extreme weather events increasing
insurance losses
Outbound risk: impacts of the Group’s balance sheet or activity on
the environment driven by our strategy or purpose. Examples
include the insufficient consideration of climate risk in external
disclosure, or external perception of the Group’s actions, claims
and disclosures
Understanding the potential impacts from climate risk on the Group
and other stakeholders continues to develop through our evolving
approach to double materiality across a range of sustainability risks,
including climate risk.
Lloyds Banking Group’s climate risk policy provides an overarching
framework for managing climate risks. This aims to ensure awareness
of key climate-related risks across the different areas of the Group,
and that appropriate processes and controls are in place to mitigate
these risks. The policy includes requirements for governance, scenario
analysis and management of climate risks, as well as governance
requirements for different aspects of Lloyds Banking Group’s net zero
strategy. Activity across the Group to meet these requirements is
actively monitored, including through the development of the Group’s
climate risk profile.
The impacts from climate risk largely manifest through other principal
risks. Therefore, the Group aims to ensure that consideration of
climate risk is reflected within its approach for managing other
principal risks.
Exposures
Climate risks arise through two channels, physical and transition risks,
with various methods used to help identify and assess the Group’s
potential exposure.
Examples of how the Group seeks to understand physical risks include
identifying areas at high risk of flooding and assessing our potential
exposure to flood risk across our mortgage portfolio. Flood risk and
coastal erosion is discussed in more detail in the Lloyds Banking Group
sustainability report 2024 on page 133.
Examples of how the Group seeks to understand transition risks
include:
For Commercial Banking lending, the Group’s ESG tool assesses
exposure to the impact of climate risk for specific customers as
part of the credit decisioning process
For Retail lending, energy efficiency is assessed for the Homes
portfolio via energy performance certificates (EPC)
Transition risks have been assessed to have more short to medium
term impacts, although are particularly dependent on the extent of
government policies to meet climate commitments on limiting future
global warming. However, current modelling approaches suggest
significant impacts relating to physical risks will be longer term,
although there are industry-wide weaknesses in determining the
economic impact of physical risk. Addressing these gaps might
increase the estimated impact of physical risk and potentially reduce
the estimated timeframe to manifest.
The Group has identified the sectors at increased risk from the
impacts of climate change and continues to monitor its loans and
advances to customers in these sectors, see page 80 in the Lloyds
Banking Group sustainability report 2024.
Taken together, these assessments, supported by consideration of the
risks relating to the Group’s response to managing these, inform the
key climate-related risks at Lloyds Banking Group level. This considers
the cross-cutting impacts across other principal risks.
The materiality of the Group’s key climate risks reflects their potential
impact on the Group, as a key component of the Lloyds Banking
Group ERMF, all risks, including climate risk are assessed against a
matrix with impact and likelihood axes. Several factors are assessed
to determine the materiality of impacts.
These impacts are considered on an ongoing basis, with formal
assessment at least annually or driven more frequently by numerous
triggers. This assessment is supported by horizon scanning of climate-
related developments and additional quantitative and qualitative
analysis, such as scenario analysis results.
Measurement
The Group undertakes a number of different activities to measure the
impact of the key inbound and outbound risks relating to climate
change.
From an outbound perspective, the Group measures its emissions
relating to activities across Bank finance, supply chain and its own
operations. This provides a view on the impact of the Group’s
activities, as well as identifying areas where the Group can most
effectively reduce emissions to support the transition to net zero.
Further detail on the approach for each of these areas is provided on
pages 4 to 40 in the Lloyds Banking Group sustainability metrics basis
of reporting 2024.
From an inbound perspective, the levels of climate risk impacting
different areas of the Group are measured through a variety of metrics
and approaches. In general, quantifying the impact of the risks
associated with climate change requires scenario analysis particularly
given the different potential outcomes and time horizons over which
the risks may manifest. This is explored further in the following sub-
section, however, there are some areas where consideration of
climate-related risks is already embedded, reflecting the relative
certainty of impacts resulting from these risks.
For example, for the UK Motor Finance portfolio, the transition from
internal combustion engines (ICE) to electric vehicles (EVs) is a key
consideration in measuring residual value risk (see page 34 for credit
performance of UK Motor Finance).
Scenario analysis
Lloyds Banking Group continues to develop its climate scenario
analysis capabilities to inform analysis of climate risks, as well as to
help shape the Lloyds Banking Group strategy to reflect climate
opportunities and assess its resilience. Subsequent analysis has
focused on understanding the areas of the Group most impacted
by climate change, as well as assessing the impact from key climate-
related risks.
Separate assessments have been undertaken for the Group’s
Commercial Banking lending portfolio to identify the sectors most
exposed to climate transition risks. Whilst climate modelling is still
relatively immature, the Group has deliberately trialled different
approaches in order to understand where modelled outputs provide
consistent messages with each other, or where they disagree and
further exploration is needed.
27
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
The following chart analyses climate risk for a benchmark of sectors
using data from Planetrics, a McKinsey & Company solution1. This data
focuses on listed companies and provides a European and North
American benchmark view of each sector and is not specific to the
Group’s portfolio.
The estimated financial impacts from transition risk are modelled for
each entity.
The relative difference between this climate estimate and a baseline
provides an indicative foresight view of discounted cashflow reflecting
transition risks to 2050 and physical risks to 2080. These entity-level
Net Present Value (NPV) differences are aggregated to provide a view
aligned to lending sectors with increased transition risk in the NGFS
Phase IV Net Zero 2050 scenario.
NPV chart jpg3.jpg
1 This chart represents the Group’s own selection of applicable scenarios that is applied
to a wide set of public companies (larger than the Group’s own portfolio). The Group
is responsible for all assumptions in its scenario selection, resulting findings,
conclusions and decisions. McKinsey & Company is not an investment adviser and has
not provided any investment advice.
This is broadly comparable with the results obtained from previous
NGFS Phases, with two main comments:
The 2nd quartiles have shifted slightly left, indicating a worsening
view – which is consistent with the increasing assumptions
required for later versions of the Net Zero 2050 scenario given lack
of transition developments in the meantime
Automobile manufacturing sector outlook has improved
significantly as NGFS pathway updates reflect the switch from ICE
to EV production already witnessed
Results of scenario analysis undertaken continue to support the
conclusion that the Group has a relatively low Commercial Banking
lending exposure to sectors which experience the most significant
negative impacts when compared to exposure across those sectors
with lower expected impacts. See page 45 for further detail of the
Group’s lending by sector.
Climate risks also transmit via traded assets and the Group has
undertaken climate scenario analysis across three bespoke climate
scenarios, to understand the impact of very short-term market risk
factor shocks stemming from both physical and transition risks.
Resulting stressed valuations fell within existing stress test framework
outcomes demonstrating the resilience of existing risk management
approaches.
In 2024, Lloyds Banking Group has explored the effects of policy
tightening leading to significant increases in expectations for
managing sustainability. A scenario exercise was undertaken to assess
the potential financial impacts of a regulatory enquiry, stemming from
observed market failings, on processes associated to green and
sustainable products and services relevant to the Group’s Commercial
Banking lending activities. The scenario analysis identified actions to
further enhance the robustness of internal controls to mitigate the
risks of greenwashing.
The use of scenario analysis in assessing the impact of climate related
change on credit quality in expected credit losses (ECL) saw
improvements in both quantification and granularity for the 2024
assessment. Retail and commercial loan portfolios were assessed for
both transition and physical risks.
For transition risk, the quantitative assessment was extended to the
entire residential real estate portfolio and now assessed at account
level for sensitivity to affordability stress arising from changes in
energy efficiency regulations. Physical risk assessments were extended
from flood risk to include coastal erosion risk for residential real
estate.
For Commercial Banking lending, a top-down sector level approach
used to estimate impacts, was updated to use the latest available
NGFS scenarios. The approach combines sector level NPV impact
estimates, NGFS Gross Domestic Product (GDP) pathways, historic
impairment data and other inputs, to assess the impact of physical
and transition risks.
All the individual portfolio assessments fell below materiality
thresholds and, hence, the overall impact continues to be immaterial.
Mitigating actions
The Group manages climate-related risk in different ways across
the four key areas of climate risk identified (net zero, disclosures,
greenwashing and physical and transition risks). The following sections
provide an overview of the Group’s mitigation approach, including the
relevant cross-cutting impacts across each of these themes.
Net zero
The Group has continued to develop action plans across its systems-
led approach. Lloyds Banking Group’s climate transition plan sets out
the steps it will take to reduce emissions to net zero for its own
operations and supply chain, as well as the emissions associated with
its lending and investments portfolios. Progress against these
ambitions is monitored through Lloyds Banking Group and Ring-
Fenced Banks Net Zero Committee on a quarterly basis and the
outputs from this have been used to measure the Group’s risk
appetite for climate risk. For further details, please see Lloyds Banking
Group’s sustainability report 2024 on page 68.
Disclosures
The Group’s external disclosures are subject to a robust governance
process, including appropriate legal review. This includes an
assessment of the relevant regulatory requirements, particularly to
ensure alignment with Climate-related Financial Disclosures
requirements (CFD) and Task Force on Climate-related Financial
Disclosures (TCFD) recommendations. External disclosures will
continue to progress in line with the changing regulatory landscape,
and the Group will ensure suitable controls remain in place as these
develop. A number of topics are being introduced this year aiming to
support early compliance of the requirements of ISSB IFRS S1 and S2
expected to be endorsed by the Government in 2025.
28
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Greenwashing
The Group is enhancing its controls and processes in relation to
greenwashing, aiming to ensure communications are clear, fair and
not misleading. The Group is committed to investigating any challenge
or suggestion of greenwashing and feeding any learnings into
enhancing the control framework. Approaches the Group takes to
support transparency, accuracy and appropriateness of products,
communications and disclosures include:
External legal review on the suitability of content within the Lloyds
Banking Group sustainability report and annual report and
accounts, endeavouring to support clear and accurate disclosures
Lloyds Banking Group product policy aligned to Consumer Duty
and focus on customer outcomes
Dedicated ESG guidance to support product governance processes
Physical and transition risks
Physical and transition risks can impact different areas of the Group in
different ways, some of the key areas are elaborated on below.
Commercial Banking and Retail lending
For the Group’s Commercial Banking and Retail lending this could
manifest in potential devaluation of property or collateral or a
reduction in clients creditworthiness or affordability. The Group
continues to integrate climate risk in its credit process, in addition to
wider ESG considerations, with continued progress in 2024. This is
through a credit risk integration strategy, which includes the Lloyds
Banking Group ESG credit risk framework and policies, development
of an ESG risk indicator framework at sector level helping to inform
lending decisions as well as portfolio and case management.
Key developments in 2024 for assessing climate-related credit risks
include:
Transition risk assessments across Commercial Banking lending
have been enhanced, including updating of the assessment criteria,
incorporating methodology from our credible transition plan work,
expanding into key net zero sectors: SME agriculture and
commercial and residential real estate
Retail credit decisioning has EPC controls for new and existing
lending for buy-to-let, and property specific transition costs
considered as part of the residential affordability assessment
The mortgage origination stage requires a physical inspection for
all properties exposed to increased flood and coastal erosion risk
Further detail on management of climate-related and ESG credit
risks is provided on page 125 of the Lloyds Banking Group
sustainability report 2024.
Investments
To help manage possible impacts of physical and transition risk in the
value or availability of assets, the Group has various controls in place
including due diligence around the selection and oversight of our
external fund managers, including around ESG factors. The
investments team has dedicated fund investment leads who are
responsible for all aspects of oversight, including review of climate-
related risks and ESG factors and related data supplied by external
fund managers. The Group also utilises the ESG Tool as part of its
credit risk assessment process.
Own operations and supply chain
Climate risk is embedded in the Group’s approach for managing
operational resilience, as one of the key drivers within the Lloyds
Banking Group strategy, considering the impact on and from climate
as part of ensuring its operations remain resilient. Climate-related
impacts could affect operational resilience through properties, IT
systems, people and third party suppliers and create disruption to
services. The Group has processes in place to consider the resilience of
its property in relation to physical risks, particularly focused on its
offices, data centres and branch network, to minimise the risk of
service disruption. Insurers periodically highlight Lloyds Banking
Group’s buildings that are subject to high flood risk. These sites are
then surveyed in detail to quantify that risk and determine
appropriate flood defence mitigation. The Group proactively monitors
the temperature and humidity in its data centres, with root cause
analysis undertaken for any incidents to identify any local climate
issues and remediate. Additionally, resilient tech rooms have
been created where power, temperature and humidity are
robustly controlled.
The Group expects its third party suppliers to review their business
continuity plans and recovery strategies, ensuring these are
appropriately updated to mitigate potential risks posed by climate
change, to ensure continued provision of service and appropriate
consideration of environmental sustainability related to
their activities.
Monitoring
The Group ensures visibility and awareness of climate risks wherever
they present themselves across its risk profile, with regular reporting
and tracking of any identified risks. Management information across a
range of themes is regularly assessed to provide insight into and
oversight of management of climate risk, together with tracking
of associated action plans and identification of triggers for
reassessment. This follows appropriate Risk governance, across the
relevant business units and is reported on a regular basis through the
Lloyds Banking Group Control and Risk Environment report. This
provides insight into any changes to risk profiles together with a
rationale for awareness and scrutiny by senior leaders.
The Group also closely monitors climate-related regulatory
developments to ensure our approach meets evolving expectations.
This includes understanding the current relevant requirements,
monitoring the Group’s activity and progress against expectations, for
example Dear CEO and CFO letters, as well as horizon scanning for
new developments, such as how the ISSB IFRS disclosure standards
are adopted in the UK. The Group also seeks to include and map
regulatory obligations within its risk and control profile in support of
compliance traceability.
29
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Compliance risk
Definition
The risk of financial penalties, regulatory censure, criminal or civil
enforcement action or customer detriment as a result of failure to
identify, assess, correctly interpret, comply with, or manage
regulatory and/or legal requirements.
Level two risks
Legal, Regulatory.
Exposures
The Group does not tolerate non-adherence to regulatory and legal
requirements, and all colleagues employed by the Group are expected
to comply with legal and regulatory obligations, requirements,
statutes, voluntary codes and permissions. Where inadvertent
instances of non-compliance occur, these are addressed promptly
with corrective action to minimise exposure and avoid recurrence.
The Group remains exposed to the evolving legal and regulatory
landscape, such as changes to the regulatory framework and other
standards.
Measurement
Compliance risk is measured against the defined risk appetite metrics,
which is an assessment of material regulatory breaches and material
legal incidents.
Mitigating actions
The Group undertakes a range of key mitigating actions to manage
compliance risk. These include the following:
A Group-wide risk appetite and metrics for compliance risk
Principles are reinforced by Lloyds Banking Group policies and
standards and apply across the business, aligning to the Group risk
appetite
Business units identify, assess and implement policy and regulatory
and legal requirements and establish controls, processes,
standards and resources to ensure appropriate governance and
compliance
Business units have systems and controls to deliver against the
purpose and expectation of legal and regulatory requirements
Business units regularly produce management information to assist
in the identification of issues and test management controls are
working effectively
The Legal function provides legal advice and together, the Risk and
Legal functions provide oversight, proactive support and
constructive challenge to the wider business in identifying and
managing regulatory and legal issues
The Risk function conducts reviews to provide oversight of
regulatory compliance
Horizon scanning is conducted to identify and address changes in
regulatory and legal requirements
The Group engages with regulatory authorities and industry bodies
on forthcoming regulatory changes, market reviews and
investigations, ensuring programmes are established to deliver new
regulation and legislation
Monitoring
Material risks are managed through the relevant business committees,
with review and escalation provided through Group-level committees,
including the escalation of any material regulatory breaches or
material legal incidents. For further detail of Group-level committees,
see page 17.
Conduct risk
Definition
The risk of the Group’s activities, behaviours, strategy or business
planning, having an adverse impact on outcomes for customers,
undermining the integrity of the market or distort competition, which
could lead to regulatory censure, reputational damage or financial
loss.
Level two risks
Colleague, Customer conduct, Market.
Exposures
The Group faces significant conduct risks, which affect all aspects of
the Group’s operations and all types of customers. The introduction of
the FCA’s Consumer Duty regulation has increased expectations in
relation to customer outcomes, including how the Group
demonstrates, monitors and measures them.
The Group continues to monitor and assess potential impacts to
customers following the Court of Appeal decision on motor finance
commission arrangements, liaising closely with regulatory bodies. See
note 26 to the consolidated financial statements on page 133.
The Group is exposed to the risk of engaging in activities which could
constitute market abuse, undermine the integrity of a market in which
it is active, distorting competition or creating conflicts of interest.
There is a high level of scrutiny from regulatory bodies, the media,
politicians and consumer groups regarding financial institutions’
treatment of customers, with particular attention to those with
characteristics of vulnerability. The Group continues to apply
significant focus to its treatment of all customers, in particular those
in financial difficulties and those with characteristics of vulnerability,
to ensure good outcomes.
The Group continuously responds and adapts to market
developments that could pose heightened conduct risk, and actively
monitors for early signs of customer financial difficulty.
Other key areas of focus include transparency and fairness of pricing
communications; ensuring victims of Authorised Push Payment Fraud
receive good outcomes; and a continued mindset shift in line with
Consumer Duty requirements to improve customer outcomes
throughout the Group, with particular focus on improvements to
Group-wide reporting and monitoring.
Measurement
To articulate its conduct risk appetite, the Group has Conduct Risk
Appetite Metrics (CRAMs) throughout all business units, with
tolerances indicating where it may be operating outside its conduct
risk appetite. These contain a range of product design, sales and
process metrics (including outcome testing results) to provide a more
holistic view of conduct risks; some products also have a suite of
additional bespoke metrics.
Each of the tolerances for the metrics are agreed for the individual
product or service and are regularly tracked. At a consolidated level,
these metrics form part of the Board risk appetite. The Group has,
and continues to, evolve its approach to conduct risk measurements
to include emerging conduct themes.
Mitigating actions
The Group’s ongoing commitment to delivering a leading customer
experience is led by the Board, and supports the continued
development of our values-led culture, with customer outcomes as a
priority. There is a strong focus on strengthening the link between
actions to support conduct, culture and customer, enabling robust
control management.
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Actions to support good conduct include:
Conduct risk appetite established at Group and divisional level,
with metrics included in the Group risk appetite to ensure ongoing
focus and escalation
Conduct policies and procedures to ensure appropriate controls
and processes to deliver good customer outcomes, and support
market integrity and competition requirements
Customer needs considered through divisional customer plans,
with an integral conduct lens
Implementation of the vulnerability strategy continues, with focus
on the monitoring of vulnerable customer outcomes, providing
strategic direction and ensuring consistency of outcomes across
the Group
Robust product governance framework to ensure products
continue to offer customers fair value, and consistently meet their
needs throughout their product lifecycle
Complaints management through responding to, and learning
from, root causes of complaint volumes and Financial Ombudsman
Service (FOS) change rates
Robust colleague recruitment and training, with a continued focus
on how the Group manages colleagues’ performance with clear
customer accountabilities
Ongoing engagement with third parties involved in serving the
Group’s customers to ensure consistent delivery in line with the
Group’s own standards and expectations
Enhancements made to monitoring and testing of customer
outcomes to ensure the Group delivers good outcomes for
customers throughout the product and service lifecycle, with areas
of improvement addressed via continuous improvements to
products, services and processes
Continued focus on market conduct. The Group is a member of the
Fixed Income, Currencies and Commodities Markets Standard
Board and is committed to conducting its market activities in line
with the principles of the UK Money Markets Code, the Global
Precious Metals Code and the FX Global Code
Adoption and investment in robust change delivery methodology,
to enable the prioritisation and delivery of initiatives which
address conduct challenges
Continued focus on proactive identification and mitigation of
conduct risk in the Group’s strategy
Active engagement with regulatory bodies and other stakeholders
to develop understanding of concerns related to customer
treatment, effective competition and market integrity, to ensure
that the Group’s strategic conduct focus continues to meet
evolving stakeholder expectations
Ongoing investment in additional support for customers impacted
by the rising cost-of-living, including the ‘More Money in Your
Pocket’ and ‘MyExtras’ hub, in addition to the benefits calculator
and bill switcher tools
Continued embedding of Consumer Duty to meet the increased
expectations relating to customer outcomes
Monitoring
Conduct risk is governed through divisional risk committees and
significant issues, including thematic conduct items are escalated to
the Group Risk Committee, in accordance with the Lloyds Banking
Group’s ERMF, as well as through regular risk reporting. The risk
exposures are reported, discussed and challenged at divisional risk
committees. Remedial action is recommended, if required. All
material conduct risk events are escalated in accordance with the
Lloyds Banking Group’s operational risk management toolkit.
A number of activities support the close ongoing monitoring of
conduct risk, including:
The use of CRAMs across the Group, with an escalation route
to Board
Oversight and assurance activities across the three lines of defence
Horizon scanning to highlight developments and trends, allowing
the Group to anticipate upcoming challenges and opportunities
Credit risk
Definition
Credit risk is defined as the risk that parties with whom the Group has
contracted fail to meet their financial obligations (both on and off-
balance sheet).
Level two risks
Retail credit (page 34), Commercial credit (page 35)
Exposures
The principal sources of credit risk within the Group arise from loans
and advances, contingent liabilities, commitments and debt securities
to customers, financial institutions and sovereigns.
Credit risk arises from
Loans and advances (for example mortgages, term loans and
overdrafts) and commitments or guarantees (for example credit
instruments): The Group can experience potential losses from both
amounts advanced and commitments to extend credit to a
customer or a bank
Debt securities and derivatives. The potential financial loss to the
Group as a result of a counterparty defaulting on its obligations
Leasing arrangements where the Group is the lessor. Note 2(J) to
the consolidated financial statements on page 87 provides details
on the Group’s approach to the treatment of leases
The investments held in the Group’s defined benefit pension schemes
also expose the Group to credit risk. Note 11 to the consolidated
financial statements on page 98 provides further information on the
defined benefit pension schemes’ assets and liabilities.
Loans and advances, contingent liabilities, commitments, debt
securities and derivatives also expose the Group to refinance risk.
Refinance risk is the possibility that an outstanding exposure cannot
be repaid at its contractual maturity date. If the Group does not wish
to refinance the exposure then there is refinance risk if the obligor is
unable to repay by securing alternative finance.
The maximum credit risk exposure of the Group in the event of other
parties failing to perform their obligations is considered to be the
balance sheet carrying amount or, for non-derivative off-balance sheet
transactions and financial guarantees, their contractual nominal
amounts (not taking into account any collateral held).
Further details can be seen in note 15 to the consolidated financial
statements on page 109 and note 34 to the consolidated financial
statements on page 139.
Measurement
The process for credit risk identification, measurement and control is
integrated into the Board-approved framework for credit risk appetite
and governance.
Credit risk is measured from different perspectives using a range of
appropriate modelling and scoring techniques at a number of levels of
granularity, including total balance sheet, individual portfolio, pertinent
concentrations and individual customer – for both new business and
existing exposure. Key metrics, which may include but are not limited
to, total exposure, ECL, risk-weighted assets, new business quality,
concentration risk and portfolio performance, are reported monthly to
risk committees and forums.
Measures such as ECL, risk-weighted assets, observed credit
performance, predicted credit quality (usually from predictive credit
scoring models), collateral cover and quality, and other credit drivers
(such as cash flow, affordability, leverage and indebtedness) have been
incorporated into the Group’s credit risk management practices to
enable effective risk measurement across the Group.
The Group is strengthening its ability to manage climate-related risks
and opportunities recognising the impact of climate change on credit
risk.
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Stress testing and scenario analysis are used to estimate impairment
losses and capital demand forecasts for both regulatory and internal
purposes and to assist in the formulation and calibration of credit risk
appetite, where appropriate.
The Risk function also tests the effectiveness of credit risk
management and internal credit risk controls. This includes ensuring
that the control and monitoring of higher risk and vulnerable
portfolios and sectors is appropriate and confirming that appropriate
loss allowances for impairment are in place. Output from these
reviews helps to inform credit risk appetite, credit policy and portfolio
mandates.
As the third line of defence, Group Internal Audit undertakes regular
risk-based reviews to assess the effectiveness of credit risk
management and controls.
Mitigating actions
The Group uses a range of approaches to mitigate credit risk.
Prudent credit principles, risk policies and appetite statements:
The independent Risk function sets out the credit principles, credit
risk policies and credit risk appetite statements.
Credit risk appetite is set at Board level and is described and reported
through a suite of metrics devised from a combination of accounting
and credit portfolio performance measures, which include the use of
various credit risk rating systems as inputs and assess credit risk at a
counterparty level using three components: (i) the probability of default
by the counterparty on its contractual obligations; (ii) the current
exposures to the counterparty and their likely future development,
from which the Group derives the exposure at default; and (iii) the
likely loss ratio on the defaulted obligations, the loss given default.
Credit principles, risk policies and appetite statements are subject to
regular review and governance, with any changes subject to an
approval process. Risk teams monitor credit performance trends and
the outlook. Risk teams also test the adequacy of and adherence to
credit risk policies and processes throughout the Group. This includes
tracking portfolio performance against an agreed set of credit risk
appetite tolerances.
Robust models and controls: see model risk on page 60.
Limitations on concentration risk: there are portfolio controls on
certain industries, sectors and products to reflect risk appetite as well
as individual, customer and bank limit risk tolerances. Credit policies,
appetite statements and mandates are aligned to the Group’s risk
appetite and restrict exposure to higher risk countries and potentially
vulnerable sectors and asset classes. Exposures are monitored to
prevent both an excessive concentration of risk and single name
concentrations. These concentration risk controls are not necessarily in
the form of a maximum limit on exposure, but may instead require new
business in concentrated sectors to fulfil additional minimum policy
and/or guideline requirements. The Group’s largest credit limits are
regularly monitored by the Board Risk Committee and reported in
accordance with regulatory requirements.
Defined country risk management framework: the Group sets a broad
maximum country risk appetite. Risk-based appetite for all countries
is set within the independent Risk function, taking into account
economic, financial, political and social factors as well as the
approved business and strategic plans of the Group.
Specialist expertise: credit quality is managed and controlled by
a number of specialist units within the business and Risk function,
which provide for example: intensive management and control;
security perfection; maintenance of customer and facility records;
expertise in documentation for lending and associated products;
sector-specific expertise; and legal services applicable to the
particular market segments and product ranges offered by the Group.
Stress testing: the Group’s credit portfolios are subject to regular
stress testing, including Group-led PRA and other regulatory stress
tests focusing on individual divisions and portfolios. For further
information see page 19.
Frequent and robust credit risk assurance: An independent function
within the Risk function provides oversight that credit risk is
effectively managed and to ensure appropriate controls are in place
and being adhered to. Group Audit conducts assurance on the
effectiveness of credit risk management.
Collateral
The principal types of acceptable collateral include: residential
and commercial properties; charges over business assets such
as inventory and accounts receivable; financial instruments such
as debt securities; vehicles; cash; and guarantees received from
third parties.
The Group maintains appetite parameters on the acceptability of
specific classes of collateral.
For non-mortgage retail lending to small businesses, collateral may
include second charges over residential property and the assignment
of life cover.
Collateral held as security for financial assets other than loans and
advances is determined by the nature of the underlying exposure.
Debt securities, including treasury and other bills, are generally
unsecured, with the exception of asset-backed securities and similar
instruments such as covered bonds, which are secured by portfolios of
financial assets. Collateral is generally not held against loans and
advances to financial institutions and debt securities. Debt securities
are classified as financial assets held at amortised cost.
Securities are held as part of reverse repurchase or securities
borrowing transactions or where a collateral agreement has been
entered into under a master netting agreement. Derivative
transactions with financial institutions are typically collateralised
under a Credit Support Annex (CSA) in conjunction with the
International Swaps and Derivatives Association (ISDA) Master
Agreement. Derivative transactions with non-financial customers are
not usually supported by a CSA.
Collateral requirements at origination depend on the transaction’s
nature and the borrower’s credit quality, size and structure. For non-
retail exposures, the Group may seek:
A first charge over land and buildings owned and occupied by
the business
A debenture over the assets of a company or limited liability
partnerships
Limited personal guarantees from directors of a company or
limited liability partnership
Key man insurance
The Group has policies on acceptable collateral valuations, maximum
loan-to-value (LTV) ratios, and other criteria for application reviews.
The customer must demonstrate its ability to generate funds from
normal operations to repay a customer or counterparty’s financial
commitments, rather than relying on the disposal of collateral.
Although lending decisions are primarily based on expected cash
flows, any collateral provided may impact the pricing and other terms
of a loan or facility granted. This will have a financial impact on the
amount of net interest income recognised and on internal loss given
default estimates that contribute to the determination of asset
quality and returns.
The Group requires collateral to be valued by a qualified, independent
source at the time of borrowing, where appropriate. For retail
residential mortgages, automated valuation models may be used,
subject to accuracy and LTV limits. Third party valuations are regularly
monitored and reviewed. Collateral values are reviewed based on
lending type, collateral and account performance to ensure they remain
appropriate. If collateral value declines, the Group may seek additional
collateral or amend facility terms. The Group adjusts estimated market
values to take account of the costs of realisation and any discount
associated with the realisation of the collateral when estimating credit
losses.
In some circumstances, where the discounted value of the estimated
net proceeds from the liquidation of collateral (i.e. net of costs,
expected haircuts and anticipated changes in the value of the collateral
to the point of sale) is greater than the estimated exposure at default,
no credit losses are expected and no ECL allowance is recognised.
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
The Group considers risk concentrations by collateral providers and
collateral type with a view to ensuring that any potential undue
concentrations of risk are identified and suitably managed by changes
to strategy, policy and/or business plans.
The Group seeks to avoid correlation or wrong-way risk where
possible. Under the Group’s repurchase (repo) policy, the issuer of the
collateral and the repo counterparty should be neither the same nor
connected. The same rule applies for derivatives. The Risk function
has the necessary discretion to extend this rule to other cases where
there is significant correlation. Countries with a rating equivalent to
AA- or better may be considered to have no adverse correlation
between the counterparty domiciled in that country and the country
of risk (issuer of securities).
The Group’s credit risk disclosures for unimpaired other retail lending
show assets gross of collateral and therefore disclose the maximum loss
exposure.
During the year, £285 million of collateral was repossessed (2023: £229
million), consisting primarily of residential property.
Additional mitigation for Retail customers
The Group uses a variety of lending criteria when assessing
applications for mortgages and unsecured lending. The general
approval process uses credit acceptance scorecards and involves a
review of an applicant’s previous credit history using internal data and
information held by Credit Reference Agencies (CRA).
The Group also assesses the affordability and sustainability of lending
for each borrower. For secured lending this includes use of an
appropriate stressed interest rate scenario. Affordability assessments
for all lending are compliant with relevant regulatory and conduct
guidelines. The Group takes reasonable steps to validate information
used in the assessment of a customer’s income and expenditure.
In addition, the Group has in place quantitative limits such as
maximum limits for individual customer products, the level of
borrowing to income and the ratio of borrowing to collateral. Some of
these limits relate to internal approval levels and others are policy
limits above which the Group will typically reject borrowing
applications. The Group also applies certain criteria that are
applicable to specific products, for example applications for buy-to-
let mortgages.
For UK mortgages, the Group’s policy permits owner occupier
applications with a maximum LTV of 95 per cent. This can increase to
100 per cent for specific products where additional security is
provided by a supporter of the applicant and held on deposit by the
Group. Applications with an LTV above 90 per cent are subject to
enhanced underwriting criteria, including higher scorecard cut-offs
and loan size restrictions.
Buy-to-let mortgages within Retail are limited to a maximum loan size
of £2,000,000 and 80 per cent LTV for a single property. Buy-to-let
applications must pass a minimum rental cover ratio of 125 per cent
under stressed interest rates, after applicable tax liabilities. Portfolio
landlords (customers with four or more mortgaged buy-to-let
properties) are subject to additional controls including evaluation of
overall portfolio resilience.
The Group’s policy is to reject any application for a lending product
where a customer is registered as bankrupt or insolvent, or has a
recent County Court Judgment or financial default registered at a CRA
used by the Group above de minimis thresholds. In addition, the
Group typically rejects applicants where total unsecured debt, debt-
to-income ratios, or other indicators of financial difficulty exceed
policy limits.
Where credit acceptance scorecards are used, new models, model
changes and monitoring of model effectiveness are independently
reviewed and approved in accordance with the governance
framework set by the Group Model Governance Committee.
The Group generally does not take physical possession of properties or
other assets held as collateral and uses external agents to realise the
value as soon as practicable, generally at auction, to settle
indebtedness. Any surplus funds are returned to the borrower or are
otherwise dealt with in accordance with appropriate insolvency
regulations. In certain circumstances the Group takes physical
possession of assets held as collateral against commercial lending. In
such cases, the assets are carried on the Group’s balance sheet and are
classified according to the Group’s accounting policies.
Additional mitigation for Commercial Banking customers
Individual credit assessment and independent sanction of customer
and bank limits: with the exception of small exposures to small to
medium-sized enterprises (SME) customers where certain relationship
managers have limited delegated credit approval authority, credit risk
in commercial customer portfolios is subject to approval by the
independent Risk function, which considers the strengths and
weaknesses of individual transactions, the balance of risk and reward,
and how credit risk aligns to risk appetite.
Exposure to individual counterparties, groups of counterparties or
customer risk segments is controlled through a tiered hierarchy of
credit authority delegations and risk-based credit limit guidances per
client group for larger exposures. Approval requirements for each
decision are based on a number of factors including, but not limited
to, the transaction amount, the customer’s aggregate facilities, any
risk mitigation in place, credit policy, risk appetite, credit risk ratings
and the nature and term of the risk. The Group’s credit risk appetite
criteria for counterparty and customer loan underwriting is generally
the same as that for loans intended to be held to maturity. All hard
loan/bond underwriting must be approved by the Risk function. A
pre-approved credit matrix may be used for ‘best efforts’
underwriting.
Counterparty credit limits: limits are set against all types of exposure
in a counterparty name, in accordance with an agreed methodology
for each exposure type. This includes credit risk exposure on
individual derivatives and securities financing transactions, which
incorporates potential future exposures from market movements
against agreed confidence intervals. Aggregate facility levels by
counterparty are set and limit breaches are subject to escalation
procedures.
Daily settlement limits: settlement risk arises in any situation where a
payment in cash, securities or equities is made in the expectation of a
corresponding receipt in cash, securities or equities. Daily settlement
limits are established for each relevant counterparty to cover the
aggregate of all settlement risk arising from the Group’s market
transactions on any single day. Where possible, the Group uses
Continuous Linked Settlement in order to reduce foreign exchange
(FX) settlement risk.
Master netting agreements
It is credit policy that a Group-approved master netting agreement
must be used for all derivative and traded product transactions and
must be in place prior to trading, with separate documentation
required for each Group entity providing facilities. This requirement
extends to trades with clients and the counterparties used for the
Group’s own hedging activities, which may also include clearing trades
with Central Counterparties (CCPs).
Any exceptions must be approved by the appropriate credit approver.
Master netting agreements do not generally result in an offset of
balance sheet assets and liabilities for accounting purposes, as
transactions are usually settled on a gross basis. However, within
relevant jurisdictions and for appropriate counterparty types, master
netting agreements do reduce the credit risk to the extent that, if an
event of default occurs, all trades with the counterparty may be
terminated and settled on a net basis. The Group’s overall exposure
to credit risk on derivative instruments subject to master netting
agreements can change substantially within a short period, since this
is the net position of all trades under the master netting agreement.
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Other credit risk transfers
The Group also undertakes asset sales, credit derivative based
transactions, securitisations (including significant risk transfer
transactions), purchases of credit default swaps and purchase of
credit insurance as a means of mitigating or reducing credit risk and/
or risk concentration, taking into account the nature of assets and the
prevailing market conditions.
Monitoring
In conjunction with the Risk function, businesses identify and define
portfolios of credit and related risk exposures and the key behaviours
and characteristics by which those portfolios are managed and
monitored. This entails the production and analysis of regular
portfolio monitoring reports for review by senior management. The
Risk function in turn produces an aggregated view of credit risk across
the Group, including reports on material credit exposures,
concentrations, concerns and other management information, which
is presented to senior officers, divisional credit risk forums, business
unit committees and forums, Group Risk Committee and the Board
Risk Committee.
Models
The performance of all models used in credit risk is monitored in line
with the Group’s model governance framework – see model risk on
page 60.
Intensive care of customers in financial difficulty
The Group operates a number of solutions to assist borrowers who are
experiencing financial distress. The material elements of these
solutions through which the Group has granted a concession, whether
temporarily or permanently, are set out below.
Forbearance
The Group’s aim in offering forbearance and other assistance to
customers in financial distress is to benefit both the customer and the
Group by supporting its customers and acting in their best interests
by, where possible, bringing customer facilities back into a sustainable
position.
The Group offers a range of tools and assistance to support customers
who are encountering financial difficulties. Cases are managed on an
individual basis, with the circumstances of each customer considered
separately and the action taken judged as being appropriate and
sustainable for both the customer and the Group.
Forbearance measures consist of concessions towards a debtor that is
experiencing or about to experience difficulties in meeting its financial
commitments. This can include modification of the previous terms
and conditions of a contract or a total or partial refinancing of a
troubled debt contract, either of which would not have been required
had the debtor not been experiencing financial difficulties.
The provision and review of such assistance is controlled through the
application of an appropriate policy framework and associated
controls. Regular review of the assistance offered to customers
is undertaken to confirm that it remains appropriate, alongside
monitoring of customers’ performance and the level of
payments received.
The Group classifies accounts as forborne at the time a customer in
financial difficulty is granted a concession.
Balances in default or classified as Stage 3 are always considered to
be non-performing. Balances may be non-performing but not in
default or Stage 3, where for example they are within their non-
performing forbearance cure period.
Non-performing exposures can be reclassified as performing forborne
after a minimum 12-month cure period, providing there are no past
due amounts or concerns regarding the full repayment of the
exposure. A minimum of a further 24 months must pass from the date
the forborne exposure was reclassified as performing forborne before
the account can exit forbearance. If conditions to exit forbearance
are not met at the end of this probation period, the exposure shall
continue to be identified as forborne until all the conditions are met.
The Group’s treatment of loan renegotiations is included in the
impairment policy in note 2(H) to the consolidated financial
statements on page 85.
Customers receiving support from Government sponsored
programmes
To assist customers in financial distress, the Group participates in
Government sponsored programmes for households, including the
Income Support for Mortgage Interest programme, under which the
government pays the Group all or part of the interest on the mortgage
on behalf of the customer. This is provided as a government loan
which the customer must repay.
Lloyds Bank Group credit risk portfolio in 2024
Overview
The Group’s portfolios are well positioned to benefit from an
improved, but still challenging macroeconomic environment. The
Group maintains a prudent approach to credit risk appetite and risk
management, with strong credit origination criteria including evidence
of affordability and robust LTVs in the secured portfolios.
Asset quality remains strong with improved credit performance in the
year. In UK mortgages and unsecured portfolios, reductions in new to
arrears and flows to default have been observed in 2024.
Securitisations of primarily legacy Retail mortgages, totalling
£2.0 billion of gross loans and advances to customers, during the
second and fourth quarter will help mitigate credit risks in higher risk
assets. Credit quality remains broadly stable and resilient in
Commercial Banking. The Group continues to monitor the impacts of
the economic environment carefully through a suite of early warning
indicators and governance arrangements that ensure risk mitigating
action plans are in place to support customers and protect the
Group’s positions.
The impairment charge in 2024 was £456 million, increasing from a
charge of £343 million in 2023 which benefitted from a significant
write-back following the full repayment of debt from a single name
client. The 2024 charge included a higher credit from improvements in
the Group’s macroeconomic outlook in the year .
The Group’s probability-weighted total ECL allowance decreased in
the year to £3,453 million (31 December 2023: £4,021 million).
Group Stage 2 loans and advances to customers decreased to £44,658
million (31 December 2023: £52,973 million) and as a percentage of
total lending to 10.0 per cent (31 December 2023: 12.1  per cent). The
movement includes a redevelopment of the IFRS 9 staging approach
and criteria for UK mortgages which increased Stage 2 assets,
introduced alongside the adoption of a new ECL model, which
together are more than offset by the transfer of assets from Stage 2
to Stage 1 as a result of improvements in the Group’s macroeconomic
outlook. Of the total Group Stage 2 loans and advances to customers,
93.0 per cent are up to date (31 December 2023: 92.5 per cent). Stage
2 coverage reduced slightly to 2.9 per cent (31 December 2023: 3.1 per
cent).
Stage 3 loans and advances to customers decreased to £6,708 million
(31 December 2023: £7,131 million), and as a percentage of total
lending to 1.5 per cent (31 December 2023: 1.6 per cent), as a result of
improved credit performance in addition to the securitisation of
primarily legacy accounts within UK mortgages. The lower proportion
of UK mortgages in Stage 3 led to an increase in Group Stage 3
coverage to 16.5 per cent (31 December 2023: 15.9 per cent).
Prudent risk appetite and risk management
The Group continues to take a prudent and proactive approach to
credit risk management and credit risk appetite with robust
oversight, particularly in response to recent external events. Risk
appetite is in line with the Group’s strategy, and helps support
customers during continued economic uncertainties in both global
and domestic markets
Sector, asset and product concentrations within the portfolios are
closely monitored and controlled, with mitigating actions taken
where appropriate. Sector and product risk appetite parameters
help manage exposure to higher risk and cyclical sectors, segments
and asset classes
The Group’s effective risk management seeks to ensure early
identification and management of customers and counterparties
who may be showing signs of distress
The Group will continue to work closely with its customers to
ensure that they receive the appropriate level of support, including
but not restricted to embracing the standards outlined in the
Mortgage Charter
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Retail credit performance
The Retail portfolio has remained resilient and well positioned.
Consumers have adjusted to a higher rate environment, leading to
a reduction in arrears over the year
Robust risk management remains in place, with strong affordability
and indebtedness controls for both new and existing lending and a
prudent risk appetite approach
In 2024, reductions in new to arrears and flow to default
have been observed across UK mortgages and the
unsecured portfolios
In UK Motor Finance, new to arrears have slightly increased,
returning to pre-COVID-19 levels. Flows to default have also
increased, largely driven by a rise in Voluntary Terminations (VT) as
used car prices have fallen from their historic highs during
the pandemic
Lending strategies are under continuous review and have been
proactively managed and calibrated to the latest macroeconomic
outlook, with actions taken to enhance both living and housing
cost assumptions in affordability assessments
The Retail impairment charge in 2024 was £457 million, lower than
the charge of £831 million for 2023. This was due to a combination
of improvements in the Group’s macroeconomic outlook, notably
from improved house price growth, improvements in UK mortgages
credit performance, one-off benefits from the release of
judgemental adjustments for inflation risk and debt sale write
backs
For UK mortgages, a redevelopment of the IFRS 9 staging
approach and criteria has been introduced alongside the adoption
of a new ECL model. At 31 December 2024, the significant increase
in credit risk (SICR) quantitative trigger to transfer accounts from
Stage 1 to Stage 2 is defined as a doubling of an account’s PD since
origination. IFRS 9 staging rules and triggers for other Retail
portfolios are the same as at 31 December 2023. Retail customer
related ECL allowance as a percentage of drawn loans and
advances (coverage) is lower at 0.7 per cent (31 December 2023:
0.8 per cent)
Improvements in the Group’s macroeconomic outlook primarily in
the first half of 2024, combined with improved credit performance
have reduced Stage 2 loans and advances to 10.6 per cent of the
Retail portfolio (31 December 2023: 12.4 per cent), of which
93.0 per cent are up to date loans (31 December 2023: 92.4 per
cent). Stage 2 ECL coverage also reduced slightly to 2.4 per cent
(31 December 2023: 2.6 per cent)
Reductions within UK mortgages, as a result of improved credit
performance in addition to securitisation activity resulted in a
decrease in Retail Stage 3 loans and advances to 1.3 per cent of
total loans and advances (31 December 2023: 1.4 per cent)
Retail Stage 3 ECL coverage increased slightly to 14.3 per cent
(31 December 2023: 14.1 per cent) as a result of a lower proportion
of UK mortgages, which typically require lower coverage compared
to other Retail products due to security, and higher Stage 3 ECL
coverage for unsecured products following debt sale activity,
which has reduced recoveries balances reported at net realisable
value
UK mortgages
The UK mortgages portfolio increased to £313.1 billion
(31 December 2023: £307.3 billion), net of the impact of the
securitisation of primarily legacy Retail mortgages, totalling
£2.0 billion of gross loans and advances to customers, in the
second and fourth quarters. Growth was largely driven by strong
application volumes in the first half of the year
The UK mortgages portfolio is well positioned with low arrears and
a strong loan to value (LTV) profile. The Group has actively
improved the quality of the portfolio in recent years using robust
affordability and credit controls, while the balances of higher risk
legacy vintages have continued to reduce
New to arrears in the UK mortgages portfolio have reduced in
2024. The Group continues to proactively monitor existing
mortgage customers as they reach the end of fixed rate deals with
customers’ behaviour remaining stable
The impairment credit of £194 million in 2024 increased, compared
to a credit of £51 million for 2023, due to improvements in the
economic outlook and stronger credit performance
Stage 2 loans and advances have reduced following improvements
to both the Group’s macroeconomic outlook and observed
performance, which more than offset the redevelopment of the
IFRS 9 staging approach and criteria following adoption of a new
ECL model. At 31 December 2024, the significant increase in credit
risk (SICR) quantitative trigger to transfer accounts from Stage 1 to
Stage 2 is defined as a doubling of an account’s PD since
origination
Stage 3 loans and advances have reduced due to improved credit
performance and securitisation activity over 2024, which also
reduces total ECL. Improvements to the macroeconomic outlook
result in a reduction in Stage 3 ECL coverage
Credit cards
Credit card balances increased to £16.2 billion (2023: £15.8 billion),
due to higher demand for new cards and increased spend
The credit card portfolio is a prime book. New to arrears have
reduced in 2024 and repayment rates remained strong
The impairment charge of £270 million for 2024 is lower than the
charge of £457 million in 2023 due to improvements in the Group’s
macroeconomic outlook, in combination with the release of ECL
judgemental adjustments raised to cover the risk of increased
defaults from high inflation and cost-of-living pressures, given
continued resilient portfolio performance. Total ECL coverage also
reduced as a result
Improvements in the macroeconomic outlook also result in
a reduction in Stage 2 loans and advances, and Stage 2
ECL coverage
Resilient observed arrears and default performance has also
resulted in lower Stage 3 loans and advances. Stage 3 ECL
coverage was higher at 50.2 per cent (2023: 45.8 per cent)
following debt sale activity
UK unsecured loans and overdrafts
UK unsecured loans and overdraft balances increased to £10.7
billion (2023: £8.5 billion) driven by organic balance growth and
lower repayments following a securitisation in the fourth quarter
of 2023
Impairment charge of £272 million for 2024 is slightly higher than
the charge of £251 million for 2023, largely in overdrafts where
one-off benefits in the prior year have not repeated
Improvements in the macroeconomic outlook and release of
inflation judgements reduce total ECL and coverage. Stage 3 ECL
coverage increased following debt sale activity
UK Motor Finance
The UK Motor Finance portfolio increased in 2024 to £16.4 billion
(31 December 2023: £15.7 billion)
Updates to Residual Value (RV) and Voluntary Termination (VT)
provisions held against Personal Contract Purchase (PCP) and Hire
Purchase (HP) lending are included within ECL and the impairment
charge. A combination of more stable used car prices in the second
half of the year, as well as utilisation of existing judgement within
this item results in a small decrease to £178 million as at 31
December 2024 (31 December 2023: £187 million)
The impairment charge of £116 million for 2024 is lower than the
charge of £169 million for 2023 as RV provisions decreased slightly
year on year
Other
Other loans and advances increased to £18.0 billion
(31 December 2023: £16.6 billion), largely driven by the European
business
Stage 3 loans and advances remained broadly stable at
0.8 per cent of total loans and advances (31 December 2023:
0.9 per cent)
There was an impairment credit of £7 million in 2024, compared to
a £5 million charge in 2023
35
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Commercial Banking credit performance
Portfolio overview
The Commercial portfolio credit quality remains broadly stable
and resilient, benefitting from a focused approach to credit
underwriting and monitoring standards and proactively managing
exposures to higher risk and cyclical sectors
Credit strategies and policy remains robust, and within our credit
risk appetite tolerances. The Group remains cognisant of the
continued relatively elevated interest rate environment especially
in, but not limited to, sectors reliant upon consumer discretionary
spend. Risks include reduced asset valuation and refinancing risk, a
reduction in market liquidity impacting credit supply and pressure
on both household discretionary spending and business margins
The Group continues to review segments of our portfolios as
appropriate, ensuring our credit strategies, appetite, sensitivities
and mitigation action plans are up-to-date and suitable for rapid
action in response to both risks and opportunities, whilst
supporting clients in the right way and ensuring the Group is
protected. Credit Playbooks are in place to cover a number of
potential credit downside scenarios and these are regularly
reassessed and updated. Early warning indicators and risk appetite
metrics are in place to ensure the Group tracks and takes action,
where appropriate, including credit risk mitigation
The Group continues to provide early support to customers in
difficulty through focused risk management via its Watchlist and
Business Support framework. The Group also balances prudent risk
appetite with ensuring support for financially viable clients
Impairments
There was a net impairment charge of £2 million, compared to a
net credit of £483 million in the prior year which included a
significant one-off write-back. Excluding this write-back, the
charge is lower given strong asset quality, a one-off release from
model loss rates and updated economic scenarios. The charge on
new and existing Stage 3 clients remains low
Customer related ECL allowances decreased in the year to
£972 million at 31 December 2024 (31 December 2023:
£1,137 million), driven by the one-off release in Commercial Banking
from loss rates used in the impairment model in the first half of the
year
Stage 2 loans and advances decreased to £5,061 million
(31 December 2023: £7,793 million), largely as a result of
improvements in the Group’s macroeconomic outlook, with
93.0 per cent of Stage 2 balances up to date (31 December 2023:
92.7 per cent). Stage 2 as a proportion of total loans and advances
to customers decreased to 7.1 per cent (31 December 2023: 10.6
per cent). Stage 2 ECL coverage was higher at 6.2 per cent
(31 December 2023: 5.7 per cent), with the increase in coverage
largely as a result of a reduction in Stage 2 balances
Stage 3 loans and advances decreased to £1,831 million
(31 December 2023: £2,058 million) and as a proportion of total
loans and advances to customers, reduced to 2.6 per cent
(31 December 2023: 2.8 per cent). Stage 3 ECL coverage increased
to 22.6 per cent (31 December 2023: 20.4 per cent)
36
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Total Group assets
Impairment charge (credit) by division
Loans and
advances to
customers
£m
Loans and
advances to
banks
£m
Debt securities
£m
Financial
assets at
fair value
through other
comprehensive
income
£m
Undrawn
balances
£m
2024
£m
2023
£m
UK mortgages
(188)
(6)
(194)
(51)
Credit cards
286
(16)
270
457
UK unsecured loans and
overdrafts
264
8
272
251
UK Motor Finance
115
1
116
169
Other
(7)
(7)
5
Retail
470
(13)
457
831
Business and Commercial Banking
47
47
114
Corporate and Institutional
Banking
(1)
(5)
(4)
(35)
(45)
(597)
Commercial Banking
46
(5)
(4)
(35)
2
(483)
Other
(3)
(3)
(5)
Total impairment charge (credit)
516
(5)
(4)
(3)
(48)
456
343
Total expected credit loss allowance
At 31 Dec
2024
£m
At 31 Dec
2023
£m
Customer related balances
Drawn
3,183
3,693
Undrawn
265
314
3,448
4,007
Loans and advances to banks
1
6
Debt securities
4
8
Total expected credit loss allowance
3,453
4,021
Movements in total expected credit loss allowance
Opening ECL at
31 Dec 2023
£m
Write-offs
and other 1
£m
Income
statement
charge (credit)
£m
Net ECL
increase
(decrease)
£m
Closing ECL at
31 Dec 2024
£m
UK mortgages2
1,115
(69)
(194)
(263)
852
Credit cards
810
(406)
270
(136)
674
UK unsecured loans and overdrafts
515
(264)
272
8
523
UK Motor Finance
342
(98)
116
18
360
Other
88
(14)
(7)
(21)
67
Retail
2,870
(851)
457
(394)
2,476
Business and Commercial Banking
537
(99)
47
(52)
485
Corporate and Institutional Banking
613
(77)
(45)
(122)
491
Commercial Banking
1,150
(176)
2
(174)
976
Other
1
3
(3)
1
Total3
4,021
(1,024)
456
(568)
3,453
1 Contains adjustments in respect of purchased or originated credit-impaired financial assets.
2Includes £53 million within write-offs and other relating to the securitisation of primarily legacy Retail mortgages, totalling £2.0 billion of gross loans and advances to customers.
3Total ECL includes £5 million relating to other non-customer-related assets (31 December 2023: £14 million).
37
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Group loans and advances to customers
The following pages contain analysis of the Group’s loans and advances to customers by sub-portfolio. Loans and advances to customers are
categorised into the following stages:
Stage 1 assets comprise of newly originated assets (unless purchased or originated credit-impaired), as well as those which have not
experienced a significant increase in credit risk. These assets carry an expected credit loss allowance equivalent to the expected credit
losses that result from those default events that are possible within 12 months of the reporting date (12 month expected credit losses).
Stage 2 assets are those which have experienced a significant increase in credit risk since origination. These assets carry an expected credit
loss allowance equivalent to the expected credit losses arising over the lifetime of the asset (lifetime expected credit losses).
Stage 3 assets have either defaulted or are otherwise considered to be credit-impaired. These assets carry a lifetime expected credit loss.
Purchased or originated credit-impaired assets (POCI) are those that have been originated or acquired in a credit-impaired state. This
includes within the definition of credit-impaired the purchase of a financial asset at a deep discount that reflects impaired credit losses.
Loans and advances to customers and expected credit loss allowance
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 2
as % of
total
%
Stage 3
as % of
total
%
At 31 December 2024
Loans and advances to customers
UK mortgages
269,760
32,995
4,166
6,207
313,128
10.5
1.3
Credit cards
13,534
2,441
265
16,240
15.0
1.6
UK unsecured loans and overdrafts
9,314
1,247
175
10,736
11.6
1.6
UK Motor Finance
13,897
2,398
124
16,419
14.6
0.8
Other
17,373
516
147
18,036
2.9
0.8
Retail
323,878
39,597
4,877
6,207
374,559
10.6
1.3
Business and Commercial Banking
25,785
3,172
1,197
30,154
10.5
4.0
Corporate and Institutional Banking
38,176
1,889
634
40,699
4.6
1.6
Commercial Banking
63,961
5,061
1,831
70,853
7.1
2.6
Other1
(322)
(322)
Total gross lending
387,517
44,658
6,708
6,207
445,090
10.0
1.5
ECL allowance on drawn balances
(730)
(1,159)
(1,107)
(187)
(3,183)
Net balance sheet carrying value
386,787
43,499
5,601
6,020
441,907
Customer related ECL allowance (drawn and undrawn)
UK mortgages
55
275
335
187
852
Credit cards
210
331
133
674
UK unsecured loans and overdrafts
170
235
118
523
UK Motor Finance2
173
115
72
360
Other
16
14
37
67
Retail
624
970
695
187
2,476
Business and Commercial Banking
132
187
166
485
Corporate and Institutional Banking
112
127
248
487
Commercial Banking
244
314
414
972
Other
Total
868
1,284
1,109
187
3,448
Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers
Stage 1
%
Stage 2
%
Stage 3
%
POCI
%
Total
%
UK mortgages
0.8
8.0
3.0
0.3
Credit cards
1.6
13.6
50.2
4.2
UK unsecured loans and overdrafts
1.8
18.8
67.4
4.9
UK Motor Finance
1.2
4.8
58.1
2.2
Other
0.1
2.7
25.2
0.4
Retail
0.2
2.4
14.3
3.0
0.7
Business and Commercial Banking
0.5
5.9
13.9
1.6
Corporate and Institutional Banking
0.3
6.7
39.1
1.2
Commercial Banking
0.4
6.2
22.6
1.4
Other
Total
0.2
2.9
16.5
3.0
0.8
1 Contains central fair value hedge accounting adjustments.
2 UK Motor Finance includes £178 million relating to provisions against residual values of vehicles subject to finance leases.
38
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 2
as % of
total
%
Stage 3
as % of
total
%
At 31 December 2023
Loans and advances to customers
UK mortgages
256,596
38,533
4,337
7,854
307,320
12.5
1.4
Credit cards
12,625
2,908
284
15,817
18.4
1.8
UK unsecured loans and overdrafts
7,103
1,187
196
8,486
14.0
2.3
UK Motor Finance
13,541
2,027
112
15,680
12.9
0.7
Other
15,898
525
144
16,567
3.2
0.9
Retail
305,763
45,180
5,073
7,854
363,870
12.4
1.4
Business and Commercial Banking
27,525
4,458
1,530
33,513
13.3
4.6
Corporate and Institutional Banking
35,872
3,335
528
39,735
8.4
1.3
Commercial Banking
63,397
7,793
2,058
73,248
10.6
2.8
Other1
(301)
(301)
Total gross lending
368,859
52,973
7,131
7,854
436,817
12.1
1.6
ECL allowance on drawn balances
(885)
(1,462)
(1,133)
(213)
(3,693)
Net balance sheet carrying value
367,974
51,511
5,998
7,641
433,124
Customer related ECL allowance (drawn and undrawn)
UK mortgages
169
376
357
213
1,115
Credit cards
234
446
130
810
UK unsecured loans and overdrafts
153
244
118
515
UK Motor Finance2
188
91
63
342
Other
20
21
47
88
Retail
764
1,178
715
213
2,870
Business and Commercial Banking
139
231
167
537
Corporate and Institutional Banking
135
212
253
600
Commercial Banking
274
443
420
1,137
Other
Total
1,038
1,621
1,135
213
4,007
Customer related ECL allowance (drawn and undrawn) as a percentage of loans and advances to customers
Stage 1
%
Stage 2
%
Stage 3
%
POCI
%
Total
%
UK mortgages
0.1
1.0
8.2
2.7
0.4
Credit cards
1.9
15.3
45.8
5.1
UK unsecured loans and overdrafts
2.2
20.6
60.2
6.1
UK Motor Finance
1.4
4.5
56.3
2.2
Other
0.1
4.0
32.6
0.5
Retail
0.2
2.6
14.1
2.7
0.8
Business and Commercial Banking
0.5
5.2
10.9
1.6
Corporate and Institutional Banking
0.4
6.4
47.9
1.5
Commercial Banking
0.4
5.7
20.4
1.6
Other
Total
0.3
3.1
15.9
2.7
0.9
1Contains central fair value hedge accounting adjustments.
2UK Motor Finance includes £187 million relating to provisions against residual values of vehicles subject to finance leases.
39
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Stage 2 loans and advances to customers and expected credit loss allowance
Up to date
1-30 days past due2
Over 30 days past due
PD movements
Other1
Gross
lending
£m
ECL3
£m
As % of
gross
lending
%
Gross
lending
£m
ECL3
£m
As % of
gross
lending
%
Gross
lending
£m
ECL3
£m
As % of
gross
lending
%
Gross
lending
£m
ECL3
£m
As % of
gross
lending
%
At 31 December 2024
UK mortgages
28,909
191
0.7
1,869
38
2.0
1,240
22
1.8
977
24
2.5
Credit cards
2,174
248
11.4
149
43
28.9
83
24
28.9
35
16
45.7
UK unsecured loans
and overdrafts
630
129
20.5
439
52
11.8
131
36
27.5
47
18
38.3
UK Motor Finance
1,192
49
4.1
1,029
30
2.9
141
25
17.7
36
11
30.6
Other
103
3
2.9
321
7
2.2
37
2
5.4
55
2
3.6
Retail
33,008
620
1.9
3,807
170
4.5
1,632
109
6.7
1,150
71
6.2
Business and
Commercial Banking
2,445
154
6.3
426
18
4.2
176
10
5.7
125
5
4.0
Corporate and
Institutional Banking
1,818
123
6.8
23
1
4.3
6
42
3
7.1
Commercial Banking
4,263
277
6.5
449
19
4.2
182
10
5.5
167
8
4.8
Total
37,271
897
2.4
4,256
189
4.4
1,814
119
6.6
1,317
79
6.0
At 31 December 2023
UK mortgages
26,665
146
0.5
9,024
133
1.5
1,771
52
2.9
1,073
45
4.2
Credit cards
2,612
345
13.2
145
49
33.8
115
34
29.6
36
18
50.0
UK unsecured loans
and overdrafts
756
148
19.6
279
46
16.5
112
34
30.4
40
16
40.0
UK Motor Finance
735
30
4.1
1,120
30
2.7
138
21
15.2
34
10
29.4
Other
125
5
4.0
295
7
2.4
52
5
9.6
53
4
7.5
Retail
30,893
674
2.2
10,863
265
2.4
2,188
146
6.7
1,236
93
7.5
Business and
Commercial Banking
3,455
202
5.8
590
17
2.9
253
8
3.2
160
4
2.5
Corporate and
Institutional Banking
3,175
208
6.6
2
0.0
27
3
11.1
131
1
0.8
Commercial Banking
6,630
410
6.2
592
17
2.9
280
11
3.9
291
5
1.7
Total
37,523
1,084
2.9
11,455
282
2.5
2,468
157
6.4
1,527
98
6.4
1 Includes forbearance, client and product-specific indicators not reflected within quantitative PD assessments.
2Includes assets that have triggered PD movements, or other rules, given that being 1 to 29 days in arrears in and of itself is not a Stage 2 trigger.
3Expected credit loss allowance on loans and advances to customers (drawn and undrawn).
The Group’s assessment of a significant increase in credit risk, and resulting categorisation of Stage 2, includes customers moving into early
arrears as well as a broader assessment that an up to date customer has experienced a level of deterioration in credit risk since origination. A
more sophisticated assessment is required for up to date customers, which varies across divisions and product type. This assessment
incorporates specific triggers such as a significant proportionate increase in probability of default relative to that at origination, recent arrears,
forbearance activity, internal watch lists and external bureau flags. Up to date exposures in Stage 2 are likely to show lower levels of expected
credit loss (ECL) allowance relative to those that have already moved into arrears given that an arrears status typically reflects a stronger
indication of future default and greater likelihood of credit losses.
40
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Movements in balances for the year ended 31 December 2024 (audited)
The movement tables below are compiled by comparing the position at the end of the period to that at the beginning of the year. Transfers
between stages are deemed to have taken place at the start of the reporting period, with all other movements shown in the stage in which the
asset is held at the end of the period. Purchased or originated credit-impaired are not transferable.
Additions and repayments comprise new loans originated and repayments of outstanding balances throughout the reporting period.
The Group’s impairment charge comprises impact of transfers between stages, other changes in credit quality and additions and repayments.
Advances written off have first been transferred to Stage 3 and then acquired a full allowance through other changes in credit quality.
Recoveries of amounts previously written off are shown at the full recovered value, with a corresponding entry in repayments and release of
allowance through other changes in credit quality.
