Benjamin Toms - RBC:

Perlie Mong - Bank of America:

Jonathan Pierce - Jefferies:

Ben Caven Roberts - Goldman Sachs:

Chris Cant - Autonomous:

Amit Goel - Mediobanca:

Charlie Nunn:
Good morning, everyone. And thank you for joining our 2024 Full Year Results Presentation at our brilliant new London Headquarters. We will officially open the building to colleagues over the coming weeks. So we are very pleased to welcome you as our first guests. Let's hope everything goes all right. As we now reach the end of our first phase of our five-year strategic transformation, our presentation will be slightly longer today. I'll start with a brief overview before handing over to William, who will run through the 2024 financials in detail. After this, I'm excited to share more detail on our strategic progress over the first three-year phase, as well as our plans for the remaining two years as we continue to transform the business at pace. We'll then have the usual time allocated for your questions. Let me begin on Slide 3. I'd like to start by highlighting three key messages. Firstly, our purpose-led strategy is continuing to deliver strong outcomes for all stakeholders. We've made excellent progress in the first phase, driving broad-based momentum and positioning us well to accelerate our transformation in the second phase. Secondly, our financial performance in 2024 was robust, in line with guidance. Our highly capital-generative business model enabled strong shareholder distributions, including a 15% increase in the ordinary dividend and a share buyback of £1.7 billion. This is despite an additional £700 million provision relating to Motor finance commissions taken in the fourth quarter. And finally, we're providing new guidance for 2025 and reaffirming our targets for 2026. We remain confident of delivering higher, more sustainable returns. On Slide 4, I'll briefly cover how our purpose is driving value for all our stakeholders. We have a long-standing purpose of helping Britain prosper and a proven track record over many years of delivering outcomes that benefit all our stakeholders. Our actions provide clear benefits for our customers and communities across the UK, whilst driving business value and supporting the real economy in areas where we're well placed to lead the change. At the same time, these actions unlock new, attractive growth opportunities for the group. For example, as the UK's largest mortgage lender, we're deeply involved in the housing sector. We've now lent nearly £100 billion to first-time buyers since 2018, including £15 billion in 2024. Alongside, we've continued to build our customers' financial resilience and savings. And in the last few years, we've provided nearly £20 billion of funding to the social housing sector, £90 billion of infrastructure financing and almost £50 billion of sustainable financing. As you heard from me at the half year, we welcome the emphasis placed on sustainable economic growth by the government. This, combined with signs of an improving macro backdrop and resilient fundamentals for consumers and businesses, positions the UK for faster growth. We believe we're well placed to support this. Turning now to the strategic progress on Slide 5. I'll elaborate on this in more detail in the second part of my presentation, but I wanted to briefly highlight the strong progress we've made in the first phase of our strategic transformation across 2022 to '24. Significantly, we've returned the franchise to growth. This has been delivered through multiple levers, including leveraging our digital leadership position and increasing focus on higher value areas such as mass affluent. At the same time, we've reinforced our efficiency position, with an increased focus on end-to-end digitization and the simplification of our technology estate. Our success in both areas is a result of the transformation of the group's capabilities across people, technology and data. We've made great strides in this area, significantly increasing the hiring of key engineering talent and adopting new technologies to drive innovation, creating the platform for the next phase. Our execution in the first three years has already delivered clear financial benefits, including circa £2 billion of net income growth, a turnaround in our other income lines and significant improvements in returns and capital distributions. On the latter, our capital distributions over the past three years exceed £11 billion. As I'll discuss later, we see further financial upside looking ahead to 2026. I'll now close this section with a brief look at our 2024 financials on Slide 6. Building upon our continued strategic progress, our financial performance in 2024 was robust, with positive business momentum in both the fourth quarter and over the course of the full year. Our 2024 financials also demonstrate delivery against the medium-term guidance we laid out for the first phase of our strategic plan. We've delivered £0.8 billion of additional revenues from strategic initiatives, ahead of our £0.7 billion target, and £1.2 billion of gross cost savings, more than offsetting the impact of payer inflation during the period. Our 2024 return on tangible equity and capital generation were impacted by the additional provision relating to Motor finance commissions. However, both were ahead of the circa 13% and circa 175 basis points, excluding this. I'll provide more details on our financial performance on a three-year view, as well as the outlook to 2026, in the second part of my presentation. But for now, I'll hand over to William to cover 2024 in more detail.

