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186 to 247 were approved by the Board of Directors on 4 March 2026 and signed on\u00a0its\u00a0behalf
by
Andy Golding
Chief Executive Officer
Victoria Hyde
Chief Financial Officer
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1.Accounting policies
OSB Group PLC is a public company limited by shares. The Group is registered in England and
Wales (company number 11976839) and the registered office is OSB House Quayside,
Chatham Maritime, Chatham, United Kingdom, ME4 4QZ. The principal activities and the
nature of the Group\u2019s operations are set out in the Strategic Report.
(a)Basis of preparation
The financial statements have been prepared in accordance with IFRS Accounting Standards
as adopted by the United Kingdom Endorsement Board (UKEB) and interpretations issued by
the IFRS Interpretations Committee (IFRS IC) and in conformity with the requirements of the
Companies Act 2006.
The financial statements have been prepared on a historical cost basis, as modified by the
revaluation of investment securities and derivative contracts and other financial assets held
at\u00a0fair value through profit or loss (FVTPL) or FVOCI (see note 1 (m) (ii)).
The financial statements are presented in pounds sterling. All amounts in the financial
statements have been rounded to the nearest \u00a30.1m.
(b)Going concern
The Board undertakes regular rigorous assessments of whether the Group is a going concern
in light of current and potential future economic conditions and all available information about
future risks and uncertainties.
In assessing whether the going concern basis is appropriate, projections for the Group have
been prepared, covering its future performance, capital and liquidity for a period extending to
June 2027. These forecasts have been subject to sensitivity tests utilising a range of stress
scenarios, which have been compared to the latest economic scenarios provided by the
Group\u2019s external economic advisors, as well as reverse stress tests.
The assessments include the following:
\u2022 Financial and capital forecasts were prepared utilising the latest economic forecasts
provided by the Group\u2019s external economic advisers. Reverse stress tests were run to
identify combinations of adverse movements in house prices and unemployment levels
which would result in the Group breaching its minimum regulatory capital requirements.
The Directors assessed the likelihood of those reverse stress scenarios occurring within the
next 12 months and concluded that the likelihood is remote.
\u2022 The latest liquidity and contingent liquidity positions and forecasts were assessed against
internal combined stress scenarios with the Group maintaining sufficient liquidity
throughout the going concern assessment period.
\u2022 The Group continues to assess and mature the resilience of its business operating model
and supporting infrastructure in the context of the emerging economic, business and
regulatory environment. The Group\u2019s Operational Resilience Self-Assessment Report for
2024/2025 was reviewed and endorsed by the Group Risk Committee and approved by the
Board in June 2025. The Group is in the process of updating this for 2026 and has
identified no material changes to its conclusions. Key areas of focus include the provision of
the Group\u2019s Important Business Services (IBSs) to minimise the impact of any service
disruptions on the firm\u2019s customers or the wider financial services industry, and validating
the levels of resilience of the third parties that the Group depends upon for delivery of its
IBSs. There were no items identified that could threaten the Group\u2019s viability over the going
concern assessment time horizon.
The Group\u2019s financial projections demonstrate that the Group has sufficient capital and
liquidity to continue to meet its regulatory capital requirements as set out by the Prudential
Regulation Authority (PRA).
The Board has therefore concluded that the Group has sufficient resources to continue in
operational existence for a period in excess of 12 months from the date of approval of these
financial statements and, as a result, it is appropriate to prepare these consolidated financial
statements on a going concern basis.
(c)Basis of consolidation
The Group accounts include the results of OSB GROUP PLC (the Company) and all its
subsidiary undertakings. Subsidiaries are those entities, including structured entities, over
which the Group has control. The Group controls an entity when it is exposed, or has rights,
to\u00a0variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the investee.
Judgement is applied in assessing the relevant factors and conditions in totality when
determining whether the Group controls an entity. Specifically, judgement is applied in
assessing whether the Group has substantive decision-making rights over the relevant
activities and whether it is exercising power as a principal or an agent.
The Group is not deemed to control an entity when it exercises power over an entity in an
agency capacity. In determining whether the Group is acting as an agent, the Directors
consider the overall relationship between the Group, the investee and other parties to the
arrangement with respect to the following factors: (i) the scope of the Group\u2019s decision-
making power; (ii) the rights held by other parties; (iii) the remuneration to which the Group is
entitled; and (iv) the Group\u2019s exposure to variability of returns. The determination of control is
based on the current facts and circumstances and is continuously assessed.
Where the Group does not retain a direct ownership interest in a securitisation entity, but the
Directors have determined that the Group controls those entities, they are treated as
subsidiaries and are consolidated. Control is determined to exist if the Group has the power to
direct the activities of each entity (for example, managing the performance of the underlying
mortgage assets and raising debt on those mortgage assets which is used to fund the Group)
and, in addition to this, the Group is exposed to a variable return (for example, retaining the
residual risk on the mortgage assets).
1.Accounting policies continued
Securitisation structures that do not meet these criteria are not treated as subsidiaries and are
excluded from the consolidated accounts. Where the Group retains an interest in the
securitisation, the loan notes held are not recognised separately but form part of the
measurement of the deemed loan balance.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group
and are deconsolidated from the date that control ceases. Upon consolidation, intercompany
transactions, balances and unrealised gains on transactions are eliminated. Unrealised losses
are also eliminated unless the transaction provides evidence of impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency, so far as is possible, with the policies adopted by the Group.
The Group\u2019s EBT is controlled and recognised by the Company using the look-through
approach, i.e. as if the EBT is included within the accounts of the Company.
In the Company\u2019s financial statements, investments in subsidiary undertakings are stated at
cost less impairment. A full list of the Company\u2019s subsidiaries which are included in the
Group\u2019s consolidated financial statements can be found in note 2 to the Company\u2019s
financial\u00a0statements on page 251 to 252.
(d)Foreign currency translation
The financial statements of each of the Company\u2019s subsidiaries are measured using the
currency of the primary economic environment in which the subsidiary operates (the
functional currency). Foreign currency transactions are translated into the functional
currencies using the exchange rates prevailing at the date of the transactions. Monetary items
denominated in\u00a0foreign currencies are retranslated at the rate prevailing at the period end.
(e)Segmental reporting
IFRS 8 requires operating segments to be identified on the basis of internal reports and
components of the Group which are regularly reviewed by the chief operating decision maker
to allocate resources to segments and to assess their performance. For this purpose, the chief
operating decision maker of the Group is the Board of Directors.
The Group provides loans, asset finance and retail deposits within the UK.\u00a0
The Group segments its lending business and operates under two segments:
\u2022 OneSavings Bank (OSB)
\u2022 Charter Court Financial Services (CCFS)
The Group has disclosed relevant risk management tables in note 41 at a sub-segment level to
provide detailed analysis of the Group\u2019s core lending business.
(f)Interest income and expense
Interest income and interest expense for all interest-bearing financial instruments measured at
amortised cost and FVOCI is recognised in profit or loss using the effective interest rate (EIR)
method. The EIR is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial asset or financial liability to the gross carrying
amount of a financial asset or to the amortised cost of a financial liability.
Interest income on financial assets categorised as stage 1 or 2 is recognised on a gross basis,
with interest income on stage 3 assets recognised net of expected credit losses (ECL).
For purchased or originated credit-impaired assets (see note 1 (m) (vii)), interest income is
calculated by applying the credit-adjusted EIR to the amortised cost of the asset. The
calculation of interest income does not revert to a gross basis even if the credit risk of the asset
improves. See note 1 (m) (vii) for further information on IFRS 9 stage classifications.
When calculating the EIR, the Group estimates cash flows considering all contractual terms of
the instrument and behavioural aspects (for example, prepayment options) but not
considering future credit losses. The calculation of the EIR includes transaction costs and fees
paid or received that are an integral part of the interest rate, together with the discounts or
premiums arising on the acquisition of loan portfolios. Transaction costs include incremental
costs that are directly attributable to the acquisition or issue of a financial instrument.\u2003
The Group monitors the actual cash flows for each portfolio and resets cash flows on a
monthly basis, discounted at the EIR to derive a new carrying value, with changes taken
to\u00a0profit or loss as interest income.
The EIR is adjusted where there is a movement in the expected reference interest rate (Sterling
Overnight Index Average (SONIA), synthetic London Interbank Offered Rate (LIBOR) or base
rate) affecting portfolios with a variable interest rate which will impact future cash flows. The
revised EIR is the rate which exactly discounts the revised cash flows to the gross carrying
value of the loan portfolio.
Interest income on investment securities is included in interest receivable and similar income.
Interest on derivatives is included in interest receivable and similar income or interest expense
and similar charges following the underlying instrument it is hedging.
Coupons paid on AT1 securities are recognised directly in equity in the period in which they are paid.
(g)Fees and commissions
Fees and commissions which are an integral part of the EIR of a financial instrument are
recognised as an adjustment to the EIR and recorded in interest income. The Group includes
early redemption charges within the EIR.
Fees received on mortgage administration services and mortgage origination activities, which
are not an integral part of the EIR, are recorded in other operating income and accounted for
in accordance with IFRS 15 Revenue from Contracts with Customers, with income recognised
when the services are delivered and the benefits are transferred to clients and customers.
1.Accounting policies continued
Other fees and commissions are recognised on the accrual basis as services are provided or on
the performance of a significant act, net of value added tax (VAT) and similar taxes.
(h)Taxation
Income tax comprises current and deferred tax. It is recognised in profit or loss, other
comprehensive income (OCI) or directly in equity, consistent with the recognition of items it
relates to. The Group recognises tax on coupons paid on AT1 securities directly in profit or loss.
Deferred tax assets are recognised only to the extent that it is probable that future taxable
profits will be available to utilise the asset. The recognition of deferred tax asset is mainly
dependent on the projections of future taxable profits and future reversals of temporary
differences. The current projections of future taxable income indicate that the Group will
be\u00a0able to utilise its deferred tax asset within the foreseeable future.
Deferred tax liabilities are recognised for all taxable temporary differences.
The Company and its tax-paying UK subsidiaries are in a group payment arrangement for
corporation tax and show a net corporation tax liability and deferred tax liability accordingly.
The Company and its UK subsidiaries are in the same VAT group.
(i)Dividends
Dividends are recognised in equity in the period in which they are paid or, if earlier, approved
by shareholders.
(j)Cash and cash equivalents
For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents
comprise cash, non-restricted balances with credit institutions and highly liquid financial
assets with original maturities of less than three months from date of acquisition, subject to an
insignificant risk of changes in their fair value and are used by the Group in the
management\u00a0of its short-term commitments.
(k)Property, plant and equipment
Property, plant and equipment comprise freehold land and buildings, major alterations to
office premises, computer equipment and fixtures measured at cost less accumulated
depreciation. These assets are reviewed for impairment annually, and if they are considered
to\u00a0be impaired, are written down immediately to their recoverable amounts.
Items of property, plant and equipment are depreciated on a straight-line basis over their
estimated useful economic lives as follows:
Buildings
50 years
Fixtures & fittings, computer hardware and vehicles
5 years
Leasehold improvements
Shorter of 10 years or lease term
Plant
15-40 years
For assets under construction (development assets), no depreciation is charged until the asset
is available for use.
Land, deemed to be 25% of purchase price of buildings, is not depreciated.
(l)Intangible assets
The Group only recognises internally generated intangible assets if all of the
following\u00a0conditions are met:
\u2022 an asset is being created that can be identified after establishing the technical and
commercial feasibility of the resulting product;
\u2022 it is probable that the asset created will generate future economic benefits; and
\u2022 the development cost of the asset can be measured reliably.
Subsequent expenditure on an internally generated intangible asset, after its purchase or
completion, is recognised as an expense in the period in which it is incurred. Where no
internally generated intangible asset can be recognised, development expenditure is
recognised as an expense in the period in which it is incurred.
Purchased software and costs directly associated with the development of computer software
are capitalised as intangible assets where the software is a unique and identifiable asset
controlled by the Group and will generate future economic benefits. Costs to establish
technological feasibility or to maintain existing levels of performance are recognised as an
expense. Software is only recognised if:
\u2022 The Group has the contractual right to take possession of the software during the hosting
period without significant penalty; and
\u2022 It is feasible for the Group to run the software on its own hardware or contract with a party
unrelated to the supplier to host the software.
The costs of configuring or customising supplier application software in a Software-as-a-
Service (SaaS) arrangement that is determined to be a service contract is recognised as an
expense or prepayment. SaaS is an arrangement that provides the Group with the right to
receive access to the supplier\u2019s application software in the future which is treated as a service
contract, rather than a software lease or the acquisition of a software intangible asset. Where
the configuration and customisation services are not distinct from the right to receive access
to\u00a0the software, then the costs are recognised as an expense over the term of the
arrangement.
Intangible assets are reviewed for impairment at least semi-annually, and if they are
considered to be impaired, are written down immediately to their recoverable amounts.
Impairment losses previously recognised for intangible assets, other than goodwill, are
reversed when there has been a change in the estimates used to determine the asset\u2019s
recoverable amount. An impairment loss reversal is recognised in the Consolidated Statement
of Comprehensive Income and the carrying amount of the asset is increased to its recoverable
amount.
1.Accounting policies continued
Intangible assets are amortised on a straight line basis over their estimated useful lives
as\u00a0follows:
Computer software and licenses
5-7 years
Assets arising on Combination
4-5 years
For development costs of assets that are under construction, no amortisation is applied until
the asset is available for use and is calculated using a full month when available for use.
The Group reviews the amortisation period on an annual basis. If the expected useful life of an
asset is different from previous assessments, the amortisation period is changed accordingly.
(m)Financial instruments
i.Recognition
The Group initially recognises loans and advances, deposits, debt securities issued, senior
notes and subordinated debt liabilities on the date on which they are originated or acquired.
All\u00a0other financial instruments are accounted for on the trade date which is when the
Group\u00a0becomes a party to the contractual provisions of the instrument.
For financial instruments classified as amortised cost or FVOCI, the Group initially recognises
financial assets and financial liabilities at fair value plus transaction income or costs that are
directly attributable to its origination, acquisition or issue. Financial instruments classified as
amortised cost are subsequently measured using the EIR method.
Transaction costs directly attributable to the acquisition or issue of a financial instrument
at\u00a0FVTPL are recognised in profit or loss as incurred.
ii.Classification
The Group classifies financial instruments based on the business model and the contractual
cash flow characteristics of the financial instruments. In accordance with IFRS 9, the Group
classifies financial assets into one of three measurement categories:
\u2022 Amortised cost \u2013 assets in a business model to hold financial assets in order to collect
contractual cash flows, where the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest (SPPI)
on\u00a0the\u00a0principal amount outstanding.
\u2022 FVOCI \u2013 assets held in a business model which collects contractual cash flows and sells
financial assets, where the contractual terms of the financial assets give rise on specified
dates to cash flows that are SPPI on the principal amount outstanding.
\u2022 FVTPL \u2013 assets not measured at amortised cost or FVOCI. The Group measures derivatives,
an acquired mortgage portfolio and some investment securities under this category.
The Group reassesses its business models each reporting period.
The Group classifies non-derivative financial liabilities as measured at amortised cost.
The Group classifies certain financial instruments as equity where they meet the following
conditions:
\u2022 the financial instrument includes no contractual obligation to deliver cash or another
financial asset on potentially unfavourable conditions;
\u2022 the financial instrument is a non-derivative that includes no contractual obligation for the
issuer to deliver a variable number of its own equity instruments; or
\u2022 the financial instrument is a derivative that will be settled only by the issuer exchanging a
fixed amount of cash or another financial asset for a fixed number of its own
equity\u00a0instruments.
The Group\u2019s sources of debt funding are deposits from retail customers and credit institutions,
including collateralised loan advances from the Bank of England (BoE) under the Term Funding
Scheme with additional incentives for SMEs (TFSME) and Indexed Long-Term Repo (ILTR),
asset-backed loan notes issued through the Group\u2019s securitisation programmes, subordinated
debt liabilities and senior notes. Cash received under the TFSME is recorded in amounts owed
to credit institutions. Financial liabilities, including Tier 2 instruments, are classified as such
where the terms allow no absolute discretion\u00a0over the payment of interest.
During the year equity financial instruments comprised own shares and AT1 securities. AT1
securities are designated as equity instruments and recognised at fair value on the date of
issuance in equity along with incremental costs directly attributable to the issuance of equity
instruments. Accordingly, the coupons paid on AT1 securities are recognised directly in
retained earnings when paid.
iii.Derecognition
The Group offers refinancing options to customers at which point the original mortgage asset
is derecognised and a new financial asset is recognised.
The forbearance measures offered by the Group are considered a modification event as the
contractual cash flows are renegotiated or otherwise modified. The Group considers the
renegotiated or modified cash flows are not a substantial modification from the contractual
cash flows and does not consider that forbearance measures give rise to a derecognition
event.
Securitisations lead to derecognition of the associated mortgage pool where the Group
transfers its right to receive cash flows from the mortgages or assumes an obligation to pay
these cash flows to a third party in a qualifying \u2018pass-through arrangement\u2019 and transfers
substantially all the risks and rewards of ownership of the pool to a third party. In assessing
this latter point, the Group compares its exposure to variability on any retained investment in
the securitisation structure to that on the underlying mortgages.
Financial liabilities are derecognised only when the obligation is discharged, cancelled or
has\u00a0expired.
1.Accounting policies continued
iv.Offsetting
The Group\u2019s derivatives are covered by industry standard master netting agreements.
Master\u00a0netting agreements create a right of set-off that becomes enforceable only following
a\u00a0specified event of default or in other circumstances not expected to arise in the normal
course of business. These arrangements do not qualify for offsetting and as such the Group
reports derivatives on a gross basis.
Collateral in respect of derivatives is subject to the standard industry terms of International
Swaps and Derivatives Association (ISDA) Credit Support Annex. This means that the cash
received or given as collateral can be pledged or used during the term of the transaction but
must be returned on maturity of the transaction. The terms also give each counterparty the
right to terminate the related transactions upon the counterparty\u2019s failure to post collateral.
Collateral paid or received does not qualify for offsetting and is recognised in loans and
advances to credit institutions and amounts owed to credit institutions, respectively.
v.Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount at which the financial
asset or financial liability is measured at initial recognition, less principal payments or receipts,
plus or minus the cumulative amortisation using the EIR method of any difference between the
initial amount recognised and the maturity amount, minus any reduction for impairment
of\u00a0assets.
vi.Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or,
in its absence, the most advantageous market to which the Group has access at that date.
When available, the Group measures the fair value of an instrument using the quoted price in
an active market for that instrument. A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume to provide pricing information
on an ongoing basis. The Group measures its investment securities at fair value using quoted
market prices where available.
If there is no quoted price in an active market, then the Group uses valuation techniques that
maximise the use of relevant observable inputs and minimise the use of unobservable inputs.
The Group uses SONIA curves to value its derivatives. The fair value of the Group\u2019s derivative
financial instruments incorporates credit valuation adjustments (CVA) and debit valuation
adjustments (DVA). The DVA and CVA take into account the respective credit ratings of the
Group\u2019s two banking entities and counterparty and whether the derivative is collateralised
or\u00a0not. Derivatives are valued using discounted cash flow models and observable market
data\u00a0and are sensitive to benchmark interest and basis rate curves.
vii.Identification and measurement of impairment of financial assets
The Group assesses all financial assets for impairment.
Loans and advances to customers
The Group uses the IFRS 9 three-stage ECL approach for measuring impairment. The three
impairment stages are as follows:
\u2022 Stage 1 \u2013 a 12-month ECL allowance is recognised where there is no significant increase in
credit risk (SICR) since initial recognition.
\u2022 Stage 2 \u2013 a lifetime ECL allowance is recognised for assets where a SICR is identified since
initial recognition. The assessment of whether credit risk has increased significantly since
initial recognition is performed for each reporting period for the life of the loan.
\u2022 Stage 3 \u2013 requires objective evidence that an asset is credit impaired, at which point a
lifetime ECL allowance is recognised.
The Group measures impairment through the use of individual and modelled assessments.
Individual assessment
The Group\u2019s provisioning process requires individual assessment for high exposure or higher
risk loans, where Law of Property Act (LPA) receivers have been appointed, the property is
taken into possession or there are other events that suggest a high probability of credit loss.
The individual assessments are carried out for all the loans associated with one counterparty.
The Group estimates cash flows from these loans, including expected interest and principal
payments, rental or sale proceeds, selling and other costs.
For all individually assessed loans, should the present value of estimated future cash flows
discounted at the original EIR be less than the carrying value of the loan, a provision is
recognised for the difference with such loans being classified as impaired. However, should the
present value of the estimated future cash flows exceed the carrying value, no provision
is\u00a0recognised.
Additionally the Group applies a modelled assessment to all loans and under certain statuses
the greater of the modelled and individually assessed provision requirement is applied.
IFRS 9 modelled impairment
Measurement of ECL
The assessment of credit risk and the estimation of ECL are unbiased and probability
weighted. The ECL calculation is a product of an individual loan\u2019s probability of default (PD),
exposure at default (EAD) and loss given default (LGD) discounted at the EIR. The ECL drivers
of PD, EAD and LGD are modelled at an account level. The assessment of whether a SICR has
occurred is based on quantitative relative and absolute PD thresholds and a suite of qualitative
triggers.
1.Accounting policies continued
Significant increase in credit risk (movement to stage 2)
The Group\u2019s transfer criteria determine what constitutes a SICR, which results in an exposure
being moved from stage 1 to stage 2.
At the point of initial recognition, a loan is assigned a PD estimate. For each monthly reporting
date thereafter, an updated PD estimate is computed. The Group\u2019s transfer criteria analyse
relative and absolute changes in PD versus the PD assigned at the point of origination,
together with qualitative triggers using both internal indicators, such as forbearance and
external information, such as changes in income and adverse credit information to assess for
SICR. In the event that given early warning triggers have not already identified SICR, an
account more than 30 days past due is\u00a0considered to have experienced a SICR.
A borrower will move back into stage 1 only if the SICR definition is no longer triggered.
Definition of default (movement to stage 3)
The Group uses a number of quantitative and qualitative criteria to determine whether an
account meets the definition of default and therefore moves to stage 3. The criteria
currently\u00a0include:
\u2022 If an account is more than 90 days past due.
\u2022 Accounts triggering an unlikeliness to pay indicator, which include possession, distressed
restructuring forbearance, and internal behavioural alerts such as default within a
borrower\u2019s broader relationship with the bank or external behavioural alerts such as
bankruptcy or individual voluntary arrangement (IVA).
A borrower will move out of stage 3 when its credit risk improves such that it no longer meets
the 90 days past due and unlikeliness to pay criteria and following this has completed an
internally approved 12-month probation period. The borrower will move to stage 1 or stage
2\u00a0dependent on whether the SICR applies.
Forward-looking macroeconomic scenarios
The risk of default and ECL assessments take into consideration the expectations of economic
changes that are deemed to be reasonably possible.
The Group conducts analysis to determine the most significant factors which may influence
the likelihood of an exposure defaulting in the future. The macroeconomic factors relate to
the\u00a0House Price Index (HPI), unemployment rate (UR), Consumer Price Index (CPI), Gross
Domestic Product (GDP), Commercial Real Estate Index (CRE) and the BoE Base Rate (BBR).
The Group has developed an approach for factoring probability-weighted macroeconomic
forecasts into ECL calculations, adjusting PD and LGD estimates. The macroeconomic
scenarios feed directly into the ECL calculation, as the adjusted PD and LGD estimates are
used within the individual account ECL allowance calculations.
The Group sources economic forecast information from an appropriately qualified third party
when determining scenarios. The Group considers four probability-weighted scenarios, being
base, upside, downside and severe downside scenarios. The expected scenarios, management
actions and results are discussed and approved by the Board.
The base case is also utilised within the Group\u2019s impairment forecasting process which in turn
feeds the wider business planning processes. The ECL models are also used to set the Group\u2019s
credit risk appetite thresholds and limits.
Period over which ECL is measured
The ECL is measured from the initial recognition of the asset which is the date at which the
loan is originated or the date a loan is purchased and at each balance sheet date thereafter.
