Lloyds Banking Group plc (LLOY) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Lloyds Banking Group plc Investor Presentation. [Operator Instructions]. Before we begin, we would just like to submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the team from Lloyds Banking Group plc. Rohith, good afternoon, sir.

Thank you very much for that, Jake, and good afternoon, everybody. I'm Rohith Chandra-Rajan, Director of Investor Relations at Lloyds. And I'm joined here today by my colleague, Tom Grantham, who's a Senior Manager on the team. We're very happy to be running another of these briefings with Investor Meet. They're a great way to engage with our shareholders. So thank you very much for joining us. In terms of how this hour is intended to run, we've got a short presentation covering our financials and our strategy. That should take about 15 minutes, and then we'll spend most of the time on your questions. So with that, then let's move on to the first slide. So as you all know, Lloyd's is a U.K.-focused bank with a simple operating model split across 4 reporting areas. Those are retail banking, commercial banking, insurance pensions and investments, and equity investments & central items. Within these divisions, we offer a comprehensive product suite to meet our customers' ever-evolving financial needs. And one of our core strength is our portfolio of trusted and recognized brands. Those include, in particular, Lloyds Bank, Halifax, Bank of Scotland and Scottish Widows. The breadth of our franchise means we're uniquely placed to meet more of our customers' needs as well as understanding them better to provide more tailored offerings that deliver value for both customers and to the group and its shareholders. And just on to the next slide, before I hand over to Tom on the financials, I just wanted to highlight a few of the things that we're really focused on. Firstly, our purpose, purpose-led strategic delivery, which is accelerating, benefiting customers and wider stakeholders. Secondly, we're delivering our sustained strength in financial performance and meeting our 2025 guidance. And the financial performance delivered strong capital generation, enabling another 15% dividend growth and a GBP 1.75 billion share buyback. Finally, we upgraded our guidance for 2026 financial performance and are confident in our outlook beyond this year. With that, let me hand over to Tom on the numbers and an update on our strategy.