William Chalmers:
Thanks, Charlie. Good morning, everybody, and thank you again for joining. As usual, I'll provide an overview of the Group's financial performance, starting on Slide 8. Lloyds Bank & Group delivered a robust financial performance in Q4, and indeed in 2024 as a whole. Statutory profit after tax for the year was £4.5 billion, or £5 billion excluding the Q4 motor provision. This equates to a return on tangible equity of 12.3%, or 14% ex-motor. Supported by franchise growth, net income for the full year was £17.1 billion. This includes a net interest margin of 2.95%, in line with guidance, alongside 9% growth in other operating income. In Q4, net income was £4.4 billion, up 1% versus Q3. This was driven by 1% growth in net interest income, in turn supported by a rising quarterly net interest margin, consistent with the improvement that started in Q3. Full-year operating costs of £9.4 billion were up 3% year-on-year, again in line with our guidance. Asset quality remained strong. The impairment charge for the year of £433 million equates to an asset quality ratio of 10 basis points, or 19 basis points, pre-releases from changes to our economic assumptions. Meanwhile, TNAV per share increased to 52.4p, up 1.6p in the year. Our performance delivered capital generation of 148 basis points in the year, or 177 basis points, excluding the Q4 motor provision. I will now turn to Slide 9 to talk through our balance sheet growth. Lending and deposits continued to exhibit robust growth in 2024. Group lending balances of £459 billion were up £9 billion, or 2% in the year, and over £2 billion in Q4. Within this, we delivered another strong quarter of mortgage growth, up £2.2 billion, or £3.2 billion, excluding legacy book securitization. Staying within retail lending, in Q4 credit card balances were flat, a slightly reduced spend offset by lower repayment rates. Unsecured lending balances were up slightly, while promoter finance in Blackhorse was down, driven by lower dealer stocking. Commercial lending balances were down slightly, by £1 billion in 2024, although up when excluding government-backed lending repayments. In Q4, a reduction of £0.3 billion was led by lower balances in PCB, outweighing growth in our CIB franchise. Turning to the liability franchise, deposits grew by 2% or £11 billion during the year. The year finished with Q4 growth in deposits of £7 billion. Within this, we saw an increase of 1% quarter-on-quarter in retail, with savings accounts up £4 billion and current accounts up £0.7 billion. Deposit churn continues to ease, as we had anticipated. In PCA, there was some benefit in the quarter from calendar effects and the impact of the October budget, but the underlying stability in balances was an encouraging performance. Q4 commercial deposits were up £1.9 billion quarter-on-quarter. This was mainly driven by CIB, reflecting growth in targeted sectors, as well as some positive FX impacts. Alongside these developments, insurance, pensions and investments saw £5.3 billion of net new money in 2024, £1.8 billion in Q4. Turning now to interest income on Slide 10. The Group delivered net interest income of £12.8 billion in 2024. This included growth of 1% in Q4 over the prior quarter, continuing the upturn that started in Q3. Average interest earning assets for the year were £451 billion, in line with our guidance. Q4 AIAs were £455 billion, up £4 billion off the back of the lending growth that we saw in the second half of the year. The full-year net interest margin was 295 basis points. Q4 margin was 297 basis points, up 2 basis points on Q3, and continuing to increase at a gradual pace as we had anticipated. The 2024 non-banking NII charge was £469 million, with a Q4 charge of £122 million, probably a little lower than we had expected. Going forward, we will focus on net interest income in our guidance. This is to simplify our approach and to focus on what matters, i.e. income. In 2025, we expect net interest income to grow to around £13.5 billion, up about £700 million from last year. This guidance is built on expected further robust lending and deposit growth, and a significant increase in the contribution from the structural hedge. These tailwinds will be partly offset by some further churn in deposits and the impact of rate reductions, alongside a continuation of the mortgage refinancing headwind. These pressures remain meaningful, but they will gradually ease through the year. As said, we will no longer be providing guidance around our net interest margin. However, to support the transition, our 2025 net interest income expectations are consistent with a banking NIM of around 305 basis points. Let me now move to our mortgage book on Slide 11. Mortgage performance in 2024 was strong. Mortgage book grew by £6.1 billion in the year, or £8 billion excluding legacy book securitizations. This growth is a result of a recovering market and our strategic initiatives helping to support a 20% share of new lending over the year, around 1 percentage point ahead of our share of stock. Our expectation is for further growth in the mortgage book this year, supported by a continued recovery in the market and a robust new business share. Completion margins in the fourth quarter remain resilient at around 75 basis points. Stable on Q3. This remains below margins on our maturing mortgages, however the difference will continue to narrow this year before then playing itself out in 2026. Let me now turn to our other asset books on Slide 12. We saw a solid performance in our consumer and commercial lending portfolios in 2024. Combined balances for cards, unsecured loans and motor were up £2.8 billion in the year, or 8%. Within this, unsecured loans were up £2.2 billion on the back of organic growth as well as lower repayment volumes following a securitization in 2023. Cards were up £0.6 billion, or 4%. Motor balances were flat as we focused on attractive growth opportunities in the leasing business, and in particular Tusker. Turning to commercial banking, lending was down £1 billion in the year. Targeted growth in CIB, including in key strategic areas such as infrastructure and project finance, was more than offset by net repayments in BCB, including the £1.6 billion of government-backed lending. Let's take a look at deposits on Slide 13. Our deposit franchise did well in 2024. Total deposits were up by over £11 billion, or 2%, to £483 billion. In retail, we continue to see the benefits of our attractive and differentiated propositions. Total retail balances were up £11 billion in the year. Current account balances ended at £101 billion, reflecting a slightly better performance than expected, with increasing wages, gyro credits and slow spend. In particular, it was pleasing to see our market share of balances increasing over the period. Savings were up £13.4 billion in the year, supported by continued significant inflows, in particular to our limited withdrawal products. Given the rate environment, we saw a further deposit churn in 2024, but as anticipated, it has eased over the year. Commercial deposits were broadly stable in the year. BCB balances increased by £1.3 billion due to targeted growth initiatives in mid-corporates, offset by an expected outflow in CIB, concentrated in the third quarter. The performance of our deposit franchise supports the Structural Hedge. So let me now turn to that. The Structural Hedge is a significant and strengthening tailwind to income. The hedge notional currently stands at £242 billion. While down £5 billion in 2024, the notional was stable in the second half of the year, off the back of our strong deposit performance. Last year, hedge income was £4.2 billion, £0.8 billion higher than 2023. The average yield on the hedge was 1.7%, increasing to over 1.9% in the fourth quarter. And as you know, the reinvestment rate as the hedge rolls over continues to be significantly higher than the current yield. The weighted average life of the hedge meanwhile remains stable at around 3.5 years. Looking forward, based on our notional and swap rate expectations, we are guiding for hedge income this year to be £1.2 billion higher than in 2024. Thereafter, we expect 2026 hedge income to be a further £1.5 billion higher than in 2025. Moving to other income on Slide 15. 2024 was another year of encouraging and broad-based growth in other income. We expect this pattern to continue. Other income of £5.6 billion was 9% higher than the prior year. Despite Q4 being a seasonally weaker quarter, it was flat versus Q3 and indeed 11% up year-on-year. Growth during the year was evidenced across the divisions, driven by higher customer activity and by our strategic investment. Retail was up 10% year-on-year, supported by a strengthening contribution from our motor leasing business and a resilient performance across our other banking income lines. Commercial was up 8% versus 2023, driven by a positive performance in our markets business across the year. Growth was supported by share gains as well as by higher client activity. Insurance, pensions and investments OI was up 7% year-on-year. This included healthy growth within general insurance, as well as workplace pensions and individual annuities. We also saw growth in other income associated with the group's equity investment businesses in the year. This was driven by Lloyds Living, previously Citra, and LDC. Looking forward, as we continue to invest in our strategic initiatives across the business, we expect strong growth in other income to continue. Turning to Operating Lease Appreciation, the 2024 charge of £1.3 billion included £331 million in Q4. Car price developments followed our expectations as we set out at H1. Looking forward, we expect this charge to grow in line with fleet growth and higher value vehicles, supporting progress in