The maximum period considered when measuring ECL (either 12 months or lifetime ECL) is the
maximum contractual period over which the Group is exposed to the credit risk of the asset.
For modelling purposes, the Group considers the contractual maturity of the loan product
and\u00a0then considers the behavioural trends of the asset.
Purchased or originated credit impaired (POCI)
Acquired loans that meet the Group\u2019s definition of default (90 days past due or an unlikely
to\u00a0pay position) at acquisition are treated as POCI assets. These assets attract a lifetime ECL
allowance over the full term of the loan, even when these loans no longer meet the definition
of\u00a0default post-acquisition. The Group does not originate credit-impaired loans.
Write-off
Loans are written off against the related provision when the underlying security is sold and
there is a shortfall amount remaining. Subsequent recoveries of amounts previously written off
are taken through profit and loss. Accounts that are derecognised for accounting purposes will
continue to be serviced and corresponding collection procedures are only discontinued
following approval from the Group Chief Credit Officer.
Intercompany loans
Intercompany receivables in the Company financial statements are assessed for ECL based on
an assessment of the PD and LGD, discounted to a net present value.
Other financial assets
Other financial assets comprise cash balances with the BoE and other credit institutions and
high-grade investment securities. The Group deems the likelihood of default across these
counterparties as low and does not recognise a provision against the carrying balances.
Share repurchase
Upon Board authorisation of a share repurchase programme and signing an irrevocable
agreement, a share repurchase liability is recognised in other liabilities with the offset in
retained earnings. Each share repurchase reduces the provision. Upon share cancellation,
share capital is debited with a credit to the capital redemption reserve equal to the nominal
value of \u00a30.01 for each share cancelled.
1.Accounting policies continued
(n)Loans and advances to customers
Loans and advances to customers are predominantly mortgage loans and advances to
customers with fixed or determinable payments that are not quoted in an active market and
that the Group does not intend to sell in the near term. They are initially recorded at fair value
plus any directly attributable transaction costs and are subsequently measured at amortised
cost using the EIR method, less impairment losses. Where exposures are hedged by derivatives,
designated and qualifying as fair value hedges, the fair value adjustment for the hedged risk
to the carrying value of the hedged loans and advances is reported in fair value adjustments
for hedged assets.
Loans and the related provision are written off when there is a shortfall remaining after the
underlying security is sold. Subsequent recoveries of amounts previously written off are taken
through profit or loss.
Loans and advances to customers over which the Group transfers its rights to the collateral
thereon to the BoE under the TFSME and ILTR schemes are not derecognised from the
Consolidated Statement of Financial Position, as the Group retains substantially all the risks
and rewards of ownership, including all cash flows arising from the loans and advances and
exposure to credit risk. The Group classifies the loans and advances at amortised cost under
IFRS 9 Financial Instruments.
Loans and advances to customers include a small acquired mortgage portfolio where the
contractual cash flows include payments that are not SPPI and as such are measured at
FVTPL.
Loans and advances to customers include the Group\u2019s asset finance lease lending. Finance
leases are initially measured at an amount equal to the net investment in the lease, using the
interest rate implicit in the finance lease. Direct costs are included in the initial measurement of
the net investment in the lease and reduce the amount of income recognised over the lease
term. Finance income is recognised over the lease term, based on a pattern reflecting
a\u00a0constant periodic rate of return on the net investment in the lease.
(o)Investment securities
Investment securities include securities held for liquidity purposes. These assets are non-
derivatives that are classified on an individual basis as amortised cost, FVOCI or FVTPL.
(p)Sale and repurchase agreements
Financial assets sold subject to repurchase agreements (repo) continue to be recognised in the
financial statements if they fail the derecognition criteria of IFRS 9 described in paragraph m)iii
above. The financial assets that are retained in the financial statements are reflected as loans
and advances to customers or investment securities and the counterparty liability is included
in amounts owed to credit institutions or other customers. Financial assets purchased under
agreements to resell at a predetermined price where the transaction is financing in nature
(reverse repo) are accounted for as loans and advances to credit institutions. The difference
between the sale and repurchase price is treated as interest and accrued over the life of the
agreement using the EIR method.
(q)Derivative financial instruments
The Group uses derivative financial instruments (interest rate swaps) to manage its exposure to
interest rate risk. The Group does not hold or issue derivative financial instruments for
proprietary trading.
The Group also uses derivatives to hedge the interest rate risk inherent in irrevocable offers to
lend. This exposes the Group to movements in the fair value of derivatives until the loan
is\u00a0drawn. The changes to fair value are recognised in profit or loss in the period.
(r)Hedge accounting
The Group has chosen to continue to apply the hedge accounting requirements of
International Accounting Standards (IAS) 39 instead of the requirements in Chapter 6 of IFRS
9. The Group uses fair value hedge accounting for a portfolio hedge of interest rate risk.
The hedging strategy of the Group is divided into portfolio hedges, where the hedged item is a
homogeneous portfolio of assets (mortgage lending or fixed rate bonds) or liabilities (savings
products), and micro hedges, where the hedged item is a distinctly identifiable asset or liability
(debt issuance). The Group applies fair value hedge accounting for both its portfolio and micro
hedges.
i.Portfolio hedges
Portfolio hedge accounting allows for hedge effectiveness testing and accounting over an
entire portfolio of financial assets or liabilities. The Group applies fair value portfolio hedge
accounting to its fixed rate portfolio of mortgages and savings accounts and to fixed rate
bonds held as a liquidity portfolio. The hedged portfolio is analysed into repricing time periods
based on expected repricing dates, utilising the Group Assets and Liabilities Committee
(ALCO) approved prepayment curve. Interest rate swaps are designated against the repricing
time periods to establish the hedge relationship.
ii.Micro hedges
The Group\u2019s micro hedging strategy entails hedge accounting on an individual instrument-by-
instrument basis, which in some instances may be implemented through partial term fair value
hedging where the instrument may be exercised early. The Group applies fair value micro
hedge accounting to manage its exposure to the interest rate risk arising from some of its fixed
rate debt issuances. Interest rate swaps are assigned to specific issuances of fixed rate notes
with terms that closely align with the hedged item.
1.Accounting policies continued
iii.Hedge effectiveness
Hedge effectiveness is calculated as a percentage of the fair value movement of the interest
rate swap against the fair value movement of the hedged item over the period tested.
The Group considers the following as key sources of hedge ineffectiveness:
\u2022 the mismatch in maturity date of the swap and hedged item, as swaps with a given
maturity date cover a portfolio of hedged items which may mature throughout the month;
\u2022 the actual behaviour of the hedged item differing from expectations, such as early
repayments or withdrawals and arrears;
\u2022 minimal movements in the yield curve leading to ineffectiveness where hedge relationships
are sensitive to small value changes; and
\u2022 the mismatch in the swap interest rate and rate used to value the hedged item where the
swap rate is higher than the contractual rate of the hedged item.
Where there is an effective hedge relationship for fair value hedges, the Group recognises the
change in fair value of each hedged item in profit or loss with the cumulative movement in their
value being shown separately in the Consolidated Statement of Financial Position as fair value
adjustments on hedged assets and liabilities. The fair value changes of both the derivative and
the hedge substantially offset each other to reduce profit volatility.
The Group discontinues hedge accounting when the derivative ceases through expiry, when
the derivative is cancelled or the underlying hedged item matures, is sold or is repaid.
If a derivative no longer meets the criteria for hedge accounting or is cancelled whilst still
effective, including LIBOR-linked derivatives cancelled as a result of Interbank Offered Rate
(IBOR) reforms, the fair value adjustment relating to the hedged assets or liabilities within the
hedge relationship prior to the derivative becoming ineffective or being cancelled remains on
the Consolidated Statement of Financial Position and is amortised over the remaining life of
the hedged assets or liabilities. The rate of amortisation over the remaining life is in line with
expected income or cost generated from the hedged assets or liabilities. Each reporting period,
the expectation is compared to actual with an accelerated run-off applied where the two
diverge by more than set parameters.
(s)Debit and credit valuation adjustments
The DVA and CVA are included in the fair value of derivative financial instruments. The DVA is
based on the expected loss a counterparty faces due to the risk of the Group\u2019s two banking
entities defaulting. The CVA reflects the Group\u2019s risk of the counterparty\u2019s default.
The methodology is based on a standard calculation, taking into account the credit rating of
the swap counterparty, time to maturity, the fair value of the swap and any
collateral\u00a0arrangements.
(t)Provisions and contingent liabilities
A provision is recognised when there is a present obligation as a result of a past event, it is
probable that the obligation will be settled and the amount can be estimated reliably.
Provisions include ECLs on the Group\u2019s undrawn loan commitments.
Contingent liabilities are possible obligations arising from past events, whose existence will be
confirmed only by uncertain future events, or present obligations arising from past events
which are either not probable or the amount of the obligation cannot be reliably measured.
Contingent liabilities are not recognised but disclosed.
(u)Employee benefits \u2013 defined contribution scheme
The Group contributes to defined contribution personal pension plans or defined contribution
retirement benefit schemes for all qualifying employees who subscribe to the terms and
conditions of the schemes\u2019 policies.
Obligations for contributions to defined contribution pension arrangements are recognised as
an expense in profit or loss as incurred.
(v)Share-based payments
Equity-settled share-based payments to employees providing services are measured at the
fair value of the equity instruments at the grant date in accordance with IFRS 2. The fair value
excludes the effect of non-market-based vesting conditions.
The cost of the awards is charged on a straight-line basis to profit or loss (with a
corresponding increase in the share-based payment reserve within equity) over the vesting
period in which the employees become entitled to the awards. The increase within the share-
based payment reserve is reclassified to retained earnings upon exercise.
The amount recognised as an expense for non-market conditions and related service
conditions is adjusted each reporting period to reflect the actual number of awards expected
to be met. The amount recognised as an expense for awards subject to market conditions is
based on the proportion that is expected to meet the condition as assessed at the grant date.
No adjustment is made to the fair value of each award calculated at grant date.
Share-based payments that are not subject to further vesting conditions (i.e. the Deferred
Share Bonus Plan (DSBP) for senior managers) are expensed in the year services are received
with a corresponding increase in equity.
Where the allowable cost of share-based options or awards for tax purposes is greater than
the cost determined in accordance with IFRS 2, the tax effect of the excess is taken to the
share-based payment reserve within equity. The tax effect is reclassified to retained earnings
upon vesting.
Employer\u2019s national insurance is charged to profit or loss at the share price at the reporting
date on the same service or vesting schedules as the underlying options and awards.
Own shares are recorded at cost and deducted from equity and represent shares of OSBG
that are held by the EBT.
1.Accounting policies continued
(w)Leases
Lessee accounting
The Group\u2019s leases are predominantly for property leases where the Group is a lessee. At lease
commencement date, the Group recognises the right-of-use asset and lease liability on the
statement of financial position, except for leases of low-value assets and short-term leases of
12 months or less are recognised directly in profit or loss on a straight-line basis over the
lease\u00a0term.
Lease liability payments are recognised within financing activities in the Consolidated
Statement of Cash Flows.
The Group assesses the likely impact of early terminations in recognising the right-of-use asset
and lease liability where an option to terminate early exists.
For modifications that increase the length of a lease the modified lease term is determined,
and the lease liability remeasured by discounting the revised lease payments using a revised
discount rate, at the effective date of the lease modification; a corresponding adjustment is
made to the right-of-use asset. Where modifications decrease the length of a lease, the lease
liability and right-of-use asset are reduced in proportion to the reduction in the lease term,
with any gain or loss recognised in profit or loss.
Lessor accounting
Finance leases are initially measured at an amount equal to the net investment in the lease,
using the interest rate implicit in the finance lease. Finance income is recognised over the lease
term, based on a pattern reflecting a constant periodic rate of return on the net investment in
the lease.
(x)Adoption of new standards
International financial reporting standards issued and adopted for the first time in the
year ended 31 December 2025
\u2018Lack of Exchangeability \u2013 Amendments to International Accounting Standard 21)\u2019 is effective
from 1 January 2025. The adoption of the amendment has not had a material impact on the
Group.
Exemptions
The Group has applied the temporary exception issued by IASB from the accounting
requirements for deferred taxes in IAS 12 \u2018Income Taxes\u2019. Accordingly, the Group neither
recognises nor discloses information about deferred tax assets and liabilities related to Pillar 2
income taxes.
International financial reporting standards issued but not yet effective which are
applicable to the Group
In April 2024, the IASB released IFRS 18 Presentation and Disclosure in Financial Statements
which is designed to give more comparability between entities in the presentation and
classification of items within the income statement and around management-defined
performance measures and is effective for reporting periods beginning on or after 1 January
2026. The Group is currently assessing the impacts of this standard.
Certain other amendments to accounting standards and interpretations that were not
effective on 31 December 2025 have not been early-adopted by the Group. The adoption of
these amendments is not expected to have a material impact on the financial statements of
the Group in future periods.
", "dimensions": { "concept": "ifrs-full:DisclosureOfMaterialAccountingPolicyInformationExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-426": { "value": "PLC is a public company limited by shares", "dimensions": { "concept": "ifrs-full:LegalFormOfEntity", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-427": { "value": "
(a)Basis of preparation
The financial statements have been prepared in accordance with IFRS Accounting Standards
as adopted by the United Kingdom Endorsement Board (UKEB) and interpretations issued by
the IFRS Interpretations Committee (IFRS IC) and in conformity with the requirements of the
Companies Act 2006.
The financial statements have been prepared on a historical cost basis, as modified by the
revaluation of investment securities and derivative contracts and other financial assets held
at\u00a0fair value through profit or loss (FVTPL) or FVOCI (see note 1 (m) (ii)).
The financial statements are presented in pounds sterling. All amounts in the financial
statements have been rounded to the nearest \u00a30.1m.", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfPreparationOfFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-428": { "value": "
The financial statements have been prepared in accordance with IFRS Accounting Standards
as adopted by the United Kingdom Endorsement Board (UKEB) and interpretations issued by
the IFRS Interpretations Committee (IFRS IC) and in conformity with the requirements of the
Companies Act 2006.", "dimensions": { "concept": "ifrs-full:StatementOfIFRSCompliance", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-429": { "value": "United Kingdom", "dimensions": { "concept": "ifrs-full:CountryOfIncorporation", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-431": { "value": "
The financial statements are presented in pounds sterling. All amounts in the financial
statements have been rounded to the nearest \u00a30.1m.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFunctionalCurrencyExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-430": { "value": "
The financial statements are presented in pounds sterling. All amounts in the financial
statements have been rounded to the nearest \u00a30.1m.", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralInformationAboutFinancialStatementsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-432": { "value": "
(b)Going concern
The Board undertakes regular rigorous assessments of whether the Group is a going concern
in light of current and potential future economic conditions and all available information about
future risks and uncertainties.
In assessing whether the going concern basis is appropriate, projections for the Group have
been prepared, covering its future performance, capital and liquidity for a period extending to
June 2027. These forecasts have been subject to sensitivity tests utilising a range of stress
scenarios, which have been compared to the latest economic scenarios provided by the
Group\u2019s external economic advisors, as well as reverse stress tests.
The assessments include the following:
\u2022 Financial and capital forecasts were prepared utilising the latest economic forecasts
provided by the Group\u2019s external economic advisers. Reverse stress tests were run to
identify combinations of adverse movements in house prices and unemployment levels
which would result in the Group breaching its minimum regulatory capital requirements.
The Directors assessed the likelihood of those reverse stress scenarios occurring within the
next 12 months and concluded that the likelihood is remote.
\u2022 The latest liquidity and contingent liquidity positions and forecasts were assessed against
internal combined stress scenarios with the Group maintaining sufficient liquidity
throughout the going concern assessment period.
\u2022 The Group continues to assess and mature the resilience of its business operating model
and supporting infrastructure in the context of the emerging economic, business and
regulatory environment. The Group\u2019s Operational Resilience Self-Assessment Report for
2024/2025 was reviewed and endorsed by the Group Risk Committee and approved by the
Board in June 2025. The Group is in the process of updating this for 2026 and has
identified no material changes to its conclusions. Key areas of focus include the provision of
the Group\u2019s Important Business Services (IBSs) to minimise the impact of any service
disruptions on the firm\u2019s customers or the wider financial services industry, and validating
the levels of resilience of the third parties that the Group depends upon for delivery of its
IBSs. There were no items identified that could threaten the Group\u2019s viability over the going
concern assessment time horizon.
The Group\u2019s financial projections demonstrate that the Group has sufficient capital and
liquidity to continue to meet its regulatory capital requirements as set out by the Prudential
Regulation Authority (PRA).
The Board has therefore concluded that the Group has sufficient resources to continue in
operational existence for a period in excess of 12 months from the date of approval of these
financial statements and, as a result, it is appropriate to prepare these consolidated financial
statements on a going concern basis.
", "dimensions": { "concept": "ifrs-full:DisclosureOfGoingConcernExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-434": { "value": "
(c)Basis of consolidation
The Group accounts include the results of OSB GROUP PLC (the Company) and all its
subsidiary undertakings. Subsidiaries are those entities, including structured entities, over
which the Group has control. The Group controls an entity when it is exposed, or has rights,
to\u00a0variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the investee.
Judgement is applied in assessing the relevant factors and conditions in totality when
determining whether the Group controls an entity. Specifically, judgement is applied in
assessing whether the Group has substantive decision-making rights over the relevant
activities and whether it is exercising power as a principal or an agent.
The Group is not deemed to control an entity when it exercises power over an entity in an
agency capacity. In determining whether the Group is acting as an agent, the Directors
consider the overall relationship between the Group, the investee and other parties to the
arrangement with respect to the following factors: (i) the scope of the Group\u2019s decision-
making power; (ii) the rights held by other parties; (iii) the remuneration to which the Group is
entitled; and (iv) the Group\u2019s exposure to variability of returns. The determination of control is
based on the current facts and circumstances and is continuously assessed.
Where the Group does not retain a direct ownership interest in a securitisation entity, but the
Directors have determined that the Group controls those entities, they are treated as
subsidiaries and are consolidated. Control is determined to exist if the Group has the power to
direct the activities of each entity (for example, managing the performance of the underlying
mortgage assets and raising debt on those mortgage assets which is used to fund the Group)
and, in addition to this, the Group is exposed to a variable return (for example, retaining the
residual risk on the mortgage assets).
1.Accounting policies continued
Securitisation structures that do not meet these criteria are not treated as subsidiaries and are
excluded from the consolidated accounts. Where the Group retains an interest in the
securitisation, the loan notes held are not recognised separately but form part of the
measurement of the deemed loan balance.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group
and are deconsolidated from the date that control ceases. Upon consolidation, intercompany
transactions, balances and unrealised gains on transactions are eliminated. Unrealised losses
are also eliminated unless the transaction provides evidence of impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency, so far as is possible, with the policies adopted by the Group.
The Group\u2019s EBT is controlled and recognised by the Company using the look-through
approach, i.e. as if the EBT is included within the accounts of the Company.
In the Company\u2019s financial statements, investments in subsidiary undertakings are stated at
cost less impairment. A full list of the Company\u2019s subsidiaries which are included in the
Group\u2019s consolidated financial statements can be found in note 2 to the Company\u2019s
financial\u00a0statements on page 251 to 252.
", "dimensions": { "concept": "ifrs-full:DisclosureOfBasisOfConsolidationExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-433": { "value": "
(c)Basis of consolidation
The Group accounts include the results of OSB GROUP PLC (the Company) and all its
subsidiary undertakings. Subsidiaries are those entities, including structured entities, over
which the Group has control. The Group controls an entity when it is exposed, or has rights,
to\u00a0variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the investee.
Judgement is applied in assessing the relevant factors and conditions in totality when
determining whether the Group controls an entity. Specifically, judgement is applied in
assessing whether the Group has substantive decision-making rights over the relevant
activities and whether it is exercising power as a principal or an agent.
The Group is not deemed to control an entity when it exercises power over an entity in an
agency capacity. In determining whether the Group is acting as an agent, the Directors
consider the overall relationship between the Group, the investee and other parties to the
arrangement with respect to the following factors: (i) the scope of the Group\u2019s decision-
making power; (ii) the rights held by other parties; (iii) the remuneration to which the Group is
entitled; and (iv) the Group\u2019s exposure to variability of returns. The determination of control is
based on the current facts and circumstances and is continuously assessed.
Where the Group does not retain a direct ownership interest in a securitisation entity, but the
Directors have determined that the Group controls those entities, they are treated as
subsidiaries and are consolidated. Control is determined to exist if the Group has the power to
direct the activities of each entity (for example, managing the performance of the underlying
mortgage assets and raising debt on those mortgage assets which is used to fund the Group)
and, in addition to this, the Group is exposed to a variable return (for example, retaining the
residual risk on the mortgage assets).
1.Accounting policies continued
Securitisation structures that do not meet these criteria are not treated as subsidiaries and are
excluded from the consolidated accounts. Where the Group retains an interest in the
securitisation, the loan notes held are not recognised separately but form part of the
measurement of the deemed loan balance.
Subsidiaries are fully consolidated from the date on which control is transferred to the Group
and are deconsolidated from the date that control ceases. Upon consolidation, intercompany
transactions, balances and unrealised gains on transactions are eliminated. Unrealised losses
are also eliminated unless the transaction provides evidence of impairment of the asset
transferred. Accounting policies of subsidiaries have been changed where necessary to ensure
consistency, so far as is possible, with the policies adopted by the Group.
The Group\u2019s EBT is controlled and recognised by the Company using the look-through
approach, i.e. as if the EBT is included within the accounts of the Company.
In the Company\u2019s financial statements, investments in subsidiary undertakings are stated at
cost less impairment. A full list of the Company\u2019s subsidiaries which are included in the
Group\u2019s consolidated financial statements can be found in note 2 to the Company\u2019s
financial\u00a0statements on page 251 to 252.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSubsidiariesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-436": { "value": "A full list of the Company\u2019s subsidiaries which are included in the
Group\u2019s consolidated financial statements can be found in note 2 to the Company\u2019s
financial\u00a0statements on page 251 to 252.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates
In preparing these financial statements, the Group has made judgements, estimates and
assumptions which affect the reported amounts within the current and future financial years.
Actual results may differ from these estimates.
As set out in the Strategic Report on page 95, climate change is a global challenge and an
emerging risk to businesses, people and the environment. Therefore, in preparing the financial
statements, the Group has considered the impact of climate-related risks on its financial
position and performance, including the impact on ECL and redemption profiles included in
EIR. While the effects of climate change represent a source of uncertainty, the Group does not
consider there to be a material impact on its judgements and estimates from the physical or
transition risks in the short term. As part of the Group\u2019s recognition of climate risk and overall
Environmental, Social and Governance (ESG) agenda, the Group considers the physical risks
of climate change and has retained a post-model adjustment (PMA) of \u00a31.0m (2024: \u00a30.3m) as
of 31 December 2025.
Estimates and judgements are regularly reviewed based on past experience, expectations of
future events and other factors.
Judgements
The Group has made the following key judgements in applying the accounting policies:
(i)Loan book impairments
Significant increase in credit risk for classification in stage 2
The Group applies both quantitative and qualitative measures to assess whether an asset has
experienced a SICR. Determining specific trigger thresholds, alongside relevant risk indicators,
involves judgement, and variations in these thresholds could materially affect the ECL
allowance. The Group continuously reviews and monitors the effectiveness of its SICR criteria,
with quantitative measures incorporating forward looking information. In addition, qualitative
triggers are applied in certain circumstances, including where a customer holds multiple loans
and linked accounts are in arrears; where the customer has exceeded their contractual term;
where there are early signs of bankruptcy or individual voluntary arrangements; where key
forbearance or impairment measures have been implemented; or where accounts are
otherwise in arrears.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates continued
(ii)IFRS 9 classification
Application of the \u2018business model\u2019 requirements under IFRS 9 requires the Group to conclude
on the business models that it operates and is a fundamental aspect in determining the
classification of the Group\u2019s financial assets.
Management assessed the intention for holding financial assets and the contractual terms of
those assets, concluding that the Group\u2019s business model is a \u2018held to collect\u2019 business model.