Movements in the gross carrying amount for loans and advances to customers and for allowance for expected credit losses were as follows:
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
At 1 January 2024
368,859
52,973
7,131
7,854
436,817
885
1,462
1,133
213
3,693
Exchange and other adjustments1
(801)
(19)
(67)
11
(876)
(11)
(5)
26
52
62
Transfers to Stage 1
25,616
(25,566)
(50)
413
(404)
(9)
Transfers to Stage 2
(25,376)
25,950
(574)
(66)
126
(60)
Transfers to Stage 3
(1,102)
(2,102)
3,204
(20)
(177)
197
Net change in ECL due to transfers
(292)
339
303
350
Impact of transfers between stages2
(862)
(1,718)
2,580
35
(116)
431
350
Other changes in credit quality2
(127)
(65)
708
66
582
Additions and repayments
21,038
(6,098)
(1,597)
(909)
12,434
(47)
(105)
(193)
(71)
(416)
Charge (credit) to the income
statement
(139)
(286)
946
(5)
516
Disposals and derecognition3
(717)
(480)
(366)
(694)
(2,257)
(5)
(12)
(25)
(18)
(60)
Advances written off
(1,173)
(55)
(1,228)
(1,173)
(55)
(1,228)
Recoveries of amounts previously
written off
200
200
200
200
At 31 December 2024
387,517
44,658
6,708
6,207
445,090
730
1,159
1,107
187
3,183
Allowance for
expected credit losses
(730)
(1,159)
(1,107)
(187)
(3,183)
Net carrying amount
386,787
43,499
5,601
6,020
441,907
Drawn ECL coverage4 (%)
0.2
2.6
16.5
3.0
0.7
1Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in
respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination,
the increase in its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2Includes a credit for methodology and model changes of £24 million, split by stage as £20 million credit for Stage 1, £2 million charge for Stage 2, £15 million charge for Stage 3 and
£21 million credit for POCI.
3Relates to the securitisations of primarily legacy Retail mortgages.
4Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
41
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
At 1 January 2023
362,766
60,103
7,611
9,622
440,102
678
1,792
1,752
253
4,475
Exchange and other adjustments1
2,432
(8)
(8)
18
2,434
(8)
(1)
106
67
164
Transfers to Stage 1
18,355
(18,317)
(38)
393
(385)
(8)
Transfers to Stage 2
(17,963)
18,545
(582)
(53)
121
(68)
Transfers to Stage 3
(1,214)
(2,507)
3,721
(13)
(223)
236
Net change in ECL due to transfers
(254)
401
312
459
Impact of transfers between stages
(822)
(2,279)
3,101
73
(86)
472
459
Other changes in credit quality2
106
(103)
802
8
813
Additions and repayments
8,168
(3,951)
(2,338)
(1,043)
836
90
(81)
(862)
(81)
(934)
Charge (credit) to the income
statement
269
(270)
412
(73)
338
Disposals and derecognition3
(3,685)
(892)
(122)
(743)
(5,442)
(54)
(59)
(24)
(34)
(171)
Advances written off
(1,229)
(1,229)
(1,229)
(1,229)
Recoveries of amounts previously
written off
116
116
116
116
At 31 December 2023
368,859
52,973
7,131
7,854
436,817
885
1,462
1,133
213
3,693
Allowance for
expected credit losses
(885)
(1,462)
(1,133)
(213)
(3,693)
Net carrying amount
367,974
51,511
5,998
7,641
433,124
Drawn ECL coverage4 (%)
0.2
2.8
15.9
2.7
0.8
1Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in
respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination,
the increase in its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2Includes a charge for methodology and model changes of £60 million, split by stage as £96 million charge for Stage 1, £33 million credit for Stage 2, £1 million credit for Stage 3 and
£2 million credit for POCI.
3Relates to the securitisations of primarily legacy Retail mortgages and Retail unsecured loans.
4Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
The total allowance for expected credit losses includes £178 million (2023: £187 million) in respect of residual value impairment and voluntary
terminations within the Group’s UK Motor Finance business.
Movements in Retail UK mortgage balances were as follows:
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Retail – UK mortgages
At 1 January 2024
256,596
38,533
4,337
7,854
307,320
161
374
357
213
1,105
Exchange and other adjustments1
12
12
1
50
53
104
Transfers to Stage 1
21,133
(21,105)
(28)
135
(132)
(3)
Transfers to Stage 2
(21,077)
21,473
(396)
(11)
32
(21)
Transfers to Stage 3
(299)
(1,341)
1,640
(39)
39
Net change in ECL due to transfers
(122)
114
56
48
Impact of transfers between stages2
(243)
(973)
1,216
2
(25)
71
48
Other changes in credit quality2
(94)
(19)
26
66
(21)
Additions and repayments
13,901
(4,143)
(956)
(910)
7,892
(16)
(48)
(79)
(72)
(215)
Charge (credit) to the income
statement
(108)
(92)
18
(6)
(188)
Disposals and derecognition3
(494)
(422)
(366)
(694)
(1,976)
(1)
(9)
(25)
(18)
(53)
Advances written off
(70)
(55)
(125)
(70)
(55)
(125)
Recoveries of amounts previously
written off
5
5
5
5
At 31 December 2024
269,760
32,995
4,166
6,207
313,128
53
273
335
187
848
Allowance for expected credit losses
(53)
(273)
(335)
(187)
(848)
Net carrying amount
269,707
32,722
3,831
6,020
312,280
Drawn ECL coverage4 (%)
0.8
8.0
3.0
0.3
1Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in
respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination,
the increase in its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2Includes a charge for methodology and model changes of £7 million, split by stage as £1 million charge for Stage 1, £9 million charge for Stage 2, £18 million charge for Stage 3 and
£21 million credit for POCI.
3Relates to the securitisations of primarily legacy Retail mortgages.
4Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
42
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Retail – UK mortgages
At 1 January 2023
257,517
41,783
3,416
9,622
312,338
91
552
311
253
1,207
Exchange and other adjustments1
18
18
53
67
120
Transfers to Stage 1
12,202
(12,195)
(7)
66
(65)
(1)
Transfers to Stage 2
(12,673)
13,103
(430)
(7)
33
(26)
Transfers to Stage 3
(450)
(1,656)
2,106
(66)
66
Net change in ECL due to transfers
(50)
91
115
156
Impact of transfers between stages
(921)
(748)
1,669
9
(7)
154
156
Other changes in credit quality2
43
(104)
14
8
(39)
Additions and repayments
1,202
(1,955)
(553)
(1,043)
(2,349)
19
(49)
(67)
(81)
(178)
Charge (credit) to the income
statement
71
(160)
101
(73)
(61)
Disposals and derecognition3
(1,202)
(547)
(94)
(743)
(2,586)
(1)
(18)
(7)
(34)
(60)
Advances written off
(108)
(108)
(108)
(108)
Recoveries of amounts previously
written off
7
7
7
7
At 31 December 2023
256,596
38,533
4,337
7,854
307,320
161
374
357
213
1,105
Allowance for expected credit losses
(161)
(374)
(357)
(213)
(1,105)
Net carrying amount
256,435
38,159
3,980
7,641
306,215
Drawn ECL coverage4 (%)
0.1
1.0
8.2
2.7
0.4
1Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in
respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination,
the increase in its carrying value is recognised within gross loans, rather than as a negative impairment allowance.
2Includes a charge for methodology and model changes of £74 million, split by stage as £91 million charge for Stage 1, £12 million credit for Stage 2, £3 million credit for Stage 3 and
£2 million credit for POCI.
3Relates to the securitisations of primarily legacy Retail mortgages.
4Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Credit quality of loans and advances to customers (audited)
The analysis of lending has been prepared based on the division in which the asset is held, with the business segment in which the exposure is
recorded reflected in the ratings system applied. The internal credit ratings systems used by the Group differ between Retail and Commercial,
reflecting the characteristics of these exposures and the way that they are managed internally; these credit ratings are set out below. All
probabilities of default (PDs) include forward-looking information and are based on 12-month values, with the exception of credit-impaired.
Retail
Commercial
Quality classification
IFRS 9 PD range
Quality classification
IFRS 9 PD range
RMS 1–3
0.000.80%
CMS 1–5
0.0000.100%
RMS 4–6
0.814.50%
CMS 6–10
0.1010.500%
RMS 7–9
4.5114.00%
CMS 11–14
0.5013.000%
RMS 10
14.0120.00%
CMS 15–18
3.00120.000%
RMS 11–13
20.0199.99%
CMS 19
20.00199.999%
RMS 14
100.00%
CMS 20–23
100.000%
Stage 3 assets include balances of £297 million (2023: £364 million) (with outstanding amounts due of £971 million (2023: £1,167 million)) which
have been subject to a partial write-off and where the Group continues to enforce recovery action.
There were no modifications of Stage 2 and Stage 3 assets during the year (2023: £180 million). No material gain or loss was recognised by the
Group.
As at 31 December 2024 there were no (2023: £5 million) significant assets that had been previously modified while classified as Stage 2 or
Stage 3 and were classified as Stage 1.
43
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Drawn exposures
Allowance for expected credit losses
Gross drawn exposures and expected credit
loss allowance (audited)
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
At 31 December 2024
Retail – UK mortgages
RMS 1–3
261,101
21,213
282,314
46
143
189
RMS 4–6
8,487
7,384
15,871
6
51
57
RMS 7–9
112
1,296
1,408
15
15
RMS 10
17
273
290
5
5
RMS 11–13
43
2,829
2,872
1
59
60
RMS 14
4,166
6,207
10,373
335
187
522
269,760
32,995
4,166
6,207
313,128
53
273
335
187
848
Retail – credit cards
RMS 1–3
5,058
10
5,068
11
1
12
RMS 4–6
7,231
1,129
8,360
87
52
139
RMS 7–9
1,242
859
2,101
51
107
158
RMS 10
3
149
152
31
31
RMS 11–13
294
294
106
106
RMS 14
265
265
133
133
13,534
2,441
265
16,240
149
297
133
579
Retail – UK unsecured loans and overdrafts
RMS 1–3
1,207
2
1,209
3
3
RMS 4–6
7,020
484
7,504
98
27
125
RMS 7–9
1,047
307
1,354
40
36
76
RMS 10
31
111
142
3
22
25
RMS 11–13
9
343
352
1
112
113
RMS 14
175
175
118
118
9,314
1,247
175
10,736
145
197
118
460
Retail – UK Motor Finance
RMS 1–3
8,967
760
9,727
112
16
128
RMS 4–6
4,487
1,169
5,656
55
40
95
RMS 7–9
440
247
687
2
17
19
RMS 10
46
46
6
6
RMS 11–13
3
176
179
36
36
RMS 14
124
124
72
72
13,897
2,398
124
16,419
169
115
72
356
Retail – other
RMS 1–3
15,163
238
15,401
4
4
8
RMS 4–6
2,132
190
2,322
11
7
18
RMS 7–9
78
72
150
3
3
RMS 10
7
7
RMS 11–13
9
9
RMS 14
147
147
37
37
17,373
516
147
18,036
15
14
37
66
Total Retail
323,878
39,597
4,877
6,207
374,559
531
896
695
187
2,309
Commercial Banking
CMS 1–5
13,611
13,611
1
1
CMS 6–10
13,819
53
13,872
11
11
CMS 11–14
31,534
1,052
32,586
121
21
142
CMS 15–18
4,997
3,234
8,231
66
165
231
CMS 19
722
722
77
77
CMS 20–23
1,831
1,831
412
412
63,961
5,061
1,831
70,853
199
263
412
874
Other1
(322)
(322)
Total loans and advances to
customers
387,517
44,658
6,708
6,207
445,090
730
1,159
1,107
187
3,183
1Drawn exposures include centralised fair value hedge accounting adjustments.
44
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Drawn exposures
Allowance for expected credit losses
Gross drawn exposures and expected credit
loss allowance (audited)
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
At 31 December 2023
Retail – UK mortgages
RMS 1–3
226,740
4,137
230,877
123
37
160
RMS 4–6
29,637
27,037
56,674
38
151
189
RMS 7–9
219
2,713
2,932
37
37
RMS 10
590
590
13
13
RMS 11–13
4,056
4,056
136
136
RMS 14
4,337
7,854
12,191
357
213
570
256,596
38,533
4,337
7,854
307,320
161
374
357
213
1,105
Retail – credit cards
RMS 1–3
3,906
5
3,911
9
9
RMS 4–6
7,159
1,248
8,407
91
65
156
RMS 7–9
1,548
1,069
2,617
67
145
212
RMS 10
12
220
232
1
50
51
RMS 11–13
366
366
141
141
RMS 14
284
284
130
130
12,625
2,908
284
15,817
168
401
130
699
Retail – UK unsecured loans and overdrafts
RMS 1–3
638
1
639
1
1
RMS 4–6
5,152
250
5,402
83
18
101
RMS 7–9
1,256
473
1,729
44
50
94
RMS 10
43
135
178
4
27
31
RMS 11–13
14
328
342
2
113
115
RMS 14
196
196
118
118
7,103
1,187
196
8,486
134
208
118
460
Retail – UK Motor Finance
RMS 1–3
9,979
569
10,548
142
12
154
RMS 4–6
2,791
998
3,789
41
29
70
RMS 7–9
769
228
997
3
13
16
RMS 10
63
63
7
7
RMS 11–13
2
169
171
30
30
RMS 14
112
112
63
63
13,541
2,027
112
15,680
186
91
63
340
Retail – other
RMS 1–3
13,613
240
13,853
3
4
7
RMS 4–6
2,197
186
2,383
16
13
29
RMS 7–9
86
86
4
4
RMS 10
6
6
RMS 11–13
88
7
95
RMS 14
144
144
47
47
15,898
525
144
16,567
19
21
47
87
Total Retail
305,763
45,180
5,073
7,854
363,870
668
1,095
715
213
2,691
Commercial Banking
CMS 1–5
12,145
12,145
2
2
CMS 6–10
17,259
121
17,380
23
23
CMS 11–14
30,366
2,793
33,159
129
57
186
CMS 15–18
3,618
4,070
7,688
63
229
292
CMS 19
9
809
818
81
81
CMS 20–23
2,058
2,058
418
418
63,397
7,793
2,058
73,248
217
367
418
1,002
Other1
(301)
(301)
Total loans and advances to customers
368,859
52,973
7,131
7,854
436,817
885
1,462
1,133
213
3,693
1Drawn exposures include centralised fair value hedge accounting adjustments.
45
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Concentrations of exposure (audited)
The Group’s management of concentration risk includes portfolio controls on certain industries, sectors and products to reflect risk appetite as
well as individual, customer and bank limit risk tolerances. Credit policies and appetite statements are aligned to the Group’s risk appetite and
restrict exposure to higher risk countries and potentially vulnerable sectors and asset classes. Exposures are monitored to prevent both an
excessive concentration of risk and single name concentrations. The Group’s largest credit limits are regularly monitored by the Board Risk
Committee and reported in accordance with regulatory requirements. As part of its credit risk policy, the Group considers sustainability risk
(which incorporates environmental (including climate), social and governance) in the assessment of Commercial Banking facilities.
At 31 December 2024 the most significant concentrations of exposure were in mortgages.
2024
£m
2023
£m
Agriculture, forestry and fishing
6,338
7,038
Construction1
3,056
3,528
Energy and water supply
4,509
3,437
Financial, business and other services
22,013
21,441
Lease financing
16,907
17,135
Manufacturing
3,651
3,763
Mining and Quarrying1
168
328
Personal:
Mortgages2
329,270
322,113
Other
27,966
25,287
Postal and telecommunications
3,062
2,482
Property companies
18,848
20,292
Transport, distribution and hotels
9,302
9,973
Total loans and advances to customers before allowance for impairment losses
445,090
436,817
Allowance for impairment losses (note 19 to the consolidated financial statements, page 122)
(3,183)
(3,693)
Total loans and advances to customers
441,907
433,124
1Mining and quarrying, previously included within construction, is now presented separately.
2Includes both UK and overseas mortgage balances.
46
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Retail UK mortgages loans and advances to customers 1
At 31 Dec
2024
£m
At 31 Dec
2023
£m
Mainstream
261,630
254,416
Buy-to-let
47,984
47,549
Specialist
3,514
5,355
Total
313,128
307,320
1Balances include the impact of HBOS-related acquisition adjustments.
Interest-only UK mortgages
The Group provides interest-only mortgages to owner occupier mortgage customers whereby only payments of interest are made for the term
of the mortgage with the customer responsible for repaying the principal outstanding at the end of the loan term. At 31 December 2024, owner
occupier interest-only balances as a proportion of total owner occupier balances had reduced to 12.5 per cent (31 December 2023: 14.4 per
cent). The average indexed loan to value remained low at 36.5 per cent (31 December 2023: 36.9 per cent).
For existing interest-only mortgages, a contact strategy is in place during the term of the mortgage to ensure that customers are aware of their
obligations to repay the principal upon maturity of the loan.
Treatment strategies are in place to help customers anticipate and plan for repayment of capital at maturity and support those who may have
difficulty in repaying the principal amount. A dedicated specialist team supports customers who have passed their contractual maturity date
and are unable to fully repay the principal. A range of treatments are offered to customers based on their individual circumstances to create
fair and sustainable outcomes.
Analysis of owner occupier interest-only UK mortgages
At 31 Dec
2024
At 31 Dec
2023
Interest-only balances (£m)
33,023
37,278
Stage 1 (%)
39.4
54.7
Stage 2 (%)1
44.5
27.6
Stage 3 (%)
5.5
5.6
Purchased or originated credit-impaired (%)
10.6
12.1
Average loan to value (%)
36.5
36.9
Maturity profile (£m)
Due
1,541
1,982
Within 1 year
1,012
1,129
2 to 5 years
8,209
8,803
6 to 10 years
10,772
13,918
Greater than 10 years
11,489
11,446
Past term interest-only balances (£m)2
1,490
1,925
Stage 1 (%)
0.3
0.2
Stage 2 (%)
8.6
9.3
Stage 3 (%)
51.8
52.2
Purchased or originated credit-impaired (%)
39.3
38.4
Average loan to value (%)
35.2
35.2
Negative equity (%)
2.5
2.6
1Includes adoption of a new ECL model, where the significant increase in credit risk (SICR) quantitative Stage 2 trigger is now defined as a doubling of an account’s PD since
origination.
2 Balances where all interest-only elements have moved past term. Some may subsequently have had a term extension, so are no longer classed as due.
Collateral held as security for Retail loans and advances to customers (audited)
UK mortgages
An analysis by loan-to-value ratio of the Group’s UK residential mortgage lending is provided below. The value of collateral used in determining
the loan-to-value ratios has been estimated based upon the last actual valuation, adjusted to take into account subsequent movements in
house prices. The market takes into account many factors, including environmental considerations such as flood risk and energy efficient
additions, in arriving at the value of a home.
In some circumstances, where the discounted value of the estimated net proceeds from the liquidation of collateral (i.e. net of costs, expected
haircuts and anticipated changes in the value of the collateral to the point of sale) is greater than the estimated exposure at default, no credit
losses are expected and no ECL allowance is recognised.
47
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
At 31 December 2024
At 31 December 2023
Gross drawn exposures
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Less than 60 per cent
145,055
27,851
3,014
5,066
180,986
145,285
22,739
3,209
6,209
177,442
60 per cent to 70 per cent
49,746
2,954
643
638
53,981
47,950
6,015
673
959
55,597
70 per cent to 80 per cent
40,292
1,168
307
232
41,999
36,413
4,506
290
333
41,542
80 per cent to 90 per cent
30,215
898
123
109
31,345
20,949
2,821
87
142
23,999
90 per cent to 100 per cent
4,420
109
36
63
4,628
5,981
2,389
30
91
8,491
Greater than 100 per cent
32
15
43
99
189
18
63
48
120
249
Total
269,760
32,995
4,166
6,207
313,128
256,596
38,533
4,337
7,854
307,320
UK mortgages energy performance certificate analysis
The energy performance certificate (EPC) profile of the security associated with the Group’s UK mortgage portfolio is shown below:
EPC profile
A
£m
B
£m
C
£m
D
£m
E
£m
F
£m
G
£m
Unrated
properties
£m
Total
At 31 December 2024
1,113
40,469
68,128
97,392
33,021
6,293
1,370
65,342
313,128
At 31 December 2023
971
41,250
64,466
95,958
34,327
6,663
1,465
62,220
307,320
The above data is sourced using the latest available government EPC information. The Group has no EPC data available for 20.9 per cent
(2023: 20.2 per cent) of the UK mortgage portfolio; this portion is classified as unrated properties.
EPC ratings are not considered to be a material credit risk factor, and do not form part of the Group’s credit risk calculations.
Other Retail lending
At 31 December 2024, Stage 1 and Stage 2 other retail gross lending amounted to £60,720 million (2023: £55,814 million). Stage 3 other retail
lending amounted to £351 million, net of an impairment allowance of £360 million (2023: £378 million, net of an impairment allowance of £358
million).
Lending decisions are predominantly based on an obligor’s ability to repay rather than reliance on the disposal of any security provided. Where
the lending is secured, collateral values are rigorously assessed at the time of loan origination and are thereafter monitored in accordance with
business unit credit policy.
The Group’s credit risk disclosures for unimpaired other retail lending show assets gross of collateral and therefore disclose the maximum loss
exposure.
Retail forbearance
The basis of disclosure for forbearance is aligned to the FINREP reporting definitions. On a statutory basis forbearance for the major retail
portfolios reduced £332 million to £3,550 million. This reduction was primarily driven by the impact of removing balances following UK
mortgage securitisations.
The main customer treatments included are: repair, where arrears are added to the loan balance and the arrears position cancelled; instances
where there are suspensions of interest and/or capital repayments; and refinance.
Retail forborne loans and advances (audited)
Total
£m
Of which
Stage 2
£m
Of which
Stage 3
£m
Of which POCI
£m
Expected
credit losses
as a % of
total loans
and advances
which are
forborne1
%
At 31 December 2024
UK mortgages
2,984
618
1,161
1,146
4.8
Credit cards
271
87
149
33.0
UK unsecured loans and overdrafts
291
119
108
34.7
UK Motor Finance
4
3
1
18.8
Total
3,550
827
1,419
1,146
9.4
At 31 December 2023
UK mortgages
3,269
695
1,008
1,552
4.1
Credit cards
268
89
141
32.5
UK unsecured loans and overdrafts
275
107
108
35.5
UK Motor Finance
70
36
32
30.7
Total
3,882
927
1,289
1,552
8.8
1 Expected credit losses as a percentage of total loans and advances which are forborne are calculated excluding loans in recoveries for credit cards and loans and overdrafts (31
December 2024: £33 million; 31 December 2023: £55 million).
Commercial Banking forbearance
Commercial Banking forborne loans and advances reduced by £169 million to £2,210 million in 2024 (2023: £2,379 million), of which
£1,776 million were in Stage 3 (2023: £1,936 million).
48
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Collateral held as security for Commercial Banking loans and advances to customers (audited)
Stage 1 and Stage 2 secured lending
For Stage 1 and Stage 2 secured commercial lending, the Group reports assets gross of collateral and therefore discloses the maximum
loss exposure.
Stage 1 and Stage 2 secured commercial lending is predominantly managed on a cash flow basis. On occasion, it may include an assessment of
underlying collateral, although, for Stage 3 lending, this will not always involve assessing it on a fair value basis. No aggregated collateral
information for the entire unimpaired secured commercial lending portfolio is provided to key management personnel.
Stage 3 secured lending
The value of collateral is re-evaluated and its legal soundness reassessed if there is observable evidence of distress of the borrower;
this evaluation is used to determine potential loss allowances and management’s strategy to try to either repair the business or recover
the debt.
At 31 December 2024, Stage 3 secured commercial lending amounted to £447 million, net of an impairment allowance of £149 million (2023:
£503 million, net of an impairment allowance of £133 million). The fair value of the collateral held in respect of impaired secured commercial
lending was £563 million (2023: £598 million). In determining the fair value of collateral, no specific amounts have been attributed to the costs
of realisation. For the purposes of determining the total collateral held by the Group in respect of impaired secured commercial lending, the
value of collateral for each loan has been limited to the principal amount of the outstanding advance in order to eliminate the effects of any
over-collateralisation and to provide a clearer representation of the Group’s exposure.
Commercial Banking UK Real Estate
Commercial Banking UK Real Estate, including Business Banking, committed drawn lending stood at £9.1 billion at 31 December 2024 (net of
£3.1 billion exposures subject to protection through Significant Risk Transfer (SRT) securitisations). In addition there are undrawn lending
facilities of £2.1 billion to predominantly investment grade rated corporate customers
The Group classifies Direct Real Estate as exposure which is directly supported by cash flows from property activities (as opposed to trading
activities, such as hotels, care homes and housebuilders). Exposures of £6.9 billion to social housing providers are also excluded
Despite some headwinds, the portfolio continues to remain well positioned and proactively managed with conservative LTVs, good levels of
interest cover and appropriate risk mitigants in place
Overall performance of the portfolio has remained resilient. The Group has seen improvement within this sector, with a decrease in cases in
its more closely monitored Watchlist category and limited flow into Business Support
Lending continues to be heavily weighted towards investment real estate (c.91 per cent) rather than development. Of these investment
exposures, c.92 per cent have an LTV of less than 70 per cent, with an average LTV of 45 per cent. The average interest cover ratio was 3.1
times, with 72 per cent having interest cover of above 2 times. In SME, LTV at origination has been typically limited to c.55 per cent, given
prudent repayment cover criteria (including notional base rate stress)
The portfolio is well diversified with limited speculative commercial development lending (defined as property not pre-sold or pre-let at a
level to fully repay the debt or generate sufficient income to meet the minimum interest cover requirements). Approximately 49 per cent of
exposures relate to commercial real estate, including c.12 per cent secured by office assets, c.10 per cent by retail assets and c.12 per cent by
industrial assets. Approximately 51 per cent of the portfolio relates to residential
Recognising this is a cyclical sector, total (gross and net) and asset type quantum caps are in place to control origination and exposure.
Focus remains on the UK market and new business has been written in line with a prudent risk appetite criteria including conservative LTVs,
strong quality of income and proven management teams. Development lending criteria also includes maximum loan to gross development
value and maximum loan to cost, with funding typically only released against completed work, as confirmed by the Group’s monitoring
quantity surveyor
Use of SRT securitisations also act as a risk mitigant in this portfolio, with run-off of these carefully managed and sequenced
LTV – UK Real Estate
At 31 December 20241,2
At 31 December 20231,2
Stage 1 and 2
£m
Stage 3
£m
Total
£m
Total
%
Stage 1 and 2
£m
Stage 3
£m
Total
£m
Total
%
Investment exposures
Less than 60 per cent
5,607
25
5,632
81.1
6,043
39
6,082
77.8
60 per cent to 70 per cent
674
47
721
10.4
955
9
964
12.3
70 per cent to 80 per cent
140
4
144
2.1
175
13
188
2.4
80 per cent to 100 per cent
26
67
93
1.3
96
45
141
1.8
100 per cent to 120 per cent
4
6
10
0.1
19
64
83
1.1
120 per cent to 140 per cent
4
4
0.1
11
38
49
0.6
Greater than 140 per cent
10
81
91
1.3
20
20
40
0.5
Unsecured3
253
253
3.6
269
269
3.4
Subtotal
6,718
230
6,948
100.0
7,588
228
7,816
100.0
Other4
512
67
579
369
19
388
Total investment
7,230
297
7,527
7,957
247
8,204
Development
731
8
739
776
71
847
Government Supported Lending5
87
1
88
158
3
161
Total
8,048
306
8,354
8,891
321
9,212
1 Excludes Commercial Banking UK Real Estate exposures subject to protection through Significant Risk Transfer transactions.
2 Excludes £0.7 billion in Business Banking (31 December 2023: £0.5 billion).
3 Predominantly Investment grade corporate CRE lending where the Group is relying on the corporate covenant.
4 Mainly lower value transactions where LTV not recorded on Commercial Banking UK Real Estate monitoring system.
5 Bounce Back Loan Scheme (BBLS) and Coronavirus Business Interruption Loan Scheme (CBILS) lending to real estate clients, where government guarantees are in place at 100 per
cent and 80 per cent, respectively.
49
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Credit quality of other financial assets (audited)
Cash and balances at central banks
Significantly all of the Group’s cash and balances at central banks are due from the Bank of England or the Deutsche Bundesbank.
Loans and advances to banks
Significantly all of the Group’s loans and advances to banks are assessed as Stage 1.
Reverse repurchase agreement held at amortised cost
All of the Group’s reverse repurchase agreements held at amortised cost are assessed as Stage 1.
Debt securities held at amortised cost
At 31 December 2024 significantly all of the Group’s debt securities held at amortised cost are investment grade.
Debt securities at fair value through other comprehensive income (excluding equity shares)
At 31 December 2024 significantly all of the Group’s debt securities at fair value through other comprehensive income are investment grade.
Derivative assets
The Group reduces exposure to credit risk by using master netting agreements and by obtaining collateral in the form of cash or highly liquid
securities.
2024
2023
Investment
grade1
£m
Other
£m
Total
£m
Investment
grade1
£m
Other
£m
Total
£m
Trading and other
3,294
126
3,420
1,763
193
1,956
Hedging
3
5
8
72
72
3,297
131
3,428
1,835
193
2,028
Due from fellow Lloyds Banking Group undertakings
807
1,137
Total derivative financial instruments
4,235
3,165
1Credit ratings equal to or better than ‘BBB’.
Financial guarantees and loan commitments
The level of expected credit loss allowance associated with the Group’s financial guarantees and loan commitments is not significant.
At 31 December 2024 £124,308 million were Stage 1 (2023: £116,583 million), £4,505 million were Stage 2 (2023: £5,948 million), £95 million
were Stage 3 (2023: £144 million) and £39 million was POCI (2023: £58 million). Against these exposures the Group held an allowance for
expected credit losses of £265 million (2023: £314 million).
Further details can be seen in note 19 to the consolidated financial statements on page 122.
Collateral held as security for other financial assets
The Group does not hold collateral against debt securities which are classified as financial assets held at amortised cost.
Reverse repurchase agreements
The Group enters into reverse repurchase agreements which are accounted for as collateralised loans (see note 15 to the consolidated financial
statements on page 109).
Derivative assets, after offsetting of amounts under master netting arrangements
The Group reduces exposure to credit risk by using master netting agreements and by obtaining collateral in the form of cash or highly liquid
securities (see note 15 to the consolidated financial statements on page 109).
Irrevocable loan commitments and other credit-related contingencies
The Group holds irrevocable loan commitments and other credit-related contingencies (see note 34 to the consolidated financial statements
on page 139). Collateral is held as security, in the event that lending is drawn down, on £17,181 million (2023: £13,036 million) of these balances.
Collateral pledged as security
The Group pledges assets primarily for repurchase agreements and securities lending transactions which are generally conducted under terms
that are usual and customary for standard secured borrowing contracts.
Repurchase agreements
The Group enters into repurchase agreements which include amounts due under the Bank of England’s Term Funding Scheme with additional
incentives for SMEs (TFSME) (see note 15 to the consolidated financial statements on page 109).
Securities lending transactions
The following on-balance sheet financial assets have been lent to counterparties under securities lending transactions:
2024
£m
2023
£m
Financial assets at fair value through other comprehensive income
5,714
4,532
In addition, securities held as collateral in the form of stock borrowed amounted to £10,329 million (2023: £7,979 million). Of this amount,
£3,970 million (2023: £2,087 million) had been resold or repledged as collateral for the Group’s own transactions.
These transactions were generally conducted under terms that are usual and customary for standard secured lending activities.
Securitisations and covered bonds
In addition to the assets detailed above, the Group also holds assets that are encumbered through the Group’s asset-backed conduits and its
securitisation and covered bond programmes. Further details of these assets are provided in note 24 to the consolidated financial statements
on page 132.
50
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Economic crime risk
Definition
Economic crime risk is defined as the risk that the Group implements
ineffective policies, systems, processes and controls to prevent,
detect and respond to the risk of fraud and/or financial crime
resulting in increased losses, regulatory censure, fines and/or adverse
publicity in the UK or other jurisdictions in which the Group operates.
Level two risks
Anti-bribery, Anti-money laundering, Fraud, Sanctions.
Exposures
The principal economic crime risks to the Group are:
Bribery, including corruption
Money laundering, including terrorist financing, proliferation
financing and the facilitation of tax evasion
Sanctions
Fraud, including intentional acts of deception or omission by
external or internal parties
All of the above could result in customer detriment, financial loss,
regulatory censure and/or reputational damage.
Measurement
Economic crime risk is measured using a suite of indicators reported
to the business unit and the Group economic crime risk management
committees. These indicators cover a variety of areas such as the
effectiveness of key controls, breaches and suspicious activity report
(SAR) disclosure rates. All are subject to ongoing monitoring, including
a periodic review of metrics and thresholds to ensure they remain
appropriate.
Mitigating actions
The Group adopts a risk-based approach to mitigate the economic
crime risks it faces, reflecting the current and emerging economic
crime risks within the market, and industry best practice.
Lloyds Banking Group-wide economic crime prevention policies and
standards are maintained to ensure compliance with legal and
regulatory requirements. The completion of a Lloyds Banking Group-
wide risk assessment and implementation of a comprehensive suite of
systems, processes and controls support the Group to detect and
prevent the use of its banking network for money laundering, bribery,
fraud and activities prohibited by legal and regulatory sanctions.
Lloyds Banking Group’s economic crime prevention policy requires all
colleagues to complete mandatory economic crime training on at
least an annual basis. Lloyds Banking Group’s fraud awareness
programme remains a key component of the fraud control
environment.
In addition to its efforts internally, Lloyds Banking Group also plays an
active role with other financial institutions, industry bodies and law
enforcement agencies in identifying and combatting economic crime,
including:
Being an active member of UK Finance, where Lloyds Banking
Group sits as a member of the Economic Crime Product and
Service Board and has representation on key economic crime
committees and panels. This includes attending the sanctions and
fraud committees, which are the industries’ primary forums for
considering and responding to issues of mutual interest
Collaborating with peer banks and the National Crime Agency
(NCA) to further develop ‘Data Fusion’, a ground-breaking, public-
private partnership, which brings together targeted bank
transaction data from seven banks and overlays it with NCA
criminal intelligence as a key strategic capability in the UK’s efforts
to disrupt serious and organised crime
Continuing a strategic partnership with City of London Police and
helping fund the Dedicated Card and Payment Crime Unit to
investigate fraud cases, target and where appropriate arrest and
gain prosecution of offenders
Being a member of Cifas, the largest cross-sector fraud
sharing organisation
Chairing the Joint Money Laundering Intelligence Taskforce senior
management team and providing expert resource to the National
Economic Crime Centre’s operational threat cells
Monitoring
Monitoring and reporting of economic crime risk is undertaken at
Board, Group and business unit and functional committees. Each
committee monitors key risks, control effectiveness, indicators,
events, risk appetite metrics and the results of independent testing
conducted by the Risk function and Group Audit. Money Laundering
Reporting Officer (MLRO) reports are also presented annually to the
relevant Group-level risk committees.
51
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Liquidity risk
Definition
Liquidity Risk is the risk that the Group does not have sufficient
financial resources to meet its commitments when they fall due or can
only secure them at excessive cost.
Level two risks
Funding, Liquidity.
Exposures
Liquidity exposure represents the potential stressed outflows in any
future period less expected inflows. The Group considers liquidity
exposure from both an internal and a regulatory perspective.
Measurement
Liquidity risk is managed through a series of measures, tests and reports
that are primarily based on contractual maturities with behavioural
overlays as appropriate. The Group undertakes quantitative and
qualitative analysis of the behavioural aspects of its assets and liabilities
in order to reflect their expected behaviour.
Mitigating actions
The Group manages and monitors liquidity risks and ensures that
liquidity risk management systems and arrangements are adequate
with regard to the internal risk appetite, Group strategy and regulatory
requirements. Liquidity policies and procedures are subject to
independent internal oversight by Risk. Overseas branches and
subsidiaries of the Group may also be required to meet the liquidity
requirements of the entity’s domestic country. Management of liquidity
requirements is performed by the overseas branch or subsidiary in line
with Group policy. The Group plans funding requirements over its
planning period, combining business as usual and stressed conditions.
The Group manages its liquidity position paying regard to its internal
risk appetite, Liquidity Coverage Ratio (LCR) and Net Stable Funding
Ratio (NSFR) as required by the PRA, the Capital Requirements
Directive (CRD V) and the Capital Requirements Regulation (UK CRR)
liquidity requirements .
The Group’s liquidity and funding position is underpinned by its
significant customer deposit base and is supported by strong
relationships across customer segments. The Group has consistently
observed that, in aggregate, the retail deposit base provides a stable
source of funding. Funding concentration by counterparty, currency
and tenor is monitored on an ongoing basis and, where
concentrations do exist, these are managed as part of the planning
process and limited by the internal liquidity and funding risk
monitoring framework, with analysis regularly provided to
senior management.
To assist in managing the balance sheet, the Group operates a
Liquidity Transfer Pricing (LTP) process which: allocates relevant
interest expenses from the centre to the Group’s banking businesses
within the internal management accounts; helps drive the correct
inputs to customer pricing; and is consistent with regulatory
requirements. LTP makes extensive use of behavioural maturity
profiles, taking account of expected customer loan prepayments and
stability of customer deposits, modelled on historic data.
The Group can monetise liquid assets quickly, either through the
repurchase agreements (repo) market or through outright sale. In
addition, the Group has pre-positioned a substantial amount of assets
at the Bank of England’s Discount Window Facility which can be used
to access additional liquidity in a time of stress. The Group considers
diversification across geography, currency, markets and tenor when
assessing appropriate holdings of liquid assets. The Group’s liquid
asset buffer is available for deployment at immediate notice, subject
to complying with regulatory requirements.
Monitoring
Daily monitoring and control processes are in place to address internal
and regulatory liquidity requirements. The Group monitors a range of
market and internal early warning indicators on a daily basis for early
signs of liquidity risk in the market or specific to the Group. This
captures regulatory metrics as well as metrics the Group considers
relevant for its liquidity profile. These are a mixture of quantitative
and qualitative measures, including: daily variation of customer
balances; changes in maturity profiles; funding concentrations;
changes in LCR outflows; credit default swap (CDS) spreads; and basis
risks.
The Group carries out internal stress testing of its liquidity and
potential cash flow mismatch position over both short (up to one
month) and longer-term horizons against a range of scenarios forming
an important part of the internal risk appetite. The scenarios and
assumptions are reviewed at least annually to ensure that they
continue to be relevant to the nature of the business, including
reflecting emerging horizon risks to the Group. For further information
on the Group’s 2024 liquidity stress testing results refer to page 54.
The Group maintains a Liquidity Contingency Framework as part of
the wider Recovery Plan which is reviewed and tested regularly and is
designed to identify emerging liquidity concerns at an early stage, so
that mitigating actions can be taken to avoid a more serious crisis
developing. The Liquidity Contingency Framework has a foundation of
robust and regular monitoring and reporting of key performance
indicators, early warning indicators and risk appetite by both Group
Corporate Treasury (GCT) and Risk up to and including Board level.
Where movements in any of these metrics and indicator suites point
to a potential issue, SME teams and their directors will escalate this
information as appropriate.
Liquidity and Funding management in 2024
The Group has maintained its strong funding and liquidity position
with a loan to deposit ratio of 98 per cent as at 31 December 2024 (31
December 2023: 98 per cent).
The Group’s liquid assets continue to exceed the regulatory minimum
and internal risk appetite, with a liquidity coverage ratio (LCR) of 137
per cent (based on a monthly simple average over the previous 12
months) as at 31 December 2024 (31 December 2023: 133 per cent).
Overall, wholesale funding totalled £62.6 billion as at 31 December
2024 (31 December 2023: £70.4 billion). The total outstanding
amount of drawings from the Bank of England’s Term Funding Scheme
with additional incentives for SMEs (TFSME) has reduced to £21.9
billion at 31 December 2024 (31 December 2023: £30.0 billion), with
maturities in 2025, 2027 and beyond. The repayment of TFSME has
been factored into the Group’s funding plans.
The Group’s credit ratings are well positioned and continue to reflect
the strength of the Group’s management and franchise, along with its
robust financial performance, capital and funding position. In
November 2024, Fitch upgraded the Group’s ratings by one notch.
52
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Lloyds Bank Group funding requirements and sources
At 31 Dec
2024
£bn
At 31 Dec
2023
£bn
Lloyds Bank Group funding position
Cash and balances at central banks
42.4
57.9
Loans and advances to banks
6.4
8.8
Loans and advances to customers
441.9
433.1
Reverse repurchase agreements – non-trading
44.1
32.8
Debt securities at amortised cost
11.9
12.5
Financial assets at fair value through other comprehensive income
30.3
27.3
Other assets1
34.2
33.0
Total Lloyds Bank Group assets
611.2
605.4
Less other liabilities1
(25.2)
(12.6)
Funding requirements
586.0
592.8
Wholesale funding2
62.6
70.4
Customer deposits
451.8
442.0
Repurchase agreements – non-trading
7.7
7.7
Term Funding Scheme with additional incentives for SMEs (TFSME)
21.9
30.0
Deposits from fellow Lloyds Banking Group undertakings
2.3
2.3
Total equity
39.7
40.4
Funding sources
586.0
592.8
1Other assets and other liabilities primarily include the fair value of derivative assets and liabilities.
2The Group’s definition of wholesale funding aligns with that used by other international market participants; including bank deposits, debt securities in issue and subordinated
liabilities. Excludes balances relating to margins of £0.6 billion (31 December 2023: £0.6 billion).
Reconciliation of Lloyds Bank Group funding to the balance sheet (audited)
Included
in funding
analysis
£bn
Cash collateral
received
£bn
Fair value
and other
accounting
methods 1
£bn
Balance
sheet
£bn
At 31 December 2024
Deposits from banks
2.3
0.6
0.2
3.1
Debt securities in issue at amortised cost
51.6
(6.3)
45.3
Subordinated liabilities
8.7
(1.5)
7.2
Total wholesale funding
62.6
0.6
Customer deposits
451.8
451.8
Total
514.4
0.6
At 31 December 2023
Deposits from banks
2.8
0.6
0.2
3.6
Debt securities in issue at amortised cost
59.3
(6.9)
52.4
Subordinated liabilities
8.3
(1.4)
6.9
Total wholesale funding
70.4
0.6
Customer deposits
442.0
442.0
Total
512.4
0.6
1 Includes the unamortised HBOS acquisition adjustments on subordinated liabilities, the fair value movements on liabilities held at fair value through profit or loss, and hedge
accounting adjustments that impact the accounting carrying value of the liabilities.
53
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Analysis of 2024 total wholesale funding by residual maturity
Up to 1
month
£bn
1 to 3
months
£bn
3 to 6
months
£bn
6 to 9
months
£bn
9 to 12
months
£bn
1 to 2
years
£bn
2 to 5
years
£bn
Over
five years
£bn
Total
at 31 Dec
2024
£bn
Total
at 31 Dec
2023
£bn
Deposits from banks
1.5
0.4
0.4
2.3
2.8
Debt securities in issue:
Certificates of deposit
issued
0.2
0.2
0.1
0.5
3.1
Commercial paper
0.3
2.4
1.0
0.7
0.6
5.0
8.4
Senior unsecured notes
issued
0.9
2.7
0.5
1.3
0.3
3.1
8.2
12.1
29.1
29.5
Covered bonds
2.0
0.2
2.7
6.5
0.3
11.7
14.1
Securitisation notes
0.7
4.0
0.6
5.3
4.2
1.2
7.3
1.9
2.0
1.0
6.5
18.7
13.0
51.6
59.3
Subordinated liabilities
0.6
0.3
0.5
2.6
4.7
8.7
8.3
Total wholesale funding1
2.7
8.3
2.6
2.0
1.0
7.0
21.3
17.7
62.6
70.4
1The Group’s definition of wholesale funding aligns with that used by other international market participants; including bank deposits, debt securities in issue and subordinated
liabilities. Excludes balances relating to margins of £0.6 billion (31 December 2023: £0.6 billion).
Total wholesale funding by currency (audited)
Sterling
£bn
US dollar
£bn
Euro
£bn
Other
currencies
£bn
Total
£bn
At 31 December 2024
16.2
25.4
14.4
6.6
62.6
At 31 December 2023
19.8
25.7
17.8
7.1
70.4
Analysis of 2024 term issuance (audited)
Sterling
£bn
US dollar
£bn
Euro
£bn
Other
currencies
£bn
Total
£bn
Securitisation1
1.3
0.4
1.7
Covered bonds
0.4
0.4
Senior unsecured notes
4.7
1.3
0.5
6.5
Subordinated liabilities
0.4
0.4
Additional tier 1
1.2
1.2
Total issuance
1.3
5.9
2.1
0.9
10.2
1Includes significant risk transfer securitisations.
54
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Liquidity portfolio
At 31 December 2024, the Group had £107.5 billion of highly liquid unencumbered LCR eligible assets, based on a monthly simple average over
the previous 12 months post any liquidity haircuts (31 December 2023: £108.7 billion), of which £102.4 billion was LCR level 1 eligible (31
December 2023: £104.4 billion) and £5.1 billion was LCR level 2 eligible (31 December 2023: £4.3 billion). These assets are available to meet
cash and collateral outflows and regulatory requirements.
LCR eligible assets
Average
20241
£bn
20231
£bn
Cash and central bank reserves
43.0
63.3
High quality government/MDB/agency bonds2
56.6
38.4
High quality covered bonds
2.8
2.7
Level 1
102.4
104.4
Level 23
5.1
4.3
Total LCR eligible assets
107.5
108.7
1 Eligible assets are calculated as an average of month-end observations over the previous 12 months post any liquidity haircuts.
2 Designated multilateral development banks (MDB).
3 Includes Level 2A and Level 2B.
LCR eligible assets by currency
Sterling
£bn
US dollar
£bn
Euro
£bn
Other
currencies
£bn
Total
£bn
At 31 December 2024
Level 1
79.0
11.5
11.9
102.4
Level 2
2.4
1.5
0.8
0.4
5.1
Total1
81.4
13.0
12.7
0.4
107.5
At 31 December 2023
Level 1
76.1
8.9
19.4
104.4
Level 2
1.7
1.9
0.5
0.2
4.3
Total1
77.8
10.8
19.9
0.2
108.7
1 Eligible assets are calculated as an average of month-end observations over the previous 12 months post any liquidity haircuts.
The Group also has a significant amount of non-LCR eligible liquid assets which are eligible for use in a range of central bank or similar facilities.
Future use of such facilities will be based on prudent liquidity management and economic considerations, having regard to external market
conditions.
Stress testing results
Internal liquidity stress testing results at 31 December 2024 (based on a monthly simple average over the previous 12 months) showed that the
Group had liquidity resources representing 127 per cent of modelled outflows under the Group’s most severe liquidity stress scenario (31
December 2023: 127 per cent).
This scenario includes a two notch downgrade of the Group’s current long-term debt rating and accompanying one notch short-term
downgrade implemented instantaneously by all major rating agencies.
55
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Maturities of financial instrument liabilities (audited)
The table below analyses financial instrument liabilities of the Group on an undiscounted future cash flow basis according to contractual
maturity, into relevant maturity groupings based on the remaining period at the balance sheet date; balances with no fixed maturity are
included in the over 5 years category.
Up to 1
month
£m
1 to 3
months
£m
3 to 12
months
£m
1 to 5
years
£m
Over 5
years
£m
Total
£m
At 31 December 2024
Deposits from banks
1,769
342
504
520
105
3,240
Customer deposits
421,432
8,810
18,855
3,396
218
452,711
Repurchase agreements
8,974
5,169
15,300
9,416
38,859
Financial liabilities at fair value through profit or loss
9
80
415
640
5,848
6,992
Debt securities in issue at amortised cost
1,363
7,812
5,422
31,428
10,982
57,007
Lease liabilities
23
64
237
554
373
1,251
Subordinated liabilities
23
681
522
3,973
4,859
10,058
Total non-derivative financial liabilities
433,593
22,958
41,255
49,927
22,385
570,118
Derivative financial liabilities:
Gross settled derivatives – outflows
7,535
4,934
7,476
4,956
2,702
27,603
Gross settled derivatives – inflows
(7,329)
(4,683)
(6,953)
(4,332)
(1,597)
(24,894)
Gross settled derivatives – net flows
206
251
523
624
1,105
2,709
Net settled derivative liabilities
3,043
21
57
286
3,407
Total derivative financial liabilities
3,249
251
544
681
1,391
6,116
At 31 December 2023
Deposits from banks
1,776
947
241
611
1
3,576
Customer deposits
412,803
5,790
15,547
8,570
255
442,965
Repurchase agreements
3,626
4,092
1,085
31,399
40,202
Financial liabilities at fair value through profit or loss
118
42
416
1,094
4,425
6,095
Debt securities in issue at amortised cost
1,386
6,651
14,283
30,893
10,932
64,145
Lease liabilities
13
69
242
754
586
1,664
Subordinated liabilities
23
58
238
4,548
5,099
9,966
Total non-derivative financial liabilities
419,745
17,649
32,052
77,869
21,298
568,613
Derivative financial liabilities:
Gross settled derivatives – outflows
2,890
2,145
11,374
6,549
4,168
27,126
Gross settled derivatives – inflows
(2,642)
(2,004)
(11,214)
(6,612)
(4,241)
(26,713)
Gross settled derivatives – net flows
248
141
160
(63)
(73)
413
Net settled derivative liabilities
3,013
51
65
317
3,446
Total derivative financial liabilities
3,261
141
211
2
244
3,859
The principal amount for undated subordinated liabilities with no redemption option is included within the over 5 years column; interest of
£16 million (2023: £16 million) per annum which is payable in respect of those instruments for as long as they remain in issue is not included
beyond 5 years.
An analysis of the Group’s total wholesale funding by residual maturity and by currency is set out on page 53.
56
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Maturities of contingent liabilities, commitments and guarantees (audited)
The table below shows the contractual maturity of the Group’s contingents, commitments and guarantees. Commitments are shown in the
time band containing the earliest date the commitment can be drawn down. For financial guarantee contracts, the maximum amount of the
guarantee is allocated to the earliest period in which the guarantee could be called.
Within 1
year
£m
1 to 3
years
£m
3 to 5
years
£m
Over 5
years
£m
Total
£m
At 31 December 2024
Acceptances and endorsements
39
39
Other contingent liabilities
1,201
547
204
532
2,484
Total contingent liabilities
1,240
547
204
532
2,523
Lending commitments and guarantees
127,789
559
404
84
128,836
Other commitments
111
111
Total commitments and guarantees
127,900
559
404
84
128,947
Total contingents, commitments and guarantees
129,140
1,106
608
616
131,470
At 31 December 2023
Acceptances and endorsements
191
191
Other contingent liabilities
1,192
595
183
594
2,564
Total contingent liabilities
1,383
595
183
594
2,755
Lending commitments and guarantees
91,674
16,577
11,591
2,789
122,631
Other commitments
38
41
23
102
Total commitments and guarantees
91,674
16,615
11,632
2,812
122,733
Total contingents, commitments and guarantees
93,057
17,210
11,815
3,406
125,488
57
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Market risk
Definition
Market risk is defined as the risk that the Group’s capital or earnings
profile are adversely affected by changes in market rates or prices,
including, but not limited to, interest rates, foreign exchange, equity
prices and credit spreads.
Level two risks
Banking book (page 57), Pensions (page 59), Trading book (page 59)
Measurement
Group risk appetite is calibrated primarily to a number of multi-risk
Group economic scenarios, and is supplemented with sensitivity-
based measures. The scenarios assess the impact of unlikely, but
plausible, adverse stresses on income with the worst case for banking
activities, defined benefit pensions and trading portfolios reported
against independently, and across the Group as a whole.
The Group risk appetite is cascaded first to the Group Asset and
Liability Committee (GALCO), chaired by the Chief Financial Officer,
where risk appetite is approved and monitored by risk type, and then
to the Group Market Risk Committee (GMRC) where risk appetite is
sub-allocated by business unit. These metrics are reviewed regularly
by senior management to inform effective decision making.
Mitigating actions
GALCO is responsible for approving and monitoring market risk
management techniques, market risk measures, behavioural
assumptions, and the market risk policy. Various mitigation activities
are assessed and undertaken across the Group to manage portfolios
and seek to ensure they remain within approved limits. The mitigation
actions will vary dependent on exposure but will, in general, look to
reduce risk in a cost effective manner by offsetting balance sheet
exposures and externalising to the financial markets dependent on
market liquidity. The market risk policy is owned by Group Corporate
Treasury (GCT) and refreshed annually. The policy is underpinned by
supplementary market risk procedures, which define specific market
risk management and oversight requirements.
Monitoring
GALCO and GMRC regularly review high level market risk exposures as
part of the wider risk management framework. They also make
recommendations to the Board concerning overall market risk
appetite and market risk policy. Exposures at lower levels of
delegation are monitored at various intervals according to their
volatility, from daily in the case of trading portfolios to monthly or
quarterly in the case of less volatile portfolios. Levels of exposures
compared to approved limits and triggers are monitored by Risk and
appropriate escalation procedures are in place.
How market risks arise and are managed across the Group’s activities
is considered in more detail below.
Banking activities
Exposures
The Group’s banking activities expose it to the risk of adverse
movements in market rates or prices, predominantly interest rates,
credit spreads, exchange rates and equity prices. The volatility of
market rates or prices can be affected by both the transparency of
prices and the amount of liquidity in the market for the relevant
asset, liability or instrument.
Interest rate risk
Yield curve risk in the Group’s divisional portfolios, and in the Group’s
capital and funding activities, arises from the different repricing
characteristics of the Group’s non-trading assets, liabilities and off-
balance sheet positions.
Basis risk arises from the potential changes in spreads between
indices, for example where the bank lends with reference to a central
bank rate but funds with reference to a market rate, for example,
SONIA, and the spread between these two rates widens or tightens.
Optionality risk arises predominantly from embedded optionality
within assets, liabilities or off-balance sheet items where either the
Group or the customer can affect the size or timing of cash flows. One
example of this is mortgage prepayment risk where the customer
owns an option allowing them to prepay when it is economical to do
so. This can result in customer balances amortising more quickly or
slowly than anticipated due to customers’ response to changes in
economic conditions.
Foreign exchange risk
Economic foreign exchange exposure arises from the Group’s
investment in its overseas operations. In addition, the Group incurs
foreign exchange risk through non-functional currency flows from
services provided by customer-facing divisions, the Group’s debt and
capital management programmes and is exposed to volatility in its
CET1 ratio, due to the impact of changes in foreign exchange rates on
the retranslation of non-sterling-denominated risk-weighted assets.
Equity risk
Equity risk arises primarily from exposure to the Lloyds Banking Group
share price through deferred shares and deferred options granted to
employees as part of their benefits package.
Credit spread risk
Credit spread risk arises largely from: (i) the liquid asset portfolio held
in the management of Group liquidity, comprising government,
supranational and other eligible assets; (ii) the Credit Valuation
Adjustment (CVA) and Debit Valuation Adjustment (DVA) sensitivity
to credit spreads; (iii) a number of the Group’s structured medium-
term notes where the Group has elected to fair value the notes
through the profit and loss account; and (iv) banking book assets in
Commercial Banking held at fair value under IFRS 9.
Measurement
Interest rate risk exposure is monitored monthly using, primarily:
Market value sensitivity: this methodology considers all repricing
mismatches (behaviourally adjusted where appropriate) in the current
balance sheet and calculates the change in market value that would
result from an instantaneous 25, 100 and 200 basis points parallel rise
or fall in the yield curve. The market value sensitivities are calculated
on a static balance sheet using principal cash flows excluding interest,
commercial margins and other spread components and are
discounted at the risk-free rate.
Interest income sensitivity: this measures the impact on future net
interest income arising from various economic scenarios. These
include instantaneous 25, 100 and 200 basis point parallel shifts in all
yield curves and the Group economic scenarios. These scenarios are
reviewed every year and are designed to replicate severe but plausible
economic events, capturing risks that would not be evident through
the use of parallel shocks alone such as basis risk and steepening or
flattening of the yield curve.
Unlike the market value sensitivities, the interest income sensitivities
incorporate additional behavioural assumptions as to how and when
individual products would reprice in response to changing rates.
Reported sensitivities are not necessarily predictive of future
performance as they do not capture additional management actions
that would likely be taken in response to an immediate, large,
movement in interest rates. These actions could reduce the net
interest income sensitivity, help mitigate any adverse impacts or they
may result in changes to total income that are not captured in the net
interest income.
Structural hedge: the structural hedging programme managing
interest rate risk in the banking book relies on assumptions made
around customer behaviour. A number of metrics are in place to
monitor the risks within the portfolio.
The Group has an integrated Asset and Liability Management (ALM)
system which supports non-traded asset and liability management of
the Group. This provides a single consolidated tool to measure and
manage interest rate repricing profiles (including behavioural
assumptions), perform stress testing and produce forecast outputs.
The Group is aware that any assumptions-based model is open to
challenge.
58
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
A full behavioural review is performed annually, or in response to changing market conditions, to ensure the assumptions remain appropriate
and the model itself is subject to annual re-validation, as required under Lloyds Banking Group’s model governance policy. The key behavioural
assumptions are:
Embedded optionality within products
The duration of balances that are contractually repayable on demand, such as current accounts and overdrafts, together with net free
reserves of the Group
The re-pricing behaviour of managed rate liabilities, such as variable rate savings
The table below shows, split by material currency, the Group’s market value sensitivities to an instantaneous parallel up and down 25 and 100
basis points change to all interest rates.
Lloyds Bank Group Banking activities: market value sensitivity (audited)
2024
2023
Up
25bps
£m
Down
25bps
£m
Up
100bps
£m
Down
100bps
£m
Up
25bps
£m
Down
25bps
£m
Up
100bps
£m
Down
100bps
£m
Sterling
5.8
(5.9)
22.4
(24.5)
7.2
(7.6)
26.9
(33.2)
US dollar
(1.2)
1.3
(4.8)
5.2
(1.3)
1.3
(5.0)
5.6
Euro
(1.9)
(1.8)
(7.1)
(7.4)
(2.6)
0.6
(9.9)
2.4
Other
(1.0)
1.0
(3.7)
4.5
(0.2)
0.2
(0.9)
0.9
Total
1.7
(5.4)
6.8
(22.2)
3.1
(5.5)
11.1
(24.3)
This is a risk-based disclosure and the amounts shown would be amortised in the income statement over the duration of the portfolio.
The market value sensitivity has decreased year-on-year as a result of small changes in the hedging profile of fixed mortgages.
The table below shows supplementary value sensitivity to a steepening and flattening (c.100 basis points around the three-year point) in the
yield curve. This ensures there are no unintended consequences to managing risk to parallel shifts in rates.
Lloyds Bank Group Banking activities: market value sensitivity to a steepening and flattening of the yield curve (audited)
2024
2023
Steepener
£m
Flattener
£m
Steepener
£m
Flattener
£m
Sterling
(1.0)
(0.4)
19.7
(23.6)
US dollar
(1.2)
1.3
(3.8)
3.9
Euro
(11.6)
2.0
(4.1)
(0.9)
Other
(2.5)
3.1
0.5
(0.5)
Total
(16.3)
6.0
12.3
(21.1)
The table below shows the banking book net interest income sensitivity on a one to three year forward-looking basis to an instantaneous
parallel up 25, down 25, up 50 and down 50 basis points change to all interest rates.
Lloyds Bank Group Banking activities: three year net interest income sensitivity (audited)
2024
2023
Year 1
£m
Year 2
£m
Year 3
£m
Year 1
£m
Year 2
£m
Year 3
£m
Up 50bps
227
333
555
252
403
577
Up 25 bps
114
167
277
126
202
288
Down 25bps
(146)
(168)
(278)
(155)
(198)
(283)
Down 50bps
(294)
(338)
(557)
(309)
(395)
(565)
Year 1 net interest income sensitivity, to both up and down shocks, has decreased slightly year-on-year mostly as a result of changing customer
deposit behaviour and structural hedge activity.
The overall three year net interest income sensitivity to up and down 25 basis points and 50 basis points shocks is largely due to reinvestment
of structural hedge maturities in years two and three.
The sensitivities are illustrative and do not reflect new business margin implications and/or pricing actions, other than as outlined.
The following assumptions have been applied:
Instantaneous parallel shift in interest rate curve, including bank base rate
Balance sheet remains constant
Illustrative 50 per cent pass-through on deposits and 100 per cent pass-through on assets, which could be different in practice
Basis risk, foreign exchange, equity and credit spread risks are measured primarily through scenario analysis by assessing the impact on profit
before tax over a 12-month horizon arising from a change in market rates, and reported within the Board risk appetite on a monthly basis.
Supplementary measures such as sensitivity and exposure limits are applied where they provide greater insight into risk positions. Frequency of
reporting supplementary measures varies from daily to quarterly appropriate to each risk type.
59
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Mitigating actions
The Group’s policy is to optimise reward while managing its market risk
exposures within the risk appetite defined by the Board. Lloyds Banking
Group’s market risk policy and procedures outlines the hedging process,
and the centralisation of risk from divisions into Group Corporate
Treasury (GCT), for example via the transfer pricing framework. GCT is
responsible for managing the centralised risk and does this through
natural offsets of matching assets and liabilities, and appropriate
hedging activity of the residual exposures, subject to the authorisation
and mandate of GALCO within the Board risk appetite. The hedges are
externalised to the market by derivative desks within GCT and the
Commercial Bank. The Group mitigates income statement volatility
through hedge accounting. This reduces the accounting volatility arising
from the Group’s economic hedging activities and any hedge
accounting ineffectiveness is continuously monitored.
The Group establishes hedge accounting relationships for interest rate
risk components using cash flow hedges and fair value hedges. The
Group is exposed to cash flow interest rate risk on its variable rate loans
and deposits together with its floating rate subordinated debt. The
derivatives used to manage the structural hedge may be designated
into cash flow hedges to manage income statement volatility. The
economic items related to the structural hedge, for example current
accounts, are not eligible hedged items under IAS 39 for inclusion into
accounting hedge relationships. The Group is exposed to fair value
interest rate risk on its fixed rate customer loans, its fixed rate customer
deposits and the majority of its subordinated debt.
Hedge ineffectiveness arises during the management of interest rate
risk due to residual unhedged risk. Sources of ineffectiveness, which the
Group may decide to not fully mitigate, can include basis differences,
timing differences and notional amount differences. The effectiveness
of accounting hedge relationships is assessed between the hedging
derivatives and the documented hedged item, which can differ to the
underlying economically hedged item.
The largest residual risk exposure arises from balances that are
deemed to be insensitive to changes in market rates (including current
accounts, a portion of variable rate deposits and investable equity),
and is managed through the Group structural hedge. Consistent with
the Group’s strategy to deliver stable returns, GALCO seeks to
minimise large reinvestment risk, and to smooth earnings over a range
of investment tenors. The structural hedge consists of longer-term
fixed rate assets or interest rate swaps and the amount and duration
of the hedging activity is reviewed regularly by GALCO.
While the Group faces uncertainty in customer behaviour due to
an elevated rate environment, its exposure to increased pipeline and
prepayment risks are managed through hedging in line with expected
customer behaviour. These are appropriately monitored and
controlled through divisional Asset and Liability Committees (ALCOs).
Economic foreign exchange exposures arising from non-functional
currency flows are identified by divisions and transferred and
managed centrally. The Group also has a policy of forward hedging its
forecasted currency profit and loss to year end.
The Group’s structural foreign currency exposure is represented by its
investments in overseas subsidiaries and branches which create capital
resources denominated in foreign currencies, principally USD and EUR.
Gains or losses on structural foreign currency exposures are taken to
reserves, resulting in a movement in CET1 capital. The Group’s main
overseas operations are in America and Europe and do not represent a
significant proportion on its overall portfolio.
The Group makes use of both accounting and economic foreign
exchange exposures, as an offset against the impact of changes in
foreign exchange rates on the value of non-sterling-denominated risk-
weighted assets. This involves the holding of a structurally open
currency position; sensitivity is minimised where, for a given currency,
the ratio of the structural open position to risk-weighted assets equals
the CET1 ratio. Continually evaluating this structural open currency
position against evolving non-sterling-denominated risk-weighted
assets mitigates volatility in the Group’s CET1 ratio.
The Group manages foreign currency accounting exposure via cash flow
hedge accounting, utilising currency swaps and forward foreign
exchange trades. All non-structural foreign exchange exposures in the
non-trading book are managed centrally within allocated exposure
limits.
