Lloyds 2025-26: NII Guide £14.9B, RoTE Target Upgraded >16%
FY25 revenue £65.0B (+73% reported, but underlying ~+5% on insurance accounting reclassifications); NI £4.66B (+5%); diluted EPS £0.27 (+8%). FY26 revenue target upgraded to ~£20B (cleaner basis). NII guide ~£14.9B with margin expansion + balance sheet growth. Cost/income target <50% in 2026. RoTE target upgraded to >16% in 2026.
Key takeaways
- 2026 strategic targets being met or exceeded. Revenue target upgraded to ~£20B in 2026 (cleaner methodology). Gross cost savings £1.9B realized since 2021. Multi-year transformation plan delivering ahead of original schedule.
- NII guide upgraded to ~£14.9B. Margin expansion + balance sheet growth + structural hedge re-pricing. Net interest margin expansion is the key earnings driver as 2-5 year fixed-rate swap maturities re-fix at higher rates.
- RoTE target upgraded to >16% for 2026. Up from previous 15%+ guide. Reflects cost discipline + capital efficiency + earnings power restoration.
- Schroders Personal Wealth acquired H2 2025. Rebranded to Lloyds Wealth. Bolt-on adding wealth management to bancassurance offering. £20B+ AUM acquired.
- Mobile + AI investment accelerating. Mobile app users up ~45% since 2021. In-app AI agents to roll out in 2026. Digital-first transformation thesis tracking.
Business
Lloyds Banking Group is the UK's largest retail + commercial bank. Three primary divisions:
- Retail (~50% of revenue): Mortgage + consumer + savings + payments. Mobile-first model; ~45% growth in mobile app users since 2021. Lloyds + Halifax + Bank of Scotland brand portfolio. AI agents rolling out in 2026.
- Insurance, Pensions & Investments (IP&I) (~25% of revenue): Bancassurance — life insurance + pensions + general insurance + wealth advisory. Schroders Personal Wealth acquisition (rebranded Lloyds Wealth) closed H2 2025 — adds £20B+ AUM. Integrated bancassurance is the structural cross-sell story.
- Commercial Banking (~25% of revenue): SME + mid-corporate + large corporate. BCB (Business Current Banking) growing as digitally-led relationship bank. Broader corporate + working capital + advisory.
Strategic position: largest UK retail bank with #1 or #2 share in mortgages, savings, current accounts, and most consumer lending products. Multi-year transformation focused on (a) digital-first customer experience, (b) cost reduction, (c) bancassurance integration, (d) capital efficiency.
FY25 financial performance (GBP reporting)
| Metric (FY) | 2023 | 2024 | 2025 |
|---|---|---|---|
| Total revenue (£B, IFRS) | 33.95 | 37.61 | 65.00 |
| Op income (£B) | 7.50 | 5.97 | 6.66 |
| Net income (£B) | 5.46 | 4.42 | 4.66 |
| Diluted EPS (£) | 0.30 | 0.25 | 0.27 |
| Total debt (£B) | 93.7 | 80.9 | 88.2 |
| Dividends (£B) | -1.65 | -2.33 | -1.96 |
| Buyback (£B) | -1.99 | -2.01 | -1.67 |
(Note: FY25 IFRS revenue jumped to £65.0B from £37.6B FY24 due to insurance accounting reclassification — gross revenue including written premiums vs net basis. Underlying clean revenue is ~£20B per FY26 guide. Net income comparison is the cleaner number.)
The earnings print:
- Net income +5% to £4.66B reflects underlying cost discipline + NII growth + insurance income contribution.
- EPS +8% to £0.27 — buyback effect contributing.
- Capital return £3.6B FY25 (£1.96B div + £1.67B buyback).
Capital allocation
- Capex: ~£500M FY25, capital-light bank model.
- Dividends: -£1.96B FY25 (~50% payout ratio target). Steady raise.
- Buybacks: -£1.67B FY25, similar to FY24 pace.
- CET1: ~14% range exit FY25, well above minimum, supporting consistent capital return.
- M&A: Schroders Personal Wealth acquisition closed H2 2025 (rebrand to Lloyds Wealth). ~£20B+ AUM.
FY26 outlook (per Q4 2025 call, 2026-01-29)
| FY26 guide | Target |
|---|---|
| Total revenue | ~£20B (upgraded) |
| Net interest income | ~£14.9B |
| Other income | ~£0.9B contribution |
| Cost/income ratio | <50% |
| Return on tangible equity (RoTE) | Upgraded to >16% |
| Cumulative cost savings (since 2021) | ~£1.9B |
| AI agents (in-app) | Roll out 2026 |
The RoTE upgrade from 15%+ to >16% is a meaningful raising of the bar. Bridge: NII expansion + cost discipline + buyback compounding + IP&I growth + Lloyds Wealth contribution. Cost/income <50% in 2026 implies operating leverage delivering through.
Key risks
- UK macro / housing: Mortgage origination + credit quality sensitive to UK rate path + housing affordability.
- NIM compression: BoE rate cut path. Lower rates compress NIM despite structural hedge.
- Schroders Personal Wealth integration: Wealth management is different sales motion — execution risk on rebrand + cross-sell.
- Regulatory: PRA + FCA + Basel rules. Capital requirements + customer remediation costs (e.g., motor finance commission + buy-now-pay-later potential).
- Competition: HSBC + Barclays + NatWest + neobanks (Monzo, Revolut, Starling) all competing. Pricing power discipline required.
- AI execution: AI agent rollout is a competitive necessity but introduces operational + compliance risk if not managed carefully.
Bottom line
Lloyds FY25 is the year of strategic targets being upgraded — revenue to ~£20B, RoTE to >16%, cost savings to £1.9B cumulative. NII guide £14.9B + cost/income <50% + Lloyds Wealth contribution + AI agent rollout in 2026 all framing FY26 as the inflection year for the multi-year transformation. The thesis works as long as UK macro doesn't shock + NIM expansion delivers + Lloyds Wealth integration on track. Capital return at scale (£3.6B FY25) continues the supported equity story.
Citations
- Lloyds Banking Group plc FY25 Annual Report (filed early 2026, UK FCA / PRA + SEC 20-F).
- Lloyds Q4 2025 earnings call, 2026-01-29 — FY26 revenue target upgraded to ~£20B, NII guide ~£14.9B, RoTE target upgraded to >16%, cost/income target <50%, cumulative cost savings £1.9B, Lloyds Wealth (Schroders Personal Wealth) acquisition close H2 2025, in-app AI agents 2026 rollout.
- Internal financial_statements view (consolidated annual + cash flow + capital return; reflects FY25 IFRS reclassification).