This conclusion was reached on the basis that the Group originates and purchases loans and
advances with the intention to collect contractual cash flows over the life of the originated or
purchased financial instrument. The Group considered recent transactions leading to the
derecognition of mortgages (see note 6) and concluded that the size and frequency of such
transactions did not affect the Group\u2019s overall business model.
The Group considers whether the contractual terms of a financial asset give rise on specified
dates to cash flows that are SPPI on the principal amount outstanding when applying the
classification criteria of IFRS 9. The majority of the Group\u2019s assets being loans and advances
to customers which have been accounted for under amortised cost with the exception of one
acquired mortgage book of \u00a311.6m (2024: \u00a312.9m) that is recognised at FVTPL.
Estimates
The Group has made the following estimates in the application of the accounting policies that
have a significant risk of material adjustment to the carrying amount of assets and liabilities
within the next financial year:
(i)Loan book impairments
Set out below are details of the critical accounting estimates which underpin loan impairment
calculations, with only those that may result in a material impact over the next 12 months
being disclosed. The Group has recognised total impairments of \u00a3123.6m (2024: \u00a3 126.9m) at
the reporting date as disclosed in note 20.
Modelled impairment
Modelled provision assessments are also subject to estimation uncertainty, underpinned by\u00a0a
number of estimates being made by management which are utilised within impairment
calculations. Key areas of estimation within modelled provisioning calculations include those
regarding PD, LGD and forward-looking macroeconomic scenarios.
Probability of default model
The Group has a number of PD models, which include estimates regarding scorecards, survival
rates, prepayment rates and lifetime curves. The PD is sensitive to the application of
unemployment rates, with an uplift of the unemployment rate by 1% seen as a reasonable
change when reviewing historical and expected 12-month outcomes. The table below shows
the resulting incremental provision required in a 1% uplift in unemployment rate (2024: an 1%
uplift in unemployment rate) applied to all scenarios in perpetuity.
2025
2024
\u00a3m
\u00a3m
OSB
11.5
6.5
CCFS
1.3
2.0
Group
12.8
8.5
The Group\u2019s forecasts of unemployment rates used in the impairment models are disclosed in
the Risk profile performance review on page 62.
Loss given default model
The Group has a number of LGD models, which include estimates regarding propensity to go
to possession given default (PPD), forced sale discount, time to sale and sale costs. The LGD is
sensitive to the application of the HPI, with an 8% haircut (2024: an 8% haircut) seen to be a
reasonable downside movement within observed market volatility and is broadly consistent
with adverse but plausible macroeconomic conditions. The table below shows the resulting
incremental provision required in an 8% house price haircut (2024: an 8% house price haircut)
being directly applied to all exposures at 31 December 2025 which not only adjust the sale
discount but also the propensity to go to possession.
2025
2024
\u00a3m
\u00a3m
OSB
19.3
22.3
CCFS
5.8
9.1
Group
25.1
31.4
The Group\u2019s forecasts of HPI movements used in the impairment models are disclosed in the
Risk profile performance review on page 62.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates continued
Forward-looking macroeconomic scenarios
The forward-looking macroeconomic scenarios affect all model components of the ECL thus
the calculation remains sensitive to both the scenarios utilised and their associated
probability\u00a0weightings.
The Group has adopted an approach which utilises four macroeconomic scenarios.
These\u00a0scenarios are provided by a reputable economics advisory firm, providing management
and the Board with advice on which scenarios to utilise and the probability weightings to
attach to each scenario. A base case forecast is provided, together with a plausible upside
scenario. Two downside scenarios are also provided (downside and a severe downside). The
Group\u2019s macroeconomic scenarios can be found on page 62.
The following tables detail the ECL scenario sensitivity analysis with each scenario weighted at
100% probability. The sensitivity analysis is performed without considering the staging shifts
driven by relative or absolute PD thresholds. The purpose of using multiple economic scenarios
is to model the non-linear impact of assumptions surrounding macroeconomic factors and
incorporate them into the ECL calculation:
As at 31 December 2025
Weighted (see
note 20)
100% Base
case scenario
100% Upside
scenario
100%
Downside
scenario
100% Severe
downside
scenario
Total loans before provisions, \u00a3m
26,032.6
26,032.6
26,032.6
26,032.6
26,032.6
Modelled ECL, \u00a3m
74.6
56.8
48.4
98.8
176.4
Individually assessed provisions
ECL, \u00a3m
44.3
44.3
44.3
44.3
44.3
Post model adjustments ECL, \u00a3m
4.7
3.8
3.2
5.9
10.3
Total ECL, \u00a3m
123.6
104.9
95.9
149.0
231.0
ECL coverage, %
0.47
0.40
0.37
0.57
0.89
As at 31 December 2024
Weighted (see
note 20)
100% Base
case
scenario
100%
Upside
scenario
100%
Downside
scenario
100% Severe
downside
scenario
Total loans before provisions, \u00a3m
25,240.3
25,240.3
25,240.3
25,240.3
25,240.3
Modelled ECL, \u00a3m
79.6
63.6
53.2
114.5
153.0
Individually assessed provisions ECL,
\u00a3m
37.6
37.6
37.6
37.6
37.6
Post model adjustments ECL, \u00a3m
9.7
7.2
4.3
15.9
23.5
Total ECL, \u00a3m
126.9
108.4
95.1
168.0
214.1
ECL coverage, %
0.50
0.43
0.38
0.67
0.85
The Group\u2019s assessment of ECL primarily focuses on scenarios where economic distress is
driven by weak demand. These scenarios typically involve low inflation accompanied by falling
interest rates.
While the Group acknowledges that economic distress can also stem from supply-side shocks
(characterised by high inflation and rising interest rates), the analysis suggested that the
impact of such scenarios on the ECL calculation is not currently significant. The Group will
continue to monitor the potential impact of supply-driven shocks on ECL and will incorporate
these considerations if they become material in future reporting periods.
(ii)Effective interest rate on lending
Estimates are made when calculating the EIR for loan assets. These include the likely customer
redemption profiles. Mortgage products offered by the Group include directly attributable net
fee income and a period on reversion rates after the fixed/discount period.
Products revert to the standard variable rate (SVR) or base rate plus a margin for the Kent
Reliance (OSB) brand, a SONIA/Base rate plus a margin for the Precise (CCFS) brand and a
LIBOR replacement rate/base rate for the InterBay brand. Subsequent to origination, changes
in actual and expected customer prepayment rates are reflected as increases or decreases in
the carrying value of loan assets with a corresponding increase or decrease in interest income.
The Group uses historical customer behaviours, expected take-up rate of retention products
and macroeconomic forecasts in its assessment of expected prepayment rates. Customer
prepayments in a fixed rate or incentive period can give rise to Early Repayment Charge
(ERC)\u00a0income.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates continued
Judgement is used in estimating the expected average life of a mortgage, to determine the
quantum and timing of redemptions that incur ERCs, the period over which net fee income is
recognised and the length of time customers spend on reversion after the fixed/discounted
period. Estimates are reviewed regularly and during 2025, the Group made small adjustments
to the average time on reversion reflecting latest observed behaviour. An additional adjustment
related to the intra-month recognition of received cash flows had the effect of removing 0.3
months in the average time spent in reversion across the Group\u2019s portfolios. The adverse EIR
adjustment for 2025 was \u00a310.5m (31 December 2024: adverse EIR adjustment of \u00a315.9m) which
reduced net interest income and loans and advances to customers.
The impact of a -/+ two months movement in time spent on reversion by Precise customers is -/
+ \u00a317.7m. \u00a313.9m of this total sensitivity relates to the \u00a32.5bn of loans with product terms
issued up to the end of 2022. These loans are from the annual cohorts identified as having
been written in a low-rate environment. The remaining \u00a33.8m sensitivity relates to the \u00a36.9bn in
loans with product terms issued from 2023 onwards, written in a higher-rate environment,
where the step-up in reversion is smaller.
As base rate increased throughout 2022 and 2023, using the EIR approach resulted in
additional monthly net interest income as the benefit of time spent on a reversion rate became
greater. Forward rates are used in the EIR calculation and a decrease greater than the current\u00a0
forward rate assumptions leads to a decrease in monthly net interest income. Based on the
loans and advances to customers, balance as at 31 December 2025, if there was a 50bps
parallel shift downwards in the forward curve, it is estimated that this would decrease monthly
interest income by \u00a31.3m across all mortgage portfolios.
Structured entities
The structured entities consolidated within the Group at 31 December 2025 were Canterbury
Finance No.2 plc, Canterbury Finance No.3 plc, Canterbury Finance No.4 plc, Canterbury
Finance No.5 plc, CMF 2023-1 plc, CMF 2024-1 plc, PMF 2024-1 plc, CMF 2025-1 plc and CSC
Shelf 2025-1 plc. These entities hold legal title to a pool of mortgages which are used as a
security for issued debt. The transfer of mortgages fails derecognition criteria because the
Group retained the subordinated notes and residual certificates issued and as such did not
transfer substantially the risks and rewards of ownership of the securitised mortgages.
Therefore, the Group is exposed to credit, interest rate and other risks on the securitised
mortgages.
Cash flows generated from the structured entities are ring-fenced and are used to pay interest
and principal of the issued debt securities in a waterfall order according to the seniority of the
bonds. The structured entities are self-funded and the Group is not contractually or
constructively obliged to provide further liquidity or financial support.
The structured entities consolidated within the Group at 31 December 2024 were Canterbury
Finance No.2 plc, Canterbury Finance No.3 plc, Canterbury Finance No.4 plc, Canterbury
Finance No.5 plc, CMF 2020-1 plc, CMF 2023-1 plc, Keys Warehouse No.1 Limited, CMF
2024-1 plc and PMF 2024-1 plc.
Unconsolidated structured entities
Structured entities, which were sponsored by the Group comprise Precise Mortgage Funding
2019-1B plc, Precise Mortgage Funding 2020-1B plc, PMF\u00a02024-2 plc and Rochester Financing
No.3 plc.
The structured entities are considered sponsored by the Group if any of the following
conditions are met:
\u2022 the Group had a key role in establishing the entity;
\u2022 the Group transferred assets to the entity;
\u2022 the entity\u2019s name includes a reference to the Group; or
\u2022 the Group provides guarantees on the entity\u2019s performance.
These structured entities are not consolidated by the Group, as the Group does not control the
entities and is not exposed to the risks and rewards of ownership from the securitised
mortgages. The Group has no contractual arrangements with the unconsolidated structured
entities other than the investments disclosed in note 16 and servicing the structured entities\u2019
mortgage portfolios.
The Group has not provided any support to the unconsolidated structured entities listed and
has no obligation or intention to do so.
During 2025 the Group received \u00a326.2m interest income (2024: \u00a38.1m) and \u00a34.0m servicing
income (2024: \u00a32.1m) from unconsolidated structured entities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInOtherEntitiesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-435": { "value": "A full list of the Company\u2019s subsidiaries which are included in the
Group\u2019s consolidated financial statements can be found in note 2 to the Company\u2019s
financial\u00a0statements on page 251 to 252.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates
In preparing these financial statements, the Group has made judgements, estimates and
assumptions which affect the reported amounts within the current and future financial years.
Actual results may differ from these estimates.
As set out in the Strategic Report on page 95, climate change is a global challenge and an
emerging risk to businesses, people and the environment. Therefore, in preparing the financial
statements, the Group has considered the impact of climate-related risks on its financial
position and performance, including the impact on ECL and redemption profiles included in
EIR. While the effects of climate change represent a source of uncertainty, the Group does not
consider there to be a material impact on its judgements and estimates from the physical or
transition risks in the short term. As part of the Group\u2019s recognition of climate risk and overall
Environmental, Social and Governance (ESG) agenda, the Group considers the physical risks
of climate change and has retained a post-model adjustment (PMA) of \u00a31.0m (2024: \u00a30.3m) as
of 31 December 2025.
Estimates and judgements are regularly reviewed based on past experience, expectations of
future events and other factors.
Judgements
The Group has made the following key judgements in applying the accounting policies:
(i)Loan book impairments
Significant increase in credit risk for classification in stage 2
The Group applies both quantitative and qualitative measures to assess whether an asset has
experienced a SICR. Determining specific trigger thresholds, alongside relevant risk indicators,
involves judgement, and variations in these thresholds could materially affect the ECL
allowance. The Group continuously reviews and monitors the effectiveness of its SICR criteria,
with quantitative measures incorporating forward looking information. In addition, qualitative
triggers are applied in certain circumstances, including where a customer holds multiple loans
and linked accounts are in arrears; where the customer has exceeded their contractual term;
where there are early signs of bankruptcy or individual voluntary arrangements; where key
forbearance or impairment measures have been implemented; or where accounts are
otherwise in arrears.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates continued
(ii)IFRS 9 classification
Application of the \u2018business model\u2019 requirements under IFRS 9 requires the Group to conclude
on the business models that it operates and is a fundamental aspect in determining the
classification of the Group\u2019s financial assets.
Management assessed the intention for holding financial assets and the contractual terms of
those assets, concluding that the Group\u2019s business model is a \u2018held to collect\u2019 business model.
This conclusion was reached on the basis that the Group originates and purchases loans and
advances with the intention to collect contractual cash flows over the life of the originated or
purchased financial instrument. The Group considered recent transactions leading to the
derecognition of mortgages (see note 6) and concluded that the size and frequency of such
transactions did not affect the Group\u2019s overall business model.
The Group considers whether the contractual terms of a financial asset give rise on specified
dates to cash flows that are SPPI on the principal amount outstanding when applying the
classification criteria of IFRS 9. The majority of the Group\u2019s assets being loans and advances
to customers which have been accounted for under amortised cost with the exception of one
acquired mortgage book of \u00a311.6m (2024: \u00a312.9m) that is recognised at FVTPL.
Estimates
The Group has made the following estimates in the application of the accounting policies that
have a significant risk of material adjustment to the carrying amount of assets and liabilities
within the next financial year:
(i)Loan book impairments
Set out below are details of the critical accounting estimates which underpin loan impairment
calculations, with only those that may result in a material impact over the next 12 months
being disclosed. The Group has recognised total impairments of \u00a3123.6m (2024: \u00a3 126.9m) at
the reporting date as disclosed in note 20.
Modelled impairment
Modelled provision assessments are also subject to estimation uncertainty, underpinned by\u00a0a
number of estimates being made by management which are utilised within impairment
calculations. Key areas of estimation within modelled provisioning calculations include those
regarding PD, LGD and forward-looking macroeconomic scenarios.
Probability of default model
The Group has a number of PD models, which include estimates regarding scorecards, survival
rates, prepayment rates and lifetime curves. The PD is sensitive to the application of
unemployment rates, with an uplift of the unemployment rate by 1% seen as a reasonable
change when reviewing historical and expected 12-month outcomes. The table below shows
the resulting incremental provision required in a 1% uplift in unemployment rate (2024: an 1%
uplift in unemployment rate) applied to all scenarios in perpetuity.
2025
2024
\u00a3m
\u00a3m
OSB
11.5
6.5
CCFS
1.3
2.0
Group
12.8
8.5
The Group\u2019s forecasts of unemployment rates used in the impairment models are disclosed in
the Risk profile performance review on page 62.
Loss given default model
The Group has a number of LGD models, which include estimates regarding propensity to go
to possession given default (PPD), forced sale discount, time to sale and sale costs. The LGD is
sensitive to the application of the HPI, with an 8% haircut (2024: an 8% haircut) seen to be a
reasonable downside movement within observed market volatility and is broadly consistent
with adverse but plausible macroeconomic conditions. The table below shows the resulting
incremental provision required in an 8% house price haircut (2024: an 8% house price haircut)
being directly applied to all exposures at 31 December 2025 which not only adjust the sale
discount but also the propensity to go to possession.
2025
2024
\u00a3m
\u00a3m
OSB
19.3
22.3
CCFS
5.8
9.1
Group
25.1
31.4
The Group\u2019s forecasts of HPI movements used in the impairment models are disclosed in the
Risk profile performance review on page 62.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates continued
Forward-looking macroeconomic scenarios
The forward-looking macroeconomic scenarios affect all model components of the ECL thus
the calculation remains sensitive to both the scenarios utilised and their associated
probability\u00a0weightings.
The Group has adopted an approach which utilises four macroeconomic scenarios.
These\u00a0scenarios are provided by a reputable economics advisory firm, providing management
and the Board with advice on which scenarios to utilise and the probability weightings to
attach to each scenario. A base case forecast is provided, together with a plausible upside
scenario. Two downside scenarios are also provided (downside and a severe downside). The
Group\u2019s macroeconomic scenarios can be found on page 62.
The following tables detail the ECL scenario sensitivity analysis with each scenario weighted at
100% probability. The sensitivity analysis is performed without considering the staging shifts
driven by relative or absolute PD thresholds. The purpose of using multiple economic scenarios
is to model the non-linear impact of assumptions surrounding macroeconomic factors and
incorporate them into the ECL calculation:
As at 31 December 2025
Weighted (see
note 20)
100% Base
case scenario
100% Upside
scenario
100%
Downside
scenario
100% Severe
downside
scenario
Total loans before provisions, \u00a3m
26,032.6
26,032.6
26,032.6
26,032.6
26,032.6
Modelled ECL, \u00a3m
74.6
56.8
48.4
98.8
176.4
Individually assessed provisions
ECL, \u00a3m
44.3
44.3
44.3
44.3
44.3
Post model adjustments ECL, \u00a3m
4.7
3.8
3.2
5.9
10.3
Total ECL, \u00a3m
123.6
104.9
95.9
149.0
231.0
ECL coverage, %
0.47
0.40
0.37
0.57
0.89
As at 31 December 2024
Weighted (see
note 20)
100% Base
case
scenario
100%
Upside
scenario
100%
Downside
scenario
100% Severe
downside
scenario
Total loans before provisions, \u00a3m
25,240.3
25,240.3
25,240.3
25,240.3
25,240.3
Modelled ECL, \u00a3m
79.6
63.6
53.2
114.5
153.0
Individually assessed provisions ECL,
\u00a3m
37.6
37.6
37.6
37.6
37.6
Post model adjustments ECL, \u00a3m
9.7
7.2
4.3
15.9
23.5
Total ECL, \u00a3m
126.9
108.4
95.1
168.0
214.1
ECL coverage, %
0.50
0.43
0.38
0.67
0.85
The Group\u2019s assessment of ECL primarily focuses on scenarios where economic distress is
driven by weak demand. These scenarios typically involve low inflation accompanied by falling
interest rates.
While the Group acknowledges that economic distress can also stem from supply-side shocks
(characterised by high inflation and rising interest rates), the analysis suggested that the
impact of such scenarios on the ECL calculation is not currently significant. The Group will
continue to monitor the potential impact of supply-driven shocks on ECL and will incorporate
these considerations if they become material in future reporting periods.
(ii)Effective interest rate on lending
Estimates are made when calculating the EIR for loan assets. These include the likely customer
redemption profiles. Mortgage products offered by the Group include directly attributable net
fee income and a period on reversion rates after the fixed/discount period.
Products revert to the standard variable rate (SVR) or base rate plus a margin for the Kent
Reliance (OSB) brand, a SONIA/Base rate plus a margin for the Precise (CCFS) brand and a
LIBOR replacement rate/base rate for the InterBay brand. Subsequent to origination, changes
in actual and expected customer prepayment rates are reflected as increases or decreases in
the carrying value of loan assets with a corresponding increase or decrease in interest income.
The Group uses historical customer behaviours, expected take-up rate of retention products
and macroeconomic forecasts in its assessment of expected prepayment rates. Customer
prepayments in a fixed rate or incentive period can give rise to Early Repayment Charge
(ERC)\u00a0income.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates continued
Judgement is used in estimating the expected average life of a mortgage, to determine the
quantum and timing of redemptions that incur ERCs, the period over which net fee income is
recognised and the length of time customers spend on reversion after the fixed/discounted
period. Estimates are reviewed regularly and during 2025, the Group made small adjustments
to the average time on reversion reflecting latest observed behaviour. An additional adjustment
related to the intra-month recognition of received cash flows had the effect of removing 0.3
months in the average time spent in reversion across the Group\u2019s portfolios. The adverse EIR
adjustment for 2025 was \u00a310.5m (31 December 2024: adverse EIR adjustment of \u00a315.9m) which
reduced net interest income and loans and advances to customers.
The impact of a -/+ two months movement in time spent on reversion by Precise customers is -/
+ \u00a317.7m. \u00a313.9m of this total sensitivity relates to the \u00a32.5bn of loans with product terms
issued up to the end of 2022. These loans are from the annual cohorts identified as having
been written in a low-rate environment. The remaining \u00a33.8m sensitivity relates to the \u00a36.9bn in
loans with product terms issued from 2023 onwards, written in a higher-rate environment,
where the step-up in reversion is smaller.
As base rate increased throughout 2022 and 2023, using the EIR approach resulted in
additional monthly net interest income as the benefit of time spent on a reversion rate became
greater. Forward rates are used in the EIR calculation and a decrease greater than the current\u00a0
forward rate assumptions leads to a decrease in monthly net interest income. Based on the
loans and advances to customers, balance as at 31 December 2025, if there was a 50bps
parallel shift downwards in the forward curve, it is estimated that this would decrease monthly
interest income by \u00a31.3m across all mortgage portfolios.
", "dimensions": { "concept": "ifrs-full:DisclosureOfSignificantInvestmentsInSubsidiariesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-437": { "value": "
(d)Foreign currency translation
The financial statements of each of the Company\u2019s subsidiaries are measured using the
currency of the primary economic environment in which the subsidiary operates (the
functional currency). Foreign currency transactions are translated into the functional
currencies using the exchange rates prevailing at the date of the transactions. Monetary items
denominated in\u00a0foreign currencies are retranslated at the rate prevailing at the period end.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForForeignCurrencyTranslationExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-438": { "value": "
(e)Segmental reporting
IFRS 8 requires operating segments to be identified on the basis of internal reports and
components of the Group which are regularly reviewed by the chief operating decision maker
to allocate resources to segments and to assess their performance. For this purpose, the chief
operating decision maker of the Group is the Board of Directors.
The Group provides loans, asset finance and retail deposits within the UK.\u00a0
The Group segments its lending business and operates under two segments:
\u2022 OneSavings Bank (OSB)
\u2022 Charter Court Financial Services (CCFS)
The Group has disclosed relevant risk management tables in note 41 at a sub-segment level to
provide detailed analysis of the Group\u2019s core lending business.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSegmentReportingExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-439": { "value": "The Group provides loans, asset finance and retail deposits within the UK.\u00a0 The Group segments its lending business and operates under two segments: \u2022 OneSavings Bank (OSB)\u2022 Charter Court Financial Services (CCFS)", "dimensions": { "concept": "ifrs-full:DescriptionOfNatureOfEntitysOperationsAndPrincipalActivities", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-440": { "value": "
(f)Interest income and expense
Interest income and interest expense for all interest-bearing financial instruments measured at
amortised cost and FVOCI is recognised in profit or loss using the effective interest rate (EIR)
method. The EIR is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial asset or financial liability to the gross carrying
amount of a financial asset or to the amortised cost of a financial liability.
Interest income on financial assets categorised as stage 1 or 2 is recognised on a gross basis,
with interest income on stage 3 assets recognised net of expected credit losses (ECL).
For purchased or originated credit-impaired assets (see note 1 (m) (vii)), interest income is
calculated by applying the credit-adjusted EIR to the amortised cost of the asset. The
calculation of interest income does not revert to a gross basis even if the credit risk of the asset
improves. See note 1 (m) (vii) for further information on IFRS 9 stage classifications.
When calculating the EIR, the Group estimates cash flows considering all contractual terms of
the instrument and behavioural aspects (for example, prepayment options) but not
considering future credit losses. The calculation of the EIR includes transaction costs and fees
paid or received that are an integral part of the interest rate, together with the discounts or
premiums arising on the acquisition of loan portfolios. Transaction costs include incremental
costs that are directly attributable to the acquisition or issue of a financial instrument.\u2003
The Group monitors the actual cash flows for each portfolio and resets cash flows on a
monthly basis, discounted at the EIR to derive a new carrying value, with changes taken
to\u00a0profit or loss as interest income.
