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Birdsong

Friday is a Bank Holiday so the markets are closed!

I get slightly different but very similar figures.

If you look at slide 23 from the half year results presentation (link below) you can see that LGEN had solvency II capital of £14.1bn with a capital ratio of 217%

Dividing the two figures gives the capital per percentage point.

This means that each percentage point is worth just under £65m and a reduction to 200% would free up £1.104bn. A reduction to 180% would free up £2.404bn.

https://group.legalandgeneral.com/media/p0tk0dzq/2025-half-year-results-presentation-slides.pdf

Thanks Strainger1234.

The website only says 31st January and doesn’t make clear which year.

The vouchers are only valid up to 31st January so if they are posted to brokers on 26th January then there would be almost no time for shareholders to receive and use them.

Knot

The excellent post made by LIBERTY2 earlier today highlights many shortcomings of the FCA redress scheme however the following addresses your reply to my post.

I understand what you are saying and appreciate that a court can overrule an ombudsman’s decision.

A decision can be challenged on three grounds. 1) the ombudsman applied the wrong law. 2) the ombudsman mis-applied the correct law or 3) the ombudsman’s decision was so bizarre that no reasonable adjudicator could have arrived at it.

I believe that Clydesdale is arguing that the law was mis-applied. As far as I can tell they seem to be arguing that all regulations were followed, there was no breach of the law and the correct application of the law would have determined that there was no unfair conduct.

It is perfectly possible for the court to agree with that interpretation. However that is irrelevant to the FCA while formulating the redress scheme.

Such a finding would go against the long established principle that it is unnecessary for there to be a breach of law or regulation for an ombudsman to find the conduct unfair.

The FCA have to base the scheme on the law as it is understood today, not on what it may be following some future court case which necessarily has an uncertain outcome.

Knot

I am not aware of any Court of Appeal challange to a FOS ruling and would be happy if you gave me the references.

Cases such as Clydesdale v FOS were put on hold, in lower courts, pending the SC ruling because the it would be stupid to decide a case while a superior court was deciding relevant issues. Nothing in the SC ruling overrules the the need for lower courts to abide by a plausable decision of an ombudsman.

The SC addressed four issues, the first three were related. The first issue was whether or not the "tort of bribery" existed or should exist. This allows a plaintiff to recover damages from both the briber and the bribee without having to show any actual damages were suffered. The SC confirmed that the tort does and should exist.

If the SC court decided that the tort did exist then the second and third issue asked the court to define exactly what constitued the tort so that the behaviour of the banks could be could be compared to the definition. The court ruled that under its definition the relationship between the banks, dealers and customers was a commercial one, the banks and dealers owed no fiduciary duty to the customers, therefore the "tort of bribery" does not apply in these cases.

The fourth issue was a case brought under the Consumer Credit Act 1974 by Mr Johnson who won but on very case specific reasons i.e. Mr Johnson had been deliberately lied too.

I am always eager to learn and I will be happy if you can provide evidence that I am wrong.

NiharRoy

One of the problems the FCA face is that there are two distinct groups of complainants to which different standards apply.

One group brought, or are seeking to bring, legal action through the courts. To succeed they need(ed) to show that a breach of the law or regulation took place. According to Lloyds CEO they have won the majority of their cases decided so far.

However most complaints were filed with the FOS. Legally an ombudsman has to decide whether or not, in the totality of the circumstances, the customer was treated fairly. There is no need to find any breach of law or regulation in order to decide in favour of the customer. This deters companies from deliberately concocting schemes which are technically legal but which still rip off customers.

I believe that customers have won the overwhelming majority of the FOS cases already decided. It seems the ombudsmen found that the disclosures of the DCA made to customers were inadequate, putting the customers at a disadvantage and hence were unfair. Whether or not the disclosure was legal is totally irrelevant.

Although a FOS decision is binding on the financial institution, the customer can reject it and proceed in court. However It is intentionally difficult for an institution to challenge a decision.