Monitoring
The appropriate limits and triggers are monitored by senior executive
committees within the Banking divisions. Banking assets, liabilities
and associated hedging are actively monitored and if necessary
rebalanced to be within agreed tolerances.
Defined benefit pension schemes
Exposures
The Group’s defined benefit pension schemes are exposed to risks
that impact their assets and liabilities, that could adversely impact
the Group.
The liability discount rate exposes the Group to interest rate risk
and credit spread risk, which is partially offset by fixed interest
assets, such as government and corporate bonds and swaps
Increases to pensions in deferment and in payment expose the
Group to inflation risk, which is partially offset by real assets, such
as index-linked gilts and swaps
The schemes’ asset holdings expose the Group to investment risk.
Assets are invested in a diversified portfolio of debt securities,
equities and other return-seeking assets
The schemes’ membership exposes the Group to longevity risk
For further information on defined benefit pension scheme assets and
liabilities please refer to note 11 to the consolidated financial
statements on page 98.
Measurement
The schemes are assessed on a number of different measures for
differing purposes, including but not limited to, the IAS 19 accounting
basis for annual reporting and accounts, and the Trustees’ Technical
Provisions funding basis for agreeing contributions into the schemes.
Management of the schemes’ assets is primarily the responsibility of
the Trustees of the schemes, who are responsible for setting the
investment strategy in consultation with the Group, and, for agreeing
funding requirements with the Group as part of the triennial valuation
process.
Pension scheme risks are measured and monitored using a number of
different metrics and use a range of techniques including scenario
analysis and stress testing.
Mitigating actions
The Group takes an active involvement in agreeing risk mitigation
strategies with the schemes’ Trustees. An interest rate and inflation
hedging programme is in place to reduce liability risk. The schemes
have also reduced equity allocations and invested the proceeds in
credit assets. The Trustees have put in place longevity swaps to
mitigate longevity risk. The merits of longevity risk transfer and
hedging solutions are reviewed regularly.
Monitoring
In addition to the wider risk management framework, governance of
the schemes includes a specialist Group Pension Committee.
The surplus, or deficit, in the schemes is tracked monthly along with
various single factor and scenario stresses which consider the risks to
the assets and liabilities holistically. Key metrics are monitored
monthly including the Group’s capital resources of the schemes, the
performance against risk appetite metrics and triggers, and the
performance of the hedged asset and liability matching positions.
Trading portfolios
Exposures
The Group’s trading activity is small relative to its peers. The Group’s
trading activity is undertaken primarily to meet the financial
requirements of commercial and retail customers for foreign exchange
and interest rate products. These activities support customer flow
and market making activities.
60
Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
All trading activities are performed within the Commercial Banking
division. While the trading positions taken are generally small, any
extreme moves in the main risk factors and other related risk factors
could cause significant losses in the trading book depending on the
positions at the time. The average 95 per cent 1-day trading VaR
(Value at Risk; diversified across risk factors) was £0.05 million for 31
December 2024 compared to £0.07 million for 31 December 2023.
Trading market risk measures are applied to all of the Group’s
regulatory trading books and they include daily VaR, sensitivity-based
measures, and stress testing calculations.
Measurement
The Group internally uses VaR as the primary risk measure for all
trading book positions.
The risk of loss measured by the VaR model is the loss in earnings
which is not expected to be exceeded with 95 per cent confidence.
The total and average trading VaR numbers reported below have been
obtained after the application of the diversification benefits across
the five risk types. The maximum and minimum VaR reported for each
risk category did not necessarily occur on the same day as the
maximum and minimum VaR reported at Group level.
The Group’s closing VaR, allowing for diversification, on 31 December
2024 across interest rate risk, foreign exchange risk, equity risk, credit
spread risk and inflation risk was less than £0.07 million. During the
year ended 31 December 2024, the Group’s minimum diversified VaR
was less than £0.04 million, its average VaR was £0.05 million and
maximum VaR was £0.08 million.
For the year ended 31 December 2024, excluding the effects of
diversification, the maximum total VaR for all of the above risks was
£0.09 million, the average total VaR was £0.06 million and minimum
VaR was less than £0.04 million. The closing VaR on 31 December
2024, excluding the effects of diversification, was less than £0.07
million.
For the year ended 31 December 2024, the average interest rate risk
VaR was £0.05 million, the maximum interest rate risk VaR was £0.07
million and the minimum interest rate risk VaR was less than £0.04
million. The minimum, maximum and average VaR for all other risk
types was less than £0.02 million. As at 31 December 2024, the closing
VaR for all risk types was less than £0.07 million.
The market risk for the trading book continues to be low relative to
the size of the Group and in comparison to peers. This reflects the
fact that the Group’s trading operations are customer-centric and
focused on hedging and recycling client risks.
Although it is an important market standard measure of risk, VaR has
limitations. One of them is the use of a limited historical data sample
which influences the output by the implicit assumption that future
market behaviour will not differ greatly from the historically observed
period. Another known limitation is the use of defined holding periods
which assumes that the risk can be liquidated or hedged within that
holding period. Also calculating the VaR at the chosen confidence
interval does not give enough information about potential losses
which may occur if this level is exceeded. The Group fully recognises
these limitations and supplements the use of VaR with a variety of
other measurements which reflect the nature of the business activity.
These include detailed sensitivity analysis, position reporting and a
stress testing programme.
Mitigating actions
The level of exposure is controlled by establishing and communicating
the approved risk limits and controls through policies and procedures
that define the responsibility and authority for risk taking. Market risk
limits are clearly and consistently communicated to the business. Any
new or emerging risks are brought within risk reporting and defined
limits.
Monitoring
Trading risk is monitored daily against 1-day 95 per cent VaR and
stress testing limits. These limits are complemented with position
level action triggers and profit and loss referrals. Risk and position
limits are set and managed at both desk and overall trading book
levels. They are reviewed at least annually and can be changed as
required within the overall Group risk appetite framework.
Model risk
Definition
Model risk is the potential for adverse consequences from model
errors or the inappropriate use of modelled outputs to inform
business decisions. Adverse consequences could lead to a
deterioration in the prudential position, non-compliance with
applicable laws and/or regulations, or damage to the Group’s
reputation. Model risk can also lead to financial loss, as well as
qualitative limitations such as the imposition of restrictions on
business activities.
Exposures
The Group uses models to support a broad range of activity, including:
Capital adequacy calculation
Formulating business strategies
Informing business decisions
Identifying and measuring risks
Credit decisioning, including fraud
Pricing models
Impairment calculation
Stress testing and forecasting
Market risk measurement
These models use quantitative methods to process input data into
quantitative or qualitative outputs which have a quantitative measure
associated with them. They use simplifications of complex real-world
systems and processes, the use of models therefore creates model
risk.
As a result of the wide scope and breadth of coverage,
there is exposure to model risk across a number of the Group’s
principal activities.
Significant events such as global conflicts and pandemics can weaken
the relationship between model inputs and subsequent outputs due
to the uncertainty these events cause. A stable economy allows
models to operate in a much steadier environment, more typical to
those used to build the models.
The evolution of GenAI will support the Group in increasing
productivity and reimagining the customer experience through
innovative solutions. However, these advancements introduce unique
risks. To address these risks, additional controls are being developed
to support the safe and controlled use of the Group’s GenAI
aspirations.
The control environment for model risk continues to be strengthened
to meet revised internal and regulatory requirements. In addition, in
common with the rest of the industry, changes required to capital
models following new regulations have created a temporary increase
in the risk relating to these models during the period of transition.
Further information on capital impacts are detailed in the capital risk
section on pages 21 to 25.
Measurement
The Board risk appetite metrics are the key components for measuring
the Group’s most material models; model performance and
compliance is reported regularly to the Group and Board
Risk Committees.
Mitigating actions
The model risk management framework, established by and with
continued oversight from an independent team in the Risk function,
provides the foundation for managing and mitigating model risk
within the Group. Accountability is cascaded from the Board
and senior management via the Group enterprise risk
management framework.
This provides the basis for Lloyds Banking Group’s model risk
management policy, which defines the mandatory requirements for
models across the Group, including:
The scope of quantitative methods covered by the policy
Classification of risk of models using materiality and complexity
Roles and responsibilities, including ownership, independent
oversight and approval
Key principles and controls regarding model development,
implementation, model use, ongoing monitoring and periodic
revalidation, independent validation, model risk mitigants, and the
process for non-compliance
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
All models have an owner who takes responsibility for the fitness for
purpose of the model and, where appropriate, are supported and
challenged by the independent specialist Group function.
As a result of the above, all models in scope of policy, including those
involved in regulatory capital calculation, are developed consistently
and are of sufficient quality to support business decisions and meet
regulatory requirements.
Monitoring
The Lloyds Banking Group Model Governance Committee is the
primary body for overseeing model risk. Policy requires that key
performance indicators are monitored for every model such that all
issues are escalated appropriately. Material model issues are reported
to the Group and Board Risk Committees regularly, with focus on any
key issues.
Operational risk
Definition
Operational risk is defined as the risk of actual or potential impact to
the Group (financial and/or non-financial) resulting from inadequate
or failed internal processes, people, and systems or from external
events.
Resilience is core to the management of operational risk within the
Group to ensure that business processes (including those that are
outsourced) can withstand operational risks and can respond to and
meet customer and stakeholder needs when continuity of operations
is compromised.
Level two risks
Business continuity, Change execution, Cyber and physical security,
Data and privacy, Financial reporting (including tax), Health and
safety and premises, Information, Internal and external supplier risk,
IT systems, People, Transaction processing.
Exposures
The principal operational risk to the Group covers a number of level
two operational risks, which could result in customer harm, unfair
outcomes, colleague detriment, financial loss, regulatory censure and/
or reputational damage.
A number of these risks could increase where there is a reliance
on third party suppliers to provide services to the Group
or its customers.
Measurement
Operational risk is managed across the Group through an operational
risk framework and policies. This framework includes a risk and
control self-assessment process, risk impact likelihood matrix, risk and
control indicators, risk appetite setting, a robust operational loss
event management and escalation process, and a scenario analysis
and operational loss forecasting process that feed into capital
planning. This is supplemented by Group level and local management
information and reporting across a suite of governed metrics.
The operational risk events by risk category table below shows high
level loss and event trends for the Group using Basel II categories.
Based on data captured on the Group’s RCSA, in 2024 the highest
frequency of events occurred in external fraud with 86 per cent of the
total volume. External fraud also accounted for the highest losses by
value at 41 per cent.
Operational risk losses and scenario analysis is used to inform the
Internal Capital Adequacy Assessment Process (ICAAP). The Group
calculates its minimum (Pillar I) operational risk capital requirements
using The Standardised Approach (TSA). Pillar II is calculated using
internal and external loss data and severe but plausible scenarios that
may occur in the next 12 months.
Mitigating actions
The Group continues to focus on risk management requirements and
developing the processes, systems and people skills and capabilities
needed to mitigate risks. Risks are reported and discussed at local
governance forums and escalated to executive management and the
Board as appropriate to ensure the correct level of visibility and
engagement. The Group employs a range of risk management
strategies, including: avoidance, mitigation, transfer (including
insurance) and acceptance within appetite or tolerance. Where there
is a reliance on third party suppliers to provide services, including the
areas of IT systems and information security, the Lloyds Banking
Group sourcing policy ensures that outsourcing initiatives follow a
defined process including due diligence, risk evaluation and ongoing
assurance. Business management uses issues and action-tracking
management to address identified risk exposure weaknesses in the
control environment in a consistent manner.
Specific mitigating actions for level two operational level risks are:
Business continuity
The Group remains committed to managing operational resilience
risks and ensuring lessons are learned from internal and external
events of disruption, which may have an impact on the Group’s ability
to continue operations. The Group’s priority is centred on minimising
any potential impacts to the Group and its customers, as well as the
wider financial sector and UK economy, such as through scenario
analysis and testing, business continuity, supplier exit planning and
implementation of ‘resilience by design’.
Change execution
The Group takes a range of mitigating actions with respect to change
execution risk. These include the following:
Ensuring there are sufficient, appropriately skilled colleagues to
support the safe delivery of the Group’s current and future change
portfolio
Businesses assess the potential impacts of undertaking any change
activity on their ability to execute effectively, on customers and
colleagues and on the potential consequences for existing business
risk profiles
Ensuring compliance with the change policy and associated
policies and procedures, which set out the principles and key
controls that apply across the business and are aligned to the
Group’s risk appetite
The implementation of effective governance and control
frameworks to ensure adequate controls are in place to manage
change activity and act to mitigate the change execution risks
identified. These controls, such as testing, are monitored in line
with the Lloyds Banking Group change policy and ERMF
Events and incidents related to change activities are escalated and
managed appropriately in line with risk framework guidance
Operational risk events by risk category (losses greater than or equal to £10,000)1
% of total volume
% of total losses
2024
2023
2024
2023
Business disruption and system failures
0.95
0.65
3.20
0.90
Clients, products and business practices
1.94
2.16
25.78
74.79
Damage to physical assets
0.15
0.06
0.05
0.03
Employee practices and workplace safety
0.40
0.32
0.55
0.16
Execution, delivery and process management
10.27
9.40
29.17
14.10
External fraud2
86.04
86.98
41.21
9.93
Internal fraud2
0.26
0.42
0.02
0.08
Total
100.00
100.00
100.00
100.00
1Excludes losses related to Insurance. 2023 breakdowns have been updated to reflect the reinstatement of PPI and provisions, and due to the nature of the risk events which can
evolve over time, such as the lag in operational losses.
2 Fraud level two risk is explained in further detail within the economic crime risk, as per the updated enterprise risk management framework.
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Lloyds Bank plc Annual Report and Accounts 2024
Risk management continued
Data and privacy
The Group continues to invest to reduce data risk exposure, by:
Delivering a strategy focused on data management and culture,
data-driven insights, platforms, tooling and AI-enablement
Enhancing data quality and capability, such as standardised
controls implemented across critical data elements
Embedding data privacy impact assessments in the processing of
high-risk data
Financial reporting (including tax)
The Group maintains risk management systems and internal controls
relating to the financial reporting process ensuring:
The consistent and appropriate application of accounting policies,
the accurate recording of transactions, which are undertaken in
accordance with delegated authorities, and safeguarding of assets
with liabilities properly stated
The calculation, preparation and reporting of financial, prudential
regulatory and tax outcomes in accordance with applicable
International Financial Reporting Standards, statutory and
regulatory requirements, such as the UK Finance Code for Financial
Reporting Disclosure and the US Sarbanes-Oxley Act
Ongoing monitoring to assess the impact of emerging regulation
and legislation on financial, prudential regulatory and tax reporting
An accurate view of the Group’s performance to allow the Board
and senior management to appropriately manage the affairs and
strategy of the business
Health and safety and premises
The Group strives to ensure compliance with legal and regulatory
requirements, embedding compliant and appropriate colleague
behaviours in line with Lloyds Banking Group’s policies, values and
people risk priorities.
The Group continues to monitor horizon scanning, risk assessments
and any incident information to continually improve its health, safety
and premises risk management. Colleagues also regularly complete
health and safety training to ensure that policies, standards,
procedures, processes and practices are understood and implemented
effectively.
Information, cyber and physical security
The Group adopts a risk-based approach to mitigate cyber threats it
faces. Specifically, the Group continues to undertake remediation
activity to address deficiencies in its access controls across certain
business applications and associated IT infrastructure. The effective
operation of the Group’s estate is supported by an IT and Cyber
Security Governance framework, guided by a threat-based strategy
which underpins investment decisions. The ongoing protection of the
estate and confidentiality of material information is ensured through
adherence to the Group Security Policy which has been aligned to
industry good practice including the NIST Cyber Security Framework;
and material laws and regulations. The Group engages a specialist
third party consultancy on a periodic basis, to assess the maturity of
its cyber security programme, in assessing, identifying and managing
material risks from cyber security threats. Thresholds have been set
that, once triggered, will bring the information security risk owning
business representatives, legal and compliance teams together as a
subcommittee. The sub-committee will own the invocation of crisis
management, Board and/or regulatory notification and the drafting of
any wider stakeholder communications.
Internal and external supplier
The threat landscape associated with third party suppliers and the
critical services they provide continues to receive a significant amount
of attention. The Group acknowledges the importance of control and
responsibility for critical business services and processes, which could
cause significant harm to the Group’s customers.
The Group segments its suppliers by criticality and has processes in
place to support ongoing supplier management, including:
Policy expectations are underpinned by standards, notably the
Lloyds Banking Group sourcing and supply chain management
framework
All material arrangements are set out in written agreements and
based on Lloyds Banking Group standard terms, which comply
with regulations, including the expectation that all sub-
outsourcing is managed in line with the supplier’s contractual
obligations to the Group
A risk-proportionate process exists for onboarding and managing
third party arrangements through the life cycle
Pre-outsourcing and ongoing risk assessments to identify key
operational and financial risks, including on-site or virtual
assurance for suppliers with a higher criticality assessment
Assessments drive the level of ongoing supplier governance,
assurance and monitoring. For example, the Group provides
training and other resources to its suppliers to support IT systems
and information security resilience in its supply chain
IT systems
The Group continues its journey to simplify its technology estate, in
line with its strategy, through the targeted simplification of legacy
applications, infrastructure platforms and on-premise data centres.
The Group has controls in place to manage legacy technology,
IT change and monitoring, incident management and recovery.
IT disaster recovery is a key capability to recover from multiple
scenarios, ranging from likely and medium impact (such as
infrastructure failure for a single application), to low likelihood with
severe or material impact scenarios, such as the loss of a data centre
or cloud region.
People
The Group takes many mitigating actions with respect to people risk.
Key areas of focus include:
Focusing on leadership and colleague engagement, through
delivery of strategies to attract, retain and develop high calibre
people together with a focus on creating a strong and resilient
talent pipeline
Continued focus on Lloyds Banking Group’s culture and inclusivity
strategy by developing and delivering initiatives that reinforce the
appropriate behaviours which generate the best possible long-
term outcomes for customers and colleagues
Managing organisational capability and capacity through divisional
people strategies to ensure there are the right skills and resources
to meet customers’ needs and deliver the Group’s strategic plan
Ensuring colleague wellbeing strategies and support are in place to
meet colleague needs, alongside skills and capability growth
required to maximise the potential of our people
Ensuring compliance with legal and regulatory requirements,
embedding compliant and appropriate colleague behaviours in line
with Lloyds Banking Group policies, values and its people risk
priorities
Reviewing and enhancing people processes to ensure they are fit
for purpose and operationally resilient
Transaction processing
The Group adopts a robust approach to minimising transaction
processing risks. This includes processing and execution failures
relating to clients and products, such as errors in payment processing
or management of payments and claims, including those where a third
party is operating on the Group’s behalf.
Monitoring
Monitoring and reporting of operational risk is undertaken at Board,
Group and business unit and functional committees. Each committee
monitors key risks, control effectiveness, indicators, events,
operational losses, risk appetite metrics and the results of
independent review conducted by the Risk function and/or Group
Audit. Additionally, the Group’s IT and information security processes
are validated and audited by internal experts within the Risk function
and Group Audit.
The Group maintains a formal approach to operational risk event
escalation, whereby events are identified, captured and escalated,
where appropriate based on materiality. Root causes of events are
determined, and action plans put in place to ensure an optimum level
of control to keep customers and the business safe and improve
efficiency.
The insurance policies are monitored and reviewed regularly, with
recommendations being made to the Group’s senior management
annually prior to each renewal. Insurers are monitored on an ongoing
basis, to ensure counterparty risk is minimised. A process is in place to
manage any insurer rating changes or insolvencies.
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Lloyds Bank plc Annual Report and Accounts 2024
Forward-looking statements
This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as
amended, and section 27A of the US Securities Act of 1933, as amended, with respect to the business, strategy, plans and/or results of Lloyds
Bank plc together with its subsidiaries (the Lloyds Bank Group) and its current goals and expectations. Statements that are not historical or
current facts, including statements about the Lloyds Bank Group’s or its directors’ and/or management’s beliefs and expectations, are forward-
looking statements. Words such as, without limitation, ‘believes’, ‘achieves’, ‘anticipates’, ‘estimates’, ‘expects’, ‘targets’, ‘should’, ‘intends’,
‘aims’, ‘projects’, ‘plans’, ‘potential’, ‘will’, ‘would’, ‘could’, ‘considered’, ‘likely’, ‘may’, ‘seek’, ‘estimate’, ‘probability’, ‘goal’, ‘objective’, ‘deliver’,
‘endeavour’, ‘prospects’, ‘optimistic’ and similar expressions or variations on these expressions are intended to identify forward-looking
statements. These statements concern or may affect future matters, including but not limited to: projections or expectations of the Lloyds
Bank Group’s future financial position, including profit attributable to shareholders, provisions, economic profit, dividends, capital structure,
portfolios, net interest margin, capital ratios, liquidity, risk-weighted assets (RWAs), expenditures or any other financial items or ratios;
litigation, regulatory and governmental investigations; the Lloyds Bank Group’s future financial performance; the level and extent of future
impairments and write-downs; the Lloyds Bank Group’s ESG targets and/or commitments; statements of plans, objectives or goals of the
Lloyds Bank Group or its management and other statements that are not historical fact and statements of assumptions underlying such
statements. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend upon
circumstances that will or may occur in the future. Factors that could cause actual business, strategy, targets, plans and/or results (including
but not limited to the payment of dividends) to differ materially from forward-looking statements include, but are not limited to: general
economic and business conditions in the UK and internationally (including in relation to tariffs); acts of hostility or terrorism and responses to
those acts, or other such events; geopolitical unpredictability; the war between Russia and Ukraine; the conflicts in the Middle East; the
tensions between China and Taiwan; political instability including as a result of any UK general election; market related risks, trends and
developments; changes in client and consumer behaviour and demand; exposure to counterparty risk; the ability to access sufficient sources of
capital, liquidity and funding when required; changes to the Lloyds Bank Group’s or Lloyds Banking Group plc’s credit ratings; fluctuations in
interest rates, inflation, exchange rates, stock markets and currencies; volatility in credit markets; volatility in the price of the Lloyds Bank
Group’s securities; natural pandemic and other disasters; risks concerning borrower and counterparty credit quality; risks affecting defined
benefit pension schemes; changes in laws, regulations, practices and accounting standards or taxation; changes to regulatory capital or
liquidity requirements and similar contingencies; the policies and actions of governmental or regulatory authorities or courts together with any
resulting impact on the future structure of the Lloyds Bank Group; risks associated with the Lloyds Bank Group’s compliance with a wide range
of laws and regulations; assessment related to resolution planning requirements; risks related to regulatory actions which may be taken in the
event of a bank or Lloyds Bank Group or Lloyds Banking Group failure; exposure to legal, regulatory or competition proceedings, investigations
or complaints; failure to comply with anti-money laundering, counter terrorist financing, anti-bribery and sanctions regulations; failure to
prevent or detect any illegal or improper activities; operational risks including risks as a result of the failure of third party suppliers; conduct
risk; technological changes and risks to the security of IT and operational infrastructure, systems, data and information resulting from increased
threat of cyber and other attacks; technological failure; inadequate or failed internal or external processes or systems; risks relating to ESG
matters, such as climate change (and achieving climate change ambitions) and decarbonisation, including the Lloyds Bank Group’s or the
Lloyds Banking Group’s ability along with the government and other stakeholders to measure, manage and mitigate the impacts of climate
change effectively, and human rights issues; the impact of competitive conditions; failure to attract, retain and develop high calibre talent; the
ability to achieve strategic objectives; the ability to derive cost savings and other benefits including, but without limitation, as a result of any
acquisitions, disposals and other strategic transactions; inability to capture accurately the expected value from acquisitions; and assumptions
and estimates that form the basis of the Lloyds Bank Group’s financial statements. A number of these influences and factors are beyond the
Lloyds Bank Group’s control. Please refer to the latest Annual Report on Form 20-F filed by Lloyds Bank plc with the US Securities and
Exchange Commission (the SEC), which is available on the SEC’s website at www.sec.gov, for a discussion of certain factors and risks. Lloyds
Bank plc may also make or disclose written and/or oral forward-looking statements in other written materials and in oral statements made by
the directors, officers or employees of Lloyds Bank plc to third parties, including financial analysts. Except as required by any applicable law or
regulation, the forward-looking statements contained in this document are made as of today’s date, and the Lloyds Bank Group expressly
disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this
document whether as a result of new information, future events or otherwise. The information, statements and opinions contained in this
document do not constitute a public offer under any applicable law or an offer to sell any securities or financial instruments or any advice or
recommendation with respect to such securities or financial instruments.
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Lloyds Bank plc Annual Report and Accounts 2024
Independent auditors’ report
Independent auditors’ report to the members of Lloyds Bank plc
Report on the audit of the financial statements
1.Opinion
In our opinion:
the financial statements of Lloyds Bank plc (the ‘Bank’) and its subsidiaries (the ‘Group’ or ‘LB’) give a true and fair view of the state of the
Group’s and of the Bank’s affairs as at 31 December 2024 and of the Group’s profit for the year then ended;
the Group financial statements have been properly prepared in accordance with United Kingdom adopted international accounting
standards and IFRS Accounting Standards as issued by the International Accounting Standards Board (IASB);
the Bank’s financial statements have been properly prepared in accordance with United Kingdom adopted international accounting
standards and as applied in accordance with the provisions of the Companies Act 2006; and
the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements which comprise the:
Group
Bank
Consolidated balance sheet as at 31 December 2024 ;
Consolidated income statement for the year then ended;
Consolidated statement of comprehensive income for the year
then ended;
Consolidated statement of changes in equity for the year then
ended;
Consolidated cash flow statement for the year then ended;
Notes 1 to 38 to the financial statements, which include the
accounting principles and policies; and
Risk management section identified as ‘audited’.
Balance sheet as at 31 December 2024;
Statement of changes in equity for the year then ended;
Cash flow statement for the year then ended; and
Notes 1 to 26 to the financial statements, which include the
accounting principles and policies.
The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom adopted international
accounting standards, and as regards the Bank financial statements, as applied in accordance with the provisions of the Companies Act 2006.
2.Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under
those standards are further described in the auditors’ responsibilities for the audit of the financial statements section of our report.
We are independent of the Group and the Bank in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, including the Financial Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements. The non-audit services provided to the Group and
the Bank for the year are disclosed in note 12 to the financial statements. We confirm that we have not provided any non-audit services
prohibited by the FRC’s Ethical Standard to the Group or the Bank.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
3.Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
Expected credit losses (‘ECL’) (Group and Bank)
Regulatory and litigation matters (Group and Bank)
IT systems that impact financial reporting (Group and Bank)
Defined benefit obligations (Group and Bank)
Our assessment of the level of risk for each of these areas has remained consistent with the prior year.
Materiality
Overall materiality used for the Group consolidated financial statements was £290 million, which was determined on
the basis of pre-tax profits, normalised for non-recurring items.
Overall materiality used for the Bank financial statements was £290 million, which was determined on the basis of net
assets and capped at Group materiality.
Scoping
Our audit scope covers 95 per cent of the Group’s total assets, 94 per cent of the Group’s total liabilities, 99 per cent
of the Group’s income and 98 per cent of the Group’s expenses.
Our audit approach
We structured our approach to the audit to reflect how the Group is organised as well as ensuring it was both effective and risk focused. It can
be summarised into the following key activities that we used to obtain sufficient audit evidence required to form our opinion on the Group and
the Bank’s financial statements:
Audit planning and risk assessment
Our audit planning procedures considered the impact of internal and external factors affecting the Group’s profitability and operations, key
audit matters most relevant to the users of the financial statements, the appropriate scope of audit work performed as well as the
expectations and requirements of the Group’s investors and regulators.
In performing our audit risk assessments, we considered the impact of macroeconomic factors on the Group’s key accounting judgements and
sources of estimation uncertainty. The key factors considered in our risk assessments were:
the impact of uncertainty in the current economic climate and ongoing geopolitical tensions on the Group’s ECL; and
changes to the regulatory and litigation environment affecting the Group’s financial reporting.
We obtained the knowledge and information required to inform our audit planning and risk assessment decision making through regular
meetings with Group and Divisional Finance and the extensive use of data and technology;
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Lloyds Bank plc Annual Report and Accounts 2024
Independent auditors’ report continued
Audit procedures undertaken at both Group and Bank level
We performed audit procedures over the Group and Bank financial statements including the consolidation of the Group’s results, the
preparation of the financial statements, certain disclosures within the directors’ remuneration report, litigation provisions and exposures in
addition to the Group’s entity level and oversight controls relevant to financial reporting. Entities not covered by our audit scope are subject to
analytical procedures to confirm our conclusion that there were no significant risks of material misstatement in the aggregated financial
information;
Internal controls testing approach
Our internal controls testing approach was informed by our scoping and risk assessment activities. We have assessed the Group’s end-to-end
financial reporting processes supporting all in-scope financial statement balances and identified relevant controls to test for these balances.
This included the testing of general IT controls, process level controls and entity level controls at the Group level; and
The impact of climate change on our audit
In planning our audit, we have considered the impact of climate change on the Group’s operations and any subsequent impact on its financial
statements. The Group sets out its assessment of the potential impact on page 26 of the Risk Management section of the Annual Report.
In conjunction with our climate risk specialists, we have held discussions with the Group to understand their:
process for identifying affected operations including the governance and controls over this process, and the subsequent effect on the
financial reporting for the Group; and
long-term strategy to respond to climate change risks and how this is factored into the Group’s forecasts, considering publicly
announced climate change commitments and any costs associated with the Group’s net zero targets.
Our audit work has involved:
evaluating climate as a factor in risk assessments for potentially affected balances;
challenging the completeness of the physical and transition risks identified and considered in the Group’s climate risk assessment and the
conclusion that there continues to be no material impact of climate change risk on financial reporting;
reviewing the Group’s qualitative loan portfolio analysis, and challenging the key assumptions used by the Group with reference to our
own understanding of the portfolios and publicly available documentation; and
assessing disclosures in the Annual Report and challenging the consistency between the financial statements and the remainder of the
Annual Report.
As part of our audit procedures we are required to read and consider these disclosures to consider whether they are materially inconsistent
with the financial statements or knowledge obtained in the audit and we did not identify any material inconsistencies or issues as a result of
these procedures.
4.Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of
the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group’s and the Bank’s ability to continue to adopt the going concern basis of accounting
included:
using our knowledge of the Group and the Bank, the financial services industry, the financial services regulatory environment and the
general economic environment including, macroeconomic pressures affecting the Group’s operations, to identify inherent risks in the
business model and how such risks might affect the financial resources or ability to continue operations over the going concern period;
making enquiries of Group management about the assumptions, including climate risk considerations, used in their going concern models,
and assessing the reasonableness of those assumptions and historical forecasting accuracy;
evaluating the Group’s strategic plans in light of the changing macroeconomic environment, short and longer term financial budgets,
funding, liquidity and capital adequacy plans including internal stress tests;
considering the Group’s operational resilience;
reading analyst reports, industry data, Bank of England reports and other external information to determine if it provided corroborative or
contradictory evidence in relation to the Group’s assumptions;
reviewing correspondence and meeting with prudential and conduct regulators to assess whether there are any matters that may impact
the going concern assessment;
testing the underlying data generated to prepare the forecast scenarios and determining whether there was adequate support for the
assumptions underlying the forecasts; and
evaluating the Group’s disclosures on going concern against the requirements of IAS 1.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group's and the Bank’s ability to continue as a going concern for a period of at least twelve
months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
5.Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of
the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) that we identified.
These matters included those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing
the efforts of the engagement team.
These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
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Expected credit losses (Group and Bank)
Key audit matter description
How the scope of our audit responded to the key audit matter
Refer to notes 2, 13, 18 , 19 and 37 in the financial statements
The Group has recognised £3.5 billion of expected credit losses
(‘ECL’) as at 31 December 2024. The valuation and allocation of
ECL consists of a number of assumptions that are inherently
uncertain and require a high degree of complex and subjective
auditor judgement, specialised skills and knowledge, and
complex impairment modelling. The increasing economic
uncertainty resulting from geopolitical risks and recent changes
in government policy in the United Kingdom (‘UK’) has further
heightened the levels of judgement required, especially in the
development of the base case economic scenario and
alternative economic scenarios. As a consequence, we have
determined ECL as a key audit matter.
The key areas we identified as having the most significant level
of management judgement were in respect of:
Multiple economic scenarios;
Collectively assessed ECL;
Individually assessed ECL; and
ECL model adjustments.
Multiple economic scenarios
The Group’s economics team develops the future economic
scenarios by developing a base case forecast based on a set of
conditioning assumptions, with the three outer economic
scenarios (upside, downside and severe downside) derived
using a Monte Carlo simulation around the base case. The
modelled severe downside scenario is then adjusted to capture
supply-side risks not contemplated by the Monte Carlo model.
The upside, the base case and the downside scenarios are
weighted at a 30 per cent probability and the severe downside
at a 10 per cent probability. The development of the base case
scenario, including the conditioning assumptions, is inherently
highly complex and requires significant judgement.
We performed the following procedures:
tested the controls over the generation of the multiple economic
scenarios including those over the Group’s governance processes to
approve the base case, different scenarios and the weightings applied
to each scenario;
working with our internal economic specialists:
challenged and evaluated economic forecasts in the base scenario
such as the unemployment rate, House Price Index, Commercial Real
Estate prices, inflation and forecasted interest rates, and Gross
Domestic Product through comparison to independent economic
outlooks, other external analyses and market data;
challenged and evaluated the appropriateness of changes in
assumptions and/or the model including changes to the non-
modelled severe downside approach;
challenged and evaluated the appropriateness of the methodology
applied to generate alternative macroeconomic scenarios, including
associated weightings and assumptions within the model; and
independently replicated the multiple economic scenario model and
compared the outputs of our independent model to the Group’s
output to test scenario generation;
tested the completeness and accuracy of the data used by the model;
performed a stand back assessment of the appropriateness of the
weightings applied to each of the scenarios based on publicly available
data; and
evaluated the appropriateness of disclosures in respect of significant
judgements and sources of estimation uncertainty including
macroeconomic scenarios.
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Key audit matter description
How the scope of our audit responded to the key audit matter
Collectively assessed ECL
The ECL for the Retail and Commercial Banking divisions,
except for individually assessed stage 3 commercial loans, is
determined on a collective basis using impairment models.
These models use a number of significant judgements to
calculate a probability weighted estimate by applying a
probability of default, exposure at default and a loss given
default, taking account of collateral held or other loss
mitigants, discounted using the effective interest rate.
The key judgements and estimates in determining the ECL
include:
modelling approach, modelling simplifications and
judgements, and selection of modelling data;
behavioural lives of products in the Retail division;
credit risk ratings for the Commercial Banking division,
which are performed on a counterparty basis for larger
exposures by a credit officer; and
the appropriate allocation of assets into the correct staging
taking into account any significant deterioration in credit
risk since inception of the loan.
We tested controls across the process to estimate the ECL provisions
including:
model governance, including model validation and monitoring;
model assumptions;
allocation of assets into stages, including those to determine the credit
risk rating in the Commercial Banking division; and
completeness and accuracy of the data used by the model.
Working with our internal modelling specialists our audit procedures over
the key areas of estimation in the valuation and allocation of the ECL
covered the following:
Model estimations, where we:
evaluated the appropriateness of the modelling approach and
assumptions used;
independently replicated a sample of the models for all in-scope
portfolios and compared the outputs of our independent models to
the Group’s outputs;
assessed model performance by evaluating variations between
observed data and model predictions;
developed an understanding of model limitations and assessed these
and remedial actions; and
tested the completeness and accuracy of the data used in model
execution and calibration.
Allocation of assets into stages, where we:
evaluated the appropriateness of quantitative and qualitative
criteria used for allocation into IFRS 9 stages, including
independently assessing the credit rating of a sample of loans in the
Commercial Banking division;
tested the appropriateness of the stage allocation for a sample of
exposures; and
tested the data used by models in assigning IFRS 9 stages and
evaluated the appropriateness of the model logic used.
Individually assessed ECL
For individual provision assessments of larger exposures in
stage 3 in the Commercial Banking division, complex and
subjective auditor judgement including specialised knowledge is
required in evaluating the methodology, models and inputs
that are inherently uncertain in determining the ECL. The
significant judgements in estimating provisions are the:
completeness and appropriateness of the potential workout
scenarios identified;
probability of default assigned to each identified potential
workout scenario; and
valuation assumptions used in determining the expected
recovery strategies.
For expected credit losses assessed individually we have:
selected senior team members with extensive IFRS 9 knowledge and
expertise to design and lead the execution of the audit of ECL;
tested the controls over individually assessed provisions including
assumptions and inputs into workout and recovery scenarios, as well as
valuation assumptions used; and
evaluated the appropriateness of workout and recovery scenarios
identified, including the judgements to determine the timing and value
of associated cash flows as well as consideration of climate risk.
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Key audit matter description
How the scope of our audit responded to the key audit matter
ECL model adjustments
Where impairment models do not incorporate all factors
relevant to estimating the ECL, adjustments are made to
address known model limitations and data limitations,
emerging or non-modelled risks and the impact of economic
uncertainty on different industry sectors. The identification of
model limitations is highly judgemental and inherently
uncertain. The adjustments made to address these limitations
require specialist auditor judgement when evaluating the:
completeness of adjustments; and
methodology, assumptions, models and inputs.
In respect of the adjustments to models, we performed the following
procedures in conjunction with our specialists:
tested the controls over the valuation of in-model and post-model
adjustments, including methodology, calculation, assumptions and the
completeness and accuracy of data used;
evaluated the methodology, rationale and assumptions in developing
the adjustments, and evaluated the Group’s selection of approaches;
tested the completeness and accuracy of the data used in formulating
the judgements;
performed a recalculation of adjustments;
evaluated the completeness of adjustments based on our
understanding of both model and data limitations; and
assessed the appropriateness of the disclosures and whether the
disclosures appropriately address the uncertainty which exists in
determining the ECL.
Key observations communicated to the Audit Committee
We are satisfied that the ECL provisions are reasonable and recognised in accordance with the requirements of IFRS 9. Calculations of the
multiple economic scenarios, in-model adjustments and post-model adjustments are made using appropriate methodologies and reasonable
modelled assumptions. Overall ECL levels are reasonable compared to peer benchmarking information.
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Regulatory and litigation matters (Group and Bank)
Key audit matter description
How the scope of our audit responded to the key audit matter
Refer to notes 2 and 26 in the financial statements.
The Group operates in an environment where it is subject to
regulatory investigations, litigation and customer remediation
including allegations of fraud and misconduct. The Group is
currently exposed to a number of regulatory and litigation
matters. The Group’s provision for these matters is £1.5 billion
as at 31 December 2024. In the current year, the Group
recognised a further provision of £700 million relating to motor
finance commission arrangements.
Significant judgement is required by the Group in determining
whether, under IAS 37 Provisions, Contingent Liabilities and
Contingent Assets:
The amount recorded is representative of the Group’s best
estimate to settle the obligation based on the information
available to the Group, including in respect of motor finance
commission arrangements where there is significant
uncertainty around the final outcome as a result of the
recent Court of Appeal decisions, appeal to the Supreme
Court and the impact of the on-going review by the
Financial Conduct Authority (‘FCA’); and
Any contingent liabilities and underlying significant
estimation uncertainties are adequately disclosed.
We performed the following audit procedures:
tested the Group’s controls over the completeness of provisions, the
review of the assessment of the provision against the requirements of
IAS 37, the review of the appropriateness of judgements used to
determine a best estimate and the completeness and accuracy of data
used in the process;
evaluated the assessment of the provisions, associated probabilities,
and potential outcomes in accordance with IAS 37;
verified and evaluated whether the methodology, data and significant
judgements and assumptions used in the valuation of the provisions are
appropriate in the context of the applicable financial reporting
framework;
inspected correspondence and, where appropriate, made direct inquiry
with the Group’s regulators and internal and external legal counsel;
critically evaluated the Group’s conclusion in the context of the
requirements of IAS 37 where no provision was made;
evaluated whether the disclosures made in the financial statements
appropriately reflect the facts and key sources of estimation
uncertainty, including in respect of motor finance commission
arrangements;
specifically in respect of motor finance commission arrangements, we:
tested the governance control operating over the choice of
assumptions used, including agreement to previous redress
experience where applicable;
engaged with our internal modelling specialists to review relevant
aspects of the code used to extract commission data used within
the model;
tested the mathematical accuracy of the model including the
completeness and accuracy of data used in the model;
inspected information available for the historical complaints, both
supportive and contradictory, the view of independent analysts and
the decisions made by the courts;
reviewed correspondence with external legal counsel to support the
probability weighting applied;
inspected correspondence and made direct inquiry with the Group’s
regulators; and
tested the methodology and assumptions applied to determine the
provision.
Key observations communicated to the Audit Committee
While there is significant judgement required in estimating the timing and value of future settlements, we are satisfied that the approach to
the recognition, estimation and disclosures of these provisions and contingent liabilities is consistent with the requirements of IFRS
Accounting Standards.
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IT systems that impact financial reporting (Group and Bank)
Key audit matter description
How the scope of our audit responded to the key audit matter
The Group’s IT environment is inherently complex due to the
number of systems it operates and its reliance on automated
and IT dependent manual controls. Together, these support a
broad range of banking and insurance products as well as the
processing of the Group’s significant volume of transactions,
which impact all account balances.
As such, IT systems within the Group form a critical component
of the Group’s financial reporting activities. Due to the
significant reliance on IT systems, effective General IT Controls
(‘GITCs’) are critical to allow reliance to be placed on the
completeness and accuracy of financial data and the integrity
of automated system functionality, such as system calculations.
We identified the IT systems that impact financial reporting as
a key audit matter because of the:
Pervasive reliance on complex technology that is integral to
the operation of key business processes and financial
reporting;
Reliance on technology which continues to develop in line
with the business strategy, such as the increase in the use of
automation across the Group and increasing reliance on
third parties; and
Importance of the IT controls in maintaining an effective
control environment. A key interdependency exists between
the ability to rely on IT controls and the ability to rely on
financial data, system configured automated controls and
system reports.
IT controls, in the context of our audit scope, primarily relate
to privileged access at the infrastructure level, user access
security at the application level and change control.
Our IT audit scope covered the Group’s IT controls over information
systems deemed relevant to the audit based on the financial data, system
configured automated controls and/or key financial reports that reside
within it.
We used IT specialists to support our evaluation of the risks associated
with IT in the following areas:
General IT Controls, including user access and change management
controls;
Key financial reports and system configured automated controls; and
Cyber security risk assessment.
Where deficiencies in the IT control environment were identified, our risk
assessment procedures included an assessment of those deficiencies to
determine the impact on our audit plan. Where relevant, the audit plan
was adjusted to mitigate the unaddressed IT risk.
Where we were able to identify and test appropriate mitigating controls
over affected financial statement line items, our testing approach
remained unchanged.
In a limited number of areas, we adopted a non-controls reliance approach
and we therefore performed additional substantive procedures.
Key observations communicated to the Audit Committee
We are satisfied that the Group’s overall IT control environment appropriately supports the financial reporting process and control
deficiencies identified in respect of privileged user access to IT infrastructure and in application user access management were mitigated by
compensating business controls.
Defined benefit obligations (Group and Bank)
Key audit matter description
How the scope of our audit responded to the key audit matter
Refer to notes 2 and 11 in the financial statements
The Group operates a number of defined benefit retirement
schemes, the obligations for which totalled £ 27.1 billion as at 31
December 2024. Their valuation is determined with reference
to key actuarial assumptions including mortality assumptions,
discount rates and inflation rates. Due to the size of these
schemes, small changes in these assumptions can have a
material impact on the value of the defined benefit obligation
and therefore, the determination of these assumptions requires
significant auditor judgement.
We performed the following audit procedures:
tested the Group’s controls over the valuation of the defined benefit
obligations, including controls over the assumptions setting process;
and
challenged and evaluated the key actuarial assumptions against the
compiled expected ranges determined by our internal actuarial experts,
based on observable market indices and market experience.
Key observations communicated to the Audit Committee
We are satisfied that the Group's judgements in relation to the defined benefit obligations are reasonable.
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6.Our application of materiality
6.1Materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Bank financial statements
Materiality
£290 million (2023: £321 million)
£290 million (2023: £321 million)
Basis for determining
materiality
In determining our benchmark for materiality, we have
considered the metrics used by investors and other
users of the financial statements. We have determined
pre-tax profits, normalised for non-recurring items to
be the most relevant to users of the financial
statements. This approach is broadly consistent with
the prior year.
The determined materiality represents 5 per cent of
normalised pre-tax profit and 0.7 per cent of net assets.
The Bank materiality represents 0.6 per cent of net
assets and is capped at Group materiality.
Rationale for the
benchmark applied
Given the importance of these measures to investors
and users of the financial statements, we have used
pre-tax profits, normalised for non-recurring items as
the primary benchmark for our determination of
materiality.
As the Bank does not disclose a standalone income
statement we do not consider an income based metric
to be an appropriate benchmark for the purposes of
setting materiality when considering the expectations
of the users of the Bank’s financial statements. As such
we have determined that a net assets benchmark is
appropriate. However, given the size of the entity’s
balance sheet, we have capped materiality at Group’s
materiality.
6.2Performance materiality
We set performance materiality at a level lower than materiality to reduce the probability that, in aggregate, uncorrected and undetected
misstatements exceed the materiality for the financial statements as a whole.
Group financial statements
Bank financial statements
Performance
materiality
70 per cent of Group materiality – £200 million
(2023 : 70 per cent at £224 million)
70 per cent of Bank materiality – £200 million
(2023 : 70 per cent at £224 million)
Basis and rationale for
determining
performance
materiality
In determining performance materiality, we considered the following factors:
a. The quality of the control environment and whether we were able to rely on controls;
b. The degree of centralisation and commonality of controls and processes;
c. The uncertain economic environment;
d. The nature, volume and size of uncorrected misstatements arising in the previous audit; and
e. The nature, volume and size of uncorrected misstatements that remain uncorrected in the current period.
6.3Error reporting threshold
We agreed with the Audit Committee that we would report to the Committee all audit differences in excess of £14 million (2023: £16 million),
as well as any differences below this threshold, which in our view, warranted reporting on qualitative grounds. We also report to the Audit
Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements.
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7.Other information
The other information comprises the information included in the Annual Report, other than the financial
statements and our auditors’ report thereon. The directors are responsible for the other information contained
within the Annual Report. Our opinion on the financial statements does not cover the other information and,
except to the extent otherwise explicitly stated in our report, we do not express any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether the other information is
materially inconsistent with the financial statements or our knowledge obtained in the course of the audit or
otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material misstatements, we are required to determine
whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work
we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact.
We have nothing to
report in this regard.
We summarise below our work in relation to areas of the other information including those areas upon which we are specifically required to
report:
Our responsibility
Our report
Matters we are specifically required to report
Strategic report and
directors’ report
Report whether they are consistent with the audited
financial statements and are prepared in accordance
with applicable legal requirements.
Report if we have identified any material
misstatements in either report in the light of the
knowledge and understanding of the Group and of the
Bank and their environment obtained in the course of
the audit.
As set out in the section ‘Opinions on other matters
prescribed by the Companies Act 2006’, in our opinion,
based on the work undertaken in the course of the
audit, the information in these reports is consistent
with the audited financial statements and has been
prepared in accordance with applicable legal
requirements.
Principal risks (within
the strategic report)
Review the confirmation and description in the light of
the knowledge gathered during the audit, such as
through considering the directors’ processes to support
the statements made, challenging the Group’s key
judgements and estimates, consideration of historical
forecasting accuracy and evaluating macro-economic
assumptions.
We have nothing material to report, add or draw
attention to in respect of these matters.
8.Responsibilities of Directors
As explained more fully in the directors’ responsibilities statement, the directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s and the Bank’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either
intend to liquidate the Group or the Bank or to cease operations, or have no realistic alternative but to do so.
9.Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement,
whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but
is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at www.frc.org.uk/
auditorsresponsibilities. This description forms part of our auditors’ report.
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10.Extent to which the audit was considered capable of detecting irregularities, including fraud
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities,
outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable
of detecting irregularities, including fraud is detailed below.
Identifying and assessing potential risks related to irregularities
In identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and
regulations, we considered the following:
the nature of the industry and sector, control environment and business performance including the design of the Group’s remuneration
policies, key drivers for directors’ remuneration, bonus levels and performance targets;
the Group’s own assessment of the risks that irregularities may occur either as a result of fraud or error that was discussed by the Audit
Committee including on 18 February 2025;
results of our inquiries of management, in-house legal counsel, internal audit and the Audit Committee about their own identification and
assessment of the risk of irregularities, including those that are specific to the financial services sector, and review of supporting
documentation, concerning the Group’s policies and procedures relating to:
identifying, evaluating and complying with laws and regulations and whether they were aware of any instances of non-compliance;
detecting and responding to the risks of fraud and whether they have knowledge of any actual, suspected or alleged fraud; and
the internal controls established to mitigate risks related to fraud or non-compliance with laws and regulations;
the discussion among the audit engagement team including relevant internal specialists, including tax, valuations, pensions, credit
modelling, actuarial, IT and industry specialists regarding how and where fraud might occur in the financial statements and any potential
indicators of fraud; and
obtaining an understanding of the legal and regulatory frameworks that the Group operates in, focusing on those laws and regulations that
had a direct effect on the financial statements, such as provisions of the UK Companies Act, pensions legislation and tax legislation or that
had a fundamental effect on the operations of the Group, including regulation and supervisory requirements of the Prudential Regulation
Authority, Financial Reporting Council and Financial Conduct Authority.
Audit response to risks identified
As a result of performing the above, we identified the Group’s determination of ‘Expected credit losses’ as a key audit matter related to the
potential risk of fraud. The key audit matters section of our report explains the matter in more detail and also describes the specific procedures
in response to this key audit matter. In common with all audits under ISAs (UK), we are also required to perform specific procedures to respond
to the risk of management override.
In addition to the above, our procedures to respond to risks identified included the following:
reviewing the financial statement disclosures and testing to supporting documentation to assess compliance with provisions of relevant
laws and regulations described as having a direct effect on the financial statements;
enquiring of management, the Audit Committee and in-house and external legal counsel concerning actual and potential litigation and
claims;
performing analytical procedures to identify any unusual or unexpected relationships that may indicate risks of material misstatement due
to fraud;
reading minutes of meetings of those charged with governance, reviewing internal audit reports and correspondence with regulators;
in addressing the risk of fraud through management override of controls, testing the appropriateness of journal entries and other
adjustments;
assessing whether the judgements made in making accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions that are unusual or outside the normal course of business.
We also communicated relevant identified laws and regulations and potential fraud risks to all engagement team members including specialists
and remained alert to any indications of fraud or non-compliance with laws and regulations throughout the audit.
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Report on other legal and regulatory requirements
11.Opinions on other matters prescribed by the Companies Act 2006
In our opinion, the part of the directors’ remuneration report to be audited has been properly prepared in accordance with the Companies Act
2006.
In our opinion, based on the work undertaken in the course of the audit:
The information given in the strategic report and the directors’ report for the financial year for which the financial statements are prepared
is consistent with the financial statements; and
The strategic report and the directors’ report have been prepared in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group and of the Parent company and their environment obtained in the course of the
audit, we have not identified any material misstatements in the strategic report or the directors’ report.
12.Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if, in our opinion:
We have not received all the information and explanations we require for our audit; or
Adequate accounting records have not been kept by the Bank, or returns adequate for our audit have
not been received from branches not visited by us; or
The Bank’s financial statements are not in agreement with the accounting records and returns.
We have nothing to report in
respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if in our opinion certain disclosures of
directors’ remuneration have not been made.
We have nothing to report in
respect of this matter.
13.Other matters which we are required to address
Auditor tenure
Following the recommendation of the Audit Committee, we were appointed by shareholders at its annual general meeting on 16 May 2024 to
audit the financial statements of Lloyds Banking Group plc, including Lloyds Bank plc for the year ended 31 December 2024 and subsequent
financial periods. The period of total uninterrupted engagement of the firm is four years.
Consistency of the audit report with the additional report to the Audit Committee
Our audit opinion is consistent with the additional report to the Audit Committee we are required to provide in accordance with ISAs (UK).
14.Use of our report
This report is made solely to the Bank’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit
work has been undertaken so that we might state to the Bank’s members those matters we are required to state to them in an auditors’ report
and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Bank and
the Bank’s members as a body, for our audit work, for this report, or for the opinions we have formed.
As required by the Financial Conduct Authority (FCA) Disclosure Guidance and Transparency Rule (DTR) 4.1.15R – DTR 4.1.18R, these financial
statements will form part of the Electronic Format Annual Financial Report filed on the National Storage Mechanism of the FCA in accordance
with DTR 4.1.15R – DTR 4.1.18R. This auditors’ report provides no assurance over whether the Electronic Format Annual Financial Report has
been prepared in compliance with DTR 4.1.15R – DTR 4.1.18R.
Michael Lloyd.jpg
Michael Lloyd (Senior Statutory Auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
27 February 2025
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Lloyds Bank plc Annual Report and Accounts 2024
Consolidated income statement
for the year ended 31 December
Note
2024
£m
2023
£m
2022
£m
Interest income
28,386
25,300
16,562
Interest expense
(15,794)
(11,591)
(3,457)
Net interest income
5
12,592
13,709
13,105
Fee and commission income
2,416
2,456
2,352
Fee and commission expense
(1,478)
(1,104)
(1,101)
Net fee and commission income
6
938
1,352
1,251
Net trading income
7
597
384
180
Other operating income
8
2,944
2,922
2,209
Other income
4,479
4,658
3,640
Total income
17,071
18,367
16,745
Operating expenses
9
(11,927)
(10,968)
(9,199)
Impairment
13
(456)
(343)
(1,452)
Profit before tax
4,688
7,056
6,094
Tax expense
14
(1,202)
(1,849)
(1,300)
Profit for the year
3,486
5,207
4,794
Profit attributable to ordinary shareholders
3,101
4,858
4,528
Profit attributable to other equity holders
363
334
241
Profit attributable to equity holders
3,464
5,192
4,769
Profit attributable to non-controlling interests
22
15
25
Profit for the year
3,486
5,207
4,794
The accompanying notes are an integral part of the consolidated financial statements.
76
Lloyds Bank plc Annual Report and Accounts 2024
Consolidated statement of comprehensive income
for the year ended 31 December
2024
£m
2023
£m
2022
£m
Profit for the year
3,486
5,207
4,794
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements:
Remeasurements before tax
(768)
(1,633)
(3,012)
Current tax
50
376
577
Deferred tax
154
52
283
(564)
(1,205)
(2,152)
Movements in revaluation reserve in respect of equity shares held at fair value through other comprehensive
income:
Change in fair value
Deferred tax
(1)
(1)
Gains and losses attributable to own credit risk:
(Losses) gains before tax
(78)
(234)
519
Deferred tax
22
66
(155)
(56)
(168)
364
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of debt securities held at fair value through other comprehensive
income:
Change in fair value
(52)
(41)
(132)
Income statement transfers in respect of disposals
157
140
76
Income statement transfers in respect of impairment
(3)
(2)
6
Current tax
1
1
8
Deferred tax
(30)
(27)
11
73
71
(31)
Movements in cash flow hedging reserve:
Effective portion of changes in fair value taken to other comprehensive income
(2,317)
725
(6,520)
Net income statement transfers
2,297
1,517
(1)
Deferred tax
6
(628)
1,804
(14)
1,614
(4,717)
Movements in foreign currency translation reserve:
Currency translation differences (tax: £nil)
(65)
(33)
91
Transfers to income statement (tax: £nil)
(65)
(33)
91
Total other comprehensive (loss) income for the year, net of tax
(626)
279
(6,446)
Total comprehensive income (loss) for the year
2,860
5,486
(1,652)
Total comprehensive income (loss) attributable to ordinary shareholders
2,475
5,137
(1,918)
Total comprehensive income attributable to other equity holders
363
334
241
Total comprehensive income (loss) attributable to equity holders
2,838
5,471
(1,677)
Total comprehensive income attributable to non-controlling interests
22
15
25
Total comprehensive income (loss) for the year
2,860
5,486
(1,652)
The accompanying notes are an integral part of the consolidated financial statements.
77
Lloyds Bank plc Annual Report and Accounts 2024
Consolidated balance sheet
at 31 December
Note
2024
£m
2023
£m
Assets
Cash and balances at central banks
42,396
57,909
Financial assets at fair value through profit or loss
16
2,321
1,862
Derivative financial instruments
16
4,235
3,165
Loans and advances to banks
6,433
8,810
Loans and advances to customers
18
441,907
433,124
Reverse repurchase agreements
44,143
32,751
Debt securities
11,854
12,546
Due from fellow Lloyds Banking Group undertakings
560
840
Financial assets at amortised cost
504,897
488,071
Financial assets at fair value through other comprehensive income
16
30,344
27,337
Goodwill and other intangible assets
21
5,804
5,837
Current tax recoverable
338
1,026
Deferred tax assets
14
4,785
4,636
Retirement benefit assets
11
3,028
3,624
Other assets
22
13,065
11,938
Total assets
611,213
605,405
Liabilities
Deposits from banks
3,144
3,557
Customer deposits
451,794
441,953
Repurchase agreements at amortised cost
37,760
37,702
Due to fellow Lloyds Banking Group undertakings
4,049
2,932
Financial liabilities at fair value through profit or loss
16
4,630
5,255
Derivative financial instruments
17
5,787
4,307
Notes in circulation
2,121
1,392
Debt securities in issue at amortised cost
24
45,281
52,449
Other liabilities
25
7,211
6,260
Retirement benefit obligations
11
122
136
Current tax liabilities
33
23
Deferred tax liabilities
14
125
157
Provisions
26
2,198
1,916
Subordinated liabilities
27
7,211
6,935
Total liabilities
571,466
564,974
Equity
Share capital
28
1,574
1,574
Share premium account
600
600
Other reserves
29
2,389
2,395
Retained profits
30
29,412
30,786
Ordinary shareholders’ equity
33,975
35,355
Other equity instruments
31
5,692
5,018
Total equity excluding non-controlling interests
39,667
40,373
Non-controlling interests
80
58
Total equity
39,747
40,431
Total equity and liabilities
611,213
605,405
The accompanying notes are an integral part of the consolidated financial statements.
The directors approved the consolidated financial statements on 27 February 2025.
1.8.3 43795_Signature_RobinBudenberg-2.jpg
1.8.1 41326_Signature_CharlieNunn_v2-2.jpg
1.8.2 41326_Signature_WilliamChalmers-2.jpg
Sir Robin Budenberg
Chair
Charlie Nunn
Group Chief Executive
William Chalmers
Chief Financial Officer
78
Lloyds Bank plc Annual Report and Accounts 2024
Consolidated statement of changes in equity
for the year ended 31 December
Attributable to ordinary shareholders
Share
capital and
premium
£m
Other
reserves
£m
Retained
profits
£m
Total
£m
Other
equity
instruments
£m
Non-
controlling
interests
£m
Total
£m
At 1 January 2024
2,174
2,395
30,786
35,355
5,018
58
40,431
Comprehensive income
Profit for the year
3,101
3,101
363
22
3,486
Other comprehensive income
Post-retirement defined benefit scheme
remeasurements, net of tax
(564)
(564)
(564)
Movements in revaluation reserve in respect of
financial assets held at fair value through other
comprehensive income, net of tax:
Debt securities
73
73
73
Gains and losses attributable to own credit risk,
net of tax
(56)
(56)
(56)
Movements in cash flow hedging reserve, net of
tax
(14)
(14)
(14)
Movements in foreign currency translation
reserve, net of tax
(65)
(65)
(65)
Total other comprehensive loss
(6)
(620)
(626)
(626)
Total comprehensive (loss) income1
(6)
2,481
2,475
363
22
2,860
Transactions with owners
Dividends (note 32)
(3,990)
(3,990)
(3,990)
Distributions on other equity instruments
(363)
(363)
Issue of other equity instruments (note 31)
(6)
(6)
1,174
1,168
Repurchases and redemptions of other equity
instruments (note 31)
(500)
(500)
Capital contributions received
142
142
142
Return of capital contributions
(1)
(1)
(1)
Total transactions with owners
(3,855)
(3,855)
311
(3,544)
Realised gains and losses on equity shares held
at fair value through other comprehensive
income
At 31 December 2024
2,174
2,389
29,412
33,975
5,692
80
39,747
1Total comprehensive income attributable to owners of the parent was a surplus of £2,838 million ( 2023 : surplus of £5,471 million; 2022: loss of £1,677 million).
Further details of movements in the Group’s share capital, reserves and other equity instruments are provided in notes 28 to 31.
The accompanying notes are an integral part of the consolidated financial statements.
79
Lloyds Bank plc Annual Report and Accounts 2024
Consolidated statement of changes in equity continued
for the year ended 31 December
Attributable to ordinary shareholders
Share
capital and
premium
£m
Other
reserves
£m
Retained
profits
£m
Total
£m
Other
equity
instruments
£m
Non-
controlling
interests
£m
Total
£m
At 1 January 2023
2,174
743
31,792
34,709
4,268
82
39,059
Comprehensive income
Profit for the year
4,858
4,858
334
15
5,207
Other comprehensive income
Post-retirement defined benefit scheme
remeasurements, net of tax
(1,205)
(1,205)
(1,205)
Movements in revaluation reserve in respect of
financial assets held at fair value through other
comprehensive income, net of tax:
Debt securities
71
71
71
Gains and losses attributable to own credit risk,
net of tax
(168)
(168)
(168)
Movements in cash flow hedging reserve,
net of tax
1,614
1,614
1,614
Movements in foreign currency translation
reserve, net of tax
(33)
(33)
(33)
Total other comprehensive income (loss)
1,652
(1,373)
279
279
Total comprehensive income
1,652
3,485
5,137
334
15
5,486
Transactions with owners
Dividends (note 32)
(4,700)
(4,700)
(39)
(4,739)
Distributions on other equity instruments
(334)
(334)
Issue of other equity instruments (note 31)
(5)
(5)
750
745
Capital contributions received
215
215
215
Return of capital contributions
(1)
(1)
(1)
Total transactions with owners
(4,491)
(4,491)
416
(39)
(4,114)
Realised gains and losses on equity shares held
at fair value through other comprehensive
income
At 31 December 2023
2,174
2,395
30,786
35,355
5,018
58
40,431
The accompanying notes are an integral part of the consolidated financial statements.
80
Lloyds Bank plc Annual Report and Accounts 2024
Consolidated statement of changes in equity continued
for the year ended 31 December
Attributable to ordinary shareholders
Share
capital and
premium
£m
Other
reserves
£m
Retained
profits
£m
Total
£m
Other
equity
instruments
£m
Non-
controlling
interests
£m
Total
£m
At 1 January 2022
2,174
5,400
28,836
36,410
4,268
94
40,772
Comprehensive income
Profit for the year
4,528
4,528
241
25
4,794
Other comprehensive income
Post-retirement defined benefit scheme
remeasurements, net of tax
(2,152)
(2,152)
(2,152)
Movements in revaluation reserve in respect of
financial assets held at fair value through other
comprehensive income, net of tax:
Debt securities
(31)
(31)
(31)
Equity shares
(1)
(1)
(1)
Gains and losses attributable to own credit risk,
net of tax
364
364
364
Movements in cash flow hedging reserve,
net of tax
(4,717)
(4,717)
(4,717)
Movements in foreign currency translation
reserve, net of tax
91
91
91
Total other comprehensive loss
(4,658)
(1,788)
(6,446)
(6,446)
Total comprehensive (loss) income
(4,658)
2,740
(1,918)
241
25
(1,652)
Transactions with owners
Dividends (note 32)
(37)
(37)
Distributions on other equity instruments
(241)
(241)
Capital contributions received
221
221
221
Return of capital contributions
(4)
(4)
(4)
Total transactions with owners
217
217
(241)
(37)
(61)
Realised gains and losses on equity shares held
at fair value through other comprehensive
income
1
(1)
At 31 December 2022
2,174
743
31,792
34,709
4,268
82
39,059
The accompanying notes are an integral part of the consolidated financial statements.