Thanks, Rohith, and good to speak to you all, and thank you for joining. So first of all, I'll touch on the financials. And then as Rohith said, I'll give a brief update on our strategy before I hand back to Rohith to close off the presentation. So in terms of the financials, as just said, we delivered sustained strength in our performance in 2025 and in line with guidance. Statutory profit after tax was GBP 4.8 billion. That was up 6% year-on-year. And this resulted in a return on tangible equity of 12.9% or 14.8%, excluding the motor provision that we took in the third quarter of the year. Within this, we delivered robust net income of GBP 18.3 billion, up 7% versus 2024. This was driven by sustained growth across NII and other income, up 6% and 9%, respectively. We retained cost discipline over the year with operating costs in line with guidance at GBP 9.8 billion. Remediation of GBP 968 million included GBP 800 million as a result of the aforementioned motor charge. Asset quality remains strong. The impairment charge of GBP 795 million represented an asset quality ratio of 17 basis points. And finally, as Rohith said, we delivered strong capital generation of 147 basis points or 178 basis points, excluding motor, in line with our guidance. After distributions, which I'll come on to later, this resulted in a CET1 ratio of 13.2%. So let me quickly turn to movements in the balance sheet. So pleasingly, lending and deposits both grew strongly in 2025. Lending balances closed the year at GBP 481 billion, up GBP 22 billion or 5%. In Q4, lending balances grew by GBP 4 billion. Within this, retail saw growth across all of our business lines. In Commercial Banking, lending was down GBP 0.2 billion in the fourth quarter. This represents further growth in targeted areas within our corporates and institutional business, offset by business as usual performance within BCB that included continued government-backed lending repayments. Turning to deposits. We saw a strong performance across both Q4 and the year as a whole. Total deposits were up by GBP 13.8 billion in 2025. Q4 was down slightly by GBP 0.2 billion. The fourth quarter saw growth in retail deposits across both savings and notably PCAs with deposit churn continuing to ease as we have expected. Commercial deposits, though fell by GBP 1.5 billion, driven by actions on low-margin funding as well as by seasonal outflows in BCB. Let me now move on to income on the next slide. Net interest income for the year was GBP 13.6 billion, in line with our guidance. This represents an increase of 6% year-on-year with Q4 up 2% versus the prior quarter. Hedge income in 2025 was GBP 5.5 billion, a material step-up from last year and a little above our guidance. Our net interest margin increased 11 basis points to 306 basis points. Average interest-earning assets of GBP 463 billion for the full year were up 3% compared to 2024, with Q4 AIEAs just over GBP 470 billion, up GBP 4.8 billion. For 2026, we're guiding to net interest income of around GBP 14.9 billion. Within this, we expect margin expansion alongside continued healthy balance sheet growth across both retail and commercial. This also includes continued growth in hedge income, rising to circa GBP 7 billion in 2026 from that GBP 5.5 billion I mentioned earlier before increasing further to circa GBP 8 billion in 2027 and continue growing towards the end of the decade. Turning now to other income. 2025 was another year of encouraging and broad-based growth in other income. We expect this pattern to continue. OOI was GBP 6.1 billion in the year, up 9% versus 2024 and up 2% in Q4 versus Q3. The latter was supported by the full acquisition of Schroders Personal Wealth or Lloyds Wealth, as it will soon be rebranded to. Growth over 2025 has been broad-based. Retail is up 12% year-on-year. Commercial was up 1%, insurance, pensions and investments grew by 11% and our equity investments business was up 15%. Turning to operating lease depreciation briefly, which is the depreciation charge for our operating fleet business. This was GBP 1.45 billion in 2025, up 10% versus 2024. This was driven by fleet growth, higher-value vehicles and to an extent, electric vehicle price movements. However, altogether, it was essentially in line with the other income growth generated by the vehicle leasing business. Let me now move to costs on the next slide. Operating costs of GBP 9.76 billion were in line with guidance. Year-on-year cost growth of 3% is on the back of continued strategic investment, volume growth and inflationary pressures, partly offset by further efficiencies. Looking ahead, we remain committed to delivering a 2026 cost/income ratio of less than 50%. Based on our current plan, that implies operating expenses of less than GBP 9.9 billion. Remediation for 2025 was GBP 968 million, including the GBP 800 million motor provision taken in Q3. We wait to see the detail of the FCA's final proposals on motor post their consultation on Monday. Let me now turn to credit performance. Credit performance remains strong, and that reflects our prime customer base, prudent approach to risk and healthy customer behaviors. Across retail, new to arrears remain low and stable. Early warning indicators likewise are also benign. In commercial, after some idiosyncratic cases in H1, such as fiber, the H2 picture was very constructive. Taking all of that together, the full year impairment charge was GBP 795 million, equivalent to an asset quality ratio of 17 basis points. Looking forward, we expect the asset quality ratio to be circa 25 basis points for 2026. That's similar to the underlying run rate that we've seen during 2025. Let me move now to the macroeconomic outlook. So it's worth saying that these are the economic assumptions as of full year results at the end of January. And so clearly, we're prior to the recent geopolitical disruption. It's also worth saying that we review economic forecast every quarter. However, as at full year, our expectations were that GDP will be 1.2% in 2026 in terms of growth. Unemployment was expected to peak at 5.3% in H1 2026. We assumed two 25 basis point cuts in U.K. bank rate in the year and house price growth was forecast at circa 2% in 2026 and 2027. Let me now turn then to our capital distributions. We continue to grow our shareholder distributions at an attractive pace. For 2025, the Board recommended a final ordinary dividend of 2.43p per share, taking the total dividend for 2025 to 3.65p, up 15% year-on-year. In addition, we announced a share buyback of up to GBP 1.75 billion. And together, this represents a total capital return of up to GBP 3.9 billion, up 8% on 2024. This hopefully demonstrates our commitment to shareholder returns. Indeed, the 2025 dividend is now up more than 80% versus 2021. Given our confidence in growing capital generation, we will now review excess capital distributions in addition to ordinary dividends every half year going forward. Let me now quickly wrap up the financial update section. To summarize, in 2025, the group's financial performance showed sustained strength. Strategic execution and business momentum delivered continued balance sheet and income growth alongside cost discipline and asset quality, allowing for growth in shareholder distributions. As we look ahead to 2026 and a culmination of our current strategic plan, we are confident in delivering on the financial guidance you can see set out in this slide. Beyond 2026, we are committed to continuing income growth, improving operating leverage and stronger sustainable returns. We will give far more detail on this in our strategic announcement with our half year results this year. On that note, let me speak briefly to strategy on the next slide. We continue to successfully deliver a significant transformation. Over the last 4 years, we have meaningfully grown the balance sheet, driven diversified revenue growth, improved our cost and capital efficiency whilst significantly derisking the business and establishing a digital and AI leadership position. These actions have both enhanced the franchise and delivered attractive returns to our shareholders, including total capital distributions of around GBP 15 billion. We're now entering the final phase of our 5-year strategic plan with delivery accelerating and momentum growing. This is translating into significant financial benefits. In particular, let me talk about how we're thinking about AI on the next slide. In 2025, we scaled 50 GenAI use cases into full production, demonstrating significant potential and generating GBP 50 million of in-year P&L benefit. It should be stressed that this is based on a narrow definition of the latest technology with the full spectrum of digital and AI initiatives contributing around 70% of our upgraded strategic initiatives revenue target of GBP 2 billion by 2026 and over 60% of the total gross cost savings, GBP 1.9 billion, realized since 2021. This represents a strong foundation for us to accelerate our progress in '26, where we intend to increase the number of use cases with a particular focus on high-value agentic opportunities. This will deliver more than GBP 100 million of P&L benefit, capturing both revenues and costs with significant upside beyond this as use cases are scaled and mature. This is just the start of the journey, and we'll talk far more about our plans in this space as part of that strategic update that I mentioned in July. So let me close out then on Slide 18. So as you've heard, we're successfully executing our strategy. This is reinforcing our competitive advantages and underpinning the delivery of strong shareholder outcomes. Our confidence extends beyond this, and we're excited about sharing our updated strategic plan in July. We'll provide more details on the actions we'll be taking to further strengthen and grow the core franchise, address new diversified growth opportunities and deliver continued improvements in productivity, enabled by our leadership position across new and emerging technologies. We'll, of course, share more detail on our medium-term financials at that stage, too. So with that, I'll hand back to Rohith.

