v3.25.4

Credit risk | 12 Months Ended
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Dec. 31, 2025
Credit risk [Abstract] |
Credit risk | T he maximum credit risk exposure of the Group in the event of other parties failing to perform their obligations is considered to be the balance sheet carrying amount or, for non-derivative off- balance sheet transactions and financial guarantees, their contractual nominal amounts (not taking into account any collateral held). Further details can be seen in note 16 to the consolidated financial statements on page 255 and note 36 to the consolidated financial statements on page 291. T he process for credit risk identification, measurement and control is integrated into the Board-approved framework for credit risk appetite and governance. Credit risk is measured from different perspectives using a range of appropriate modelling and scoring techniques at a number of levels of granularity, including total balance sheet, individual portfolio, pertinent concentrations and individual customer – for both new business and existing exposure. Key metrics, which may include but are not limited to, total exposure, ECL, risk- weighted assets, new business quality, concentration risk and portfolio performance, are reported monthly to risk committees and forums. Measures such as ECL, risk-weighted assets, observed credit performance, predicted credit quality (usually from predictive credit scoring models), collateral cover and quality, and other credit drivers (such as cash flow, affordability, leverage and indebtedness) have been incorporated into the Group’s credit risk management practices to enable effective risk measurement across the Group. Credit risk appetite is set at Board level and is described and reported through a suite of metrics devised from a combination of accounting and credit portfolio performance measures, which include the use of various credit risk rating systems as inputs and assess credit risk at a counterparty level using three components: (i) the probability of default by the counterparty on its contractual obligations; (ii) the current exposures to the counterparty and their likely future development, from which the Group derives the exposure at default; and (iii) the likely loss ratio on the defaulted obligations, the loss given default. Limitations on concentration risk There are portfolio controls on certain industries, sectors and products to reflect risk appetite as well as individual, customer and bank limit risk tolerances. Credit standards, appetite statements and mandates are aligned to the Group’s risk appetite and restrict exposure to higher risk countries and potentially vulnerable sectors and asset classes. Exposures are monitored to prevent both an excessive concentration of risk and single name concentrations. These concentration risk controls are not necessarily in the form of a maximum limit on exposure, but may instead require new business in concentrated sectors to fulfil additional minimum standards and/or guideline requirements. The Group’s largest credit limits are regularly monitored by the Board Risk Committee and reported in accordance with regulatory requirements The Group requires collateral to be valued by a qualified, independent source at the time of borrowing, where appropriate. For retail residential mortgages and limited residential assets in Commercial, automated valuation models may be used, subject to accuracy and LTV limits. Third-party valuations are regularly monitored and reviewed. Collateral values are reviewed based on lending type, collateral and account performance to ensure they remain appropriate. If collateral value declines, the Group may seek additional collateral or amend facility terms. The Group adjusts estimated market values to take account of the costs of realisation and any discount associated with the realisation of the collateral when estimating credit losses. In some circumstances, where the discounted value of the estimated net proceeds from the liquidation of collateral (i.e. net of costs, expected haircuts and anticipated changes in the value of the collateral to the point of sale) is greater than the estimated exposure at default, no credit losses are expected and no ECL allowance is recognised. The Group’s credit risk disclosures for unimpaired other retail lending show assets gross of collateral and therefore disclose the maximum loss exposure. During the year, £394 million of collateral was repossessed (2024: £285 million), consisting primarily of residential property. The Group generally does not take physical possession of properties or other assets held as collateral and uses external agents to realise the value as soon as practicable, generally at auction, to settle indebtedness. Any surplus funds are returned to the borrower or are otherwise dealt with in accordance with appropriate insolvency regulations. In certain circumstances the Group takes physical possession of assets held as collateral against commercial lending. In such cases, the assets are carried on the Group’s balance sheet and are classified according to the Group’s accounting policies. Movements in balances for the year ended 31 December 2025 (audited) The movement tables below are compiled by comparing the position at the end of the period to that at the beginning of the year. Transfers between stages are deemed to have taken place at the start of the reporting period, with all other movements shown in the stage in which the asset is held at the end of the period. Purchased or originated credit-impaired are not transferable. Additions and repayments comprise new loans originated and repayments of outstanding balances throughout the reporting period. The Group’s impairment charge comprises impact of transfers between stages, other changes in credit quality and additions and repayments. Advances written off have first been transferred to Stage 3 and then acquired a full allowance through other changes in credit quality. Recoveries of amounts previously written off are shown at the full recovered value, with a corresponding entry in repayments and release of allowance through other changes in credit quality. Movements in the gross carrying amount for loans and advances to customers and for allowance for expected credit losses were as follows:
| Gross carrying amount |  | Allowance for expected credit losses
| Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m |  | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m
At 1 January 2025 | 405,360 |  | 44,765 |  | 6,716 |  | 6,207 |  | 463,048 |  | 736 |  | 1,160 |  | 1,108 |  | 187 |  | 3,191
Exchange and other adjustments 1 | 1,034 |  | (17) |  | 3 |  | 8 |  | 1,028 |  | (13) |  | (1) |  | 18 |  | 45 |  | 49
Transfers to Stage 1 | 7,165 |  | (7,021) |  | (144) |  |  |  | – |  | 240 |  | (221) |  | (19) |  |  |  | –
Transfers to Stage 2 | (10,427) |  | 11,211 |  | (784) |  |  |  | – |  | (53) |  | 114 |  | (61) |  |  |  | –
Transfers to Stage 3 | (1,557) |  | (1,871) |  | 3,428 |  |  |  | – |  | (35) |  | (157) |  | 192 |  |  |  | –
Net change in ECL due to transfers |  |  |  |  |  |  |  |  |  |  | (153) |  | 257 |  | 350 |  |  |  | 454
Impact of transfers between stages 2 | (4,819) |  | 2,319 |  | 2,500 |  |  |  | – |  | (1) |  | (7) |  | 462 |  |  |  | 454