The EIR is adjusted where there is a movement in the expected reference interest rate (Sterling
Overnight Index Average (SONIA), synthetic London Interbank Offered Rate (LIBOR) or base
rate) affecting portfolios with a variable interest rate which will impact future cash flows. The
revised EIR is the rate which exactly discounts the revised cash flows to the gross carrying
value of the loan portfolio.
Interest income on investment securities is included in interest receivable and similar income.
Interest on derivatives is included in interest receivable and similar income or interest expense
and similar charges following the underlying instrument it is hedging.
Coupons paid on AT1 securities are recognised directly in equity in the period in which they are paid.
(g)Fees and commissions
Fees and commissions which are an integral part of the EIR of a financial instrument are
recognised as an adjustment to the EIR and recorded in interest income. The Group includes
early redemption charges within the EIR.
Fees received on mortgage administration services and mortgage origination activities, which
are not an integral part of the EIR, are recorded in other operating income and accounted for
in accordance with IFRS 15 Revenue from Contracts with Customers, with income recognised
when the services are delivered and the benefits are transferred to clients and customers.
1.Accounting policies continued
Other fees and commissions are recognised on the accrual basis as services are provided or on
the performance of a significant act, net of value added tax (VAT) and similar taxes.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRecognitionOfRevenue", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-443": { "value": "
(f)Interest income and expense
Interest income and interest expense for all interest-bearing financial instruments measured at
amortised cost and FVOCI is recognised in profit or loss using the effective interest rate (EIR)
method. The EIR is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial asset or financial liability to the gross carrying
amount of a financial asset or to the amortised cost of a financial liability.
Interest income on financial assets categorised as stage 1 or 2 is recognised on a gross basis,
with interest income on stage 3 assets recognised net of expected credit losses (ECL).
For purchased or originated credit-impaired assets (see note 1 (m) (vii)), interest income is
calculated by applying the credit-adjusted EIR to the amortised cost of the asset. The
calculation of interest income does not revert to a gross basis even if the credit risk of the asset
improves. See note 1 (m) (vii) for further information on IFRS 9 stage classifications.
When calculating the EIR, the Group estimates cash flows considering all contractual terms of
the instrument and behavioural aspects (for example, prepayment options) but not
considering future credit losses. The calculation of the EIR includes transaction costs and fees
paid or received that are an integral part of the interest rate, together with the discounts or
premiums arising on the acquisition of loan portfolios. Transaction costs include incremental
costs that are directly attributable to the acquisition or issue of a financial instrument.\u2003
The Group monitors the actual cash flows for each portfolio and resets cash flows on a
monthly basis, discounted at the EIR to derive a new carrying value, with changes taken
to\u00a0profit or loss as interest income.
The EIR is adjusted where there is a movement in the expected reference interest rate (Sterling
Overnight Index Average (SONIA), synthetic London Interbank Offered Rate (LIBOR) or base
rate) affecting portfolios with a variable interest rate which will impact future cash flows. The
revised EIR is the rate which exactly discounts the revised cash flows to the gross carrying
value of the loan portfolio.
Interest income on investment securities is included in interest receivable and similar income.
Interest on derivatives is included in interest receivable and similar income or interest expense
and similar charges following the underlying instrument it is hedging.
Coupons paid on AT1 securities are recognised directly in equity in the period in which they are paid.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInterestIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-442": { "value": "
(f)Interest income and expense
Interest income and interest expense for all interest-bearing financial instruments measured at
amortised cost and FVOCI is recognised in profit or loss using the effective interest rate (EIR)
method. The EIR is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial asset or financial liability to the gross carrying
amount of a financial asset or to the amortised cost of a financial liability.
Interest income on financial assets categorised as stage 1 or 2 is recognised on a gross basis,
with interest income on stage 3 assets recognised net of expected credit losses (ECL).
For purchased or originated credit-impaired assets (see note 1 (m) (vii)), interest income is
calculated by applying the credit-adjusted EIR to the amortised cost of the asset. The
calculation of interest income does not revert to a gross basis even if the credit risk of the asset
improves. See note 1 (m) (vii) for further information on IFRS 9 stage classifications.
When calculating the EIR, the Group estimates cash flows considering all contractual terms of
the instrument and behavioural aspects (for example, prepayment options) but not
considering future credit losses. The calculation of the EIR includes transaction costs and fees
paid or received that are an integral part of the interest rate, together with the discounts or
premiums arising on the acquisition of loan portfolios. Transaction costs include incremental
costs that are directly attributable to the acquisition or issue of a financial instrument.\u2003
The Group monitors the actual cash flows for each portfolio and resets cash flows on a
monthly basis, discounted at the EIR to derive a new carrying value, with changes taken
to\u00a0profit or loss as interest income.
The EIR is adjusted where there is a movement in the expected reference interest rate (Sterling
Overnight Index Average (SONIA), synthetic London Interbank Offered Rate (LIBOR) or base
rate) affecting portfolios with a variable interest rate which will impact future cash flows. The
revised EIR is the rate which exactly discounts the revised cash flows to the gross carrying
value of the loan portfolio.
Interest income on investment securities is included in interest receivable and similar income.
Interest on derivatives is included in interest receivable and similar income or interest expense
and similar charges following the underlying instrument it is hedging.
Coupons paid on AT1 securities are recognised directly in equity in the period in which they are paid.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceCostsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-441": { "value": "
(f)Interest income and expense
Interest income and interest expense for all interest-bearing financial instruments measured at
amortised cost and FVOCI is recognised in profit or loss using the effective interest rate (EIR)
method. The EIR is the rate that exactly discounts estimated future cash payments or receipts
through the expected life of the financial asset or financial liability to the gross carrying
amount of a financial asset or to the amortised cost of a financial liability.
Interest income on financial assets categorised as stage 1 or 2 is recognised on a gross basis,
with interest income on stage 3 assets recognised net of expected credit losses (ECL).
For purchased or originated credit-impaired assets (see note 1 (m) (vii)), interest income is
calculated by applying the credit-adjusted EIR to the amortised cost of the asset. The
calculation of interest income does not revert to a gross basis even if the credit risk of the asset
improves. See note 1 (m) (vii) for further information on IFRS 9 stage classifications.
When calculating the EIR, the Group estimates cash flows considering all contractual terms of
the instrument and behavioural aspects (for example, prepayment options) but not
considering future credit losses. The calculation of the EIR includes transaction costs and fees
paid or received that are an integral part of the interest rate, together with the discounts or
premiums arising on the acquisition of loan portfolios. Transaction costs include incremental
costs that are directly attributable to the acquisition or issue of a financial instrument.\u2003
The Group monitors the actual cash flows for each portfolio and resets cash flows on a
monthly basis, discounted at the EIR to derive a new carrying value, with changes taken
to\u00a0profit or loss as interest income.
The EIR is adjusted where there is a movement in the expected reference interest rate (Sterling
Overnight Index Average (SONIA), synthetic London Interbank Offered Rate (LIBOR) or base
rate) affecting portfolios with a variable interest rate which will impact future cash flows. The
revised EIR is the rate which exactly discounts the revised cash flows to the gross carrying
value of the loan portfolio.
Interest income on investment securities is included in interest receivable and similar income.
Interest on derivatives is included in interest receivable and similar income or interest expense
and similar charges following the underlying instrument it is hedging.
Coupons paid on AT1 securities are recognised directly in equity in the period in which they are paid.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinanceIncomeAndCostsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-444": { "value": "
(g)Fees and commissions
Fees and commissions which are an integral part of the EIR of a financial instrument are
recognised as an adjustment to the EIR and recorded in interest income. The Group includes
early redemption charges within the EIR.
Fees received on mortgage administration services and mortgage origination activities, which
are not an integral part of the EIR, are recorded in other operating income and accounted for
in accordance with IFRS 15 Revenue from Contracts with Customers, with income recognised
when the services are delivered and the benefits are transferred to clients and customers.
1.Accounting policies continued
Other fees and commissions are recognised on the accrual basis as services are provided or on
the performance of a significant act, net of value added tax (VAT) and similar taxes.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFeeAndCommissionIncomeAndExpenseExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-446": { "value": "
(h)Taxation
Income tax comprises current and deferred tax. It is recognised in profit or loss, other
comprehensive income (OCI) or directly in equity, consistent with the recognition of items it
relates to. The Group recognises tax on coupons paid on AT1 securities directly in profit or loss.
Deferred tax assets are recognised only to the extent that it is probable that future taxable
profits will be available to utilise the asset. The recognition of deferred tax asset is mainly
dependent on the projections of future taxable profits and future reversals of temporary
differences. The current projections of future taxable income indicate that the Group will
be\u00a0able to utilise its deferred tax asset within the foreseeable future.
Deferred tax liabilities are recognised for all taxable temporary differences.
The Company and its tax-paying UK subsidiaries are in a group payment arrangement for
corporation tax and show a net corporation tax liability and deferred tax liability accordingly.
The Company and its UK subsidiaries are in the same VAT group.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDeferredIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-445": { "value": "
(h)Taxation
Income tax comprises current and deferred tax. It is recognised in profit or loss, other
comprehensive income (OCI) or directly in equity, consistent with the recognition of items it
relates to. The Group recognises tax on coupons paid on AT1 securities directly in profit or loss.
Deferred tax assets are recognised only to the extent that it is probable that future taxable
profits will be available to utilise the asset. The recognition of deferred tax asset is mainly
dependent on the projections of future taxable profits and future reversals of temporary
differences. The current projections of future taxable income indicate that the Group will
be\u00a0able to utilise its deferred tax asset within the foreseeable future.
Deferred tax liabilities are recognised for all taxable temporary differences.
The Company and its tax-paying UK subsidiaries are in a group payment arrangement for
corporation tax and show a net corporation tax liability and deferred tax liability accordingly.
The Company and its UK subsidiaries are in the same VAT group.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-447": { "value": "
(i)Dividends
Dividends are recognised in equity in the period in which they are paid or, if earlier, approved
by shareholders.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDividendsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-449": { "value": "
(j)Cash and cash equivalents
For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents
comprise cash, non-restricted balances with credit institutions and highly liquid financial
assets with original maturities of less than three months from date of acquisition, subject to an
insignificant risk of changes in their fair value and are used by the Group in the
management\u00a0of its short-term commitments.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyToDetermineComponentsOfCashAndCashEquivalents", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-448": { "value": "
(j)Cash and cash equivalents
For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents
comprise cash, non-restricted balances with credit institutions and highly liquid financial
assets with original maturities of less than three months from date of acquisition, subject to an
insignificant risk of changes in their fair value and are used by the Group in the
management\u00a0of its short-term commitments.
(m)Financial instruments
i.Recognition
The Group initially recognises loans and advances, deposits, debt securities issued, senior
notes and subordinated debt liabilities on the date on which they are originated or acquired.
All\u00a0other financial instruments are accounted for on the trade date which is when the
Group\u00a0becomes a party to the contractual provisions of the instrument.
For financial instruments classified as amortised cost or FVOCI, the Group initially recognises
financial assets and financial liabilities at fair value plus transaction income or costs that are
directly attributable to its origination, acquisition or issue. Financial instruments classified as
amortised cost are subsequently measured using the EIR method.
Transaction costs directly attributable to the acquisition or issue of a financial instrument
at\u00a0FVTPL are recognised in profit or loss as incurred.
ii.Classification
The Group classifies financial instruments based on the business model and the contractual
cash flow characteristics of the financial instruments. In accordance with IFRS 9, the Group
classifies financial assets into one of three measurement categories:
\u2022 Amortised cost \u2013 assets in a business model to hold financial assets in order to collect
contractual cash flows, where the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest (SPPI)
on\u00a0the\u00a0principal amount outstanding.
\u2022 FVOCI \u2013 assets held in a business model which collects contractual cash flows and sells
financial assets, where the contractual terms of the financial assets give rise on specified
dates to cash flows that are SPPI on the principal amount outstanding.
\u2022 FVTPL \u2013 assets not measured at amortised cost or FVOCI. The Group measures derivatives,
an acquired mortgage portfolio and some investment securities under this category.
The Group reassesses its business models each reporting period.
The Group classifies non-derivative financial liabilities as measured at amortised cost.
The Group classifies certain financial instruments as equity where they meet the following
conditions:
\u2022 the financial instrument includes no contractual obligation to deliver cash or another
financial asset on potentially unfavourable conditions;
\u2022 the financial instrument is a non-derivative that includes no contractual obligation for the
issuer to deliver a variable number of its own equity instruments; or
\u2022 the financial instrument is a derivative that will be settled only by the issuer exchanging a
fixed amount of cash or another financial asset for a fixed number of its own
equity\u00a0instruments.
The Group\u2019s sources of debt funding are deposits from retail customers and credit institutions,
including collateralised loan advances from the Bank of England (BoE) under the Term Funding
Scheme with additional incentives for SMEs (TFSME) and Indexed Long-Term Repo (ILTR),
asset-backed loan notes issued through the Group\u2019s securitisation programmes, subordinated
debt liabilities and senior notes. Cash received under the TFSME is recorded in amounts owed
to credit institutions. Financial liabilities, including Tier 2 instruments, are classified as such
where the terms allow no absolute discretion\u00a0over the payment of interest.
During the year equity financial instruments comprised own shares and AT1 securities. AT1
securities are designated as equity instruments and recognised at fair value on the date of
issuance in equity along with incremental costs directly attributable to the issuance of equity
instruments. Accordingly, the coupons paid on AT1 securities are recognised directly in
retained earnings when paid.
iii.Derecognition
The Group offers refinancing options to customers at which point the original mortgage asset
is derecognised and a new financial asset is recognised.
The forbearance measures offered by the Group are considered a modification event as the
contractual cash flows are renegotiated or otherwise modified. The Group considers the
renegotiated or modified cash flows are not a substantial modification from the contractual
cash flows and does not consider that forbearance measures give rise to a derecognition
event.
Securitisations lead to derecognition of the associated mortgage pool where the Group
transfers its right to receive cash flows from the mortgages or assumes an obligation to pay
these cash flows to a third party in a qualifying \u2018pass-through arrangement\u2019 and transfers
substantially all the risks and rewards of ownership of the pool to a third party. In assessing
this latter point, the Group compares its exposure to variability on any retained investment in
the securitisation structure to that on the underlying mortgages.
Financial liabilities are derecognised only when the obligation is discharged, cancelled or
has\u00a0expired.
1.Accounting policies continued
iv.Offsetting
The Group\u2019s derivatives are covered by industry standard master netting agreements.
Master\u00a0netting agreements create a right of set-off that becomes enforceable only following
a\u00a0specified event of default or in other circumstances not expected to arise in the normal
course of business. These arrangements do not qualify for offsetting and as such the Group
reports derivatives on a gross basis.
Collateral in respect of derivatives is subject to the standard industry terms of International
Swaps and Derivatives Association (ISDA) Credit Support Annex. This means that the cash
received or given as collateral can be pledged or used during the term of the transaction but
must be returned on maturity of the transaction. The terms also give each counterparty the
right to terminate the related transactions upon the counterparty\u2019s failure to post collateral.
Collateral paid or received does not qualify for offsetting and is recognised in loans and
advances to credit institutions and amounts owed to credit institutions, respectively.
v.Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount at which the financial
asset or financial liability is measured at initial recognition, less principal payments or receipts,
plus or minus the cumulative amortisation using the EIR method of any difference between the
initial amount recognised and the maturity amount, minus any reduction for impairment
of\u00a0assets.
vi.Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or,
in its absence, the most advantageous market to which the Group has access at that date.
When available, the Group measures the fair value of an instrument using the quoted price in
an active market for that instrument. A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume to provide pricing information
on an ongoing basis. The Group measures its investment securities at fair value using quoted
market prices where available.
If there is no quoted price in an active market, then the Group uses valuation techniques that
maximise the use of relevant observable inputs and minimise the use of unobservable inputs.
The Group uses SONIA curves to value its derivatives. The fair value of the Group\u2019s derivative
financial instruments incorporates credit valuation adjustments (CVA) and debit valuation
adjustments (DVA). The DVA and CVA take into account the respective credit ratings of the
Group\u2019s two banking entities and counterparty and whether the derivative is collateralised
or\u00a0not. Derivatives are valued using discounted cash flow models and observable market
data\u00a0and are sensitive to benchmark interest and basis rate curves.
vii.Identification and measurement of impairment of financial assets
The Group assesses all financial assets for impairment.
Loans and advances to customers
The Group uses the IFRS 9 three-stage ECL approach for measuring impairment. The three
impairment stages are as follows:
\u2022 Stage 1 \u2013 a 12-month ECL allowance is recognised where there is no significant increase in
credit risk (SICR) since initial recognition.
\u2022 Stage 2 \u2013 a lifetime ECL allowance is recognised for assets where a SICR is identified since
initial recognition. The assessment of whether credit risk has increased significantly since
initial recognition is performed for each reporting period for the life of the loan.
\u2022 Stage 3 \u2013 requires objective evidence that an asset is credit impaired, at which point a
lifetime ECL allowance is recognised.
The Group measures impairment through the use of individual and modelled assessments.
Individual assessment
The Group\u2019s provisioning process requires individual assessment for high exposure or higher
risk loans, where Law of Property Act (LPA) receivers have been appointed, the property is
taken into possession or there are other events that suggest a high probability of credit loss.
The individual assessments are carried out for all the loans associated with one counterparty.
The Group estimates cash flows from these loans, including expected interest and principal
payments, rental or sale proceeds, selling and other costs.
For all individually assessed loans, should the present value of estimated future cash flows
discounted at the original EIR be less than the carrying value of the loan, a provision is
recognised for the difference with such loans being classified as impaired. However, should the
present value of the estimated future cash flows exceed the carrying value, no provision
is\u00a0recognised.
Additionally the Group applies a modelled assessment to all loans and under certain statuses
the greater of the modelled and individually assessed provision requirement is applied.
IFRS 9 modelled impairment
Measurement of ECL
The assessment of credit risk and the estimation of ECL are unbiased and probability
weighted. The ECL calculation is a product of an individual loan\u2019s probability of default (PD),
exposure at default (EAD) and loss given default (LGD) discounted at the EIR. The ECL drivers
of PD, EAD and LGD are modelled at an account level. The assessment of whether a SICR has
occurred is based on quantitative relative and absolute PD thresholds and a suite of qualitative
triggers.
1.Accounting policies continued
Significant increase in credit risk (movement to stage 2)
The Group\u2019s transfer criteria determine what constitutes a SICR, which results in an exposure
being moved from stage 1 to stage 2.
At the point of initial recognition, a loan is assigned a PD estimate. For each monthly reporting
date thereafter, an updated PD estimate is computed. The Group\u2019s transfer criteria analyse
relative and absolute changes in PD versus the PD assigned at the point of origination,
together with qualitative triggers using both internal indicators, such as forbearance and
external information, such as changes in income and adverse credit information to assess for
SICR. In the event that given early warning triggers have not already identified SICR, an
account more than 30 days past due is\u00a0considered to have experienced a SICR.
A borrower will move back into stage 1 only if the SICR definition is no longer triggered.
Definition of default (movement to stage 3)
The Group uses a number of quantitative and qualitative criteria to determine whether an
account meets the definition of default and therefore moves to stage 3. The criteria
currently\u00a0include:
\u2022 If an account is more than 90 days past due.
\u2022 Accounts triggering an unlikeliness to pay indicator, which include possession, distressed
restructuring forbearance, and internal behavioural alerts such as default within a
borrower\u2019s broader relationship with the bank or external behavioural alerts such as
bankruptcy or individual voluntary arrangement (IVA).
A borrower will move out of stage 3 when its credit risk improves such that it no longer meets
the 90 days past due and unlikeliness to pay criteria and following this has completed an
internally approved 12-month probation period. The borrower will move to stage 1 or stage
2\u00a0dependent on whether the SICR applies.
Forward-looking macroeconomic scenarios
The risk of default and ECL assessments take into consideration the expectations of economic
changes that are deemed to be reasonably possible.
The Group conducts analysis to determine the most significant factors which may influence
the likelihood of an exposure defaulting in the future. The macroeconomic factors relate to
the\u00a0House Price Index (HPI), unemployment rate (UR), Consumer Price Index (CPI), Gross
Domestic Product (GDP), Commercial Real Estate Index (CRE) and the BoE Base Rate (BBR).
The Group has developed an approach for factoring probability-weighted macroeconomic
forecasts into ECL calculations, adjusting PD and LGD estimates. The macroeconomic
scenarios feed directly into the ECL calculation, as the adjusted PD and LGD estimates are
used within the individual account ECL allowance calculations.
The Group sources economic forecast information from an appropriately qualified third party
when determining scenarios. The Group considers four probability-weighted scenarios, being
base, upside, downside and severe downside scenarios. The expected scenarios, management
actions and results are discussed and approved by the Board.
The base case is also utilised within the Group\u2019s impairment forecasting process which in turn
feeds the wider business planning processes. The ECL models are also used to set the Group\u2019s
credit risk appetite thresholds and limits.
Period over which ECL is measured
The ECL is measured from the initial recognition of the asset which is the date at which the
loan is originated or the date a loan is purchased and at each balance sheet date thereafter.
The maximum period considered when measuring ECL (either 12 months or lifetime ECL) is the
maximum contractual period over which the Group is exposed to the credit risk of the asset.
For modelling purposes, the Group considers the contractual maturity of the loan product
and\u00a0then considers the behavioural trends of the asset.
Purchased or originated credit impaired (POCI)
Acquired loans that meet the Group\u2019s definition of default (90 days past due or an unlikely
to\u00a0pay position) at acquisition are treated as POCI assets. These assets attract a lifetime ECL
allowance over the full term of the loan, even when these loans no longer meet the definition
of\u00a0default post-acquisition. The Group does not originate credit-impaired loans.
Write-off
Loans are written off against the related provision when the underlying security is sold and
there is a shortfall amount remaining. Subsequent recoveries of amounts previously written off
are taken through profit and loss. Accounts that are derecognised for accounting purposes will
continue to be serviced and corresponding collection procedures are only discontinued
following approval from the Group Chief Credit Officer.
Intercompany loans
Intercompany receivables in the Company financial statements are assessed for ECL based on
an assessment of the PD and LGD, discounted to a net present value.
Other financial assets
Other financial assets comprise cash balances with the BoE and other credit institutions and
high-grade investment securities. The Group deems the likelihood of default across these
counterparties as low and does not recognise a provision against the carrying balances.
Share repurchase
Upon Board authorisation of a share repurchase programme and signing an irrevocable
agreement, a share repurchase liability is recognised in other liabilities with the offset in
retained earnings. Each share repurchase reduces the provision. Upon share cancellation,
share capital is debited with a credit to the capital redemption reserve equal to the nominal
value of \u00a30.01 for each share cancelled.
1.Accounting policies continued
(n)Loans and advances to customers
Loans and advances to customers are predominantly mortgage loans and advances to
customers with fixed or determinable payments that are not quoted in an active market and
that the Group does not intend to sell in the near term. They are initially recorded at fair value
plus any directly attributable transaction costs and are subsequently measured at amortised
cost using the EIR method, less impairment losses. Where exposures are hedged by derivatives,
designated and qualifying as fair value hedges, the fair value adjustment for the hedged risk
to the carrying value of the hedged loans and advances is reported in fair value adjustments
for hedged assets.
Loans and the related provision are written off when there is a shortfall remaining after the
underlying security is sold. Subsequent recoveries of amounts previously written off are taken
through profit or loss.
Loans and advances to customers over which the Group transfers its rights to the collateral
thereon to the BoE under the TFSME and ILTR schemes are not derecognised from the
Consolidated Statement of Financial Position, as the Group retains substantially all the risks
and rewards of ownership, including all cash flows arising from the loans and advances and
exposure to credit risk. The Group classifies the loans and advances at amortised cost under
IFRS 9 Financial Instruments.
Loans and advances to customers include a small acquired mortgage portfolio where the
contractual cash flows include payments that are not SPPI and as such are measured at
FVTPL.