other income. Let me move to costs on Slide 16. Operating costs were £9.4 billion in 2024, again in line with our guidance. This represents 3% growth year-on-year or 2%, excluding the sector-wide BOE charge introduced in the first quarter. Cost discipline remains an imperative for the group. Last year, we continued to invest while offsetting inflationary pressure with further cost savings. We now hit our target of £1.2 billion of gross cost saves versus 2021. Most recently, Q4 operating costs were £2.5 billion, stable on Q3, excluding the annual payment of the bank levy. Looking ahead to this year we expect operating costs of circa £9.7 billion. This is in the context of continued investment alongside inflationary pressures partly offset by ongoing efficiency benefits. It also includes the impact of higher national insurance contributions which are equivalent to about £100 million per annum. Our continued tight BAU cost control enables us to make ongoing investment to support our growth ambitions within our planned cost budgets. This means that our investment in severance spend 2026 will be slightly higher than previously planned, driving further income growth, cost savings and reinforcing operating leverage. All of this is consistent with our 2026 ambitions including the below 50% cost to income ratio. The remediation charge is £899 million for the full year and £775 million in the quarter. £700 million of the charge relates to the incremental motor finance provision. Stepping back for the typical full year run rate we still see £200 million to £300 million as an appropriate guide. I'll elaborate on motor finance on the next slide. In Q4 we took an additional £700 million provision for the potential remediation costs relating to motor commission arrangements. This provision is following the recent Court of Appeal judgment which changes the previously understood law around the disclosure and consent to motor commissions. It also goes beyond the scope of the original FCA review. In this context we welcome the expedited Supreme Court hearing at the beginning of April. I'll take a moment to explain the framework around the provision. The provision is built upon a number of key inputs including the potential outcomes from the Supreme Court appeal any subsequent FCA intervention and depending on that the potential remedy per case, the customer claim rate, the potential rate of interest applied and so forth. These inputs give rise to a range of scenarios against which we assess probabilities to determine the probability weighted provision. Clearly there's significant uncertainty around each of these inputs but combined with the previous provision of £450 million the total amount of £1.15 billion represents our best estimate. Final financial impact could of course differ meaningfully both higher or lower from the amount that we have provided. Let me now turn to asset quality on Slide 18. Asset quality remains very strong. It reflects our prime customer base and a prudent approach to risk. 2024 impairment charge was £433 million equivalent to an asset quality ratio of 10 basis points. This incorporates a low underlying charge as well as some one-offs such as the release of inflationary judgments. It also benefits from improvements in our economic assumptions or MES throughout the year. On a pre-MES basis the impairment charges are still low £827 million an AQR of 19 basis points. The Q4 impairment charge is £160 million or 14 basis points including a £70 million MES credit. Pre-MES the charge is 20 basis points. Our stock of ECLs on the balance sheet is now £3.7 billion about £450 million in excess of our base case and like for like higher than pre-pandemic levels. Looking forward we expect the asset quality ratio to be circa 25 basis points for 2025 based upon our stated economic assumptions. Let me move to Slide 19 and briefly look at our portfolio. Our portfolio is low risk and highly resilient. New to arrears and UK mortgages improved throughout 2024. Over two-thirds of our book are now on pay rates in excess of 3% with the portfolio of course having been stress tested to much higher rates. Our mortgage book average LTV stands at 43.7%. Arrears and defaults across other portfolios remain low and in most cases falling. Importantly across retail and commercial early warning indicators continue to be reassuring. In retail for example minimum payers in cards remain low and stable. Commercial we're seeing stable SME working capital utilization trends. Our asset quality performance has been underpinned by extensive de-risking in recent years both in retail and in commercial portfolios. A lower ECL and our improved results in recent external stress tests testify to this progress. Moving on I'll turn to Slide 20 to take a look at the updated macroeconomic outlook. The macroeconomic outlook continues to be stable. In the fourth quarter we've made only minor revisions to our forecasts in Q3. We now forecast 1% growth in GDP for 2025. We expect three 25 basis point cuts in the UK bank rate this year. We then expect a further two cuts in 2026. Our unemployment forecast remains largely unchanged averaging 4.7% both in 2025 and in 2026. We expect modest house price growth of around 2% this year supported by a lower rate environment. As usual we present the full set of economic and associated ECL provisions in the appendix. So moving on let's turn to Slide 21 to look at the below the line items TNAV and ROTE. Return on tangible equity for 2024 was 12.3%. Excluding the motor provision, the full year ROTE was 14%. Within this restructuring costs were low at £40 million in the year and £19 million in Q4. The volatility in other items charge was £332 million in the year and £150 million in the final three months. The fourth quarter charge in particular was significantly driven by negative insurance volatility and rates movements that we saw. Tangible net assets per share at 52.4p were up 1.6p in 2024. The increase over the year was driven by profits and a reduced share count from our buyback program. This was offset by shareholder distributions. In Q4 growth in TNAV per share dampened by the motor provision was more than offset by the impact of higher rates on the cash flow hedge reserve and the pension surplus. Looking ahead we expect TNAV per share to materially grow as the business builds alongside support from the unwind of the cash flow hedge reserve and the reduced share count from the buyback. In 2025 including the impact of a growing TNAV we expect a return on tangible equity circa 13.5%. Let me now turn to capital generation on Slide 22. Group delivered capital generation in the year of 148 basis points or 177 basis points excluding the motor provision. This strong underlying capital build is in line with our expectations and before motor consistent with our target of circa 175 basis points for the full year. Within this risk weighted assets were 224.6 billion in line with the guidance that we set out in 2022. The £5.5 billion increase in the year includes lending growth as well as £3.3 billion relating to our adjustments for CRD IV secured risk weightings. We previously guided that CRD IV was going to result in about £5 billion of incremental RWA growth from 2024 to '26. We now expect the ultimate impact may be modestly greater than this depending upon our discussions with the PRA. Suffice to say we will continue to focus on RWA efficiency and optimization to offset these regulatory pressures. While on the topic of regulatory change you will know that BAL 3.1 has now been delayed to the start of 2027. We expect this to lead to a moderate reduction in RWAs when it is eventually implemented. At end 2024 our closing CET1 ratio after our dividend and buyback distributions is 13.5%. This meets our guidance to pay down to this level by the end of the year. Looking forward, we expect 2025 capital generation to be circa 175 basis points and to move to our target CET1 ratio of 13% by the end of 2026. I'll now move to Slide 23 to discuss distributions. We remain highly committed to returning capital to shareholders. Our consistent capital generation underpins strong distributions. For 2024, the robust financial performance and capital position enables the Board to announce a final ordinary dividend of 2.11p per share for a total of 3.17p. This is up 15% on the prior year. In addition to the final dividend, today we're announcing a buyback of £1.7 billion. This is a good result after taking into account the additional motor provision. Together, this means that the group will distribute a total of up to £3.6 billion in respect to 2024, around 9% of our market cap. Dividend is now around 60% higher than it was in 2021. Our consecutive buyback programs, meanwhile, have so far reduced share count by more than 15% over the same period. Going forward, prospects for continued healthy growth in our distributions are good. Let me now wrap up the financial section of the presentation on Slide 24. In sum, 2024 represented another robust financial performance, reflecting income growth in the second half of the year, as well as continued cost discipline and reassuring asset quality. Together, this offers strong capital generation and healthy distributions. We are building firm foundations. For 2025, we now expect net interest income to be circa £13.5 billion. Operating costs to be circa £9.7 billion. The asset quality ratio to be circa 25 basis points. The return on tangible equity to be circa 13.5%. And capital generation to be circa 175 basis points. We also reconfirm our 2026 targets, which you've seen before and are laid out here on the slide. We are confident of delivering higher, more sustainable returns. That concludes my comments for this morning. I'll now hand back to Charlie to provide an update on our strategic progress.