Other changes in credit quality 2 |  |  |  |  |  |  |  |  |  |  | 27 |  | (46) |  | 677 |  | 11 |  | 669
Additions and repayments | 28,618 |  | (4,388) |  | (1,606) |  | (1,130) |  | 21,494 |  | (12) |  | (29) |  | (140) |  | (75) |  | (256)
Charge (credit) to the income statement |  |  |  |  |  |  |  |  |  |  | 14 |  | (82) |  | 999 |  | (64) |  | 867
Disposals and derecognition | – |  | – |  | – |  | – |  | – |  | – |  | – |  | – |  | – |  | –
Advances written off |  |  |  |  | (1,296) |  | (9) |  | (1,305) |  |  |  |  |  | (1,296) |  | (9) |  | (1,305)
Recoveries of amounts previously written off |  |  |  |  | 209 |  | – |  | 209 |  |  |  |  |  | 209 |  | – |  | 209
At 31 December 2025 | 430,193 |  | 42,679 |  | 6,526 |  | 5,076 |  | 484,474 |  | 737 |  | 1,077 |  | 1,038 |  | 159 |  | 3,011
Allowance for expected credit losses | (737) |  | (1,077) |  | (1,038) |  | (159) |  | (3,011) |  |  |  |  |  |  |  |  |  |
Net carrying amount | 429,456 |  | 41,602 |  | 5,488 |  | 4,917 |  | 481,463 |  |  |  |  |  |  |  |  |  |
Drawn ECL coverage 3 (%) | 0.2 |  | 2.5 |  | 15.9 |  | 3.1 |  | 0.6 |  |  |  |  |  |  |  |  |  |
1 Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in its carrying value is recognised within gross loans, rather than as a negative impairment allowance. 2 Includes a credit for methodology and model changes of £136 million, split by stage as £41 million credit for Stage 1, £47 million credit for Stage 2, £52 million credit for Stage 3 and £4 million charge for POCI. 3 Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers. The total allowance for expected credit losses includes £243 million (2024: £178 million) in respect of residual value impairment and voluntary terminations within the Group’s UK Motor Finance business. Movements in balances for the year ended 31 December 2024 (audited)
| Gross carrying amount |  | Allowance for expected credit losses
| Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m |  | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m
At 1 January 2024 | 385,294 |  | 53,167 |  | 7,147 |  | 7,854 |  | 453,462 |  | 900 |  | 1,467 |  | 1,137 |  | 213 |  | 3,717
Exchange and other adjustments 1 | (910) |  | (23) |  | (74) |  | 12 |  | (995) |  | (12) |  | (6) |  | 21 |  | 53 |  | 56
Transfers to Stage 1 | 25,658 |  | (25,607) |  | (51) |  |  |  | – |  | 413 |  | (404) |  | (9) |  |  |  | –
Transfers to Stage 2 | (25,390) |  | 25,967 |  | (577) |  |  |  | – |  | (66) |  | 126 |  | (60) |  |  |  | –
Transfers to Stage 3 | (1,104) |  | (2,119) |  | 3,223 |  |  |  | – |  | (21) |  | (178) |  | 199 |  |  |  | –
Net change in ECL due to transfers |  |  |  |  |  |  |  |  |  |  | (293) |  | 340 |  | 303 |  |  |  | 350
Impact of transfers between stages 2 | (836) |  | (1,759) |  | 2,595 |  |  |  | – |  | 33 |  | (116) |  | 433 |  |  |  | 350
Other changes in credit quality 2 |  |  |  |  |  |  |  |  |  |  | (130) |  | (66) |  | 709 |  | 66 |  | 579
Additions and repayments | 22,529 |  | (6,140) |  | (1,612) |  | (910) |  | 13,867 |  | (50) |  | (107) |  | (193) |  | (72) |  | (422)
Charge (credit) to the income statement |  |  |  |  |  |  |  |  |  |  | (147) |  | (289) |  | 949 |  | (6) |  | 507
Disposals and derecognition 3 | (717) |  | (480) |  | (366) |  | (694) |  | (2,257) |  | (5) |  | (12) |  | (25) |  | (18) |  | (60)
Advances written off |  |  |  |  | (1,174) |  | (55) |  | (1,229) |  |  |  |  |  | (1,174) |  | (55) |  | (1,229)
Recoveries of amounts previously written off |  |  |  |  | 200 |  | – |  | 200 |  |  |  |  |  | 200 |  | – |  | 200
At 31 December 2024 | 405,360 |  | 44,765 |  | 6,716 |  | 6,207 |  | 463,048 |  | 736 |  | 1,160 |  | 1,108 |  | 187 |  | 3,191
Allowance for expected credit losses | (736) |  | (1,160) |  | (1,108) |  | (187) |  | (3,191) |  |  |  |  |  |  |  |  |  |
Net carrying amount | 404,624 |  | 43,605 |  | 5,608 |  | 6,020 |  | 459,857 |  |  |  |  |  |  |  |  |  |
Drawn ECL coverage 4 (%) | 0.2 |  | 2.6 |  | 16.5 |  | 3.0 |  | 0.7 |  |  |  |  |  |  |  |  |  |
1 Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in its carrying value is recognised within gross loans, rather than as a negative impairment allowance. 2 Includes a credit for methodology and model changes of £24 million, split by stage as £20 million credit for Stage 1, £2 million charge for Stage 2, £15 million charge for Stage 3 and £21 million credit for POCI. 3 Relates to the securitisations of primarily legacy Retail mortgages 4 Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers. Concentrations of exposure (audited) The Group’s management of concentration risk includes portfolio controls on certain industries, sectors and products to reflect risk appetite as well as individual, customer and bank limit risk tolerances. Credit policies and appetite statements are aligned to the Group’s risk appetite and restrict exposure to higher risk countries and potentially vulnerable sectors and asset classes. Exposures are monitored to prevent both an excessive concentration of risk and single name concentrations. The Group’s largest credit limits are regularly monitored by the Board Risk Committee and reported in accordance with regulatory requirements. As part of its credit risk policy, the Group considers sustainability risk (which incorporates environmental (including climate), social and governance) in the assessment of Commercial Banking facilities. At 31 December 2025 the most significant concentrations of exposure were in mortgages.
| 2025 £m | 2024 £m
Agriculture, forestry and fishing | 6,071 | 6,424
Construction 1 | 3,175 | 3,389
Energy and water supply | 5,571 | 4,912
Financial, business and other services | 40,221 | 38,034
Manufacturing | 5,326 | 4,790
Mining and Quarrying | 314 | 205
Personal: |  |
Mortgages 1 | 346,033 | 330,840
Lease financing 2 | 13,972 | 13,249
Other | 31,145 | 28,016
Postal and telecommunications | 3,177 | 3,182
Property companies | 19,139 | 19,271
Transport, distribution and hotels | 10,330 | 10,736
Total loans and advances to customers before allowance for impairment losses | 484,474 | 463,048
Allowance for impairment losses (note 21 to the consolidated financial statements, page 272) | (3,011) | (3,191)
Total loans and advances to customers | 481,463 | 459,857
1 Includes both UK and overseas mortgage balances. 2 Lease financing, previously reported in aggregate, is presented separately according to whether the lending is personal or non-personal. Non-personal lease financing is allocated to the industries or sectors relevant to the exposure. Comparatives are represented on a consistent basis. Credit quality of loans and advances to customers (audited) The analysis of lending has been prepared based on the division in which the asset is held, with the business segment in which the exposure is recorded reflected in the ratings system applied. The internal credit ratings systems used by the Group differ between Retail and Commercial, reflecting the characteristics of these exposures and the way that they are managed internally; these credit ratings are set out below. All probabilities of default (PDs) include forward-looking information and are based on 12-month values, with the exception of credit-impaired.