81
Lloyds Bank plc Annual Report and Accounts 2024
Consolidated cash flow statement
for the year ended 31 December
Note
2024
£m
2023
£m
2022
£m
Cash flows (used in) provided by operating activities
Profit before tax
4,688
7,056
6,094
Adjustments for:
Change in operating assets
38(A)
(21,996)
8,923
(2,900)
Change in operating liabilities
38(B)
4,470
(15,325)
16,894
Non-cash and other items
38(C)
6,051
4,818
(129)
Tax paid1
(1,432)
(1,357)
(670)
Tax refunded1
970
21
Net cash (used in) provided by operating activities
(7,249)
4,115
19,310
Cash flows (used in) provided by investing activities
Purchase of financial assets
(10,508)
(10,303)
(7,953)
Proceeds from sale and maturity of financial assets
7,053
5,289
11,041
Purchase of fixed assets1
(3,693)
(3,489)
(2,309)
Purchase of other intangible assets1
(1,246)
(1,473)
(1,395)
Proceeds from sale of fixed assets1
1,183
979
871
Proceeds from sale of goodwill and other intangible assets1
8
Acquisition of businesses, net of cash acquired
38(D)
(293)
Net cash (used in) provided by investing activities
(7,203)
(9,290)
255
Cash flows used in financing activities
Dividends paid to ordinary shareholders
32
(3,990)
(4,700)
Distributions on other equity instruments
(363)
(334)
(241)
Dividends paid to non-controlling interests
(39)
(37)
Return of capital contributions
(1)
(1)
(4)
Interest paid on subordinated liabilities
(366)
(335)
(397)
Proceeds from issue of subordinated liabilities
386
670
837
Proceeds from issue of other equity instruments
1,168
745
Repayment of subordinated liabilities
(251)
(2,216)
Repurchases and redemptions of other equity instruments
(500)
Borrowings from parent company
2,895
1,942
1,852
Repayments of borrowings to parent company
(1,280)
(931)
Interest paid on borrowings from parent company
(200)
(210)
(200)
Net cash used in financing activities
(2,251)
(3,444)
(406)
Effects of exchange rate changes on cash and cash equivalents
(123)
(44)
82
Change in cash and cash equivalents
(16,826)
(8,663)
19,241
Cash and cash equivalents at beginning of year
66,538
75,201
55,960
Cash and cash equivalents at end of year
38(E)
49,712
66,538
75,201
1Previously presented in aggregate.
The accompanying notes are an integral part of the consolidated financial statements.
82
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements
for the year ended 31 December
Note 1: Basis of preparation
The consolidated financial statements of Lloyds Bank plc and its subsidiary undertakings (the Group) have been prepared in accordance with
international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements have also been
prepared in accordance with IFRS ® Accounting Standards as issued by the International Accounting Standards Board (IASB).
The financial information has been prepared under the historical cost convention, as modified by the revaluation of investment properties,
financial assets measured at fair value through other comprehensive income, trading securities and certain other financial assets and liabilities
at fair value through profit or loss and all derivative contracts. The directors consider that it is appropriate to continue to adopt the going
concern basis in preparing the financial statements. In reaching this assessment, the directors have considered the Group’s capital and funding
position, the impact of climate change upon the Group’s future performance and the results from stress testing scenarios.
The Group’s accounting policies are consistent with those applied by the Group in its financial statements for the year ended 31 December
2023 and there have been no changes in the Group’s methods of computation.
The IASB has issued a number of minor amendments to the IFRS Accounting Standards effective 1 January 2024, including IFRS 16 Lease
Liability in a Sale and Leaseback, IAS 1 Non-current Liabilities with Covenants, and IAS 1 Classification of Liabilities as Current or Non-current.
These amendments do not have a significant impact on the Group.
Future accounting developments
There are a number of new accounting pronouncements issued by the IASB with an effective date of 1 January 2027. This includes IFRS 18
Presentation and Disclosure in Financial Statements which replaces IAS 1 Presentation of Financial Statements and IFRS 19 Subsidiaries without
Public Accountability: Disclosures. The impact of these standards is being assessed and they have not yet been endorsed for use in the UK.
The IASB has issued its annual improvements and a number of amendments to the IFRS Accounting Standards effective on or after 1 January
2025, including Amendments to IFRS 9 Financial Instruments (effective 1 January 2026) and Amendments to IFRS 7 Financial Instruments
Disclosure (effective 1 January 2026) and IAS 21 The Effects of Changes in Foreign Exchange Rates (effective 1 January 2025). These
improvements and amendments are not expected to have a significant impact on the Group.
Note 2: Accounting policies
The Group’s accounting policies are set out below. These accounting policies have been applied consistently.
(A)Consolidation
The assets, liabilities and results of Group undertakings (including structured entities) are included in the financial statements on the basis of
accounts made up to the reporting date. Group undertakings include subsidiaries, associates and joint ventures. Details of the Group’s
subsidiaries and related undertakings are given on pages 180 to 183.
Subsidiaries are entities controlled by the Group. The Group controls an entity when it has power over the entity, is exposed to, or has rights
to, variable returns from its involvement with the entity, and has the ability to affect those returns through the exercise of its power. This
generally accompanies a shareholding of more than one half of the voting rights although in certain circumstances a holding of less than one
half of the voting rights may still result in the ability of the Group to exercise control. The existence and effect of potential voting rights that
are currently exercisable or convertible are considered when assessing whether the Group controls another entity. The Group reassesses
whether or not it controls an entity if facts and circumstances indicate that there have been changes to any of the above elements.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group; they are deconsolidated from the date that
control ceases.
Structured entities are entities that are designed so that their activities are not governed by way of voting rights. In assessing whether the
Group has power over such entities in which it has an interest, the Group considers factors such as the purpose and design of the entity; its
practical ability to direct the relevant activities of the entity; the nature of the relationship with the entity; and the size of its exposure to the
variability of returns of the entity.
The treatment of transactions with non-controlling interests depends on whether, as a result of the transaction, the Group loses control of the
subsidiary. Changes in the parent’s ownership interest in a subsidiary that do not result in a loss of control are accounted for as equity
transactions; any difference between the amount by which the non-controlling interests are adjusted and the fair value of the consideration
paid or received is recognised directly in equity and attributed to the owners of the parent entity. Where the Group loses control of the
subsidiary, at the date when control is lost the amount of any non-controlling interest in that former subsidiary is derecognised and any
investment retained in the former subsidiary is remeasured to its fair value; the gain or loss that is recognised in profit or loss on the partial
disposal of the subsidiary includes the gain or loss on the remeasurement of the retained interest.
Intercompany transactions, balances and unrealised gains and losses on transactions between Group companies are eliminated.
The acquisition method of accounting is used to account for business combinations by the Group. The consideration for the acquisition of a
subsidiary is the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration
includes the fair value of any asset or liability resulting from a contingent consideration arrangement. Acquisition-related costs are expensed as
incurred except those relating to the issuance of debt instruments (see (E)(4) below) or share capital (see ( O) below). Identifiable assets
acquired and liabilities assumed in a business combination are measured initially at their fair value at the acquisition date.
(B)Goodwill
Goodwill arises on business combinations and represents the excess of the cost of an acquisition over the fair value of the Group’s share of the
identifiable assets, liabilities and contingent liabilities acquired. Where the fair value of the Group’s share of the identifiable assets, liabilities
and contingent liabilities of the acquired entity is greater than the cost of acquisition, the excess is recognised immediately in the income
statement.
Goodwill is recognised as an asset at cost and is tested at least annually for impairment. For impairment testing, goodwill is allocated to the
cash-generating unit (CGU) or groups of CGUs that are expected to benefit from the business combination. The Group’s CGUs are largely
product based for its Retail business and client based for its Commercial Banking business. An impairment loss is recognised if the carrying
amount of a CGU is determined to be greater than its recoverable amount. The recoverable amount of a CGU is the higher of its fair value less
costs to sell and its value in use. If an impairment is identified the carrying value of the goodwill is written down immediately through the
income statement and this is not subsequently reversed. At the date of disposal of a subsidiary, the carrying value of attributable goodwill is
included in the calculation of the profit or loss on disposal.
83
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 2: Accounting policies continued
(C)Other intangible assets
Intangible assets which have been determined to have a finite useful life are amortised on a straight-line basis over their estimated useful life as
follows: up to 7 years for capitalised software; 10 to 15 years for brands and other intangible assets.
Intangible assets with finite useful lives are reviewed at each reporting date to assess whether there is any indication that they are impaired. If
any such indication exists the recoverable amount of the asset is determined and in the event that the asset’s carrying amount is greater than
its recoverable amount, it is written down immediately. Certain brands have been determined to have an indefinite useful life and are not
amortised. Such intangible assets are assessed annually to determine whether the asset is impaired and to reconfirm that an indefinite useful
life remains appropriate. In the event that an indefinite life is inappropriate, a finite life is determined and a further impairment review is
performed on the asset.
(D)Revenue recognition
(1)Net interest income
Interest income and expense are recognised in the income statement using the effective interest method for all interest-bearing financial
instruments, except for those classified at fair value through profit or loss. The effective interest method is a method of calculating the
amortised cost of a financial asset or liability and of allocating the interest income or interest expense over the expected life of the financial
instrument. The effective interest rate is the rate that exactly discounts the estimated future cash payments or receipts over the expected life
of the financial instrument to the gross carrying amount of the financial asset (before adjusting for expected credit losses) or to the amortised
cost of the financial liability, including early redemption fees, other fees, and premiums and discounts that are an integral part of the overall
return. In the case of financial assets that are purchased or originated credit-impaired, the effective interest rate is the rate that discounts the
estimated future cash flows to the amortised cost of the instrument. Direct incremental transaction costs related to the acquisition, issue or
disposal of a financial instrument are also taken into account. Interest income from non-credit-impaired financial assets is recognised by
applying the effective interest rate to the gross carrying amount of the asset; for credit-impaired financial assets, the effective interest rate is
applied to the net carrying amount after deducting the allowance for expected credit losses. Impairment policies are set out in (H) below.
(2)Fee and commission income and expense
Fees and commissions receivable which are not an integral part of the effective interest rate are recognised as income as the Group fulfils its
performance obligations. The Group’s principal performance obligations arising from contracts with customers are in respect of value added
current accounts, credit cards and debit cards. These fees are received, and the Group provides the service, monthly; the fees are recognised in
income on this basis. The Group also receives certain fees in respect of its asset finance business where the performance obligations are
typically fulfilled towards the end of the customer contract; these fees are recognised in income on this basis. Where it is unlikely that the loan
commitments will be drawn, loan commitment fees are recognised in fee and commission income over the life of the facility, rather than as an
adjustment to the effective interest rate for the lending expected to be drawn. Incremental costs incurred to generate fee and commission
income are charged to fee and commission expense as they are incurred.
(3)Other
Dividend income is recognised when the right to receive payment is established.
Revenue recognition policies specific to trading income are set out in (E)(3) below and those relating to leases are set out in (J)(1) below.
(E)Financial assets and liabilities
On initial recognition, financial assets are classified as measured at amortised cost, fair value through other comprehensive income or fair value
through profit or loss, depending on the Group’s business model for managing those financial assets and whether the resultant cash flows
represent solely payments of principal and interest on principal outstanding. The Group assesses its business models at a portfolio level based
on its objectives for the relevant portfolio, how the performance of the portfolio is managed and reported, and the frequency of asset sales.
Financial assets with embedded derivatives are considered in their entirety when considering their cash flow characteristics. The Group
reclassifies financial assets only when its business model for managing those assets changes. A reclassification will only take place when the
change is significant to the Group’s operations and will occur at a portfolio level and not for individual instruments; reclassifications are
expected to be rare. Equity investments are measured at fair value through profit or loss unless the Group elects at initial recognition to
account for the instruments at fair value through other comprehensive income. For these instruments, principally strategic investments,
dividends are recognised in profit or loss but fair value gains and losses are not subsequently reclassified to profit or loss following
derecognition of the investment.
The Group initially recognises loans and advances, deposits, debt securities in issue and subordinated liabilities when the Group becomes a
party to the contractual provisions of the instrument. Regular way purchases and sales of securities and other financial assets and trading
liabilities are recognised on trade date, being the date that the Group is committed to purchase or sell an asset.
Financial assets are derecognised when the contractual right to receive cash flows from those assets has expired or when the Group has
transferred its contractual right to receive the cash flows from the assets and either: substantially all of the risks and rewards of ownership
have been transferred; or the Group has neither retained nor transferred substantially all of the risks and rewards, but has transferred control.
Financial liabilities are derecognised when the obligation is discharged, cancelled or expires.
(1)Financial instruments measured at amortised cost
Financial assets that are held to collect contractual cash flows where those cash flows represent solely payments of principal and interest are
measured at amortised cost. A basic lending arrangement results in contractual cash flows that are solely payments of principal and interest on
the principal amount outstanding. Where the contractual cash flows introduce exposure to risks or volatility unrelated to a basic lending
arrangement such as changes in equity prices or commodity prices, the payments do not comprise solely principal and interest. Financial assets
measured at amortised cost are predominantly loans and advances to customers and banks, reverse repurchase agreements and certain debt
securities used by the Group to manage its liquidity. Loans and advances and reverse repurchase agreements are initially recognised when cash
is advanced to the borrower at fair value inclusive of transaction costs. Interest income is accounted for using the effective interest method
(see (D) above).
Financial liabilities are measured at amortised cost, except for trading liabilities and other financial liabilities designated at fair value through
profit or loss on initial recognition which are held at fair value.
84
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 2: Accounting policies continued
(2)Financial assets measured at fair value through other comprehensive income
Financial assets that are held to collect contractual cash flows and for subsequent sale where those cash flows represent solely payments of
principal and interest are recognised in the balance sheet at their fair value, inclusive of transaction costs. Interest calculated using the
effective interest method and foreign exchange gains and losses on assets denominated in foreign currencies are recognised in the income
statement. All other gains and losses arising from changes in fair value are recognised directly in other comprehensive income, until the financial
asset is either sold or matures, at which time, other than in respect of equity shares, the cumulative gain or loss previously recognised in other
comprehensive income is recognised in the income statement. The cumulative revaluation amount in respect of equity shares is transferred
directly to retained profits. The Group recognises a charge for expected credit losses in the income statement (see (H) below). As the asset is
measured at fair value, the charge does not adjust the carrying value of the asset, and this is reflected in other comprehensive income.
(3)Financial instruments measured at fair value through profit or loss
Financial assets are classified at fair value through profit or loss where they do not meet the criteria to be measured at amortised cost or fair
value through other comprehensive income or where they are designated at fair value through profit or loss to reduce an accounting mismatch.
All derivatives are carried at fair value through profit or loss, other than those in effective cash flow hedging relationships. Derivatives are
carried on the balance sheet as assets when their fair value is positive and as liabilities when their fair value is negative. Refer to note 16 (Fair
values of financial assets and liabilities) for details of valuation techniques and significant inputs to valuation models.
Derivatives embedded in a financial asset are not considered separately; the financial asset is considered in its entirety when determining
whether its cash flows are solely payments of principal and interest. Derivatives embedded in financial liabilities are treated as separate
derivatives when their economic characteristics and risks are not closely related to those of the host contract and the host contract is not
carried at fair value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognised in the
income statement.
Trading securities, which are debt securities and equity shares acquired principally for the purpose of selling in the short term or which are part
of a portfolio which is managed for short-term gains, do not meet these criteria and are also measured at fair value through profit or loss.
Financial assets measured at fair value through profit or loss are recognised in the balance sheet at their fair value. Fair value gains and losses
together with interest coupons and dividend income are recognised in the income statement within net trading income.
Financial liabilities are measured at fair value through profit or loss where they are trading liabilities or where they are designated at fair value
through profit or loss in order to reduce an accounting mismatch; where the liabilities are part of a group of liabilities (or assets and liabilities)
which is managed, and its performance evaluated, on a fair value basis; or where the liabilities contain one or more embedded derivatives that
significantly modify the cash flows arising under the contract and would otherwise need to be separately accounted for. Financial liabilities
measured at fair value through profit or loss are recognised in the balance sheet at their fair value. Fair value gains and losses are recognised in
the income statement within net trading income in the period in which they occur, except in the case of financial liabilities designated at fair
value through profit or loss where gains and losses attributable to changes in own credit risk are recognised in other comprehensive income.
The fair values of assets and liabilities traded in active markets are based on current bid and offer prices, respectively, which include the
expected effects of potential changes to laws and regulations, risks associated with climate change and other factors. If the market is not
active the Group establishes a fair value by using valuation techniques. The fair values of derivative financial instruments are adjusted where
appropriate to reflect credit risk (via credit valuation adjustments (CVAs), debit valuation adjustments (DVAs) and funding valuation
adjustments (FVAs)), market liquidity and other risks.
(4)Borrowings
Borrowings (which include deposits from banks, customer deposits, repurchase agreements, debt securities in issue and subordinated liabilities)
are recognised initially at fair value, being their issue proceeds net of transaction costs incurred. These instruments are subsequently stated at
amortised cost using the effective interest method.
Preference shares and other instruments which carry a mandatory coupon or are redeemable on a specific date are classified as financial
liabilities. The coupon on these instruments is recognised in the income statement as interest expense. Securities which carry a discretionary
coupon and have no fixed maturity or redemption date are classified as other equity instruments. Interest payments on these securities are
recognised as distributions from equity in the period in which they are paid.
An exchange of financial liabilities on substantially different terms is accounted for as an extinguishment of the original financial liability and
the recognition of a new financial liability. The difference between the carrying amount of a financial liability extinguished and the new
financial liability is recognised in profit or loss together with any related costs or fees incurred. When a financial liability is exchanged for an
equity instrument, the new equity instrument is recognised at fair value and any difference between the carrying value of the liability and the
fair value of the new equity instrument is recognised in profit or loss.
(5)Sale and repurchase agreements (including securities lending and borrowing)
Securities sold subject to repurchase agreements (repos) continue to be recognised on the balance sheet where substantially all of the risks and
rewards are retained. Funds received for repos carried at fair value are included within trading liabilities.
Securities purchased under agreements to resell (reverse repos), where the Group does not acquire substantially all of the risks and rewards of
ownership, are measured at amortised cost or at fair value. Those measured at fair value are recognised within trading securities. The difference
between sale and repurchase price is treated as interest and accrued over the life of the agreements using the effective interest method.
Securities borrowing and lending transactions are typically secured; collateral takes the form of securities or cash advanced or received.
Securities lent to counterparties are retained on the balance sheet. Securities borrowed are not recognised on the balance sheet, unless these
are sold to third parties, in which case the obligation to return them is recorded at fair value as a trading liability. Cash collateral given or
received is treated as a loan and advance measured at amortised cost or customer deposit.
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Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 2: Accounting policies continued
(F)Hedge accounting
As permitted by IFRS 9, the Group continues to apply the requirements of IAS 39 to its hedging relationships.
Changes in the fair value of all derivative instruments, other than those in effective cash flow hedging relationships, are recognised immediately
in the income statement. As noted in (2) below, the change in fair value of a derivative in an effective cash flow hedging relationship is
allocated between the income statement and other comprehensive income.
Hedge accounting allows one financial instrument, generally a derivative such as a swap, to be designated as a hedge of another financial
instrument such as a loan or deposit or a portfolio of such instruments. At the inception of the hedge relationship, formal documentation is
drawn up specifying the hedging strategy, the hedged item, the hedging instrument and the methodology that will be used to measure the
effectiveness of the hedge relationship in offsetting changes in the fair value or cash flow of the hedged risk. The effectiveness of the hedging
relationship is tested both at inception and throughout its life and if at any point it is concluded that it is no longer highly effective in achieving
its documented objective, hedge accounting is discontinued. Note 17 provides details of the types of derivatives held by the Group and
presents separately those designated in hedge relationships.
(1)Fair value hedges
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement, together
with the changes in the fair value of the hedged asset or liability that are attributable to the hedged risk; this also applies if the hedged asset is
classified as a financial asset at fair value through other comprehensive income. If the hedge no longer meets the criteria for hedge accounting,
changes in the fair value of the hedged item attributable to the hedged risk are no longer recognised in the income statement. The cumulative
adjustment that has been made to the carrying amount of the hedged item is amortised to the income statement using the effective interest
method over the period to maturity.
(2)Cash flow hedges
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised in other
comprehensive income in the cash flow hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the
income statement. Amounts accumulated in equity are reclassified to the income statement in the periods in which the hedged item affects
profit or loss. When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative
gain or loss existing in equity at that time remains in equity and is recognised in the income statement when the forecast transaction is
ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that
was reported in equity is immediately transferred to the income statement.
(G)Offset
Financial assets and liabilities are offset and the net amount reported in the balance sheet when there is a legally enforceable right of offset
and there is an intention to settle on a net basis, or realise the asset and settle the liability simultaneously. Cash collateral on exchange traded
derivative transactions is presented gross unless the collateral cash flows are always settled net with the derivative cash flows. In certain
situations, even though master netting agreements exist, the lack of management intention to settle on a net basis results in the financial
assets and liabilities being reported gross on the balance sheet.
(H)Impairment of financial assets
The impairment charge in the income statement reflects the change in expected credit losses, including those arising from fraud. Expected
credit losses are recognised for loans and advances to customers and banks, other financial assets held at amortised cost, financial assets
(other than equity investments) measured at fair value through other comprehensive income, and certain loan commitments and financial
guarantee contracts. Expected credit losses are calculated as an unbiased and probability-weighted estimate using an appropriate probability
of default, adjusted to take into account a range of possible future economic scenarios, and applying this to the estimated exposure of the
Group at the point of default after taking into account the value of any collateral held, repayments, or other mitigants of loss and including the
impact of discounting using the effective interest rate.
At initial recognition, allowance (or provision in the case of some loan commitments and financial guarantees) is made for expected credit
losses resulting from default events that are possible within the next 12 months (12-month expected credit losses). In the event of a significant
increase in credit risk since origination, allowance (or provision) is made for expected credit losses resulting from all possible default events
over the expected life of the financial instrument (lifetime expected credit losses). Financial assets where 12-month expected credit losses are
recognised are considered to be Stage 1; financial assets which are considered to have experienced a significant increase in credit risk since
initial recognition are in Stage 2; and financial assets which have defaulted or are otherwise considered to be credit-impaired are allocated to
Stage 3. Some Stage 3 assets, mainly in Commercial Banking, are subject to individual rather than collective assessment. Such cases are subject
to a risk-based impairment sanctioning process, and these are reviewed and updated at least quarterly, or more frequently if there is a
significant change in the credit profile. The collective assessment of impairment aggregates financial instruments with similar risk
characteristics, such as whether the facility is revolving in nature or secured and the type of security held against financial assets.
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Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 2: Accounting policies continued
An assessment of whether credit risk has increased significantly since initial recognition considers the change in the risk of default occurring
over the remaining expected life of the financial instrument. In determining whether there has been a significant increase in credit risk, the
Group uses quantitative tests based on relative and absolute probability of default (PD) movements linked to internal credit ratings together
with qualitative indicators such as watchlists and other indicators of historical delinquency, credit weakness or financial difficulty. The use of
internal credit ratings and qualitative indicators ensures alignment between the assessment of staging and the Group’s management of credit
risk which utilises these internal metrics within distinct retail and commercial portfolio risk management practices. However, unless identified
at an earlier stage, the credit risk of financial assets is deemed to have increased significantly when more than 30 days past due. The use of a
payment holiday in and of itself has not been judged to indicate a significant increase in credit risk, with the underlying long-term credit risk
deemed to be driven by economic conditions and captured through the use of forward-looking models. These portfolio-level models are
capturing the anticipated volume of increased defaults and therefore an appropriate assessment of staging and expected credit loss. Where
the credit risk subsequently improves such that it no longer represents a significant increase in credit risk since initial recognition, the asset is
transferred back to Stage 1.
Assets are transferred to Stage 3 when they have defaulted or are otherwise considered to be credit-impaired. Default is considered to have
occurred when there is evidence that the customer is experiencing financial difficulty which is likely to affect significantly the ability to repay
the amount due. IFRS 9 contains a rebuttable presumption that default occurs no later than when a payment is 90 days past due which the
Group uses for all its products. In addition, other indicators of mortgage default are added including end-of-term payments on past due
interest-only accounts and loans considered non-performing due to recent arrears or forbearance. The use of payment holidays is not
considered to be an automatic trigger of regulatory default and therefore does not automatically trigger Stage 3. Days past due will also not
accumulate on any accounts that have taken a payment holiday including those already past due.
In certain circumstances, the Group will renegotiate the original terms of a customer’s loan, either as part of an ongoing customer relationship
or in response to adverse changes in the circumstances of the borrower. In the latter circumstances, the loan will remain classified as either
Stage 2 or Stage 3 until the credit risk has improved such that it no longer represents a significant increase since origination (for a return to
Stage 1), or the loan is no longer credit-impaired (for a return to Stage 2). On renegotiation the gross carrying amount of the loan is recalculated
as the present value of the renegotiated or modified contractual cash flows, which are discounted at the original effective interest rate.
Renegotiation may also lead to the loan and associated allowance being derecognised and a new loan being recognised initially at fair value.
Purchased or originated credit-impaired financial assets (POCI) include financial assets that are purchased or originated at a deep discount
that reflects incurred credit losses. At initial recognition, POCI assets do not carry an impairment allowance; instead, lifetime expected credit
losses are incorporated into the calculation of the effective interest rate. All changes in lifetime expected credit losses subsequent to the
assets’ initial recognition are recognised as an impairment charge.
A loan or advance is normally written off, either partially or in full, against the related allowance when the proceeds from realising any available
security have been received or there is no realistic prospect of recovery and the amount of the loss has been determined. Subsequent
recoveries of amounts previously written off decrease the amount of impairment losses recorded in the income statement. For both secured
and unsecured retail balances, the write-off takes place only once an extensive set of collections processes has been completed, or the status
of the account reaches a point where policy dictates that continuing attempts to recover are no longer appropriate. For commercial lending, a
write-off occurs if the loan facility with the customer is restructured, the asset is under administration and the only monies that can be
received are the amounts estimated by the administrator, the underlying assets are disposed and a decision is made that no further settlement
monies will be received, or external evidence (for example, third party valuations) is available that there has been an irreversible decline in
expected cash flows.
(I)Property, plant and equipment
Property, plant and equipment (other than investment property) is included at cost less accumulated depreciation. The value of land (included
in premises) is not depreciated. Depreciation on other assets is calculated using the straight-line method to allocate the difference between
the cost and the residual value over their estimated useful lives, as follows: the shorter of 50 years and the remaining period of the lease for
freehold/long and short leasehold premises; the shorter of 10 years and, if lease renewal is not likely, the remaining period of the lease for
leasehold improvements; 10 to 20 years for fixtures and furnishings; and 2 to 8 years for other equipment and motor vehicles.
The assets’ residual values and useful lives are reviewed and, if appropriate, revised at each balance sheet date.
Assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In
assessing the recoverable amount of assets the Group considers the effects of potential or actual changes in legislation, customer behaviour,
climate-related risks and other factors on the asset’s cash-generating unit (CGU). In the event that an asset’s CGU carrying amount is
determined to be greater than its recoverable amount the asset is written down immediately.
Investment property comprises freehold and long leasehold land and buildings that are held either to earn rental income or for capital
accretion or both. Investment property is carried at fair value based on current prices for similar properties, adjusted for the specific
characteristics of the property (such as location or condition). If this information is not available, the Group uses alternative valuation methods
such as discounted cash flow projections or recent prices in less active markets. These valuations are reviewed at least annually by independent
professionally qualified valuers. Investment property being redeveloped for continuing use as investment property, or for which the market has
become less active, continues to be valued at fair value.
87
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 2: Accounting policies continued
(J)Leases
Under IFRS 16, a lessor is required to determine if a lease is a finance or operating lease. A lessee is not required to make this determination.
(1)As lessor
Assets leased to customers are classified as finance leases if the lease agreements transfer substantially all of the risks and rewards of
ownership to the lessee but not necessarily legal title. All other leases are classified as operating leases. When assets are subject to finance
leases, the present value of the lease payments, together with any unguaranteed residual value, is recognised as a receivable, net of allowances
for expected credit losses and residual value impairment, within loans and advances to banks and customers. The difference between the gross
receivable and the present value of the receivable is recognised as unearned finance lease income. Finance lease income is recognised in
interest income over the term of the lease using the net investment method (before tax) so as to give a constant rate of return on the net
investment in the lease. Unguaranteed residual values are reviewed regularly to identify any impairment.
Operating lease assets are included within other assets at cost and depreciated over their estimated useful lives. The depreciation charge is
based on the asset’s residual value and the life of the lease. Operating lease rental income is recognised on a straight-line basis over the life of
the lease.
The Group evaluates non-lease arrangements such as outsourcing and similar contracts to determine if they contain a lease which is then
accounted for separately.
(2)As lessee
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the
Group. Assets and liabilities arising from a lease are initially measured on a present value basis. The lease payments are discounted using the
interest rate implicit in the lease, if that rate can be determined, or the Group’s incremental borrowing rate appropriate for the right-of-use
asset arising from the lease, and the liability recognised within other liabilities.
Lease payments are allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to
produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over
the shorter of the asset’s useful life and the lease term on a straight-line basis.
Payments associated with short-term leases and leases of low-value assets are recognised on a straight-line basis as an expense in profit or loss.
Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise IT equipment and small items of office furniture.
(K)Employee benefits
Short-term employee benefits, such as salaries, paid absences, performance-based cash awards and social security costs, are recognised over
the period in which the employees provide the related services.
(1)Pension schemes
The Group operates a number of post-retirement benefit schemes for its employees including both defined benefit and defined contribution
pension plans. A defined benefit scheme is a pension plan that defines an amount of pension benefit that an employee will receive on
retirement, dependent on one or more factors such as age, years of pensionable service and pensionable salary. A defined contribution plan is a
pension plan into which the Group pays fixed contributions; there is no legal or constructive obligation to pay further contributions.
(i)Defined benefit schemes
Scheme assets are included at their fair value and scheme liabilities are measured on an actuarial basis using the projected unit credit method.
The defined benefit scheme liabilities are discounted using rates equivalent to the market yields at the balance sheet date on high quality
corporate bonds that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to
the terms of the related pension liability. The Group’s income statement charge includes the current service cost of providing pension benefits,
past service costs, net interest expense (income), and plan administration costs that are not deducted from the return on plan assets. Past
service costs, which represents the change in the present value of the defined benefit obligation resulting from a plan amendment or
curtailment, are recognised when the plan amendment or curtailment occurs. Net interest expense (income) is calculated by applying the
discount rate at the beginning of the period to the net defined benefit liability or asset.
Remeasurements, comprising actuarial gains and losses, the return on plan assets (excluding amounts included in net interest expense (income)
and net of the cost of managing the plan assets), and the effect of changes to the asset ceiling (if applicable) are reflected immediately in the
balance sheet with a charge or credit recognised in other comprehensive income in the period in which they occur. Remeasurements recognised
in other comprehensive income are reflected immediately in retained profits and will not subsequently be reclassified to profit or loss.
The Group’s balance sheet includes the net surplus or deficit, being the difference between the fair value of scheme assets and the discounted
value of scheme liabilities at the balance sheet date. Surpluses are only recognised to the extent that they are recoverable through reduced
contributions in the future or through refunds from the schemes. In assessing whether a surplus is recoverable, the Group considers (i) its
current right to obtain a refund or a reduction in future contributions and (ii) the rights of other parties existing at the balance sheet date. In
determining the rights of third parties existing at the balance sheet date, the Group does not anticipate any future acts by other parties.
(ii)Defined contribution schemes
The costs of the Group’s defined contribution plans are charged to the income statement in the period in which they fall due.
(2)Share-based compensation
Lloyds Banking Group operates a number of equity-settled, share-based compensation plans in respect of services received from certain of its
employees. The value of the employee services received in exchange for equity instruments granted under these plans is recognised as an
expense over the vesting period of the instruments, with a corresponding increase in equity. This expense is determined by reference to the fair
value of the number of equity instruments that are expected to vest. The fair value of equity instruments granted is based on market prices, if
available, at the date of grant. In the absence of market prices, the fair value of the instruments at the date of grant is estimated using an
appropriate valuation technique, such as a Black-Scholes option pricing model or a Monte Carlo simulation. The determination of fair values
excludes the impact of any non-market vesting conditions, which are included in the assumptions used to estimate the number of options that
are expected to vest. At each balance sheet date, this estimate is reassessed and if necessary revised. Any revision of the original estimate is
recognised in the income statement, together with a corresponding adjustment to equity. Cancellations by employees of contributions to the
Group’s Save As You Earn plans are treated as non-vesting conditions and the Group recognises, in the year of cancellation, the amount of the
expense that would have otherwise been recognised over the remainder of the vesting period. Modifications are assessed at the date of
modification and any incremental charges are charged to the income statement.
88
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 2: Accounting policies continued
(L)Taxation
Tax expense comprises current and deferred tax. Current and deferred tax are charged or credited in the income statement except to the
extent that the tax arises from a transaction or event which is recognised, in the same or a different period, outside the income statement
(either in other comprehensive income, directly in equity, or through a business combination), in which case the tax appears in the same
statement as the transaction that gave rise to it. The tax consequences of the Group’s dividend payments (including distributions on other
equity instruments), if any, are charged or credited to the statement in which the profit distributed originally arose.
Current tax is the amount of corporate income taxes expected to be payable or recoverable based on the profit for the period as adjusted for
items that are not taxable or not deductible, and is calculated using tax rates and laws that were enacted or substantively enacted at the
balance sheet date.
Current tax includes amounts provided in respect of uncertain tax positions when management expects that, upon examination of the
uncertainty by His Majesty’s Revenue and Customs (HMRC) or other relevant tax authority, it is more likely than not that an economic outflow
will occur. Provisions reflect management’s best estimate of the ultimate liability based on their interpretation of tax law, precedent and
guidance, informed by external tax advice as necessary. Changes in facts and circumstances underlying these provisions are reassessed at each
balance sheet date, and the provisions are remeasured as required to reflect current information.
Deferred tax is recognised on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the
balance sheet. Deferred tax is calculated using tax rates and laws that have been enacted or substantively enacted at the balance sheet date,
and which are expected to apply when the related deferred tax asset is realised or the deferred tax liability is settled.
Deferred tax liabilities are generally recognised for all taxable temporary differences but not recognised for taxable temporary differences
arising on investments in subsidiaries where the reversal of the temporary difference can be controlled and it is probable that the difference
will not reverse in the foreseeable future. Deferred tax liabilities are not recognised on temporary differences that arise from goodwill which is
not deductible for tax purposes.
Deferred tax assets are recognised to the extent it is probable that taxable profits will be available against which the deductible temporary
differences can be utilised, and are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax assets and liabilities are not recognised in respect of temporary differences that arise on initial recognition of assets and liabilities
acquired other than in a business combination, or where at the time of the transaction they give rise to equal taxable and deductible
temporary differences. Deferred tax is not discounted.
The Group has applied the exception to recognising and disclosing information about deferred tax assets and liabilities related to Pillar 2
income taxes currently required by IAS 12 Income Taxes.
(M)Foreign currency translation
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency). Foreign currency transactions are translated into the appropriate
functional currency using the exchange rates prevailing at the dates of the transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at year end exchange rates of monetary assets and liabilities denominated in foreign
currencies are recognised in the income statement, except when recognised in other comprehensive income as qualifying cash flow hedges.
Non-monetary assets that are measured at fair value are translated using the exchange rate at the date that the fair value was determined.
Translation differences on equities and similar non-monetary items held at fair value through profit and loss are recognised in profit or loss as
part of the fair value gain or loss. Translation differences on non-monetary financial assets measured at fair value through other comprehensive
income, such as equity shares, are included in the fair value reserve in equity unless the asset is a hedged item in a fair value hedge.
The results and financial position of all Group entities that have a functional currency different from the presentation currency are translated
into the presentation currency as follows: the assets and liabilities of foreign operations, including goodwill and fair value adjustments arising
on the acquisition of a foreign entity, are translated into sterling at foreign exchange rates ruling at the balance sheet date; and the income and
expenses of foreign operations are translated into sterling at average exchange rates unless these do not approximate to the foreign exchange
rates ruling at the dates of the transactions, in which case income and expenses are translated at the dates of the transactions.
Foreign exchange differences arising on the translation of a foreign operation are recognised in other comprehensive income and accumulated
in a separate component of equity together with exchange differences arising from the translation of borrowings and other currency
instruments designated as hedges of such investments. On disposal or liquidation of a foreign operation, the cumulative amount of exchange
differences relating to that foreign operation is reclassified from equity and included in determining the profit or loss arising on disposal or
liquidation.
(N)Provisions and contingent liabilities
Provisions are recognised in respect of present obligations arising from past events where it is probable that outflows of resources will be
required to settle the obligations and they can be reliably estimated.
Contingent liabilities are possible obligations whose existence depends on the outcome of uncertain future events or those present obligations
where the outflows of resources are uncertain or cannot be measured reliably. Contingent liabilities are not recognised in the financial
statements but are disclosed unless they are remote.
Provision is made for expected credit losses in respect of irrevocable undrawn loan commitments and financial guarantee contracts
(see (H) above).
89
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 2: Accounting policies continued
(O)Share capital
Incremental costs directly attributable to the issue of new shares or options or to the acquisition of a business are shown in equity as a
deduction, net of tax, from the proceeds. Dividends paid on the Group’s ordinary shares are recognised as a reduction in equity in the period in
which they are paid.
(P)Cash and cash equivalents
For the purposes of the cash flow statement, cash and cash equivalents comprise cash and non-mandatory deposits held with central banks,
mandatory deposits held with central banks in demand accounts and amounts due from banks with an original maturity of less than three
months that are available to finance the Group’s day-to-day operations.
Note 3: Critical accounting judgements and key sources of estimation uncertainty
The preparation of the Group’s financial statements in accordance with IFRS Accounting Standards requires management to make judgements,
estimates and assumptions in applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Due
to the inherent uncertainty in making estimates, actual results reported in future periods may be based upon amounts which differ from those
estimates. Estimates, judgements and assumptions are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. In preparing the financial statements, the
Group has considered the impact of climate-related risks on its financial position and performance. While the effects of climate change
represent a source of uncertainty, the Group does not consider there to be a material impact on its judgements and estimates from the
physical, transition and other climate-related risks in the short term.
The significant judgements, apart from those involving estimation, made by management in applying the Group’s accounting policies in these
financial statements (critical judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities within the next financial year (key sources of estimation uncertainty), which
together are considered critical to the Group’s results and financial position, are as follows:
Retirement benefit obligations (note 11)
Uncertain tax positions (note 14)
Fair value of financial instruments (note 16)
Allowance for expected credit losses (note 19)
Regulatory and legal provisions (note 26)
Consideration of climate change
Financial statement preparation includes the consideration of the impact of climate change on the Group’s financial statements. There has
been no material impact identified on the financial reporting judgements and estimates. In particular, the directors considered the impact of
climate change in respect of the:
Going concern of the Group for a period of at least 12 months from the date of approval of the financial statements
Assessment of impairment of non-financial assets including goodwill
Carrying value and useful economic lives of property, plant and equipment
Fair value of financial assets and liabilities. These are generally based on market indicators which include the market’s assessment of climate
risk
Assessments on expected credit loss, focusing on specific climate-related macroeconomic, physical and transition risk impacts on credit
quality at a sector and segment level
Forecasting of the Group’s future UK taxable profits, which impacts deferred tax recognition
Whilst there is currently no material short-term impact of climate change expected, the Group acknowledges the long-term nature of climate
risk and continues to monitor and assess climate risks highlighted in the risk management section on pages 26 to 28.
Note 4: Segmental analysis
The Group provides a wide range of banking and financial services in the UK and in certain locations overseas. The Group Executive Committee
(GEC) of the Lloyds Banking Group has been determined to be the chief operating decision-maker, as defined by IFRS 8 Operating Segments,
for the Group. The Group’s operating segments reflect its organisational and management structures. The GEC reviews the Group’s internal
reporting based around these segments in order to assess performance and allocate resources. They consider interest income and expense on a
net basis and consequently the total interest income and expense for all reportable segments is presented net. The segments are differentiated
by the type of products provided and by whether the customers are individuals or corporate entities.
The Group has two operating and reportable segments: Retail and Commercial Banking:
Retail offers a broad range of financial services products to personal customers, including current accounts, savings, mortgages, credit cards,
unsecured loans, motor finance and leasing solutions. Its aim is to build enduring relationships that meet more of its customers’ financial
needs and improves their financial resilience throughout their lifetime
Commercial Banking serves small and medium businesses and corporate and institutional clients, providing lending, transactional banking,
working capital management, debt financing and risk management services whilst connecting the whole Group to clients
Other comprises income and expenditure not attributed to the Group’s operating segments. These amounts include the costs of certain central
and head office functions.
Inter-segment services are generally recharged at cost, although some attract a margin. Inter-segment lending and deposits are generally
entered into at market rates, except that non-interest bearing balances are priced at a rate that reflects the external yield that could be
earned on such funds.
For the majority of those derivative contracts entered into by business units for risk management purposes, the business unit recognises the net
interest income or expense on an accrual accounting basis and transfers the remainder of the movement in the fair value of the derivative to
the central function where the resulting accounting volatility is managed where possible through the establishment of hedge accounting
relationships. Any change in fair value of the hedged instrument attributable to the hedged risk is also recorded within the central function.
This allocation of the fair value of the derivative and change in fair value of the hedged instrument attributable to the hedged risk avoids
accounting asymmetry in segmental results and leads to accounting volatility, which is managed centrally and reported within Other.
90
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 4: Segmental analysis continued
Year ended 31 December 2024
Retail
£m
Commercial
Banking
£m
Other
£m
Group
£m
Net interest income
8,934
3,265
393
12,592
Other income
2,058
1,073
1,348
4,479
Total income
10,992
4,338
1,741
17,071
Operating expenses
(7,779)
(2,375)
(1,773)
(11,927)
Impairment (charge) credit
(457)
(2)
3
(456)
Profit (loss) before tax
2,756
1,961
(29)
4,688
External income
13,269
5,606
(1,804)
17,071
Inter-segment (expense) income
(2,277)
(1,268)
3,545
Total income
10,992
4,338
1,741
17,071
External assets
386,199
82,731
142,283
611,213
External liabilities
324,727
135,396
111,343
571,466
Analysis of other income:
Net fee and commission income
271
794
(127)
938
Operating lease rental income
1,672
9
1,681
Gains less losses on disposal of financial assets at fair value through other comprehensive
income
(157)
(157)
Other income
115
270
1,632
2,017
Other income
2,058
1,073
1,348
4,479
Other items reflected in income statement above:
Depreciation and amortisation
2,303
337
731
3,371
Defined benefit scheme charge
(11)
(11)
Non-income statement items:
Additions to fixed assets
3,485
99
1,355
4,939
91
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 4: Segmental analysis continued
Year ended 31 December 2023
Retail
£m
Commercial
Banking
£m
Other
£m
Group
£m
Net interest income
9,651
3,675
383
13,709
Other income
2,157
1,054
1,447
4,658
Total income
11,808
4,729
1,830
18,367
Operating expenses
(7,031)
(2,278)
(1,659)
(10,968)
Impairment (charge) credit
(831)
483
5
(343)
Profit before tax
3,946
2,934
176
7,056
External income
12,805
5,788
(226)
18,367
Inter-segment (expense) income
(997)
(1,059)
2,056
Total income
11,808
4,729
1,830
18,367
External assets
376,589
90,301
138,515
605,405
External liabilities
313,232
138,835
112,907
564,974
Analysis of other income:
Net fee and commission income
618
822
(88)
1,352
Operating lease rental income
1,373
10
1,383
Gains less losses on disposal of financial assets at fair value through other comprehensive
income
(140)
(140)
Other income
166
222
1,675
2,063
Other income
2,157
1,054
1,447
4,658
Other items reflected in income statement above:
Depreciation and amortisation
1,927
408
516
2,851
Defined benefit scheme charge
(79)
(79)
Non-income statement items:
Additions to fixed assets
3,294
86
1,583
4,963
92
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 4: Segmental analysis continued
Year ended 31 December 2022
Retail
£m
Commercial
Banking
£m
Other
£m
Group
£m
Net interest income
9,746
3,227
132
13,105
Other income
1,684
947
1,009
3,640
Total income
11,430
4,174
1,141
16,745
Operating expenses
(5,696)
(2,207)
(1,296)
(9,199)
Impairment (charge) credit
(1,373)
(471)
392
(1,452)
Profit before tax
4,361
1,496
237
6,094
External income
11,996
3,375
1,374
16,745
Inter-segment (expense) income
(566)
799
(233)
Total income
11,430
4,174
1,141
16,745
External assets
372,585
89,536
154,807
616,928
External liabilities
314,051
140,923
122,895
577,869
Analysis of other income:
Net fee and commission income
555
822
(126)
1,251
Operating lease rental income
1,065
12
1,077
Gains less losses on disposal of financial assets at fair value through other comprehensive
income
(76)
(76)
Other income
64
113
1,211
1,388
Other income
1,684
947
1,009
3,640
Other items reflected in income statement above:
Depreciation and amortisation
1,216
195
937
2,348
Defined benefit scheme charge
72
28
25
125
Non-income statement items:
Additions to fixed assets
2,146
94
1,464
3,704
Geographical areas
The Group’s operations are predominantly UK-based and as a result an analysis between UK and non-UK activities is not provided.
Note 5: Net interest income
2024
£m
2023
£m
2022
£m
Interest income:
Loans and advances to banks
2,439
3,096
846
Loans and advances to customers
21,712
18,992
13,789
Reverse repurchase agreements
2,441
1,866
835
Debt securities
737
495
145
Financial assets held at amortised cost
27,329
24,449
15,615
Financial assets at fair value through other comprehensive income
1,057
851
947
Total interest income1
28,386
25,300
16,562
Interest expense:
Deposits from banks
(121)
(131)
(78)
Customer deposits
(9,009)
(6,045)
(1,083)
Repurchase agreements
(2,390)
(2,397)
(827)
Debt securities in issue at amortised cost2
(3,814)
(2,595)
(1,075)
Lease liabilities
(30)
(28)
(27)
Subordinated liabilities
(430)
(395)
(367)
Total interest expense
(15,794)
(11,591)
(3,457)
Net interest income
12,592
13,709
13,105
1 Includes £1,089 million (2023: £885 million; 2022 : £711 million ) in respect of finance lease receivables.
2 The impact of the Group’s hedging arrangements is included on this line.
Net interest income also includes a debit of £ 2,297 million (2023: debit of £1,517 million; 2022: credit of £1 million) transferred from the cash
flow hedging reserve (see note 29).
93
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 6: Net fee and commission income
Year ended 31 December 2024
Retail
£m
Commercial
Banking
£m
Other
£m
Total
£m
Fee and commission income:
Current accounts
423
217
640
Credit and debit card fees
829
453
1,282
Commercial banking fees
195
195
Factoring
69
69
Other fees and commissions
74
144
12
230
Total fee and commission income
1,326
1,078
12
2,416
Fee and commission expense
(1,055)
(284)
(139)
(1,478)
Net fee and commission income
271
794
(127)
938
Year ended 31 December 2023
Retail
£m
Commercial
Banking
£m
Other
£m
Total
£m
Fee and commission income:
Current accounts
406
214
620
Credit and debit card fees
800
459
1,259
Commercial banking fees
191
191
Factoring
75
75
Other fees and commissions
85
171
55
311
Total fee and commission income
1,291
1,110
55
2,456
Fee and commission expense
(673)
(288)
(143)
(1,104)
Net fee and commission income
618
822
(88)
1,352
Year ended 31 December 2022
Retail
£m
Commercial
Banking
£m
Other
£m
Total
£m
Fee and commission income:
Current accounts
420
222
642
Credit and debit card fees
734
456
1,190
Commercial banking fees
196
196
Factoring
79
79
Other fees and commissions
66
149
30
245
Total fee and commission income
1,220
1,102
30
2,352
Fee and commission expense
(665)
(280)
(156)
(1,101)
Net fee and commission income
555
822
(126)
1,251
Fees and commissions which are an integral part of the effective interest rate form part of net interest income shown in note 5. Fees and
commissions relating to instruments that are held at fair value through profit or loss are included within net trading income shown in note 7.
In determining the disaggregation of fees and commissions the Group has considered how the nature, amount, timing and uncertainty of
revenue and cash flows are affected by economic factors, including those that are impacted by climate-related factors. It has determined that
the above disaggregation by product type provides useful information that does not aggregate items that have substantially different
characteristics.
At 31 December 2024 , the Group held on its balance sheet £105 million (31 December 2023: £100 million) in respect of services provided to
customers and £69 million (31 December 2023 : £62 million) in respect of amounts received from customers for services to be provided after the
balance sheet date. Current unsatisfied performance obligations amount to £189 million (31 December 2023: £165 million); the Group expects
to receive substantially all of this revenue by the end of 2026.
Income recognised during the year included £27 million (2023: £30 million) in respect of amounts included in the contract liability balance at
the start of the year and £nil (2023: £nil) in respect of amounts from performance obligations satisfied in previous years.
The most significant performance obligations undertaken by the Group are in respect of current accounts, the provision of other banking
services for commercial customers and credit and debit card services.
In respect of current accounts, the Group receives fees for the provision of bank account and transaction services such as ATM services, fund
transfers, overdraft facilities and other value-added offerings.
For commercial customers, alongside its provision of current accounts, the Group provides other corporate banking services including factoring
and commitments to provide loan financing. Loan commitment fees are included in fees and commissions where the loan is not expected to be
drawn down by the customer.
The Group receives interchange and merchant fees, together with fees for overseas use and cash advances, for provision of card services to
cardholders and merchants.
94
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 7: Net trading income
2024
£m
2023
£m
2022
£m
Net gains (losses) on financial assets and liabilities at fair value through profit or loss:
Net gains (losses) on financial instruments held for trading1
416
295
(24)
Net gains on other financial instruments mandatorily held at fair value through profit or loss
83
64
10
Net losses on financial liabilities designated at fair value through profit or loss
(335)
(342)
(153)
164
17
(167)
Foreign exchange and other
433
367
347
Net trading income
597
384
180
1Includes hedge ineffectiveness in respect of fair value hedges (2024: loss of £78 million; 2023 : loss of £264 million; 2022 : loss of £21 million) and cash flow hedges ( 2024: loss of
£ 56 million; 2023: gain of £17 million; 2022: loss of £6 million).
Note 8: Other operating income
2024
£m
2023
£m
2022
£m
Operating lease rental income
1,681
1,383
1,077
Net losses on disposal of financial assets at fair value through other comprehensive income (note 29)
(157)
(140)
(76)
Gain on disposal of business1
191
Intercompany recharges and other
1,420
1,488
1,208
Total other operating income
2,944
2,922
2,209
1On 1 November 2023 the Group sold Halifax Share Dealing Limited to a fellow Lloyds Banking Group undertaking.
Note 9: Operating expenses
2024
£m
2023
£m
2022
£m
Staff costs:
Salaries and social security costs1
3,563
3,389
3,081
Pensions and other retirement benefit schemes (note 11)
504
335
439
Restructuring and other staff costs
378
538
333
4,445
4,262
3,853
Premises and equipment costs2
407
411
292
Depreciation and amortisation3
3,371
2,851
2,348
Regulatory and legal provisions (note 26)
880
661
225
Other
2,824
2,783
2,481
Total operating expenses
11,927
10,968
9,199
1Including social security costs of £405 million (2023: £347 million; 2022 : 322 million ).Also includes amounts related to the Group’s share-based payment schemes (see note 10).
2Net of profits on disposal of operating lease assets of £ 59 million ( 2023 : £93 million; 2022: £197 million).
3Comprising depreciation in respect of premises £ 94 million (2023: £107 million; 2022: £112 million), equipment £397 million (2023 : £385 million; 2022: £558 million ), operating lease
assets £1,411 million (2023: £1,070 million; 2022: £570 million ) and right-of-use assets £ 192 million (2023: £203 million ; 2022: £213 million).
Average headcount
The average number of persons on a headcount basis employed by the Group during the year was as follows:
2024
2023
2022
UK
63,777
64,844
62,062
Overseas
1,658
555
487
Total
65,435
65,399
62,549
Note 10: Share-based payments
During the year ended 31 December 2024 Lloyds Banking Group plc operated a number of share-based payment schemes for which employees
of the Lloyds Bank Group were eligible and all of which are mainly equity settled. Details of all schemes operated by Lloyds Banking Group are
set out below; these are managed and operated on a Lloyds Banking Group-wide basis. The amount charged to the Group’s income statement
in respect of Lloyds Banking Group share-based payment schemes, and which is included within staff costs (note 9), was £ 259 million (2023:
£302 million; 2022: £351 million).
During the year ended 31 December 2024 the Lloyds Banking Group operated the following share-based payment schemes, all of which are
mainly equity settled.
95
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 10: Share-based payments continued
Lloyds Banking Group Performance Share plan
The Lloyds Banking Group operates a Group Performance Share plan that is part equity settled. Bonuses in respect of employee service in 2024
have been recognised in the charge in line with the proportion of the deferral period completed.
Save-As-You-Earn schemes
Eligible employees may enter into contracts through the Save-As-You-Earn (SAYE) schemes to save up to £500 per month and, at the expiry of
a fixed term of three years, have the option to use these savings within six months of the expiry of the fixed term to acquire shares in the
Group at a discounted price of no less than 90 per cent of the market price at the start of the invitation period.
Movements in the number of share options outstanding under the SAYE schemes are set out below:
2024
2023
Number
of options
Weighted
average
exercise price
(pence)
Number
of options
Weighted
average
exercise price
(pence)
Outstanding at 1 January
1,311,205,148
31.70
1,256,918,075
31.30
Granted
200,820,157
52.35
287,984,574
38.55
Exercised
(663,187,372)
24.60
(164,709,399)
38.55
Forfeited
(17,375,716)
39.01
(12,862,726)
31.78
Cancelled
(27,852,684)
40.70
(45,807,000)
37.65
Expired
(5,984,747)
35.40
(10,318,376)
38.25
Outstanding at 31 December
797,624,786
42.30
1,311,205,148
31.70
Exercisable at 31 December
955,281
24.25
410,368
39.87
The weighted average share price at the time that the options were exercised during 2024 was £ 0.47 (2023: £0.48). The weighted average
remaining contractual life of options outstanding at the end of the year was 1.85 years (2023: 1.58 years).
The weighted average fair value of SAYE options granted during 2024 was £0.09 ( 2023: £0.09). The fair values of the SAYE options have been
determined using a standard Black-Scholes model.
Other share option plans
Executive Share Plans – buyout and retention awards
Share options may be granted to senior employees under the Lloyds Banking Group Executive Share Plan 2003, Lloyds Banking Group
Executive Group Ownership Share Plan and Deferred Bonus Scheme 2021 specifically to facilitate recruitment (to compensate new recruits for
any lost share awards), and also to make grants to key individuals for retention purposes. In some instances, grants may be made subject to
individual performance conditions.
Participants are not entitled to any dividends paid during the vesting period.
2024
2023
Number
of Options
Weighted
average
exercise price
(pence)
Number
of Options
Weighted
average
exercise price
(pence)
Outstanding at 1 January
26,131,255
Nil
20,466,471
Nil
Granted
768,170
Nil
15,198,717
Nil
Exercised
(10,815,436)
Nil
(8,739,497)
Nil
Vested
Nil
(765,247)
Nil
Forfeited
(488,091)
Nil
(8,216)
Nil
Lapsed
(16,901)
Nil
(20,973)
Nil
Outstanding at 31 December
15,578,997
Nil
26,131,255
Nil
Exercisable at 31 December
988,243
Nil
1,148,770
Nil
The weighted average fair value of options granted in the year was £0.46 (2023: £0.41). The fair values of options granted have been
determined using a standard Black-Scholes model. The weighted average share price at the time that the options were exercised during 2024
was £0.53 (2023: £0.46). The weighted average remaining contractual life of options outstanding at the end of the year was 6.2 years (2023:
6.3 years).
Included in the above are awards to the Group Chief Executive.
96
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 10: Share-based payments continued
Charlie Nunn joined the Group on 16 August 2021 as Group Chief Executive. He was granted deferred share awards over 8,301,708 shares to
replace unvested awards from his former employer, HSBC, that were forfeited as a result of him joining the Lloyds Banking Group.
2024
Number
of options
2023
Number
of options
Outstanding at 1 January
5,337,899
6,585,447
Exercised
(1,368,990)
(1,247,548)
Outstanding at 31 December
3,968,909
5,337,899
Other share plans
Lloyds Banking Group Executive Group Ownership Share Plan
The plan, introduced in 2006, is aimed at delivering shareholder value by linking the receipt of shares to an improvement in the performance of
the Lloyds Banking Group over a three -year period. Awards are made within limits set by the rules of the plan, with the limits determining the
maximum number of shares that can be awarded equating to three times annual salary. In exceptional circumstances this may increase to four
times annual salary.
The Executive Group Ownership awards were replaced by Long Term Share Plan awards in 2021.
2024
Number
of shares
2023
Number
of shares
Outstanding at 1 January
39,804,293
202,394,509
Vested
(18,490,246)
(66,555,435)
Forfeited
(33,055)
(96,034,781)
Dividend award
842,202
Outstanding at 31 December
22,123,194
39,804,293
Lloyds Banking Group Long Term Share Plan
The plan, approved at the 2020 AGM and introduced in 2021, replaced the Lloyds Banking Executive Group Ownership Share Plan and is
intended to provide alignment to the Group’s aim of delivering sustainable returns to shareholders, supported by its values and behaviours.
The awards in respect of the 2022 grant are due to vest in 2025 at a rate of 100 per cent.
2024
Number
of shares
2023
Number
of shares
Outstanding at 1 January
262,409,389
171,947,743
Granted
108,551,439
Vested
(53,608,504)
Forfeited
(12,921,590)
(18,089,793)
Outstanding at 31 December
195,879,295
262,409,389
The weighted average fair value of awards granted in the year was £nil (2023: £0.42).
Lloyds Banking Group Long Term Incentive Plan
The plan, approved at the 2023 AGM and introduced in 2024, replaced the Long Term Share Plan and is intended to deliver stronger alignment
between variable reward outcomes and the creation of shareholder value through the delivery of our strategy and the deepening of our
relationships with our customers.
The awards in respect of the 2024 grant are due to vest in 2027. Details in relation to the plan are provided in the directors’ remuneration
report.
2024
Number
of shares
2023
Number
of shares
Outstanding at 1 January
Granted
75,063,395
Outstanding at 31 December
75,063,395
The weighted average fair value of awards granted in the year was £0.30 (2023: £nil).
Executive Share Plans – buyout and retention awards
Share awards in the form of conditional shares may be granted to senior employees under the Lloyds Banking Group Executive Group
Ownership Share Plan and Deferred Bonus Scheme 2021 specifically to facilitate recruitment (to compensate new recruits for any lost share
awards), and also to make grants to key individuals for retention purposes. In some instances, grants may be made subject to individual
performance conditions.
Participants are not entitled to any dividends paid during the vesting period.
97
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
2024
2023
Number
of Shares
Number
of Shares
Outstanding at 1 January
Granted
3,593,397
Vested
(728,370)
Outstanding at 31 December
2,865,027
The weighted average fair value of awards granted in the year was £0.51 (2023: £nil).
Assumptions at 31 December 2024
The fair value calculations at 31 December 2024 for grants made in the year, using Black-Scholes models and Monte Carlo simulation, are based
on the following assumptions:
SAYE
Executive
Option Plans
Executive
Share Plans
Long Term Share
Plan
Weighted average risk-free interest rate
3.58%
4.43%
4.35%
4.07%
Weighted average expected life
3.3 years
1.6 years
1.3 years
4.4 years
Weighted average expected volatility
25%
24%
23%
29%
Weighted average expected dividend yield
6.0%
7.0%
7.0%
7.0%
Weighted average share price
£0.58
£0.52
£0.56
£0.48
Weighted average exercise price
£0.52
Nil
Nil
Nil
Expected volatility is a measure of the amount by which the Lloyds Banking Group’s shares are expected to fluctuate during the life of an
option. The expected volatility is estimated based on the historical volatility of the closing daily share price over the most recent period that is
commensurate with the expected life of the option. The historical volatility is compared to the implied volatility generated from market traded
options in the Lloyds Banking Group’s shares to assess the reasonableness of the historical volatility and adjustments made where appropriate.
Share Incentive Plans
Matching shares
The Lloyds Banking Group undertakes to match shares purchased by employees up to the value of £45 per month; these matching shares are
held in trust for a mandatory period of three years on the employee’s behalf, during which period the employee is entitled to any dividends
paid on such shares. The award is subject to a non-market based condition: if an employee leaves within this three-year period for other than a
‘good’ reason, all of the matching shares are forfeited. Similarly, if the employees sell their purchased shares within three years, their matching
shares are forfeited.
The number of shares awarded relating to matching shares in 2024 was 38,464,042 (2023: 43,945,238), with an average fair value of £0.53
(2023: £0.46), based on market prices at the date of award.
Fixed share awards
Fixed share awards were introduced in 2014 in order to ensure that total fixed remuneration is commensurate with role and to provide a
competitive reward package for certain Lloyds Banking Group employees, with an appropriate balance of fixed and variable remuneration, in
line with regulatory requirements. The fixed share awards are delivered in Lloyds Banking Group plc shares, and are released over three years
with one third being released each year following the year of award. The number of shares purchased in relation to fixed share awards in 2024
was 1,541,751 (2023: 1,790,243) with an average fair value of £0.55 (2023: £0.46) based on market prices at the date of the award.
The fixed share award is not subject to any performance conditions, performance adjustment or clawback. On an employee leaving the Lloyds
Banking Group, there is no change to the timeline for which shares will become unrestricted.
Since the beginning of 2023 the number of recipients of these awards has been reduced to the executive directors only.
Free shares
An award of shares may be made annually to employees up to a maximum of £3,600. The shares awarded are held in trust for a mandatory
period of three years on the employee’s behalf, during which period the employee is entitled to any dividends paid on such shares. The award is
subject to a non-market based condition. If an employee leaves the Group within this three-year period for other than a ‘good’ reason, all of
the shares awarded will be forfeited.
There have not been any awards made since 2021.
98
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 11: Retirement benefit obligations
Critical accounting judgements and key sources of estimation uncertainty
Key sources of estimation uncertainty:
Discount rate applied to future cash flows
Expected lifetime of the schemes’ members
Expected rate of future inflationary increases
The net asset recognised in the balance sheet at 31 December 2024 in respect of the Group’s defined benefit pension scheme obligations was
£ 2,945 million, comprising an asset of £3,028 million and a liability of £83 million ( 2023: a net asset of £3,532 million comprising an asset of
£3,624 million and a liability of £92 million ). The Group’s accounting policy for its defined benefit pension scheme obligations is set out in note
2 (K).
Income statement and balance sheet sensitivities to changes in the key sources of estimation uncertainty and other actuarial assumptions are
provided in part (v).