Charlie Nunn:
Many thanks, William. So, it's now been three years since we presented our strategic plan, covering the period to 2026, with 2024 representing a major checkpoint along this journey. I'm very encouraged with the progress we've made to date, and I'm highly confident of delivering long-term differentiation across our businesses, cementing our position as a leading national champion. In this section, I want to share with you the following key messages. Firstly, our purpose-driven strategy is delivering and driving long-term competitive advantage across the business. Secondly, there have been a number of key strategic deliveries in the first phase, which are creating broad-based momentum. And thirdly, we are excellently positioned to accelerate our transformation in the second phase and deliver an enhanced financial profile to 2026. Let me start on Slide 26 with an overview of our strategy. We have a clear strategy anchored around our purpose of helping Britain prosper. Our strategic priorities of grow, focus and change build upon and reinforce our competitive advantages that come from our deep scale customer relationships, our proven track record and efficiency, and our commitment to being a leader when it comes to digital and technology. Our strategic execution is enhancing our customer proposition, whilst at the same time delivering a compelling investment case for our shareholders. This is characterized by growing revenues and significant operating leverage, supporting strong returns and increased distribution capacity. Building on this, on Slide 27, I'll provide a brief reminder of the opportunities we identified when we started our transformation in 2022. Our strategy is built upon strong foundations. As a leading integrated financial services provider in the UK, the group's scale, distinctive customer propositions, broad product offering and trusted brands provide a platform from which we can unlock our full potential. To achieve this, a number of strategic opportunities were identified in 2022. This included returning the group to growth, de-risking in a number of areas, further improving our cost and capital efficiency, and transforming our digital AI and talent to further differentiate our services for customers and position us for the future. There are a few specific targeted outcomes that we did not deliver in the first phase, but overall we've made excellent progress in this regard. I'll provide examples of this over the coming slides. Looking ahead, with the majority of de-risking activities now complete, we see the opportunity to accelerate the scale of our transformation over the next two years as we become unencumbered by some of these challenges. This will support the delivery of a truly differentiated franchise for both our customers and shareholders by 2026, and a stronger competitive position for us to progress into the future. Starting on Slide 28, I'll highlight the progress we've made across our three strategic pillars. When we laid out the strategy in February '22, we provided you with a selection of targeted outcomes that would help you track the progress we were making through 2024. Encouragingly, we've successfully delivered 80% of these. In a few areas, we're slightly behind our original expectations, such as mass affluent investment flows, as higher interest rates drove a shift to savings instead. However, this has been more than offset by meaningfully surpassing our targets in other areas. A full scorecard of our progress has been provided in the appendix. As a result, we've delivered £0.8 billion of additional revenues from strategic initiatives, ahead of target, and realized £1.2 billion of gross cost savings, having increased this from £1 billion. We've delivered this at the same time as undertaking significant de-risking activity, such as addressing a £7 billion pension deficit, more than halving our legacy mortgage portfolio, removing circa 650 legacy technology applications, and achieving £18 billion of RWA optimization over the three years. The ability to deliver these outcomes, whilst also growing the core franchise, demonstrates a shift in organizational agility. Looking at our strategic priorities in order, on Slide 29 I'll highlight the strong revenue momentum our growth has delivered in the first three years. The first phase of our strategy represented a clear shift in focus towards growth. Aligned to this, we've built momentum across the business, and in turn delivered net income growth of nearly £2 billion since 2021. We've seen meaningful headwinds during this period, including margin pressures for the run-off of our SVR mortgage book, and a prolonged period of weaker front-book margins. Operating lease depreciation has also normalized from historically low levels, whilst the run-off of government-backed lending has acted as a drag on our commercial banking business. In aggregate, this headwind has more than offset a £2 billion increase in structural hedge income in the period. However, this has been outweighed by approximately £3 billion of net income growth from the core franchise. This includes the £0.8 billion of additional revenues from strategic initiatives, combined with more than £2 billion of BAU income growth. Whilst the latter does capture the benefit of higher rates, it also reflects strong growth not linked to our strategic investment, such as in IP&I and CIB, where we've benefitted from increased focus. Our revenue growth also includes a significant contribution from other income, with an 11% CAGR over the period, across our three main reporting divisions. This is in line with our focus on growing more diversified revenue streams and reducing long-term NII reliance. Let me now explain on Slide 30 how we've delivered this strong growth. As you've heard in our half-yearly updates and through our investor seminars, we have multiple levers to drive revenue growth. Firstly, we've delivered growth through the core franchise, supported by a renewed growth focus and strengthened capabilities. For example, our gross mortgage lending share in 2024 was the highest for over a decade. We delivered strong growth in segments of strength, such as first-time buyers, whilst investments in intermediary journeys and our home-hub ecosystem are driving improved acquisition and retention outcomes. Secondly, with deepening relationships across the group, leveraging our broad offering to meet more needs for our customers and clients. Our market-leading digital experiences, trusted relationship teams, and advanced data insights are key to this. Thirdly, we're driving growth in high-value areas such as mass affluent. Previously, we did not have a dedicated proposition for this important customer group, but in the past three years, we've grown our customer base to over three million and increased banking balances by around £25 billion. And finally, we're driving greater cross-group collaboration, increasing the penetration of protection, home insurance, and investments across our retail customer base, and driving greater links between our workplace business and CIB clients. This is an area where we see more opportunity looking forward, increasing access to the group's unique breadth of businesses. Turning now to our second strategic pillar, focus, which covers both cost and capital efficiency. I'll start with costs on slide 31. Our commitment to cost efficiency is equally important as our growth focus, with both contributing to improving operating leverage. Our £1.2 billion of gross cost savings have more than offset elevated pay and inflation in the period. These savings were broad-based, but with meaningful contributions from our technology decommissioning efforts, the consolidation of our office footprint, and improving efficiency within our branch network as we shift to mobile first. These savings have mitigated headwinds and created capacity to drive growth in the business. This investment capacity will help unlock the additional revenues from strategic initiatives that we've targeted for 2026, with many of these having a lower marginal cost income ratio than the group today. As well as enabling further gross cost savings, we continue to target a cost income ratio of less than 50% by 2026. As you'd expect from us, costs will remain a key area of focus over the next two years and beyond. Turning now to capital efficiency, our second priority within the focus pillar on Slide 32. Our strategic participation choices are supportive of driving improved capital efficiency, growing in fee-generating capital light areas. However, we've also proactively delivered significant RWA optimization since 2021, supported by growing originate-to-distribute capabilities within our CIB business, and increasing adoption of SRT transactions. This optimization activity has more than offset regulatory inflation in the period, ensuring that RWA growth has more closely aligned to business growth, with our end 2024 position within the £220 billion to £225 billion guidance we provided three years ago. Ongoing optimization actions combined with the portfolio de-risking we've undertaken increase the predictability of capital generation going forward. On Slide 33, I'll move to our third pillar, change. Critical to our growth priorities is the way we leverage our strengths in technology and data to drive improved customer and business outcomes. Having established the largest UK retail digital bank with over 20 million app users and over 6 billion logons, our focus has been twofold. Firstly, to replicate this success across the group, delivering best-in-class digital experiences that drive superior levels of engagement in areas such as IP&I and BCB. I'm going to have to take a quick break. Do you mind if I just take two minutes? I'm just going to go to the restroom. Apologies, everyone. I won't finish comfortably if I don't. I'll be back in one minute. Sorry about that. Sorry about that. Not planned. I think that's the first for me. But I wanted to be really focused on the next part because I get to talk about the transformation going forward. It's not to try and shorten the Q&A. We've got plenty of time for that. So let me go back to this. It's early days in both areas, but our progress is encouraging. For example, our Scottish Widows app was rolled out to workplace customers during 2024 and has already recorded 8 million logons as customer interaction increases off the back of personalized experiences and innovative gamification. This level of engagement is significant in an area that customers have historically neglected and we see scope for further improvements over time as we extend this to more of our IP&I customer base and eventually the open market. Secondly, we're focused on driving greater value from our engagement, shifting our digital businesses from a servicing channel to one of acquisition too. To enable this shift, we've delivered a number of innovative propositions over the last three years. I'll cover some of these on Slide 34. We have meaningfully increased the pace of innovation since 2021, building and scaling unique mobile-first propositions across our core customer ecosystems. By leveraging new technologies and harnessing the power of the significant data asset, we've been able to meet clear customer needs, drive greater engagement and ultimately deliver business value. For example, our mobile-first home hub ecosystem, available to both relationship and intermediary customers, is a one-stop shop helping customers to improve their home ownership experience, from understanding the value of their homes to sourcing retrofit solutions. This has driven increased direct customer engagement in a highly intermediated market and is ultimately improving our retention experience and building deeper relationships. Similarly, we have meaningfully scaled and expanded your credit score, improving creditworthiness and driving increased conversion rates and lending volumes for the business. Having initially focused on eligibility linked to personal loans, customers are now able to consider the full suite of retail products from car finance to mortgages. This