Retail |  |  | Commercial |
Quality classification | IFRS 9 PD range |  | Quality classification | IFRS 9 PD range
RMS 1–3 | 0.00–0.80% |  | CMS 1–5 | 0.000–0.100%
RMS 4–6 | 0.81–4.50% |  | CMS 6–10 | 0.101–0.500%
RMS 7–9 | 4.51–14.00% |  | CMS 11–14 | 0.501–3.000%
RMS 10 | 14.01–20.00% |  | CMS 15–18 | 3.001–20.000%
RMS 11–13 | 20.01–99.99% |  | CMS 19 | 20.001–99.999%
RMS 14 | 100.00% |  | CMS 20–23 | 100.000%
Stage 3 assets include balances of £235 million (2024: £297 million) (with outstanding amounts due of £992 million (2024: £971 million)) which have been subject to a partial write-off and where the Group continues to enforce recovery action. There were no modifications of Stage 2 and Stage 3 assets during the year (2024: none). No material gain or loss was recognised by the Group. As at 31 December 2025 there were no (2024: none) significant assets that had been previously modified while classified as Stage 2 or Stage 3 and were classified as Stage 1.
| Drawn exposures |  | Allowance for expected credit losses
Gross drawn exposures and expected credit loss allowance (audited) | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m |  | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m
At 31 December 2025 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail – UK mortgages |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMS 1–3 | 276,020 |  | 19,717 |  | – |  | – |  | 295,737 |  | 43 |  | 99 |  | – |  | – |  | 142
RMS 4–6 | 8,034 |  | 6,274 |  | – |  | – |  | 14,308 |  | 6 |  | 34 |  | – |  | – |  | 40
RMS 7–9 | 154 |  | 1,193 |  | – |  | – |  | 1,347 |  | 1 |  | 12 |  | – |  | – |  | 13
RMS 10 | 23 |  | 338 |  | – |  | – |  | 361 |  | – |  | 5 |  | – |  | – |  | 5
RMS 11–13 | 76 |  | 2,892 |  | – |  | – |  | 2,968 |  | 1 |  | 57 |  | – |  | – |  | 58
RMS 14 | – |  | – |  | 4,016 |  | 5,076 |  | 9,092 |  | – |  | – |  | 309 |  | 159 |  | 468
| 284,307 |  | 30,414 |  | 4,016 |  | 5,076 |  | 323,813 |  | 51 |  | 207 |  | 309 |  | 159 |  | 726
Retail – credit cards |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMS 1–3 | 5,708 |  | 6 |  | – |  | – |  | 5,714 |  | 11 |  | – |  | – |  | – |  | 11
RMS 4–6 | 8,221 |  | 1,108 |  | – |  | – |  | 9,329 |  | 85 |  | 44 |  | – |  | – |  | 129
RMS 7–9 | 1,321 |  | 793 |  | – |  | – |  | 2,114 |  | 48 |  | 87 |  | – |  | – |  | 135
RMS 10 | 8 |  | 140 |  | – |  | – |  | 148 |  | 1 |  | 26 |  | – |  | – |  | 27
RMS 11–13 | – |  | 279 |  | – |  | – |  | 279 |  | – |  | 91 |  | – |  | – |  | 91
RMS 14 | – |  | – |  | 274 |  | – |  | 274 |  | – |  | – |  | 121 |  | – |  | 121
| 15,258 |  | 2,326 |  | 274 |  | – |  | 17,858 |  | 145 |  | 248 |  | 121 |  | – |  | 514
Retail – UK unsecured loans and overdrafts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMS 1–3 | 1,376 |  | 2 |  | – |  | – |  | 1,378 |  | 4 |  | – |  | – |  | – |  | 4
RMS 4–6 | 8,130 |  | 624 |  | – |  | – |  | 8,754 |  | 106 |  | 34 |  | – |  | – |  | 140
RMS 7–9 | 1,062 |  | 324 |  | – |  | – |  | 1,386 |  | 37 |  | 33 |  | – |  | – |  | 70
RMS 10 | 26 |  | 110 |  | – |  | – |  | 136 |  | 2 |  | 19 |  | – |  | – |  | 21
RMS 11–13 | 7 |  | 337 |  | – |  | – |  | 344 |  | 1 |  | 99 |  | – |  | – |  | 100
RMS 14 | – |  | – |  | 193 |  | – |  | 193 |  | – |  | – |  | 112 |  | – |  | 112
| 10,601 |  | 1,397 |  | 193 |  | – |  | 12,191 |  | 150 |  | 185 |  | 112 |  | – |  | 447
Retail – UK Motor Finance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMS 1–3 | 8,531 |  | 910 |  | – |  | – |  | 9,441 |  | 135 |  | 22 |  | – |  | – |  | 157
RMS 4–6 | 5,083 |  | 1,275 |  | – |  | – |  | 6,358 |  | 63 |  | 52 |  | – |  | – |  | 115
RMS 7–9 | 606 |  | 359 |  | – |  | – |  | 965 |  | 3 |  | 25 |  | – |  | – |  | 28
RMS 10 | – |  | 77 |  | – |  | – |  | 77 |  | – |  | 10 |  | – |  | – |  | 10
RMS 11–13 | 2 |  | 165 |  | – |  | – |  | 167 |  | – |  | 39 |  | – |  | – |  | 39
RMS 14 | – |  | – |  | 141 |  | – |  | 141 |  | – |  | – |  | 79 |  | – |  | 79
| 14,222 |  | 2,786 |  | 141 |  | – |  | 17,149 |  | 201 |  | 148 |  | 79 |  | – |  | 428
Retail – other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMS 1–3 | 18,554 |  | 3 |  | – |  | – |  | 18,557 |  | 7 |  | – |  | – |  | – |  | 7
RMS 4–6 | 2,616 |  | 213 |  | – |  | – |  | 2,829 |  | 10 |  | 7 |  | – |  | – |  | 17
RMS 7–9 | 75 |  | 86 |  | – |  | – |  | 161 |  | – |  | 1 |  | – |  | – |  | 1
RMS 10 | – |  | 57 |  | – |  | – |  | 57 |  | – |  | 1 |  | – |  | – |  | 1
RMS 11–13 | – |  | 33 |  | – |  | – |  | 33 |  | – |  | 1 |  | – |  | – |  | 1
RMS 14 | – |  | – |  | 145 |  | – |  | 145 |  | – |  | – |  | 35 |  | – |  | 35
| 21,245 |  | 392 |  | 145 |  | – |  | 21,782 |  | 17 |  | 10 |  | 35 |  | – |  | 62
Total Retail | 345,633 |  | 37,315 |  | 4,769 |  | 5,076 |  | 392,793 |  | 564 |  | 798 |  | 656 |  | 159 |  | 2,177
Commercial Banking |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CMS 1–5 | 31,945 |  | 123 |  | – |  | – |  | 32,068 |  | 6 |  | – |  | – |  | – |  | 6
CMS 6–10 | 17,918 |  | 40 |  | – |  | – |  | 17,958 |  | 18 |  | – |  | – |  | – |  | 18
CMS 11–14 | 31,833 |  | 2,007 |  | – |  | – |  | 33,840 |  | 110 |  | 41 |  | – |  | – |  | 151
CMS 15–18 | 2,324 |  | 2,486 |  | – |  | – |  | 4,810 |  | 39 |  | 144 |  | – |  | – |  | 183
CMS 19 | – |  | 708 |  | – |  | – |  | 708 |  | – |  | 94 |  | – |  | – |  | 94
CMS 20–23 | – |  | – |  | 1,757 |  | – |  | 1,757 |  | – |  | – |  | 382 |  | – |  | 382
| 84,020 |  | 5,364 |  | 1,757 |  | – |  | 91,141 |  | 173 |  | 279 |  | 382 |  | – |  | 834
Other 1 | 540 |  | – |  | – |  | – |  | 540 |  | – |  | – |  | – |  | – |  | –
Total loans and advances to customers | 430,193 |  | 42,679 |  | 6,526 |  | 5,076 |  | 484,474 |  | 737 |  | 1,077 |  | 1,038 |  | 159 |  | 3,011