2024
£m
2023
£m
2022
£m
(Credit) charge to the income statement
Defined benefit pension schemes
(13)
(80)
123
Other retirement benefit schemes
2
1
2
Total defined benefit schemes
(11)
(79)
125
Defined contribution pension schemes
515
414
314
Total charge to the income statement (note 9)
504
335
439
2024
£m
2023
£m
Amounts recognised in the balance sheet
Retirement benefit assets
3,028
3,624
Retirement benefit obligations
(122)
(136)
Total amounts recognised in the balance sheet
2,906
3,488
The total amounts recognised in the balance sheet relate to:
2024
£m
2023
£m
Defined benefit pension schemes
2,945
3,532
Other retirement benefit schemes
(39)
(44)
Total amounts recognised in the balance sheet
2,906
3,488
99
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 11: Retirement benefit obligations continued
Pension schemes
Defined benefit schemes
(i)Characteristics of and risks associated with the Group’s schemes
The Group has established a number of defined benefit pension schemes in the UK and overseas, both funded and unfunded. All significant
schemes are funded and based in the UK, with the three most significant being the main sections of the Lloyds Bank Pension Scheme No. 1, the
Lloyds Bank Pension Scheme No. 2 and the HBOS Final Salary Pension Scheme. At 31 December 2024 , these schemes represented 94 per cent
of the Group’s total gross defined benefit pension assets (2023 : 94 per cent). These schemes provide retirement benefits calculated as a
proportion of final pensionable salary depending upon the length of pensionable service.
All of the UK funded schemes are operated as separate legal entities under trust law, are in compliance with the Pensions Act 2004 and are
managed by a Trustee Board (the Trustee) whose role is to ensure that the schemes are administered in accordance with the scheme rules and
relevant legislation, and to safeguard the assets in the best interests of all members and beneficiaries.
A valuation to determine the funding status of each scheme is carried out at least every three years, whereby scheme assets are measured at
market value and liabilities (technical provisions) are measured using prudent assumptions. If a deficit is identified a recovery plan is agreed
between the employer and the scheme Trustee and sent to the Pensions Regulator for review. The Group does not provide for these deficit
contributions as the future economic benefits arising from these contributions are expected to be available to the Group. The Group’s overseas
defined benefit pension schemes are subject to local regulatory arrangements.
The 31 December 2022 triennial valuation for the main defined benefit schemes was completed in 2023, and following the contributions paid in
2023, there will be no further deficit contributions for this triennial period (to 31 December 2025).
The Group pays regular contributions to meet benefits accruing over the year, and to cover the expenses of running the schemes. The Group
expects to pay contributions of at least £ 0.1 billion to its defined benefit schemes in 2025.
The Group provides additional security arrangements to a number of the UK schemes for the Group’s obligations to the schemes.
At 31 December 2024 the security arrangements held assets of £ 4.1 billion. The security arrangements are fully consolidated in the
Group’s balance sheet.
The last funding valuations of other Group schemes were carried out on a number of different dates. In order to report the position under
IAS 19 as at 31 December 2024, the most recent valuation results for all schemes have been updated by qualified independent actuaries. The
funding valuations use a more prudent approach to setting the discount rate and more conservative longevity and inflation assumptions than
the IAS 19 valuations.
In June 2023, the High Court handed down a decision (Virgin Media Limited v NTL Pension Trustees II Limited and others) which potentially has
implications for the validity of amendments made by pension schemes, which were contracted-out on a salary-related basis between 6 April
1997 and the abolition of contracting-out in 2016. The High Court ruled that any amendments made to these pension schemes during the
relevant period would be void unless the scheme actuary had confirmed that the pension scheme would continue to satisfy the statutory
standard for contracted-out schemes. On 25 July 2024, the Court of Appeal upheld the original decision. The Group is carrying out a review of
scheme amendments to decide whether any subsequent actions or amendments to IAS 19 liabilities are required. The Group has not made any
allowance for the possible impact of the ruling as it is currently unclear whether any additional liabilities might arise, and if they were to arise,
how they would be reliably measured. The Group will continue to monitor developments.
(ii)Amounts in the financial statements
2024
£m
2023
£m
Amount included in the balance sheet
Present value of funded obligations
(27,118)
(30,201)
Fair value of scheme assets
30,063
33,733
Net amount recognised in the balance sheet
2,945
3,532
2024
£m
2023
£m
Net amount recognised in the balance sheet
At 1 January
3,532
3,732
Net defined benefit pension credit
13
80
Actuarial gains (losses) on defined benefit obligation
2,940
(1,304)
Return on plan assets
(3,712)
(318)
Employer contributions
172
1,342
At 31 December
2,945
3,532
100
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 11: Retirement benefit obligations continued
2024
£m
2023
£m
Movements in the defined benefit obligation
At 1 January
(30,201)
(28,965)
Current service cost
(85)
(88)
Interest expense
(1,385)
(1,394)
Remeasurements:
Actuarial gains – demographic assumptions
109
153
Actuarial gains (losses) – experience
94
(1,067)
Actuarial gains (losses) – financial assumptions
2,737
(390)
Benefits paid
1,638
1,544
Past service cost
(35)
(5)
Settlements
1
Exchange and other adjustments
9
11
At 31 December
(27,118)
(30,201)
2024
£m
2023
£m
Analysis of the defined benefit obligation
Active members
(2,463)
(2,955)
Deferred members
(7,080)
(8,438)
Dependants
(1,429)
(1,572)
Pensioners
(16,146)
(17,236)
At 31 December
(27,118)
(30,201)
2024
£m
2023
£m
Changes in the fair value of scheme assets
At 1 January
33,733
32,697
Return on plan assets excluding amounts included in interest income
(3,712)
(318)
Interest income
1,551
1,602
Employer contributions
172
1,342
Benefits paid
(1,638)
(1,544)
Settlements
(1)
Administrative costs paid
(33)
(35)
Exchange and other adjustments
(9)
(11)
At 31 December
30,063
33,733
The (credit) expense recognised in the income statement for the year ended 31 December comprises:
2024
£m
2023
£m
2022
£m
Current service cost
85
88
180
Net interest amount
(166)
(208)
(95)
Past service cost – plan amendments
35
5
4
Plan administration costs incurred during the year
33
35
34
Total defined benefit pension (credit) expense
(13)
(80)
123
101
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 11: Retirement benefit obligations continued
(iii)Composition of scheme assets
2024
2023
Quoted
£m
Unquoted
£m
Total
£m
Quoted
£m
Unquoted
£m
Total
£m
Debt instruments1:
Fixed interest government bonds
6,985
6,985
5,657
5,657
Index-linked government bonds
15,550
15,550
16,105
16,105
Corporate and other debt securities
7,396
7,396
7,305
7,305
Asset-backed securities
4
4
29,931
29,931
29,071
29,071
Pooled investment vehicles
686
7,342
8,028
613
8,361
8,974
Property
130
130
97
97
Equity instruments
23
66
89
23
62
85
Money market instruments, cash, derivatives and other assets
and liabilities
55
(8,170)
(8,115)
466
(4,960)
(4,494)
At 31 December
30,695
(632)
30,063
30,173
3,560
33,733
1Of the total debt instruments, £27,551 million (2023: £26,777 million ) were investment grade (credit ratings equal to or better than ‘BBB’).
The assets of all of the funded plans are held independently of the Group’s assets in separate trustee-administered funds.
The pension schemes’ pooled investment vehicles comprise:
2024
£m
2023
£m
Alternative credit funds
1,793
1,962
Bond and debt funds
449
571
Equity funds
1,553
1,674
Hedge and mutual funds
709
808
Infrastructure funds
1,059
1,147
Liquidity funds
1,449
1,585
Property funds
992
1,227
Other
24
At 31 December
8,028
8,974
The Trustee’s approach to investment is focused on acting in the members’ best financial interests, with the integration of ESG (environmental,
social and governance) considerations into investment management processes and practices. This policy is reviewed annually (or more
frequently as required) and has been shared with the schemes’ investment managers for implementation.
Climate change is one of the risks the schemes manage given its potential financial impact on valuation of assets.
(iv)Assumptions
The principal actuarial and financial assumptions used in valuations of the defined benefit pension schemes were as follows:
2024
%
2023
%
Discount rate
5.55
4.70
Rate of inflation:
Retail Price Index (RPI)
2.97
2.96
Consumer Price Index (CPI)
2.52
2.47
Rate of salary increases
0.00
0.00
Weighted-average rate of increase for pensions in payment
2.69
2.73
To determine the RPI assumption a term-dependent inflation curve has been used adjusting for an assumed inflation risk premium. A gap of
100 basis points has been assumed between RPI and CPI from 2025 to 2030; thereafter a 20 basis point gap has been assumed.
Men
Women
2024
Years
2023
Years
2024
Years
2023
Years
Life expectancy for average member aged 60, on the valuation date
26.4
26.7
28.5
28.7
Life expectancy for average member aged 60, 15 years after the valuation date
27.3
27.8
29.4
29.8
The mortality assumptions used in the UK scheme valuations are based on standard tables published by the Institute and Faculty of Actuaries
which were adjusted in line with the actual experience of the relevant schemes. The Group uses the CMI mortality projections model to project
future mortality improvements. In line with actuarial industry recommendations no weight is placed on 2020 and 2021 mortality experience
and 15 per cent weight on 2022 and 2023 mortality experience.
102
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 11: Retirement benefit obligations continued
(v)Amount, timing and uncertainty of future cash flows
Risk exposure of the defined benefit schemes
While the Group is not exposed to any unusual, entity-specific or scheme-specific risks in its defined benefit pension schemes, it is exposed to a
number of significant risks, detailed below:
Inflation rate risk: The majority of the schemes’ benefit obligations are linked to inflation both in deferment and once in payment. Higher
inflation will lead to higher liabilities although this will be materially offset by holdings of inflation-linked gilts and, in most cases, caps on the
level of inflationary increases are in place to protect against extreme inflation.
Interest rate risk: The defined benefit obligation is determined using a discount rate derived from yields on AA-rated corporate bonds. A
decrease in corporate bond yields will increase plan liabilities although this will be materially offset by an increase in the value of bond holdings
and through the use of derivatives.
Longevity risk: The majority of the schemes’ obligations are to provide benefits for the life of the members so increases in life expectancy will
result in an increase in the schemes’ liabilities.
Investment risk: Scheme assets are invested in a diversified portfolio of debt securities, equities and other return-seeking assets. If the assets
underperform the discount rate used to calculate the defined benefit obligation, it will reduce the surplus or increase the deficit. Volatility in
asset values and the discount rate will lead to volatility in the net pension asset on the Group’s balance sheet and in other comprehensive
income. To a lesser extent this will also lead to volatility in the pension expense in the Group’s income statement.
In addition, the schemes themselves are exposed to liquidity risk with the need to ensure that liquid assets held are sufficient to meet benefit
payments as they fall due and there is sufficient collateral available to support their hedging activity.
The ultimate cost of the defined benefit obligations to the Group will depend upon actual future events rather than the assumptions made.
The assumptions made are unlikely to be borne out in practice and as such the cost may be higher or lower than expected.
Sensitivity analysis
The effect of reasonably possible changes in key assumptions on the Group’s income statement and on the net defined benefit pension scheme
asset from the change in value of scheme liabilities is set out below. The sensitivities provided assume that all other assumptions and the value
of the schemes’ assets remain unchanged. The calculations are approximate in nature and full detailed calculations could lead to a different
result. It is unlikely that isolated changes to individual assumptions will be experienced in practice. Due to the correlation of assumptions,
aggregating the effects of these isolated changes may not be a reasonable estimate of the actual effect of simultaneous changes in multiple
assumptions.
Effect of reasonably possible alternative assumptions
Increase (decrease) in the
income statement charge
(Increase) decrease in the
net defined benefit
pension scheme surplus
2024
£m
2023
£m
2024
£m
2023
£m
Inflation (including pension increases)1:
Increase of 0.25 per cent
28
484
Decrease of 0.25 per cent
(27)
(467)
Increase of 0.1 per cent
11
224
Decrease of 0.1 per cent
(12)
(235)
Discount rate2:
Increase of 0.25 per cent
(51)
(718)
Decrease of 0.25 per cent
49
757
Increase of 0.1 per cent
(22)
(355)
Decrease of 0.1 per cent
21
363
Expected life expectancy of members:
Increase of one year
46
45
806
927
Decrease of one year
(47)
(46)
(830)
(946)
1At 31 December 2024, the assumed rate of RPI inflation is 2.97 per cent and CPI inflation 2.52 per cent (2023: RPI 2.96 per cent and CPI 2.47 per cent).
2At 31 December 2024, the assumed discount rate is 5.55 per cent ( 2023: 4.70 per cent).
Sensitivity analysis method and assumptions
The sensitivity analysis above reflects the impact on the liabilities of the Group’s three most significant schemes which account for over 90 per
cent of the Group’s defined benefit obligations. While differences in the underlying liability profiles for the remainder of the Group’s pension
arrangements mean that they may exhibit slightly different sensitivities to variations in these assumptions, the sensitivities provided above are
indicative of the impact across the Group as a whole.
The inflation assumption sensitivity applies to the assumed rate of increase in both the Consumer Price Index (CPI) and the Retail Price Index
(RPI), and includes the impact on the rate of increases to pensions, both before and after retirement. These pension increases are linked to
inflation (either CPI or RPI) subject to certain minimum and maximum limits.
The sensitivity analysis (including the inflation sensitivity) does not include the impact of any change in the rate of salary increases as
pensionable salaries have been frozen since 2 April 2014.
The life expectancy assumption has been applied by allowing for an increase/decrease in life expectation from age 60 of one year, based upon
the approximate weighted average age for each scheme. While this is an approximate approach and will not give the same result as a one year
increase in life expectancy at every age, it provides an appropriate indication of the potential impact on the schemes from changes in life
expectancy.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from the prior year.
103
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 11: Retirement benefit obligations continued
Asset-liability matching strategies
The main schemes’ assets are invested in a diversified portfolio which are independently determined by the responsible governance body for
each scheme and in consultation with the employer.
A significant goal of the asset strategies adopted by the schemes is to reduce volatility caused by changes in market expectations of interest
rates and inflation. In the main schemes this is achieved by investing in liability-driven investment (LDI) strategies. The assets in these LDI
strategies represented c.47 per cent of scheme assets at 31 December 2024.
The LDI strategies are actively managed to reflect both changing market conditions and changes to the liability profile. At 31 December 2024
the asset-liability matching strategy mitigated c.116 per cent of the liability sensitivity to interest rate movements and c.131 per cent of the
liability sensitivity to inflation movements. In addition, a small amount of interest rate sensitivity arises through holdings of corporate and
other debt securities. The higher level of hedging provides greater protection to the funding position of the schemes.
The main schemes hold a number of longevity insurance contracts, hedging c.30 per cent of their longevity risk exposure at 31 December 2024.
These arrangements form part of the schemes’ investment portfolio and provide income to the schemes in the event that pensions are paid out
for longer than expected. As of 1 January 2025 an additional longevity insurance arrangement was entered into, taking the total the main
schemes have now hedged to c.35 per cent of their longevity risk exposure.
At 31 December 2024 the value of scheme assets included longevity swaps valued at £(175) million (after allowing for the impact of the
revisions to the base mortality assumptions).
Maturity profile of defined benefit obligation
The following table provides information on the weighted average duration of the defined benefit pension obligation and the distribution and
timing of benefit payments:
2024
Years
2023
Years
Duration of the defined benefit obligation
12
13
Maturity analysis of benefits expected to be paid:
2024
£m
2023
£m
Within 12 months
1,800
1,697
Between 1 and 2 years
1,595
1,513
Between 2 and 5 years
5,134
4,886
Between 5 and 10 years
9,318
9,159
Between 10 and 15 years
9,150
9,176
Between 15 and 25 years
16,316
16,882
Between 25 and 35 years
11,294
12,343
Between 35 and 45 years
5,171
6,121
In more than 45 years
1,201
1,595
Maturity analysis method and assumptions
The projected benefit payments are based on the assumptions underlying the assessment of the obligations, including allowance for expected
future inflation. They are shown in their undiscounted form and therefore appear large relative to the discounted assessment of the defined
benefit obligations recognised in the Group’s balance sheet. They are in respect of benefits that have been accrued prior to the respective year
end date only and make no allowance for any benefits that may have been accrued subsequently.
Defined contribution schemes
The Group operates a number of defined contribution pension schemes in the UK and overseas, principally Your Tomorrow and the defined
contribution sections of the Lloyds Bank Pension Scheme No. 1.
During the year ended 31 December 2024 the charge to the income statement in respect of defined contribution schemes was £515 million
(2023: £414 million; 2022: £314 million ), representing the contributions payable by the employer in accordance with each scheme’s rules.
Other retirement benefit schemes
The Group operates a number of schemes which provide post-retirement healthcare benefits to certain employees, retired employees and their
dependants. The principal scheme relates to former Lloyds Bank staff and under this scheme the Group has undertaken to meet the cost of
post-retirement healthcare for all eligible former employees (and their dependants) who retired prior to 1 January 1996. The Group has entered
into an insurance contract to provide these benefits and a provision has been made for the estimated cost of future insurance premiums
payable.
For the principal post-retirement healthcare scheme, the latest actuarial valuation of the liability was carried out at 31 December 2024 by
qualified independent actuaries. The principal assumptions used were as set out above in section (iv), except that the rate of increase in
healthcare premiums has been assumed at 10.00 per cent (2023: 10.00 per cent).
Movements in the other retirement benefits obligation:
2024
£m
2023
£m
At 1 January
(44)
(35)
Actuarial gains (losses)
4
(11)
Insurance premiums paid
3
3
Charge for the year
(2)
(1)
At 31 December
(39)
(44)
104
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 12: Auditors’ remuneration
Fees payable to the Bank’s auditors are included within other operating expenses and are as follows:
2024
£m
2023
£m
2022
£m
Fees payable for the:
– audit of the Bank’s current year Annual report
5.2
5.1
4.9
– audits of the Bank’s subsidiaries
12.4
12.2
10.8
– total audit fees in respect of the statutory audit of Group entities1
17.6
17.3
15.7
– services normally provided in connection with statutory and regulatory filings or engagements
0.5
0.3
0.8
Total audit fees2
18.1
17.6
16.5
Other audit-related fees2
0.2
0.1
0.4
All other fees2
0.2
0.1
0.2
Total non-audit services3
0.4
0.2
0.6
Total fees payable to the Bank’s auditors by the Group
18.5
17.8
17.1
1As defined by the Financial Reporting Council (FRC).
2As defined by the Securities and Exchange Commission (SEC).
3As defined by the SEC. Total non-audit services as defined by the FRC include all fees other than audit fees in respect of the statutory audit of Group entities. These fees totalled
£0.9 million in 2024 ( 2023: £0.5 million; 2022: £1.4 million).
The following types of services are included in the categories listed above:
Audit fees: This category includes fees in respect of the audit of the Group’s annual financial statements and other services in connection with
regulatory filings. Other services supplied pursuant to legislation relate primarily to costs incurred in connection with client asset assurance and
with the Sarbanes-Oxley Act requirements associated with the audit of the financial statements of Lloyds Banking Group filed on its Form 20-
F.
Other audit-related fees: This category includes fees in respect of services for assurance and related services that are reasonably related to the
performance of the audit or review of the financial statements, for example acting as reporting accountants in respect of debt prospectuses
required by the Listing Rules.
All other fees: This category includes other assurance services not related to the performance of the audit or review of the financial
statements, for example, the review of controls operated by the Group on behalf of a third party. The auditors are not engaged to provide tax
services.
It is the Group’s policy to use the auditors only on assignments in cases where their knowledge of the Group means that it is neither efficient
nor cost effective to employ another firm of accountants.
Lloyds Banking Group has procedures that are designed to ensure auditor independence for Lloyds Banking Group plc and all of its subsidiaries,
including prohibiting certain non-audit services. All audit and non-audit assignments must be pre-approved by the Lloyds Banking Group Audit
Committee (the Audit Committee) on an individual engagement basis; for certain types of non-audit engagements where the fee is ‘de minimis’
the Audit Committee has pre-approved all assignments subject to confirmation by management. On a quarterly basis, the Audit Committee
receives and reviews a report detailing all pre-approved services and amounts paid to the auditors for such pre-approved services.
During the year, the auditors also earned fees payable by entities outside the consolidated Lloyds Bank Group in respect of the following:
2024
£m
2023
£m
2022
£m
Audits of Group pension schemes
0.4
0.4
0.3
105
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 13: Impairment
Year ended 31 December 2024
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
In respect of:
Loans and advances to banks
(5)
(5)
Loans and advances to customers
(139)
(286)
946
(5)
516
Debt securities
(4)
(4)
Financial assets at amortised cost
(148)
(286)
946
(5)
507
Financial assets at fair value through other comprehensive income
(3)
(3)
Loan commitments and financial guarantees
(14)
(34)
(48)
Total impairment (credit) charge
(165)
(320)
946
(5)
456
Year ended 31 December 2023
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
In respect of:
Loans and advances to banks
(3)
(3)
Loans and advances to customers
269
(270)
412
(73)
338
Debt securities
Financial assets at amortised cost
266
(270)
412
(73)
335
Financial assets at fair value through other comprehensive income
(2)
(2)
Loan commitments and financial guarantees
31
(19)
(2)
10
Total impairment charge (credit)
295
(289)
410
(73)
343
Year ended 31 December 2022
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
In respect of:
Loans and advances to banks
9
9
Loans and advances to customers
(232)
679
882
(9)
1,320
Debt securities
6
6
Financial assets at amortised cost
(217)
679
882
(9)
1,335
Financial assets at fair value through other comprehensive income
6
6
Loan commitments and financial guarantees
20
92
(1)
111
Total impairment (credit) charge
(191)
771
881
(9)
1,452
The impairment charge includes a charge of £ 24 million ( 2023: £73 million charge; 2022: no charge ) in respect of residual value impairment and
voluntary terminations within the Group’s UK motor finance business.
106
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 14: Tax
Analysis of tax expense for the year
2024
£m
2023
£m
2022
£m
UK corporation tax:
Current tax on profit for the year
(1,181)
(1,307)
(1,050)
Adjustments in respect of prior years
(2)
87
110
(1,183)
(1,220)
(940)
Foreign tax:
Current tax on profit for the year
(41)
(44)
(20)
Adjustments in respect of prior years
2
2
(12)
(39)
(42)
(32)
Current tax expense
(1,222)
(1,262)
(972)
Deferred tax:
Current year
(41)
(559)
(498)
Adjustments in respect of prior years
61
(28)
170
Deferred tax credit (expense)
20
(587)
(328)
Tax expense
(1,202)
(1,849)
(1,300)
Factors affecting the tax expense for the year
The UK corporation tax rate for the year was 25.0 per cent (2023 : 23.5 per cent; 2022: 19.0 per cent). The increase in applicable tax rate from
2023 relates to the change in statutory tax rate effective from 1 April 2023. An explanation of the relationship between tax expense and
accounting profit is set out below.
2024
£m
2023
£m
2022
£m
Profit before tax
4,688
7,056
6,094
UK corporation tax thereon
(1,172)
(1,658)
(1,158)
Impact of surcharge on banking profits
(145)
(290)
(340)
Non-deductible costs: conduct charges
(27)
(30)
(5)
Non-deductible costs: bank levy
(32)
(31)
(25)
Other non-deductible costs
(32)
(53)
(58)
Non-taxable income
52
14
48
Tax relief on coupons on other equity instruments
91
78
46
Tax-exempt gains on disposals
5
71
Remeasurement of deferred tax due to rate changes
(8)
(21)
Differences in overseas tax rates
(3)
(3)
(55)
Adjustments in respect of prior years
61
61
268
Tax expense
(1,202)
(1,849)
(1,300)
On 11 July 2023, the Government enacted its legislation implementing the G20-OECD Inclusive Framework Pillar 2 rules in the UK, including a
Qualified Domestic Minimum Top-Up Tax rule. This legislation seeks to ensure that UK-headquartered multinational enterprises pay a minimum
tax rate of 15 per cent on UK and overseas profits arising after 31 December 2023. No provision for Pillar 2 current tax is included in tax expense
for the period because Lloyds Banking Group plc, the Group’s ultimate parent entity, will bear the cost of any Pillar 2 income taxes payable in
respect of 2024 on behalf of its subsidiaries.
Deferred tax
The Group’s deferred tax assets and liabilities are as follows:
Statutory position
2024
£m
2023
£m
Tax disclosure
2024
£m
2023
£m
Deferred tax assets
4,785
4,636
Deferred tax assets
6,599
6,863
Deferred tax liabilities
(125)
(157)
Deferred tax liabilities
(1,939)
(2,384)
Net deferred tax asset at 31 December
4,660
4,479
Net deferred tax asset at 31 December
4,660
4,479
The statutory position reflects the deferred tax assets and liabilities as disclosed in the consolidated balance sheet and takes into account the
ability of the Group to net assets and liabilities where there is a legally enforceable right of offset. The tax disclosure of deferred tax assets and
liabilities ties to the amounts outlined in the tables below which splits the deferred tax assets and liabilities by type, before such netting.
107
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 14: Tax continued
Movements in deferred tax assets and liabilities (before taking into consideration the offsetting of balances within the same taxing jurisdiction)
can be summarised as follows:
Deferred tax assets
Tax
losses
£m
Property,
plant and
equipment
£m
Provisions
£m
Share-based
payments
£m
Asset
revaluations1
£m
Pension
liabilities
£m
Derivatives
£m
Other
temporary
differences
£m
Total
£m
At 1 January 2023
5,014
523
259
14
8
47
2,024
110
7,999
(Charge) credit to the income statement
(267)
(253)
(40)
12
73
29
(36)
(482)
Charge to other comprehensive income
(26)
(628)
(654)
At 31 December 2023
4,747
270
219
26
55
47
1,425
74
6,863
(Charge) credit to the income statement
(132)
(75)
(21)
(1)
45
(8)
(41)
(6)
(239)
(Charge) credit to other comprehensive
income
(30)
5
(25)
At 31 December 2024
4,615
195
198
25
70
39
1,389
68
6,599
Deferred tax liabilities
Capitalised
software
enhancements
£m
Acquisition
fair value
£m
Pension
assets
£m
Derivatives
£m
Other
temporary
differences
£m
Total
£m
At 1 January 2023
(158)
(323)
(1,019)
(470)
(380)
(2,350)
Credit (charge) to the income statement
69
35
(5)
(213)
9
(105)
Credit to other comprehensive income
53
66
119
Acquisitions
(58)
(58)
Exchange and other adjustments
10
10
At 31 December 2023
(89)
(346)
(971)
(683)
(295)
(2,384)
(Charge) credit to the income statement
(31)
123
2
150
15
259
Credit to other comprehensive income
155
22
177
Exchange and other adjustments
9
9
At 31 December 2024
(120)
(223)
(814)
(533)
(249)
(1,939)
1Financial assets at fair value through other comprehensive income.
At 31 December 2024 the Group carried deferred tax assets on its balance sheet of £4,785 million ( 2023: £4,636 million) principally relating to
tax losses carried forward.
Estimation of income taxes includes the assessment of recoverability of deferred tax assets. Deferred tax assets are only recognised to the
extent that they are considered more likely than not to be recoverable based on existing tax laws and forecasts of future taxable profits
against which the underlying tax deductions can be utilised. The Group has recognised a deferred tax asset of £4,615 million (2023 : £4,747
million ) in respect of trading losses carried forward. Substantially all of these losses have arisen in Bank of Scotland plc and Lloyds Bank plc,
and they will be utilised as taxable profits arise in those legal entities in future periods.
The Group’s expectations of future UK taxable profits require management judgement, and take into account the Group’s long-term financial
and strategic plans and anticipated future tax-adjusting items. In making this assessment, account is taken of business plans, the Board-
approved operating plan and the expected future economic outlook as set out in the strategic report, as well as the risks associated with future
regulatory, climate-related and other change, in order to produce a base case forecast of future UK taxable profits. Under current law there is
no expiry date for UK trading losses not yet utilised, and given the forecast of future profitability and the Group’s commitment to the UK
market, in management’s judgement it is more likely than not that the value of the losses will be recovered by the Group while still operating as
a going concern. Banking tax losses that arose before 1 April 2015 can only be used against 25 per cent of taxable profits arising after 1 April
2016, and they cannot be used to reduce the surcharge on banking profits. These restrictions in utilisation mean that the value of the deferred
tax asset in respect of tax losses is only expected to be fully recovered by 2037 ( 2023 : 2036) in the base case forecast. The rate of recovery of
the Group’s tax loss asset is not a straight line, being affected by the relative profitability of the different legal entities in future periods, and
the relative size of their tax losses carried forward. It is expected in the base case that 85 per cent of the value will be recovered by 2033, when
Bank of Scotland plc will have utilised all of its available tax losses. It is possible that future tax law changes could materially affect the timing
of recovery and the value of these losses ultimately realised by the Group.
Deferred tax not recognised
Deferred tax assets of £119 million (2023: £142 million) have not been recognised in respect of £ 474 million of UK tax losses and other
temporary differences which can only be used to offset future capital gains. UK capital losses can be carried forward indefinitely.
No deferred tax has been recognised in respect of foreign trade losses where it is not more likely than not that we will be able to utilise them in
future periods. Of the asset not recognised, £48 million ( 2023: £50 million) relates to losses that will expire if not used within 20 years, and
£4 million (2023: £7 million) relates to losses with no expiry date.
108
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 14: Tax continued
Critical accounting judgements and key sources of estimation uncertainty
Critical judgement:
The Group believes that its interpretation of the tax rules on group relief are correct
The Group has an open matter in relation to a claim for group relief of losses incurred in its former Irish banking subsidiary, which ceased
trading on 31 December 2010. In 2020, HMRC concluded its enquiry into the matter and issued a closure notice denying the group relief claim.
The Group appealed to the First Tier Tax Tribunal. The hearing took place in May 2023. In January 2025, the First Tier Tribunal concluded in
favour of HMRC. The Group believes it has applied the rules correctly and that the claim for group relief is correct. Having reviewed the
Tribunal’s conclusions and having taken appropriate advice, the Group intends to appeal the decision and does not consider this to be a case
where an additional tax liability will ultimately fall due. If the final determination of the matter by the judicial process is that HMRC’s position
is correct, management believes that this would result in an increase in current tax liabilities of £850 million (including interest) and a reduction
in the Group’s deferred tax asset of approximately £275 million. Following the First Tier Tax Tribunal outcome, the tax will be paid and
recognised as a current tax asset, given the Group’s view that the tax liability will not ultimately fall due. It is unlikely that any appeal hearing
will be held before 2026, and final conclusion of the judicial process may not be for several years.
There are a number of other open matters on which the Group is in discussions with HMRC (including the tax treatment of certain costs arising
from the divestment of TSB Banking Group plc, and the tax treatment of costs relating to HBOS Reading), none of which is expected to have a
material impact on the financial position of the Group.
109
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 15: Measurement basis of financial assets and liabilities
The accounting policies in note 2 describe how different classes of financial instruments are measured, and how income and expenses,
including fair value gains and losses, are recognised. The following table analyses the carrying amounts of the financial assets and liabilities by
category and by balance sheet heading.
Derivatives
designated
as hedging
instruments
£m
Mandatorily held at
fair value through
profit or loss
Designated
at fair value
through
profit or loss
£m
At fair value
through other
comprehensive
income
£m
Held at
amortised
cost
£m
Total
£m
At 31 December 2024
Held for
trading
£m
Other
£m
Financial assets
Cash and balances at central banks
42,396
42,396
Financial assets at fair value through profit or
loss
2,321
2,321
Derivative financial instruments
51
4,184
4,235
Loans and advances to banks
6,433
6,433
Loans and advances to customers
441,907
441,907
Reverse repurchase agreements
44,143
44,143
Debt securities
11,854
11,854
Due from fellow Lloyds Banking Group
undertakings
560
560
Financial assets at amortised cost
504,897
504,897
Financial assets at fair value through other
comprehensive income
30,344
30,344
Other
172
172
Total financial assets
51
4,184
2,321
30,344
547,465
584,365
Financial liabilities
Deposits from banks
3,144
3,144
Customer deposits
451,794
451,794
Repurchase agreements at amortised cost
37,760
37,760
Due to fellow Lloyds Banking Group
undertakings
4,049
4,049
Financial liabilities at fair value through profit
or loss
4,630
4,630
Derivative financial instruments
340
5,447
5,787
Notes in circulation
2,121
2,121
Debt securities in issue at amortised cost
45,281
45,281
Other
1,663
1,663
Subordinated liabilities
7,211
7,211
Total financial liabilities
340
5,447
4,630
553,023
563,440
Offsetting of financial assets and liabilities
Related amounts where set off in the balance
sheet not permitted1
Potential
net amounts
if offset
of related
amounts
permitted
£m
At 31 December 2024
Gross
amounts of
assets and
liabilities
£m
Amount
offset in
the balance
sheet2
£m
Net amounts
presented in
the balance
sheet
£m
Cash
collateral
(received)/
pledged
£m
Non-cash
collateral
(received)/
pledged
£m
Master
netting and
similar
agreements
£m
Derivative assets
40,288
(36,053)
4,235
(407)
(524)
(2,217)
1,087
Derivative liabilities
(44,261)
38,474
(5,787)
1,742
208
2,217
(1,620)
Net position
(3,973)
2,421
(1,552)
1,335
(316)
(533)
Non-trading reverse repurchase agreements
55,165
(11,022)
44,143
256
(44,031)
368
Non-trading repurchase agreements
(48,782)
11,022
(37,760)
8
37,427
(325)
Net position
6,383
6,383
264
(6,604)
43
1The Group enters into derivatives and repurchase and reverse repurchase agreements with various counterparties which are governed by industry standard master netting
agreements. The Group holds and provides cash and securities collateral in respect of derivative transactions covered by these agreements. The right to set off balances under these
master netting agreements or to set off cash and securities collateral only arises in the event of non-payment or default and, as a result, these arrangements do not qualify for
offsetting under IAS 32.
2The amounts offset in the balance sheet as shown above meet the criteria for offsetting under IAS 32.
The format of the table above has been updated to give a clearer view of the net exposures of the Group.
110
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 15: Measurement basis of financial assets and liabilities continued
Derivatives
designated
as hedging
instruments
£m
Mandatorily held at
fair value through
profit or loss
Designated
at fair value
through
profit or loss
£m
At fair value
through other
comprehensive
income
£m
Held at
amortised
cost
£m
Total
£m
At 31 December 2023
Held for
trading
£m
Other
£m
Financial assets
Cash and balances at central banks
57,909
57,909
Financial assets at fair value through profit or
loss
1,862
1,862
Derivative financial instruments
72
3,093
3,165
Loans and advances to banks
8,810
8,810
Loans and advances to customers
433,124
433,124
Reverse repurchase agreements
32,751
32,751
Debt securities
12,546
12,546
Due from fellow Lloyds Banking Group
undertakings
840
840
Financial assets at amortised cost
488,071
488,071
Financial assets at fair value through other
comprehensive income
27,337
27,337
Other
240
240
Total financial assets
72
3,093
1,862
27,337
546,220
578,584
Financial liabilities
Deposits from banks
3,557
3,557
Customer deposits
441,953
441,953
Repurchase agreements
37,702
37,702
Due to fellow Lloyds Banking Group
undertakings
2,932
2,932
Financial liabilities at fair value through profit
or loss
5,255
5,255
Derivative financial instruments
427
3,880
4,307
Notes in circulation
1,392
1,392
Debt securities in issue at amortised cost
52,449
52,449
Other
1,912
1,912
Subordinated liabilities
6,935
6,935
Total financial liabilities
427
3,880
5,255
548,832
558,394
Offsetting of financial assets and liabilities
Related amounts where
set off in the balance
sheet not permitted1
Potential
net amounts
if offset
of related
amounts
permitted
£m
At 31 December 2023
Gross
amounts of
assets and
liabilities
£m
Amount
offset in
the balance
sheet2
£m
Net amounts
presented in
the balance
sheet
£m
Cash
collateral
received/
pledged
£m
Non-cash
collateral
received/
pledged
£m
Master
netting and
similar
agreements
£m
Derivative assets
42,629
(39,464)
3,165
(679)
(2,213)
273
Derivative liabilities
(46,431)
42,124
(4,307)
1,223
685
2,213
(186)
Net position
(3,802)
2,660
(1,142)
544
685
87
Non-trading reverse repurchase agreements
40,387
(7,636)
32,751
58
(32,559)
250
Non-trading repurchase agreements
(45,338)
7,636
(37,702)
(60)
37,714
(48)
Net position
(4,951)
(4,951)
(2)
5,155
202
1The Group enters into derivatives and repurchase and reverse repurchase agreements with various counterparties which are governed by industry standard master netting
agreements. The Group holds and provides cash and securities collateral in respect of derivative transactions covered by these agreements. The right to set off balances under these
master netting agreements or to set off cash and securities collateral only arises in the event of non-payment or default and, as a result, these arrangements do not qualify for
offsetting under IAS 32.
2The amounts offset in the balance sheet as shown above meet the criteria for offsetting under IAS 32.
The format of the table above has been updated to give a clearer view of the net exposures of the Group.
111
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 16: Fair values of financial assets and liabilities
At 31 December 2024, the carrying value of the Group’s financial instrument assets held at fair value was £36,900 million (2023:
£32,364 million ), and its financial instrument liabilities held at fair value was £10,417 million (2023: £9,562 million).
(1)Fair value measurement
Fair value is the price that would be received on sale of an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. It is a measure as at a specific date and may be significantly different from the amount which will
actually be paid or received on maturity or settlement date.
Wherever possible, fair values have been calculated using unadjusted quoted market prices in active markets for identical instruments to those
held by the Group. Where quoted market prices are not available, or are unreliable because of poor liquidity, fair values have been determined
using valuation techniques which, to the extent possible, use market observable inputs, but in some cases use non-market observable inputs.
Valuation techniques used include discounted cash flow analysis and pricing models and, where appropriate, comparison to instruments with
characteristics similar to those of the instruments held by the Group. The Group measures valuation adjustments for its derivative exposures on
the same basis as the derivatives are managed.
The carrying amount of the following financial instruments is a reasonable approximation of fair value: cash and balances at central banks,
items in the course of collection from banks, items in course of transmission to banks and notes in circulation.
Because a variety of estimation techniques are employed and significant estimates made, comparisons of fair values between financial
institutions may not be meaningful. Readers of these financial statements are thus advised to use caution when using this data to evaluate the
Group’s financial position.
Fair value information is not provided for items that are not financial instruments or for other assets and liabilities which are not carried at fair
value in the Group’s consolidated balance sheet. These items include intangible assets, property, plant and equipment, and shareholders’
equity. These items are material and accordingly the Group believes that any fair value information presented would not represent the
underlying value of the Group.
Valuation control framework
The key elements of the control framework for the valuation of financial instruments include model validation, product implementation review
and independent price verification. These functions are carried out by appropriately skilled risk and finance teams, independent of the business
area responsible for the products.
Model validation covers both qualitative and quantitative elements relating to new models. In respect of new products, a product
implementation review is conducted pre and post-trading. Pre-trade testing ensures that the new model is integrated into the Group’s systems
and that the profit and loss and risk reporting are consistent throughout the trade lifecycle. Post-trade testing examines the explanatory power
of the implemented model, actively monitoring model parameters and comparing in-house pricing to external sources. Independent price
verification procedures cover financial instruments carried at fair value and are performed at a minimum on a monthly basis. Valuation
differences in breach of established thresholds are escalated to senior management. The results from independent pricing and valuation
reserves are reviewed monthly by senior management.
Formal committees, consisting of senior risk, finance and business management, meet at least quarterly to discuss and approve valuations in
more judgemental areas, in particular for unquoted equities, structured credit, derivatives and the credit valuation adjustment (CVA), funding
valuation adjustment (FVA) and other valuation adjustments.
Valuation of financial assets and liabilities
Assets and liabilities carried at fair value or for which fair values are disclosed have been classified into three levels according to the quality and
reliability of information used to determine the fair values.
Level 1
Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets or liabilities. Products
classified as level 1 predominantly comprise listed equity shares and government securities.
Level 2
Level 2 valuations are those where quoted market prices are not available, for example where the instrument is traded in a market that is not
considered to be active or valuation techniques are used to determine fair value and where these techniques use inputs that are based
significantly on observable market data. Examples of such financial instruments include most over-the-counter derivatives, financial institution
issued securities, certificates of deposit and certain asset-backed securities.
Level 3
Level 3 portfolios are those where at least one input which could have a significant effect on the instrument’s valuation is not based on
observable market data. Such instruments would include the Group’s unlisted equity investments which are valued using various valuation
techniques that require significant management judgement in determining appropriate assumptions, including earnings multiples and
estimated future cash flows. Certain of the Group’s asset-backed securities , loans and advances recognised at fair value and derivatives are also
classified as level 3.
Transfers in or out of the level 3 portfolio arise when inputs that could have a significant impact on the instrument’s valuation become
unobservable or observable, or where an unobservable input becomes significant or insignificant to an instrument’s value.
(2)Financial assets and liabilities carried at fair value
(A)Financial assets (excluding derivatives)
Valuation hierarchy
At 31 December 2024, the Group’s financial assets (excluding derivatives) carried at fair value totalled £32,665 million (2023: £29,199 million).
The table below analyses these financial assets by balance sheet classification, asset type and valuation methodology (level 1, 2 or 3, as
described above). The fair value measurement approach is recurring in nature. There were no significant transfers between level 1 and 2 during
the year. For amounts included below which are subject to repurchase and reverse repurchase agreements see page 37.
112
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 16: Fair values of financial assets and liabilities continued
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
At 31 December 2024
Financial assets at fair value through profit or loss
Loans and advances to customers
1,813
276
2,089
Equity shares
228
4
232
Total financial assets at fair value through profit or loss
228
1,813
280
2,321
Financial assets at fair value through other comprehensive income
Debt securities:
Government securities
15,131
115
15,246
Asset-backed securities
149
48
197
Corporate and other debt securities
1,147
13,754
14,901
16,278
14,018
48
30,344
Equity shares
Total financial assets at fair value through other comprehensive income
16,278
14,018
48
30,344
Total financial assets (excluding derivatives) at fair value
16,506
15,831
328
32,665
At 31 December 2023
Financial assets at fair value through profit or loss
Loans and advances to customers
1,391
266
1,657
Equity shares
201
4
205
Total financial assets at fair value through profit or loss
201
1,391
270
1,862
Financial assets at fair value through other comprehensive income
Debt securities:
Government securities
14,074
48
14,122
Asset-backed securities
121
52
173
Corporate and other debt securities
951
12,090
13,041
15,025
12,259
52
27,336
Equity shares
1
1
Total financial assets at fair value through other comprehensive income
15,025
12,259
53
27,337
Total financial assets (excluding derivatives) at fair value
15,226
13,650
323
29,199
Movements in level 3 portfolio
The table below analyses movements in level 3 financial assets (excluding derivatives) at fair value, recurring basis.
2024
2023
Financial
assets at
fair value
through
profit or loss
£m
Financial
assets at
fair value
through other
comprehensive
income
£m
Total level 3
financial assets
(excluding
derivatives)
at fair value,
recurring basis
£m
Financial
assets at
fair value
through
profit or loss
£m
Financial
assets at
fair value
through other
comprehensive
income
£m
Total level 3
financial assets
(excluding
derivatives)
at fair value,
recurring basis
£m
At 1 January
270
53
323
295
52
347
Exchange and other adjustments
(2)
(2)
(1)
(1)
Gains (losses) recognised in the income statement
within other income
41
(1)
40
(1)
5
4
Purchases/increases to customer loans
4
4
Sales/repayments of customer loans
(35)
(2)
(37)
(24)
(3)
(27)
At 31 December
280
48
328
270
53
323
Gains (losses) recognised in the income statement,
within other income, relating to the change in fair
value of those assets held at 31 December
36
(1)
35
4
4
Valuation methodology for financial assets (excluding derivatives)
Loans and advances to customers
The fair value of these assets is determined using discounted cash flow techniques. The discount rates are derived from market observable
interest rates, a risk margin that reflects loan credit ratings and an incremental illiquidity premium based on historical spreads at origination on
similar loans.
Reverse repurchase agreements
The fair value of these assets is determined using discounted cash flow techniques. The discount rates are derived from observable repurchase
agreement rate curves specific to the type of security sold under the reverse repurchase agreement.
113
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 16: Fair values of financial assets and liabilities continued
Debt securities
Debt securities measured at fair value and classified as level 2 are valued by discounting expected cash flows using an observable credit spread
applicable to the particular instrument.
Where there is limited trading activity in debt securities, the Group uses valuation models, consensus pricing information from third party
pricing services and broker or lead manager quotes to determine an appropriate valuation. Debt securities are classified as level 3 if there is a
significant valuation input that cannot be corroborated through market sources or where there are materially inconsistent values for an input.
Asset classes classified as level 3 mainly comprise certain collateralised loan obligations and collateralised debt obligations.
At 31 December 2024 £1,714 million (2023: £1,511 million) of financial assets at fair value through profit or loss had a contractual residual
maturity of greater than one year.
(B)Financial liabilities (excluding derivatives)
Valuation hierarchy
At 31 December 2024, the Group’s financial liabilities (excluding derivatives) carried at fair value, comprised its financial liabilities at fair value
through profit or loss and totalled £4,630 million (2023: £5,255 million ). The table below analyses these financial liabilities by balance sheet
classification and valuation methodology (level 1, 2 or 3, as described on page 111). The fair value measurement approach is recurring in nature.
There were no significant transfers between level 1 and 2 during the year.
2024
2023
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Debt securities in issue designated at fair value through
profit or loss
4,608
22
4,630
5,232
23
5,255
The amount contractually payable on maturity of the debt securities held at fair value through profit or loss at 31 December 2024 was
£9,863 million, which was £5,232 million higher than the balance sheet carrying value (2023: £10,433 million, which was £5,178 million higher
than the balance sheet carrying value). At 31 December 2024 there was a cumulative £12 million decrease in the fair value of these liabilities
attributable to changes in credit spread risk; this is determined by reference to the quoted credit spreads of Lloyds Bank plc, the issuing entity
within the Group. Of the cumulative amount, an increase of £78 million arose in 2024 and an increase of £234 million arose in 2023.
Movements in level 3 portfolio
The table below analyses movements in the level 3 financial liabilities (excluding derivatives) at fair value portfolio.
2024
£m
2023
£m
At 1 January
23
26
Losses (gains) recognised in the income statement within other income
3
(1)
Redemptions
(4)
(2)
At 31 December
22
23
Losses (gains) recognised in the income statement, within other income, relating to the change in fair value of those
liabilities held at 31 December
3
(1)
Valuation methodology for financial liabilities (excluding derivatives)
Liabilities held at fair value through profit or loss
These principally comprise debt securities in issue which are classified as level 2 and their fair value is determined using techniques whose
inputs are based on observable market data. The carrying amount of the securities is adjusted to reflect the effect of changes in own credit
spreads and the resulting gain or loss is recognised in other comprehensive income.
In the year ended 31 December 2024, the own credit adjustment arising from the fair valuation of £4,630 million (2023: £5,255 million ) of the
Group’s debt securities in issue designated at fair value through profit or loss resulted in a loss of £ 78 million (2023: loss of £234 million), before
tax, recognised in other comprehensive income.  
At 31 December 2024, £4,147 million (2023: £4,721 million) of financial liabilities at fair value through profit or loss had a contractual residual
maturity of greater than one year.
(C)Derivatives
Valuation hierarchy
All of the Group’s derivative assets and liabilities are carried at fair value. At 31 December 2024, such assets totalled £4,235 million (2023:
£3,165 million ) and liabilities totalled £5,787 million (2023: £4,307 million). The table below analyses these derivative balances by valuation
methodology (level 1, 2 or 3, as described on page 111). The fair value measurement approach is recurring in nature. There were no significant
transfers between level 1 and level 2 during the year.
2024
2023
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Derivative assets
4,235
4,235
3,165
3,165
Derivative liabilities
(5,644)
(143)
(5,787)
(4,168)
(139)
(4,307)
114
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 16: Fair values of financial assets and liabilities continued
Movements in level 3 portfolio
The table below analyses movements in level 3 derivative assets and liabilities carried at fair value.
2024
2023
Derivative
assets
£m
Derivative
liabilities
£m
Derivative
assets
£m
Derivative
liabilities
£m
At 1 January
(139)
(163)
(Losses) gains recognised in the income statement within other income
(24)
3
Redemptions
20
21
At 31 December
(143)
(139)
Gains recognised in the income statement, within other income, relating to the change in
fair value of those assets or liabilities held at 31 December
(24)
2
Valuation methodology for derivatives
The Group’s derivatives are valued using techniques including discounted cash flow and options pricing models, as appropriate. The types of
derivatives classified as level 2 and the valuation techniques used include:
Interest rate swaps which are valued using discounted cash flow models; the most significant inputs into those models are interest rate yield
curves which are developed from publicly quoted rates
Foreign exchange derivatives that do not contain options which are priced using rates available from publicly quoted sources
Credit derivatives are valued using standard models with observable inputs, including publicly available yield and credit default swap (CDS)
curves
Less complex interest rate and foreign exchange option products which are valued using volatility surfaces developed from publicly available
interest rate cap, interest rate swaption and other option volatilities; option volatility skew information is derived from a market standard
consensus pricing service
Complex interest rate products where inputs to the valuation are significant and unobservable are classified as level 3.
Derivatives where the counterparty becomes distressed from a credit perspective are generally reclassified to level 3 given limited observability
in all traded levels.
115
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 16: Fair values of financial assets and liabilities continued
(D)Sensitivity of level 3 valuations
Critical accounting judgements and key sources of estimation uncertainty
Key sources of estimation uncertainty:
Interest rate spreads, credit spreads, earnings multiples, interest rate volatility and recovery rates
The Group’s valuation control framework and a description of level 1, 2 and 3 financial assets and liabilities is set out in section (1) above. The
valuation techniques for level 3 financial instruments involve management judgement and estimates, the extent of which depends on the
complexity of the instrument and the availability of market observable information. In addition, in line with market practice, the Group applies
credit, debit and funding valuation adjustments in determining the fair value of its uncollateralised derivative positions. A description of these
adjustments is set out in section (C) above.
2024
2023
Effect of reasonably possible
alternative assumptions1
Effect of reasonably possible
alternative assumptions1
Valuation techniques
Significant
unobservable inputs2
Carrying
value
£m
Favourable
changes
£m
Unfavourable
changes
£m
Carrying
value
£m
Favourable
changes
£m
Unfavourable
changes
£m
Financial assets at fair value through profit or loss
Loans and
advances to
customers
Discounted cash
flows
Interest rate spreads
(+/- 50bps)3
276
19
(19)
266
21
(19)
Equity
investments
n/a
4
1
(1)
4
1
(1)
280
270
Financial assets at fair value through other comprehensive income
Asset-backed
securities
Lead manager or
broker quote/
consensus pricing
n/a
48
2
(2)
52
2
(1)
Equity
investments
n/a
1
48
53
Level 3 financial assets carried at fair value
328
323
Financial liabilities at fair value through profit or loss
Securitisation
notes and other
Discounted cash
flows
Interest rate spreads
(+/- 50bps)4
22
1
(1)
23
1
(1)
Derivative financial liabilities
Interest rate
derivatives
Option pricing
model
Interest rate
volatility
( 11%/183%) 5
13
16
Shared
appreciation
rights
Market values –
property valuation
HPI (+/- 1%) 6
130
12
(11)
123
13
(12)
143
139
Level 3 financial liabilities carried at fair value
165
162
1Where the exposure to an unobservable input is managed on a net basis, only the net impact is shown in the table.
2Ranges are shown where appropriate and represent the highest and lowest inputs used in the level 3 valuations.
32023: +/- 50bps.
42023: +/- 50bps.
52023 : 13%/200%.
62023: +/- 1%.
Unobservable inputs
Significant unobservable inputs affecting the valuation of debt securities and derivatives are as follows:
Credit spreads represent the premium above the benchmark reference instrument required to compensate for lower credit quality; higher
spreads lead to a lower fair value
Volatility parameters represent key attributes of option behaviour; higher volatilities typically denote a wider range of possible outcomes
116
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 16: Fair values of financial assets and liabilities continued
Reasonably possible alternative assumptions
Valuation techniques applied to many of the Group’s level 3 instruments often involve the use of two or more inputs whose relationship is
interdependent. The calculation of the effect of reasonably possible alternative assumptions included in the table above reflects such
relationships.
Debt securities
Reasonably possible alternative assumptions have been determined in respect of the Group’s structured credit investments by flexing credit
spreads.
Derivatives
Reasonably possible alternative assumptions have been determined in respect of swaptions in the Group’s derivative portfolios which are
priced using industry standard option pricing models. Such models require interest rate volatilities which may be unobservable at longer
maturities. To derive reasonably possible alternative valuations these volatility parameters have been flexed within a range
(3)Financial assets and liabilities carried at amortised cost
(A)Financial assets
Valuation hierarchy
The table below analyses the fair values of those financial assets of the Group which are carried at amortised cost by valuation methodology
(level 1, 2 or 3, as described on page 111). Financial assets carried at amortised cost are mainly classified as level 3 due to significant
unobservable inputs used in the valuation models. Where inputs are observable, debt securities are classified as level 1 or 2.
Carrying
value
£m
Fair
value
£m
Valuation hierarchy
Level 1
£m
Level 2
£m
Level 3
£m
At 31 December 2024
Loans and advances to banks
6,433
6,433
6,433
Loans and advances to customers
441,907
438,094
438,094
Reverse repurchase agreements
44,143
44,143
44,143
Debt securities
11,854
11,808
9,554
2,254
Due from fellow Lloyds Banking Group undertakings
560
560
560
At 31 December 2023
Loans and advances to banks
8,810
8,810
8,810
Loans and advances to customers
433,124
423,183
423,183
Reverse repurchase agreements
32,751
32,751
32,751
Debt securities
12,546
12,506
8,392
4,114
Due from fellow Lloyds Banking Group undertakings
840
840
840
The carrying amount of the following financial instruments is a reasonable approximation of fair value: cash and balances at central banks,
items in the course of collection from banks, items in course of transmission to banks and notes in circulation.
Valuation methodology
Loans and advances to banks
The carrying value of short-dated loans and advances to banks is assumed to be their fair value. The fair value of other loans and advances to
banks is estimated by discounting the anticipated cash flows at a market discount rate adjusted for the credit spread of the obligor or, where
not observable, the credit spread of borrowers of similar credit quality.
Loans and advances to customers
The Group provides loans and advances to commercial, corporate and personal customers at both fixed and variable rates.
To determine the fair value of loans and advances to customers, loans are segregated into portfolios of similar characteristics. A number of
techniques are used to estimate the fair value of fixed rate lending; these take account of expected credit losses based on historic trends,
prevailing market interest rates and expected future cash flows. For retail exposures, fair value is usually estimated by discounting anticipated
cash flows (including interest at contractual rates) at market rates for similar loans offered by the Group and other financial institutions.
Certain loans secured on residential properties are made at a fixed rate for a limited period, typically two to five years, after which the loans
revert to the relevant variable rate. The fair value of such loans is estimated by reference to market rates for similar loans of maturity equal to
the remaining fixed interest rate period. The fair value of commercial loans is estimated by discounting anticipated cash flows at a rate which
reflects the effects of interest rate changes, adjusted for changes in credit risk.
Reverse repurchase agreements
The carrying amount is deemed a reasonable approximation of fair value given the short-term nature of these instruments.
Debt securities
The fair values of debt securities are determined predominantly from lead manager quotes and, where these are not available, by alternative
techniques including reference to credit spreads on similar assets with the same obligor, market standard consensus pricing services, broker
quotes and other research data.
117
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 16: Fair values of financial assets and liabilities continued
(B)Financial liabilities
Valuation hierarchy
The table below analyses the fair values of those financial liabilities of the Group which are carried at amortised cost by valuation methodology
(level 1, 2 or 3, as described on page 111).
Carrying
value
£m
Fair
value
£m
Valuation hierarchy
Level 1
£m
Level 2
£m
Level 3
£m
At 31 December 2024
Deposits from banks
3,144
3,144
3,144
Customer deposits
451,794
452,607
452,607
Repurchase agreements
37,760
37,760
37,760
Due to fellow Lloyds Banking Group undertakings
4,049
4,049
4,049
Debt securities in issue at amortised cost
45,281
45,382
45,382
Subordinated liabilities
7,211
7,304
7,304
At 31 December 2023
Deposits from banks
3,557
3,557
3,557
Customer deposits
441,953
442,391
442,391
Repurchase agreements
37,702
37,702
37,702
Due to fellow Lloyds Banking Group undertakings
2,932
2,932
2,932
Debt securities in issue at amortised cost
52,449
52,243
52,243
Subordinated liabilities
6,935
7,160
7,160
Valuation methodology
Deposits from banks and customer deposits
The fair value of bank and customer deposits repayable on demand is assumed to be equal to their carrying value.
The fair value for all other deposits is estimated using discounted cash flows applying either market rates, where applicable, or current rates for
deposits of similar remaining maturities.
Repurchase agreements
The carrying amount is deemed a reasonable approximation of fair value given the short-term nature of these instruments.
Debt securities in issue at amortised cost
The fair value of short-term debt securities in issue is approximately equal to their carrying value. Fair value for other debt securities in issue is
calculated based on quoted market prices where available. Where quoted market prices are not available, fair value is estimated using
discounted cash flow techniques at a rate which reflects market rates of interest and the Lloyds Banking Group’s own credit spread.
Subordinated liabilities
The fair value of subordinated liabilities is determined by reference to quoted market prices where available or by reference to quoted market
prices of similar instruments. Subordinated liabilities are classified as level 2, since the inputs used to determine their fair value are largely
observable.
(4)Reclassifications of financial assets
There have been no reclassifications of financial assets in 2023 or 2024.
118
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 17: Derivative financial instruments
The fair values and notional amounts of derivative instruments are set out in the following table:
2024
2023
Contract/
notional
amount
£m
Fair value
Changes in fair
value used for
calculating
hedge
ineffectiveness
£m
Contract/
notional
amount
£m
Fair value
Changes in fair
value used for
calculating
hedge
ineffectiveness
£m
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Trading and other
Exchange rate contracts
70,547
2,550
1,793
96,730
853
686
Interest rate contracts
689,874
1,554
3,425
815,557
2,183
3,006
Credit derivatives
3,614
79
99
3,595
48
65
Equity and other contracts
78
1
130
65
9
123
Total derivative assets/
liabilities - trading and other
764,113
4,184
5,447
915,947
3,093
3,880
Hedging
Interest rate
Currency swaps
43
2
35
3
2
Interest rate swaps
213,215
336
1,185
134,631
68
413
(3,098)
Designated as fair value hedges
213,258
2
336
1,185
134,666
71
413
(3,096)
Foreign exchange
Currency swaps
1,967
46
4
91
541
1
14
(14)
Interest rate
Interest rate swaps
468,726
3
(672)
450,568
2,221
Designated as cash flow hedges
470,693
49
4
(581)
451,109
1
14
2,207
Total derivative assets/
liabilities - hedging
683,951
51
340
604
585,775
72
427
(889)
Total recognised derivative
assets/liabilities
1,448,064
4,235
5,787
1,501,722
3,165
4,307
The notional amount of the contract does not represent the Group’s exposure to credit risk, which is limited to the current cost of replacing
contracts with a positive value to the Group should the counterparty default. To reduce credit risk the Group uses a variety of credit
enhancement techniques such as netting and collateralisation, where security is provided against the exposure; a large proportion of the
Group’s derivatives are held through exchanges such as London Clearing House and are collateralised through those exchanges.
The Group holds derivatives as part of the following strategies:
Customer driven, where derivatives are held as part of the provision of risk management products to Group customers
To manage and hedge the Group’s interest rate and foreign exchange risk arising from normal banking business. The hedge accounting
strategy adopted by the Group is to utilise a combination of fair value and cash flow hedge approaches
The principal derivatives used by the Group are as follows:
Interest rate related contracts include interest rate swaps, forward rate agreements and options. An interest rate swap is an agreement
between two parties to exchange fixed and floating interest payments, based upon interest rates defined in the contract, without the
exchange of the underlying principal amounts. Forward rate agreements are contracts for the payment of the difference between a
specified rate of interest and a reference rate, applied to a notional principal amount at a specific date in the future. An interest rate option
gives the buyer, on payment of a premium, the right, but not the obligation, to fix the rate of interest on a future loan or deposit, for a
specified period and commencing on a specified future date
Exchange rate related contracts include forward foreign exchange contracts, currency swaps and options. A forward foreign exchange
contract is an agreement to buy or sell a specified amount of foreign currency on a specified future date at an agreed rate. Currency swaps
generally involve the exchange of interest payment obligations denominated in different currencies; the exchange of principal can be
notional or actual. A currency option gives the buyer, on payment of a premium, the right, but not the obligation, to sell specified amounts
of currency at agreed rates of exchange on or before a specified future date
Credit derivatives, principally credit default swaps, are used by the Group as part of its trading activity and to manage its own exposure to
credit risk. A credit default swap is a swap in which one counterparty receives a premium at pre-set intervals in consideration for
guaranteeing to make a specific payment should a negative credit event take place
Equity, commodity and other contracts include commodity swaps and options
119
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 17: Derivative financial instruments continued
Details of the Group’s hedging instruments are set out below:
Maturity
Fair value hedges
Up to 1 month
£m
1 to 3 months
£m
3 to 12 months
£m
1 to 5 years
£m
Over 5 years
£m
Total
£m
At 31 December 2024
Interest rate
Cross currency swap
Notional
43
43
Average fixed interest rate
1.28%
Average EUR/GBP exchange rate
1.38
Interest rate swap
Notional
3,354
12,749
52,764
101,148
43,200
213,215
Average fixed interest rate
4.43%
3.84%
4.12%
3.44%
2.30%
213,258
At 31 December 2023
Interest rate
Cross currency swap
Notional
35
35
Average fixed interest rate
1.28%
Average EUR/GBP exchange rate
1.38
Interest rate swap
Notional
1,908
4,993
16,411
73,607
37,712
134,631
Average fixed interest rate
0.95%
1.44%
2.11%
3.05%
2.03%
134,666
Maturity
Cash flow hedges
Up to 1 month
£m
1 to 3 months
£m
3 to 12 months
£m
1 to 5 years
£m
Over 5 years
£m
Total
£m
At 31 December 2024
Foreign exchange
Currency swap
Notional
599
596
746
26
1,967
Average EUR/GBP exchange rate
1.17
1.16
1.19
1.16
Average USD/GBP exchange rate
1.27
1.29
1.29
1.24
Interest rate
Interest rate swap
Notional
8,601
20,637
126,308
254,931
58,249
468,726
Average fixed interest rate
4.38%
4.40%
3.87%
3.37%
3.03%
470,693
At 31 December 2023
Foreign exchange
Currency swap
Notional
12
49
439
41
541
Average EUR/GBP exchange rate
1.14
1.14
1.10
Average USD/GBP exchange rate
1.25
1.27
1.24
1.20
Interest rate
Interest rate swap
Notional
9,148
22,496
73,979
277,180
67,765
450,568
Average fixed interest rate
4.14%
4.20%
3.89%
3.39%
2.61%
451,109
120
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 17: Derivative financial instruments continued
The Group’s hedged items are as follows:
Carrying amount of
the hedged item
Accumulated amount of
fair value adjustment on
the hedged item
Change in fair
value of hedged
item for
ineffectiveness
assessment
£m
Fair value hedges
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
At 31 December 2024
Interest rate
Fixed rate mortgages1
124,013
(890)
(185)
Fixed rate issuance2
32,535
1,507
80
Fixed rate bonds3
29,264
(1,070)
(1,158)
At 31 December 2023
Interest rate
Fixed rate mortgages1
75,871
25
2,542
Fixed rate issuance2
30,852
1,463
(672)
Fixed rate bonds3
24,146
(331)
962
1 Included within loans and advances to customers.
2 Included within debt securities in issue at amortised cost.
3 Included within financial assets at amortised cost and financial assets at fair value through other comprehensive income.