Thank you, Tom. I hope you found that useful. To summarize, we're very pleased with the progress so far. We're confident in meeting the objectives of our current strategy, and we're excited about the next strategic phase, supporting a compelling investment case with continued growth, improving operating leverage and stronger sustainable returns. As promised, we've left plenty of time for questions. So let's now hand back to Jake for the Q&A.

Perfect. That's great. Thank you very much indeed for your presentation this afternoon. [Operator Instructions] Just like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can all be accessed via your investor dashboards. Guys, as you can see, we have received a number of questions throughout your presentation this afternoon. And thank you to all of those on the call for taking the time to submit their questions. But at this point, if I may just hand back to you to read out those questions and give your responses where it's appropriate to do so. And if I pick up from you at the end, that would be great. Thank you.

Brilliant. Thanks, Jake. So I think the first question then, which I'll hand over to Rohith. What is the dividend policy for the group moving forward?

Yes. Thank you very much for the question. So the dividend policy is progressive and sustainable. As Tom mentioned, we grew the dividend 15% last year. It's been growing at that pace for a while. And whilst we don't have a payout ratio, that is one of the benchmarks that we think about, particularly in terms of that dividend sustainability. So we want to grow it, but we want to keep it at a sustainable level. We think there is plenty of room for continued strong dividend growth as earnings continue to expand and also as we gradually increase the payout ratio over time. So the policy is progressive and sustainable growth, and we think that gives us lots of space for continued strong dividend growth.