1 Drawn exposures include centralised fair value hedge accounting adjustments.
| Drawn exposures |  | Allowance for expected credit losses
Gross drawn exposures and expected credit loss allowance (audited) | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m |  | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m
At 31 December 2024 |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Retail – UK mortgages |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMS 1–3 | 261,101 |  | 21,213 |  | – |  | – |  | 282,314 |  | 46 |  | 143 |  | – |  | – |  | 189
RMS 4–6 | 8,487 |  | 7,384 |  | – |  | – |  | 15,871 |  | 6 |  | 51 |  | – |  | – |  | 57
RMS 7–9 | 112 |  | 1,296 |  | – |  | – |  | 1,408 |  | – |  | 15 |  | – |  | – |  | 15
RMS 10 | 17 |  | 273 |  | – |  | – |  | 290 |  | – |  | 5 |  | – |  | – |  | 5
RMS 11–13 | 43 |  | 2,829 |  | – |  | – |  | 2,872 |  | 1 |  | 59 |  | – |  | – |  | 60
RMS 14 | – |  | – |  | 4,166 |  | 6,207 |  | 10,373 |  | – |  | – |  | 335 |  | 187 |  | 522
| 269,760 |  | 32,995 |  | 4,166 |  | 6,207 |  | 313,128 |  | 53 |  | 273 |  | 335 |  | 187 |  | 848
Retail – credit cards |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMS 1–3 | 5,058 |  | 10 |  | – |  | – |  | 5,068 |  | 11 |  | 1 |  | – |  | – |  | 12
RMS 4–6 | 7,231 |  | 1,129 |  | – |  | – |  | 8,360 |  | 87 |  | 52 |  | – |  | – |  | 139
RMS 7–9 | 1,242 |  | 859 |  | – |  | – |  | 2,101 |  | 51 |  | 107 |  | – |  | – |  | 158
RMS 10 | 3 |  | 149 |  | – |  | – |  | 152 |  | – |  | 31 |  | – |  | – |  | 31
RMS 11–13 | – |  | 294 |  | – |  | – |  | 294 |  | – |  | 106 |  | – |  | – |  | 106
RMS 14 | – |  | – |  | 265 |  | – |  | 265 |  | – |  | – |  | 133 |  | – |  | 133
| 13,534 |  | 2,441 |  | 265 |  | – |  | 16,240 |  | 149 |  | 297 |  | 133 |  | – |  | 579
Retail – UK unsecured loans and overdrafts |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMS 1–3 | 1,207 |  | 2 |  | – |  | – |  | 1,209 |  | 3 |  | – |  | – |  | – |  | 3
RMS 4–6 | 7,020 |  | 484 |  | – |  | – |  | 7,504 |  | 98 |  | 27 |  | – |  | – |  | 125
RMS 7–9 | 1,047 |  | 307 |  | – |  | – |  | 1,354 |  | 40 |  | 36 |  | – |  | – |  | 76
RMS 10 | 31 |  | 111 |  | – |  | – |  | 142 |  | 3 |  | 22 |  | – |  | – |  | 25
RMS 11–13 | 9 |  | 343 |  | – |  | – |  | 352 |  | 1 |  | 112 |  | – |  | – |  | 113
RMS 14 | – |  | – |  | 175 |  | – |  | 175 |  | – |  | – |  | 118 |  | – |  | 118
| 9,314 |  | 1,247 |  | 175 |  | – |  | 10,736 |  | 145 |  | 197 |  | 118 |  | – |  | 460
Retail – UK Motor Finance |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMS 1–3 | 8,967 |  | 760 |  | – |  | – |  | 9,727 |  | 112 |  | 16 |  | – |  | – |  | 128
RMS 4–6 | 4,487 |  | 1,169 |  | – |  | – |  | 5,656 |  | 55 |  | 40 |  | – |  | – |  | 95
RMS 7–9 | 440 |  | 247 |  | – |  | – |  | 687 |  | 2 |  | 17 |  | – |  | – |  | 19
RMS 10 | – |  | 46 |  | – |  | – |  | 46 |  | – |  | 6 |  | – |  | – |  | 6
RMS 11–13 | 3 |  | 176 |  | – |  | – |  | 179 |  | – |  | 36 |  | – |  | – |  | 36
RMS 14 | – |  | – |  | 124 |  | – |  | 124 |  | – |  | – |  | 72 |  | – |  | 72
| 13,897 |  | 2,398 |  | 124 |  | – |  | 16,419 |  | 169 |  | 115 |  | 72 |  | – |  | 356
Retail – other |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
RMS 1–3 | 15,163 |  | 238 |  | – |  | – |  | 15,401 |  | 4 |  | 4 |  | – |  | – |  | 8
RMS 4–6 | 2,132 |  | 190 |  | – |  | – |  | 2,322 |  | 11 |  | 7 |  | – |  | – |  | 18
RMS 7–9 | 78 |  | 72 |  | – |  | – |  | 150 |  | – |  | 3 |  | – |  | – |  | 3
RMS 10 | – |  | 7 |  | – |  | – |  | 7 |  | – |  | – |  | – |  | – |  | –
RMS 11–13 | – |  | 9 |  | – |  | – |  | 9 |  | – |  | – |  | – |  | – |  | –
RMS 14 | – |  | – |  | 147 |  | – |  | 147 |  | – |  | – |  | 37 |  | – |  | 37
| 17,373 |  | 516 |  | 147 |  | – |  | 18,036 |  | 15 |  | 14 |  | 37 |  | – |  | 66
Total Retail | 323,878 |  | 39,597 |  | 4,877 |  | 6,207 |  | 374,559 |  | 531 |  | 896 |  | 695 |  | 187 |  | 2,309
Commercial Banking |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
CMS 1–5 | 26,925 |  | 6 |  | – |  | – |  | 26,931 |  | 3 |  | – |  | – |  | – |  | 3
CMS 6–10 | 17,126 |  | 56 |  | – |  | – |  | 17,182 |  | 13 |  | – |  | – |  | – |  | 13
CMS 11–14 | 32,424 |  | 1,128 |  | – |  | – |  | 33,552 |  | 122 |  | 21 |  | – |  | – |  | 143
CMS 15–18 | 5,002 |  | 3,253 |  | – |  | – |  | 8,255 |  | 67 |  | 166 |  | – |  | – |  | 233
CMS 19 | – |  | 725 |  | – |  | – |  | 725 |  | – |  | 77 |  | – |  | – |  | 77
CMS 20–23 | – |  | – |  | 1,839 |  | – |  | 1,839 |  | – |  | – |  | 413 |  | – |  | 413
| 81,477 |  | 5,168 |  | 1,839 |  | – |  | 88,484 |  | 205 |  | 264 |  | 413 |  | – |  | 882
Other 1 | 5 |  | – |  | – |  | – |  | 5 |  | – |  | – |  | – |  | – |  | –
Total loans and advances to customers | 405,360 |  | 44,765 |  | 6,716 |  | 6,207 |  | 463,048 |  | 736 |  | 1,160 |  | 1,108 |  | 187 |  | 3,191
1 Drawn exposures include centralised fair value hedge accounting adjustments. Retail UK mortgage balance movements (audited)
| Gross carrying amount |  | Allowance for expected credit losses
| Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m |  | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m
Retail – UK mortgages |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
At 1 January 2025 | 269,760 |  | 32,995 |  | 4,166 |  | 6,207 |  | 313,128 |  | 53 |  | 273 |  | 335 |  | 187 |  | 848
Exchange and other adjustments 1 | – |  | – |  | – |  | 7 |  | 7 |  | (1) |  | (1) |  | 36 |  | 45 |  | 79
Transfers to Stage 1 | 3,892 |  | (3,850) |  | (42) |  |  |  | – |  | 29 |  | (27) |  | (2) |  |  |  | –
Transfers to Stage 2 | (5,474) |  | 6,053 |  | (579) |  |  |  | – |  | (2) |  | 25 |  | (23) |  |  |  | –