level of innovation would not have been possible three years ago and is testament to the organizational and cultural change that has taken place. This has been supported by our targeted investments in technology and talent in key areas, including the hiring of more than 4,000 technology and data specialists. Having covered our progress to date, I'll now shift to focus on the second phase and cover our exciting plans for 2025 and 2026, starting on Slide 35. Our strategy is a five-year one and therefore many of the items that I've discussed in the first phase will continue to be relevant as we move through to 2025 and 2026. Before commenting on our strategic priorities, let me take a moment to reflect on the external environment we see over the next few years. We believe this provides a supportive backdrop for our strategy during this period and for broader investment in the UK. As William said, our current forecast for the UK is for a resilient but slow growth economy. However, we see both the opportunity for economic growth to accelerate and for Lloyds Banking Group to grow faster than the economy. This is for a few key reasons. Firstly, households and businesses' financial health has strengthened again in 2024. The Government is committed to growth and regulatory reform and sees financial services as an important part of enabling it. Although there is significant geopolitical uncertainty, we see the UK as well-placed to navigate it relative to other economies and expect base rates to continue to come down through 2026. And finally, our strategy is focused on higher growth economic areas such as housing, infrastructure, transition finance, pensions and mass affluent customers. In that context, during the next two years we will build on the strong foundations and business momentum we've developed in the first phase to drive growth across the group with a focus on high-value areas. Our commitment to cost and capital efficiency will be reinforced by further savings, delivering strong operating leverage. Whilst we' will extend optimization capabilities further to mitigate headwinds and facilitate growth. And we’ll begin the next phase of our technology transformation, increasing the adoption new technologies, including extending Gen AI used cases across the group, driving benefits in both in near and longer term. Over the coming slides I’ll talk through our priorities for each of the main business units, where we’re building upon our existing strength to drive long-term competitive advantage. Let me start with our consumer relationships business within retail on Slide 36. Our consumer business has significant scale and reach, we have relationships with over half of the UK adult population with leading positions across both products and channels. Our strategic focus within consumer relationships is to deliver market leading mobile first and highly personalized experiences. This complemented by targeted human interactions, will drive more meaningful engagement with our customers, allowing us to meet more of their broader lifetime needs and further increase depth of relationship. In line with our focus on growing in high-value areas, we are further enhancing our mass affluent offering. Our new PCA proposition will be a key lever for increasing customer acquisition and building deeper relationships with a customer group that has more needs than that of the mass market. We're also exploring the use of Gen AI as a channel, providing personalized financial goal planning and money management journeys for customers as we continue to identify ways to close the advice gap. Turning now to Consumer Lending on Slide 37. We are a leading provider across all the main retail lending product lines in which we participate, with number one shares in mortgages, credit cards, loans and transport. Our focus is to maintain these leadership positions through ongoing improvements to customer journeys across all channels, whilst delivering innovative new solutions to drive deeper customer engagement and value. In mortgages, we are focused on maintaining strong gross lending flows, increasing participation in high-value areas and meeting more needs across the homes ecosystem. In unsecured, we will build upon the strong progress in the first phase, where we grew share in key areas such as credit card spend and loans, the latter by around 3 percentage points. Over the next two years, we plan to drive further value from your credit score and scale our differentiated, embedded finance offering, FlexPay, having launched this at the end of 2024. In transport, we will maintain our strong share through targeted participation in higher growth areas, including our fast-growing salary sacrifice business, Tusker. I'll now cover IP&I on Slide 38. IP&I enable us to deliver a truly differentiated experience. With 10 million customers, of which only roughly 2 million have a banking relationship with the group, there is significant opportunity for driving deeper relationships through an integrated bank assurance model. As I mentioned earlier, we are driving increased engagement with this customer base and plan to scale the Scottish Widows app from 400,000 customers today to more than 1.5 million by the end of 2026. At the same time, we are embedding IP&I products and experiences into the retail banking app, including investment solutions. This is an important lever for increasing penetration of our banking customers. Finally, in workplace pensions, we will continue to build profitable scale supported by increased connectivity with the rest of the group, particularly our CIB clients. Our repositioning of the IP&I business will ensure that it continues to be a sustainable source of earnings and dividends for the group. Turning now to commercial banking and, firstly, our BCB business on Slide 39. BCB is a highly profitable business and we're well established in this area with trusted, long-standing relationships with businesses that make a significant contribution to the UK economy. We're building the best digitally led relationship bank, bringing together the expertise and knowledge of our team of dedicated relationship managers with compelling mobile first experiences. Building upon our deposit franchise, we see opportunities to diversify across both products and sectors. We're targeting growth in sectors such as manufacturing that have a broader range of needs beyond lending and therefore tend to have higher product holdings. We've got headroom here in product areas that support capital light, returns accretive growth. Our focus on digitization is front to back. Having made strong progress on digital origination in the first phase, we're now focused on digitizing key servicing journeys, improving experience and driving efficiencies for the group. More broadly, we believe the capabilities we've built thus far position us well to capitalize on an improving outlook for businesses and already seeing green shoots across priority lending areas to evidence this. I'll now move to CIB on Slide 40. CIB is an exciting growth area and one where we've made great strides in the first phase. The business is built upon leading positions in core areas such as UK infrastructure and project finance and selling DCM. Underpinning this is a simple business model with disciplined participation across cash, debt and risk management. We've made great progress on becoming a broader solutions provider, meeting more transaction banking and markets needs. The latter has been an important source of revenue diversification and will continue to be so as we seek to grow CIB OOI by circa 45% over the five-year period. Over the next two years, we will solidify our position as well as growing selectively in Europe and the U.S., supporting UK linked clients. A continued focus on capital efficiency ensures disciplined growth. We've improved our income per average RWA by more than 150 basis points over the last three years, targeting a further meaningful increase by 2026. Turning now to Slide 41, where I'll briefly cover the technology step change we are driving. Our technology strategy over the next two years will have two distinct elements. Ongoing modernization and rationalization of our state will continue to deliver savings and improve efficiency, providing the capacity for investment in new technologies. With regard to the latter, we're well positioned as an AI leader with 800 AI models live today supporting our colleagues and customers whilst we continue to attract key hires at all levels. Having established the necessary capabilities, we've already launched a significant number of Gen AI, AI use cases across the group, including rolling out a knowledge management tool to more than 10,000 of our frontline colleagues to help them better support customers. We see opportunities to scale and extend these use cases over the next few years, improving speed to market, lowering cost to serve, and delivering more personalized experiences. While some of these use cases will extend beyond the current plan period, these investments are critical to driving structural advantage that will support long-term financial benefits and reinforce the group's technology leadership position into the future. Let me turn now to the financials in 2026, starting with Slide 42. The acceleration in our strategic transformation over the next two years will further enhance our franchise and financial performance. Building upon the improvements in financial performance in the first phase, we see further upside over the final two years. This is supported by growing revenue momentum and a continued commitment to cost savings, along with reduced headwinds relative to those in the first phase. This will support increasing levels of capital generation with a reducing number of claims. To bring this to life, let me elaborate on our revenue outlook on Slide 43. We're entering this next phase with a netting composition of circa £17 billion in 2024, having increased this by almost £2 billion over the preceding three years. Headwinds to our revenue growth will persist over the next two years to some degree, namely the ongoing but easing mortgage headwind and the timing and impact of base rate cuts. However, as we see it today, we expect the headwinds to be smaller than they were in the years to 2024. As we've guided for some time, we continue to expect year-on-year progression in our structural hedge earnings across both 2025 and 2026. We are today quantifying this impact with a combined uplift of around £2.7 billion. Importantly, we expect the hedge tailwind to be materially larger than the headwinds in the second phase. Added to this, we expect to see further growth across our strategic initiatives and BAU activities. On strategic initiatives, based on our performance in the first three years, we are upgrading our guidance to greater than £1.5 billion of additional revenues. Taking these factors together, we're confident in the outlook for net income growth. Let me now close with the full suite of 2026 guidance on Slide 44. The group is on a clear path to delivering an enhanced financial performance in 2026. As I've just mentioned, we see strong revenue upside in the second phase, including further OOI growth. Alongside, we'll retain our clear focus on cost and capital efficiency, delivering additional savings and RWA optimization. This will support a cost-income ratio of below 50%, and we remain committed to managing to a 13% CET1 ratio by 2026. The significant operating leverage we're generating in the second phase will support higher, more sustainable returns and capital generation. For 2026, this represents a return on tangible equity of greater than 15% and greater than 200 basis points of capital generation. I hope you found this to be a useful update on our progress to date and future plans. To summarize, I'm very pleased with the strong progress so far, and I'm excited about the opportunities to accelerate our transformation as we deliver a highly compelling investment case for shareholders. Thank you for listening. I'll now hand over to Douglas, who will manage the Q&A. Douglas?