At 31 December 2024
At 31 December 2023
Change in fair
value of hedged
item for
ineffectiveness
assessment
£m
Cash flow hedging reserve
Change in fair
value of hedged
item for
ineffectiveness
assessment
£m
Cash flow hedging reserve
Continuing
hedges
£m
Discontinued
hedges
£m
Continuing
hedges
£m
Discontinued
hedges
£m
Cash flow hedges
Foreign exchange
Foreign currency issuance1
(91)
77
22
14
(11)
20
Customer deposits2
5
3
Interest rate
Customer loans3
1,006
(4,098)
(1,626)
(1,721)
(3,529)
(1,914)
Central bank balances4
414
(692)
(890)
(468)
(272)
(1,425)
Customer deposits2
(56)
2,174
72
250
2,169
23
1 Included within debt securities in issue at amortised cost.
2 Included within customer deposits.
3 Included within loans and advances to customers.
4 Included within cash and balances at central banks.
The accumulated amount of fair value hedge adjustments remaining in the balance sheet for hedged items that have ceased to be adjusted for
hedging gains and losses is a liability of £524 million relating to fixed rate issuances of £126 million and mortgages of £398  million (2023: liability
of £960 million relating to fixed rate issuances of £170 million and mortgages of £790 million).
121
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 17: Derivative financial instruments continued
Gains and losses arising from hedge accounting are summarised as follows:
Hedge ineffectiveness
recognised in the
income statement1
Fair value hedges
2024
£m
2023
£m
Interest rate
Fixed rate mortgages
(51)
(264)
Fixed rate issuance
(10)
(13)
Fixed rate bonds
(17)
13
1 Hedge ineffectiveness is included in the income statement within net trading income.
Gain (loss)
recognised in
other
comprehensive
income
£m
Hedge
ineffectiveness
recognised in the
income
statement1
£m
Amounts reclassified from reserves
to income statement as:
Cash flow hedges
Hedged cash
flows will no
longer occur
£m
Hedged item
affected income
statement
£m
At 31 December 2024
Foreign exchange
Foreign currency issuance
92
(1)
Interest rate
Customer loans
(2,880)
(61)
2,600
Central bank balances
(603)
(3)
718
Customer deposits
1,074
8
(1,020)
At 31 December 2023
Foreign exchange
Foreign currency issuance
(14)
5
Interest rate
Customer loans
(134)
17
1,663
Central bank balances
297
3
519
Customer deposits
576
(3)
(670)
There was no gain or loss in either 2024 or 2023 reclassified from the cash flow hedging reserve for which hedge accounting had previously
been used but for which the hedged future cash flows are no longer expected to occur.
At 31 December 2024 £ 3,097 million of total recognised derivative assets and £ 4,716 million of total recognised derivative liabilities
(2023£2,072 million of assets and £3,241 million of liabilities) had a contractual residual maturity of greater than one year.
122
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 18: Loans and advances to customers
Reference is made to the Credit Risk section.
At 31 December 2024 £383,009 million (2023: £377,462 million) of loans and advances to customers had a contractual residual maturity of
greater than one year.
Note 19: Allowance for expected credit losses
The Group recognises an allowance for expected credit losses (ECLs) for loans and advances to customers and banks, other financial assets
held at amortised cost, financial assets (other than equity investments) measured at fair value through other comprehensive income and
certain loan commitment and financial guarantee contracts. At 31 December 2024, the Group’s expected credit loss allowance was
£3,453 million (2023: £4,021 million), of which £3,188 million (2023: £ 3,707 million) was in respect of drawn balances .
The Group’s total expected credit loss allowances were as follows:
At 31 December 2024
At 31 December 2023
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
POCI
£m
Total
£m
In respect of:
Loans and advances to banks
1
1
6
6
Loans and advances to customers
730
1,159
1,107
187
3,183
885
1,462
1,133
213
3,693
Debt securities
3
1
4
7
1
8
Financial assets at amortised cost
734
1,159
1,108
187
3,188
898
1,462
1,134
213
3,707
Provisions in relation to loan commitments
and financial guarantees
138
125
2
265
153
159
2
314
Total
872
1,284
1,110
187
3,453
1,051
1,621
1,136
213
4,021
Expected credit loss in respect of financial
assets at fair value through other
comprehensive income (memorandum
item)
4
4
7
7
The calculation of the Group’s expected credit loss allowances and provisions against loan commitments and guarantees, which are set out
above, requires the Group to make a number of judgements, assumptions and estimates. The most significant are set out below:
Critical accounting judgements and key sources of estimation uncertainty
Critical judgements:
Determining an appropriate definition of default against which a probability of default, exposure at default and loss given
default parameter can be evaluated
Establishing the criteria for a significant increase in credit risk (SICR)
The individual assessment of material cases and the use of judgemental adjustments made to impairment modelling processes
that adjust inputs, parameters and outputs to reflect risks not captured by models
Key source of estimation uncertainty:
Base case and multiple economic scenarios (MES) assumptions, including the rate of unemployment and the rate of change of
house prices, required for creation of MES scenarios and forward-looking credit parameters
Definition of default
The probability of default (PD) of an exposure, both over a 12-month period and over its lifetime, is a key input to the measurement of the ECL
allowance. Default has occurred when there is evidence that the customer is experiencing significant financial difficulty which is likely to affect
the ability to repay amounts due. The definition of default adopted by the Group is described in note 2(H) Impairment of financial assets. A
Stage 3 asset that is no longer credit-impaired is transferred back to Stage 2 as no general probation period is applied to assets in Stage 3. UK
mortgages is an exception to this rule where a probation period is enforced for non-performing forborne and defaulted exposures in
accordance with prudential regulation.
Significant increase in credit risk
An ECL allowance equivalent to 12 months’ expected losses is established against assets in Stage 1; assets classified as Stage 2 carry an ECL
allowance equivalent to lifetime expected losses. Assets are transferred from Stage 1 to Stage 2 when there has been a significant increase in
credit risk (SICR) since initial recognition. Credit-impaired assets are transferred to Stage 3 with a lifetime expected losses allowance. If an
exposure that is classified as Stage 2 no longer meets the SICR criteria, which in some cases capture customer behaviour in previous periods, it
is moved back to Stage 1.
The Group uses both quantitative and qualitative indicators to determine whether there has been a SICR for an asset. The setting of precise
trigger points combined with risk indicators requires judgement and the use of different trigger points may have a material impact upon the
ECL allowance. The Group monitors the effectiveness of SICR criteria on an ongoing basis.
For UK mortgages a reassessment of the SICR criteria was performed following redevelopment of the ECL model in the period, in order to
maintain SICR effectiveness. At 31 December 2024 a doubling of PD since origination was set as a quantitative SICR trigger. All originations
post IFRS 9 adoption incorporate forward looking information, and for recent Interest Only accounts the likelihood of default occurring at the
end of term. This is supplemented by qualitative triggers including where customers have surpassed their original contractual term through use
of term extensions, where fraud is evident, or where an account is in arrears.
123
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 19: Allowance for expected credit losses continued
For credit cards, loans and overdrafts an increase of three PD grades since origination on the retail master scale (RMS) shown below is set as a
quantitative SICR trigger. Assets are also assumed to have suffered a SICR if they have either been in arrears on three occasions, or in default
once, in the past 12 months.
RMS grade
1
2
3
4
5
6
7
8
9
10
11
12
13
14
PD boundary1 (%)
0.10
0.40
0.80
1.20
2.50
4.50
7.50
10.00
14.00
20.00
30.00
45.00
99.99
100.00
1Probability-weighted annualised lifetime probability of default.
For Commercial Banking a doubling of PD with a minimum increase in PD of 1 per cent since origination is treated as a SICR. This is
complemented with the use of internal credit risk classifications and ratings as qualitative indicators to identify a SICR.
The Group does not use the low credit risk exemption in its staging assessments, though more simplistic SICR criteria are applied for portfolios
not listed above. All financial assets are assumed to have suffered a SICR if they are more than 30 days past due.
Individual assessments and application of judgement in adjustments to modelled ECL
The table below analyses total ECL allowances by portfolio, separately identifying the amounts that have been modelled, those that have been
individually assessed and those arising through the application of judgemental adjustments.
At 31 December 2024
At 31 December 2023
Judgements due to:
Judgements due to:
Modelled
ECL
£m
Individually
assessed
£m
Inflationary
and interest
rate risk
£m
Other
£m
Total
ECL
£m
Modelled
ECL
£m
Individually
assessed
£m
Inflationary
and interest
rate risk
£m
Other
£m
Total
ECL
£m
UK mortgages
720
132
852
991
61
63
1,115
Credit cards
681
(7)
674
703
92
15
810
Other Retail
860
90
950
867
32
46
945
Commercial Banking
877
354
(255)
976
1,090
340
(280)
1,150
Other
1
1
1
1
Total
3,139
354
(40)
3,453
3,652
340
185
(156)
4,021
Individually assessed ECL
Stage 3 ECL in Commercial Banking is largely assessed on an individual basis by the Business Support Unit using bespoke assessment of loss for
each specific client based on potential recovery strategies. While these assessments are based on the Group’s latest economic view, the use of
Group-wide multiple economic scenarios and weightings is not considered appropriate for these cases due to their individual characteristics. In
place of this, a range of case-specific outcomes are considered with any alternative better or worse outcomes that carry a 25 per cent
likelihood taken into account in establishing a probability-weighted ECL. At 31 December 2024, individually assessed provisions for Commercial
Banking were £354 million (2023 : £340 million) which reflected a range of £309 million to £437 million (2023 : £291 million to £413 million ),
based on the range of alternative outcomes considered.
Application of judgement in adjustments to modelled ECL
Impairment models fall within the Group’s model risk framework with model monitoring, periodic validation and back testing performed on
model components, such as probability of default. Limitations in the models or data inputs may be identified through these assessments and
review of model outputs, which may require appropriate judgemental adjustments to the ECL. These adjustments are determined by
considering the particular attributes of exposures which have not been adequately captured by the impairment models and range from
changes to model inputs and parameters, at account level (in-model adjustments), through to more qualitative post-model adjustments.
Judgements due to inflationary and interest rate risk
During 2022 and 2023 the intensifying inflationary pressures, alongside rising interest rates created further risks not deemed to be fully
captured by ECL models which meant judgemental adjustments were required. Throughout 2024 these risks subsided with inflation back at
around 2 per cent, base rates reducing and credit performance proving resilient. As a result, the judgements held in respect of inflationary and
interest rate risks have been removed (2023: £185 million). Other judgements continue to be applied for broader data and model limitations,
both increasing and decreasing ECL where deemed necessary.
Other judgements
UK mortgages: £132 million (2023: £63 million)
These adjustments principally comprise:
Repossession risk1: £110 million (2023: £106 million)
The Group’s repossession activity and respective data associated with the UK mortgage portfolio has been distorted for a number of years
following pauses in litigation activity both before and during COVID-19. This has seen a larger number of customers in default for a longer
period than would typically be expected resulting in a risk that ECL calculated on these accounts is understated. Judgemental adjustments to
mitigate this risk have been in place for several years, although the approach has been revisited in 2024. An assessment of recent cure trends
indicated that the overall possession rates used in the model appeared adequate; however, the assessment identified a potential recovery risk
on specific subsets of long-term defaulted cases (greater than five years), as well as a continued risk from a longer duration between default
and repossession than model assumptions used on existing and future defaults.
1Previously reported as Increase in time to repossession.
Adjustment for specific segments: £13 million (2023: £23 million)
The Group monitors risks across specific segments of its portfolios which may not be fully captured through collective models. The judgement
for fire safety and cladding uncertainty reduced in the period following methodology refinement. Though experience remains limited the risk is
considered sufficiently material to address, given evidence of cases having defective cladding, or other fire safety issues.
124
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 19: Allowance for expected credit losses continued
Credit cards: £(7) million (2023: £ 15 million) and Other Retail: £90 million (2023: £46 million)
These adjustments principally comprise:
Lifetime extension: Credit cards: £55 million (2023: £ 67 million) and Other Retail: £10 million (2023: £10 million)
An adjustment is required to extend the lifetime used for Stage 2 exposures on Retail revolving products from a three-year modelled lifetime,
which reflected the outcome data available when the ECL models were developed. Incremental defaults beyond year three are calculated
through the extrapolation of the default trajectory observed throughout the three years and beyond. The Credit cards judgement has reduced
slightly in the period reflecting portfolio movement.
Adjustments to loss rates: Credit cards: £(57) million (2023: £ (50) million) and Other Retail: £ 47 million ( 2023: £ 37 million)
A number of adjustments have been 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
is used to incorporate the latest outlook on used car prices.
Commercial Banking: £ (255) million (2023: £(280) million)
These adjustments principally comprise:
Corporate insolvency rates: £(248) million ( 2023: £(287) 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 strong with low
defaults, a negative adjustment is applied by reverting judgementally to the long-term average of the insolvency rate.
Adjustments to loss given defaults (LGDs): £(80) million (2023: £(105) million)
Following a review of the loss given default approach for commercial exposures, management continues to judge that ECL should be adjusted
to mitigate limitations identified in the approach which are causing loss given defaults to be inflated. These include the benefit from
amortisation of exposures relative to collateral values at default and a move to an exposure-weighted approach being adopted.
These temporary adjustments will be addressed through future model development.
Corporate income gearing (CIG) adjustment: £36 million (2023: £nil)
An adjustment was raised, based upon the assessment of Corporate Income Gearing (CIG), a model parameter for affordability used in
Commercial Banking. The modelled ECL release resulting from updating CIG drivers (interest rates) was judgmentally reversed, with interest
rates having reached a plateau which has translated into a slower year-on-year increase in CIG. This slowdown gave a release in modelled ECL
which is not judged representative of the continued pressure on borrowers and business margins.
Commercial Real Estate (CRE) price reduction: £35 million (2023: £65 million)
The material fall in CRE prices observed in late 2022, previously required a judgemental reinstatement within ECL model assumptions
at 31 December 2023, given the materially reduced level in CRE prices could still trigger additional losses. At 31 December 2024 the adjustment
remains in place only for loss rates on a small proportion of accounts still to be reassessed following this fall. This is alongside a more material
adjustment for the potential impact on loss rates from valuations on specific CRE sectors where evidence suggests valuations may lag
achievable levels, notably in cases of stressed sale.
125
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 19: Allowance for expected credit losses continued
Generation of multiple economic scenarios
The estimate of expected credit losses is required to be based on an unbiased expectation of future economic scenarios. The approach used to
generate the range of future economic scenarios depends on the methodology and judgements adopted. The Group’s approach is to start from
a defined base case scenario, used for planning purposes, and to generate alternative economic scenarios around this base case. The base case
scenario is a conditional forecast underpinned by a number of conditioning assumptions that reflect the Group’s best view of key future
developments. If circumstances appear likely to materially deviate from the conditioning assumptions, then the base case scenario is updated.
The base case scenario is central to a range of future economic scenarios generated by simulation of an economic model, for which the same
conditioning assumptions apply as in the base case scenario. These scenarios are ranked by using estimated relationships with industry-wide
historical loss data. With the base case already pre-defined, three other scenarios are identified as averages of constituent scenarios located
around the 15th, 75th and 95th percentiles of the distribution. The full distribution is therefore summarised by a practical number of scenarios
to run through ECL models representing an upside, the base case, and a downside scenario weighted at 30 per cent each, together with a
severe downside scenario weighted at 10 per cent. The scenario weights represent the distribution of economic scenarios and not subjective
views on likelihood. The inclusion of a severe downside scenario with a smaller weighting ensures that the non-linearity of losses in the tail of
the distribution is adequately captured. Macroeconomic projections may employ reversionary techniques to adjust the paths of economic
drivers towards long-run equilibria after a reasonable forecast horizon. The Group does not use such techniques to force the MES scenarios to
revert to the base case planning view. Utilising such techniques would be expected to be immaterial for expected credit losses since loss
sensitivity is minimal after the initial five years of the projections.
A forum under the chairmanship of the Chief Economist meets at least quarterly to review and, if appropriate, recommend changes to the
method by which economic scenarios are generated, for approval by the Chief Financial Officer and Chief Risk Officer. The Group continues to
judge it appropriate to include a non-modelled severe downside scenario for Group ECL calculations. The scenario is generated as a simple
average of a fully modelled severe scenario, better representing shocks to demand, and a scenario with higher paths for UK Bank Rate and CPI
inflation, as a representation of shocks to supply. The combined ‘adjusted’ scenario used in ECL modelling is considered to better reflect the
risks around the Group’s base case view in an economic environment where demand and supply shocks are more balanced.
Base case and MES economic assumptions
The Group’s base case economic scenario has been updated to reflect ongoing geopolitical developments and changes in domestic economic
policy. The Group’s updated base case scenario has three conditioning assumptions. First, cross-border conflicts do not lead to major
disruptions in commodity prices or global trade. Second, the US pursues a more isolationist economic agenda, with policies including trade
tariffs; immigration cuts; and unfunded tax cuts. China, EU and UK are assumed to retaliate to US tariffs imposed on them. Third, UK Budget
public investment plans are assumed to have a small but positive impact on trend productivity growth, subject to further review as more
specific policy detail emerges.
Based on these assumptions and incorporating the economic data published in the fourth quarter, the Group’s base case scenario is for a slow
expansion in GDP and a rise in the unemployment rate alongside modest changes in residential and commercial property prices. Against a
backdrop of some persistence in inflationary pressures, UK Bank Rate is expected to be lowered gradually during 2025. Risks around this base
case economic view lie in both directions and are largely captured by the generation of alternative economic scenarios.
The Group has accommodated the latest available information at the reporting date in defining its base case scenario and generating
alternative economic scenarios. The scenarios include forecasts for key variables in the fourth quarter of 2024, for which actuals may have
since emerged prior to publication.
Scenarios by year
The key UK economic assumptions made by the Group are shown in the following tables across a number of measures explained below.
Annual assumptions
Gross domestic product (GDP) growth and Consumer Price Index (CPI) inflation are presented as an annual change, house price growth and
commercial real estate price growth are presented as the growth in the respective indices over each year. Unemployment rate and UK Bank
Rate are averages over the year.
Five-year average
The five-year average reflects the average annual growth rate, or level, over the five-year period. It includes movements within the current
reporting year, such that the position as at 31 December 2024 covers the five years 2024 to 2028. The inclusion of the reporting year within the
five-year period reflects the need to predict variables which remain unpublished at the reporting date and recognises that credit models utilise
both level and annual changes. The use of calendar years maintains a comparability between the annual assumptions presented.
Five-year start to peak and trough
The peak or trough for any metric may occur intra year and therefore not be identifiable from the annual assumptions, so they are also
disclosed. For GDP, house price growth and commercial real estate price growth, the peak, or trough, reflects the highest, or lowest cumulative
quarterly position reached relative to the start of the five-year period, which as at 31 December 2024 is 1 January 2024. Given these metrics
may exhibit increases followed by greater falls, the start to trough movements quoted may be smaller than the equivalent ‘peak to trough’
movement (and vice versa for start to peak). Unemployment, UK Bank Rate and CPI inflation reflect the highest, or lowest, quarterly level
reached in the five-year period.
126
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 19: Allowance for expected credit losses continued
At 31 December 2024
2024
%
2025
%
2026
%
2027
%
2028
%
2024 to 2028
average
%
Start to
peak
%
Start to
trough
%
Upside
Gross domestic product growth
0.8
1.9
2.2
1.5
1.4
1.6
8.9
0.7
Unemployment rate
4.3
3.5
2.8
2.7
2.8
3.2
4.4
2.7
House price growth
3.4
3.7
6.5
6.6
5.4
5.1
28.2
0.4
Commercial real estate price growth
0.7
7.8
6.7
3.2
0.5
3.7
20.0
(0.8)
UK Bank Rate
5.06
4.71
5.02
5.19
5.42
5.08
5.50
4.50
CPI inflation
2.6
2.8
2.6
2.9
3.0
2.8
3.5
2.0
Base case
Gross domestic product growth
0.8
1.0
1.4
1.5
1.5
1.2
7.0
0.7
Unemployment rate
4.3
4.7
4.7
4.5
4.5
4.5
4.8
4.2
House price growth
3.4
2.1
1.0
1.4
2.4
2.0
10.5
0.4
Commercial real estate price growth
0.7
0.3
2.5
1.9
0.0
1.1
5.4
(0.8)
UK Bank Rate
5.06
4.19
3.63
3.50
3.50
3.98
5.25
3.50
CPI inflation
2.6
2.8
2.4
2.4
2.2
2.5
3.5
2.0
Downside
Gross domestic product growth
0.8
(0.5)
(0.4)
1.0
1.5
0.5
3.2
0.0
Unemployment rate
4.3
6.0
7.4
7.4
7.1
6.4
7.5
4.2
House price growth
3.4
0.6
(5.5)
(6.6)
(3.4)
(2.4)
4.0
(11.4)
Commercial real estate price growth
0.7
(7.8)
(3.1)
(0.9)
(2.3)
(2.7)
0.7
(12.9)
UK Bank Rate
5.06
3.53
1.56
0.96
0.68
2.36
5.25
0.59
CPI inflation
2.6
2.8
2.3
1.8
1.2
2.1
3.5
0.9
Severe downside
Gross domestic product growth
0.8
(1.9)
(1.5)
0.7
1.3
(0.1)
1.2
(2.4)
Unemployment rate
4.3
7.7
10.0
10.0
9.7
8.4
10.2
4.2
House price growth
3.4
(0.8)
(12.4)
(13.6)
(8.8)
(6.7)
3.4
(29.2)
Commercial real estate price growth
0.7
(17.4)
(8.5)
(5.5)
(5.7)
(7.5)
0.7
(32.3)
UK Bank Rate – modelled
5.06
2.68
0.28
0.08
0.02
1.62
5.25
0.02
UK Bank Rate – adjusted1
5.06
4.03
2.70
2.23
1.95
3.19
5.25
1.88
CPI inflation – modelled
2.6
2.8
1.9
1.0
0.1
1.7
3.5
(0.2)
CPI inflation – adjusted1
2.6
3.6
2.1
1.4
0.8
2.1
3.9
0.7
Probability-weighted
Gross domestic product growth
0.8
0.5
0.8
1.2
1.4
1.0
5.7
0.7
Unemployment rate
4.3
5.0
5.5
5.4
5.3
5.1
5.5
4.2
House price growth
3.4
1.8
(0.7)
(1.0)
0.4
0.8
5.3
0.4
Commercial real estate price growth
0.7
(1.7)
1.0
0.7
(1.1)
(0.1)
0.7
(1.3)
UK Bank Rate – modelled
5.06
4.00
3.09
2.90
2.88
3.59
5.25
2.88
UK Bank Rate – adjusted1
5.06
4.13
3.33
3.12
3.08
3.74
5.25
3.06
CPI inflation – modelled
2.6
2.8
2.4
2.2
1.9
2.4
3.5
1.8
CPI inflation – adjusted1
2.6
2.9
2.4
2.3
2.0
2.4
3.5
1.9
1 The adjustment to UK Bank Rate and CPI inflation in the severe downside is considered to better reflect the risks around the Group’s base case view in an economic environment
where the risks of supply and demand shocks are more balanced.
Base case scenario by quarter1
At 31 December 2024
First
quarter
2024
%
Second
quarter
2024
%
Third
quarter
2024
%
Fourth
quarter
2024
%
First
quarter
2025
%
Second
quarter
2025
%
Third
quarter
2025
%
Fourth
quarter
2025
%
Gross domestic product growth
0.7
0.4
0.0
0.1
0.2
0.3
0.3
0.3
Unemployment rate
4.3
4.2
4.3
4.4
4.5
4.6
4.7
4.8
House price growth
0.4
1.8
4.6
3.4
3.6
4.0
3.0
2.1
Commercial real estate price growth
(5.3)
(4.7)
(2.8)
0.7
1.8
1.4
0.9
0.3
UK Bank Rate
5.25
5.25
5.00
4.75
4.50
4.25
4.00
4.00
CPI inflation
3.5
2.1
2.0
2.5
2.4
3.0
2.9
2.7
1Gross domestic product growth is presented quarter-on-quarter. House price growth, commercial real estate growth and CPI inflation are presented year-on-year, i.e. from the
equivalent quarter in the previous year. Unemployment rate and UK Bank Rate are presented as at the end of each quarter.
127
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 19: Allowance for expected credit losses continued
At 31 December 2023
2023
%
2024
%
2025
%
2026
%
2027
%
2023 to 2027
average
%
Start to
peak
%
Start to
trough
%
Upside
Gross domestic product
0.3
1.5
1.7
1.7
1.9
1.4
8.1
0.2
Unemployment rate
4.0
3.3
3.1
3.1
3.1
3.3
4.2
3.0
House price growth
1.9
0.8
6.9
7.2
6.8
4.7
25.7
(1.2)
Commercial real estate price growth
(3.9)
9.0
3.8
1.3
1.3
2.2
11.5
(3.9)
UK Bank Rate
4.94
5.72
5.61
5.38
5.18
5.37
5.79
4.25
CPI inflation
7.3
2.7
3.1
3.2
3.1
3.9
10.2
2.1
Base case
Gross domestic product
0.3
0.5
1.2
1.7
1.9
1.1
6.4
0.2
Unemployment rate
4.2
4.9
5.2
5.2
5.0
4.9
5.2
3.9
House price growth
1.4
(2.2)
0.5
1.6
3.5
1.0
4.8
(1.2)
Commercial real estate price growth
(5.1)
(0.2)
0.1
0.0
0.8
(0.9)
(1.2)
(5.3)
UK Bank Rate
4.94
4.88
4.00
3.50
3.06
4.08
5.25
3.00
CPI inflation
7.3
2.7
2.9
2.5
2.2
3.5
10.2
2.1
Downside
Gross domestic product
0.2
(1.0)
(0.1)
1.5
2.0
0.5
3.4
(1.2)
Unemployment rate
4.3
6.5
7.8
7.9
7.6
6.8
8.0
3.9
House price growth
1.3
(4.5)
(6.0)
(5.6)
(1.7)
(3.4)
2.0
(15.7)
Commercial real estate price growth
(6.0)
(8.7)
(4.0)
(2.1)
(1.2)
(4.4)
(1.2)
(20.4)
UK Bank Rate
4.94
3.95
1.96
1.13
0.55
2.51
5.25
0.43
CPI inflation
7.3
2.8
2.7
1.8
1.1
3.2
10.2
1.0
Severe downside
Gross domestic product
0.1
(2.3)
(0.5)
1.3
1.8
0.1
1.0
(2.9)
Unemployment rate
4.5
8.7
10.4
10.5
10.1
8.8
10.5
3.9
House price growth
0.6
(7.6)
(13.3)
(12.7)
(7.5)
(8.2)
2.0
(35.0)
Commercial real estate price growth
(7.7)
(19.5)
(10.6)
(7.7)
(5.2)
(10.3)
(1.2)
(41.8)
UK Bank Rate – modelled
4.94
2.75
0.49
0.13
0.03
1.67
5.25
0.02
UK Bank Rate – adjusted1
4.94
6.56
4.56
3.63
3.13
4.56
6.75
3.00
CPI inflation – modelled
7.3
2.7
2.2
0.9
(0.2)
2.6
10.2
(0.3)
CPI inflation – adjusted1
7.6
7.5
3.5
1.3
1.0
4.2
10.2
0.9
Probability-weighted
Gross domestic product
0.3
0.1
0.8
1.6
1.9
0.9
5.4
0.1
Unemployment rate
4.2
5.3
5.9
5.9
5.7
5.4
6.0
3.9
House price growth
1.4
(2.5)
(0.9)
(0.3)
1.8
(0.1)
2.0
(2.8)
Commercial real estate price growth
(5.3)
(1.9)
(1.1)
(1.0)
(0.2)
(1.9)
(1.2)
(9.9)
UK Bank Rate – modelled
4.94
4.64
3.52
3.02
2.64
3.75
5.25
2.59
UK Bank Rate – adjusted1
4.94
5.02
3.93
3.37
2.95
4.04
5.42
2.89
CPI inflation – modelled
7.3
2.7
2.8
2.3
1.9
3.4
10.2
1.9
CPI inflation – adjusted1
7.4
3.2
3.0
2.4
2.0
3.6
10.2
2.0
1The adjustment to UK Bank Rate and CPI inflation in the severe downside is considered to better reflect the risks around the Group’s base case view in an economic environment
where supply shocks are the principal concern.
Base case scenario by quarter1
At 31 December 2023
First
quarter
2023
%
Second
quarter
2023
%
Third
quarter
2023
%
Fourth
quarter
2023
%
First
quarter
2024
%
Second
quarter
2024
%
Third
quarter
2024
%
Fourth
quarter
2024
%
Gross domestic product growth
0.3
0.0
(0.1)
0.0
0.1
0.2
0.3
0.3
Unemployment rate
3.9
4.2
4.2
4.3
4.5
4.8
5.0
5.2
House price growth
1.6
(2.6)
(4.5)
1.4
(1.1)
(1.5)
0.5
(2.2)
Commercial real estate price growth
(18.8)
(21.2)
(18.2)
(5.1)
(4.1)
(3.8)
(2.2)
(0.2)
UK Bank Rate
4.25
5.00
5.25
5.25
5.25
5.00
4.75
4.50
CPI inflation
10.2
8.4
6.7
4.0
3.8
2.1
2.3
2.8
1Gross domestic product growth is presented quarter-on-quarter. House price growth, commercial real estate growth and CPI inflation are presented year-on-year, i.e. from the
equivalent quarter in the previous year. Unemployment rate and UK Bank Rate are presented as at the end of each quarter.
128
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 19: Allowance for expected credit losses continued
ECL sensitivity to economic assumptions
The following table shows the Group’s ECL for the probability-weighted, upside, base case, downside and severe downside scenarios, with the
severe downside scenario incorporating adjustments made to CPI inflation and UK Bank Rate paths. The stage allocation for an asset is based
on the overall scenario probability-weighted probability of default and hence the staging of assets is constant across all the scenarios. In each
economic scenario the ECL for individual assessments is held constant reflecting the basis on which they are evaluated. Judgemental
adjustments applied through changes to model inputs or parameters, or more qualitative post model adjustments, are apportioned across the
scenarios in proportion to modelled ECL where this better reflects the sensitivity of these adjustments to each scenario. The probability-
weighted view shows the extent to which a higher ECL allowance has been recognised to take account of multiple economic scenarios relative
to the base case; the uplift on a statutory basis being £443 million compared to £673 million at 31 December 2023.
At 31 December 2024
At 31 December 2023
Probability-
weighted
£m
Upside
£m
Base case
£m
Downside
£m
Severe
downside
£m
Probability-
weighted
£m
Upside
£m
Base case
£m
Downside
£m
Severe
downside
£m
UK mortgages
852
345
567
1,064
2,596
1,115
395
670
1,155
4,485
Credit cards
674
518
641
773
945
810
600
771
918
1,235
Other Retail
950
843
923
1,010
1,172
945
850
920
981
1,200
Commercial Banking
976
737
878
1,110
1,586
1,150
780
986
1,342
2,179
Other
1
1
1
1
1
1
1
1
1
1
ECL allowance
3,453
2,444
3,010
3,958
6,300
4,021
2,626
3,348
4,397
9,100
The table below shows the Group’s ECL for the upside, base case, downside and severe downside scenarios, with staging of assets based on
each specific scenario probability of default. In each economic scenario the ECL for individual assessments is held constant reflecting the basis
on which they are evaluated. Judgemental adjustments applied through changes to model inputs or parameters, or more qualitative post-
model adjustments, are apportioned across the scenarios in proportion to modelled ECL where this better reflects the sensitivity of these
adjustments to each scenario. A probability-weighted scenario is not shown as this view does not reflect the basis on which ECL is calculated.
Comparing the probability-weighted ECL in the table above to the base case ECL with base case scenario specific staging, as shown in the
table below, results in an uplift of £465 million compared to £586 million at 31 December 2023.
At 31 December 2024
At 31 December 2023
Upside
£m
Base case
£m
Downside
£m
Severe
downside
£m
Upside
£m
Base case
£m
Downside
£m
Severe
downside
£m
UK mortgages
345
566
1,061
2,741
384
617
1,070
5,403
Credit cards
492
634
802
1,036
593
770
931
1,279
Other Retail
843
927
1,026
1,212
923
1,004
1,076
1,328
Commercial Banking
721
860
1,135
2,149
835
1,044
1,486
3,194
Other
1
1
1
1
ECL allowance
2,402
2,988
4,025
7,139
2,735
3,435
4,563
11,204
The impact of isolated changes in the UK unemployment rate and House Price Index (HPI) has been assessed on a univariate basis. Although
such changes would not be observed in isolation, as economic indicators tend to be correlated in a coherent scenario, this gives insight into the
sensitivity of the Group’s ECL to gradual changes in these two critical economic factors.
The impacts are assessed as changes to base case modelled ECL only (at 100 per cent weighting) with staging held flat to the reported view.
The probability weighted ECL impact of applying the changes to all four scenarios, including the impact on staging and post model
adjustments, would be greater.
The table below shows the impact on the Group’s ECL resulting from a 1 percentage point increase or decrease in the UK unemployment rate.
The increase or decrease is presented based on the adjustment phased evenly over the first 10 quarters of the base case scenario. A more
immediate increase or decrease would drive a more material ECL impact as it would be fully reflected in both 12-month and lifetime probability
of defaults.
At 31 December 2024
At 31 December 2023
1pp increase in
unemployment
£m
1pp decrease in
unemployment
£m
1pp increase in
unemployment
£m
1pp decrease in
unemployment
£m
UK mortgages
4
(3)
33
(32)
Credit cards
40
(41)
38
(38)
Other Retail
18
(20)
19
(19)
Commercial Banking
70
(66)
87
(81)
ECL impact
132
(130)
177
(170)
The table below shows the impact on the Group’s ECL in respect of UK mortgages of an increase or decrease in loss given default for a
10 percentage point increase or decrease in HPI. The increase or decrease is presented based on the adjustment phased evenly over the first 10
quarters of the base case scenario.
At 31 December 2024
At 31 December 2023
10pp increase
in HPI
£m
10pp decrease
in HPI
£m
10pp increase
in HPI
£m
10pp decrease
in HPI
£m
ECL impact
(127)
182
(201)
305
129
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 20: Finance lease receivables
The Group’s finance lease receivables are classified as loans and advances to customers and accounted for at amortised cost. These balances
are analysed as follows:
2024
£m
2023
£m
Not later than 1 year
6,160
5,903
Later than 1 year and not later than 2 years
5,215
4,817
Later than 2 years and not later than 3 years
4,268
4,579
Later than 3 years and not later than 4 years
2,846
3,051
Later than 4 years and not later than 5 years
502
618
Later than 5 years
294
354
Gross investment
19,285
19,322
Unearned future finance income
(2,362)
(2,175)
Rentals received in advance
(16)
(12)
Net investment
16,907
17,135
Equipment leased to customers under finance lease receivables relates to financing transactions to fund the purchase of aircraft, ships, motor
vehicles and other items. There was an allowance for uncollectable finance lease receivables included in the allowance for impairment losses of
£368 million (2023: £350 million ).
The Group’s finance lease assets are comprised as follows:
2024
£m
2023
£m
Electric vehicles
996
1,336
Internal combustion engine vehicles
11,521
11,425
Self-charging hybrid vehicles
346
237
Plug-in hybrid vehicles
1,302
907
Other
2,742
3,230
Net investment
16,907
17,135
130
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 21: Goodwill and other intangible assets
Goodwill
£m
Brands
£m
Purchased
credit card
relationships
£m
Customer-
related
intangibles
£m
Capitalised
software
enhancements
£m
Total
£m
Cost:1
At 1 January 2023
814
584
1,002
50
7,591
10,041
Exchange and other adjustments
1
1
Additions
143
1
180
1,474
1,798
Disposals and write-offs
(292)
(292)
At 31 December 2023
957
585
1,002
230
8,774
11,548
Exchange and other adjustments
(5)
(5)
Additions
1,246
1,246
Disposals
(208)
(208)
At 31 December 2024
957
585
1,002
230
9,807
12,581
Accumulated amortisation:
At 1 January 2023
344
204
692
50
3,627
4,917
Exchange and other adjustments
Charge for the year2
70
9
1,007
1,086
Disposals and write-offs
(292)
(292)
At 31 December 2023
344
204
762
59
4,342
5,711
Exchange and other adjustments
(11)
(11)
Charge for the year2
70
10
1,197
1,277
Disposals
(200)
(200)
At 31 December 2024
344
204
832
69
5,328
6,777
Balance sheet amount at 31 December 20243
613
381
170
161
4,479
5,804
Balance sheet amount at 31 December 20233
613
381
240
171
4,432
5,837
1For acquisitions made prior to 1 January 2004, the date of transition to IFRS Accounting Standards, cost is included net of amounts amortised up to 31 December 2003.
2The charge for the year is recognised in operating expenses (note 9).
3Includes core deposit intangible of £nil, cost of £2,770 million and accumulated amortisation of £2,770 million.
Goodwill
The goodwill held in the Group’s balance sheet is tested at least annually for impairment. For the purposes of impairment testing the goodwill
is allocated to the appropriate cash generating unit; of the total balance of £613 million (2023: £613 million), £302 million , or 49 per cent (2023:
£302 million, 49 per cent) has been allocated to the Credit card cash generating unit and £309 million, or 50 per cent (2023 : £309 million , 50
per cent) has been allocated to the Motor business cash generating units, both in the Group’s Retail division.
The recoverable amount of the goodwill relating to Credit cards has been based on a value-in-use calculation using post-tax cash flow
projections based on financial budgets and plans approved by management covering a four -year period and a discount rate (post-tax) of 10.5
per cent, based on the Group’s cost of equity. This is equivalent to a pre-tax rate of 14.0 per cent. The budgets and plans are based upon past
experience adjusted to take into account anticipated changes in credit card volumes having regard to expected market conditions and
competitor activity. The cash flows beyond the four-year period assume 3.5 per cent growth, which does not exceed the long-term average
growth rates for the markets in which the Cards business participates. Management believes that any reasonably possible change in the key
assumptions above would not cause the recoverable amount of the goodwill relating to Credit cards to fall below the balance sheet carrying
value.
The recoverable amount of the goodwill relating to the Motor business is based on a value-in-use calculation using post-tax cash flow
projections based on financial budgets and plans approved by management covering a four -year period and a discount rate (post-tax) of 10.5
per cent, based on the Group’s cost of equity. This is equivalent to a pre-tax rate of 14.0 per cent. The budgets and plans are based upon past
experience adjusted to take into account anticipated changes in sales volumes having regard to expected market conditions and competitor
activity. The cash flows beyond the four-year period are extrapolated using a growth rate of 3.5 per cent which does not exceed the long-term
average growth rates for the markets in which the Motor business participates. Management believes that any reasonably possible change in
the key assumptions, including from the impacts of climate change or climate-related legislation, would not cause the recoverable amount of
the goodwill relating to the Motor business to fall below the balance sheet carrying value.
Other intangible assets
The brand arising from the acquisition of Bank of Scotland in 2009 is recognised on the Group’s balance sheet and has been determined to
have an indefinite useful life. The carrying value at 31 December 2024 was £380 million (2023: £380 million). The Bank of Scotland name has
been in existence for over 300 years and there are no indications that the brand should not have an indefinite useful life. The recoverable
amount has been based on a value-in-use calculation. The calculation uses post-tax projections for a four-year period of the income generated
by the Bank of Scotland cash-generating unit, a discount rate of 10.5 per cent and a future growth rate of 3.5 per cent. Management believes
that any reasonably possible change in the key assumptions would not cause the recoverable amount of the Bank of Scotland brand to fall
below its balance sheet carrying value.
131
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 22: Other assets
2024
£m
2023
£m
Property, plant and equipment:
Premises
1,085
903
Equipment
877
1,163
Operating lease assets (see below)
7,265
6,523
Right-of-use assets (note 23)
849
1,025
10,076
9,614
Prepayments
1,478
1,338
Other assets1
1,511
986
Total other assets
13,065
11,938
1Settlement balances and items in the course of collection from banks, previously presented separately, is now included within other assets.
Operating lease assets where the Group is lessor
Equipment leased to customers under operating leases primarily relates to vehicle contract hire arrangements. At 31 December the future
minimum rentals receivable under non-cancellable operating leases were as follows:
Within 1 year
£m
1 to 2 years
£m
2 to 3 years
£m
3 to 4 years
£m
4 to 5 years
£m
Over 5 years
£m
Total
£m
At 31 December 2024
1,577
956
821
365
85
6
3,810
At 31 December 2023
1,336
857
680
309
70
4
3,256
Equipment leased to customers under operating leases primarily relates to vehicle contract hire arrangements. Operating lease assets are
comprised as follows:
2024
£m
2023
£m
Electric vehicles
3,894
3,259
Internal combustion engine vehicles
1,630
1,815
Self-charging hybrid vehicles
166
186
Plug-in hybrid vehicles
1,575
1,258
Other
5
Total operating lease assets
7,265
6,523
Note 23: Lessee disclosures
The table below sets out the movement in the Group’s right-of-use assets, which are primarily in respect of premises, and are recognised within
other assets (note 22 ).
2024
£m
2023
£m
At 1 January
1,025
1,119
Exchange and other adjustments
1
6
Additions
128
135
Disposals
(113)
(32)
Depreciation charge for the year
(192)
(203)
At 31 December
849
1,025
The Group’s lease liabilities are recognised within other liabilities (note 25 ). The maturity analysis of the Group’s lease liabilities on an
undiscounted basis is set out in the liquidity risk section.
The total cash outflow for leases in the year ended 31 December 2024 was £199 million (2023: £209 million). The amount recognised within
interest expense in respect of lease liabilities is disclosed in note 5.
132
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 24: Debt securities in issue
2024
2023
At fair value
through profit
or loss
£m
At
amortised
cost
£m
Total
£m
At fair value
through profit
or loss
£m
At
amortised
cost
£m
Total
£m
Senior unsecured notes issued
4,608
22,902
27,510
5,232
22,642
27,874
Covered bonds
11,800
11,800
14,318
14,318
Certificates of deposit issued
597
597
3,096
3,096
Securitisation notes
22
5,185
5,207
23
4,211
4,234
Commercial paper
4,797
4,797
8,182
8,182
Total debt securities in issue
4,630
45,281
49,911
5,255
52,449
57,704
Covered bonds and securitisation programmes
At 31 December 2024, the covered bonds held by external parties and those held internally, were secured on certain loans and advances to
customers amounting to £26,202 million (2023: £27,019 million ) which have been assigned to bankruptcy remote limited liability partnerships
to provide security for issues of covered bonds by the Group. The Group retains all of the risks and rewards associated with these loans and the
partnerships are consolidated fully with the loans retained on the Group’s balance sheet.
The Group has two covered bond programmes, which have ring-fence asset pools and guarantee the covered bonds issued by the Group. At the
reporting date the Group had over-collateralised these programmes to meet the terms of the programmes, to secure the rating of the covered
bonds and to provide operational flexibility. From time to time, the obligations of the Group to provide collateral may increase due to the
formal requirements of the programmes. The Group may also voluntarily contribute collateral to support the ratings of the covered bonds.
Covered bonds includes Pfandbriefe, which the Group issued for the first time in 2024.
The Group’s securitisation vehicles issue notes that are held both externally and internally, and are secured on loans and advances to
customers amounting to £27,284 million at 31 December 2024 (2023: £30,190 million ), the majority of which have been sold by subsidiary
companies to bankruptcy remote structured entities. As the structured entities are funded by the issue of debt on terms whereby the majority
of the risks and rewards of the portfolio are retained by the subsidiary, the structured entities are consolidated fully and all of these loans are
retained on the Group’s balance sheet.
Certain loans and advances to customers have been assigned to bankruptcy remote limited liability partnerships.
Cash deposits of £3,225 million ( 2023: £3,678 million) which support the debt securities issued by the structured entities, the term advances
related to covered bonds and other legal obligations, are held by the Group. Additionally, the Group has certain contractual arrangements to
provide liquidity facilities to some of these structured entities. At 31 December 2024 these obligations had not been triggered; the maximum
exposure under these facilities was £4 million (2023: £4 million).
The Group recognises the full liabilities associated with its securitisation and covered bond programmes within debt securities in issue,
although the obligations of the Group in respect of its securitisation issuances are limited to the cash flows generated from the underlying
assets. The Group could be required to provide additional support to a number of the securitisation programmes to support the credit ratings
of the debt securities issued, in the form of increased cash reserves and the holding of subordinated notes. Further, certain programmes
contain contractual obligations that require the Group to repurchase assets should they become credit-impaired or as otherwise required by
the transaction documents. The Group has not provided financial or other support by voluntarily offering to repurchase assets from any of its
public securitisation programmes during 2024 (2023: none ).
At 31 December 2024 £32,397 million (2023: £32,036 million) of debt securities in issue at amortised cost had a contractual residual maturity
of greater than one year.
Note 25: Other liabilities
2024
£m
2023
£m
Lease liabilities
1,219
1,589
Other creditors and accruals
5,992
4,671
Total other liabilities
7,211
6,260
The maturity analysis of the Group’s lease liabilities on an undiscounted basis is set out in the liquidity risk section.
At 31 December 2024 £898 million (2023: £1,305 million) of lease liabilities had a contractual residual maturity of greater than one year.
Note 26: Provisions
Critical accounting judgements and key sources of estimation uncertainty
Critical judgement:
Determining whether a present obligation exists and whether it is more likely than not that an outflow of
resources will be required to settle that obligation
Key sources of estimation uncertainty:
Populations impacted, level of remediation and response rates
Determining the amount of the provisions, which represent management’s best estimate of the cost of settling these issues, requires the
exercise of significant judgement and estimation. It will often be necessary to form a view on matters which are inherently uncertain, such as
the scope of reviews required by regulators, and to estimate the number of future complaints, the extent to which they will be upheld, the
average cost of redress and the impact of decisions reached by legal and other review processes that may be relevant to claims received.
Consequently, the continued appropriateness of the underlying assumptions is reviewed on a regular basis against actual experience and other
relevant evidence and adjustments made to the provisions where appropriate.
133
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 26: Provisions continued
Provisions
for financial
commitments
and guarantees
£m
Regulatory
and legal
provisions
£m
Other
£m
Total
£m
At 1 January 2024
314
1,014
588
1,916
Exchange and other adjustments
(1)
(1)
(2)
Provisions applied
(378)
(475)
(853)
Charge for the year
(48)
880
305
1,137
At 31 December 2024
265
1,516
417
2,198
Provisions for financial commitments and guarantees
Provisions are recognised for expected credit losses on undrawn loan commitments and financial guarantees.
Regulatory and legal provisions
In the course of its business, the Group is engaged on a regular basis in discussions with UK and overseas regulators and other governmental
authorities on a range of matters, including legal and regulatory reviews and, from time to time, enforcement investigations (including in
relation to compliance with applicable laws and regulations, such as those relating to prudential regulation, consumer protection, investment
advice, employment, business conduct, systems and controls, environmental, sustainability, competition/anti-trust, tax, anti-bribery, anti-
money laundering and sanctions). Any matters discussed or identified during such discussions and inquiries may result in, among other things,
further inquiry or investigation, other action being taken by governmental and/or regulatory authorities, increased costs being incurred by the
Group, remediation of systems and controls, public or private censure, restriction of the Group’s business activities and/or fines. The Group also
receives complaints in connection with its past conduct and claims brought by or on behalf of current and former employees, customers
(including their appointed representatives), investors and other third parties and is subject to legal proceedings and other legal actions from
time to time. Any events or circumstances disclosed could have a material adverse effect on the Group’s financial position, operations or cash
flows. Provisions are held where the Group can reliably estimate a probable outflow of economic resources. The ultimate liability of the Group
may be significantly more, or less, than the amount of any provision recognised. If the Group is unable to determine a reliable estimate, a
contingent liability is disclosed. The recognition of a provision does not amount to an admission of liability or wrongdoing on the part of the
Group. During the year ended 31 December 2024 the Group charged a further £880 million in respect of legal actions and other regulatory
matters and the unutilised balance at 31 December 2024 was £1,516 million (31 December 2023: £1,014 million). The most significant items are
outlined below.
Motor commission review
The Group recognised a £450 million provision in 2023 for the potential impact of the FCA review into historical motor finance commission
arrangements and sales announced in January 2024. In the fourth quarter of 2024, a further £700 million provision has been recognised in
relation to motor finance commission arrangements, in light of the Court of Appeal (CoA) decisions handed down in their judgment in Wrench,
Johnson and Hopcraft (WJH) in October 2024, which goes beyond the scope of the original FCA motor finance commissions review.
The CoA judgment in WJH, determined that motor dealers acting as credit brokers owe certain duties to disclose to their customers
commission payable to them by lenders, and that lenders will be liable for dealers’ non-disclosures. This sets a higher bar for the disclosure of
and consent to the existence, nature, and quantum of any commission paid than had been understood to be required or applied across the
motor finance industry prior to the decision. The Group’s understanding of compliant disclosure was built on FCA and other regulatory
guidance and previous legal authorities. These CoA decisions relate to commission disclosure and consent obligations which go beyond the
scope of the current FCA motor finance commissions review. The Supreme Court granted the relevant lenders permission to appeal the WJH
judgment and the substantive hearing is scheduled to be heard on 1 April to 3 April 2025.
Following the WJH decision, the FCA extended their temporary complaint handling rules in relation to discretionary commission arrangements
(DCA) complaints to include non-DCA commission complaints until December 2025. The FCA has also announced that it intends to set out
next steps in its review into DCAs in May 2025 and hopes to provide an update on motor finance non-DCA complaints at the same time, but its
next steps in relation to both types of complaint will depend on the progress of the appeal to the Supreme Court of WJH and the timing and
nature of any decision. In addition, there are a number of other relevant judicial proceedings which may influence the eventual outcome,
including a judicial review (which is now subject to appeal) of a final decision by the Financial Ombudsman Service (FOS) against another
lender that was heard in October 2024.
The Group continues to receive complaints as well as claims in the County Courts in respect of motor finance commissions. A large number of
those claims have been stayed, as has a claim in the Competition Appeal Tribunal.
In establishing the provision estimate, the Group has created a number of scenarios to address uncertainties around a number of key
assumptions. These include the potential outcomes of the Supreme Court appeal, any steps that the FCA may take and outcomes in relation to
the extent of harm and remedies. Other key assumptions include applicable commission models, commission rates, time periods, response
rates, uphold rates, levels of redress / interest applied and costs to deliver. The Group will continue to assess developments and potential
impacts, including the outcome of the appeals, any announcement by the FCA of their next steps, and any action by other regulators or
government bodies. Given that there is a significant level of uncertainty in terms of the eventual outcome, the ultimate financial impact could
materially differ from the amount provided.
134
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 26: Provisions continued
HBOS Reading – review
The Group continues to apply the recommendations from Sir Ross Cranston’s review, issued in December 2019, including a reassessment of
direct and consequential losses by an independent panel (the Foskett Panel), an extension of debt relief and a wider definition of de facto
directors. The Foskett Panel’s full scope and methodology was published on 7 July 2020. The Foskett Panel’s stated objective is to consider
cases via a non-legalistic and fair process and to make its decisions in a generous, fair and common sense manner, assessing claims against an
expanded definition of the fraud and on a lower evidential basis.
In June 2022, the Foskett Panel announced an alternative option, in the form of a fixed sum award which could be accepted as an alternative
to participation in the full re-review process, to support earlier resolution of claims for those deemed by the Foskett Panel to be victims of the
fraud.
Virtually all of the population have now had decisions via the Fixed Sum Award process, with operational costs, redress and tax costs
associated with the re-reviews recognised within the amount provided.
Notwithstanding the settled claims and the increase in outcomes which builds confidence in the full estimated cost, uncertainties remain and
the final outcome could be different. There is no confirmed timeline for the completion of the re-review process nor the review by Dame Linda
Dobbs. The Group remains committed to implementing the recommendations in full.
Payment protection insurance (PPI)
The Group continues to challenge PPI litigation cases, with mainly operational costs and legal fees associated with litigation activity recognised
within regulatory and legal provisions.
Other
The Group carries provisions of £153 million (31 December 2023 : £137 million) in respect of dilapidations, rent reviews and other property-
related matters.
Provisions are also made for staff and other costs related to Group restructuring initiatives at the point at which the Group becomes
committed to the expenditure; at 31 December 2024 provisions of £130 million (31 December 2023 : £240 million) were held.
The Group carries provisions of £35 million (31 December 2023: £46 million) for indemnities and other matters relating to legacy business
disposals in prior years. Whilst there remains significant uncertainty as to the timing of the utilisation of the provisions, the Group expects the
majority of the remaining provisions to have been utilised by 31 December 2026.
Note 27: Subordinated liabilities
The movement in subordinated liabilities during the year was as follows:
Preferred
securities
£m
Undated
£m
Dated
£m
Total
£m
At 1 January 2023
146
6,447
6,593
Issued during the year1:
5.25% Fixed Rate Reset Dated Subordinated Notes 2033 (500S$ million)
288
288
Fixed-to-Floating Rate Dated Subordinated Notes 2033 (A$750 million)
382
382
670
670
Repurchases and redemptions during the year1:
9.625% Subordinated Bonds 2023 (£300 million)
(92)
(92)
7.07% Subordinated Fixed Rate Notes 2023 (€175 million)
(155)
(155)
8.75% Perpetual Subordinated Bonds (£100 million)
(5)
(5)
7.375% Subordinated Undated Instruments (£150 million)
8% Undated Subordinated Step-up Notes 2023 (£200 million)
(5)
(247)
(252)
Foreign exchange movements
(268)
(268)
Other movements (cash and non-cash)2
192
192
At 31 December 2023
141
6,794
6,935
Issued during the year1:
Floating Rate Dated Subordinated Notes 2034 (A$500 million)
257
257
5.963% Fixed-to-Floating Rate Dated Subordinated Notes 2034 (A$250 million)
129
129
386
386
Foreign exchange movements
(3)
(3)
Other movements (cash and non-cash)2
(107)
(107)
At 31 December 2024
141
7,070
7,211
1 Issuances in the year generated cash inflows of £386 million ( 2023: £670 million); the repurchases and redemptions resulted in cash outflows of £nil (2023: £251 million).
2Other movements include hedge accounting movements and cash payments in respect of interest on subordinated liabilities in the year amounting to £366 million (2023: £335
million) offset by the interest expense in respect of subordinated liabilities of £ 430 million (2023: £395 million).
These securities will, in the event of the winding-up of the issuer, be subordinated to the claims of depositors and all other creditors of the
issuer, other than creditors whose claims rank equally with, or are junior to, the claims of the holders of the subordinated liabilities. The
subordination of specific subordinated liabilities is determined in respect of the issuer and any guarantors of that liability. The claims of holders
of preference shares and preferred securities are generally junior to those of the holders of undated subordinated liabilities, which in turn are
junior to the claims of holders of the dated subordinated liabilities.
135
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 27: Subordinated liabilities continued
Preference shares
The Bank has in issue one class of preference shares which are classified as liabilities under accounting standards.
2024
2023
2024
Number
of shares
2023
Number
of shares
2022
Number
of shares
£m
% of
share
capital
£m
% of
share
capital
2022
£m
6% Non-cumulative Redeemable
Preference shares of GBP1.00
100
100
100
The rights and obligations attaching to these shares are set out in the Bank’s articles of association, a copy of which can be obtained from
Companies House or from the Lloyds Banking Group website (www.lloydsbankinggroup.com/who-we-are/group-overview/corporate-
governance.html).
At 31 December 2024 £6,289 million (2023: £6,921 million) of subordinated liabilities had a contractual residual maturity of greater than one
year.
Note 28: Share capital
Issued and fully paid ordinary share capital
Ordinary shares of £1 each1
2024
Number
of shares
2023
Number
of shares
2022
Number
of shares
2024
£m
2023
£m
2022
£m
At 1 January and 31 December
1,574,285,752
1,574,285,752
1,574,285,752
1,574
1,574
1,574
1 Ordinary shares represent effectively 100 per cent of total share capital in issue as the issued preference shares represent below 0.01 per cent.
Ordinary shares
The holders of ordinary shares are entitled to receive the Bank’s report and accounts, attend, speak and vote at general meetings and appoint
proxies to exercise voting rights. Holders of ordinary shares may also receive a dividend (subject to the provisions of the Bank’s articles of
association) and in the event of a winding-up, may share in the assets of the Bank.
Issued and fully paid preference shares
The Bank has in issue one class of preference shares which are classified as liabilities under accounting standards and which are included in note
27.
Note 29: Other reserves
2024
£m
2023
£m
2022
£m
Merger reserve1
6,348
6,348
6,348
Revaluation reserve in respect of debt securities held at fair value through other comprehensive income
(249)
(322)
(393)
Cash flow hedging reserve
(3,568)
(3,554)
(5,168)
Foreign currency translation reserve
(142)
(77)
(44)
At 31 December
2,389
2,395
743
1 There has been no movements in this reserve in 2024 , 2023 or 2022 .
The merger reserve arose on the transfer of HBOS plc from the Bank’s ultimate holding company in January 2010.
The revaluation reserves in respect of debt securities and equity shares held at fair value through other comprehensive income represent the
cumulative after-tax unrealised change in the fair value of financial assets so classified since initial recognition; or in the case of financial assets
obtained on acquisitions of businesses, since the date of acquisition.
The cash flow hedging reserve represents the cumulative after-tax gains and losses on effective cash flow hedging instruments that will be
reclassified to the income statement in the periods in which the hedged item affects profit or loss.
The foreign currency translation reserve represents the cumulative after-tax gains and losses on the translation of foreign operations and
exchange differences arising on financial instruments designated as hedges of the Group’s net investment in foreign operations.
136
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 29: Other reserves continued
Movements in other reserves were as follows:
Revaluation reserve in respect of debt securities held at fair value through other comprehensive income
2024
£m
2023
£m
2022
£m
At 1 January
(322)
(393)
(362)
Change in fair value
(52)
(41)
(132)
Deferred tax
14
11
34
Current tax
1
1
8
(37)
(29)
(90)
Income statement transfers in respect of disposals (note 8)
157
140
76
Deferred tax
(44)
(38)
(23)
113
102
53
Impairment recognised in the income statement
(3)
(2)
6
At 31 December
(249)
(322)
(393)
Revaluation reserve in respect of equity shares held at fair value through other comprehensive income
2024
£m
2023
£m
2022
£m
At 1 January
Change in fair value
Deferred tax
(1)
(1)
Realised gains and losses transferred to retained profits
Deferred tax
1
1
At 31 December
Cash flow hedging reserve
2024
£m
2023
£m
2022
£m
At 1 January
(3,554)
(5,168)
(451)
Change in fair value of hedging derivatives
(2,317)
725
(6,520)
Deferred tax
649
(207)
1,803
(1,668)
518
(4,717)
Net income statement transfers
2,297
1,517
(1)
Deferred tax
(643)
(421)
1
1,654
1,096
At 31 December
(3,568)
(3,554)
(5,168)
Foreign currency translation reserve
2024
£m
2023
£m
2022
£m
At 1 January
(77)
(44)
(135)
Currency translation differences arising in the year
(65)
(33)
91
At 31 December
(142)
(77)
(44)
137
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 30: Retained profits
2024
£m
2023
£m
2022
£m
At 1 January
30,786
31,792
28,836
Profit attributable to ordinary shareholders
3,101
4,858
4,528
Post-retirement defined benefit scheme remeasurements
(564)
(1,205)
(2,152)
Gains and losses attributable to own credit risk (net of tax)
(56)
(168)
364
Dividends paid (note 32)
(3,990)
(4,700)
Issue costs of other equity instruments (net of tax)
(6)
(5)
Capital contributions received
142
215
221
Return of capital contributions
(1)
(1)
(4)
Realised gains and losses on equity shares held at fair value through other comprehensive income
(1)
At 31 December
29,412
30,786
31,792
Note 31: Other equity instruments
2024
£m
2023
£m
2022
£m
At 1 January
5,018
4,268
4,268
Issued in the year:
$550 million Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Permanent Write-Down Securities
410
$1,000 million Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Permanent Write-Down Securities
764
£750 million Fixed Rate Reset Additional Tier 1 Perpetual Subordinated Permanent Write-Down Securities
750
1,174
750
Repurchases and redemptions during the year:
£500 million Additional Tier 1 Perpetual Subordinated Permanent Write-Down Securities
(500)
Profit for the year attributable to other equity holders
363
334
241
Distributions on other equity instruments
(363)
(334)
(241)
At 31 December
5,692
5,018
4,268
The principal terms of the AT1 securities are described below:
The securities rank behind the claims against the Bank of unsubordinated creditors on a winding-up
The fixed rate reset securities bear a fixed rate of interest until the first call date. After the initial call date, in the event that they are not
redeemed, the fixed rate reset AT1 securities will bear interest at rates fixed periodically in advance. The floating rate AT1 securities will be
reset quarterly both prior to and following the first call date
Interest on the securities will be due and payable only at the sole discretion of the Bank and the Bank may at any time elect to cancel any
interest payment (or any part thereof) which would otherwise be payable on any interest payment date. There are also certain restrictions
on the payment of interest as specified in the terms
The securities are undated and are repayable, at the option of the Bank, in whole at the first call date, or at any interest payment date
thereafter. In addition, the AT1 securities are repayable, at the option of the Bank, in whole for certain regulatory or tax reasons. Any
repayments require the prior consent of the PRA
The securities will be subject to a Permanent Write Down should the Common Equity Tier 1 ratio of the Bank fall below 7.0 per cent
Note 32: Dividends on ordinary shares
Dividends paid during the year were as follows:
During the year the Bank paid cumulative interim dividends of £3,990 million (2023: £4,700 million). The directors have not recommended a
final dividend for the year ended 31 December 2024 (2023: £nil).
2024
£m
2023
£m
2022
£m
Interim dividends
3,990
4,700
138
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 33: Related party transactions
Key management personnel
Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of an
entity; the Group’s key management personnel are the members of the Lloyds Banking Group plc Group Executive Committee together with its
non-executive directors.
The table below details, on an aggregated basis, key management personnel compensation:
Compensation
2024
£m
2023
£m
2022
£m
Salaries and other short-term benefits
14
15
11
Share-based payments
18
15
14
Total compensation
32
30
25
The aggregate of the emoluments of the directors was £9.2 million (2023 : £9.3 million ; 2022: £9.2 million ).
There were £nil aggregate contributions in respect of key management personnel to defined contribution pension schemes (2023: £nil; 2022:
£nil).
The total for the highest paid director (Charlie Nunn) was £4,966,000 (2023 : Charlie Nunn: £5,105,000 ; 2022: Charlie Nunn: £5,160,000); this
did not include any gain on exercise of Lloyds Banking Group plc shares in any year.
Share options over Lloyds Banking Group plc shares
2024
million
2023
million
2022
million
At 1 January
Granted, including certain adjustments (includes entitlements of appointed key management personnel)
Exercised/lapsed (includes entitlements of former key management personnel)
At 31 December
Share plans settled in Lloyds Banking Group plc shares
2024
million
2023
million
2022
million
At 1 January
55
72
74
Granted, including certain adjustments (includes entitlements of appointed key management personnel)
69
27
29
Exercised/lapsed (includes entitlements of former key management personnel)
(10)
(44)
(31)
At 31 December
114
55
72
The tables below detail, on an aggregated basis, balances outstanding at the year end and related income and expense, together with
information relating to other transactions between the Group and its key management personnel:
Loans
2024
£m
2023
£m
2022
£m
At 1 January
1
2
3
Advanced (includes loans to appointed key management personnel)
1
1
Repayments (includes loans to former key management personnel)
(1)
(1)
(2)
At 31 December
1
1
2
The loans are on both a secured and unsecured basis and are expected to be settled in cash. The loans attracted interest rates of between 2.03
per cent and 32.40 per cent in 2024 (2023: 1.09 per cent and 32.40 per cent; 2022: 1.01 per cent and 30.15 per cent).
No provisions have been recognised in respect of loans given to key management personnel (2023 and 2022: £ nil).