Transfers to Stage 3 | (399) |  | (999) |  | 1,398 |  |  |  | – |  | – |  | (19) |  | 19 |  |  |  | –
Net change in ECL due to transfers |  |  |  |  |  |  |  |  |  |  | (29) |  | 27 |  | 60 |  |  |  | 58
Impact of transfers between stages 2 | (1,981) |  | 1,204 |  | 777 |  |  |  | – |  | (2) |  | 6 |  | 54 |  |  |  | 58
Other changes in credit quality 2 |  |  |  |  |  |  |  |  |  |  | (6) |  | (33) |  | 89 |  | 11 |  | 61
Additions and repayments | 16,528 |  | (3,785) |  | (794) |  | (1,129) |  | 10,820 |  | 7 |  | (38) |  | (72) |  | (75) |  | (178)
Charge (credit) to the income statement |  |  |  |  |  |  |  |  |  |  | (1) |  | (65) |  | 71 |  | (64) |  | (59)
Advances written off |  |  |  |  | (139) |  | (9) |  | (148) |  |  |  |  |  | (139) |  | (9) |  | (148)
Recoveries of amounts previously written off |  |  |  |  | 6 |  | – |  | 6 |  |  |  |  |  | 6 |  | – |  | 6
At 31 December 2025 | 284,307 |  | 30,414 |  | 4,016 |  | 5,076 |  | 323,813 |  | 51 |  | 207 |  | 309 |  | 159 |  | 726
Allowance for expected credit losses | (51) |  | (207) |  | (309) |  | (159) |  | (726) |  |  |  |  |  |  |  |  |  |
Net carrying amount | 284,256 |  | 30,207 |  | 3,707 |  | 4,917 |  | 323,087 |  |  |  |  |  |  |  |  |  |
Drawn ECL coverage 3 (%) | – |  | 0.7 |  | 7.7 |  | 3.1 |  | 0.2 |  |  |  |  |  |  |  |  |  |
1 Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in its carrying value is recognised within gross loans, rather than as a negative impairment allowance. 2 Includes a credit for methodology and model changes of £12 million, split by stage as £22 million credit for Stage 2, £6 million charge for Stage 3 and £4 million charge for POCI. 3 Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
| Gross carrying amount |  | Allowance for expected credit losses
| Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m |  | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | POCI £m |  | Total £m
Retail – UK mortgages |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
At 1 January 2024 | 256,596 |  | 38,533 |  | 4,337 |  | 7,854 |  | 307,320 |  | 161 |  | 374 |  | 357 |  | 213 |  | 1,105
Exchange and other adjustments 1 | – |  | – |  | – |  | 12 |  | 12 |  | 1 |  | – |  | 50 |  | 53 |  | 104
Transfers to Stage 1 | 21,133 |  | (21,105) |  | (28) |  |  |  | – |  | 135 |  | (132) |  | (3) |  |  |  | –
Transfers to Stage 2 | (21,077) |  | 21,473 |  | (396) |  |  |  | – |  | (11) |  | 32 |  | (21) |  |  |  | –
Transfers to Stage 3 | (299) |  | (1,341) |  | 1,640 |  |  |  | – |  | – |  | (39) |  | 39 |  |  |  | –
Net change in ECL due to transfers |  |  |  |  |  |  |  |  |  |  | (122) |  | 114 |  | 56 |  |  |  | 48
Impact of transfers between stages 2 | (243) |  | (973) |  | 1,216 |  |  |  | – |  | 2 |  | (25) |  | 71 |  |  |  | 48
Other changes in credit quality 2 |  |  |  |  |  |  |  |  |  |  | (94) |  | (19) |  | 26 |  | 66 |  | (21)
Additions and repayments | 13,901 |  | (4,143) |  | (956) |  | (910) |  | 7,892 |  | (16) |  | (48) |  | (79) |  | (72) |  | (215)
Charge (credit) to the income statement |  |  |  |  |  |  |  |  |  |  | (108) |  | (92) |  | 18 |  | (6) |  | (188)
Disposals and derecognition 3 | (494) |  | (422) |  | (366) |  | (694) |  | (1,976) |  | (1) |  | (9) |  | (25) |  | (18) |  | (53)
Advances written off |  |  |  |  | (70) |  | (55) |  | (125) |  |  |  |  |  | (70) |  | (55) |  | (125)
Recoveries of amounts previously written off |  |  |  |  | 5 |  | – |  | 5 |  |  |  |  |  | 5 |  | – |  | 5
At 31 December 2024 | 269,760 |  | 32,995 |  | 4,166 |  | 6,207 |  | 313,128 |  | 53 |  | 273 |  | 335 |  | 187 |  | 848
Allowance for expected credit losses | (53) |  | (273) |  | (335) |  | (187) |  | (848) |  |  |  |  |  |  |  |  |  |
Net carrying amount | 269,707 |  | 32,722 |  | 3,831 |  | 6,020 |  | 312,280 |  |  |  |  |  |  |  |  |  |
Drawn ECL coverage 4 (%) | – |  | 0.8 |  | 8.0 |  | 3.0 |  | 0.3 |  |  |  |  |  |  |  |  |  |
1 Exchange and other adjustments includes the impact of movements in exchange rates, discount unwind, derecognising assets as a result of modifications and adjustments in respect of purchased or originated credit-impaired financial assets (POCI). Where a POCI asset’s expected credit loss is less than its expected credit loss on purchase or origination, the increase in its carrying value is recognised within gross loans, rather than as a negative impairment allowance. 2 Includes a charge for methodology and model changes of £7 million, split by stage as £1 million charge for Stage 1, £9 million charge for Stage 2, £18 million charge for Stage 3 and £21 million credit for POCI. 3 Relates to the securitisations of primarily legacy Retail mortgages. 4 Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers. Collateral held as security for Retail loans and advances to customers (audited) UK mortgages An analysis by loan-to-value ratio of the Group’s UK residential mortgage lending is provided below. The value of collateral used in determining the loan-to-value ratios has been estimated based upon the last actual valuation, adjusted to take into account subsequent movements in house prices. The market takes into account many factors, including environmental considerations such as flood risk and energy efficient additions, in arriving at the value of a home. In some circumstances, where the discounted value of the estimated net proceeds from the liquidation of collateral (i.e. net of costs, expected haircuts and anticipated changes in the value of the collateral to the point of sale) is greater than the estimated exposure at default, no credit losses are expected and no ECL allowance is recognised.