A - Douglas Radcliffe:
Thank you, Charlie. So, moving to questions. As usual, if you could please raise your hands when you want to question, though clearly, a number of you are very keen. Please could everyone use the microphones that are going to be allocated by the ladies on the side, and if possible, please restrict yourself to two questions. So, why don't we start with Andrew?

Unidentified Analyst:
Thank you very much for the presentation. I have a number of questions, but I will try and limit myself to two. Let's do one numbers question and one broader strategic question. On the numbers question, firstly, a big thank you for the guidance around the structural hedge, but would love a bit more substance on the building blocks behind it. So, if you could possibly give us your thoughts on the trajectory of the nominal, how much you expect to mature in '25 and '26, and then if there is anything you can say on what you've assumed both on maturing yields and reinvestment yields as well, that would be incredibly helpful. And then the second question on the strategic initiatives. You're obviously very proud of what you've achieved. You're £100 million ahead of where you expected to be at this stage. You've increased it to greater than 1.5 cumulative. I think previously when you gave this guidance at the end of 2021, you had that 50-50 in NII and OII split, but it was always expected that a lot of the ROI-based benefits will come through in the latter couple of years because of some of the initiatives they were more focused on OOI were coming through then. So perhaps you can just elaborate on the greater than 0.7 that's now expected to come through over the next two years, how much of that is NII versus how much of those non-NII and which initiatives you particularly thinking are going to drive that?