Loans and advances to customers include the Group\u2019s asset finance lease lending. Finance
leases are initially measured at an amount equal to the net investment in the lease, using the
interest rate implicit in the finance lease. Direct costs are included in the initial measurement of
the net investment in the lease and reduce the amount of income recognised over the lease
term. Finance income is recognised over the lease term, based on a pattern reflecting
a\u00a0constant periodic rate of return on the net investment in the lease.
(r)Hedge accounting
The Group has chosen to continue to apply the hedge accounting requirements of
International Accounting Standards (IAS) 39 instead of the requirements in Chapter 6 of IFRS
9. The Group uses fair value hedge accounting for a portfolio hedge of interest rate risk.
The hedging strategy of the Group is divided into portfolio hedges, where the hedged item is a
homogeneous portfolio of assets (mortgage lending or fixed rate bonds) or liabilities (savings
products), and micro hedges, where the hedged item is a distinctly identifiable asset or liability
(debt issuance). The Group applies fair value hedge accounting for both its portfolio and micro
hedges.
i.Portfolio hedges
Portfolio hedge accounting allows for hedge effectiveness testing and accounting over an
entire portfolio of financial assets or liabilities. The Group applies fair value portfolio hedge
accounting to its fixed rate portfolio of mortgages and savings accounts and to fixed rate
bonds held as a liquidity portfolio. The hedged portfolio is analysed into repricing time periods
based on expected repricing dates, utilising the Group Assets and Liabilities Committee
(ALCO) approved prepayment curve. Interest rate swaps are designated against the repricing
time periods to establish the hedge relationship.
ii.Micro hedges
The Group\u2019s micro hedging strategy entails hedge accounting on an individual instrument-by-
instrument basis, which in some instances may be implemented through partial term fair value
hedging where the instrument may be exercised early. The Group applies fair value micro
hedge accounting to manage its exposure to the interest rate risk arising from some of its fixed
rate debt issuances. Interest rate swaps are assigned to specific issuances of fixed rate notes
with terms that closely align with the hedged item.
1.Accounting policies continued
iii.Hedge effectiveness
Hedge effectiveness is calculated as a percentage of the fair value movement of the interest
rate swap against the fair value movement of the hedged item over the period tested.
The Group considers the following as key sources of hedge ineffectiveness:
\u2022 the mismatch in maturity date of the swap and hedged item, as swaps with a given
maturity date cover a portfolio of hedged items which may mature throughout the month;
\u2022 the actual behaviour of the hedged item differing from expectations, such as early
repayments or withdrawals and arrears;
\u2022 minimal movements in the yield curve leading to ineffectiveness where hedge relationships
are sensitive to small value changes; and
\u2022 the mismatch in the swap interest rate and rate used to value the hedged item where the
swap rate is higher than the contractual rate of the hedged item.
Where there is an effective hedge relationship for fair value hedges, the Group recognises the
change in fair value of each hedged item in profit or loss with the cumulative movement in their
value being shown separately in the Consolidated Statement of Financial Position as fair value
adjustments on hedged assets and liabilities. The fair value changes of both the derivative and
the hedge substantially offset each other to reduce profit volatility.
The Group discontinues hedge accounting when the derivative ceases through expiry, when
the derivative is cancelled or the underlying hedged item matures, is sold or is repaid.
If a derivative no longer meets the criteria for hedge accounting or is cancelled whilst still
effective, including LIBOR-linked derivatives cancelled as a result of Interbank Offered Rate
(IBOR) reforms, the fair value adjustment relating to the hedged assets or liabilities within the
hedge relationship prior to the derivative becoming ineffective or being cancelled remains on
the Consolidated Statement of Financial Position and is amortised over the remaining life of
the hedged assets or liabilities. The rate of amortisation over the remaining life is in line with
expected income or cost generated from the hedged assets or liabilities. Each reporting period,
the expectation is compared to actual with an accelerated run-off applied where the two
diverge by more than set parameters.
(s)Debit and credit valuation adjustments
The DVA and CVA are included in the fair value of derivative financial instruments. The DVA is
based on the expected loss a counterparty faces due to the risk of the Group\u2019s two banking
entities defaulting. The CVA reflects the Group\u2019s risk of the counterparty\u2019s default.
The methodology is based on a standard calculation, taking into account the credit rating of
the swap counterparty, time to maturity, the fair value of the swap and any
collateral\u00a0arrangements.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialAssetsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-452": { "value": "
(k)Property, plant and equipment
Property, plant and equipment comprise freehold land and buildings, major alterations to
office premises, computer equipment and fixtures measured at cost less accumulated
depreciation. These assets are reviewed for impairment annually, and if they are considered
to\u00a0be impaired, are written down immediately to their recoverable amounts.
Items of property, plant and equipment are depreciated on a straight-line basis over their
estimated useful economic lives as follows:
Buildings
50 years
Fixtures & fittings, computer hardware and vehicles
5 years
Leasehold improvements
Shorter of 10 years or lease term
Plant
15-40 years
For assets under construction (development assets), no depreciation is charged until the asset
is available for use.
Land, deemed to be 25% of purchase price of buildings, is not depreciated.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-451": { "value": "
(k)Property, plant and equipment
Property, plant and equipment comprise freehold land and buildings, major alterations to
office premises, computer equipment and fixtures measured at cost less accumulated
depreciation. These assets are reviewed for impairment annually, and if they are considered
to\u00a0be impaired, are written down immediately to their recoverable amounts.
Intangible assets are reviewed for impairment at least semi-annually, and if they are
considered to be impaired, are written down immediately to their recoverable amounts.
Impairment losses previously recognised for intangible assets, other than goodwill, are
reversed when there has been a change in the estimates used to determine the asset\u2019s
recoverable amount. An impairment loss reversal is recognised in the Consolidated Statement
of Comprehensive Income and the carrying amount of the asset is increased to its recoverable
amount.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfNonfinancialAssetsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-450": { "value": "
(k)Property, plant and equipment
Property, plant and equipment comprise freehold land and buildings, major alterations to
office premises, computer equipment and fixtures measured at cost less accumulated
depreciation. These assets are reviewed for impairment annually, and if they are considered
to\u00a0be impaired, are written down immediately to their recoverable amounts.
Intangible assets are reviewed for impairment at least semi-annually, and if they are
considered to be impaired, are written down immediately to their recoverable amounts.
Impairment losses previously recognised for intangible assets, other than goodwill, are
reversed when there has been a change in the estimates used to determine the asset\u2019s
recoverable amount. An impairment loss reversal is recognised in the Consolidated Statement
of Comprehensive Income and the carrying amount of the asset is increased to its recoverable
amount.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfAssetsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-453": { "value": "
Items of property, plant and equipment are depreciated on a straight-line basis over their
estimated useful economic lives as follows:
Buildings
50 years
Fixtures & fittings, computer hardware and vehicles
5 years
Leasehold improvements
Shorter of 10 years or lease term
Plant
15-40 years
For assets under construction (development assets), no depreciation is charged until the asset
is available for use.
Land, deemed to be 25% of purchase price of buildings, is not depreciated.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDepreciationExpenseExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-455": { "value": "
(l)Intangible assets
The Group only recognises internally generated intangible assets if all of the
following\u00a0conditions are met:
\u2022 an asset is being created that can be identified after establishing the technical and
commercial feasibility of the resulting product;
\u2022 it is probable that the asset created will generate future economic benefits; and
\u2022 the development cost of the asset can be measured reliably.
Subsequent expenditure on an internally generated intangible asset, after its purchase or
completion, is recognised as an expense in the period in which it is incurred. Where no
internally generated intangible asset can be recognised, development expenditure is
recognised as an expense in the period in which it is incurred.
Purchased software and costs directly associated with the development of computer software
are capitalised as intangible assets where the software is a unique and identifiable asset
controlled by the Group and will generate future economic benefits. Costs to establish
technological feasibility or to maintain existing levels of performance are recognised as an
expense. Software is only recognised if:
\u2022 The Group has the contractual right to take possession of the software during the hosting
period without significant penalty; and
\u2022 It is feasible for the Group to run the software on its own hardware or contract with a party
unrelated to the supplier to host the software.
The costs of configuring or customising supplier application software in a Software-as-a-
Service (SaaS) arrangement that is determined to be a service contract is recognised as an
expense or prepayment. SaaS is an arrangement that provides the Group with the right to
receive access to the supplier\u2019s application software in the future which is treated as a service
contract, rather than a software lease or the acquisition of a software intangible asset. Where
the configuration and customisation services are not distinct from the right to receive access
to\u00a0the software, then the costs are recognised as an expense over the term of the
arrangement.
Intangible assets are reviewed for impairment at least semi-annually, and if they are
considered to be impaired, are written down immediately to their recoverable amounts.
Impairment losses previously recognised for intangible assets, other than goodwill, are
reversed when there has been a change in the estimates used to determine the asset\u2019s
recoverable amount. An impairment loss reversal is recognised in the Consolidated Statement
of Comprehensive Income and the carrying amount of the asset is increased to its recoverable
amount.
1.Accounting policies continued
Intangible assets are amortised on a straight line basis over their estimated useful lives
as\u00a0follows:
Computer software and licenses
5-7 years
Assets arising on Combination
4-5 years
For development costs of assets that are under construction, no amortisation is applied until
the asset is available for use and is calculated using a full month when available for use.
The Group reviews the amortisation period on an annual basis. If the expected useful life of an
asset is different from previous assessments, the amortisation period is changed accordingly.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsAndGoodwillExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-454": { "value": "
(l)Intangible assets
The Group only recognises internally generated intangible assets if all of the
following\u00a0conditions are met:
\u2022 an asset is being created that can be identified after establishing the technical and
commercial feasibility of the resulting product;
\u2022 it is probable that the asset created will generate future economic benefits; and
\u2022 the development cost of the asset can be measured reliably.
Subsequent expenditure on an internally generated intangible asset, after its purchase or
completion, is recognised as an expense in the period in which it is incurred. Where no
internally generated intangible asset can be recognised, development expenditure is
recognised as an expense in the period in which it is incurred.
Purchased software and costs directly associated with the development of computer software
are capitalised as intangible assets where the software is a unique and identifiable asset
controlled by the Group and will generate future economic benefits. Costs to establish
technological feasibility or to maintain existing levels of performance are recognised as an
expense. Software is only recognised if:
\u2022 The Group has the contractual right to take possession of the software during the hosting
period without significant penalty; and
\u2022 It is feasible for the Group to run the software on its own hardware or contract with a party
unrelated to the supplier to host the software.
The costs of configuring or customising supplier application software in a Software-as-a-
Service (SaaS) arrangement that is determined to be a service contract is recognised as an
expense or prepayment. SaaS is an arrangement that provides the Group with the right to
receive access to the supplier\u2019s application software in the future which is treated as a service
contract, rather than a software lease or the acquisition of a software intangible asset. Where
the configuration and customisation services are not distinct from the right to receive access
to\u00a0the software, then the costs are recognised as an expense over the term of the
arrangement.
Intangible assets are reviewed for impairment at least semi-annually, and if they are
considered to be impaired, are written down immediately to their recoverable amounts.
Impairment losses previously recognised for intangible assets, other than goodwill, are
reversed when there has been a change in the estimates used to determine the asset\u2019s
recoverable amount. An impairment loss reversal is recognised in the Consolidated Statement
of Comprehensive Income and the carrying amount of the asset is increased to its recoverable
amount.
1.Accounting policies continued
Intangible assets are amortised on a straight line basis over their estimated useful lives
as\u00a0follows:
Computer software and licenses
5-7 years
Assets arising on Combination
4-5 years
For development costs of assets that are under construction, no amortisation is applied until
the asset is available for use and is calculated using a full month when available for use.
The Group reviews the amortisation period on an annual basis. If the expected useful life of an
asset is different from previous assessments, the amortisation period is changed accordingly.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForIntangibleAssetsOtherThanGoodwillExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-459": { "value": "
(m)Financial instruments
i.Recognition
The Group initially recognises loans and advances, deposits, debt securities issued, senior
notes and subordinated debt liabilities on the date on which they are originated or acquired.
All\u00a0other financial instruments are accounted for on the trade date which is when the
Group\u00a0becomes a party to the contractual provisions of the instrument.
For financial instruments classified as amortised cost or FVOCI, the Group initially recognises
financial assets and financial liabilities at fair value plus transaction income or costs that are
directly attributable to its origination, acquisition or issue. Financial instruments classified as
amortised cost are subsequently measured using the EIR method.
Transaction costs directly attributable to the acquisition or issue of a financial instrument
at\u00a0FVTPL are recognised in profit or loss as incurred.
ii.Classification
The Group classifies financial instruments based on the business model and the contractual
cash flow characteristics of the financial instruments. In accordance with IFRS 9, the Group
classifies financial assets into one of three measurement categories:
\u2022 Amortised cost \u2013 assets in a business model to hold financial assets in order to collect
contractual cash flows, where the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest (SPPI)
on\u00a0the\u00a0principal amount outstanding.
\u2022 FVOCI \u2013 assets held in a business model which collects contractual cash flows and sells
financial assets, where the contractual terms of the financial assets give rise on specified
dates to cash flows that are SPPI on the principal amount outstanding.
\u2022 FVTPL \u2013 assets not measured at amortised cost or FVOCI. The Group measures derivatives,
an acquired mortgage portfolio and some investment securities under this category.
The Group reassesses its business models each reporting period.
The Group classifies non-derivative financial liabilities as measured at amortised cost.
The Group classifies certain financial instruments as equity where they meet the following
conditions:
\u2022 the financial instrument includes no contractual obligation to deliver cash or another
financial asset on potentially unfavourable conditions;
\u2022 the financial instrument is a non-derivative that includes no contractual obligation for the
issuer to deliver a variable number of its own equity instruments; or
\u2022 the financial instrument is a derivative that will be settled only by the issuer exchanging a
fixed amount of cash or another financial asset for a fixed number of its own
equity\u00a0instruments.
The Group\u2019s sources of debt funding are deposits from retail customers and credit institutions,
including collateralised loan advances from the Bank of England (BoE) under the Term Funding
Scheme with additional incentives for SMEs (TFSME) and Indexed Long-Term Repo (ILTR),
asset-backed loan notes issued through the Group\u2019s securitisation programmes, subordinated
debt liabilities and senior notes. Cash received under the TFSME is recorded in amounts owed
to credit institutions. Financial liabilities, including Tier 2 instruments, are classified as such
where the terms allow no absolute discretion\u00a0over the payment of interest.
During the year equity financial instruments comprised own shares and AT1 securities. AT1
securities are designated as equity instruments and recognised at fair value on the date of
issuance in equity along with incremental costs directly attributable to the issuance of equity
instruments. Accordingly, the coupons paid on AT1 securities are recognised directly in
retained earnings when paid.
iii.Derecognition
The Group offers refinancing options to customers at which point the original mortgage asset
is derecognised and a new financial asset is recognised.
The forbearance measures offered by the Group are considered a modification event as the
contractual cash flows are renegotiated or otherwise modified. The Group considers the
renegotiated or modified cash flows are not a substantial modification from the contractual
cash flows and does not consider that forbearance measures give rise to a derecognition
event.
Securitisations lead to derecognition of the associated mortgage pool where the Group
transfers its right to receive cash flows from the mortgages or assumes an obligation to pay
these cash flows to a third party in a qualifying \u2018pass-through arrangement\u2019 and transfers
substantially all the risks and rewards of ownership of the pool to a third party. In assessing
this latter point, the Group compares its exposure to variability on any retained investment in
the securitisation structure to that on the underlying mortgages.
Financial liabilities are derecognised only when the obligation is discharged, cancelled or
has\u00a0expired.
1.Accounting policies continued
iv.Offsetting
The Group\u2019s derivatives are covered by industry standard master netting agreements.
Master\u00a0netting agreements create a right of set-off that becomes enforceable only following
a\u00a0specified event of default or in other circumstances not expected to arise in the normal
course of business. These arrangements do not qualify for offsetting and as such the Group
reports derivatives on a gross basis.
Collateral in respect of derivatives is subject to the standard industry terms of International
Swaps and Derivatives Association (ISDA) Credit Support Annex. This means that the cash
received or given as collateral can be pledged or used during the term of the transaction but
must be returned on maturity of the transaction. The terms also give each counterparty the
right to terminate the related transactions upon the counterparty\u2019s failure to post collateral.
Collateral paid or received does not qualify for offsetting and is recognised in loans and
advances to credit institutions and amounts owed to credit institutions, respectively.
v.Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount at which the financial
asset or financial liability is measured at initial recognition, less principal payments or receipts,
plus or minus the cumulative amortisation using the EIR method of any difference between the
initial amount recognised and the maturity amount, minus any reduction for impairment
of\u00a0assets.
vi.Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or,
in its absence, the most advantageous market to which the Group has access at that date.
When available, the Group measures the fair value of an instrument using the quoted price in
an active market for that instrument. A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume to provide pricing information
on an ongoing basis. The Group measures its investment securities at fair value using quoted
market prices where available.
If there is no quoted price in an active market, then the Group uses valuation techniques that
maximise the use of relevant observable inputs and minimise the use of unobservable inputs.
The Group uses SONIA curves to value its derivatives. The fair value of the Group\u2019s derivative
financial instruments incorporates credit valuation adjustments (CVA) and debit valuation
adjustments (DVA). The DVA and CVA take into account the respective credit ratings of the
Group\u2019s two banking entities and counterparty and whether the derivative is collateralised
or\u00a0not. Derivatives are valued using discounted cash flow models and observable market
data\u00a0and are sensitive to benchmark interest and basis rate curves.
vii.Identification and measurement of impairment of financial assets
The Group assesses all financial assets for impairment.
Loans and advances to customers
The Group uses the IFRS 9 three-stage ECL approach for measuring impairment. The three
impairment stages are as follows:
\u2022 Stage 1 \u2013 a 12-month ECL allowance is recognised where there is no significant increase in
credit risk (SICR) since initial recognition.
\u2022 Stage 2 \u2013 a lifetime ECL allowance is recognised for assets where a SICR is identified since
initial recognition. The assessment of whether credit risk has increased significantly since
initial recognition is performed for each reporting period for the life of the loan.
\u2022 Stage 3 \u2013 requires objective evidence that an asset is credit impaired, at which point a
lifetime ECL allowance is recognised.
The Group measures impairment through the use of individual and modelled assessments.
Individual assessment
The Group\u2019s provisioning process requires individual assessment for high exposure or higher
risk loans, where Law of Property Act (LPA) receivers have been appointed, the property is
taken into possession or there are other events that suggest a high probability of credit loss.
The individual assessments are carried out for all the loans associated with one counterparty.
The Group estimates cash flows from these loans, including expected interest and principal
payments, rental or sale proceeds, selling and other costs.
For all individually assessed loans, should the present value of estimated future cash flows
discounted at the original EIR be less than the carrying value of the loan, a provision is
recognised for the difference with such loans being classified as impaired. However, should the
present value of the estimated future cash flows exceed the carrying value, no provision
is\u00a0recognised.
Additionally the Group applies a modelled assessment to all loans and under certain statuses
the greater of the modelled and individually assessed provision requirement is applied.
IFRS 9 modelled impairment
Measurement of ECL
The assessment of credit risk and the estimation of ECL are unbiased and probability
weighted. The ECL calculation is a product of an individual loan\u2019s probability of default (PD),
exposure at default (EAD) and loss given default (LGD) discounted at the EIR. The ECL drivers
of PD, EAD and LGD are modelled at an account level. The assessment of whether a SICR has
occurred is based on quantitative relative and absolute PD thresholds and a suite of qualitative
triggers.
1.Accounting policies continued
Significant increase in credit risk (movement to stage 2)
The Group\u2019s transfer criteria determine what constitutes a SICR, which results in an exposure
being moved from stage 1 to stage 2.
At the point of initial recognition, a loan is assigned a PD estimate. For each monthly reporting
date thereafter, an updated PD estimate is computed. The Group\u2019s transfer criteria analyse
relative and absolute changes in PD versus the PD assigned at the point of origination,
together with qualitative triggers using both internal indicators, such as forbearance and
external information, such as changes in income and adverse credit information to assess for
SICR. In the event that given early warning triggers have not already identified SICR, an
account more than 30 days past due is\u00a0considered to have experienced a SICR.
A borrower will move back into stage 1 only if the SICR definition is no longer triggered.
Definition of default (movement to stage 3)
The Group uses a number of quantitative and qualitative criteria to determine whether an
account meets the definition of default and therefore moves to stage 3. The criteria
currently\u00a0include:
\u2022 If an account is more than 90 days past due.
\u2022 Accounts triggering an unlikeliness to pay indicator, which include possession, distressed
restructuring forbearance, and internal behavioural alerts such as default within a
borrower\u2019s broader relationship with the bank or external behavioural alerts such as
bankruptcy or individual voluntary arrangement (IVA).
A borrower will move out of stage 3 when its credit risk improves such that it no longer meets
the 90 days past due and unlikeliness to pay criteria and following this has completed an
internally approved 12-month probation period. The borrower will move to stage 1 or stage
2\u00a0dependent on whether the SICR applies.
Forward-looking macroeconomic scenarios
The risk of default and ECL assessments take into consideration the expectations of economic
changes that are deemed to be reasonably possible.
The Group conducts analysis to determine the most significant factors which may influence
the likelihood of an exposure defaulting in the future. The macroeconomic factors relate to
the\u00a0House Price Index (HPI), unemployment rate (UR), Consumer Price Index (CPI), Gross
Domestic Product (GDP), Commercial Real Estate Index (CRE) and the BoE Base Rate (BBR).
The Group has developed an approach for factoring probability-weighted macroeconomic
forecasts into ECL calculations, adjusting PD and LGD estimates. The macroeconomic
scenarios feed directly into the ECL calculation, as the adjusted PD and LGD estimates are
used within the individual account ECL allowance calculations.
The Group sources economic forecast information from an appropriately qualified third party
when determining scenarios. The Group considers four probability-weighted scenarios, being
base, upside, downside and severe downside scenarios. The expected scenarios, management
actions and results are discussed and approved by the Board.
The base case is also utilised within the Group\u2019s impairment forecasting process which in turn
feeds the wider business planning processes. The ECL models are also used to set the Group\u2019s
credit risk appetite thresholds and limits.
Period over which ECL is measured
The ECL is measured from the initial recognition of the asset which is the date at which the
loan is originated or the date a loan is purchased and at each balance sheet date thereafter.
The maximum period considered when measuring ECL (either 12 months or lifetime ECL) is the
maximum contractual period over which the Group is exposed to the credit risk of the asset.
For modelling purposes, the Group considers the contractual maturity of the loan product
and\u00a0then considers the behavioural trends of the asset.
Purchased or originated credit impaired (POCI)
Acquired loans that meet the Group\u2019s definition of default (90 days past due or an unlikely
to\u00a0pay position) at acquisition are treated as POCI assets. These assets attract a lifetime ECL
allowance over the full term of the loan, even when these loans no longer meet the definition
of\u00a0default post-acquisition. The Group does not originate credit-impaired loans.
Write-off
Loans are written off against the related provision when the underlying security is sold and
there is a shortfall amount remaining. Subsequent recoveries of amounts previously written off
are taken through profit and loss. Accounts that are derecognised for accounting purposes will
continue to be serviced and corresponding collection procedures are only discontinued
following approval from the Group Chief Credit Officer.
Intercompany loans
Intercompany receivables in the Company financial statements are assessed for ECL based on
an assessment of the PD and LGD, discounted to a net present value.
Other financial assets
Other financial assets comprise cash balances with the BoE and other credit institutions and
high-grade investment securities. The Group deems the likelihood of default across these
counterparties as low and does not recognise a provision against the carrying balances.
Share repurchase
Upon Board authorisation of a share repurchase programme and signing an irrevocable
agreement, a share repurchase liability is recognised in other liabilities with the offset in
retained earnings. Each share repurchase reduces the provision. Upon share cancellation,
share capital is debited with a credit to the capital redemption reserve equal to the nominal
value of \u00a30.01 for each share cancelled.
1.Accounting policies continued
(n)Loans and advances to customers
Loans and advances to customers are predominantly mortgage loans and advances to
customers with fixed or determinable payments that are not quoted in an active market and
that the Group does not intend to sell in the near term. They are initially recorded at fair value
plus any directly attributable transaction costs and are subsequently measured at amortised
cost using the EIR method, less impairment losses. Where exposures are hedged by derivatives,
designated and qualifying as fair value hedges, the fair value adjustment for the hedged risk
to the carrying value of the hedged loans and advances is reported in fair value adjustments
for hedged assets.