Thanks, Rohith. So we've had another question. How does the group measure ROI on digital investments, particularly in customer acquisition and retention? And is there evidence that digital engagement is deepening product penetration per customer? So maybe I'll start on that one. So in terms of how we measure, I guess, the return on investment in general, I'd probably point to the strategic targets that we set out '22 to '26. So as mentioned in the presentation, we invested over GBP 4 billion over the period of time. We are planning on generating over 2 -- well, circa GBP 2 billion of strategic of income related to those strategic initiatives and circa GBP 1.9 billion of gross cost saves as of '25. We haven't given a target for '26. In terms of your question on digital and specifically, so digital and AI underpinned essentially 70% of those revenues and about 60% of those costs. And so from our perspective, there is a strong return on those investments. And we do have stats internally to back those up, but we haven't disclosed those. But clearly, when we come to our next strategy, we will talk about essentially the ways that we'll measure and continue to make sure that we're generating sufficient ROI on those investments. In terms of any evidence that it's deepening product penetration with customers, I think there is. So one of the key tenets of our strategy was deepening relationships with customers. We actually set out a target of increasing products per customer by 5% out to 2024. We achieved that. And we have a target '24, '26 to increase products per customer by 3%. And so we'll obviously update that as we get to the end of this year. But maybe some other stats to justify it. So clearly, being able to utilize the fact that we have an insurance business and make sure that our retail customers can fully take advantage of that. One product in particular is protection insurance. Previously, with new mortgages for Lloyd's, we sold less than 10% of protection insurance products to those mortgage customers. We now sell more like 20%. And so you can see that that's one example, but there are other examples of where we are getting much better at deepening those relationships with customers. So next question here on wealth. Given the rise of free-to-trade share dealing services, do you expect a reduction in revenue? And maybe, Rohith, you can take that one.

Yes. Thank you, Tom. So we do have one of the top 4 platforms in Halifax share dealing. So we operate in that space. As Tom mentioned, we've also now just recently brought Schroders Personal Wealth, which was a joint venture with Schroders back into the group. So it's now fully integrated into the group. And as Tom mentioned, will be rebranded Lloyds Wealth. And that's part of a broader investment franchise, which spans -- that's very much advice-led, so face-to-face. But we are also in the process of -- and as I mentioned, we've got Halifax share dealing. We're also in the process of developing an AI supported investment tool, which will provide much more tailored guidance to customers in terms of not just understanding their risk appetite, but also a bit more about their personal circumstances and their goals to help tailor portfolios of low-cost investments for them. So that's where we think there's significant growth. We are developing that in conjunction with the regulator, with the FCA in a sandbox or regulatory environment where they have oversight of the testing. It's being tested with friends and family, so internally at the moment and something that we expect to launch later in the year. And we think that tool in particular, is really important in terms of democratizing, if you would like, investments for the public in the U.K., where the government obviously is keen to move people out of cash savings and get people investing a lot more. We think those types of tools can be very helpful. And then there's a combination then of all of those 3 platforms that will give you potentially some hybrid operation where if you're doing something that's slightly more complex that you don't just want to rely on the AI tool, you're happy to let the AI tool guide you, but you want to speak to a real person before you actually execute against those plans, that's potentially also part of that offering. So yes, it's a very competitive space. It's an area that we are expanding where we think there's a big customer need, which the government also seems to be in favor of. So we think this is a long-term trend that we are uniquely positioned to benefit from and to support customers with.

Brilliant. Thanks, Rohith. And I think there's probably another question for you. Are there any signs of competitive pressure on mortgage margins or deposit pricing?

Short answer, yes. So the U.K. is -- it's a fairly consolidated banking market, but by the same token, still a very competitive one. So in terms of new mortgages, we are writing new mortgage business at above 0.7% above what it was costing us to fund that business through last year, that was actually coming down very marginally, so 0.01% or 0.02% per quarter. We started the year also very competitive. There are -- there were a lot of mortgages written in late 2020, early 2021, and those were on 5-year fixed rates are in the process of maturing. Those were very profitable mortgages for us, and we took an outsized market share of them, but the market is now jockeying to win that refinancing activity as it matures. So it's a very competitive market. It's also quite a tricky market at the moment in that as you will have seen from the news flow, interest rate expectations have moved -- are moving around a lot. They're not moving day-to-day. They are moving intraday, which makes it very difficult to know. We can see where our competitors are pricing. We don't know quite how much they're making when they are selling new mortgages today because we don't know what their funding costs are. So at the moment, it's quite a volatile and quite a tricky market. We're looking to be there to support customers, but also to win good market share at good value for the group and for investors. And on the deposit side, I think there are really different segments to the market. So the current account market is, number one, very sticky but also very competitive in a way, certainly in terms of new account openings, the likes of the neobanks or the digital banks, the likes of Monzo's, Chase, et cetera, have been very competitive. They have been winning a lot of new accounts. However, what I would say is that we've been winning share in balances quite consistently over recent years despite that very elevated competition. I think the same also to a degree, is true of instant access accounts, although, again, there are some very competitive offers there. I think what is particularly stark at the moment is as we head into ISA season, where ISAs and time deposits are being priced, that is an extraordinarily competitive market again this year. Now we don't yet know whether that pricing pressure is going to persist or whether it's a peculiarity of this being the final year that you'll be able to put all of your GBP 20,000 ISA limit into cash savings compared to GBP 12,000 from next year. So it's unclear at the moment how the market is going to evolve. But certainly, for the time being, it remains a very competitive market where we are competing selectively looking for value rather than needing to drive volumes in terms of deposits.