Charlie Nunn:
Do you want to take the first one? I'll take the second?

William Chalmers:
Sure. Thanks. Thanks, Charlie. Thanks, Andrew, for the question. I'm glad you're pleased to see the additional disclosure around the structural hedge. The structural hedge, as I said in my comments earlier on, is a significant and accelerating tailwind to the income profile of the group. What are we seeing within that over the course of 2024, we held the notional, as you know, a £242 billion? That represented a reduction in balances of about £5 billion in the first half, but then because of the deposit performance of the business and ability to keep the notional stable during the second half. You asked about yields and how we get to '25 and '26. The yield in 2024 Q4 was 1.9%. And you can tell from that, that it's significantly below the refinancing yield of the business. So what do we look at when we go forward on the yield point, first of all? We've obviously got a big jump in terms of maturing yield versus refinancing yield. There's two points to make there that are sometimes missed. One is what are we refinancing at? We've got rates of about 4% versus the 1.9% yield that we're running right now. That's one. The second factor is that the yield on the existing derivatives that are maturing is somewhat uneven in their profile. And so you're going to get growth of the type that we suggested there, both off the back of rates as they are today, but also off the back of the yield that is in the maturing derivatives. Third point, growth in the notional. We are not really expecting any material growth in the notional for 2025, and we're expecting very modest growth in the national for 2026. Now based upon the deposit performance that we've seen to date, including the £11.3 billion up that we saw in 2024, I'd be quite surprised if we don't beat that actually. But purposes of our forecast, the notional expansion in '25 is really very limited, and the notional expansion in '26 is also limited, albeit not quite as much as '25 Further question, how much of that have we got locked in? How do we feel about it today? Essentially, although we are somewhat active at the margins in terms of managing the structural hedge to make sure that we don't invest in flat yield curve environments, nonetheless, the hedge by and large is more like a caterpillar than anything else. And so the locking that we have more or less reflects that pattern off the back of a 3.5 year weighted average life hedge. What does that mean in very literal terms? What it means is that we've got about 90% of our hedge expectation this year locked in. We've got about 75% of the 2026 hedge expectation locked in. So when we talk about the $4.2 billion in 2024 expanding by £1.2 billion in 2025, we're pretty certain that's going to happen because it's already on the books. When we talk about it then expanding a further £1.5 billion in 2026, getting to a total of £6.9 billion, we're pretty sure that's going to happen because most of it, 3.25 of it, is on the books. So hopefully that gives you an idea that we're not relying upon any heroic assumptions at all in respect of the hedge progress from here. It's really pretty much mechanical, as I've described it before.