| At 31 December 2025 |  | At 31 December 2024
| Stage 1 (£m) | Stage 2 (£m) | Stage 3 (£m) | POCI (£m) | Total (£m) |  | Stage 1 (£m) | Stage 2 (£m) | Stage 3 (£m) | POCI (£m) | Total (£m)
Gross drawn exposures |  |  |  |  |  |  |  |  |  |  |
Less than 60% | 142,960 | 25,099 | 2,811 | 4,343 | 175,213 |  | 145,055 | 27,851 | 3,014 | 5,066 | 180,986
60% to 70% | 48,852 | 2,647 | 620 | 451 | 52,570 |  | 49,746 | 2,954 | 643 | 638 | 53,981
70% to 80% | 47,327 | 1,324 | 321 | 158 | 49,130 |  | 40,292 | 1,168 | 307 | 232 | 41,999
80% to 90% | 38,070 | 1,181 | 165 | 62 | 39,478 |  | 30,215 | 898 | 123 | 109 | 31,345
90% to 100% | 7,053 | 156 | 46 | 22 | 7,277 |  | 4,420 | 109 | 36 | 63 | 4,628
Greater than 100% | 45 | 7 | 53 | 40 | 145 |  | 32 | 15 | 43 | 99 | 189
Total | 284,307 | 30,414 | 4,016 | 5,076 | 323,813 |  | 269,760 | 32,995 | 4,166 | 6,207 | 313,128
Allowance for expected credit losses |  |  |  |  |  |  |  |  |  |  |
Less than 60% | 11 | 128 | 105 | 62 | 306 |  | 14 | 165 | 130 | 66 | 375
60% to 70% | 10 | 36 | 69 | 34 | 149 |  | 11 | 51 | 77 | 36 | 175
70% to 80% | 15 | 20 | 56 | 23 | 114 |  | 13 | 30 | 59 | 27 | 129
80% to 90% | 16 | 19 | 37 | 15 | 87 |  | 13 | 23 | 32 | 17 | 85
90% to 100% | 3 | 4 | 14 | 6 | 27 |  | 2 | 3 | 13 | 10 | 28
Greater than 100% | – | 1 | 28 | 19 | 48 |  | – | 1 | 24 | 31 | 56
Total | 55 | 208 | 309 | 159 | 731 |  | 53 | 273 | 335 | 187 | 848
UK mortgages energy performance certificate analysis The energy performance certificate (EPC) profile of the security associated with the Group’s UK mortgage portfolio is shown below:
EPC profile | A £m | B £m | C £m | D £m | E £m | F £m | G £m | Unrated properties £m | Total
At 31 December 2025 | 2,087 | 47,170 | 77,625 | 102,066 | 32,690 | 6,124 | 1,361 | 54,690 | 323,813
At 31 December 2024 | 1,113 | 40,469 | 68,128 | 97,392 | 33,021 | 6,293 | 1,370 | 65,342 | 313,128
The above data is sourced using the latest available government EPC information. The Group has no EPC data available for 16.9% (2024: 20.9%) of the UK mortgage portfolio; this portion is classified as unrated properties. EPC ratings are not considered to be a material credit risk factor, and do not form part of the Group’s credit risk calculations. Retail credit card balance movements (audited)
| Gross carrying amount |  | Allowance for expected credit losses
| Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | Total £m |  | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | Total £m
Retail – credit cards |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
At 1 January 2025 | 13,534 |  | 2,441 |  | 265 |  | 16,240 |  | 149 |  | 297 |  | 133 |  | 579
Exchange and other adjustments | – |  | – |  | – |  | – |  | – |  | – |  | (19) |  | (19)
Transfers to Stage 1 | 956 |  | (953) |  | (3) |  | – |  | 92 |  | (91) |  | (1) |  | –
Transfers to Stage 2 | (657) |  | 694 |  | (37) |  | – |  | (10) |  | 27 |  | (17) |  | –
Transfers to Stage 3 | (206) |  | (227) |  | 433 |  | – |  | (5) |  | (55) |  | 60 |  | –
Net change in ECL due to transfers |  |  |  |  |  |  |  |  | (52) |  | 77 |  | 78 |  | 103
Impact of transfers between stages 1 | 93 |  | (486) |  | 393 |  | – |  | 25 |  | (42) |  | 120 |  | 103
Other changes in credit quality 1 |  |  |  |  |  |  |  |  | (24) |  | (14) |  | 272 |  | 234
Additions and repayments | 1,631 |  | 371 |  | (11) |  | 1,991 |  | (5) |  | 7 |  | (12) |  | (10)
Charge to the income statement |  |  |  |  |  |  |  |  | (4) |  | (49) |  | 380 |  | 327
Advances written off |  |  |  |  | (496) |  | (496) |  |  |  |  |  | (496) |  | (496)
Recoveries of amounts previously written off |  |  |  |  | 123 |  | 123 |  |  |  |  |  | 123 |  | 123
At 31 December 2025 | 15,258 |  | 2,326 |  | 274 |  | 17,858 |  | 145 |  | 248 |  | 121 |  | 514
Allowance for expected credit losses | (145) |  | (248) |  | (121) |  | (514) |  |  |  |  |  |  |  |
Net carrying amount | 15,113 |  | 2,078 |  | 153 |  | 17,344 |  |  |  |  |  |  |  |
Drawn ECL coverage 2 (%) | 1.0 |  | 10.7 |  | 44.2 |  | 2.9 |  |  |  |  |  |  |  |
1 Includes a credit for methodology and model changes of £53 million, split by stage as £18 million credit for Stage 1, £18 million credit for Stage 2 and £17 million credit for Stage 3. 2 Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
| Gross carrying amount |  | Allowance for expected credit losses
| Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | Total £m |  | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | Total £m
Retail – credit cards |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
At 1 January 2024 | 12,625 |  | 2,908 |  | 284 |  | 15,817 |  | 168 |  | 401 |  | 130 |  | 699
Exchange and other adjustments | – |  | – |  | – |  | – |  | – |  | – |  | (18) |  | (18)
Transfers to Stage 1 | 1,162 |  | (1,162) |  | – |  | – |  | 128 |  | (128) |  | – |  | –
Transfers to Stage 2 | (642) |  | 683 |  | (41) |  | – |  | (13) |  | 31 |  | (18) |  | –
Transfers to Stage 3 | (184) |  | (241) |  | 425 |  | – |  | (5) |  | (65) |  | 70 |  | –
Net changes in ECL due to transfers |  |  |  |  |  |  |  |  | (71) |  | 84 |  | 84 |  | 97
Impact of transfers between stages | 336 |  | (720) |  | 384 |  | – |  | 39 |  | (78) |  | 136 |  | 97
Other changes in credit quality |  |  |  |  |  |  |  |  | (31) |  | (22) |  | 284 |  | 231
Additions and repayments | 573 |  | 253 |  | (15) |  | 811 |  | (27) |  | (4) |  | (11) |  | (42)
Charge to the income statement |  |  |  |  |  |  |  |  | (19) |  | (104) |  | 409 |  | 286
Advances written off |  |  |  |  | (506) |  | (506) |  |  |  |  |  | (506) |  | (506)
Recoveries of amounts previously written off |  |  |  |  | 118 |  | 118 |  |  |  |  |  | 118 |  | 118
At 31 December 2024 | 13,534 |  | 2,441 |  | 265 |  | 16,240 |  | 149 |  | 297 |  | 133 |  | 579
Allowance for expected credit losses | (149) |  | (297) |  | (133) |  | (579) |  |  |  |  |  |  |  |
Net carrying amount | 13,385 |  | 2,144 |  | 132 |  | 15,661 |  |  |  |  |  |  |  |
Drawn ECL coverage 1 (%) | 1.1 |  | 12.2 |  | 50.2 |  | 3.6 |  |  |  |  |  |  |  |
1 Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers. Commercial Banking balance movements (audited)
| Gross carrying amount |  | Allowance for expected credit losses
| Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | Total £m |  | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | Total £m
Commercial Banking |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
At 1 January 2025 | 81,477 |  | 5,168 |  | 1,839 |  | 88,484 |  | 205 |  | 264 |  | 413 |  | 882
Exchange and other adjustments | (543) |  | (38) |  | – |  | (581) |  | (13) |  | (2) |  | 6 |  | (9)