Brilliant. Thanks, Rohith. We've had one question of what is the share price target for year-end 2026. Maybe I'll just briefly answer. So we obviously don't have a share price target or give an expectation. I guess it's worth saying that what we do, we obviously concentrate on our own performance. We have a commitment to a greater than 16% RoTE and growing returns beyond this year as well in terms of what we've given for our outlook and what we're saying about our next strategy. And we also expect tangible net asset value of the business to grow as well. So that's our, I guess, commitment to improving returns and generating sustainable returns, which will ultimately deliver capital generation and therefore, capital returns to investors. Clearly, though, the share price is impacted by a number of different things, particularly the external environment and the geopolitical environment. So very difficult to say what we expect the share price to be at the year-end. Rohith, if you want to add?

Yes. Maybe I'll just add to that. As Tom said, we -- the management team here is focused on running the business and running the business for good shareholder value. Our belief is that those aspirations and expectations are not yet fully embedded in the share price, obviously, at the moment, particularly impacted by geopolitics. But it's you as our investors and the broader market that sets the share price, not us, but we are -- the business is absolutely being run for shareholder value.

And maybe a question now on capital allocation. You touched upon it earlier in terms of the different choices we can make. But one question of, will you be considering special dividends this year?

So the Board -- so in terms of how we think about capital allocation, number one is the ordinary dividend. And as we discussed before, the policy there is a progressive and sustainable dividend. So that is the #1 priority. Historically, the Board has then reviewed what to do with any surplus capital each year-end. What we've announced now, given we are more confident on both profitability, the broader environment and particularly the regulatory environment is that the Board will now think about those surplus capital distributions every half year. Typically, that's taken the form of a share buyback, but special dividends and other forms of distribution or other uses of capital, including occasionally M&A are also included in those Board discussions.

Brilliant. Thanks, Rohith. One quick question, which maybe I'll address. So what is your net shares in issue target given buybacks offset by staff share allocation? So you're correct. That is essentially the function for what determines the net shares in issue is the buybacks, which ultimately leads to a reduction in shares offset by some staff allocations. It's probably worth saying here that we -- because we have been committed to share buybacks, and we've done a succession of buybacks over the last few years, we've reduced shares in issue as of full year '25 by about 17% versus the end of 2021. So that gives a sense of the direction of travel. That now takes us to, I think, under about 60 billion shares in issue. We don't give a target for where we'll go from here. But clearly, the fact that we announced a further buyback with the full year '25 results of GBP 1.75 billion will be supportive of that continued reduction in shares in issue, but we don't have an absolute target. Another question was what measures have Lloyd's put in place to avoid issues like the recent breach of data, car loans and other expensive remediation issues. I'd like to see more stability with the news being more positive, rather negative and potentially expensive. So Rohith, do you want to maybe start on that and maybe I'll add if there's anything to add.