Charlie Nunn:
Great. Then on NII, yes, we haven't been 100% transparent on '24 on the split of the £800 million, or in fact the original £700 million. We never gave a split, but we did give the split of 50-50, as you said, on the £1.5 billion, and we think that's still good. I think the more strategic answer, because what we defined as strategic initiatives versus BAU growth was always a very specific answer. If you look at that chart that William looked through, which shows you NII progression over the last three years, it's grown a billion pounds in revenue, with a CAGR consistently growing quarter on quarter, with the seasonality of Q4 always being weaker. It's been pretty consistent across the four divisions that are running that, so retail, IP&I, BCB, and then of course our equity investments group at the center that has two businesses in there that support it. The real shareholder value story is around the billion of growth, 11% CAGR if you exclude equity investments, but 9% CAGR on that business. Our expectation is a chunk of that's coming from strategic initiatives, for example the growth in the transport business, the growth in credit card payments, the growth in working capital in BCB, and then some of it's been more linked to us bringing in new talent, new focus, and then a new operating model around existing businesses. I think William and I highlighted IP&I and BCB as examples -- sorry CIB as examples where we had existing initiatives but we brought in new talent. We didn't tag that as strategic initiatives, but it's obviously a really important part of getting the economics and the trajectory around NII growing. So we're very comfortable with the longer-term outlook, and I think from our perspective this is a really strategic part of our commitment in this strategic phase. We know NII has expanded through this period, but really getting those NII -- OOI businesses growing faster, linked to strategic competitive advantage and seeing that trajectory and the momentum, we think is a really important part of what we're going to deliver in the next two years and what we've already delivered in the last three.

Douglas Radcliffe:
Ben, why don't you take the next question?

Benjamin Toms:
Thank you for my questions. Ben Toms from RBC. The first one's on your tangible value per share growth. You talked about in the presentation that you expect material growth in that balance, and it'll be one of the underpins of analysts' ROTE expectations. Can you just give us an idea of how fast you expect the cash flow hedge reserves to unwind? I think if we look at consensus, it has growth of 6% in tangible value per share growth for next year. Is that what you envisage when you say material? And then secondly, on motor finance, I think you probably said all you're going to say in terms of the assumptions, but I'm just interested in terms of timing. We have the court case at the beginning of April. Everything we've seen so far means that expedited means expedited. Do you think we could get an outcome by the time we get to your half-year results? Thank you.

Charlie Nunn:
Shall I take the second one?

William Chalmers:
Sure. Thanks, Charlie. Thanks for those questions, Ben. Both important questions. In respect of TNAV, as you know, we ended up the year at 52.4p per share. That was in part driven by rates developments, actually, and was probably a little shy of what we might have expected if you had asked us this time last year. But nonetheless, based upon the rates expectations that we have, based upon the progress of the business expectations that we have, we do expect, as your comment alluded to, and as I said in my script, TNAV per share to grow materially over the course of this year. Your question is, what does materially mean? I'm not going to comment directly on consensus, save to say that I think it looks more like double digits than I see in consensus right now. Why is that? I think a couple of points. One is we see the rates evolution. That, if you like, unwinds the cash flow hedge reserve, number one, but you've also got the maturity of derivatives on the cash flow hedge reserve as well as that. And so you've got those two factors, if you like, aiding the reduction in the cash flow hedge reserve over the course of the year. Combined with that, and maybe as important, the business build. And the business build will obviously build in RWAs and therefore TNAV associated with that in the context of capital to the TNAV per share. You've then got the pension build. I wouldn't rely upon that too much, but it should be a factor in building TNAV per share over the course of the year. And then finally, of course, the buyback. The buyback is a significant tailwind over the course of the year. It clearly depends on our share price. So in our respect, at least, the less the tailwind, the better. Of course, you'd expect me to say that. But nonetheless, you're going to get some driving benefit, if you like, from that component. So again, when I look at TNAV, the growth is expected to be material. I'm not going to put a number on it, but I would expect it to be closer to double digits than I see sometimes commented.

Charlie Nunn:
Great. And then on the second question, as we've discussed, well, first of all, thank you for your carefully asked question. We'll see how far we spend on this, how much time we spend on this topic. But obviously, we welcome the Supreme Court having an accelerated timeline. As you know, they're going to hear the court case in the first week of April. We don't exactly know when they would come out. An accelerated timeline for them would be kind of three months. And so it might be at the start of the summer, it might be in time for the results. A more normal timeline would be longer than that. So we're not sure exactly when we'll hear from the Supreme Court. Of course, the next step, once we've got that clarity, is then to see how the FCA then intervenes. And William talked about the uncertainties, but that's a really important part of this. And obviously, our role, where we are doing it appropriately, is supporting the appellants around that Supreme Court case.

Douglas Radcliffe:
Guy?

Unidentified Analyst:
Good morning. Thank you very much for the update today. The first question was around costs. And thanks for the 2025 guide around £100 million higher than consensus. But if we look to 2026, consensus has you falling short of the cost income guidance. So I'm just wondering whether we shouldn't be rolling forward that sort of uplift from 2025 and perhaps be thinking about a sort of flattish OpEx versus that £9.7 billion guide. Or is it just simply the fact that you're much more positive on the top line when thinking about cost income? And then the second question was on deposits. A really strong quarter for deposit flows, particularly retail savings. You note the noise around the budget, but even so, it looks like some encouraging underlying trends. Can you just give a bit more flavor of the color that you've seen, perhaps what you saw post the budget, later in the period, things around deposit mix, and then how you're thinking about that into 2025, given some of your comments around the structural hedge notion? It certainly sounds encouraging. Thank you.

William Chalmers:
Sure. Yes. I’ll take that Charlie. Great. Guy, you started off asking about costs, but then you ended up that same question talking about cost income. So I'm going to pick up where you left off, as it were. When we look at cost income, it is, of course, a function of both of those, both sides of the equation. So what do we expect to see in income over the course of the year? We've been pretty explicit in terms of the net interest income expectations, £13.5 billion, up about £700 million. That is composed of a number of headwinds and tailwinds. I shan't get into this right now, but I'm sure we will over the course of the Q&A. That is likely to be supplemented by decent OOI growth. We were up 9% OOI year on year. Quarter 4 was actually up 11% year on year. I would expect that OOI growth to continue in a similar vein to what we've seen in '24, in '25. Indeed, I would expect that OOI growth to continue over the course of '26, again, in a similar sort of way. The same time, within the income line, you've seen operational depreciation normalizing over the last year or two. That is now more or less normalized. So as a result, that which has been a headwind in the past is no longer really a headwind going into the income equation going forward. Having said all of t