Transfers to Stage 1 | 1,439 |  | (1,353) |  | (86) |  | – |  | 62 |  | (53) |  | (9) |  | –
Transfers to Stage 2 | (2,502) |  | 2,633 |  | (131) |  | – |  | (12) |  | 12 |  | – |  | –
Transfers to Stage 3 | (485) |  | (277) |  | 762 |  | – |  | (5) |  | (18) |  | 23 |  | –
Net change in ECL due to transfers |  |  |  |  |  |  |  |  | (45) |  | 80 |  | 108 |  | 143
Impact of transfers between stages 1 | (1,548) |  | 1,003 |  | 545 |  | – |  | – |  | 21 |  | 122 |  | 143
Other changes in credit quality 1 |  |  |  |  |  |  |  |  | (15) |  | (9) |  | 45 |  | 21
Additions and repayments | 4,634 |  | (769) |  | (475) |  | 3,390 |  | (4) |  | 5 |  | (52) |  | (51)
Charge to the income statement |  |  |  |  |  |  |  |  | (19) |  | 17 |  | 115 |  | 113
Advances written off |  |  |  |  | (153) |  | (153) |  |  |  |  |  | (153) |  | (153)
Recoveries of amounts previously written off |  |  |  |  | 1 |  | 1 |  |  |  |  |  | 1 |  | 1
At 31 December 2025 | 84,020 |  | 5,364 |  | 1,757 |  | 91,141 |  | 173 |  | 279 |  | 382 |  | 834
Allowance for expected credit losses | (173) |  | (279) |  | (382) |  | (834) |  |  |  |  |  |  |  |
Net carrying amount | 83,847 |  | 5,085 |  | 1,375 |  | 90,307 |  |  |  |  |  |  |  |
Drawn ECL coverage 2 (%) | 0.2 |  | 5.2 |  | 21.7 |  | 0.9 |  |  |  |  |  |  |  |
1 Includes a credit for methodology and model changes of £19 million, split by stage as £18 million credit for Stage 1, £23 million charge for Stage 2 and £24 million credit for Stage 3. 2 Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers.
| Gross carrying amount |  | Allowance for expected credit losses
| Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | Total £m |  | Stage 1 £m |  | Stage 2 £m |  | Stage 3 £m |  | Total £m
Commercial Banking |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
At 1 January 2024 | 79,574 |  | 7,987 |  | 2,068 |  | 89,629 |  | 232 |  | 372 |  | 418 |  | 1,022
Exchange and other adjustments | (103) |  | (5) |  | (64) |  | (172) |  | (13) |  | (5) |  | 1 |  | (17)
Transfers to Stage 1 | 2,361 |  | (2,347) |  | (14) |  | – |  | 86 |  | (85) |  | (1) |  | –
Transfers to Stage 2 | (1,850) |  | 1,951 |  | (101) |  | – |  | (12) |  | 13 |  | (1) |  | –
Transfers to Stage 3 | (301) |  | (258) |  | 559 |  | – |  | (4) |  | (19) |  | 23 |  | –
Net changes in ECL due to transfers |  |  |  |  |  |  |  |  | (63) |  | 70 |  | 62 |  | 69
Impact of transfers between stages 1 | 210 |  | (654) |  | 444 |  | – |  | 7 |  | (21) |  | 83 |  | 69
Other changes in credit quality 1 |  |  |  |  |  |  |  |  | (11) |  | (20) |  | 152 |  | 121
Additions and repayments | 1,796 |  | (2,160) |  | (449) |  | (813) |  | (10) |  | (62) |  | (81) |  | (153)
Charge to the income statement |  |  |  |  |  |  |  |  | (14) |  | (103) |  | 154 |  | 37
Advances written off |  |  |  |  | (163) |  | (163) |  |  |  |  |  | (163) |  | (163)
Recoveries of amounts previously written off |  |  |  |  | 3 |  | 3 |  |  |  |  |  | 3 |  | 3
At 31 December 2024 | 81,477 |  | 5,168 |  | 1,839 |  | 88,484 |  | 205 |  | 264 |  | 413 |  | 882
Allowance for expected credit losses | (205) |  | (264) |  | (413) |  | (882) |  |  |  |  |  |  |  |
Net carrying amount | 81,272 |  | 4,904 |  | 1,426 |  | 87,602 |  |  |  |  |  |  |  |
Drawn ECL coverage 2 (%) | 0.3 |  | 5.1 |  | 22.5 |  | 1.0 |  |  |  |  |  |  |  |
1 Includes a credit for methodology and model changes of £25 million, split by stage as £17 million credit for Stage 1, £8 million credit for Stage 2, £nil for Stage 3. 2 Allowance for expected credit losses on loans and advances to customers as a percentage of gross loans and advances to customers. Collateral held as security for Commercial Banking loans and advances to customers (audited) Stage 1 and Stage 2 secured lending For Stage 1 and Stage 2 secured commercial lending, the Group reports assets gross of collateral and therefore discloses the maximum loss exposure. Stage 1 and Stage 2 secured commercial lending is predominantly managed on a cash flow basis. On occasion, it may include an assessment of underlying collateral, although, for Stage 3 lending, this will not always involve assessing it on a fair value basis. No aggregated collateral information for the entire unimpaired secured commercial lending portfolio is provided to key management personnel. Stage 3 secured lending The value of collateral is re-evaluated and its legal soundness reassessed if there is observable evidence of distress of the borrower; this evaluation is used to determine potential loss allowances and management’s strategy to either repair the business or recover the debt. At 31 December 2025, Stage 3 secured commercial lending amounted to £448 million, net of an impairment allowance of £121 million (2024: £450 million, net of an impairment allowance of £150 million). The fair value of the collateral held in respect of impaired secured commercial lending was £468 million (2024: £575 million). In determining the fair value of collateral, no specific amounts have been attributed to the costs of realisation. For the purposes of determining the total collateral held by the Group in respect of impaired secured commercial lending, the value of collateral for each loan has been limited to the principal amount of the outstanding advance in order to eliminate the effects of any over-collateralisation and to provide a clearer representation of the Group’s exposure. Credit quality of other financial assets (audited) Cash and balances at central banks Substantially all of the Group’s cash and balances at central banks are due from the Bank of England, the Federal Reserve Bank of New York or the Deutsche Bundesbank. Debt securities, treasury and other bills, and contracts held with reinsurers at fair value through profit or loss Substantially all of the Group’s trading assets and other loans and advances to customers, loans and advances to banks and reverse repurchase agreements held at fair value through profit or loss have an investment grade rating. The credit quality of the Group’s other debt securities, treasury and other bills, and contracts held with reinsurers held at fair value through profit or loss is set out below:
| 2025 |  | 2024
| Investment grade 1 £m |  | Other £m |  | Total £m |  | Investment grade 1 £m |  | Other £m |  | Total £m
Other financial assets mandatorily at fair value through profit or loss: |  |  |  |  |  |  |  |  |  |  |
Debt securities: |  |  |  |  |  |  |  |  |  |  |
Government securities | 16,593 |  | – |  | 16,593 |  | 7,093 |  | – |  | 7,093