If an institution mounts a legal challenge the court cannot overturn an ombudsman’s decision just because it would have decided the case differently. Where an issue has multiple plausible interpretations the court must abide by the one chosen by the ombudsman. In many, if not all cases, it is plausible that a lack of full disclosure of the DCA was unfair so a reviewing court would have to accept that decision.

Any FCA scheme has to take into account both the court cases the banks lost and that many/most customers would go (or be steered to) the FOS and win.

I’m not happy about the situation but have to face the reality of it.

HardDown

You are not alone in preferring Barclays to Lloyds. Where I live there used to be branches of both within 100 yards of each other.

Armed robbers targeted the Barclays branch at least twice to my knowledge but never the Lloyds branch!

Barclays closed their branch.

But I hope that they proceed with caution on any M&A.

Apart from the over £52bn of losses on HBOS assets that Lloyds suffered after the HBOS takeover, the total cost of the HBOS Reading scandal is still unknown.

Mergers and takeovers make companies liable for the misdeeds of the other party.

The total amount of the net debt is only one aspect of the situation. The redemption profile is another.

PHNX. Have a comparatively large debt compared to other insurance companies but large parts of that debt are not repayable for decades.

1bn GBP is not due until 2073 and 720m EURO is not repayable until 2082.

I don’t have a breakdown of the BP debt but it would be useful if someone who does posts it.

Chid

But Lloyds will have the security of the property until the money is paid back.

What Lloyds mean is that they are providing the funds to develop the sites. The owners are the councils and housing associations.

LTI

I totally agree with your comments on the buybacks.

Since at least the 1970’s Lloyds have been managed for long term shareholders and was considered a good investment for people looking for reliable long term income. That has been the objective the various boards.

Obviously the aftermath of the GFC with the takeover of HBOS, PPI and Covid have disrupted that but it remains the objective.

Lloyds are predicting a substantial capital surplus available for distribution at Y/E 2026. If the SP is high at that time then the board may consider a special dividend as well as a buyback.

Paul Atkins, chairman of the US Securities and Exchange Commission, has announced his support for the move from quarterly to semiannual reporting.

It promotes longer term thinking, reduces costs and allows senior executives to concentrate more on running the business than complying with regulations.

At the outset may I say that I am not and never have been a CBG shareholder but I do have a substantial LLOY holding and hence have a vested interest in the ultimate outcome of the DCA process.

The really important issue is how much money the lenders can recover from the dealer/ brokers.

A couple of months ago I posted about the Clydesdale case on the LLOY board and will just give a summary here.

Although the case was between Clydesdale and the FOS the judge helpfully gave details of the legal relationship between the bank and the dealer (Arnold Clark).

Arnold Clark gave Clydesdale a wide ranging indemnity for anything the dealer did which it shouldn’t have done or which it should have done but didn’t, which caused the bank to be liable to the customer under the Consumer Credit Act 1974.

This makes sense as otherwise the dealer would gain all of the benefits from misconduct while Clydesdale would have to foot the bill.

I cannot imagine any finance company proceeding without such an indemnity and expect that once the consumer redress has been sorted, the banks will bring actions against the dealers.

The latest consensus figures for Lloyds can be found using the link below.

https://www.lloydsbankinggroup.com/assets/pdfs/investors/financial-performance/lloyds-banking-group-plc/2025/q3/2025-lbg-q3-consensus.pdf

Perhaps we will find out more during the Digital & AI update on 6th November

Eckie8

I doubt that a drop in SCR to 217% would be significant to the market as it is still very high. Companies such as Phoenix operate within a target SCR of between 140-180%.

Aviva reported a very high SCR today for a very good reason i.e. the results were prior to the Direct Line acquisition so don’t take into account the cash payments to Direct Line shareholders or the expenses of the transaction. I expect the reported SCR for Aviva at full year to be considerably lower.

I can’t comment on the prospects for NWG but during the Q&A at the end of the 20024 results presentation there was the following exchange (tidied up).