Deposits
2024
£m
2023
£m
2022
£m
At 1 January
14
10
11
Placed (includes deposits of appointed key management personnel)
32
45
37
Withdrawn (includes deposits of former key management personnel)
(38)
(41)
(38)
At 31 December
8
14
10
Deposits placed by key management personnel attracted interest rates of up to 6.25 per cent (2023 : 6.25 per cent; 2022: 5.0 per cent).
At 31 December 2024, the Group did not provide any guarantees in respect of key management personnel (2023 and 2022: none).
At 31 December 2024, transactions, arrangements and agreements entered into by the Group and its banking subsidiaries with directors and
connected persons included amounts outstanding in respect of loans and credit card transactions of £29.0 thousand with five directors and
one connected person (2023: £23.6 thousand with six directors and no connected persons; 2022: £2.1 thousand with three directors and no
connected persons).
139
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 33: Related party transactions continued
Balances and transactions with fellow Lloyds Banking Group undertakings
Balances and transactions between members of the Lloyds Bank Group
In accordance with IFRS 10 Consolidated Financial Statements, transactions and balances between the Bank and its subsidiary undertakings,
and between those subsidiary undertakings, have all been eliminated on consolidation and thus are not reported as related party transactions
of the Group.
Balances and transactions with Lloyds Banking Group plc and fellow subsidiaries of the Bank
The Bank and its subsidiaries have balances due to and from the Bank’s parent company, Lloyds Banking Group plc and fellow subsidiaries of
the Bank. These are included on the Group’s balance sheet as follows:
2024
£m
2023
£m
Assets, included within:
Derivative financial instruments
807
1,137
Financial assets at amortised cost: due from fellow Lloyds Banking Group undertakings
560
840
Financial assets at fair value through profit or loss
1
1,367
1,978
Liabilities, included within:
Due to fellow Lloyds Banking Group undertakings
4,049
2,932
Derivative financial instruments
687
953
Debt securities in issue at amortised cost
19,198
18,131
Subordinated liabilities
7,336
6,919
31,270
28,935
These balances include Lloyds Banking Group plc’s banking arrangements and, due to the size and volume of transactions passing through
these accounts, it is neither practical nor meaningful to disclose information on gross inflows and outflows. During 2024 the Group earned
£18 million interest income on the above asset balances (2023: £9 million; 2022: £11 million) and the Group incurred £1,353 million interest
expense on the above liability balances (2023: £1,010 million; 2022: £666 million).
Details of intercompany recharges recognised within other operating income are given in note 8 and details of contingent liabilities and
commitments entered into on behalf of fellow Lloyds Banking Group undertakings are given in note 34.
During the year, the Group recognised fee and commission expense of £310 million due to the impact of changes to commission arrangements
with Scottish Widows.
Other related party transactions
Pension funds
The Group provides banking services to certain of its pension funds. At 31 December 2024, customer deposits of £113 million (2023:
£133 million) related to the Group’s pension funds.
Joint ventures and associates
At 31 December 2024 there were loans and advances to customers of £23 million (2023: £47 million) outstanding and balances within customer
deposits of £12 million (2023: £6 million) relating to joint ventures and associates.
During the year the Group paid fees of £4 million (2023 : £4 million) to the Lloyds Banking Group’s Schroders Personal Wealth joint venture.
Note 34: Contingent liabilities, commitments and guarantees
Contingent liabilities, commitments and guarantees arising from the banking business
At 31 December 2024 contingent liabilities, such as performance bonds and letters of credit, arising from the banking business were
£ 2,523 million (31 December 2023: £2,755 million ).
The contingent liabilities of the Group arise in the normal course of its banking business and it is not practicable to quantify their future
financial effect. Total commitments and guarantees were £ 128,947 million (31 December 2023: £122,733 million), of which in respect of
undrawn formal standby facilities, credit lines and other commitments to lend, £ 59,143 million (31 December 2023 : £53,722 million)
was irrevocable.
Capital commitments
Capital expenditure contracted but not provided for at 31 December 2024 amounted to £640 million (2023 : £1,240 million) and related to
assets to be leased to customers under operating leases. The Group’s management is confident that future net revenues and funding will be
sufficient to cover these commitments.
140
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 34: Contingent liabilities, commitments and guarantees continued
Interchange fees
With respect to multi-lateral interchange fees (MIFs), the Lloyds Banking Group is not a party in the ongoing or threatened litigation which
involves the card schemes Visa and Mastercard or any settlements of such litigation. However, the Group is a member/licensee of Visa and
Mastercard and other card schemes. The litigation in question is as follows:
Litigation brought by or on behalf of retailers against both Visa and Mastercard in the English Courts, in which retailers are seeking damages
on grounds that Visa and Mastercard’s MIFs breached competition law (this includes a judgment of the Supreme Court in June 2020
upholding the Court of Appeal’s finding in 2018 that certain historic interchange arrangements of Mastercard and Visa infringed competition
law)
Litigation brought on behalf of UK consumers in the English Courts against Mastercard
Any impact on the Group of the litigation against Visa and Mastercard remains uncertain at this time, such that it is not practicable for the
Group to provide an estimate of any potential financial effect. Insofar as Visa is required to pay damages to retailers for interchange fees set
prior to June 2016, contractual arrangements to allocate liability have been agreed between various UK banks (including the Lloyds Banking
Group) and Visa Inc, as part of Visa Inc’s acquisition of Visa Europe in 2016. These arrangements cap the maximum amount of liability to which
the Lloyds Banking Group may be subject and this cap is set at the cash consideration received by the Lloyds Banking Group for the sale of its
stake in Visa Europe to Visa Inc in 2016. In 2016, the Lloyds Banking Group received Visa preference shares as part of the consideration for the
sale of its shares in Visa Europe. A release assessment is carried out by Visa on certain anniversaries of the sale (in line with the Visa Europe sale
documentation) and as a result, some Visa preference shares may be converted into Visa Inc Class A common stock from time to time. Any such
release and any subsequent sale of Visa common stock does not impact the contingent liability.
LIBOR and other trading rates
Certain Lloyds Banking Group companies, together with other panel banks, have been named as defendants in ongoing private lawsuits,
including purported class action suits, in the US in connection with their roles as panel banks contributing to the setting of US dollar, Japanese
yen and Sterling London Interbank Offered Rate.
Certain Lloyds Banking Group companies are also named as defendants in (i) UK-based claims, and (ii) two Dutch class actions, raising LIBOR
manipulation allegations. A number of claims against the Lloyds Banking Group in the UK relating to the alleged mis-sale of interest rate
hedging products also include allegations of LIBOR manipulation.
It is currently not possible to predict the scope and ultimate outcome on the Lloyds Banking Group of any private lawsuits or ongoing related
challenges to the interpretation or validity of any of the Lloyds Banking Group’s contractual arrangements, including their timing and scale. As
such, it is not practicable to provide an estimate of any potential financial effect.
Tax authorities
The Group has an open matter in relation to a claim for group relief of losses incurred in its former Irish banking subsidiary, which ceased
trading on 31 December 2010. In 2020, HMRC concluded its enquiry into the matter and issued a closure notice denying the group relief claim.
The Group appealed to the First Tier Tax Tribunal. The hearing took place in May 2023. In January 2025, the First Tier Tribunal concluded in
favour of HMRC. The Group believes it has applied the rules correctly and that the claim for group relief is correct. Having reviewed the
Tribunal’s conclusions and having taken appropriate advice, the Group intends to appeal the decision and does not consider this to be a case
where an additional tax liability will ultimately fall due. If the final determination of the matter by the judicial process is that HMRC’s position
is correct, management believes that this would result in an increase in current tax liabilities of approximately £850 million (including interest)
and a reduction in the Group’s deferred tax asset of approximately £275 million. Following the First Tier Tax Tribunal outcome, the tax will be
paid and recognised as a current tax asset, given the Group’s view that the tax liability will not ultimately fall due. It is unlikely that any appeal
hearing will be held before 2026, and final conclusion of the judicial process may not be for several years.
There are a number of other open matters on which the Group is in discussions with HMRC (including the tax treatment of certain costs arising
from the divestment of TSB Banking Group plc and the tax treatment of costs relating to HBOS Reading), none of which is expected to have a
material impact on the financial position of the Group.
Arena and Sentinel litigation claims
The Group is facing claims alleging breach of duty and/or mandate in the context of an underlying external fraud matter involving Arena
Television. The Group is defending the claims, which are at an early stage. As such, it is not practicable to estimate the final outcome of the
matter and its financial impact (if any) to the Group.
FCA investigation into the Group’s anti-money laundering control framework
As previously disclosed, the FCA had opened an investigation into the Group’s compliance with domestic UK money laundering regulations and
the FCA’s rules and Principles for Businesses, with a focus on aspects of its anti-money laundering control framework. This investigation has
now been closed by the FCA without any enforcement action taken.
Other legal actions and regulatory matters
In addition, in the course of its business the Group is subject to other complaints and threatened or actual legal proceedings (including class or
group action claims) brought by or on behalf of current or former employees, customers (including their appointed representatives), investors
or other third parties, as well as legal and regulatory reviews, enquiries and examinations, requests for information, audits, challenges,
investigations and enforcement actions, which could relate to a number of issues. This includes matters in relation to compliance with
applicable laws and regulations, such as those relating to prudential regulation, employment, consumer protection, investment advice, business
conduct, systems and controls, environmental, sustainability, competition/anti-trust, tax, anti-bribery, anti-money laundering and sanctions,
some of which may be beyond the Group’s control, both in the UK and overseas. Where material, such matters are periodically reassessed, with
the assistance of external professional advisers where appropriate, to determine the likelihood of the Group incurring a liability. The Group
does not currently expect the final outcome of any such case to have a material adverse effect on its financial position, operations or cash
flows. Where there is a contingent liability related to an existing provision the relevant disclosures are included within note 26.
141
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 35: Structured entities
The Group’s interests in structured entities are both consolidated and unconsolidated. Details of the Group’s interests in consolidated
structured entities are set out in note 24 for securitisations and covered bond vehicles, note 11 for structured entities associated with the
Group’s pension schemes, and below. Details of the Group’s interests in unconsolidated structured entities are also included below.
Asset-backed conduits
In addition to the structured entities discussed in note 24, which are used for securitisation and covered bond programmes, the Group sponsors
an active asset-backed conduit, Cancara, which invests in client receivables and debt securities. The total consolidated exposure of Cancara at
31 December 2024 was £2,272 million (2023: £2,808 million), comprising £ 1,155 million of loans and advances ( 2023: £1,521 million), £559 million
of debt securities (2023: £698 million) and £ 558 million of financial assets at fair value through profit or loss (2023 : £589 million).
All lending assets and debt securities held by the Group in Cancara are restricted in use, as they are held by the collateral agent for the benefit
of the commercial paper investors and the liquidity providers only. The Group provides liquidity facilities to Cancara under terms that are usual
and customary for standard lending activities in the normal course of the Group’s banking activities. During 2024 there have continued to be
planned drawdowns on certain liquidity facilities for balance sheet management purposes, supporting the programme to provide funding
alongside the proceeds of the asset-backed commercial paper issuance. The Group could be asked to provide support under the contractual
terms of these arrangements including, for example, if Cancara experienced a shortfall in external funding, which may occur in the event of
market disruption. The external assets in Cancara are consolidated in the Group’s financial statements.
Unconsolidated structured entities
The Group considers itself the sponsor of a structured entity where it is primarily involved in the design and establishment of the structured
entity and further where the Group transfers assets to the structured entity, markets products associated with the structured entity in its own
name and/or provides guarantees regarding the structured entity’s performance.
The following table describes the types of structured entities that the Group does not consolidate but in which it holds an interest.
Total assets of
structured entities
Type of entity
Nature and purpose of structured entities
Interest held by the Group
2024
£bn
2023
£bn
Securitisation vehicles
These vehicles issue asset-backed notes to
investors and facilitate the management of the
Group’s balance sheet.
Interest in notes issued by the vehicles
Fees for loan servicing
5
5
The following table sets out an analysis of the carrying amount of interest held by the Group in the unconsolidated structured entities. The
maximum exposure to loss is the carrying amounts of the assets held.
Carrying amount
Recognised within;
2024
£m
2023
£m
Notes held in securitisation vehicles
Financial assets at fair value through profit or loss; and
Financial assets at amortised cost
2,311
4,016
During the year the Group has not provided any non-contractual financial or other support to these entities and has no current intention of
providing any non-contractual financial or other support in the future.
The carrying amount of assets transferred to securitisation vehicles at the time of transfer was £2,004 million (2023: £5,481 million) and the
Group recognised a gain of £11 million on transfer (2023: gain of £31 million).
Continuing involvement in financial assets that have been derecognised
The Group has derecognised financial assets in their entirety following transactions with securitisation vehicles, as noted above. The continuing
involvement largely arises from funding provided to the vehicles through the purchase of issued notes. The majority of these notes are
recognised as debt securities held at amortised cost, with the remaining notes held by the Group recognised at fair value through profit or loss.
The carrying amount of these interests and the maximum exposure to loss is included in the table above. At 31 December 2024 the fair value of
the retained notes was £2,310  million (2023: £4,032 million). The income from the Group’s interest in these structures for the year ended 31
December 2024 was £218 million and cumulatively for the lifetime was £341 million.
142
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 36: Transfers of financial assets
Transferred financial assets derecognised in their entirety with ongoing exposure
Through asset securitisations, the Group has transferred financial assets which were derecognised in their entirety, with some continuing
involvement. Further details are available in note 35.
Transferred financial assets that continue to be recognised
Details of transferred financial assets that continue to be recognised in full are as follows.
The Group enters into repurchase and securities lending transactions in the normal course of business that do not result in derecognition of the
financial assets as substantially all of the risks and rewards, including credit, interest rate, prepayment and other price risks are retained by the
Group. In all cases, the transferee has the right to sell or repledge the assets concerned.
As set out in note 24 , included within financial assets measured at amortised cost are loans transferred under the Group’s securitisation and
covered bond programmes. As the Group retains all or a majority of the risks and rewards associated with these loans, including credit, interest
rate, prepayment and liquidity risk, they remain on the Group’s balance sheet. Assets transferred into the Group’s securitisation and covered
bond programmes are not available to be used by the Group while the assets are within the programmes. However, the Group retains the right
to remove loans from the covered bond programmes where they are in excess of the programme’s requirements. In addition, where the Group
has retained some of the notes issued by securitisation and covered bond programmes, the Group has the ability to sell or pledge these
retained notes.
In 2024, the Group securitised a portfolio of £1.25 billion of finance lease receivables. This transaction resulted in a partial derecognition of the
leases, as the Group neither retained nor transferred substantially all risks and rewards. As of 31 December 2024, the Group continues to
recognise £798 million of these lease receivables with a gross up of the same amount in finance lease receivables and other liabilities for the
continuing involvement asset and liability required to be recognised under IFRS 9.
The table below sets out the carrying values of the transferred assets and the associated liabilities. For repurchase and securities lending
transactions, the associated liabilities represent the Group’s obligation to repurchase the transferred assets. For securitisation programmes, the
associated liabilities represent the external notes in issue (note 24). The liabilities shown in the table below have recourse to the transferred
assets.
2024
2023
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Repurchase and securities lending transactions
Debt securities held at amortised cost
1,420
1,401
Financial assets at fair value through other comprehensive income
10,272
3,543
9,583
4,906
Securitisation programmes
Financial assets at amortised cost:
Loans and advances to customers1
27,284
5,207
30,190
4,234
1 The carrying value of associated liabilities excludes securitisation notes held by the Group of £16,752 million (31 December 2023: £19,617 million).
143
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 37: Financial risk management
Financial instruments are fundamental to the Group’s activities and the associated risks represent a significant component of the overall risks
faced by the Group.
The primary risks affecting the Group through its use of financial instruments are: market risk, credit risk, liquidity risk and capital risk.
Market risk
The Group’s risk management policy is to optimise reward while managing its market risk exposures within the risk appetite defined by the
Lloyds Banking Group Board. The Group’s largest residual interest rate risk exposure arises from balances that are deemed to be insensitive to
changes in market rates (including current accounts, a portion of variable rate deposits and investable equity). The risk is managed through the
Group’s structural hedge which consists of longer-term fixed rate assets and interest rate swaps. The notional balance and duration of the
structural hedge is reviewed regularly by the Lloyds Banking Group Asset and Liability Committee. More information is set out on page 57.
Credit risk
The Group’s credit risk exposure arises in respect of the instruments below and predominantly in the United Kingdom. Credit risk appetite is set
at Board level and is described and reported through a suite of metrics devised from a combination of accounting and credit portfolio
performance measures, which include the use of various credit risk rating systems as inputs and assess credit risk at a counterparty level using
three components: (i) the probability of default by the counterparty on its contractual obligations; (ii) the current exposures to the
counterparty and their likely future development, from which the Group derives the exposure at default; and (iii) the likely loss ratio on the
defaulted obligations, the loss given default. The Group uses a range of approaches to mitigate credit risk, including internal control policies,
obtaining collateral, using master netting agreements and other credit risk transfers, such as asset sales and credit derivatives based
transactions. More information is set out on page 30.
Liquidity risk
Liquidity risk is defined as the risk that the Group has insufficient financial resources to meet its commitments as they fall due, or can only
secure them at excessive cost. Liquidity risk is managed through a series of measures, tests and reports that are primarily based on contractual
maturity. The Group carries out monthly stress testing of its liquidity position against a range of scenarios, including those prescribed by the
PRA. The Group’s liquidity risk appetite is also calibrated against a number of stressed liquidity metrics. More information is set out on page 51.
The Group’s assets and liabilities may be repaid or otherwise mature earlier or later than implied by their contractual terms.
Capital risk
Capital is actively managed on an ongoing basis for both the Group and its regulated banking subsidiaries, with associated capital policies and
procedures subjected to regular review. The Group assesses both its regulatory capital requirements and the quantity and quality of capital
resources it holds to meet those requirements in accordance with the relevant provisions of the Capital Requirements Directive (CRD V) and
Capital Requirements Regulation (UK CRR). This is supplemented through additional regulation set out under the PRA Rulebook and through
associated statements of policy, supervisory statements and other regulatory guidance. Regulatory capital ratios are considered a key part of
the budgeting and planning processes. Target capital levels take account of current and future regulatory requirements, capacity for growth
and to cover uncertainties. At 31 December 2024, the Group’s common equity tier 1 capital was £25,610 million (31 December 2023: £26,220
million).
Note 38: Cash flow statement
(A)Change in operating assets
2024
£m
2023
£m
2022
£m
Change in amounts due from fellow Lloyds Banking Group undertakings
280
(24)
(77)
Change in other financial assets held at amortised cost
(19,683)
9,394
(167)
Change in financial assets at fair value through profit or loss
(459)
(491)
427
Change in derivative financial instruments
(3,182)
279
(2,877)
Change in other operating assets
1,048
(235)
(206)
Change in operating assets
(21,996)
8,923
(2,900)
(B)Change in operating liabilities
2024
£m
2023
£m
2022
£m
Change in deposits from banks
(413)
(1,101)
1,295
Change in customer deposits
9,841
(4,219)
(3,201)
Change in repurchase agreements
58
(10,888)
18,484
Change in amounts due to fellow Lloyds Banking Group undertakings
(298)
(408)
(603)
Change in financial liabilities at fair value through profit or loss
(703)
(138)
(859)
Change in derivative financial instruments
1,480
(1,584)
1,248
Change in debt securities in issue at amortised cost
(7,160)
3,393
332
Change in other operating liabilities1
1,665
(380)
198
Change in operating liabilities
4,470
(15,325)
16,894
1 Includes a decrease of £370 million (2023 : increase of £329 million; 2022: decrease of £150 million ) in respect of lease liabilities.
144
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the consolidated financial statements continued
for the year ended 31 December
Note 38: Cash flow statement continued
(C)Non-cash and other items
2024
£m
2023
£m
2022
£m
Interest expense on subordinated liabilities
430
399
377
Revaluation of investment properties
1
Net (credit) charge in respect of defined benefit schemes
(11)
(79)
125
Depreciation and amortisation
3,371
2,851
2,348
Regulatory and legal provisions
880
661
225
Other provision movements
(170)
7
(134)
Allowance for loan losses
507
335
1,335
Write-off of allowance for loan losses, net of recoveries
(1,028)
(1,113)
(759)
Impairment (credit) charge relating to undrawn balances
(48)
10
111
Impairment (credit) charge on financial assets at fair value through other comprehensive income
(3)
(2)
6
Foreign exchange impact on balance sheet1
92
273
30
Other non-cash items
2,584
3,182
(673)
Total non-cash items
6,604
6,525
2,991
Contributions to defined benefit schemes
(175)
(1,345)
(2,533)
Payments in respect of regulatory and legal provisions
(378)
(362)
(587)
Total other items
(553)
(1,707)
(3,120)
Non-cash and other items
6,051
4,818
(129)
1When considering the movement on each line of the balance sheet, the impact of foreign exchange rate movements is removed in order to show the underlying cash impact.
(D)Acquisition of Group undertakings and businesses
2024
£m
2023
£m
2022
£m
Net assets acquired:
Cash and cash equivalents
38
Intangible assets
182
Other assets
672
Deferred tax
(58)
Other liabilities
(646)
Goodwill arising on acquisition
143
Cash consideration
331
Less cash and cash equivalents acquired
(38)
Net cash outflow arising from acquisitions of subsidiaries and businesses
293
(E)Analysis of cash and cash equivalents as shown in the balance sheet
2024
£m
2023
£m
2022
£m
Cash and balances at central banks
42,396
57,909
72,005
Less mandatory reserve deposits1
(21)
(1,740)
(1,935)
42,375
56,169
70,070
Loans and advances to banks and reverse repurchase agreements
13,278
15,186
11,913
Less amounts with a maturity of three months or more
(5,941)
(4,817)
(6,782)
7,337
10,369
5,131
Total cash and cash equivalents
49,712
66,538
75,201
1Mandatory reserve deposits are held with local central banks in accordance with statutory requirements. Where these deposits are not held in demand accounts and are not
available to finance the Group’s day-to-day operations they are excluded from cash and cash equivalents.
145
Lloyds Bank plc Annual Report and Accounts 2024
Bank balance sheet
at 31 December
Note
2024
£m
2023
£m
Assets
Cash and balances at central banks
36,838
52,268
Financial assets at fair value through profit or loss
6
6,746
6,255
Derivative financial instruments
7
7,217
7,049
Loans and advances to banks
6,195
8,512
Loans and advances to customers
8
105,148
106,497
Reverse repurchase agreements
44,143
32,751
Debt securities
9,945
10,144
Due from fellow Lloyds Banking Group undertakings
139,380
124,627
Financial assets at amortised cost
304,811
282,531
Financial assets at fair value through other comprehensive income
6
30,116
27,156
Intangible assets
10
4,177
4,150
Current tax recoverable
2
12
Deferred tax assets
4
3,139
3,001
Investment in subsidiary undertakings
11
31,664
31,591
Retirement benefit assets
3
1,827
2,118
Other assets
12
3,715
3,310
Total assets
430,252
419,441
Liabilities
Deposits from banks
2,965
3,380
Customer deposits
273,511
266,907
Repurchase agreements at amortised cost
15,593
7,305
Due to fellow Lloyds Banking Group undertakings
21,204
20,400
Financial liabilities at fair value through profit or loss
6
9,653
10,474
Derivative financial instruments
7
9,376
7,614
Debt securities in issue at amortised cost
14
34,169
41,365
Other liabilities
15
3,732
3,317
Retirement benefit obligations
3
48
54
Current tax liabilities
891
Provisions
16
736
838
Subordinated liabilities
17
6,686
6,421
Total liabilities
378,564
368,075
Equity
Share capital
18
1,574
1,574
Share premium account
600
600
Other reserves
19
(1,799)
(1,106)
Retained profits1
20
45,621
45,280
Shareholders’ equity
45,996
46,348
Other equity instruments
18
5,692
5,018
Total equity
51,688
51,366
Total equity and liabilities
430,252
419,441
1The Bank recorded a profit after tax for the year of £4,897 million (2023: £4,660 million).
No income statement or statement of comprehensive income has been shown for the Bank, as permitted by section 408 of the Companies Act
2006.
The accompanying notes are an integral part of the Bank financial statements.
The directors approved the Bank financial statements on 27 February 2025 .
1.8.1 41326_Signature_CharlieNunn_v2-2.jpg
1.8.2 41326_Signature_WilliamChalmers-2.jpg
Sir Robin Budenberg
Chair
Charlie Nunn
Group Chief Executive
William Chalmers
Chief Financial Officer
146
Lloyds Bank plc Annual Report and Accounts 2024
Bank statement of changes in equity
for the year ended 31 December
Attributable to ordinary shareholders
Share
capital and
premium
£m
Other
reserves
£m
Retained
profits
£m
Total
£m
Other
equity
instruments
£m
Total
£m
At 1 January 2024
2,174
(1,106)
45,280
46,348
5,018
51,366
Comprehensive income
Profit for the year
4,534
4,534
363
4,897
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net
of tax
(282)
(282)
(282)
Movements in revaluation reserve in respect of financial assets
held at fair value through other comprehensive income, net of
tax:
Debt securities
(39)
(39)
(39)
Gains and losses attributable to own credit risk, net of tax
(56)
(56)
(56)
Movements in cash flow hedging reserve, net of tax
(653)
(653)
(653)
Movements in foreign currency translation reserve,
net of tax
(1)
(1)
(1)
Total other comprehensive loss
(693)
(338)
(1,031)
(1,031)
Total comprehensive (loss) income1,2
(693)
4,196
3,503
363
3,866
Transactions with owners
Dividends
(3,990)
(3,990)
(3,990)
Distributions on other equity instruments
(363)
(363)
Issue of other equity instruments
(6)
(6)
1,174
1,168
Redemptions of other equity instruments
(500)
(500)
Capital contributions received
142
142
142
Return of capital contributions
(1)
(1)
(1)
Total transactions with owners
(3,855)
(3,855)
311
(3,544)
Realised gains and losses on equity shares held at fair
value through other comprehensive income
At 31 December 2024
2,174
(1,799)
45,621
45,996
5,692
51,688
1No income statement or statement of comprehensive income has been shown for the Bank , as permitted by section 408 of the Companies Act 2006.
2Total comprehensive income attributable to owners of the parent was £3,866 million (2023: £4,428 million; 2022: £90 million).
The accompanying notes are an integral part of the Bank financial statements.
147
Lloyds Bank plc Annual Report and Accounts 2024
Bank statement of changes in equity continued
for the year ended 31 December
Attributable to ordinary shareholders
Share
capital and
premium
£m
Other
reserves
£m
Retained
profits
£m
Total
£m
Other
equity
instruments
£m
Total
£m
At 1 January 2022
2,174
824
43,681
46,679
4,268
50,947
Comprehensive income
Profit for the year
3,276
3,276
241
3,517
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net
of tax
(1,232)
(1,232)
(1,232)
Movements in revaluation reserve in respect of financial assets
held at fair value through other comprehensive income, net of
tax:
Debt securities
(109)
(109)
(109)
Equity shares
(1)
(1)
(1)
Gains and losses attributable to own credit risk, net of tax
364
364
364
Movements in cash flow hedging reserve, net of tax
(2,452)
(2,452)
(2,452)
Movements in foreign currency translation reserve,
net of tax
3
3
3
Total other comprehensive income
(2,559)
(868)
(3,427)
(3,427)
Total comprehensive (loss) income1
(2,559)
2,408
(151)
241
90
Transactions with owners
Distributions on other equity instruments
(241)
(241)
Capital contributions received
221
221
221
Return of capital contributions
(4)
(4)
(4)
Total transactions with owners
217
217
(241)
(24)
Realised gains and losses on equity shares held at fair
value through other comprehensive income
1
(1)
At 31 December 2022
2,174
(1,734)
46,305
46,745
4,268
51,013
Comprehensive income
Profit for the year
4,326
4,326
334
4,660
Other comprehensive income
Post-retirement defined benefit scheme remeasurements, net
of tax
(692)
(692)
(692)
Movements in revaluation reserve in respect of financial assets
held at fair value through other comprehensive income, net of
tax:
Debt securities
(120)
(120)
(120)
Gains and losses attributable to own credit risk, net of tax
(168)
(168)
(168)
Movements in cash flow hedging reserve, net of tax
751
751
751
Movements in foreign currency translation reserve,
net of tax
(3)
(3)
(3)
Total other comprehensive income
628
(860)
(232)
(232)
Total comprehensive (loss) income1
628
3,466
4,094
334
4,428
Transactions with owners
Dividends
(4,700)
(4,700)
(4,700)
Distributions on other equity instruments
(334)
(334)
Issue of other equity instruments
(5)
(5)
750
745
Capital contributions received
215
215
215
Return of capital contributions
(1)
(1)
(1)
Total transactions with owners
(4,491)
(4,491)
416
(4,075)
Realised gains and losses on equity shares held at fair
value through other comprehensive income
At 31 December 2023
2,174
(1,106)
45,280
46,348
5,018
51,366
1No income statement or statement of comprehensive income has been shown for the Bank, as permitted by section 408 of the Companies Act 2006.
The accompanying notes are an integral part of the Bank financial statements.
148
Lloyds Bank plc Annual Report and Accounts 2024
Bank cash flow statement
for the year ended 31 December
Note
2024
£m
2023
£m
2022
£m
Cash flows (used in) provided by operating activities
Profit before tax
6,168
6,329
4,107
Adjustments for:
Change in operating assets
25 (A)
(27,510)
8,782
(5,368)
Change in operating liabilities
25 (B)
7,961
(15,938)
22,262
Non-cash and other items
25 (C)
1,576
2,422
(2,817)
Tax paid
(98)
(728)
(243)
Net cash (used in) provided by operating activities
(11,903)
867
17,941
Cash flows (used in) provided by investing activities
Purchase of financial assets
(10,449)
(10,293)
(9,563)
Proceeds from sale and maturity of financial assets
7,050
5,286
10,641
Purchase of fixed assets1
(284)
(350)
(339)
Purchase of other intangible assets1
(1,137)
(1,381)
(1,335)
Proceeds from sale of fixed assets
27
11
3
Additional capital injections to subsidiaries
(1,250)
(350)
(600)
Dividends received from subsidiaries
1,075
122
1,850
Distributions on other equity instruments received
210
191
125
Capital repayments and redemptions
1,200
32
Disposal of businesses, net of cash disposed
5
Net cash (used in) provided by investing activities
(3,558)
(6,764)
819
Cash flows used in financing activities
Dividends paid to ordinary shareholders
(3,990)
(4,700)
Distributions on other equity instruments
(363)
(334)
(241)
Return of capital contributions
(1)
(1)
(4)
Interest paid on subordinated liabilities
(332)
(285)
(290)
Proceeds from issue of subordinated liabilities
386
670
837
Proceeds from issue of other equity instruments
1,168
745
Repayment of subordinated liabilities
(92)
(2,156)
Repurchases and redemptions of other equity instruments
(500)
Borrowings from parent company
2,895
1,942
1,852
Repayments of borrowings to parent company
(1,280)
(931)
Interest paid on borrowings from parent company
(200)
(210)
(200)
Net cash used in financing activities
(2,217)
(3,196)
(202)
Effects of exchange rate changes on cash and cash equivalents
1
Change in cash and cash equivalents
(17,678)
(9,093)
18,559
Cash and cash equivalents at beginning of year
61,696
70,789
52,230
Cash and cash equivalents at end of year
25 (D)
44,018
61,696
70,789
1Previously presented in aggregate.
The accompanying notes are an integral part of the Bank financial statements.
149
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 1: Basis of preparation and accounting policies
The financial statements of Lloyds Bank plc have been prepared in accordance with international accounting standards in conformity with the
requirements of the Companies Act 2006. The financial statements have also been prepared in accordance with IFRS® Accounting Standards as
issued by the International Accounting Standards Board (IASB).
The financial information has been prepared under the historical cost convention, as modified by the revaluation of financial assets measured
at fair value through other comprehensive income, certain financial assets and liabilities at fair value through profit or loss and all derivative
contracts. The accounting policies of the Bank are the same as those of the Group which are set out in note 2 to the consolidated financial
statements. Investments in subsidiaries are carried at historical cost, less any provisions for impairment. Fees payable to the Bank’s auditors by
the Group are set out in note 12 to the consolidated financial statements.
Note 2: Critical accounting judgements and key sources of estimation uncertainty
The preparation of the Bank’s financial statements in accordance with IFRS Accounting Standards requires management to make judgements,
estimates and assumptions in applying the accounting policies that affect the reported amounts of assets, liabilities, income and expenses. Due
to the inherent uncertainty in making estimates, actual results reported in future periods may be based upon amounts which differ from those
estimates. Estimates, judgements and assumptions are continually evaluated and are based on historical experience and other factors,
including expectations of future events that are believed to be reasonable under the circumstances. In preparing the financial statements, the
Bank has considered the impact of climate-related risks on its financial position and performance. While the effects of climate change
represent a source of uncertainty, the Bank does not consider there to be a material impact on its judgements and estimates from the physical,
transition and other climate-related risks in the short term.
The significant judgements, apart from those involving estimation, made by management in applying the Bank’s accounting policies in these
financial statements (critical judgements) and the key sources of estimation uncertainty that may have a significant risk of causing a material
adjustment to the carrying amount of assets and liabilities within the next financial year (key sources of estimation uncertainty), which
together are considered critical to the Bank’s results and financial position, are as follows:
Retirement benefit obligations (note 3)
Fair value of financial instruments (note 16 to the consolidated financial statements)
Allowance for expected credit losses (note 19 to the consolidated financial statements)
Regulatory and legal provisions (note 26 to the consolidated financial statements)
Note 3: Retirement benefit obligations
2024
£m
2023
£m
Amounts recognised in the balance sheet
Retirement benefit assets
1,827
2,118
Retirement benefit obligations
(48)
(54)
Total amounts recognised in the balance sheet
1,779
2,064
The total amounts recognised in the balance sheet relate to:
2024
£m
2023
£m
Defined benefit pension schemes
1,801
2,089
Other retirement benefit schemes
(22)
(25)
Total amounts recognised in the balance sheet
1,779
2,064
Pension schemes
Defined benefit schemes
(i)Characteristics of and risks associated with the Bank’s schemes
Note 11 to the consolidated financial statements outlines the characteristics of and risks associated with the Group’s and the Bank’s defined
benefit pension schemes; the two significant schemes for the Bank are the Lloyds Bank Pension Scheme No. 1 and the Lloyds Bank Pension
Scheme No. 2.
(ii)Amounts in the financial statements
2024
£m
2023
£m
Amount included in the balance sheet
Present value of funded obligations
(17,066)
(19,033)
Fair value of scheme assets
18,867
21,122
Net amount recognised in the balance sheet
1,801
2,089
150
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 3: Retirement benefit obligations continued
2024
£m
2023
£m
Net amount recognised in the balance sheet
At 1 January
2,089
2,046
Net defined benefit pension credit
22
53
Actuarial gains (losses) on defined benefit obligation
1,788
(681)
Return on plan assets
(2,182)
(272)
Employer contributions
85
944
Exchange and other adjustments
(1)
(1)
At 31 December
1,801
2,089
2024
£m
2023
£m
Movements in the defined benefit obligation
At 1 January
(19,033)
(18,485)
Current service cost
(41)
(41)
Interest expense
(872)
(889)
Remeasurements:
Actuarial gains – demographic assumptions
69
86
Actuarial gains (losses) – experience
105
(560)
Actuarial gains (losses) – financial assumptions
1,614
(207)
Benefits paid
1,110
1,058
Past service cost
(15)
(1)
Exchange and other adjustments
(3)
6
At 31 December
(17,066)
(19,033)
2024
£m
2023
£m
Analysis of the defined benefit obligation
Active members
(1,305)
(1,563)
Deferred members
(4,073)
(4,981)
Dependants
(1,002)
(1,116)
Pensioners
(10,686)
(11,373)
At 31 December
(17,066)
(19,033)
2024
£m
2023
£m
Changes in the fair value of scheme assets
At 1 January
21,122
20,531
Return on plan assets excluding amounts included in interest income
(2,182)
(272)
Interest income
971
1,006
Employer contributions
85
944
Benefits paid
(1,110)
(1,058)
Administrative costs paid
(21)
(22)
Exchange and other adjustments
2
(7)
At 31 December
18,867
21,122
151
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 3: Retirement benefit obligations continued
(iii)Composition of scheme assets
2024
2023
Quoted
£m
Unquoted
£m
Total
£m
Quoted
£m
Unquoted
£m
Total
£m
Debt instruments1:
Fixed interest government bonds
4,044
4,044
3,283
3,283
Index-linked government bonds
8,714
8,714
8,775
8,775
Corporate and other debt securities
4,566
4,566
4,531
4,531
17,324
17,324
16,589
16,589
Pooled investment vehicles
317
4,830
5,147
292
5,591
5,883
Equity instruments
18
43
61
19
41
60
Money market instruments, cash, derivatives and other assets
and liabilities
(276)
(3,389)
(3,665)
19
(1,429)
(1,410)
At 31 December
17,383
1,484
18,867
16,919
4,203
21,122
1Of the total debt instruments £ 15,809 million ( 2023: £15,127 million) were investment grade (credit ratings equal to or better than ‘BBB’).
The assets of all of the funded plans are held independently of the Bank’s assets in separate trustee-administered funds.
The pension schemes’ pooled investment vehicles comprise:
2024
£m
2023
£m
Alternative credit funds
1,131
1,233
Bond and debt funds
266
314
Equity funds
1,063
1,194
Hedge and mutual funds
464
529
Infrastructure funds
465
460
Liquidity funds
1,032
1,228
Property funds
726
925
At 31 December
5,147
5,883
The Trustee’s approach to investment is focused on acting in the members’ best financial interests, with the integration of ESG (environmental,
social and governance) considerations into investment management processes and practices. This policy is reviewed annually (or more
frequently as required) and has been shared with the schemes’ investment managers for implementation.
Climate change is one of the risks the schemes manage given its potential financial impact on valuation of assets.
(iv)Assumptions
Note 11 to the consolidated financial statements includes details of the assumptions used in the valuations of the Group’s and the Bank’s
defined benefit pension schemes, including information on anticipated life expectancy.
(v)Amount, timing and uncertainty of future cash flows
Risk exposure of the defined benefit schemes
Note 11 to the consolidated financial statements includes details of the significant risks faced by the Group and the Bank in relation to their
defined benefit schemes.
152
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 3: Retirement benefit obligations continued
Sensitivity analysis
The effect of reasonably possible changes in key assumptions on the value of scheme liabilities and the resulting pension charge in the Bank’s
income statement and on the net defined benefit pension scheme asset, for the Bank’s two most significant schemes, is set out below. The
sensitivities provided assume that all other assumptions and the value of the schemes’ assets remain unchanged, and are not intended to
represent changes that are at the extremes of possibility. The calculations are approximate in nature and full detailed calculations could lead
to a different result. It is unlikely that isolated changes to individual assumptions will be experienced in practice. Due to the correlation of
assumptions, aggregating the effects of these isolated changes may not be a reasonable estimate of the actual effect of simultaneous changes
in multiple assumptions.
Effect of reasonably possible alternative assumptions
Increase (decrease) in the
income statement charge
(Increase) decrease in the
net defined benefit
pension scheme surplus
2024
£m
2023
£m
2024
£m
2023
£m
Inflation (including pension increases)1:
Increase of 0.25 per cent
18
320
Decrease of 0.25 per cent
(18)
(309)
Increase of 0.1 per cent
7
148
Decrease of 0.1 per cent
(8)
(155)
Discount rate2:
Increase of 0.25 per cent
(31)
(443)
Decrease of 0.25 per cent
30
463
Increase of 0.1 per cent
(13)
(221)
Decrease of 0.1 per cent
13
226
Expected life expectancy of members:
Increase of one year
31
30
550
620
Decrease of one year
(32)
(31)
(567)
(634)
1At 31 December 2024, the assumed rate of RPI inflation is 2.97 per cent and CPI inflation 2.52 per cent ( 2023: RPI 2.96 per cent and CPI 2.47 per cent).
2At 31 December 2024, the assumed discount rate is 5.55 per cent (2023: 4.70 per cent).
Sensitivity analysis method and assumptions
The sensitivity analysis above reflects the impact on the liabilities of the Bank’s two most significant schemes which account for over 98 per
cent of the Bank’s defined benefit obligations. While differences in the underlying liability profiles for the remainder of the Bank’s pension
arrangements mean that they may exhibit slightly different sensitivities to variations in these assumptions, the sensitivities provided above are
indicative of the impact across the Bank as a whole.
The inflation assumption sensitivity applies to the assumed rate of increase in both the Consumer Price Index (CPI) and the Retail Price Index
(RPI), and includes the impact on the rate of increases to pensions, both before and after retirement. These pension increases are linked to
inflation (either CPI or RPI) subject to certain minimum and maximum limits.
The sensitivity analysis (including the inflation sensitivity) does not include the impact of any change in the rate of salary increases as
pensionable salaries have been frozen since 2 April 2014.
The life expectancy assumption has been applied by allowing for an increase/decrease in life expectation from age 60 of one year, based upon
the approximate weighted average age for each scheme. While this is an approximate approach and will not give the same result as a one year
increase in life expectancy at every age, it provides an appropriate indication of the potential impact on the schemes from changes in life
expectancy.
There was no change in the methods and assumptions used in preparing the sensitivity analysis from the prior year.
Asset-liability matching strategies
Note 11 to the consolidated financial statements includes a discussion of the measures taken by the Group and the Bank to match scheme
assets and liabilities.
153
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 3: Retirement benefit obligations continued
Maturity profile of defined benefit obligation
The following table provides information on the weighted average duration of the defined benefit pension obligation and the distribution and
timing of benefit payments:
2024
Years
2023
Years
Duration of the defined benefit obligation
11
12
Maturity analysis of benefits expected to be paid:
2024
£m
2023
£m
Within 12 months
1,250
1,194
Between 1 and 2 years
1,092
1,045
Between 2 and 5 years
3,469
3,325
Between 5 and 10 years
6,068
6,048
Between 10 and 15 years
5,682
5,755
Between 15 and 25 years
9,728
10,181
Between 25 and 35 years
6,240
6,984
Between 35 and 45 years
2,453
3,044
In more than 45 years
377
554
Maturity analysis method and assumptions
The projected benefit payments are based on the assumptions underlying the assessment of the obligations, including allowance for expected
future inflation. They are shown in their undiscounted form and therefore appear large relative to the discounted assessment of the defined
benefit obligations recognised in the Bank’s balance sheet. They are in respect of benefits that have been accrued prior to the respective year-
end date only and make no allowance for any benefits that may have been accrued subsequently.
Defined contribution schemes
The Bank operates a number of defined contribution pension schemes in the UK and overseas, principally Your Tomorrow and the defined
contribution sections of the Lloyds Bank Pension Scheme No. 1.
Other retirement benefit schemes
The Bank operates a number of schemes which provide post-retirement healthcare benefits to certain employees, retired employees and their
dependants. Under the principal scheme the Bank has undertaken to meet the cost of post-retirement healthcare for all eligible former
employees (and their dependants) who retired prior to 1 January 1996. The Bank has entered into an insurance contract to provide these
benefits and a provision has been made for the estimated cost of future insurance premiums payable.
For the principal post-retirement healthcare scheme, the latest actuarial valuation of the liability was carried out at 31 December 2024 by
qualified independent actuaries. The principal assumptions used were as set out in note 11 to the consolidated financial statements.
Movements in the other retirement benefits obligation:
2024
£m
2023
£m
At 1 January
(25)
(21)
Actuarial gains (losses)
2
(6)
Insurance premiums paid
2
2
Charge for the year
(1)
At 31 December
(22)
(25)
154
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 4: Tax
Deferred tax
The Bank’s deferred tax assets and liabilities are as follows:
Statutory position
2024
£m
2023
£m
Tax disclosure
2024
£m
2023
£m
Deferred tax assets
3,139
3,001
Deferred tax assets
3,778
3,707
Deferred tax liabilities
Deferred tax liabilities
(639)
(706)
Net deferred tax asset at 31 December
3,139
3,001
Net deferred tax asset at 31 December
3,139
3,001
The statutory position reflects the deferred tax assets and liabilities as disclosed in the Bank balance sheet and takes into account the ability of
the Bank to net assets and liabilities where there is a legally enforceable right of offset. The tax disclosure of deferred tax assets and liabilities
ties to the amounts outlined in the tables below which splits the deferred tax assets and liabilities by type, before such netting.
Movements in deferred tax assets and liabilities (before taking into consideration the offsetting of balances within the same taxing jurisdiction)
can be summarised as follows:
Deferred tax assets
Tax losses
£m
Property,
plant and
equipment
£m
Provisions
£m
Share-
based
payments
£m
Derivatives
£m
Asset
revaluations
1
£m
Pension
liabilities
£m
Other
temporary
differences
£m
Total
£m
At 1 January 2023
3,161
332
161
7
673
2
20
25
4,381
(Charge) credit to the income statement
(271)
(130)
(27)
14
(14)
(428)
(Charge) credit to other comprehensive
income
(292)
46
(246)
At 31 December 2023
2,890
202
134
21
381
48
20
11
3,707
Charge to the income statement
(139)
(43)
(5)
(1)
(3)
(7)
(198)
Credit to other comprehensive income
254
15
269
At 31 December 2024
2,751
159
129
20
635
63
17
4
3,778
Deferred tax liabilities
Capitalised
software
enhancements
£m
Pension
assets
£m
Other
temporary
differences
£m
Total
£m
At 1 January 2023
(146)
(581)
(98)
(825)
Credit (charge) to the income statement
64
(2)
1
63
(Charge) credit to other comprehensive income
(10)
66
56
At 31 December 2023
(82)
(593)
(31)
(706)
(Charge) credit to the income statement
(35)
1
(34)
Credit to other comprehensive income
80
22
102
Exchange and other adjustments
(1)
(1)
At 31 December 2024
(117)
(512)
(10)
(639)
1Financial assets at fair value through other comprehensive income.
At 31 December 2024 the Bank carried net deferred tax assets of £ 3,139 million (2023: £3,001 million ) principally relating to tax losses carried
forward.
Estimation of income taxes includes the assessment of recoverability of deferred tax assets. Deferred tax assets are only recognised to the
extent that they are considered more likely than not to be recoverable based on existing tax laws and forecasts of future taxable profits
against which the underlying tax deductions can be utilised. The Bank has recognised a deferred tax asset of £2,751 million ( 2023 : £2,890
million) in respect of trading losses carried forward, and they will be utilised as taxable profits arise in future periods.
Deferred tax not recognised
Deferred tax assets of £114 million (2023: £118 million) have not been recognised in respect of £451 million of UK tax losses and other temporary
differences which can only be used to offset future capital gains. UK capital losses can be carried forward indefinitely.
No deferred tax has been recognised in respect of foreign trade losses where it is not more likely than not that we will be able to utilise them in
future periods. Of the asset not recognised, £17 million (2023: £16 million) relates to losses that will expire if not used within 20  years, and
£4 million (2023: £5 million) relates to losses with no expiry date.
As a result of parent company exemptions on dividends from subsidiaries and on capital gains on disposal there are no significant taxable
temporary differences associated with investments in subsidiaries, branches, associates and joint arrangements.
155
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 5: Measurement basis of financial assets and liabilities
Intentionally left blank
The accounting policies in note 2 to the consolidated financial statements describe how different classes of financial instruments are measured,
and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the carrying amounts of the
financial assets and liabilities by category and by balance sheet heading.
Derivatives
designated
as hedging
instruments
£m
Mandatorily held at
fair value through
profit or loss
Designated
at fair value
through
profit or loss
£m
At fair value
through other
comprehensive
income
£m
Held at
amortised
cost
£m
Total
£m
At 31 December 2024
Held for
trading
£m
Other
£m
Financial assets
Cash and balances at central banks
36,838
36,838
Financial assets at fair value through profit or
loss
6,746
6,746
Derivative financial instruments
47
7,170
7,217
Loans and advances to banks
6,195
6,195
Loans and advances to customers
105,148
105,148
Reverse repurchase agreements
44,143
44,143
Debt securities
9,945
9,945
Due from fellow Lloyds Banking Group
undertakings
139,380
139,380
Financial assets at amortised cost
304,811
304,811
Financial assets at fair value through other
comprehensive income
30,116
30,116
Other
124
124
Total financial assets
47
7,170
6,746
30,116
341,773
385,852
Financial liabilities
Deposits from banks
2,965
2,965
Customer deposits
273,511
273,511
Repurchase agreements
15,593
15,593
Due to fellow Lloyds Banking Group
undertakings
21,204
21,204
Financial liabilities at fair value through profit
or loss
9,653
9,653
Derivative financial instruments
336
9,040
9,376
Debt securities in issue at amortised cost
34,169
34,169
Other
903
903
Subordinated liabilities
6,686
6,686
Total financial liabilities
336
9,040
9,653
355,031
374,060
Offsetting of financial assets and liabilities
Related amounts where set off in the balance
sheet not permitted1
Potential
net amounts
if offset
of related
amounts
permitted
£m
At 31 December 2024
Gross
amounts of
assets and
liabilities
£m
Amount
offset in
the balance
sheet2
£m
Net amounts
presented in
the balance
sheet
£m
Cash
collateral
(received)/
pledged
£m
Non-cash
collateral
(received)/
pledged
£m
Master
netting and
similar
agreements
£m
Derivative assets
43,270
(36,053)
7,217
(319)
(522)
(4,300)
2,076
Derivative liabilities
(47,850)
38,474
(9,376)
2,280
182
4,300
(2,614)
Net position
(4,580)
2,421
(2,159)
1,961
(340)
(538)
Non-trading reverse repurchase agreements
55,165
(11,022)
44,143
256
(44,031)
368
Non-trading repurchase agreements
(26,615)
11,022
(15,593)
8
15,259
(326)
Net position
28,550
28,550
264
(28,772)
42
1The Bank enters into derivatives and repurchase and reverse repurchase agreements with various counterparties which are governed by industry standard master netting
agreements. The Bank holds and provides cash and securities collateral in respect of derivative transactions covered by these agreements. The right to set off balances under these
master netting agreements or to set off cash and securities collateral only arises in the event of non-payment or default and, as a result, these arrangements do not qualify for
offsetting under IAS 32.
2The amounts offset in the balance sheet as shown above meet the criteria for offsetting under IAS 32.
156
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 5: Measurement basis of financial assets and liabilities continued
Derivatives
designated
as hedging
instruments
£m
Mandatorily held at
fair value through
profit or loss
Designated
at fair value
through
profit or loss
£m
At fair value
through other
comprehensive
income
£m
Held at
amortised
cost
£m
Total
£m
At 31 December 2023
Held for
trading
£m
Other
£m
Financial assets
Cash and balances at central banks
52,268
52,268
Financial assets at fair value through profit or
loss
6,255
6,255
Derivative financial instruments
72
6,977
7,049
Loans and advances to banks
8,512
8,512
Loans and advances to customers
106,497
106,497
Reverse repurchase agreements
32,751
32,751
Debt securities
10,144
10,144
Due from fellow Lloyds Banking Group
undertakings
124,627
124,627
Financial assets at amortised cost
282,531
282,531
Financial assets at fair value through other
comprehensive income
27,156
27,156
Other
189
189
Total financial assets
72
6,977
6,255
27,156
334,988
375,448
Financial liabilities
Deposits from banks
3,380
3,380
Customer deposits
266,907
266,907
Repurchase agreements
7,305
7,305
Due to fellow Lloyds Banking Group
undertakings
20,400
20,400
Financial liabilities at fair value through profit
or loss
10,474
10,474
Derivative financial instruments
420
7,194
7,614
Debt securities in issue at amortised cost
41,365
41,365
Other
929
929
Subordinated liabilities
6,421
6,421
Total financial liabilities
420
7,194
10,474
346,707
364,795
Offsetting of financial assets and liabilities
Related amounts where
set off in the balance
sheet not permitted1
Potential
net amounts
if offset
of related
amounts
permitted
£m
At 31 December 2023
Gross
amounts of
assets and
liabilities
£m
Amount
offset in
the balance
sheet2
£m
Net amounts
presented in
the balance
sheet
£m
Cash
collateral
(received)/
pledged
£m
Non-cash
collateral
(received)/
pledged
£m
Master
netting and
similar
agreements
£m
Derivative assets
46,513
(39,464)
7,049
(2,075)
(145)
(4,822)
7
Derivative liabilities
(49,738)
42,124
(7,614)
2,052
620
4,822
(120)
Net position
(3,225)
2,660
(565)
(23)
475
(113)
Non-trading reverse repurchase agreements
40,387
(7,636)
32,751
58
(32,559)
250
Non-trading repurchase agreements
(14,941)
7,636
(7,305)
(60)
7,317
(48)
Net position
25,446
25,446
(2)
(25,242)
202
1The Bank enters into derivatives and repurchase and reverse repurchase agreements with various counterparties which are governed by industry standard master netting
agreements. The Bank holds and provides cash and securities collateral in respect of derivative transactions covered by these agreements. The right to set off balances under these
master netting agreements or to set off cash and securities collateral only arises in the event of non-payment or default and, as a result, these arrangements do not qualify for
offsetting under IAS 32.
2The amounts offset in the balance sheet as shown above meet the criteria for offsetting under IAS 32.
157
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 6: Fair values of financial assets and liabilities
At 31 December 2024, the carrying value of the Bank’s financial instrument assets held at fair value was £44,079 million (2023:
£40,460 million ), and its financial instrument liabilities held at fair value was £19,029 million (2023: £18,088 million ).
(1)Fair value measurement
Note 16 to the consolidated financial statements outlines the valuation hierarchy into which financial instruments of the Group and the Bank
measured at fair value are categorised and discusses valuation methodologies.
(2)Financial assets and liabilities carried at fair value
(A)Financial assets (excluding derivatives)
Valuation hierarchy
At 31 December 2024, the Bank’s financial assets (excluding derivatives) carried at fair value totalled £36,862 million (2023: £33,411 million ).
The table below analyses these financial assets by balance sheet classification, asset type and valuation methodology (level 1, 2 or 3, as
described on page 111). The fair value measurement approach is recurring in nature. There were no significant transfers between level 1 and 2
during the year.
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
At 31 December 2024
Financial assets at fair value through profit or loss
Loans and advances to customers
1,256
1,256
Corporate and other debt securities
5,486
5,486
Equity shares
4
4
Total financial assets at fair value through profit or loss
6,742
4
6,746
Financial assets at fair value through other comprehensive income
Debt securities:
Government securities
15,013
115
15,128
Asset-backed securities
146
146
Corporate and other debt securities
1,146
13,696
14,842
16,159
13,957
30,116
Total financial assets at fair value through other comprehensive income
16,159
13,957
30,116
Total financial assets (excluding derivatives) at fair value
16,159
20,699
4
36,862
At 31 December 2023
Financial assets at fair value through profit or loss
Loans and advances to customers
801
801
Corporate and other debt securities
5,450
5,450
Equity shares
4
4
Total financial assets at fair value through profit or loss
6,251
4
6,255
Financial assets at fair value through other comprehensive income
Debt securities:
Government securities
13,949
48
13,997
Asset-backed securities
118
118
Corporate and other debt securities
951
12,090
13,041
14,900
12,256
27,156
Total financial assets at fair value through other comprehensive income
14,900
12,256
27,156
Total financial assets (excluding derivatives) at fair value
14,900
18,507
4
33,411
Movements in level 3 portfolio
The table below analyses movements in level 3 financial assets (excluding derivatives) at fair value, recurring basis.
2024
2023
Financial
assets at
fair value
through
profit or loss
£m
Total level 3
financial assets
(excluding
derivatives)
at fair value,
recurring basis
£m
Financial
assets at
fair value
through
profit or loss
£m
Total level 3
financial assets
(excluding
derivatives)
at fair value,
recurring basis
£m
At 1 January
4
4
4
4
Sales/repayments of customer loans
At 31 December
4
4
4
4
158
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 6: Fair values of financial assets and liabilities continued
(B)Financial liabilities (excluding derivatives)
Valuation hierarchy
At 31 December 2024, the Bank’s financial liabilities (excluding derivatives) carried at fair value, comprised its financial liabilities at fair value
through profit or loss and totalled £9,653 million (2023: £10,474 million ). The table below analyses these financial liabilities by balance sheet
classification and valuation methodology (level 1, 2 or 3, as described on page 111). The fair value measurement approach is recurring in nature.
There were no significant transfers between level 1 and 2 during the year.
2024
2023
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Debt securities in issue designated at fair value through
profit or loss
9,653
9,653
10,474
10,474
The amount contractually payable on maturity of the debt securities held at fair value through profit or loss at 31 December 2024 was
£9,832 million, which was £179 million higher than the balance sheet carrying value ( 2023: £10,398 million , which was £76 million lower than
the balance sheet carrying value). At 31 December 2024 there was a cumulative £12 million decrease in the fair value of these liabilities
attributable to changes in credit spread risk; this is determined by reference to the quoted credit spreads of Lloyds Bank plc, the issuing entity
within the Group. Of the cumulative amount, an increase of £78 million arose in 2024 and an increase of £234 million arose in2023 .
(C)Derivatives
Valuation hierarchy
All of the Bank’s derivative assets and liabilities are carried at fair value. At 31 December 2024, such assets totalled £7,217 million ( 2023:
£7,049 million) and liabilities totalled £9,376 million (2023: £7,614 million). The table below analyses these derivative balances by valuation
methodology (level 1, 2 or 3, as described on page 111). The fair value measurement approach is recurring in nature. There were no significant
transfers between level 1 and level 2 during the year.
2024
2023
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
Derivative assets
7,217
7,217
7,049
7,049
Derivative liabilities
(9,369)
(7)
(9,376)
(7,603)
(11)
(7,614)
Movements in level 3 portfolio
The table below analyses movements in level 3 derivative assets and liabilities carried at fair value.
2024
2023
Derivative
assets
£m
Derivative
liabilities
£m
Derivative
assets
£m
Derivative
liabilities
£m
At 1 January
(11)
(13)
Gains recognised in the income statement within other income
3
Redemptions
1
2
At 31 December
(7)
(11)
Gains recognised in the income statement, within other income, relating to the change in
fair value of those assets or liabilities held at 31 December
3
159
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 6: Fair values of financial assets and liabilities continued
(3)Financial assets and liabilities carried at amortised cost
(A)Financial assets
Valuation hierarchy
The table below analyses the fair values of those financial assets of the Bank which are carried at amortised cost by valuation methodology
(level 1, 2 or 3, as described on page 111). Financial assets carried at amortised cost are mainly classified as level 3 due to significant
unobservable inputs used in the valuation models. Where inputs are observable, debt securities are classified as level 1 or 2.
Carrying
value
£m
Fair
value
£m
Valuation hierarchy
Level 1
£m
Level 2
£m
Level 3
£m
At 31 December 2024
Loans and advances to banks
6,195
6,195
6,195
Loans and advances to customers
105,148
103,999
103,999
Reverse repurchase agreements
44,143
44,143
44,143
Debt securities
9,945
9,905
8,995
910
Due from fellow Lloyds Banking Group undertakings
139,380
139,380
139,380
At 31 December 2023
Loans and advances to banks
8,512
8,512
8,512
Loans and advances to customers
106,497
104,381
104,381
Reverse repurchase agreements
32,751
32,751
32,751
Debt securities
10,144
10,012
7,692
2,320
Due from fellow Lloyds Banking Group undertakings
124,627
124,627
124,627
The carrying amount of the following financial instruments is a reasonable approximation of fair value: cash and balances at central banks,
items in the course of collection from banks, items in course of transmission to banks and notes in circulation.
(B)Financial liabilities
Valuation hierarchy
The table below analyses the fair values of those financial liabilities of the Bank which are carried at amortised cost by valuation methodology
(level 1, 2 or 3, as described on page 111).
Carrying
value
£m
Fair
value
£m
Valuation hierarchy
Level 1
£m
Level 2
£m
Level 3
£m
At 31 December 2024
Deposits from banks
2,965
2,965
2,965
Customer deposits
273,511
274,010
274,010
Repurchase agreements
15,593
15,593
15,593
Due to fellow Lloyds Banking Group undertakings
21,204
21,204
21,204
Debt securities in issue at amortised cost
34,169
34,188
34,188
Subordinated liabilities
6,686
6,709
6,709
At 31 December 2023
Deposits from banks
3,380
3,380
3,380
Customer deposits
266,907
267,176
267,176
Repurchase agreements
7,305
7,305
7,305
Due to fellow Lloyds Banking Group undertakings
20,400
20,400
20,400
Debt securities in issue at amortised cost
41,365
41,069
41,069
Subordinated liabilities
6,421
6,529
6,529
(4)Reclassifications of financial assets
There have been no reclassifications of financial assets in 2023 or 2024.
160
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 7: Derivative financial instruments
Note 17 to the consolidated financial statements includes a discussion of the types of derivatives held by the Group and the Bank and the
strategies for doing so.
The fair values and notional amounts of derivative instruments are set out in the following table:
2024
2023
Contract/
notional
amount
£m
Fair value
Changes in fair
value used for
calculating
hedge
ineffectiveness
£m
Contract/
notional
amount
£m
Fair value
Changes in fair
value used for
calculating hedge
ineffectiveness
£m
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Trading and other
Exchange rate contracts
73,550
2,723
1,849
100,473
1,032
723
Interest rate contracts
1,303,464
4,441
7,084
1,361,789
5,939
6,407
Credit derivatives
3,477
6
107
3,106
6
64
Total derivative assets/
liabilities - trading and other
1,380,491
7,170
9,040
1,465,368
6,977
7,194
Hedging
Interest rate
Currency swaps
43
2
35
3
2
Interest rate swaps
63,933
336
1,122
55,360
69
413
(414)
Designated as fair value hedges:
63,976
2
336
1,122
55,395
72
413
(412)
Foreign exchange
Currency swaps
1,739
45
96
258
7
(4)
Interest rate
Interest rate swaps
142,886
(890)
97,908
1,284
Designated as cash flow hedges
144,625
45
(794)
98,166
7
1,280
Total derivative assets/
liabilities - hedging
208,601
47
336
328
153,561
72
420
868
Total recognised derivative
assets/liabilities
1,589,092
7,217
9,376
1,618,929
7,049
7,614
161
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 7: Derivative financial instruments continued
Details of the Bank’s hedging instruments are set out below:
Maturity
Fair value hedges
Up to 1 month
£m
1 to 3 months
£m
3 to 12 months
£m
1 to 5 years
£m
Over 5 years
£m
Total
£m
At 31 December 2024
Interest rate
Cross currency swap
Notional
43
43
Average fixed interest rate
1.28%
Average EUR/GBP exchange rate
1.38
Interest rate swap
Notional
76
2,058
2,299
28,508
30,992
63,933
Average fixed interest rate
1.22%
1.03%
2.33%
2.76%
2.26%
63,976
At 31 December 2023
Interest rate
Cross currency swap
Notional
35
35
Average fixed interest rate
1.28%
Average EUR/GBP exchange rate
1.38
Interest rate swap
Notional
133
1,200
3,554
26,405
24,068
55,360
Average fixed interest rate
1.55%
0.40%
1.88%
1.96%
1.75%
55,395
Maturity
Cash flow hedges
Up to 1 month
£m
1 to 3 months
£m
3 to 12 months
£m
1 to 5 years
£m
Over 5 years
£m
Total
£m
At 31 December 2024
Foreign exchange
Currency swap
Notional
559
513
661
6
1,739
Average USD/GBP exchange rate
1.27%
1.29%
1.29%
1.21%
Interest rate
Interest rate swap
Notional
250
1,584
9,000
81,578
50,474
142,886
Average fixed interest rate
1.01%
3.75%
2.57%
2.96%
2.93%
144,625
At 31 December 2023
Foreign exchange
Currency swap
Notional
5
20
227
6
258
Average USD/GBP exchange rate
1.25%
1.27%
1.24%
1.20%
Interest rate
Interest rate swap
Notional
1,000
33
4,208
47,132
45,535
97,908
Average fixed interest rate
0.92%
4.66%
1.49%
2.58%
2.27%
98,166
162
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 7: Derivative financial instruments continued
The Bank’s hedged items are as follows:
Carrying amount of
the hedged item
Accumulated amount of
fair value adjustment on
the hedged item
Change in fair
value of hedged
item for
ineffectiveness
assessment
£m
Fair value hedges
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
At 31 December 2024
Interest rate
Fixed rate issuance1
26,925
1,549
7
Fixed rate bonds2
29,264
(1,070)
(1,158)
At 31 December 2023
Interest rate
Fixed rate issuance1
24,449
1,599
(551)
Fixed rate bonds2
24,146
(331)
962
1. Included within debt securities in issue at amortised cost.
2. Included within financial assets at amortised cost and financial assets at fair value through other comprehensive income.