Other public sector securities | 1,898 |  | 7 |  | 1,905 |  | 2,286 |  | 2 |  | 2,288
Bank and building society certificates of deposit | 7,036 |  | – |  | 7,036 |  | 8,667 |  | – |  | 8,667
Asset-backed securities | 909 |  | 14 |  | 923 |  | 641 |  | 11 |  | 652
Corporate and other debt securities | 20,476 |  | 2,934 |  | 23,410 |  | 13,984 |  | 2,899 |  | 16,883
| 46,912 |  | 2,955 |  | 49,867 |  | 32,671 |  | 2,912 |  | 35,583
Treasury and other bills | 11 |  | – |  | 11 |  | 32 |  | – |  | 32
Contracts held with reinsurers | 8,168 |  | – |  | 8,168 |  | 10,527 |  | – |  | 10,527
Total other financial assets mandatorily held at fair value through profit or loss (excluding loans and advances and equity shares) | 55,091 |  | 2,955 |  | 58,046 |  | 43,230 |  | 2,912 |  | 46,142
1 Credit ratings equal to or better than ‘BBB’. Credit risk in respect of trading and other financial assets at fair value through profit or loss held within the Group’s unit-linked funds is borne by the policyholders and credit risk in respect of With-Profits funds is largely borne by the policyholders. Consequently, the Group has no significant exposure to credit risk for such assets which back those contract liabilities. Loans and advances to bank s Significantly all of the Group’s loans and advances to banks are assessed as Stage 1. Reverse repurchase agreement held at amortised cost All of the Group’s reverse repurchase agreements held at amortised cost are assessed as Stage 1. Debt securities held at amortised cos t At 31 December 2025 significantly all of the Group’s debt securities held at amortised cost are investment grade. Debt securities at fair value through other comprehensive income (excluding equity shares) At 31 December 2025 significantly all of the Group’s debt securities at fair value through other comprehensive income are investment grade. Derivative assets The Group reduces exposure to credit risk by using master netting agreements and by obtaining collateral in the form of cash or highly liquid securities.
| 2025 |  | 2024
| Investment grade 1 £m |  | Other £m |  | Total £m |  | Investment grade 1 £m |  | Other £m |  | Total £m
Trading and other | 18,361 |  | 1,341 |  | 19,702 |  | 22,684 |  | 1,333 |  | 24,017
Hedging | 24 |  | 1 |  | 25 |  | 39 |  | 9 |  | 48
Total derivative financial instruments | 18,385 |  | 1,342 |  | 19,727 |  | 22,723 |  | 1,342 |  | 24,065
1 Credit ratings equal to or better than ‘BBB’. Financial guarantees and loan commitments The level of expected credit loss allowance associated with the Group’s financial guarantees and loan commitments is not significant. At 31 December 2025, £153,410 million were Stage 1 (2024: £143,914 million), £4,083 million were Stage 2 (2024: £4,565 million), £61 million were Stage 3 (2024: £101 million) and £20 million was POCI (2024: £39 million). Against these exposures the Group held an allowance for expected credit losses of £197 million (2024: £270 million). Further details can be seen in note 21 to the consolidated financial statements on page 272. Collateral held as security for other financial assets (audited) The Group does not hold collateral against debt securities which are classified as financial assets held at amortised cost. Reverse repurchase agreements The Group enters into reverse repurchase agreements which are accounted for as collateralised loans (see note 16 to the consolidated financial statements on page 255). Financial assets at fair value through profit or loss (excluding equity shares) Included in financial assets at fair value through profit or loss are reverse repurchase agreements, against which the Group holds collateral, all of which the Group is able to repledge (see note 16 to the consolidated financial statements on page 255). At 31 December 2025, £12,257 million had been repledged (2024: £10,676 million). These transactions were generally conducted under terms that are usual and customary for standard secured lending activities. Derivative assets, after offsetting of amounts under master netting arrangements The Group reduces exposure to credit risk by using master netting agreements and by obtaining collateral in the form of cash or highly liquid securities (see note 16 to the consolidated financial statements on page 255). Irrevocable loan commitments and other credit-related contingencies The Group holds irrevocable loan commitments and other credit-related contingencies (see note 36 to the consolidated financial statements on page 291). Collateral is held as security, in the event that lending is drawn down, on £18,272 million (2024: £17,181 million) of these balances. Collateral pledged as security (audited) The Group pledges assets primarily for repurchase agreements and securities lending transactions which are generally conducted under terms that are usual and customary for standard secured borrowing contracts. Repurchase agreements The Group enters into repurchase agreements which include amounts due under the Bank of England’s Term Funding Scheme with additional incentives for SMEs (TFSME) (see note 16 to the consolidated financial statements on page 255). Financial liabilities at fair value through profit or loss Included in financial liabilities at fair value through profit or loss are repurchase agreements, against which the Group pledges collateral (see note 16 to the consolidated financial statements on page 255). The secured party is permitted by contract or custom to repledge this collateral. Securities lending transactions The following on-balance sheet financial assets have been lent to counterparties under securities lending transactions:
| 2025 £m | 2024 £m
Financial assets at fair value through profit or loss | 1,088 | 889
Financial assets at fair value through other comprehensive income | 5,034 | 6,124
Total | 6,122 | 7,013
In addition, securities held as collateral in the form of stock borrowed amounted to £12,763 million (2024: £20,887 million). Of this amount, £7,542 million (2024: £11,781 million) had been resold or repledged as collateral for the Group’s own transactions. These transactions were generally conducted under terms that are usual and customary for standard secured lending activities. Securitisations and covered bonds In addition to the assets detailed above, the Group also holds assets that are encumbered through the Group’s asset-backed conduits and its securitisation and covered bond programmes. Further details of these assets are provided in note 26 to the consolidated financial statements on page 283

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