v3.25.4

Credit risk

12 Months Ended

Dec. 31, 2025

Credit risk [Abstract]

Credit risk

The 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.

The 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 requirementsThe 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 adjustments1	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 stages2	(4,819)		2,319		2,500				–		(1)		(7)		462				454
Other changes in credit quality2											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 coverage3 (%)	0.2		2.5		15.9		3.1		0.6

1Exchange 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.

2Includes 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.

3Allowance 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 adjustments1	(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 stages2	(836)		(1,759)		2,595				–		33		(116)		433				350
Other changes in credit quality2											(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 derecognition3	(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 coverage4 (%)	0.2		2.6		16.5		3.0		0.7

1Exchange 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.

2Includes 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.

3Relates to the securitisations of primarily legacy Retail mortgages

4Allowance 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
Construction1	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:
Mortgages1	346,033	330,840
Lease financing2	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

1Includes both UK and overseas mortgage balances.

2Lease 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
Other1	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

1Drawn 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
Other1	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

1Drawn 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 adjustments1	–		–		–		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 stages2	(1,981)		1,204		777				–		(2)		6		54				58
Other changes in credit quality2											(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 coverage3 (%)	–		0.7		7.7		3.1		0.2

1Exchange 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.

2Includes 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 £4million charge for POCI.

3Allowance 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 adjustments1	–		–		–		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 stages2	(243)		(973)		1,216				–		2		(25)		71				48
Other changes in credit quality2											(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 derecognition3	(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 coverage4 (%)	–		0.8		8.0		3.0		0.3

1Exchange 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.

2Includes 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.

3Relates to the securitisations of primarily legacy Retail mortgages.

4Allowance 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 stages1	93		(486)		393		–		25		(42)		120		103
Other changes in credit quality1									(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 coverage2 (%)	1.0		10.7		44.2		2.9

1Includes 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.

2Allowance 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 coverage1 (%)	1.1		12.2		50.2		3.6

1Allowance 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 stages1	(1,548)		1,003		545		–		–		21		122		143
Other changes in credit quality1									(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 coverage2 (%)	0.2		5.2		21.7		0.9

1Includes 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.

2Allowance 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 stages1	210		(654)		444		–		7		(21)		83		69
Other changes in credit quality1									(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 coverage2 (%)	0.3		5.1		22.5		1.0

1Includes 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.

2Allowance 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 grade1 £m		Other £m		Total £m		Investment grade1 £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

1Credit 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 banks

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 cost

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 grade1 £m		Other £m		Total £m		Investment grade1 £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

1Credit 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

X

- Definition

The disclosure of credit risk. [Refer: Credit risk [member]]

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Name IFRS
-Number 7
-IssueDate 2025-01-01
-Section Credit risk
-URI https://taxonomy.ifrs.org/xifrs-link?type=IFRS&num=7&code=ifrs-tx-2025-en-r&doctype=Standard&dita_xref=IFRS07_g35A-38_TI
-URIDate 2025-03-27

Reference 2: http://www.xbrl.org/2009/role/commonPracticeRef
-Note Expiry date 2027-01-01
-Name IAS
-Number 1
-IssueDate 2025-01-01
-Paragraph 10
-Subparagraph e
-URI https://taxonomy.ifrs.org/xifrs-link?type=IAS&num=1&code=ifrs-tx-2025-en-b&anchor=para_10_e&doctype=Standard
-URIDate 2025-03-27

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X

- Definition

Credit risk

+ References

No definition available.

+ Details

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