Question 8: Aman Rakkar, BARCLAYS

The second question is a follow-on on distribution, so I think your guidance for 2026, greater than 200 basis points of CET1 capital generation, and running your target CET1 ratio down to target of 13%, it does imply a massive step-up in the surplus capital in '26. I think very crudely I can get to £6 billion of excess capital in 2026. The street is modelling dividends of around £2 billion. Without being too smart, it implies potentially really quite out-sized surplus distributions in 2026, motor finance notwithstanding. I mean is it realistic to think about a buyback of £4 billion in full year 2026 results whenever that may be? Thank you.

William Chalmers:

The 2026 guidance, you're right to point out that our capital guidance does take a step-up in 2026 and as you know we've guided to an excess of 200 basis points without being more specific about that. Exactly what does greater than 200 mean? That's off the back of uncertainties that are out there for sure. Macro uncertainties, regulatory, which I'll come back to in just a second. But nonetheless, all of those points notwithstanding, we are very comfortable with our greater than 200 basis points guidance that we have given you for 2026. And that is off the back of everything that we know and particularly that which is in our control.

Couple of points. First of all, I don't think you're missing anything in respect to the P&L, the capital build and so forth.

We pointed all of that out and you've got it collectively. The market, I think has got its arms around that. There are some uncertainties that are still out there. I won't mention the macro because everybody knows about that and has a point of view on it.

I highlighted earlier on that CRD IV still requires a bit of ironing out in the conversations. We are looking at modestly greater than £5 billion potentially. It depends upon how the PRA conversations land. So there's an uncertainty there.

Now that was until very recently offset by the introduction of Basil 3.1, which has now been delayed. Now, what you've got is Basil 3.1 happening on 1 January 2027. There isn't now the overlap that there was, albeit it's not terribly different in its overall timetable.

So those uncertainties are perhaps worth mentioning. I don't want to confirm the number that you put out a second ago, but I do want to say that we do expect a meaningful step-up in capital generation in respect of 2026. And then it'll be up to the board to figure out hopefully with Charlie's and my input as members of the board to determine what do we do with that capital. Thanks, Aman.

https://www.lloydsbankinggroup.com/assets/pdfs/investors/financial-performance/lloyds-banking-group-plc/2024/q4/2024-lbg-fy-sellside-transcript.pdf

I’ve been looking into an issue which I raised briefly some time ago i.e. the possibility of the finance companies recovering damages from the dealers. I can’t find anything specific to Lloyds or Black Horse Finance but there is some interesting information in the case Clydesdale Financial Services Ltd v. Financial Ombudsman Service Ltd : [2024] EWHC 3237 (Admin).

Clydesdale was the finance company and Arnold Clark was the dealer and the judge helpfully set out some of the legal relations between the two.

Clydesdale provided Arnold Clark with a document for the use of the latter’s sales staff, entitled “Motor loan application process”. This stressed the importance of treating the customer fairly and complying with the Equality Act.

The document said that it was permissible to vary the interest rate charged to the customer (within set limits) but that the customer must be told of the variation and why it was being changed.

A number of examples of what was and what was not acceptable were given. E.g.Increasing the rate to reduce the customer’s monthly repayments to meet their budget was permitted but increasing the rate because they could afford to pay more was not.

The terms of the “application process” document were given legal effect by their incorporation by reference into another document “The Brokerage agreement”.

Under the Brokerage agreement “Arnold Clark must not act so as to make Clydesdale’s relationship with the customer “unfair” under the CCA or treat the customer unfairly under FSA (now FCA) rules (clause 6.1.4). It must not cause Clydesdale to incur liability under section 56 of the CCA (clause 6.1.5).”

“By clause 9 and its subclauses, Arnold Clark provided a wide ranging indemnity for liabilities incurred by Clydesdale to the customer as a result of things done or not done by Arnold Clark or representations made by it to the customer in respect of which it would be deemed Clydesdale’s agent under section 56 of the CCA. Clydesdale’s liability to Arnold Clark was limited to payment of commission at the agreed rates (clause 9.3).”

Without the indemnities the Arnold Clark would gain the benefits from unacceptable behaviour while Clydesdale would face all the costs. I can’t see any finance company accepting a situation like that and expect others to have similar indemnities. I can foresee the possibility of another set of legal action, this time between the banks and the dealers, once the customer’s claims have been met.