Loans and the related provision are written off when there is a shortfall remaining after the
underlying security is sold. Subsequent recoveries of amounts previously written off are taken
through profit or loss.
Loans and advances to customers over which the Group transfers its rights to the collateral
thereon to the BoE under the TFSME and ILTR schemes are not derecognised from the
Consolidated Statement of Financial Position, as the Group retains substantially all the risks
and rewards of ownership, including all cash flows arising from the loans and advances and
exposure to credit risk. The Group classifies the loans and advances at amortised cost under
IFRS 9 Financial Instruments.
Loans and advances to customers include a small acquired mortgage portfolio where the
contractual cash flows include payments that are not SPPI and as such are measured at
FVTPL.
Loans and advances to customers include the Group\u2019s asset finance lease lending. Finance
leases are initially measured at an amount equal to the net investment in the lease, using the
interest rate implicit in the finance lease. Direct costs are included in the initial measurement of
the net investment in the lease and reduce the amount of income recognised over the lease
term. Finance income is recognised over the lease term, based on a pattern reflecting
a\u00a0constant periodic rate of return on the net investment in the lease", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-458": { "value": "
(m)Financial instruments
i.Recognition
The Group initially recognises loans and advances, deposits, debt securities issued, senior
notes and subordinated debt liabilities on the date on which they are originated or acquired.
All\u00a0other financial instruments are accounted for on the trade date which is when the
Group\u00a0becomes a party to the contractual provisions of the instrument.
For financial instruments classified as amortised cost or FVOCI, the Group initially recognises
financial assets and financial liabilities at fair value plus transaction income or costs that are
directly attributable to its origination, acquisition or issue. Financial instruments classified as
amortised cost are subsequently measured using the EIR method.
Transaction costs directly attributable to the acquisition or issue of a financial instrument
at\u00a0FVTPL are recognised in profit or loss as incurred.
ii.Classification
The Group classifies financial instruments based on the business model and the contractual
cash flow characteristics of the financial instruments. In accordance with IFRS 9, the Group
classifies financial assets into one of three measurement categories:
\u2022 Amortised cost \u2013 assets in a business model to hold financial assets in order to collect
contractual cash flows, where the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest (SPPI)
on\u00a0the\u00a0principal amount outstanding.
\u2022 FVOCI \u2013 assets held in a business model which collects contractual cash flows and sells
financial assets, where the contractual terms of the financial assets give rise on specified
dates to cash flows that are SPPI on the principal amount outstanding.
\u2022 FVTPL \u2013 assets not measured at amortised cost or FVOCI. The Group measures derivatives,
an acquired mortgage portfolio and some investment securities under this category.
The Group reassesses its business models each reporting period.
The Group classifies non-derivative financial liabilities as measured at amortised cost.
The Group classifies certain financial instruments as equity where they meet the following
conditions:
\u2022 the financial instrument includes no contractual obligation to deliver cash or another
financial asset on potentially unfavourable conditions;
\u2022 the financial instrument is a non-derivative that includes no contractual obligation for the
issuer to deliver a variable number of its own equity instruments; or
\u2022 the financial instrument is a derivative that will be settled only by the issuer exchanging a
fixed amount of cash or another financial asset for a fixed number of its own
equity\u00a0instruments.
The Group\u2019s sources of debt funding are deposits from retail customers and credit institutions,
including collateralised loan advances from the Bank of England (BoE) under the Term Funding
Scheme with additional incentives for SMEs (TFSME) and Indexed Long-Term Repo (ILTR),
asset-backed loan notes issued through the Group\u2019s securitisation programmes, subordinated
debt liabilities and senior notes. Cash received under the TFSME is recorded in amounts owed
to credit institutions. Financial liabilities, including Tier 2 instruments, are classified as such
where the terms allow no absolute discretion\u00a0over the payment of interest.
During the year equity financial instruments comprised own shares and AT1 securities. AT1
securities are designated as equity instruments and recognised at fair value on the date of
issuance in equity along with incremental costs directly attributable to the issuance of equity
instruments. Accordingly, the coupons paid on AT1 securities are recognised directly in
retained earnings when paid.
iii.Derecognition
The Group offers refinancing options to customers at which point the original mortgage asset
is derecognised and a new financial asset is recognised.
The forbearance measures offered by the Group are considered a modification event as the
contractual cash flows are renegotiated or otherwise modified. The Group considers the
renegotiated or modified cash flows are not a substantial modification from the contractual
cash flows and does not consider that forbearance measures give rise to a derecognition
event.
Securitisations lead to derecognition of the associated mortgage pool where the Group
transfers its right to receive cash flows from the mortgages or assumes an obligation to pay
these cash flows to a third party in a qualifying \u2018pass-through arrangement\u2019 and transfers
substantially all the risks and rewards of ownership of the pool to a third party. In assessing
this latter point, the Group compares its exposure to variability on any retained investment in
the securitisation structure to that on the underlying mortgages.
Financial liabilities are derecognised only when the obligation is discharged, cancelled or
has\u00a0expired.
1.Accounting policies continued
iv.Offsetting
The Group\u2019s derivatives are covered by industry standard master netting agreements.
Master\u00a0netting agreements create a right of set-off that becomes enforceable only following
a\u00a0specified event of default or in other circumstances not expected to arise in the normal
course of business. These arrangements do not qualify for offsetting and as such the Group
reports derivatives on a gross basis.
Collateral in respect of derivatives is subject to the standard industry terms of International
Swaps and Derivatives Association (ISDA) Credit Support Annex. This means that the cash
received or given as collateral can be pledged or used during the term of the transaction but
must be returned on maturity of the transaction. The terms also give each counterparty the
right to terminate the related transactions upon the counterparty\u2019s failure to post collateral.
Collateral paid or received does not qualify for offsetting and is recognised in loans and
advances to credit institutions and amounts owed to credit institutions, respectively.
v.Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount at which the financial
asset or financial liability is measured at initial recognition, less principal payments or receipts,
plus or minus the cumulative amortisation using the EIR method of any difference between the
initial amount recognised and the maturity amount, minus any reduction for impairment
of\u00a0assets.
vi.Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or,
in its absence, the most advantageous market to which the Group has access at that date.
When available, the Group measures the fair value of an instrument using the quoted price in
an active market for that instrument. A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume to provide pricing information
on an ongoing basis. The Group measures its investment securities at fair value using quoted
market prices where available.
If there is no quoted price in an active market, then the Group uses valuation techniques that
maximise the use of relevant observable inputs and minimise the use of unobservable inputs.
The Group uses SONIA curves to value its derivatives. The fair value of the Group\u2019s derivative
financial instruments incorporates credit valuation adjustments (CVA) and debit valuation
adjustments (DVA). The DVA and CVA take into account the respective credit ratings of the
Group\u2019s two banking entities and counterparty and whether the derivative is collateralised
or\u00a0not. Derivatives are valued using discounted cash flow models and observable market
data\u00a0and are sensitive to benchmark interest and basis rate curves.
vii.Identification and measurement of impairment of financial assets
The Group assesses all financial assets for impairment.
Loans and advances to customers
The Group uses the IFRS 9 three-stage ECL approach for measuring impairment. The three
impairment stages are as follows:
\u2022 Stage 1 \u2013 a 12-month ECL allowance is recognised where there is no significant increase in
credit risk (SICR) since initial recognition.
\u2022 Stage 2 \u2013 a lifetime ECL allowance is recognised for assets where a SICR is identified since
initial recognition. The assessment of whether credit risk has increased significantly since
initial recognition is performed for each reporting period for the life of the loan.
\u2022 Stage 3 \u2013 requires objective evidence that an asset is credit impaired, at which point a
lifetime ECL allowance is recognised.
The Group measures impairment through the use of individual and modelled assessments.
Individual assessment
The Group\u2019s provisioning process requires individual assessment for high exposure or higher
risk loans, where Law of Property Act (LPA) receivers have been appointed, the property is
taken into possession or there are other events that suggest a high probability of credit loss.
The individual assessments are carried out for all the loans associated with one counterparty.
The Group estimates cash flows from these loans, including expected interest and principal
payments, rental or sale proceeds, selling and other costs.
For all individually assessed loans, should the present value of estimated future cash flows
discounted at the original EIR be less than the carrying value of the loan, a provision is
recognised for the difference with such loans being classified as impaired. However, should the
present value of the estimated future cash flows exceed the carrying value, no provision
is\u00a0recognised.
Additionally the Group applies a modelled assessment to all loans and under certain statuses
the greater of the modelled and individually assessed provision requirement is applied.
IFRS 9 modelled impairment
Measurement of ECL
The assessment of credit risk and the estimation of ECL are unbiased and probability
weighted. The ECL calculation is a product of an individual loan\u2019s probability of default (PD),
exposure at default (EAD) and loss given default (LGD) discounted at the EIR. The ECL drivers
of PD, EAD and LGD are modelled at an account level. The assessment of whether a SICR has
occurred is based on quantitative relative and absolute PD thresholds and a suite of qualitative
triggers.
1.Accounting policies continued
Significant increase in credit risk (movement to stage 2)
The Group\u2019s transfer criteria determine what constitutes a SICR, which results in an exposure
being moved from stage 1 to stage 2.
At the point of initial recognition, a loan is assigned a PD estimate. For each monthly reporting
date thereafter, an updated PD estimate is computed. The Group\u2019s transfer criteria analyse
relative and absolute changes in PD versus the PD assigned at the point of origination,
together with qualitative triggers using both internal indicators, such as forbearance and
external information, such as changes in income and adverse credit information to assess for
SICR. In the event that given early warning triggers have not already identified SICR, an
account more than 30 days past due is\u00a0considered to have experienced a SICR.
A borrower will move back into stage 1 only if the SICR definition is no longer triggered.
Definition of default (movement to stage 3)
The Group uses a number of quantitative and qualitative criteria to determine whether an
account meets the definition of default and therefore moves to stage 3. The criteria
currently\u00a0include:
\u2022 If an account is more than 90 days past due.
\u2022 Accounts triggering an unlikeliness to pay indicator, which include possession, distressed
restructuring forbearance, and internal behavioural alerts such as default within a
borrower\u2019s broader relationship with the bank or external behavioural alerts such as
bankruptcy or individual voluntary arrangement (IVA).
A borrower will move out of stage 3 when its credit risk improves such that it no longer meets
the 90 days past due and unlikeliness to pay criteria and following this has completed an
internally approved 12-month probation period. The borrower will move to stage 1 or stage
2\u00a0dependent on whether the SICR applies.
Forward-looking macroeconomic scenarios
The risk of default and ECL assessments take into consideration the expectations of economic
changes that are deemed to be reasonably possible.
The Group conducts analysis to determine the most significant factors which may influence
the likelihood of an exposure defaulting in the future. The macroeconomic factors relate to
the\u00a0House Price Index (HPI), unemployment rate (UR), Consumer Price Index (CPI), Gross
Domestic Product (GDP), Commercial Real Estate Index (CRE) and the BoE Base Rate (BBR).
The Group has developed an approach for factoring probability-weighted macroeconomic
forecasts into ECL calculations, adjusting PD and LGD estimates. The macroeconomic
scenarios feed directly into the ECL calculation, as the adjusted PD and LGD estimates are
used within the individual account ECL allowance calculations.
The Group sources economic forecast information from an appropriately qualified third party
when determining scenarios. The Group considers four probability-weighted scenarios, being
base, upside, downside and severe downside scenarios. The expected scenarios, management
actions and results are discussed and approved by the Board.
The base case is also utilised within the Group\u2019s impairment forecasting process which in turn
feeds the wider business planning processes. The ECL models are also used to set the Group\u2019s
credit risk appetite thresholds and limits.
Period over which ECL is measured
The ECL is measured from the initial recognition of the asset which is the date at which the
loan is originated or the date a loan is purchased and at each balance sheet date thereafter.
The maximum period considered when measuring ECL (either 12 months or lifetime ECL) is the
maximum contractual period over which the Group is exposed to the credit risk of the asset.
For modelling purposes, the Group considers the contractual maturity of the loan product
and\u00a0then considers the behavioural trends of the asset.
Purchased or originated credit impaired (POCI)
Acquired loans that meet the Group\u2019s definition of default (90 days past due or an unlikely
to\u00a0pay position) at acquisition are treated as POCI assets. These assets attract a lifetime ECL
allowance over the full term of the loan, even when these loans no longer meet the definition
of\u00a0default post-acquisition. The Group does not originate credit-impaired loans.
Write-off
Loans are written off against the related provision when the underlying security is sold and
there is a shortfall amount remaining. Subsequent recoveries of amounts previously written off
are taken through profit and loss. Accounts that are derecognised for accounting purposes will
continue to be serviced and corresponding collection procedures are only discontinued
following approval from the Group Chief Credit Officer.
Intercompany loans
Intercompany receivables in the Company financial statements are assessed for ECL based on
an assessment of the PD and LGD, discounted to a net present value.
Other financial assets
Other financial assets comprise cash balances with the BoE and other credit institutions and
high-grade investment securities. The Group deems the likelihood of default across these
counterparties as low and does not recognise a provision against the carrying balances.
Share repurchase
Upon Board authorisation of a share repurchase programme and signing an irrevocable
agreement, a share repurchase liability is recognised in other liabilities with the offset in
retained earnings. Each share repurchase reduces the provision. Upon share cancellation,
share capital is debited with a credit to the capital redemption reserve equal to the nominal
value of \u00a30.01 for each share cancelled.
(w)Leases
Lessee accounting
The Group\u2019s leases are predominantly for property leases where the Group is a lessee. At lease
commencement date, the Group recognises the right-of-use asset and lease liability on the
statement of financial position, except for leases of low-value assets and short-term leases of
12 months or less are recognised directly in profit or loss on a straight-line basis over the
lease\u00a0term.
Lease liability payments are recognised within financing activities in the Consolidated
Statement of Cash Flows.
The Group assesses the likely impact of early terminations in recognising the right-of-use asset
and lease liability where an option to terminate early exists.
For modifications that increase the length of a lease the modified lease term is determined,
and the lease liability remeasured by discounting the revised lease payments using a revised
discount rate, at the effective date of the lease modification; a corresponding adjustment is
made to the right-of-use asset. Where modifications decrease the length of a lease, the lease
liability and right-of-use asset are reduced in proportion to the reduction in the lease term,
with any gain or loss recognised in profit or loss.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForBorrowingsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-457": { "value": "
(m)Financial instruments
i.Recognition
The Group initially recognises loans and advances, deposits, debt securities issued, senior
notes and subordinated debt liabilities on the date on which they are originated or acquired.
All\u00a0other financial instruments are accounted for on the trade date which is when the
Group\u00a0becomes a party to the contractual provisions of the instrument.
For financial instruments classified as amortised cost or FVOCI, the Group initially recognises
financial assets and financial liabilities at fair value plus transaction income or costs that are
directly attributable to its origination, acquisition or issue. Financial instruments classified as
amortised cost are subsequently measured using the EIR method.
Transaction costs directly attributable to the acquisition or issue of a financial instrument
at\u00a0FVTPL are recognised in profit or loss as incurred.
ii.Classification
The Group classifies financial instruments based on the business model and the contractual
cash flow characteristics of the financial instruments. In accordance with IFRS 9, the Group
classifies financial assets into one of three measurement categories:
\u2022 Amortised cost \u2013 assets in a business model to hold financial assets in order to collect
contractual cash flows, where the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest (SPPI)
on\u00a0the\u00a0principal amount outstanding.
\u2022 FVOCI \u2013 assets held in a business model which collects contractual cash flows and sells
financial assets, where the contractual terms of the financial assets give rise on specified
dates to cash flows that are SPPI on the principal amount outstanding.
\u2022 FVTPL \u2013 assets not measured at amortised cost or FVOCI. The Group measures derivatives,
an acquired mortgage portfolio and some investment securities under this category.
The Group reassesses its business models each reporting period.
The Group classifies non-derivative financial liabilities as measured at amortised cost.
The Group classifies certain financial instruments as equity where they meet the following
conditions:
\u2022 the financial instrument includes no contractual obligation to deliver cash or another
financial asset on potentially unfavourable conditions;
\u2022 the financial instrument is a non-derivative that includes no contractual obligation for the
issuer to deliver a variable number of its own equity instruments; or
\u2022 the financial instrument is a derivative that will be settled only by the issuer exchanging a
fixed amount of cash or another financial asset for a fixed number of its own
equity\u00a0instruments.
The Group\u2019s sources of debt funding are deposits from retail customers and credit institutions,
including collateralised loan advances from the Bank of England (BoE) under the Term Funding
Scheme with additional incentives for SMEs (TFSME) and Indexed Long-Term Repo (ILTR),
asset-backed loan notes issued through the Group\u2019s securitisation programmes, subordinated
debt liabilities and senior notes. Cash received under the TFSME is recorded in amounts owed
to credit institutions. Financial liabilities, including Tier 2 instruments, are classified as such
where the terms allow no absolute discretion\u00a0over the payment of interest.
During the year equity financial instruments comprised own shares and AT1 securities. AT1
securities are designated as equity instruments and recognised at fair value on the date of
issuance in equity along with incremental costs directly attributable to the issuance of equity
instruments. Accordingly, the coupons paid on AT1 securities are recognised directly in
retained earnings when paid.
iii.Derecognition
The Group offers refinancing options to customers at which point the original mortgage asset
is derecognised and a new financial asset is recognised.
The forbearance measures offered by the Group are considered a modification event as the
contractual cash flows are renegotiated or otherwise modified. The Group considers the
renegotiated or modified cash flows are not a substantial modification from the contractual
cash flows and does not consider that forbearance measures give rise to a derecognition
event.
Securitisations lead to derecognition of the associated mortgage pool where the Group
transfers its right to receive cash flows from the mortgages or assumes an obligation to pay
these cash flows to a third party in a qualifying \u2018pass-through arrangement\u2019 and transfers
substantially all the risks and rewards of ownership of the pool to a third party. In assessing
this latter point, the Group compares its exposure to variability on any retained investment in
the securitisation structure to that on the underlying mortgages.
Financial liabilities are derecognised only when the obligation is discharged, cancelled or
has\u00a0expired.
1.Accounting policies continued
iv.Offsetting
The Group\u2019s derivatives are covered by industry standard master netting agreements.
Master\u00a0netting agreements create a right of set-off that becomes enforceable only following
a\u00a0specified event of default or in other circumstances not expected to arise in the normal
course of business. These arrangements do not qualify for offsetting and as such the Group
reports derivatives on a gross basis.
Collateral in respect of derivatives is subject to the standard industry terms of International
Swaps and Derivatives Association (ISDA) Credit Support Annex. This means that the cash
received or given as collateral can be pledged or used during the term of the transaction but
must be returned on maturity of the transaction. The terms also give each counterparty the
right to terminate the related transactions upon the counterparty\u2019s failure to post collateral.
Collateral paid or received does not qualify for offsetting and is recognised in loans and
advances to credit institutions and amounts owed to credit institutions, respectively.
v.Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount at which the financial
asset or financial liability is measured at initial recognition, less principal payments or receipts,
plus or minus the cumulative amortisation using the EIR method of any difference between the
initial amount recognised and the maturity amount, minus any reduction for impairment
of\u00a0assets.
vi.Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or,
in its absence, the most advantageous market to which the Group has access at that date.
When available, the Group measures the fair value of an instrument using the quoted price in
an active market for that instrument. A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume to provide pricing information
on an ongoing basis. The Group measures its investment securities at fair value using quoted
market prices where available.
If there is no quoted price in an active market, then the Group uses valuation techniques that
maximise the use of relevant observable inputs and minimise the use of unobservable inputs.
The Group uses SONIA curves to value its derivatives. The fair value of the Group\u2019s derivative
financial instruments incorporates credit valuation adjustments (CVA) and debit valuation
adjustments (DVA). The DVA and CVA take into account the respective credit ratings of the
Group\u2019s two banking entities and counterparty and whether the derivative is collateralised
or\u00a0not. Derivatives are valued using discounted cash flow models and observable market
data\u00a0and are sensitive to benchmark interest and basis rate curves.
vii.Identification and measurement of impairment of financial assets
The Group assesses all financial assets for impairment.
Loans and advances to customers
The Group uses the IFRS 9 three-stage ECL approach for measuring impairment. The three
impairment stages are as follows:
\u2022 Stage 1 \u2013 a 12-month ECL allowance is recognised where there is no significant increase in
credit risk (SICR) since initial recognition.
\u2022 Stage 2 \u2013 a lifetime ECL allowance is recognised for assets where a SICR is identified since
initial recognition. The assessment of whether credit risk has increased significantly since
initial recognition is performed for each reporting period for the life of the loan.
\u2022 Stage 3 \u2013 requires objective evidence that an asset is credit impaired, at which point a
lifetime ECL allowance is recognised.
The Group measures impairment through the use of individual and modelled assessments.
Individual assessment
The Group\u2019s provisioning process requires individual assessment for high exposure or higher
risk loans, where Law of Property Act (LPA) receivers have been appointed, the property is
taken into possession or there are other events that suggest a high probability of credit loss.
The individual assessments are carried out for all the loans associated with one counterparty.
The Group estimates cash flows from these loans, including expected interest and principal
payments, rental or sale proceeds, selling and other costs.
For all individually assessed loans, should the present value of estimated future cash flows
discounted at the original EIR be less than the carrying value of the loan, a provision is
recognised for the difference with such loans being classified as impaired. However, should the
present value of the estimated future cash flows exceed the carrying value, no provision
is\u00a0recognised.
Additionally the Group applies a modelled assessment to all loans and under certain statuses
the greater of the modelled and individually assessed provision requirement is applied.
IFRS 9 modelled impairment
Measurement of ECL
The assessment of credit risk and the estimation of ECL are unbiased and probability
weighted. The ECL calculation is a product of an individual loan\u2019s probability of default (PD),
exposure at default (EAD) and loss given default (LGD) discounted at the EIR. The ECL drivers
of PD, EAD and LGD are modelled at an account level. The assessment of whether a SICR has
occurred is based on quantitative relative and absolute PD thresholds and a suite of qualitative
triggers.
1.Accounting policies continued
Significant increase in credit risk (movement to stage 2)
The Group\u2019s transfer criteria determine what constitutes a SICR, which results in an exposure
being moved from stage 1 to stage 2.
At the point of initial recognition, a loan is assigned a PD estimate. For each monthly reporting
date thereafter, an updated PD estimate is computed. The Group\u2019s transfer criteria analyse
relative and absolute changes in PD versus the PD assigned at the point of origination,
together with qualitative triggers using both internal indicators, such as forbearance and
external information, such as changes in income and adverse credit information to assess for
SICR. In the event that given early warning triggers have not already identified SICR, an
account more than 30 days past due is\u00a0considered to have experienced a SICR.
A borrower will move back into stage 1 only if the SICR definition is no longer triggered.
Definition of default (movement to stage 3)
The Group uses a number of quantitative and qualitative criteria to determine whether an
account meets the definition of default and therefore moves to stage 3. The criteria
currently\u00a0include:
\u2022 If an account is more than 90 days past due.
\u2022 Accounts triggering an unlikeliness to pay indicator, which include possession, distressed
restructuring forbearance, and internal behavioural alerts such as default within a
borrower\u2019s broader relationship with the bank or external behavioural alerts such as
bankruptcy or individual voluntary arrangement (IVA).
A borrower will move out of stage 3 when its credit risk improves such that it no longer meets
the 90 days past due and unlikeliness to pay criteria and following this has completed an
internally approved 12-month probation period. The borrower will move to stage 1 or stage
2\u00a0dependent on whether the SICR applies.
Forward-looking macroeconomic scenarios
The risk of default and ECL assessments take into consideration the expectations of economic
changes that are deemed to be reasonably possible.