Yes. So we -- so number one, we share your sentiment. We don't want those issues to persist. I think a lot of them are legacy issues, notwithstanding the recent issues with the app. Motor Finance, as an example, we will find out from the FCA on Monday how -- if and how it expects to run a remuneration scheme or remediation scheme for affected historical customers. We have raised a GBP 1.95 billion provision in relation to that. We will have to take a view how the final proposals compare to the provision that we've raised. Our expectation is, given that the FCA's proposals back in October were the highest weighted scenario that we used in coming to that provision. We're not far off unless there's very substantial change in what the FCA proposes or enforces, there should not be a significant change or a material change in the provision, but it could move up or down to some degree, we expect relatively modestly. But more broadly, I think from a conduct perspective or a regulation perspective more broadly, actually, the government has tasked both the regulators who look at conduct, so the FCA, but also capital liquidity in terms of the PRA to support competitiveness and growth of the U.K. economy as well as their primary remits in terms of regulation. I think you see that most clearly from a conduct perspective, where actually what you've seen from the FCA, I think, over the last year or so has been much more inclusive. So I think the conduct agenda in the U.K. is evolving in a positive way. And whilst it doesn't always feel like I think the FCA has been focused on trying to manage the motor finance process to resolve it expediently and to have control of that process. So actually, I think they're trying to do something that's positive for the industry. In terms of how we manage the business, as I said, a lot of those issues are legacy. On the recent app issue, it was an incident that was -- whilst very regrettable, was one that was short-lived. As soon as we're aware of it, it was corrected within a couple of hours. There was a relatively small number of customers impacted and we reported it to the regulator very promptly. We put a lot of updates through the app in terms of new releases, new functionality. So this is very much an isolated incident, but one that we are looking at in a lot of detail to ensure that doesn't -- it's not repeated.

Brilliant. So next question, what is the process for ensuring you don't pay too much for share buybacks? And Rohith, do you want to take that one?

Yes. So share buybacks, so we take a view at the beginning or the Board takes a view at the beginning of the year or as I said, going forward every half year as to whether, number one, that's the right use of capital. And if we have surplus capital, should we be retaining it, spending it or returning it. If the view is that we are going to return it, there is numerous mechanisms that can be used to do that, of which the share buyback is one. And that is driven by -- that decision is driven by a number of things, including whether we or not we see continued value in the shares. So if we continue to see upside, it makes sense to buy the shares at below fair value. Also, we have an ongoing dialogue with our investors in terms of whether they think that's an appropriate tool to be using. So it's a combination of things in terms of what the right capital allocation is, where the valuations are and what investor appetite is. I guess in terms of the way the share buyback is structured, it is in part programmatic. And in part, there is some flex around that where the broker that executes it for us is incentivized actually to buy -- to accelerate the share buyback when the price is low. We report every day, and you will have seen a pickup actually in the recent share price weakness. So we look to take advantage of points of share price weakness to accelerate the buyback selectively during the year.

