Lloyds Banking Group has delivered a robust financial performance for 2025, with pre-tax profits climbing by 12% to reach £6.66 billion. This impressive result comes despite the bank setting aside substantial funds to address motor finance compensation claims, highlighting its resilience in a challenging economic climate.
Strong Annual Performance Exceeds Expectations
The high street lending giant reported that its pre-tax profits increased from £5.97 billion in 2024 to £6.66 billion in 2025, surpassing market forecasts. This growth was underpinned by a particularly strong final quarter, where profits more than doubled to £1.98 billion, up from £824 million in the same period the previous year.
Motor Finance Remediation Costs
Notably, this profit jump occurred in spite of £968 million in remediation costs, including an £800 million charge in the third quarter specifically for compensating customers who were unfairly sold car loans. The total provision for this motor finance saga now stands at £1.95 billion, reflecting the bank's commitment to addressing past issues while maintaining financial strength.
Upgraded Outlook for 2026
Encouraged by these results, Lloyds has upgraded its guidance for key performance measures in 2026. The bank now anticipates underlying net interest income of approximately £14.9 billion for the coming year, a significant increase from the £13.6 billion recorded in 2025. This optimistic projection signals confidence in the group's strategic direction and operational momentum.
Credit Performance and Strategic Vision
The lender revealed that underlying bad debt charges almost doubled last year to £795 million, up from £433 million in 2024. However, management emphasised that this total remains low and indicative of a strong and stable credit performance across the portfolio.
Chief executive Charlie Nunn commented on the results, stating: "The group demonstrated sustained strength in financial performance in 2025, including in the final quarter, with continued balance sheet and income growth, as well as strong cost discipline and credit performance."
He added: "Looking ahead to 2026 and the culmination of the five-year strategy we set out in 2022, our continued business momentum and strategic delivery enable us to upgrade guidance." This statement underscores the bank's focus on long-term planning and execution, even amidst short-term challenges.
Overall, Lloyds Banking Group's 2025 results demonstrate a remarkable ability to navigate financial headwinds, particularly the motor finance compensation issue, while still achieving substantial profit growth and setting ambitious targets for the future.