The Group conducts analysis to determine the most significant factors which may influence
the likelihood of an exposure defaulting in the future. The macroeconomic factors relate to
the\u00a0House Price Index (HPI), unemployment rate (UR), Consumer Price Index (CPI), Gross
Domestic Product (GDP), Commercial Real Estate Index (CRE) and the BoE Base Rate (BBR).
The Group has developed an approach for factoring probability-weighted macroeconomic
forecasts into ECL calculations, adjusting PD and LGD estimates. The macroeconomic
scenarios feed directly into the ECL calculation, as the adjusted PD and LGD estimates are
used within the individual account ECL allowance calculations.
The Group sources economic forecast information from an appropriately qualified third party
when determining scenarios. The Group considers four probability-weighted scenarios, being
base, upside, downside and severe downside scenarios. The expected scenarios, management
actions and results are discussed and approved by the Board.
The base case is also utilised within the Group\u2019s impairment forecasting process which in turn
feeds the wider business planning processes. The ECL models are also used to set the Group\u2019s
credit risk appetite thresholds and limits.
Period over which ECL is measured
The ECL is measured from the initial recognition of the asset which is the date at which the
loan is originated or the date a loan is purchased and at each balance sheet date thereafter.
The maximum period considered when measuring ECL (either 12 months or lifetime ECL) is the
maximum contractual period over which the Group is exposed to the credit risk of the asset.
For modelling purposes, the Group considers the contractual maturity of the loan product
and\u00a0then considers the behavioural trends of the asset.
Purchased or originated credit impaired (POCI)
Acquired loans that meet the Group\u2019s definition of default (90 days past due or an unlikely
to\u00a0pay position) at acquisition are treated as POCI assets. These assets attract a lifetime ECL
allowance over the full term of the loan, even when these loans no longer meet the definition
of\u00a0default post-acquisition. The Group does not originate credit-impaired loans.
Write-off
Loans are written off against the related provision when the underlying security is sold and
there is a shortfall amount remaining. Subsequent recoveries of amounts previously written off
are taken through profit and loss. Accounts that are derecognised for accounting purposes will
continue to be serviced and corresponding collection procedures are only discontinued
following approval from the Group Chief Credit Officer.
Intercompany loans
Intercompany receivables in the Company financial statements are assessed for ECL based on
an assessment of the PD and LGD, discounted to a net present value.
Other financial assets
Other financial assets comprise cash balances with the BoE and other credit institutions and
high-grade investment securities. The Group deems the likelihood of default across these
counterparties as low and does not recognise a provision against the carrying balances.
Share repurchase
Upon Board authorisation of a share repurchase programme and signing an irrevocable
agreement, a share repurchase liability is recognised in other liabilities with the offset in
retained earnings. Each share repurchase reduces the provision. Upon share cancellation,
share capital is debited with a credit to the capital redemption reserve equal to the nominal
value of \u00a30.01 for each share cancelled.
(o)Investment securities
Investment securities include securities held for liquidity purposes. These assets are non-
derivatives that are classified on an individual basis as amortised cost, FVOCI or FVTPL.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-456": { "value": "
(m)Financial instruments
i.Recognition
The Group initially recognises loans and advances, deposits, debt securities issued, senior
notes and subordinated debt liabilities on the date on which they are originated or acquired.
All\u00a0other financial instruments are accounted for on the trade date which is when the
Group\u00a0becomes a party to the contractual provisions of the instrument.
For financial instruments classified as amortised cost or FVOCI, the Group initially recognises
financial assets and financial liabilities at fair value plus transaction income or costs that are
directly attributable to its origination, acquisition or issue. Financial instruments classified as
amortised cost are subsequently measured using the EIR method.
Transaction costs directly attributable to the acquisition or issue of a financial instrument
at\u00a0FVTPL are recognised in profit or loss as incurred.
ii.Classification
The Group classifies financial instruments based on the business model and the contractual
cash flow characteristics of the financial instruments. In accordance with IFRS 9, the Group
classifies financial assets into one of three measurement categories:
\u2022 Amortised cost \u2013 assets in a business model to hold financial assets in order to collect
contractual cash flows, where the contractual terms of the financial asset give rise on
specified dates to cash flows that are solely payments of principal and interest (SPPI)
on\u00a0the\u00a0principal amount outstanding.
\u2022 FVOCI \u2013 assets held in a business model which collects contractual cash flows and sells
financial assets, where the contractual terms of the financial assets give rise on specified
dates to cash flows that are SPPI on the principal amount outstanding.
\u2022 FVTPL \u2013 assets not measured at amortised cost or FVOCI. The Group measures derivatives,
an acquired mortgage portfolio and some investment securities under this category.
The Group reassesses its business models each reporting period.
The Group classifies non-derivative financial liabilities as measured at amortised cost.
The Group classifies certain financial instruments as equity where they meet the following
conditions:
\u2022 the financial instrument includes no contractual obligation to deliver cash or another
financial asset on potentially unfavourable conditions;
\u2022 the financial instrument is a non-derivative that includes no contractual obligation for the
issuer to deliver a variable number of its own equity instruments; or
\u2022 the financial instrument is a derivative that will be settled only by the issuer exchanging a
fixed amount of cash or another financial asset for a fixed number of its own
equity\u00a0instruments.
The Group\u2019s sources of debt funding are deposits from retail customers and credit institutions,
including collateralised loan advances from the Bank of England (BoE) under the Term Funding
Scheme with additional incentives for SMEs (TFSME) and Indexed Long-Term Repo (ILTR),
asset-backed loan notes issued through the Group\u2019s securitisation programmes, subordinated
debt liabilities and senior notes. Cash received under the TFSME is recorded in amounts owed
to credit institutions. Financial liabilities, including Tier 2 instruments, are classified as such
where the terms allow no absolute discretion\u00a0over the payment of interest.
During the year equity financial instruments comprised own shares and AT1 securities. AT1
securities are designated as equity instruments and recognised at fair value on the date of
issuance in equity along with incremental costs directly attributable to the issuance of equity
instruments. Accordingly, the coupons paid on AT1 securities are recognised directly in
retained earnings when paid.
iii.Derecognition
The Group offers refinancing options to customers at which point the original mortgage asset
is derecognised and a new financial asset is recognised.
The forbearance measures offered by the Group are considered a modification event as the
contractual cash flows are renegotiated or otherwise modified. The Group considers the
renegotiated or modified cash flows are not a substantial modification from the contractual
cash flows and does not consider that forbearance measures give rise to a derecognition
event.
Securitisations lead to derecognition of the associated mortgage pool where the Group
transfers its right to receive cash flows from the mortgages or assumes an obligation to pay
these cash flows to a third party in a qualifying \u2018pass-through arrangement\u2019 and transfers
substantially all the risks and rewards of ownership of the pool to a third party. In assessing
this latter point, the Group compares its exposure to variability on any retained investment in
the securitisation structure to that on the underlying mortgages.
Financial liabilities are derecognised only when the obligation is discharged, cancelled or
has\u00a0expired.
1.Accounting policies continued
iv.Offsetting
The Group\u2019s derivatives are covered by industry standard master netting agreements.
Master\u00a0netting agreements create a right of set-off that becomes enforceable only following
a\u00a0specified event of default or in other circumstances not expected to arise in the normal
course of business. These arrangements do not qualify for offsetting and as such the Group
reports derivatives on a gross basis.
Collateral in respect of derivatives is subject to the standard industry terms of International
Swaps and Derivatives Association (ISDA) Credit Support Annex. This means that the cash
received or given as collateral can be pledged or used during the term of the transaction but
must be returned on maturity of the transaction. The terms also give each counterparty the
right to terminate the related transactions upon the counterparty\u2019s failure to post collateral.
Collateral paid or received does not qualify for offsetting and is recognised in loans and
advances to credit institutions and amounts owed to credit institutions, respectively.
v.Amortised cost measurement
The amortised cost of a financial asset or financial liability is the amount at which the financial
asset or financial liability is measured at initial recognition, less principal payments or receipts,
plus or minus the cumulative amortisation using the EIR method of any difference between the
initial amount recognised and the maturity amount, minus any reduction for impairment
of\u00a0assets.
vi.Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or,
in its absence, the most advantageous market to which the Group has access at that date.
When available, the Group measures the fair value of an instrument using the quoted price in
an active market for that instrument. A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume to provide pricing information
on an ongoing basis. The Group measures its investment securities at fair value using quoted
market prices where available.
If there is no quoted price in an active market, then the Group uses valuation techniques that
maximise the use of relevant observable inputs and minimise the use of unobservable inputs.
The Group uses SONIA curves to value its derivatives. The fair value of the Group\u2019s derivative
financial instruments incorporates credit valuation adjustments (CVA) and debit valuation
adjustments (DVA). The DVA and CVA take into account the respective credit ratings of the
Group\u2019s two banking entities and counterparty and whether the derivative is collateralised
or\u00a0not. Derivatives are valued using discounted cash flow models and observable market
data\u00a0and are sensitive to benchmark interest and basis rate curves.
vii.Identification and measurement of impairment of financial assets
The Group assesses all financial assets for impairment.
Loans and advances to customers
The Group uses the IFRS 9 three-stage ECL approach for measuring impairment. The three
impairment stages are as follows:
\u2022 Stage 1 \u2013 a 12-month ECL allowance is recognised where there is no significant increase in
credit risk (SICR) since initial recognition.
\u2022 Stage 2 \u2013 a lifetime ECL allowance is recognised for assets where a SICR is identified since
initial recognition. The assessment of whether credit risk has increased significantly since
initial recognition is performed for each reporting period for the life of the loan.
\u2022 Stage 3 \u2013 requires objective evidence that an asset is credit impaired, at which point a
lifetime ECL allowance is recognised.
The Group measures impairment through the use of individual and modelled assessments.
Individual assessment
The Group\u2019s provisioning process requires individual assessment for high exposure or higher
risk loans, where Law of Property Act (LPA) receivers have been appointed, the property is
taken into possession or there are other events that suggest a high probability of credit loss.
The individual assessments are carried out for all the loans associated with one counterparty.
The Group estimates cash flows from these loans, including expected interest and principal
payments, rental or sale proceeds, selling and other costs.
For all individually assessed loans, should the present value of estimated future cash flows
discounted at the original EIR be less than the carrying value of the loan, a provision is
recognised for the difference with such loans being classified as impaired. However, should the
present value of the estimated future cash flows exceed the carrying value, no provision
is\u00a0recognised.
Additionally the Group applies a modelled assessment to all loans and under certain statuses
the greater of the modelled and individually assessed provision requirement is applied.
IFRS 9 modelled impairment
Measurement of ECL
The assessment of credit risk and the estimation of ECL are unbiased and probability
weighted. The ECL calculation is a product of an individual loan\u2019s probability of default (PD),
exposure at default (EAD) and loss given default (LGD) discounted at the EIR. The ECL drivers
of PD, EAD and LGD are modelled at an account level. The assessment of whether a SICR has
occurred is based on quantitative relative and absolute PD thresholds and a suite of qualitative
triggers.
1.Accounting policies continued
Significant increase in credit risk (movement to stage 2)
The Group\u2019s transfer criteria determine what constitutes a SICR, which results in an exposure
being moved from stage 1 to stage 2.
At the point of initial recognition, a loan is assigned a PD estimate. For each monthly reporting
date thereafter, an updated PD estimate is computed. The Group\u2019s transfer criteria analyse
relative and absolute changes in PD versus the PD assigned at the point of origination,
together with qualitative triggers using both internal indicators, such as forbearance and
external information, such as changes in income and adverse credit information to assess for
SICR. In the event that given early warning triggers have not already identified SICR, an
account more than 30 days past due is\u00a0considered to have experienced a SICR.
A borrower will move back into stage 1 only if the SICR definition is no longer triggered.
Definition of default (movement to stage 3)
The Group uses a number of quantitative and qualitative criteria to determine whether an
account meets the definition of default and therefore moves to stage 3. The criteria
currently\u00a0include:
\u2022 If an account is more than 90 days past due.
\u2022 Accounts triggering an unlikeliness to pay indicator, which include possession, distressed
restructuring forbearance, and internal behavioural alerts such as default within a
borrower\u2019s broader relationship with the bank or external behavioural alerts such as
bankruptcy or individual voluntary arrangement (IVA).
A borrower will move out of stage 3 when its credit risk improves such that it no longer meets
the 90 days past due and unlikeliness to pay criteria and following this has completed an
internally approved 12-month probation period. The borrower will move to stage 1 or stage
2\u00a0dependent on whether the SICR applies.
Forward-looking macroeconomic scenarios
The risk of default and ECL assessments take into consideration the expectations of economic
changes that are deemed to be reasonably possible.
The Group conducts analysis to determine the most significant factors which may influence
the likelihood of an exposure defaulting in the future. The macroeconomic factors relate to
the\u00a0House Price Index (HPI), unemployment rate (UR), Consumer Price Index (CPI), Gross
Domestic Product (GDP), Commercial Real Estate Index (CRE) and the BoE Base Rate (BBR).
The Group has developed an approach for factoring probability-weighted macroeconomic
forecasts into ECL calculations, adjusting PD and LGD estimates. The macroeconomic
scenarios feed directly into the ECL calculation, as the adjusted PD and LGD estimates are
used within the individual account ECL allowance calculations.
The Group sources economic forecast information from an appropriately qualified third party
when determining scenarios. The Group considers four probability-weighted scenarios, being
base, upside, downside and severe downside scenarios. The expected scenarios, management
actions and results are discussed and approved by the Board.
The base case is also utilised within the Group\u2019s impairment forecasting process which in turn
feeds the wider business planning processes. The ECL models are also used to set the Group\u2019s
credit risk appetite thresholds and limits.
Period over which ECL is measured
The ECL is measured from the initial recognition of the asset which is the date at which the
loan is originated or the date a loan is purchased and at each balance sheet date thereafter.
The maximum period considered when measuring ECL (either 12 months or lifetime ECL) is the
maximum contractual period over which the Group is exposed to the credit risk of the asset.
For modelling purposes, the Group considers the contractual maturity of the loan product
and\u00a0then considers the behavioural trends of the asset.
Purchased or originated credit impaired (POCI)
Acquired loans that meet the Group\u2019s definition of default (90 days past due or an unlikely
to\u00a0pay position) at acquisition are treated as POCI assets. These assets attract a lifetime ECL
allowance over the full term of the loan, even when these loans no longer meet the definition
of\u00a0default post-acquisition. The Group does not originate credit-impaired loans.
Write-off
Loans are written off against the related provision when the underlying security is sold and
there is a shortfall amount remaining. Subsequent recoveries of amounts previously written off
are taken through profit and loss. Accounts that are derecognised for accounting purposes will
continue to be serviced and corresponding collection procedures are only discontinued
following approval from the Group Chief Credit Officer.
Intercompany loans
Intercompany receivables in the Company financial statements are assessed for ECL based on
an assessment of the PD and LGD, discounted to a net present value.
Other financial assets
Other financial assets comprise cash balances with the BoE and other credit institutions and
high-grade investment securities. The Group deems the likelihood of default across these
counterparties as low and does not recognise a provision against the carrying balances.
Share repurchase
Upon Board authorisation of a share repurchase programme and signing an irrevocable
agreement, a share repurchase liability is recognised in other liabilities with the offset in
retained earnings. Each share repurchase reduces the provision. Upon share cancellation,
share capital is debited with a credit to the capital redemption reserve equal to the nominal
value of \u00a30.01 for each share cancelled.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFinancialLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-460": { "value": "
iii.Derecognition
The Group offers refinancing options to customers at which point the original mortgage asset
is derecognised and a new financial asset is recognised.
The forbearance measures offered by the Group are considered a modification event as the
contractual cash flows are renegotiated or otherwise modified. The Group considers the
renegotiated or modified cash flows are not a substantial modification from the contractual
cash flows and does not consider that forbearance measures give rise to a derecognition
event.
Securitisations lead to derecognition of the associated mortgage pool where the Group
transfers its right to receive cash flows from the mortgages or assumes an obligation to pay
these cash flows to a third party in a qualifying \u2018pass-through arrangement\u2019 and transfers
substantially all the risks and rewards of ownership of the pool to a third party. In assessing
this latter point, the Group compares its exposure to variability on any retained investment in
the securitisation structure to that on the underlying mortgages.
Financial liabilities are derecognised only when the obligation is discharged, cancelled or
has\u00a0expired.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerecognitionOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-462": { "value": "
iv.Offsetting
The Group\u2019s derivatives are covered by industry standard master netting agreements.
Master\u00a0netting agreements create a right of set-off that becomes enforceable only following
a\u00a0specified event of default or in other circumstances not expected to arise in the normal
course of business. These arrangements do not qualify for offsetting and as such the Group
reports derivatives on a gross basis.
Collateral in respect of derivatives is subject to the standard industry terms of International
Swaps and Derivatives Association (ISDA) Credit Support Annex. This means that the cash
received or given as collateral can be pledged or used during the term of the transaction but
must be returned on maturity of the transaction. The terms also give each counterparty the
right to terminate the related transactions upon the counterparty\u2019s failure to post collateral.
Collateral paid or received does not qualify for offsetting and is recognised in loans and
advances to credit institutions and amounts owed to credit institutions, respectively.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForOffsettingOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-461": { "value": "
iv.Offsetting
The Group\u2019s derivatives are covered by industry standard master netting agreements.
Master\u00a0netting agreements create a right of set-off that becomes enforceable only following
a\u00a0specified event of default or in other circumstances not expected to arise in the normal
course of business. These arrangements do not qualify for offsetting and as such the Group
reports derivatives on a gross basis.
Collateral in respect of derivatives is subject to the standard industry terms of International
Swaps and Derivatives Association (ISDA) Credit Support Annex. This means that the cash
received or given as collateral can be pledged or used during the term of the transaction but
must be returned on maturity of the transaction. The terms also give each counterparty the
right to terminate the related transactions upon the counterparty\u2019s failure to post collateral.
Collateral paid or received does not qualify for offsetting and is recognised in loans and
advances to credit institutions and amounts owed to credit institutions, respectively.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForCollateralExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-463": { "value": "
vi.Fair value measurement
Fair value is the price that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement date in the principal or,
in its absence, the most advantageous market to which the Group has access at that date.
When available, the Group measures the fair value of an instrument using the quoted price in
an active market for that instrument. A market is regarded as active if transactions for the
asset or liability take place with sufficient frequency and volume to provide pricing information
on an ongoing basis. The Group measures its investment securities at fair value using quoted
market prices where available.
If there is no quoted price in an active market, then the Group uses valuation techniques that
maximise the use of relevant observable inputs and minimise the use of unobservable inputs.
The Group uses SONIA curves to value its derivatives. The fair value of the Group\u2019s derivative
financial instruments incorporates credit valuation adjustments (CVA) and debit valuation
adjustments (DVA). The DVA and CVA take into account the respective credit ratings of the
Group\u2019s two banking entities and counterparty and whether the derivative is collateralised
or\u00a0not. Derivatives are valued using discounted cash flow models and observable market
data\u00a0and are sensitive to benchmark interest and basis rate curves.
(v)Share-based payments
Equity-settled share-based payments to employees providing services are measured at the
fair value of the equity instruments at the grant date in accordance with IFRS 2. The fair value
excludes the effect of non-market-based vesting conditions.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-464": { "value": "
vii.Identification and measurement of impairment of financial assets
The Group assesses all financial assets for impairment.
Loans and advances to customers
The Group uses the IFRS 9 three-stage ECL approach for measuring impairment. The three
impairment stages are as follows:
\u2022 Stage 1 \u2013 a 12-month ECL allowance is recognised where there is no significant increase in
credit risk (SICR) since initial recognition.
\u2022 Stage 2 \u2013 a lifetime ECL allowance is recognised for assets where a SICR is identified since
initial recognition. The assessment of whether credit risk has increased significantly since
initial recognition is performed for each reporting period for the life of the loan.
\u2022 Stage 3 \u2013 requires objective evidence that an asset is credit impaired, at which point a
lifetime ECL allowance is recognised.
The Group measures impairment through the use of individual and modelled assessments.
Individual assessment
The Group\u2019s provisioning process requires individual assessment for high exposure or higher
risk loans, where Law of Property Act (LPA) receivers have been appointed, the property is
taken into possession or there are other events that suggest a high probability of credit loss.
The individual assessments are carried out for all the loans associated with one counterparty.
The Group estimates cash flows from these loans, including expected interest and principal
payments, rental or sale proceeds, selling and other costs.
For all individually assessed loans, should the present value of estimated future cash flows
discounted at the original EIR be less than the carrying value of the loan, a provision is
recognised for the difference with such loans being classified as impaired. However, should the
present value of the estimated future cash flows exceed the carrying value, no provision
is\u00a0recognised.
Additionally the Group applies a modelled assessment to all loans and under certain statuses
the greater of the modelled and individually assessed provision requirement is applied.
IFRS 9 modelled impairment
Measurement of ECL
The assessment of credit risk and the estimation of ECL are unbiased and probability
weighted. The ECL calculation is a product of an individual loan\u2019s probability of default (PD),
exposure at default (EAD) and loss given default (LGD) discounted at the EIR. The ECL drivers
of PD, EAD and LGD are modelled at an account level. The assessment of whether a SICR has
occurred is based on quantitative relative and absolute PD thresholds and a suite of qualitative
triggers.
1.Accounting policies continued
Significant increase in credit risk (movement to stage 2)
The Group\u2019s transfer criteria determine what constitutes a SICR, which results in an exposure
being moved from stage 1 to stage 2.
At the point of initial recognition, a loan is assigned a PD estimate. For each monthly reporting
date thereafter, an updated PD estimate is computed. The Group\u2019s transfer criteria analyse
relative and absolute changes in PD versus the PD assigned at the point of origination,
together with qualitative triggers using both internal indicators, such as forbearance and
external information, such as changes in income and adverse credit information to assess for
SICR. In the event that given early warning triggers have not already identified SICR, an
account more than 30 days past due is\u00a0considered to have experienced a SICR.
A borrower will move back into stage 1 only if the SICR definition is no longer triggered.
Definition of default (movement to stage 3)
The Group uses a number of quantitative and qualitative criteria to determine whether an
account meets the definition of default and therefore moves to stage 3. The criteria
currently\u00a0include:
\u2022 If an account is more than 90 days past due.
\u2022 Accounts triggering an unlikeliness to pay indicator, which include possession, distressed
restructuring forbearance, and internal behavioural alerts such as default within a
borrower\u2019s broader relationship with the bank or external behavioural alerts such as
bankruptcy or individual voluntary arrangement (IVA).
A borrower will move out of stage 3 when its credit risk improves such that it no longer meets
the 90 days past due and unlikeliness to pay criteria and following this has completed an
internally approved 12-month probation period. The borrower will move to stage 1 or stage
2\u00a0dependent on whether the SICR applies.
Forward-looking macroeconomic scenarios
The risk of default and ECL assessments take into consideration the expectations of economic
changes that are deemed to be reasonably possible.
The Group conducts analysis to determine the most significant factors which may influence
the likelihood of an exposure defaulting in the future. The macroeconomic factors relate to
the\u00a0House Price Index (HPI), unemployment rate (UR), Consumer Price Index (CPI), Gross
Domestic Product (GDP), Commercial Real Estate Index (CRE) and the BoE Base Rate (BBR).
The Group has developed an approach for factoring probability-weighted macroeconomic
forecasts into ECL calculations, adjusting PD and LGD estimates. The macroeconomic
scenarios feed directly into the ECL calculation, as the adjusted PD and LGD estimates are
used within the individual account ECL allowance calculations.
The Group sources economic forecast information from an appropriately qualified third party
when determining scenarios. The Group considers four probability-weighted scenarios, being
base, upside, downside and severe downside scenarios. The expected scenarios, management
actions and results are discussed and approved by the Board.
The base case is also utilised within the Group\u2019s impairment forecasting process which in turn
feeds the wider business planning processes. The ECL models are also used to set the Group\u2019s
credit risk appetite thresholds and limits.
Period over which ECL is measured
The ECL is measured from the initial recognition of the asset which is the date at which the
loan is originated or the date a loan is purchased and at each balance sheet date thereafter.
The maximum period considered when measuring ECL (either 12 months or lifetime ECL) is the
maximum contractual period over which the Group is exposed to the credit risk of the asset.