Great. Thanks, Rohith. There's one more question -- well, not one more question, there's a question I'll answer in a moment. But the question is, how will Revolut impact your plans? So I guess the first thing to say, Revolut has been around for a while, and it has impacted -- has clearly been a major competitor alongside other fintechs that we all know in the market. And so them getting the banking license clearly gives them optionality and allows them to do additional things. But from our perspective, it doesn't change our view of ultimately where the competitive landscape is heading. And I think, if anything, emphasizes the direction of our strategy. And maybe I'll just talk a little bit about what I mean by that. Ultimately, when we think about what we've done over the last few years, we have been keen to invest in the app and invest in the customer-facing elements of the group, but also invest in the back office. What that has meant is that we can now be far more agile, and we can be far more agile in line with some of those leading fintechs. So for example, for customers that want to onboard onto our app for a current account, it now only takes 7 minutes. And that is in line with some of those leading fintechs. And actually, it's far better than we were a few years ago. Likewise, when we onboard customers on to deposits and loans, we onboard them onto our core banking platform that's a cloud-based platform. So again, it means that we can access that data much more efficiently. It also means we can change things much more quickly. And so we have advantages now that are now in line with some of those leading fintechs. And I think to your point, to the point of the question, the fact that Revolut have their full banking license only emphasizes the importance of doing that. I think the other point to say here is that if we think about why customers choose Lloyd's, there's a multitude of reasons. And I think those are things that we will emphasize and lean into when it comes to competing with the likes of Revolut. Firstly is the trust element. I think people trust Lloyd's and it's a trusted brand, and that gives us an advantage, particularly when we install maybe new products, things like Agentic AI, things like digital assets. Having a brand that you trust is really important there. Secondly, we have scale and we have that data, and therefore, we have advantages in terms of how we are able to utilize that and make sure we can come out with good propositions for customers. And then finally, I guess, most relevant to competing with the likes of Revolut and other fintechs is we have that breadth. And so I think the importance here is that we need to lean into those things so that when customers choose us, we can make sure that we introduce them to the full breadth of the franchise and make sure that we can deepen that relationship to ensure that we can continue to win against those types of fintechs. So to answer your question very quickly, it emphasizes the need to continue with our transformation, but it also means that we need to continue to deal with high levels of competition, which we're used to dealing with, and we need to lean into our strengths. So I think that hopefully answers the question. We've had one other question here on AI. Does the AI push drive your energy costs? If so, how can you mitigate this? So I can't answer that specifically. What I will say is that, obviously, we've dealt with inflation over the last few years. And that's not just inflation in energy costs, it's inflation in people costs, it's inflation in other aspects of the business. Clearly, like you say, there will be impacts of some of the investments that we put in. I can't answer your question to what extent the push into AI impacts energy costs. But clearly, there will be offsets there because we've decommissioned some things such as legacy data centers and reintroduced things like the cloud. So there will be some offsets, some puts and some takes. Overall, though, how do we mitigate those increasing costs? Well, we do it by essentially being more efficient by generating gross cost saves. And you heard earlier, me talk about the GBP 1.9 billion of gross cost saves that we have generated as a business. That is by, for example, investing more efficiently, being more agile. It's also by reducing some of our property, consolidating some of our property. It's also by automating customer journeys. And so one good stat actually is that customer-facing colleagues can now serve 45% more customers than they could before the start of the strategy. So I can't speak specifically to energy, but overall costs have clearly increased over the last few years in line with inflation. And definitely some of the investments have increased costs as well, but we continue to mitigate that to make sure that we can continue to invest in the business. I think we've got one more sort of Motor adjacent question, Rohith. So with Motor, the question is, and you touched upon it a little bit earlier, has something changed in the way that we look at motor finance products to eradicate the possibility of a similar occurrence? And are there any penalties applied to those that have maybe benefited from the previous sale of those products?

Yes. Thank you, Tom. So there are a few things that have changed in the motor finance industry. So I guess just going back a few years, this is all about the commission arrangements with motor dealers. And that was something that was reviewed by the FCA between 2017 and 2019. They had a look at it at the time, and they said they didn't really like these adjustable commission agreements, which were prevalent in the market at the time. They were by no way -- by no means Lloyd's specific. That was standard market practice. So in 2020, they came to the decision that they -- that would no longer be allowable. And we and our competitors changed the way that we sold motorfold, changed the remuneration for the dealers on motor finance from 2021 onwards. So that has been a change in the market. Then also the year before last there was a case that came to the Court of Appeal around whether the customer knew that the -- whether the customer really knew that the dealer was receiving a commission. In response to that ruling, we withdrew the product for about 2 weeks, redrew all of our contracts, which now require customers to explicitly indicate that they understand that the dealer is receiving a commission and then we reopened the product. And to be frank, that's made very little difference to the volumes of business that we've been writing. So there has been a change in the way the industry operates. We all through this have complied with the law and the regulation, but the regulation has now changed. The law has now changed, and we've made sure that we kept up to date with it.

Brilliant. Thanks, Rohith. I think that gets us to the end of the questions that have been submitted. Jake, would just to double check if that's the case from your side.

Absolutely, guys. And thank you very much indeed for being so generous of your time then addressing all of those questions that came in from investors this afternoon. And of course, if there are any further questions that do come through, we'll make these available to you after the presentation has ended just for you to review. But Rohith, perhaps before really now just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great.

Yes. Thank you. So thank you again for joining us. We really do appreciate your time and your interest and would welcome your feedback. I hope you found that a useful session. And thank you very much also to Investor Meet for hosting us, and we look forward to updating you on the next phase of our strategy later in the year.

Brilliant. Thank you.

Perfect. Rohith, Tom, that's great. And thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback. On behalf of the management team of Lloyds Banking Group plc, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.