At 31 December 2024
At 31 December 2023
Change in
fair value of
hedged item for
ineffectiveness
assessment
£m
Cash flow hedging reserve
Change in fair
value of hedged
item for
ineffectiveness
assessment
£m
Cash flow hedging reserve
Continuing
hedges
£m
Discontinued
hedges
£m
Continuing
hedges
£m
Discontinued
hedges
£m
Cash value hedges
Foreign exchange
Foreign currency issuance1
(96)
75
26
4
(11)
17
Interest rate
Customer loans2
755
(534)
(556)
(1,247)
238
(586)
Central bank balances3
463
(567)
(649)
(390)
(5)
(856)
Customer deposits4
(84)
(225)
161
434
(300)
141
1 Included within debt securities in issue at amortised cost.
2Included within loans and advances to customers.
3Included within cash and balances at central banks.
4Included within customer deposits.
The accumulated amount of fair value hedge adjustments remaining in the balance sheet for hedged items that have ceased to be adjusted for
hedging gains and losses is an asset of £27 million (2023: asset of £28 million) relating to fixed rate issuances.
163
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 7: Derivative financial instruments continued
Gains and losses arising from hedge accounting are summarised as follows:
Hedge ineffectiveness
recognised in the
income statement1
Fair value hedges
2024
£m
2023
£m
Interest rate
Fixed rate issuance
(11)
(15)
Fixed rate bonds
(18)
14
Gain (loss)
recognised
in other
comprehensive
income
£m
Hedge
ineffectiveness
recognised in
the income
statement1
£m
Amounts reclassified from reserves
to income statement as:
Cash flow hedges
Hedged cash
flows will no
longer occur
£m
Hedged item
affected income
statement
£m
At 31 December 2024
Foreign exchange
Foreign currency issuance
96
(1)
Interest rate
Customer loans
(1,220)
(76)
477
Central bank balances
(886)
(17)
532
Customer deposits
67
23
28
At 31 December 2023
Foreign exchange
Foreign currency issuance
(5)
(1)
Interest rate
Customer loans
700
23
65
Central bank balances
319
11
159
Customer deposits
(224)
(7)
30
1. Hedge ineffectiveness is included in the income statement within net trading income.
In 2024 and 2023 there were no gains or losses reclassified from the cash flow hedging reserve for which hedge accounting had previously been
used but for which the hedged future cash flows are no longer expected to occur.
At 31 December 2024 £6,041 million of total recognised derivative assets and £7,987 million of total recognised derivative liabilities (2023:
£5,987 million of assets and £9,940 million of liabilities) had a contractual residual maturity of greater than one year.
164
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 8: Loans and advances to customers
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
At 1 January 2024
91,107
13,695
2,990
107,792
309
564
422
1,295
Exchange and other adjustments1
(115)
49
(64)
(130)
(12)
(2)
(4)
(18)
Transfers to Stage 1
4,290
(4,275)
(15)
135
(131)
(4)
Transfers to Stage 2
(6,304)
6,505
(201)
(19)
36
(17)
Transfers to Stage 3
(390)
(643)
1,033
(7)
(60)
67
Net change in ECL due to transfers
(93)
119
111
137
Impact of transfers between stages
(2,404)
1,587
817
16
(36)
157
137
Other changes in credit quality
(22)
(24)
304
258
Additions and repayments
2,264
(2,544)
(661)
(941)
17
(47)
(69)
(99)
Charge (credit) to the income statement
11
(107)
392
296
Disposals and derecognition2
Advances written off
(438)
(438)
(438)
(438)
Recoveries of amounts previously written off
63
63
63
63
At 31 December 2024
90,852
12,787
2,707
106,346
308
455
435
1,198
Allowance for impairment losses
(308)
(455)
(435)
(1,198)
Net carrying amount
90,544
12,332
2,272
105,148
Drawn ECL coverage3 (%)
0.3
3.6
16.1
1.1
1 Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind and derecognising assets as a result of modifications.
2Relates to the securitisation of Retail unsecured loans.
3Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
Gross carrying amount
Allowance for expected credit losses
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
At 1 January 2023
94,852
17,516
2,952
115,320
293
698
381
1,372
Exchange and other adjustments1
(327)
1
(6)
(332)
(5)
(11)
(16)
Transfers to Stage 1
4,867
(4,842)
(25)
160
(156)
(4)
Transfers to Stage 2
(4,794)
4,964
(170)
(21)
40
(19)
Transfers to Stage 3
(515)
(872)
1,387
(6)
(84)
90
Net change in ECL due to transfers
(112)
162
94
144
Impact of transfers between stages
(442)
(750)
1,192
21
(38)
161
144
Other changes in credit quality
21
(10)
380
391
Additions and repayments
(494)
(2,727)
(677)
(3,898)
32
(44)
(29)
(41)
(Credit) charge to the income statement
74
(92)
512
494
Disposals and derecognition2
(2,482)
(345)
(28)
(2,855)
(53)
(42)
(17)
(112)
Advances written off
(465)
(465)
(465)
(465)
Recoveries of amounts previously written off
22
22
22
22
At 31 December 2023
91,107
13,695
2,990
107,792
309
564
422
1,295
Allowance for impairment losses
(309)
(564)
(422)
(1,295)
Net carrying amount
90,798
13,131
2,568
106,497
Drawn ECL coverage3 (%)
0.3
4.1
14.1
1.2
1 Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind and derecognising assets as a result of modifications.
2Relates to the securitisation of Retail unsecured loans.
3Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
The movement tables above are compiled by comparing the position at the end of the period to that at the beginning of the year. Transfers
between stages are deemed to have taken place at the start of the reporting period, with all other movements shown in the stage in which the
asset is held at the end of the period. Purchased or originated credit-impaired are not transferable.
Additions and repayments comprise new loans originated and repayments of outstanding balances throughout the reporting period.
The Group’s impairment charge comprises impact of transfers between stages, other changes in credit quality and additions and repayments.
Advances written off have first been transferred to Stage 3 and then acquired a full allowance through other changes in credit quality.
Recoveries of amounts previously written off are shown at the full recovered value, with a corresponding entry in repayments and release of
allowance through other changes in credit quality.
At 31 December 2024 £69,752 million (2023: £73,466 million) of loans and advances to customers had a contractual residual maturity of
greater than one year.
165
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 9: Finance leases receivables
The Bank’s finance lease receivables are classified as loans and advances to customers and accounted for at amortised cost. These balances are
analysed as follows:
2024
£m
2023
£m
Not later than 1 year
2,015
1,812
Later than 1 year and not later than 2 years
701
810
Later than 2 years and not later than 3 years
292
455
Later than 3 years and not later than 4 years
127
170
Later than 4 years and not later than 5 years
56
56
Later than 5 years
17
19
Gross investment
3,208
3,322
Unearned future finance income
(283)
(251)
Rentals received in advance
Net investment
2,925
3,071
Equipment leased to customers under finance lease receivables relates to financing transactions to fund the purchase of aircraft, ships, motor
vehicles and other items. There was an allowance for uncollectable finance lease receivables included in the allowance for impairment losses of
£ 24 million (2023: £29 million).
Note 10: Intangible assets
Capitalised
software
enhancements
£m
Cost:
At 1 January 2023
6,879
Exchange and other adjustments
1
Additions
1,381
Disposals and write-offs
(223)
At 31 December 2023
8,038
Additions
1,137
Disposals
(145)
At 31 December 2024
9,030
Accumulated amortisation:
At 1 January 2023
3,181
Charge for the year
930
Disposals and write-offs
(223)
At 31 December 2023
3,888
Exchange and other adjustments
(3)
Charge for the year
1,113
Disposals
(145)
At 31 December 2024
4,853
Balance sheet amount at 31 December 2024
4,177
Balance sheet amount at 31 December 2023
4,150
166
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 11: Investment in subsidiary undertakings
2024
£m
2023
£m
At 1 January
31,591
31,197
Additions and capital injections
1,250
350
Capital contributions
23
44
Capital repayments
(1,200)
At 31 December
31,664
31,591
Details of the subsidiaries and related undertakings are given on pages 180 to 183 and are incorporated by reference.
Certain subsidiary companies currently have insufficient distributable reserves to make dividend payments, however, there were no further
significant restrictions on any of the Bank’s subsidiaries in paying dividends or repaying loans and advances. All regulated banking subsidiaries
are required to maintain capital at levels agreed with the regulators; this may impact those subsidiaries’ ability to make distributions.
Note 12: Other assets
2024
£m
2023
£m
Property, plant and equipment:
Premises
584
504
Equipment
758
987
Right-of-use assets (note 13)
468
603
1,810
2,094
Prepayments
933
735
Other assets1
972
481
Total other assets
3,715
3,310
1Settlement balances and items in the course of collection from banks, previously presented separately, is now included within other assets.
Note 13: Lessee disclosures
The table below sets out the movement in the Bank’s right-of-use assets, which are primarily in respect of premises, and are recognised within
other assets (note 12 ).
2024
£m
2023
£m
At 1 January
603
626
Exchange and other adjustments
5
7
Additions
86
108
Disposals
(100)
(11)
Depreciation charge for the year
(126)
(127)
At 31 December
468
603
The Bank’s lease liabilities are recognised within other liabilities (note 15). The maturity analysis of the Bank’s lease liabilities on an
undiscounted basis is set out in the liquidity risk section of note 24. The total cash outflow for leases in the year ended 31 December 2024 was
£ 104 million (2023: £ 108 million).
Note 14: Debt securities in issue
2024
2023
At fair value
through profit
or loss
£m
At
amortised
cost
£m
Total
£m
At fair value
through profit
or loss
£m
At
amortised
cost
£m
Total
£m
Senior unsecured notes issued
9,653
17,483
27,136
10,474
16,896
27,370
Covered bonds
11,266
11,266
13,616
13,616
Certificates of deposit issued
597
597
3,096
3,096
Securitisation notes
1,043
1,043
658
658
Commercial paper
3,780
3,780
7,099
7,099
Total debt securities in issue
9,653
34,169
43,822
10,474
41,365
51,839
At 31 December 2024 £23,784 million (2023: £22,859 million) of debt securities in issue at amortised cost had a contractual residual maturity
of greater than one year.
167
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 15: Other liabilities
2024
£m
2023
£m
Lease liabilities
519
681
Other creditors and accruals
3,213
2,636
Total other liabilities
3,732
3,317
The maturity analysis of the Bank’s lease liabilities on an undiscounted basis is set out in the liquidity risk section of note 24 .
Note 16: Provisions
Provisions
for financial
commitments
and guarantees
£m
Regulatory
and legal
provisions
£m
Other
£m
Total
£m
At 1 January 2024
183
256
399
838
Provisions applied
(99)
(326)
(425)
Charge for the year
(35)
144
214
323
At 31 December 2024
148
301
287
736
Note 26 to the consolidated financial statements outlines the significant provisions of the Group and the Bank.
Note 17: Subordinated liabilities
Preferred
securities
£m
Undated
£m
Dated
£m
Total
£m
At 1 January 2023
102
5,818
5,920
Issued in the year1:
5.25% Fixed Rate Reset Dated Subordinated Notes 2033 (S$500 million)
288
288
Fixed-to-Floating Rate Dated Subordinated Notes 2033 (A$750 million)
382
382
670
670
Repurchases and redemptions during the year1:
9.625% Subordinated Bonds 2023 (£300 million)
(92)
(92)
8% Undated Subordinated Step-up Notes 2023 (£200 million)
(92)
(92)
Foreign exchange movements
(244)
(244)
Other movements (cash and non-cash)
167
167
At 31 December 2023
102
6,319
6,421
Issued in the year1:
Floating Rate Dated Subordinated Notes 2034 (A$500 million)
257
257
5.963% Fixed-to-Floating Rate Dated Subordinated Notes 2034 (A$250 million)
129
129
386
386
Foreign exchange movements
10
10
Other movements (cash and non-cash)
(131)
(131)
At 31 December 2024
102
6,584
6,686
1 Issuances in the year generated cash inflows of £386 million ( 2023 : £670 million); the repurchases and redemptions resulted in cash outflows of £nil (2023: £92 million).
2Other movements include hedge accounting movements and cash payments in respect of interest on subordinated liabilities in the year amounting to £332 million (2023 : £285
million) offset by the interest expense in respect of subordinated liabilities of £362 million (2023: £329 million).
These securities will, in the event of the winding-up of the issuer, be subordinated to the claims of depositors and all other creditors of the
issuer, other than creditors whose claims rank equally with, or are junior to, the claims of the holders of the subordinated liabilities. The
subordination of specific subordinated liabilities is determined in respect of the issuer and any guarantors of that liability. The claims of holders
of preference shares and preferred securities are generally junior to those of the holders of undated subordinated liabilities, which in turn are
junior to the claims of holders of the dated subordinated liabilities.
Preference shares
The Bank has in issue one class of preference shares which are classified as liabilities under accounting standards. Details are provided in note
27 to the consolidated financial statements.
At 31 December 2024 £6,145 million (2023: £6,420 million) of subordinated liabilities had a contractual residual maturity of greater than one
year.
168
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 18: Share capital and other equity instruments
Details of the Bank’s share capital and other equity instruments are provided in notes 28 and 31 to the consolidated financial statements.
Note 19: Other reserves
2024
£m
2023
£m
2022
£m
Revaluation reserve in respect of debt securities held at fair value through other comprehensive income
(163)
(124)
(4)
Cash flow hedging reserve
(1,634)
(981)
(1,732)
Foreign currency translation reserve
(2)
(1)
2
At 31 December
(1,799)
(1,106)
(1,734)
The revaluation reserve in respect of debt securities and equity shares held at fair value through other comprehensive income represent the
cumulative after-tax unrealised change in the fair value of financial assets so classified since initial recognition; or in the case of financial assets
obtained on acquisitions of businesses, since the date of acquisition.
The cash flow hedging reserve represents the cumulative after-tax gains and losses on effective cash flow hedging instruments that will be
reclassified to the income statement in the periods in which the hedged item affects profit or loss.
The foreign currency translation reserve represents the cumulative after-tax gains and losses on the translation of foreign operations and
exchange differences arising on financial instruments designated as hedges of the Bank’s net investment in foreign operations.
Movements in other reserves were as follows:
Revaluation reserve in respect of debt securities held at fair value through other comprehensive income
2024
£m
2023
£m
2022
£m
At 1 January
(124)
(4)
105
Change in fair value
(47)
(39)
(50)
Deferred tax
13
11
23
Current tax
(34)
(28)
(27)
Income statement transfers in respect of disposals
(4)
(123)
(118)
Deferred tax
2
35
30
(2)
(88)
(88)
Impairment recognised in the income statement
(3)
(4)
6
At 31 December
(163)
(124)
(4)
Revaluation reserve in respect of equity shares held at fair value through other comprehensive income
2024
£m
2023
£m
2022
£m
At 1 January
Change in fair value
Deferred tax
(1)
(1)
Realised gains and losses transferred to retained profits
Deferred tax
1
1
At 31 December
Cash flow hedging reserve
2024
£m
2023
£m
2022
£m
At 1 January
(981)
(1,732)
720
Change in fair value of hedging derivatives
(1,943)
790
(3,089)
Deferred tax
544
(222)
894
(1,399)
568
(2,195)
Net income statement transfers
1,036
253
(352)
Deferred tax
(290)
(70)
95
746
183
(257)
At 31 December
(1,634)
(981)
(1,732)
169
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 19: Other reserves continued
Foreign currency translation reserve
2024
£m
2023
£m
2022
£m
At 1 January
(1)
2
(1)
Currency translation differences arising in the year
(1)
(3)
3
At 31 December
(2)
(1)
2
Note 20: Retained profits
2024
£m
2023
£m
2022
£m
At 1 January
45,280
46,305
43,681
Profit attributable to ordinary shareholders (see below)
4,534
4,326
3,276
Post-retirement defined benefit scheme remeasurements
(282)
(692)
(1,232)
Gains and losses attributable to own credit risk (net of tax)
(56)
(168)
364
Dividends paid1
(3,990)
(4,700)
Issue costs of other equity instruments (net of tax)
(6)
(5)
Capital contributions received
142
215
221
Return of capital contributions
(1)
(1)
(4)
Realised gains and losses on equity shares held at fair value through other comprehensive income
(1)
At 31 December
45,621
45,280
46,305
1Details of the Bank’s dividends are as set out in note 32 to the consolidated financial statements.
The profit after tax of the Bank was arrived at as follows:
2024
£m
2023
£m
2022
£m
Net interest income
8,311
10,526
7,605
Net fee and commission income
547
914
800
Dividends received
1,075
122
1,850
Net trading and other operating income
3,530
2,151
1,027
Other income
5,152
3,187
3,677
Total income
13,463
13,713
11,282
Operating expenses
(7,073)
(6,947)
(6,430)
Impairment (charge) credit
(222)
(437)
(745)
Profit before tax
6,168
6,329
4,107
Tax (expense) credit
(1,271)
(1,669)
(590)
Profit for the year
4,897
4,660
3,517
Profit attributable to ordinary shareholders
4,534
4,326
3,276
Profit attributable to other equity holders
363
334
241
Profit for the year
4,897
4,660
3,517
170
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 21: Related party transactions
Key management personnel
The key management personnel of the Group and the Bank are the same. The relevant disclosures are given in note 33 to the consolidated
financial statements.
Balances and transactions with fellow Lloyds Banking Group undertakings
Balances and transactions between members of the Lloyds Bank Group
The Bank, as a result of its position as parent of a banking group, has a large number of transactions with various of its subsidiary undertakings;
these are included on the balance sheet of the Bank as follows:
2024
£m
2023
£m
Assets, included within:
Financial assets at fair value through profit or loss
5,486
5,450
Derivative financial instruments
3,507
4,442
Financial assets at amortised cost: due from fellow Lloyds Banking Group undertakings
139,016
124,177
148,009
134,069
Liabilities, included within:
Due to fellow Lloyds Banking Group undertakings
17,215
17,693
Derivative financial instruments
4,126
3,855
Debt securities in issue at amortised cost
141
97
21,482
21,645
Due to the size and volume of transactions passing through these accounts, it is neither practical nor meaningful to disclose information on
gross inflows and outflows. During 2024 the Bank earned interest income on the above asset balances of £ 7,468 million (2023 : £6,706 million;
2022: £3,423 million) and incurred interest expense on the above liability balances of £2,132 million (2023: £1,695 million; 2022: £787 million).
In addition, the Bank raised recharges of £2,138 million (2023: £2,089 million; 2022: £2,099 million) on its subsidiaries in respect of costs
incurred and also received fees of £ 29 million (2023: £24 million; 2022: £22 million), and paid fees of £72 million (2023: £15 million; 2022:
£6 million), for various services provided between the Bank and its subsidiaries.
Details of intercompany recharges recognised within other operating income are given in note 8 to the consolidated financial statements and
details of contingent liabilities and commitments entered into on behalf of fellow Lloyds Banking Group undertakings are given in note 22.
Balances and transactions with Lloyds Banking Group plc and fellow subsidiaries of the Bank
The Bank has balances due to and from the Bank’s parent company, Lloyds Banking Group plc and fellow subsidiaries of the Bank. These are
included on the balance sheet as follows:
2024
£m
2023
£m
Assets, included within:
Derivative financial instruments
804
1,136
Financial assets at amortised cost: due from fellow Lloyds Banking Group undertakings
364
450
1,168
1,586
Liabilities, included within:
Due to fellow Lloyds Banking Group undertakings
3,989
2,707
Financial liabilities at fair value through profit or loss
5,045
5,242
Derivative financial instruments
662
890
Debt securities in issue at amortised cost
14,201
12,903
Subordinated liabilities
7,438
7,035
31,335
28,777
These balances include Lloyds Banking Group plc’s banking arrangements and, due to the size and volume of transactions passing through
these accounts, it is neither practical nor meaningful to disclose information on gross inflows and outflows. During 2024 the Bank earned
£18 million interest income on the above asset balances (2023 : £9 million; 2022: £11 million) and the Bank incurred £1,175 million interest
expense on the above liability balances (2023: £830 million; 2022: £570 million).
Other related party transactions
Related party information in respect of other related party transactions is given in note 33 to the consolidated financial statements.
171
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 22: Contingent liabilities, commitments and guarantees
Note 34 to the consolidated financial statements outlines the significant contingent liabilities of the Group and the Bank, other than those
arising from the banking business which are detailed below.
Contingent liabilities, commitments and guarantees arising from the banking business
At 31 December 2024 contingent liabilities, such as performance bonds and letters of credit, arising from the banking business were
£2,425  million (31 December 2023: £2,645 million), of which £ nil (2023: £ nil) was incurred on behalf of fellow Lloyds Banking Group
undertakings. The contingent liabilities of the Bank arise in the normal course of its banking business and it is not practicable to quantify their
future financial effect. Total commitments and guarantees were £62,206 million (2023: £61,198 million), of which £2,195 million ( 2023:
£3,090 million) was incurred on behalf of fellow Lloyds Banking Group undertakings. Of the amounts shown above in respect of undrawn
formal standby facilities, credit lines and other commitments to lend, £36,077 million (2023: £35,575 million) was irrevocable.
Note 23: Transfers of financial assets
Continuing involvement in financial assets that have been derecognised
The Bank has derecognised financial assets in their entirety following transactions with securitisation vehicles, as detailed in note 35 to the
consolidated financial statements. The Bank’s continuing involvement largely arises from funding provided to the vehicles through the purchase
of issued notes. The majority of these notes are recognised as debt securities held at amortised cost, with the remaining notes held by the Bank
recognised at fair value through profit or loss. The carrying amount of these interests and the maximum exposure to loss is included in note 35
to the consolidated financial statements. At 31 December 2024 the fair value of the retained notes was £910 million (2023: £2,325 million). The
income from the Bank’s interest in these structures for the year ended 31 December 2024 was £110 million and cumulatively for the lifetime was
£120 million (2023: £10 million).
Details of transferred financial assets that continue to be recognised in full are as follows.
The Bank enters into repurchase and securities lending transactions in the normal course of business that do not result in derecognition of the
financial assets as substantially all of the risks and rewards, including credit, interest rate, prepayment and other price risks are retained by the
Bank. In all cases, the transferee has the right to sell or repledge the assets concerned.
The table below sets out the carrying values of the transferred assets and the associated liabilities. For repurchase and securities lending
transactions, the associated liabilities represent the Bank’s obligation to repurchase the transferred assets. The liabilities shown in the table
below have recourse to the transferred assets.
2024
2023
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
Repurchase and securities lending transactions
Debt securities held at amortised cost
1,124
1,401
Financial assets at fair value through other comprehensive income
11,120
3,866
10,332
4,761
Securitisation programmes
Financial assets at amortised cost:
Loans and advances to customers1
1,043
561
1 The carrying value of transferred assets for the Bank includes amounts relating to assets transferred to structured entities which are fully consolidated into the Group. The liabilities
associated with such assets are issued by the structured entities.
172
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 24: Financial risk management
Market risk
(A)Interest rate
Note 37 to the consolidated financial statements outlines the nature of the interest rate risk to which the Group and the Bank are exposed and
how this is managed.
Note 37 to the consolidated financial statements also outlines the steps that the Group and the Bank are taking to manage the transition to
alternative benchmark rates.
Interest rate sensitivity analysis relating to the Group’s banking activities is set out in the tables marked audited on page 58.
(B)Foreign exchange
The nature of the foreign exchange risk to which the Group and the Bank are exposed and the steps taken to manage this are described on
page 57.
Credit risk
(A)Maximum credit exposure
The maximum credit risk exposure of the Bank in the event of other parties failing to perform their obligations is considered to be the balance
sheet carrying amount or, for non-derivative off-balance sheet transactions and financial guarantees, their contractual nominal amounts (not
taking into account any collateral held).
Further details can be seen in note 5 and note 22.
Concentrations of exposure
Note 37 to the consolidated financial statements includes a discussion of how the Group and the Bank manage concentration risk.
2024
£m
2023
£m
Agriculture, forestry and fishing
2,212
2,573
Construction1
2,414
2,811
Energy and water supply
4,482
3,402
Financial, business and other services
19,192
19,084
Lease financing
2,925
3,071
Manufacturing
3,244
3,465
Mining and Quarrying1
162
310
Personal:
Mortgages2
34,736
38,108
Other
10,725
7,960
Postal and telecommunications
3,031
2,329
Property companies
16,052
17,224
Transport, distribution and hotels
7,171
7,455
Total loans and advances to customers before allowance for impairment losses
106,346
107,792
Allowance for impairment losses
(1,198)
(1,295)
Total loans and advances to customers
105,148
106,497
1Mining and quarrying, previously included within construction, is now presented separately.
2Includes both UK and overseas mortgage balances.
The Bank’s operations are predominantly UK based and as a result an analysis of credit risk exposures by geographical region is not provided.
Credit quality of other financial assets (audited)
Cash and balances at central banks
Significantly all of the Bank’s cash and balances at central banks are due from the Bank of England or the Deutsche Bundesbank.
Loans and advances to customers
Note 37 to the consolidated financial statements includes details of the internal credit rating systems used by the Group and the Bank.
173
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 24: Financial risk management continued
Drawn exposures
Allowance for expected credit losses
Gross drawn exposures and expected
credit loss allowance
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
At 31 December 2024
Retail – UK mortgages
RMS 1–3
25,621
4,806
30,427
2
18
20
RMS 4–6
446
1,453
1,899
8
8
RMS 7–9
5
163
168
1
1
RMS 10
2
27
29
RMS 11–13
6
527
533
6
6
RMS 14
1,119
1,119
69
69
26,080
6,976
1,119
34,175
2
33
69
104
Retail – credit cards
RMS 1–3
1,749
3
1,752
3
3
RMS 4–6
2,036
362
2,398
26
18
44
RMS 7–9
321
304
625
13
38
51
RMS 10
45
45
9
9
RMS 11–13
77
77
26
26
RMS 14
66
66
34
34
4,106
791
66
4,963
42
91
34
167
Retail – loans and overdrafts
RMS 1–3
461
1
462
1
1
RMS 4–6
4,113
204
4,317
64
16
80
RMS 7–9
496
139
635
19
16
35
RMS 10
15
53
68
1
11
12
RMS 11–13
4
174
178
1
57
58
RMS 14
81
81
53
53
5,089
571
81
5,741
86
100
53
239
Retail – UK Motor Finance
RMS 1–3
4
8
12
RMS 4–6
563
563
4
4
RMS 7–9
RMS 10
RMS 11–13
6
6
2
2
RMS 14
7
7
5
5
567
14
7
588
4
2
5
11
Retail – other
RMS 1–3
RMS 4–6
450
64
514
1
2
3
RMS 7–9
RMS 10
RMS 11–13
RMS 14
76
76
20
20
450
64
76
590
1
2
20
23
Total Retail
36,292
8,416
1,349
46,057
135
228
181
544
Commercial Banking
CMS 1–5
11,742
11,742
1
1
CMS 6–10
12,412
46
12,458
11
11
CMS 11–14
25,588
953
26,541
105
19
124
CMS 15–18
4,289
2,801
7,090
56
144
200
CMS 19
571
571
64
64
CMS 20–23
1,358
1,358
254
254
54,031
4,371
1,358
59,760
173
227
254
654
Other1
529
529
Total loans and advances to customers
90,852
12,787
2,707
106,346
308
455
435
1,198
1Drawn exposures include centralised fair value hedge accounting adjustments.
174
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 24: Financial risk management continued
Drawn exposures
Allowance for expected credit losses
Gross drawn exposures and expected
credit loss allowance
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
At 31 December 2023
Retail – UK mortgages
RMS 1–3
26,381
658
27,039
6
2
8
RMS 4–6
4,258
3,698
7,956
2
18
20
RMS 7–9
22
538
560
5
5
RMS 10
92
92
1
1
RMS 11–13
707
707
12
12
RMS 14
1,162
1,162
71
71
30,661
5,693
1,162
37,516
8
38
71
117
Retail – credit cards
RMS 1–3
1,312
2
1,314
3
3
RMS 4–6
1,661
341
2,002
20
19
39
RMS 7–9
328
329
657
14
51
65
RMS 10
64
64
16
16
RMS 11–13
90
90
36
36
RMS 14
68
68
31
31
3,301
826
68
4,195
37
122
31
190
Retail – loans and overdrafts
RMS 1–3
208
208
RMS 4–6
2,512
94
2,606
52
12
64
RMS 7–9
451
154
605
15
18
33
RMS 10
17
54
71
1
12
13
RMS 11–13
4
158
162
55
55
RMS 14
91
91
54
54
3,192
460
91
3,743
68
97
54
219
Retail – UK Motor Finance
RMS 1–3
457
5
462
4
4
RMS 4–6
1
2
3
RMS 7–9
RMS 10
RMS 11–13
5
5
2
2
RMS 14
7
7
4
4
458
12
7
477
4
2
4
10
Retail – other
RMS 1–3
1
1
RMS 4–6
472
83
555
5
5
RMS 7–9
RMS 10
RMS 11–13
RMS 14
68
68
23
23
472
83
68
623
1
5
23
29
Total Retail
38,084
7,074
1,396
46,554
118
264
183
565
Commercial Banking
CMS 1–5
10,146
10,146
2
2
CMS 6–10
15,322
115
15,437
21
21
CMS 11–14
23,999
2,473
26,472
117
51
168
CMS 15–18
3,122
3,432
6,554
51
189
240
CMS 19
8
601
609
60
60
CMS 20–23
1,594
1,594
239
239
52,597
6,621
1,594
60,812
191
300
239
730
Other1
426
426
Total loans and advances to customers
91,107
13,695
2,990
107,792
309
564
422
1,295
1Drawn exposures include centralised fair value hedge accounting adjustments.
175
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 24: Financial risk management continued
Loans and advances to banks
Significantly all of the Bank’s loans and advances to banks are assessed as Stage 1.
Reverse repurchase agreement held at amortised cost
All of the Bank’s reverse repurchase agreements held at amortised cost are assessed as Stage 1.
Debt securities held at amortised cost
At 31 December 2024 significantly all of the Bank’s debt securities held at amortised cost are investment grade .
Debt securities at fair value through other comprehensive income
At 31 December 2024 significantly all of the Bank’s debt securities at fair value through other comprehensive income are investment grade.
Derivative assets
The Bank reduces exposure to credit risk by using master netting agreements and by obtaining collateral in the form of cash or highly liquid
securities.
2024
2023
Investment
grade1
£m
Other
£m
Total
£m
Investment
grade1
£m
Other
£m
Total
£m
Trading and other
2,889
10
2,899
1,386
13
1,399
Hedging
2
5
7
72
72
2,891
15
2,906
1,458
13
1,471
Due from fellow Lloyds Banking Group undertakings
4,311
5,578
Total derivative financial instruments
7,217
7,049
1Credit ratings equal to or better than ‘BBB’.
Financial guarantees and loan commitments
The Bank’s exposure to credit risk in respect of financial guarantees and loan commitments is not significant.
At 31 December 2024 £60,005 million were Stage 1 (2023: £57,832 million), £2,158 million were Stage 2 (2023: £3,284 million) and £43 million
were Stage 3 (2023: £82 million). Against these exposures the Group held an allowance for expected credit losses of £148 million (2023: £183
million).
Further details can be seen in note 19 to the consolidated financial statements.
Collateral held as security for other financial assets
The principal types of collateral accepted by the Bank include: residential and commercial properties; charges over business assets such as
premises, inventory and accounts receivable; financial instruments; cash; and guarantees from third parties. The Bank holds collateral against
loans and advances, reverse repurchase agreements, irrevocable loan commitments, financial assets at fair value through profit or loss and
derivative assets.
The Bank does not hold collateral against debt securities which are classified as financial assets held at amortised cost.
Loans and advances to customers
Retail lending
UK mortgages product analysis
An analysis by loan-to-value ratio of the Bank’s UK residential mortgage lending is provided below. The value of collateral used in determining
the loan-to-value ratios has been estimated based upon the last actual valuation, adjusted to take into account subsequent movements in
house prices. The market takes into account many factors, including environmental considerations such as flood risk and energy efficient
additions, in arriving at the value of a home.
In some circumstances, where the discounted value of the estimated net proceeds from the liquidation of collateral (i.e. net of costs, expected
haircuts and anticipated changes in the value of the collateral to the point of sale) is greater than the estimated exposure at default, no credit
losses are expected and no ECL allowance is recognised.
2024
2023
Gross drawn exposures
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Stage 1
£m
Stage 2
£m
Stage 3
£m
Total
£m
Less than 60 per cent
19,934
6,333
849
27,116
24,329
4,478
867
29,674
60 per cent to 70 per cent
2,980
470
166
3,616
3,523
650
185
4,358
70 per cent to 80 per cent
1,870
128
65
2,063
1,951
311
74
2,336
80 per cent to 90 per cent
1,117
29
22
1,168
713
148
18
879
90 per cent to 100 per cent
176
10
6
192
143
95
6
244
Greater than 100 per cent
2
6
11
19
2
11
12
25
Total
26,079
6,976
1,119
34,174
30,661
5,693
1,162
37,516
The Bank’s credit risk disclosures for unimpaired other retail lending show assets gross of collateral and therefore disclose the maximum loss
exposure.
Commercial lending
Stage 1 and Stage 2 secured lending
For Stage 1 and Stage 2 secured commercial lending, the Bank reports assets gross of collateral and therefore discloses the maximum loss
exposure.
Stage 1 and Stage 2 secured commercial lending is predominantly managed on a cash flow basis. On occasion, it may include an assessment of
underlying collateral, although, for Stage 3 lending, this will not always involve assessing it on a fair value basis. No aggregated collateral
information for the entire unimpaired secured commercial lending portfolio is provided to key management personnel.
176
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 24: Financial risk management continued
Stage 3 secured lending
The value of collateral is re-evaluated and its legal soundness reassessed if there is observable evidence of distress of the borrower;
this evaluation is used to determine potential loss allowances and management’s strategy to try to either repair the business or recover
the debt.
At 31 December 2024, Stage 3 secured commercial lending amounted to £254 million, net of an impairment allowance of £110 million (2023:
£365 million, net of an impairment allowance of £85 million). The fair value of the collateral held in respect of impaired secured commercial
lending was £494 million (2023: £529 million). In determining the fair value of collateral, no specific amounts have been attributed to the costs
of realisation. For the purposes of determining the total collateral held by the Bank in respect of impaired secured commercial lending, the
value of collateral for each loan has been limited to the principal amount of the outstanding advance in order to eliminate the effects of any
over-collateralisation and to provide a clearer representation of the Bank’s exposure.
Reverse repurchase agreements
The Bank enters into reverse repurchase agreements which are accounted for as collateralised loans (see note 5).
Derivative assets, after offsetting of amounts under master netting arrangements
The Bank reduces exposure to credit risk by using master netting agreements and by obtaining collateral in the form of cash or highly liquid
securities (see note 5).
Irrevocable loan commitments and other credit-related contingencies
The Bank holds irrevocable loan commitments and other credit-related contingencies (see note 22). Collateral is held as security, in the event
that lending is drawn down, on £905 million (2023: £855 million) of these balances.
Collateral repossessed
During the year, £29 million of collateral was repossessed (2023: £24million), consisting primarily of residential property.
The Bank generally does not take physical possession of properties or other assets held as collateral and uses external agents to realise the value as soon
as practicable, generally at auction, to settle indebtedness. Any surplus funds are returned to the borrower or are otherwise dealt with in accordance
with appropriate insolvency regulations. In certain circumstances the Bank takes physical possession of assets held as collateral against commercial
lending. In such cases, the assets are carried on the Bank’s balance sheet and are classified according to the Bank’s accounting policies.
Collateral pledged as security
The Bank pledges assets primarily for repurchase agreements and securities lending transactions which are generally conducted under terms
that are usual and customary for standard secured borrowing contracts.
Repurchase agreements
The Bank enters into repurchase agreements, against which it pledges collateral (see note 5).
Securities lending transactions
The following on-balance sheet financial assets have been lent to counterparties under securities lending transactions:
2024
£m
2023
£m
Financial assets at fair value through other comprehensive income
5,988
5,421
In addition, securities held as collateral in the form of stock borrowed amounted to £11,206 million (2023: £8,098 million). Of this amount,
£3,883million (2023: £3,137 million) had been resold or repledged as collateral for the Bank’s own transactions.
These transactions were generally conducted under terms that are usual and customary for standard secured lending activities.
177
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 24: Financial risk management continued
Liquidity risk
The table below analyses financial instrument liabilities of the Bank on an undiscounted future cash flow basis according to contractual
maturity, into relevant maturity groupings based on the remaining period at the balance sheet date; balances with no fixed maturity are
included in the over 5 years category.
Up to 1
month
£m
1 to 3
months
£m
3 to 12
months
£m
1 to 5
years
£m
Over 5
years
£m
Total
£m
At 31 December 2024
Deposits from banks
1,761
342
504
348
105
3,060
Customer deposits
266,879
3,448
2,564
610
11
273,512
Repurchase agreements
8,706
5,169
1,683
94
15,652
Financial liabilities at fair value through profit or loss
38
106
1,599
3,984
6,999
12,726
Debt securities in issue at amortised cost
1,191
5,779
4,720
23,622
9,547
44,859
Lease liabilities
11
21
76
223
188
519
Subordinated liabilities
23
302
499
3,929
4,605
9,358
Total non-derivative financial liabilities
278,609
15,167
11,645
32,810
21,455
359,686
Derivative financial liabilities:
Gross settled derivatives – outflows
7,599
5,420
7,284
6,054
2,816
29,173
Gross settled derivatives – inflows
(7,400)
(5,171)
(6,760)
(5,390)
(1,728)
(26,449)
Gross settled derivatives – net flows
199
249
524
664
1,088
2,724
Net settled derivative liabilities
6,746
21
26
286
7,079
Total derivative financial liabilities
6,945
249
545
690
1,374
9,803
At 31 December 2023
Deposits from banks
1,766
947
241
442
3,396
Customer deposits
259,921
2,667
3,022
1,227
73
266,910
Repurchase agreements
3,229
4,092
29
2
7,352
Financial liabilities at fair value through profit or loss
118
42
416
1,071
4,425
6,072
Debt securities in issue at amortised cost
755
6,100
13,157
23,633
8,416
52,061
Lease liabilities
1
22
65
235
369
692
Subordinated liabilities
23
41
207
4,106
4,846
9,223
Total non-derivative financial liabilities
265,813
13,911
17,137
30,716
18,129
345,706
Derivative financial liabilities:
Gross settled derivatives – outflows
3,045
2,118
11,327
6,440
4,005
26,935
Gross settled derivatives – inflows
(2,812)
(2,004)
(11,168)
(6,494)
(3,977)
(26,455)
Gross settled derivatives – net flows
233
114
159
(54)
28
480
Net settled derivative liabilities
6,487
51
31
317
6,886
Total derivative financial liabilities
6,720
114
210
(23)
345
7,366
The principal amount for undated subordinated liabilities with no redemption option is included within the over 5 years column; interest of
£11 million ( 2023 : £11 million) per annum for the Bank which is payable in respect of those instruments for as long as they remain in issue is not
included beyond 5 years.
178
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 24: Financial risk management continued
The table below shows the contractual maturity of the Bank’s contingents, commitments and guarantees. Commitments are shown in the time
band containing the earliest date the commitment can be drawn down. For financial guarantee contracts, the maximum amount of the
guarantee is allocated to the earliest period in which the guarantee could be called.
Within 1
year
£m
1 to 3
years
£m
3 to 5
years
£m
Over 5
years
£m
Total
£m
At 31 December 2024
Acceptances and endorsements
39
39
Other contingent liabilities
1,178
534
204
470
2,386
Total contingent liabilities
1,217
534
204
470
2,425
Lending commitments and guarantees
61,078
558
394
65
62,095
Other commitments
111
111
Total commitments and guarantees
61,189
558
394
65
62,206
Total contingents, commitments and guarantees
62,406
1,092
598
535
64,631
At 31 December 2023
Acceptances and endorsements
191
191
Other contingent liabilities
1,169
585
183
517
2,454
Total contingent liabilities
1,360
585
183
517
2,645
Lending commitments and guarantees
31,473
15,999
10,981
2,643
61,096
Other commitments
38
41
23
102
Total commitments and guarantees
31,473
16,037
11,022
2,666
61,198
Total contingents, commitments and guarantees
32,833
16,622
11,205
3,183
63,843
Capital risk
Note 37 to the consolidated financial statements includes a discussion of the management of the capital risk faced by the Group and the Bank.
Note 25: Cash flow statement
(A)Change in operating assets
2024
£m
2023
£m
2022
£m
Change in amounts due from fellow Lloyds Banking Group undertakings
(14,753)
(5,345)
(10,858)
Change in other financial assets held at amortised cost
(10,485)
15,148
7,993
Change in financial assets at fair value through profit or loss
(491)
(1,261)
(465)
Change in derivative financial instruments
(1,905)
402
(1,985)
Change in other operating assets
124
(162)
(53)
Change in operating assets
(27,510)
8,782
(5,368)
(B)Change in operating liabilities
2024
£m
2023
£m
2022
£m
Change in deposits from banks
(415)
(1,085)
1,697
Change in customer deposits
6,604
(2,566)
790
Change in repurchase agreements
8,288
(11,075)
18,302
Change in amounts due to fellow Lloyds Banking Group undertakings
(611)
(743)
(4,182)
Change in financial liabilities at fair value through profit or loss
1,762
996
(58)
Change in derivative financial instruments
(7,196)
(2,733)
4,245
Change in debt securities in issue at amortised cost
(899)
1,546
1,380
Change in other operating liabilities1
428
(278)
88
Change in operating liabilities
7,961
(15,938)
22,262
1Includes a decrease of £162 million (2023: decrease of £25 million ; 2022 : decrease of £72 million ) in respect of lease liabilities.
179
Lloyds Bank plc Annual Report and Accounts 2024
Notes to the Bank financial statements continued
for the year ended 31 December
Note 25: Cash flow statement continued
(C)Non-cash and other items
2024
£m
2023
£m
2022
£m
Interest expense on subordinated liabilities
362
329
300
Net (credit) charge in respect of defined benefit schemes
(21)
(53)
54
Depreciation and amortisation
1,665
1,475
1,462
Regulatory and legal provisions
144
247
127
Other provision movements
(112)
(16)
(95)
Allowance for loan losses
287
491
567
Write-off of allowance for loan losses, net of recoveries
(375)
(443)
(346)
Impairment (credit) charge relating to undrawn balances
(35)
(4)
73
Impairment (credit) charge on financial assets at fair value through other comprehensive income
(3)
(4)
6
Dividends and distributions on other equity instruments received from subsidiary undertakings
(1,285)
(313)
(1,975)
Additional capital injections to subsidiaries
(23)
(44)
(46)
Foreign exchange impact on balance sheet1
(42)
85
(246)
Other non-cash items
1,200
1,749
(959)
Total non-cash items
1,762
3,499
(1,078)
Contributions to defined benefit schemes
(87)
(946)
(1,607)
Payments in respect of regulatory and legal provisions
(99)
(131)
(132)
Total other items
(186)
(1,077)
(1,739)
Non-cash and other items
1,576
2,422
(2,817)
1When considering the movement on each line of the balance sheet, the impact of foreign exchange rate movements is removed in order to show the underlying cash impact.
(D)Analysis of cash and cash equivalents as shown in the balance sheet
2024
£m
2023
£m
2022
£m
Cash and balances at central banks
36,838
52,268
66,783
Less mandatory reserve deposits1
(817)
(957)
36,838
51,451
65,826
Loans and advances to banks and reverse repurchase agreements
13,040
14,888
11,534
Less amounts with a maturity of three months or more
(5,860)
(4,643)
(6,571)
7,180
10,245
4,963
Total cash and cash equivalents
44,018
61,696
70,789
1Mandatory reserve deposits are held with local central banks in accordance with statutory requirements. Where these deposits are not held in demand accounts and are not
available to finance the Bank’s day-to-day operations they are excluded from cash and cash equivalents.
Note 26: Other information
Lloyds Bank plc is incorporated as a public limited company and registered in England with the registered number 2065. Lloyds Bank plc’s
registered office is 25 Gresham Street, London, EC2V 7HN, and its principal executive offices are located at 25 Gresham Street, London,
EC2V 7HN.
Lloyds Bank plc and its subsidiaries form a leading UK-based financial services group, whose businesses provide a wide range of banking and
financial services in the UK and in certain locations overseas.
Lloyds Bank plc’s immediate parent undertaking and ultimate parent undertaking and controlling party is Lloyds Banking Group plc which is
incorporated in Scotland. Copies of the consolidated Annual Report and Accounts of Lloyds Banking Group plc may be obtained from Lloyds
Banking Group’s head office at 25 Gresham Street, London EC2V 7HN or downloaded via www.lloydsbankinggroup.com.
180
Lloyds Bank plc Annual Report and Accounts 2024
Subsidiaries and related undertakings
In compliance with section 409 of the Companies Act 2006, the
following comprises a list of all related undertakings of the Group,
as at 31 December 2024. The list includes each undertaking’s
registered office and the percentage of the class(es) of shares held
by the Group. All shares held are ordinary shares unless indicated
otherwise in the notes.
Subsidiary undertakings
The Group directly or indirectly holds 100 per cent of the share
class or a majority of voting rights (including where the
undertaking does not have share capital as indicated) in the
following undertakings. All material subsidiary undertakings are
consolidated by Lloyds Banking Group.
Name of undertaking
Notes
A G Finance Ltd
20 ii iii
A.C.L. Ltd
1 i
ACL Autolease Holdings Ltd
1 i
Alex Lawrie Factors Ltd
9 i
Alex. Lawrie Receivables Financing Ltd
9 i
Amberdate Ltd
1 i v
Anglo Scottish Utilities Partnership 1
+ *
Aquilus Ltd
13 i ‡
Automobile Association Personal Finance Ltd
4 i
Bank of Scotland (B G S) Nominees Ltd
5 *
Bank of Scotland Edinburgh Nominees Ltd
5 *
Bank of Scotland Equipment Finance Ltd
13 i ‡
Bank of Scotland plc
5 i v
Bank of Scotland Structured Asset Finance Ltd
1 i
Bank of Scotland Transport Finance 1 Ltd
13 i ‡
Bank of Wales Ltd
8 i
Barents Leasing Ltd
1 i
Birchcrown Finance Ltd
1 v xii
Black Horse (TRF) Ltd
1 i
Black Horse Finance Holdings Ltd
1 ii iii
Black Horse Finance Management Ltd
13 i ‡
Black Horse Group Ltd
1 i v
Black Horse Ltd
1 i
Boltro Nominees Ltd
1 i
BOS (Ireland) Property Services 2 Ltd
16 i ‡
BOS (Shared Appreciation Mortgages (Scotland)) Ltd
4 i
BOS (Shared Appreciation Mortgages (Scotland) No. 2) Ltd
4 i
BOS (Shared Appreciation Mortgages (Scotland) No. 3) Ltd
4 i
BOS (Shared Appreciation Mortgages) No. 1 plc
4 # i
BOS (Shared Appreciation Mortgages) No. 2 plc
4 # i
BOS (Shared Appreciation Mortgages) No. 3 plc
4 # i
BOS (Shared Appreciation Mortgages) No. 4 plc
4 # i
BOS (Shared Appreciation Mortgages) No. 5 plc
4 i
BOS (Shared Appreciation Mortgages) No. 6 plc
4 i
BOS Personal Lending Ltd
4 ii iii
BOSSAF Rail Ltd
1 i
British Linen Leasing (London) Ltd
5 i
British Linen Leasing Ltd
5 i
British Linen Shipping Ltd
5 i
Capital 1945 Ltd
13 i ‡
Capital Bank Leasing 12 Ltd
5 i
Capital Bank Leasing 3 Ltd
13 i ‡
Capital Bank Leasing 5 Ltd
8 i
Capital Bank Property Investments (3) Ltd
8 i
Capital Personal Finance Ltd
4 i
Cardnet Merchant Services Ltd
1 # ^ iii iv
Cashfriday Ltd
9 i
Caveminster Ltd
13 i ‡
Cawley (Chester) Ltd
8 ii iii vii
Name of undertaking
Notes
CF Asset Finance Ltd
13 i ‡
Cheltenham & Gloucester plc
12 i
Cloak Lane Funding Sàrl
23 i
Cloak Lane Investments Sàrl
23 i
Conquest Securities Ltd
1 v xii
Corbiere Asset Investments Ltd
1 ii iii
Dunstan Investments (UK) Ltd
1 i
Eurolead Services Holdings Ltd
9 i
First Retail Finance (Chester) Ltd
4 i
Forthright Finance Ltd
8 i
General Leasing (No. 12) Ltd
13 i ‡
Gresham Nominee 1 Ltd
1 i
Gresham Nominee 2 Ltd
1 i
Halifax Group Ltd
13 i ‡
Halifax Leasing (March No.2) Ltd
1 i
Halifax Leasing (September) Ltd
1 i
Halifax Ltd
13 i ‡
Halifax Loans Ltd
4 i
Halifax Pension Nominees Ltd
1 i
Halifax Vehicle Leasing (1998) Ltd
4 i
Hamsard 3352 Ltd
14 ii iii viii ix
xiii xiv
Hamsard 3353 Ltd
14 i
HBOS Covered Bonds LLP
13 * ‡
HBOS plc
5 i v vi
HBOS Social Housing Covered Bonds LLP
8 *
HBOS UK Ltd
5 i
Heidi Finance Holdings (UK) Ltd
1 i
Hill Samuel Bank Ltd
13 i ‡
Hill Samuel Finance Ltd
1 v xi
Hill Samuel Leasing Co. Ltd
1 i
Home Shopping Personal Finance Ltd
4 i
HVF Ltd
1 i
Hyundai Car Finance Ltd
20 ii iii
IBOS Finance Ltd
13 i ‡
International Motors Finance Ltd
20 ii #
Landau Finance Ltd
18 i
LB Healthcare Trustee Ltd
1 i
LBCF Ltd
9 i
LBI Leasing Ltd
1 i
Lex Autolease (CH) Ltd
1 i
Lex Autolease (VC) Ltd
1 i
Lex Autolease Carselect Ltd
1 i
Lex Autolease Ltd
1 i
Lex Vehicle Leasing (Holdings) Ltd
13 ii iii x ‡
Lex Vehicle Leasing Ltd
13 i ‡
Lime Street (Funding) Ltd
13 i ‡
Lloyds (Gresham) Ltd
13 i x ‡
Lloyds (Nimrod) Specialist Finance Ltd
1 i
Lloyds Asset Leasing Ltd
1 i
Lloyds Bank (Colonial & Foreign) Nominees Ltd
1 i
Lloyds Bank (I.D.) Nominees Ltd
1 i
Lloyds Bank Asset Finance Ltd
1 i
Lloyds Bank Commercial Finance Ltd
9 i
Lloyds Bank Commercial Finance Scotland Ltd
15 i
Lloyds Bank Corporate Asset Finance (HP) Ltd
1 i
Lloyds Bank Corporate Asset Finance (No.2) Ltd
1 i
Lloyds Bank Corporate Asset Finance (No.3) Ltd
1 i
Lloyds Bank Corporate Asset Finance (No.4) Ltd
1 i
181
Lloyds Bank plc Annual Report and Accounts 2024
Subsidiaries and related undertakings continued
Name of undertaking
Notes
Lloyds Bank Covered Bonds (LM) Ltd
26 i
Lloyds Bank Covered Bonds LLP
26 *
Lloyds Bank Equipment Leasing (No. 1) Ltd
13 i ‡
Lloyds Bank Equipment Leasing (No. 7) Ltd
13 i ‡
Lloyds Bank Equipment Leasing (No. 9) Ltd
1 i
Lloyds Bank Financial Services (Holdings) Ltd
1 i v
Lloyds Bank General Leasing (No. 3) Ltd
13 i ‡
Lloyds Bank General Leasing (No. 5) Ltd
13 i ‡
Lloyds Bank General Leasing (No. 11) Ltd
13 i ‡
Lloyds Bank GmbH
29 i
Lloyds Bank Leasing (No. 6) Ltd
1 i
Lloyds Bank Leasing Ltd
1 i
Lloyds Bank Maritime Leasing (No. 10) Ltd
1 i
Lloyds Bank Nominees Ltd
1 i
Lloyds Bank Offshore Pension Trust Ltd
28 i
Lloyds Bank Pension ABCS (No. 1) LLP
1 *
Lloyds Bank Pension ABCS (No. 2) LLP
1 *
Lloyds Bank Pensions Property (Guernsey) Ltd
27 ii iii
Lloyds Bank Property Company Ltd
1 i
Lloyds Bank S.F. Nominees Ltd
1 i
Lloyds Bank Subsidiaries Ltd
1 i
Lloyds Bank Trustee Services Ltd
1 i
Lloyds Banking Group Pensions Trustees Ltd
1 i
Lloyds Far East Sàrl
23 i
Lloyds General Leasing Ltd
1 i
Lloyds Hypotheken B.V.
21 i
Lloyds Industrial Leasing Ltd
1 i
Lloyds Investment Securities No.5 Ltd
13 i ‡
Lloyds Leasing (North Sea Transport) Ltd
1 i
Lloyds Leasing Developments Ltd
13 i ‡
Lloyds Offshore Global Services Private Ltd
7 i
Lloyds Plant Leasing Ltd
1 i
Lloyds Portfolio Leasing Ltd
1 i
Lloyds Project Leasing Ltd
1 i
Lloyds Property Investment Company No. 4 Ltd
13 i ‡
Lloyds Secretaries Ltd
1 i
Lloyds TSB Pacific Ltd
2 i
Lloyds UDT Asset Rentals Ltd
13 i ‡
Lloyds UDT Leasing Ltd
1 i
Lloyds UDT Ltd
13 i ‡
Loans.co.uk Ltd
8 i
London Taxi Finance Ltd
1 ii iii
Lotus Finance Ltd
20 ii iii
LTGP Limited Partnership Incorporated
27 *
Maritime Leasing (No. 19) Ltd
13 i ‡
MBNA Ltd
8 i
Membership Services Finance Ltd
4 i
Mitre Street Funding Sàrl
23 i
NWS Trust Ltd
5 i
Pacific Leasing Ltd
13 i ‡
Perry Nominees Ltd
1 i
PIPS Asset Investments Ltd
1 ii iii
Proton Finance Ltd
20 ii iii
R.F. Spencer and Company Ltd
9 i
Ranelagh Nominees Ltd
1 i
Retail Revival (Burgess Hill) Investments Ltd
1 i
Savban Leasing Ltd
1 i
Scotland International Finance B.V.
24 i
Scottish Widows Services Ltd
5 i
Name of undertaking
Notes
Seabreeze Leasing Ltd
13 i ‡
Seaspirit Leasing Ltd
1 i
Shogun Finance Ltd
20 i
St. Mary’s Court Investments
13 i ‡
Standard Property Investment (1987) Ltd
5 ii #
Sussex County Homes Ltd
4 i
Suzuki Financial Services Ltd
20 ii #
The Agricultural Mortgage Corporation plc
11 i
The British Linen Company Ltd
5 i
The Mortgage Business plc
4 i
Thistle Leasing
+ *
Tower Hill Property Investments (7) Ltd
13 i # ‡
Tower Hill Property Investments (10) Ltd
13 i # ‡
Tranquility Leasing Ltd
1 i
TuskerDirect Ltd
14 i
UDT Budget Leasing Ltd
13 i ‡
United Dominions Leasing Ltd
1 i
United Dominions Trust Ltd
1 i
Ward Nominees (Abingdon) Ltd
1 i
Waymark Asset Investments Ltd
1 ii iii
Wood Street Leasing Ltd
1 i
182
Lloyds Bank plc Annual Report and Accounts 2024
Subsidiaries and related undertakings continued
Subsidiary undertakings continued
The Group has determined that it has the power to exercise
control over the following entities without having the majority of
the voting rights of the undertakings. Unless otherwise stated, the
undertakings do not have share capital or the Group does not hold
any shares.
Name of undertaking
Notes
Addison Social Housing Holdings Ltd
22
Cancara Asset Securitisation Ltd
30
Candide Financing 2021-1 B.V.
19
Candide Financing 2024-1 B.V.
19
Cardiff Auto Receivables Securitisation 2022-1 plc
26
Cardiff Auto Receivables Securitisation 2024-1 plc
6
Cardiff Auto Receivables Securitisation Holdings Ltd
26
Cardiff Auto Receivables Securitisation Holdings No. 2 Ltd
6
Elland RMBS 2018 plc
26
Elland RMBS Holdings Ltd
26
Fontwell Securities 2016 Ltd
22
Fontwell II Securities 2020 DAC
17
Gresham Receivables (No. 3) Ltd
30
Gresham Receivables (No. 10) Ltd
30
Gresham Receivables (No. 13) UK Ltd
25
Gresham Receivables (No. 15) UK Ltd
10 ‡
Gresham Receivables (No. 16) UK Ltd
10 ‡
Gresham Receivables (No. 20) Ltd
30
Gresham Receivables (No. 24) Ltd
30
Gresham Receivables (No.27) UK Ltd
25
Gresham Receivables (No. 32) UK Ltd
25
Gresham Receivables (No. 34) UK Ltd
25
Gresham Receivables (No.35) Ltd
30
Gresham Receivables (No.36) UK Ltd
25
Gresham Receivables (No.37) UK Ltd
25
Gresham Receivables (No.38) UK Ltd
25
Gresham Receivables (No.39) UK Ltd
25
Gresham Receivables (No.40) UK Ltd
25
Gresham Receivables (No.41) UK Ltd
25
Gresham Receivables (No.44) UK Ltd
25
Gresham Receivables (No.45) UK Ltd
25
Gresham Receivables (No.46) UK Ltd
25
Gresham Receivables (No.47) UK Ltd
25
Gresham Receivables (No.48) UK Ltd
25
Guildhall Asset Purchasing Company (No.11) UK Ltd
25
Housing Association Risk Transfer 2019 DAC
17
Lloyds Bank Covered Bonds (Holdings) Ltd
26
Molineux RMBS 2016-1 plc
26
Molineux RMBS Holdings Ltd
26
Penarth Asset Securitisation Holdings Ltd
26
Penarth Funding 1 Ltd
26
Penarth Funding 2 Ltd
26
Penarth Master Issuer plc
26
Penarth Receivables Trustee Ltd
26
Permanent Funding (No. 1) Ltd
26
Permanent Funding (No. 2) Ltd
26
Permanent Holdings Ltd
26
Permanent Master Issuer plc
26
Permanent Mortgages Trustee Ltd
26
Permanent PECOH Holdings Ltd
26
Permanent PECOH Ltd
26
Salisbury Securities 2015 Ltd
22
Name of undertaking
Notes
Salisbury II Securities 2016 Ltd
22
Salisbury II-A Securities 2017 Ltd
22
Salisbury III Securities 2019 DAC
17
Stichting Holding Candide Financing
19
Stichting Holding Candide Financing 2024-1
19
Stichting Security Trustee Candide Financing 2021-1 B.V.
19
Stichting Security Trustee Candide Financing 2024-1
19
Syon Securities 2019 DAC
17
Syon Securities 2020 DAC
17
Syon Securities 2020-2 DAC
17
Wetherby II Securities 2018 DAC
3 ‡
Wetherby III Securities 2019 DAC
17
Wilmington Cards 2021-1 plc
26
Wilmington Cards Holdings Ltd
26
Wilmington Receivables Trustee Ltd
26
183
Lloyds Bank plc Annual Report and Accounts 2024
Subsidiaries and related undertakings continued
Associated Undertaking
The Group has a participating interest in the following undertakings.
Name of undertaking
% of share class
held by immediate
parent company
(or by the Group
where this varies)
Registered office address
Notes
Addison Social Housing Ltd
20%
1 Bartholomew Lane, London, EC2N 2AX
i
Notes
*The undertaking does not have share capital
+The undertaking does not have a registered office
#In relation to Subsidiary Undertakings, an undertaking external to the Group
holds shares
^Shares held directly by Lloyds Banking Group plc
The undertaking is in Liquidation
(i)  Ordinary Shares
(ii)  A Ordinary Shares
(iii)  B Ordinary Shares
(iv)  Deferred Shares
(v)  Preference Shares
(vi)  Non-Voting Deferred Shares
(vii)  C Ordinary Shares
(viii) D Ordinary Shares
(ix)  E Ordinary Shares
(x)  Redeemable Preference Shares
(xi)  Ordinary Limited Voting Shares
(xii)  Ordinary Non-Voting Shares
(xiii) C1 Ordinary Shares
(xiv) C2 Ordinary Shares
Registered office addresses
(1) 25 Gresham Street, London, EC2V 7HN
(2) 43/F, One Taikoo Place, 979 King’s Road, Quarry Bay, Hong Kong
(3) 13-18 City Quay, Dublin 2, DO2 ED70
(4) Trinity Road, Halifax, West Yorkshire, HX1 2RG
(5) The Mound, Edinburgh, EH1 1YZ
(6) 10th Floor, 5 Churchill Place, London, E14 5HU
(7) 6/12, Primrose Road, Bangalore, 560025, India
(8) Cawley House, Chester Business Park, Chester, CH4 9FB
(9) 1 Brookhill Way, Banbury, Oxon, OX16 3EL
(10) 7th Floor, 21 Lombard Street, London, EC3V 9AH
(11) Keens House, Anton Mill Road, Andover, Hampshire, SP10 2NQ
(12) Barnett Way, Gloucester, GL4 3RL
(13)1 More London Place, London, SE1 2AF
(14)Building 4 Hatters Lane, Croxley Green Business Park, Watford, Hertfordshire,
WD18 8YF
(15)110 St. Vincent Street, Glasgow, G2 4QR
(16)McStay Luby, Dargan House, 21-23 Fenian Street, Dublin 2, DO2 HC63, Ireland
(17)5th Floor, The Exchange, George’s Dock, IFSC, Dublin 1, Ireland
(18)Building 4 Hatters Lane, Croxley Green Business Park, Watford, Hertfordshire,
WS18 8YF
(19) Basisweg 10, Amsterdam, 1043AP, Netherlands
(20) 33 Old Broad Street, London, EC2N 1HZ
(21)Fascinatio Boulevard 1302, 2909VA Capelle aan den IJssel, Netherlands
(22) 44 Esplanade, St. Helier, JE4 9WG, Jersey
(23) 17 Boulevard F.W. Raiffeisen, L-2411 Luxembourg
(24) De Entrée 254, 1101 EE, Amsterdam, Netherlands
(25) Wilmington Trust SP Services (London) Limited, Third Floor, 1 King’s Arms Yard,
London, EC2R 7AF
(26) 1 Bartholomew Lane, London, EC2N 2AX
(27) P O Box 186, Royal Chambers, St Julian’s Avenue, St. Peter Port, GY1 4HP,
Guernsey
(28) 3rd Floor, IFC5, Castle Street, St Helier, JE2 3BY, Jersey
(29) Karl-Liebknecht-STR. 5, D-10178 Berlin, Germany
(30) 26 New Street, St. Helier, JE2 3RA, Jersey