For modelling purposes, the Group considers the contractual maturity of the loan product
and\u00a0then considers the behavioural trends of the asset.
Purchased or originated credit impaired (POCI)
Acquired loans that meet the Group\u2019s definition of default (90 days past due or an unlikely
to\u00a0pay position) at acquisition are treated as POCI assets. These assets attract a lifetime ECL
allowance over the full term of the loan, even when these loans no longer meet the definition
of\u00a0default post-acquisition. The Group does not originate credit-impaired loans.
Write-off
Loans are written off against the related provision when the underlying security is sold and
there is a shortfall amount remaining. Subsequent recoveries of amounts previously written off
are taken through profit and loss. Accounts that are derecognised for accounting purposes will
continue to be serviced and corresponding collection procedures are only discontinued
following approval from the Group Chief Credit Officer.
Intercompany loans
Intercompany receivables in the Company financial statements are assessed for ECL based on
an assessment of the PD and LGD, discounted to a net present value.
Other financial assets
Other financial assets comprise cash balances with the BoE and other credit institutions and
high-grade investment securities. The Group deems the likelihood of default across these
counterparties as low and does not recognise a provision against the carrying balances.
Share repurchase
Upon Board authorisation of a share repurchase programme and signing an irrevocable
agreement, a share repurchase liability is recognised in other liabilities with the offset in
retained earnings. Each share repurchase reduces the provision. Upon share cancellation,
share capital is debited with a credit to the capital redemption reserve equal to the nominal
value of \u00a30.01 for each share cancelled.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForImpairmentOfFinancialAssetsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-465": { "value": "
(o)Investment securities
Investment securities include securities held for liquidity purposes. These assets are non-
derivatives that are classified on an individual basis as amortised cost, FVOCI or FVTPL.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-466": { "value": "
(p)Sale and repurchase agreements
Financial assets sold subject to repurchase agreements (repo) continue to be recognised in the
financial statements if they fail the derecognition criteria of IFRS 9 described in paragraph m)iii
above. The financial assets that are retained in the financial statements are reflected as loans
and advances to customers or investment securities and the counterparty liability is included
in amounts owed to credit institutions or other customers. Financial assets purchased under
agreements to resell at a predetermined price where the transaction is financing in nature
(reverse repo) are accounted for as loans and advances to credit institutions. The difference
between the sale and repurchase price is treated as interest and accrued over the life of the
agreement using the EIR method.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRepurchaseAndReverseRepurchaseAgreementsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-468": { "value": "
(q)Derivative financial instruments
The Group uses derivative financial instruments (interest rate swaps) to manage its exposure to
interest rate risk. The Group does not hold or issue derivative financial instruments for
proprietary trading.
The Group also uses derivatives to hedge the interest rate risk inherent in irrevocable offers to
lend. This exposes the Group to movements in the fair value of derivatives until the loan
is\u00a0drawn. The changes to fair value are recognised in profit or loss in the period.
(r)Hedge accounting
The Group has chosen to continue to apply the hedge accounting requirements of
International Accounting Standards (IAS) 39 instead of the requirements in Chapter 6 of IFRS
9. The Group uses fair value hedge accounting for a portfolio hedge of interest rate risk.
The hedging strategy of the Group is divided into portfolio hedges, where the hedged item is a
homogeneous portfolio of assets (mortgage lending or fixed rate bonds) or liabilities (savings
products), and micro hedges, where the hedged item is a distinctly identifiable asset or liability
(debt issuance). The Group applies fair value hedge accounting for both its portfolio and micro
hedges.
i.Portfolio hedges
Portfolio hedge accounting allows for hedge effectiveness testing and accounting over an
entire portfolio of financial assets or liabilities. The Group applies fair value portfolio hedge
accounting to its fixed rate portfolio of mortgages and savings accounts and to fixed rate
bonds held as a liquidity portfolio. The hedged portfolio is analysed into repricing time periods
based on expected repricing dates, utilising the Group Assets and Liabilities Committee
(ALCO) approved prepayment curve. Interest rate swaps are designated against the repricing
time periods to establish the hedge relationship.
ii.Micro hedges
The Group\u2019s micro hedging strategy entails hedge accounting on an individual instrument-by-
instrument basis, which in some instances may be implemented through partial term fair value
hedging where the instrument may be exercised early. The Group applies fair value micro
hedge accounting to manage its exposure to the interest rate risk arising from some of its fixed
rate debt issuances. Interest rate swaps are assigned to specific issuances of fixed rate notes
with terms that closely align with the hedged item.
1.Accounting policies continued
iii.Hedge effectiveness
Hedge effectiveness is calculated as a percentage of the fair value movement of the interest
rate swap against the fair value movement of the hedged item over the period tested.
The Group considers the following as key sources of hedge ineffectiveness:
\u2022 the mismatch in maturity date of the swap and hedged item, as swaps with a given
maturity date cover a portfolio of hedged items which may mature throughout the month;
\u2022 the actual behaviour of the hedged item differing from expectations, such as early
repayments or withdrawals and arrears;
\u2022 minimal movements in the yield curve leading to ineffectiveness where hedge relationships
are sensitive to small value changes; and
\u2022 the mismatch in the swap interest rate and rate used to value the hedged item where the
swap rate is higher than the contractual rate of the hedged item.
Where there is an effective hedge relationship for fair value hedges, the Group recognises the
change in fair value of each hedged item in profit or loss with the cumulative movement in their
value being shown separately in the Consolidated Statement of Financial Position as fair value
adjustments on hedged assets and liabilities. The fair value changes of both the derivative and
the hedge substantially offset each other to reduce profit volatility.
The Group discontinues hedge accounting when the derivative ceases through expiry, when
the derivative is cancelled or the underlying hedged item matures, is sold or is repaid.
If a derivative no longer meets the criteria for hedge accounting or is cancelled whilst still
effective, including LIBOR-linked derivatives cancelled as a result of Interbank Offered Rate
(IBOR) reforms, the fair value adjustment relating to the hedged assets or liabilities within the
hedge relationship prior to the derivative becoming ineffective or being cancelled remains on
the Consolidated Statement of Financial Position and is amortised over the remaining life of
the hedged assets or liabilities. The rate of amortisation over the remaining life is in line with
expected income or cost generated from the hedged assets or liabilities. Each reporting period,
the expectation is compared to actual with an accelerated run-off applied where the two
diverge by more than set parameters.
(s)Debit and credit valuation adjustments
The DVA and CVA are included in the fair value of derivative financial instruments. The DVA is
based on the expected loss a counterparty faces due to the risk of the Group\u2019s two banking
entities defaulting. The CVA reflects the Group\u2019s risk of the counterparty\u2019s default.
The methodology is based on a standard calculation, taking into account the credit rating of
the swap counterparty, time to maturity, the fair value of the swap and any
collateral\u00a0arrangements.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-467": { "value": "
(q)Derivative financial instruments
The Group uses derivative financial instruments (interest rate swaps) to manage its exposure to
interest rate risk. The Group does not hold or issue derivative financial instruments for
proprietary trading.
The Group also uses derivatives to hedge the interest rate risk inherent in irrevocable offers to
lend. This exposes the Group to movements in the fair value of derivatives until the loan
is\u00a0drawn. The changes to fair value are recognised in profit or loss in the period.
(r)Hedge accounting
The Group has chosen to continue to apply the hedge accounting requirements of
International Accounting Standards (IAS) 39 instead of the requirements in Chapter 6 of IFRS
9. The Group uses fair value hedge accounting for a portfolio hedge of interest rate risk.
The hedging strategy of the Group is divided into portfolio hedges, where the hedged item is a
homogeneous portfolio of assets (mortgage lending or fixed rate bonds) or liabilities (savings
products), and micro hedges, where the hedged item is a distinctly identifiable asset or liability
(debt issuance). The Group applies fair value hedge accounting for both its portfolio and micro
hedges.
i.Portfolio hedges
Portfolio hedge accounting allows for hedge effectiveness testing and accounting over an
entire portfolio of financial assets or liabilities. The Group applies fair value portfolio hedge
accounting to its fixed rate portfolio of mortgages and savings accounts and to fixed rate
bonds held as a liquidity portfolio. The hedged portfolio is analysed into repricing time periods
based on expected repricing dates, utilising the Group Assets and Liabilities Committee
(ALCO) approved prepayment curve. Interest rate swaps are designated against the repricing
time periods to establish the hedge relationship.
ii.Micro hedges
The Group\u2019s micro hedging strategy entails hedge accounting on an individual instrument-by-
instrument basis, which in some instances may be implemented through partial term fair value
hedging where the instrument may be exercised early. The Group applies fair value micro
hedge accounting to manage its exposure to the interest rate risk arising from some of its fixed
rate debt issuances. Interest rate swaps are assigned to specific issuances of fixed rate notes
with terms that closely align with the hedged item.
1.Accounting policies continued
iii.Hedge effectiveness
Hedge effectiveness is calculated as a percentage of the fair value movement of the interest
rate swap against the fair value movement of the hedged item over the period tested.
The Group considers the following as key sources of hedge ineffectiveness:
\u2022 the mismatch in maturity date of the swap and hedged item, as swaps with a given
maturity date cover a portfolio of hedged items which may mature throughout the month;
\u2022 the actual behaviour of the hedged item differing from expectations, such as early
repayments or withdrawals and arrears;
\u2022 minimal movements in the yield curve leading to ineffectiveness where hedge relationships
are sensitive to small value changes; and
\u2022 the mismatch in the swap interest rate and rate used to value the hedged item where the
swap rate is higher than the contractual rate of the hedged item.
Where there is an effective hedge relationship for fair value hedges, the Group recognises the
change in fair value of each hedged item in profit or loss with the cumulative movement in their
value being shown separately in the Consolidated Statement of Financial Position as fair value
adjustments on hedged assets and liabilities. The fair value changes of both the derivative and
the hedge substantially offset each other to reduce profit volatility.
The Group discontinues hedge accounting when the derivative ceases through expiry, when
the derivative is cancelled or the underlying hedged item matures, is sold or is repaid.
If a derivative no longer meets the criteria for hedge accounting or is cancelled whilst still
effective, including LIBOR-linked derivatives cancelled as a result of Interbank Offered Rate
(IBOR) reforms, the fair value adjustment relating to the hedged assets or liabilities within the
hedge relationship prior to the derivative becoming ineffective or being cancelled remains on
the Consolidated Statement of Financial Position and is amortised over the remaining life of
the hedged assets or liabilities. The rate of amortisation over the remaining life is in line with
expected income or cost generated from the hedged assets or liabilities. Each reporting period,
the expectation is compared to actual with an accelerated run-off applied where the two
diverge by more than set parameters.
(s)Debit and credit valuation adjustments
The DVA and CVA are included in the fair value of derivative financial instruments. The DVA is
based on the expected loss a counterparty faces due to the risk of the Group\u2019s two banking
entities defaulting. The CVA reflects the Group\u2019s risk of the counterparty\u2019s default.
The methodology is based on a standard calculation, taking into account the credit rating of
the swap counterparty, time to maturity, the fair value of the swap and any
collateral\u00a0arrangements.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForDerivativeFinancialInstrumentsAndHedgingExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-469": { "value": "
(r)Hedge accounting
The Group has chosen to continue to apply the hedge accounting requirements of
International Accounting Standards (IAS) 39 instead of the requirements in Chapter 6 of IFRS
9. The Group uses fair value hedge accounting for a portfolio hedge of interest rate risk.
The hedging strategy of the Group is divided into portfolio hedges, where the hedged item is a
homogeneous portfolio of assets (mortgage lending or fixed rate bonds) or liabilities (savings
products), and micro hedges, where the hedged item is a distinctly identifiable asset or liability
(debt issuance). The Group applies fair value hedge accounting for both its portfolio and micro
hedges.
i.Portfolio hedges
Portfolio hedge accounting allows for hedge effectiveness testing and accounting over an
entire portfolio of financial assets or liabilities. The Group applies fair value portfolio hedge
accounting to its fixed rate portfolio of mortgages and savings accounts and to fixed rate
bonds held as a liquidity portfolio. The hedged portfolio is analysed into repricing time periods
based on expected repricing dates, utilising the Group Assets and Liabilities Committee
(ALCO) approved prepayment curve. Interest rate swaps are designated against the repricing
time periods to establish the hedge relationship.
ii.Micro hedges
The Group\u2019s micro hedging strategy entails hedge accounting on an individual instrument-by-
instrument basis, which in some instances may be implemented through partial term fair value
hedging where the instrument may be exercised early. The Group applies fair value micro
hedge accounting to manage its exposure to the interest rate risk arising from some of its fixed
rate debt issuances. Interest rate swaps are assigned to specific issuances of fixed rate notes
with terms that closely align with the hedged item.
1.Accounting policies continued
iii.Hedge effectiveness
Hedge effectiveness is calculated as a percentage of the fair value movement of the interest
rate swap against the fair value movement of the hedged item over the period tested.
The Group considers the following as key sources of hedge ineffectiveness:
\u2022 the mismatch in maturity date of the swap and hedged item, as swaps with a given
maturity date cover a portfolio of hedged items which may mature throughout the month;
\u2022 the actual behaviour of the hedged item differing from expectations, such as early
repayments or withdrawals and arrears;
\u2022 minimal movements in the yield curve leading to ineffectiveness where hedge relationships
are sensitive to small value changes; and
\u2022 the mismatch in the swap interest rate and rate used to value the hedged item where the
swap rate is higher than the contractual rate of the hedged item.
Where there is an effective hedge relationship for fair value hedges, the Group recognises the
change in fair value of each hedged item in profit or loss with the cumulative movement in their
value being shown separately in the Consolidated Statement of Financial Position as fair value
adjustments on hedged assets and liabilities. The fair value changes of both the derivative and
the hedge substantially offset each other to reduce profit volatility.
The Group discontinues hedge accounting when the derivative ceases through expiry, when
the derivative is cancelled or the underlying hedged item matures, is sold or is repaid.
If a derivative no longer meets the criteria for hedge accounting or is cancelled whilst still
effective, including LIBOR-linked derivatives cancelled as a result of Interbank Offered Rate
(IBOR) reforms, the fair value adjustment relating to the hedged assets or liabilities within the
hedge relationship prior to the derivative becoming ineffective or being cancelled remains on
the Consolidated Statement of Financial Position and is amortised over the remaining life of
the hedged assets or liabilities. The rate of amortisation over the remaining life is in line with
expected income or cost generated from the hedged assets or liabilities. Each reporting period,
the expectation is compared to actual with an accelerated run-off applied where the two
diverge by more than set parameters.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForHedgingExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-470": { "value": "
(t)Provisions and contingent liabilities
A provision is recognised when there is a present obligation as a result of a past event, it is
probable that the obligation will be settled and the amount can be estimated reliably.
Provisions include ECLs on the Group\u2019s undrawn loan commitments.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForProvisionsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-471": { "value": "
Contingent liabilities are possible obligations arising from past events, whose existence will be
confirmed only by uncertain future events, or present obligations arising from past events
which are either not probable or the amount of the obligation cannot be reliably measured.
Contingent liabilities are not recognised but disclosed.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-472": { "value": "
(u)Employee benefits \u2013 defined contribution scheme
The Group contributes to defined contribution personal pension plans or defined contribution
retirement benefit schemes for all qualifying employees who subscribe to the terms and
conditions of the schemes\u2019 policies.
Obligations for contributions to defined contribution pension arrangements are recognised as
an expense in profit or loss as incurred.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-473": { "value": "
(v)Share-based payments
Equity-settled share-based payments to employees providing services are measured at the
fair value of the equity instruments at the grant date in accordance with IFRS 2. The fair value
excludes the effect of non-market-based vesting conditions.
The cost of the awards is charged on a straight-line basis to profit or loss (with a
corresponding increase in the share-based payment reserve within equity) over the vesting
period in which the employees become entitled to the awards. The increase within the share-
based payment reserve is reclassified to retained earnings upon exercise.
The amount recognised as an expense for non-market conditions and related service
conditions is adjusted each reporting period to reflect the actual number of awards expected
to be met. The amount recognised as an expense for awards subject to market conditions is
based on the proportion that is expected to meet the condition as assessed at the grant date.
No adjustment is made to the fair value of each award calculated at grant date.
Share-based payments that are not subject to further vesting conditions (i.e. the Deferred
Share Bonus Plan (DSBP) for senior managers) are expensed in the year services are received
with a corresponding increase in equity.
Where the allowable cost of share-based options or awards for tax purposes is greater than
the cost determined in accordance with IFRS 2, the tax effect of the excess is taken to the
share-based payment reserve within equity. The tax effect is reclassified to retained earnings
upon vesting.
Employer\u2019s national insurance is charged to profit or loss at the share price at the reporting
date on the same service or vesting schedules as the underlying options and awards.
Own shares are recorded at cost and deducted from equity and represent shares of OSBG
that are held by the EBT.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForSharebasedPaymentTransactionsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-474": { "value": "
Own shares are recorded at cost and deducted from equity and represent shares of OSBG
that are held by the EBT.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForTreasurySharesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-475": { "value": "
(w)Leases
Lessee accounting
The Group\u2019s leases are predominantly for property leases where the Group is a lessee. At lease
commencement date, the Group recognises the right-of-use asset and lease liability on the
statement of financial position, except for leases of low-value assets and short-term leases of
12 months or less are recognised directly in profit or loss on a straight-line basis over the
lease\u00a0term.
Lease liability payments are recognised within financing activities in the Consolidated
Statement of Cash Flows.
The Group assesses the likely impact of early terminations in recognising the right-of-use asset
and lease liability where an option to terminate early exists.
For modifications that increase the length of a lease the modified lease term is determined,
and the lease liability remeasured by discounting the revised lease payments using a revised
discount rate, at the effective date of the lease modification; a corresponding adjustment is
made to the right-of-use asset. Where modifications decrease the length of a lease, the lease
liability and right-of-use asset are reduced in proportion to the reduction in the lease term,
with any gain or loss recognised in profit or loss.
Lessor accounting
Finance leases are initially measured at an amount equal to the net investment in the lease,
using the interest rate implicit in the finance lease. Finance income is recognised over the lease
term, based on a pattern reflecting a constant periodic rate of return on the net investment in
the lease.
", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForLeasesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-477": { "value": "
(x)Adoption of new standards
International financial reporting standards issued and adopted for the first time in the
year ended 31 December 2025
\u2018Lack of Exchangeability \u2013 Amendments to International Accounting Standard 21)\u2019 is effective
from 1 January 2025. The adoption of the amendment has not had a material impact on the
Group.
Exemptions
The Group has applied the temporary exception issued by IASB from the accounting
requirements for deferred taxes in IAS 12 \u2018Income Taxes\u2019. Accordingly, the Group neither
recognises nor discloses information about deferred tax assets and liabilities related to Pillar 2
income taxes.
International financial reporting standards issued but not yet effective which are
applicable to the Group
In April 2024, the IASB released IFRS 18 Presentation and Disclosure in Financial Statements
which is designed to give more comparability between entities in the presentation and
classification of items within the income statement and around management-defined
performance measures and is effective for reporting periods beginning on or after 1 January
2026. The Group is currently assessing the impacts of this standard.
Certain other amendments to accounting standards and interpretations that were not
effective on 31 December 2025 have not been early-adopted by the Group. The adoption of
these amendments is not expected to have a material impact on the financial statements of
the Group in future periods.
", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesAccountingEstimatesAndErrorsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-476": { "value": "
(x)Adoption of new standards
International financial reporting standards issued and adopted for the first time in the
year ended 31 December 2025
\u2018Lack of Exchangeability \u2013 Amendments to International Accounting Standard 21)\u2019 is effective
from 1 January 2025. The adoption of the amendment has not had a material impact on the
Group.
Exemptions
The Group has applied the temporary exception issued by IASB from the accounting
requirements for deferred taxes in IAS 12 \u2018Income Taxes\u2019. Accordingly, the Group neither
recognises nor discloses information about deferred tax assets and liabilities related to Pillar 2
income taxes.
International financial reporting standards issued but not yet effective which are
applicable to the Group
In April 2024, the IASB released IFRS 18 Presentation and Disclosure in Financial Statements
which is designed to give more comparability between entities in the presentation and
classification of items within the income statement and around management-defined
performance measures and is effective for reporting periods beginning on or after 1 January
2026. The Group is currently assessing the impacts of this standard.
Certain other amendments to accounting standards and interpretations that were not
effective on 31 December 2025 have not been early-adopted by the Group. The adoption of
these amendments is not expected to have a material impact on the financial statements of
the Group in future periods.
", "dimensions": { "concept": "ifrs-full:DisclosureOfChangesInAccountingPoliciesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-478": { "value": "
(x)Adoption of new standards
International financial reporting standards issued and adopted for the first time in the
year ended 31 December 2025
\u2018Lack of Exchangeability \u2013 Amendments to International Accounting Standard 21)\u2019 is effective
from 1 January 2025. The adoption of the amendment has not had a material impact on the
Group.
Exemptions
The Group has applied the temporary exception issued by IASB from the accounting
requirements for deferred taxes in IAS 12 \u2018Income Taxes\u2019. Accordingly, the Group neither
recognises nor discloses information about deferred tax assets and liabilities related to Pillar 2
income taxes.
", "dimensions": { "concept": "ifrs-full:DescriptionOfInitialApplicationOfStandardsOrInterpretations", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-479": { "value": "
International financial reporting standards issued but not yet effective which are
applicable to the Group
In April 2024, the IASB released IFRS 18 Presentation and Disclosure in Financial Statements
which is designed to give more comparability between entities in the presentation and
classification of items within the income statement and around management-defined
performance measures and is effective for reporting periods beginning on or after 1 January
2026. The Group is currently assessing the impacts of this standard.
Certain other amendments to accounting standards and interpretations that were not
effective on 31 December 2025 have not been early-adopted by the Group. The adoption of
these amendments is not expected to have a material impact on the financial statements of
the Group in future periods.
", "dimensions": { "concept": "ifrs-full:DescriptionOfExpectedImpactOfInitialApplicationOfNewStandardsOrInterpretations", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-480": { "value": "
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates
In preparing these financial statements, the Group has made judgements, estimates and
assumptions which affect the reported amounts within the current and future financial years.
Actual results may differ from these estimates.
As set out in the Strategic Report on page 95, climate change is a global challenge and an
emerging risk to businesses, people and the environment. Therefore, in preparing the financial
statements, the Group has considered the impact of climate-related risks on its financial
position and performance, including the impact on ECL and redemption profiles included in
EIR. While the effects of climate change represent a source of uncertainty, the Group does not
consider there to be a material impact on its judgements and estimates from the physical or
transition risks in the short term. As part of the Group\u2019s recognition of climate risk and overall
Environmental, Social and Governance (ESG) agenda, the Group considers the physical risks
of climate change and has retained a post-model adjustment (PMA) of \u00a31.0m (2024: \u00a30.3m) as
of 31 December 2025.
Estimates and judgements are regularly reviewed based on past experience, expectations of
future events and other factors.
Judgements
The Group has made the following key judgements in applying the accounting policies:
(i)Loan book impairments
Significant increase in credit risk for classification in stage 2
The Group applies both quantitative and qualitative measures to assess whether an asset has
experienced a SICR. Determining specific trigger thresholds, alongside relevant risk indicators,
involves judgement, and variations in these thresholds could materially affect the ECL
allowance. The Group continuously reviews and monitors the effectiveness of its SICR criteria,
with quantitative measures incorporating forward looking information. In addition, qualitative
triggers are applied in certain circumstances, including where a customer holds multiple loans
and linked accounts are in arrears; where the customer has exceeded their contractual term;
where there are early signs of bankruptcy or individual voluntary arrangements; where key
forbearance or impairment measures have been implemented; or where accounts are
otherwise in arrears.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates continued
(ii)IFRS 9 classification
Application of the \u2018business model\u2019 requirements under IFRS 9 requires the Group to conclude
on the business models that it operates and is a fundamental aspect in determining the
classification of the Group\u2019s financial assets.
Management assessed the intention for holding financial assets and the contractual terms of
those assets, concluding that the Group\u2019s business model is a \u2018held to collect\u2019 business model.
This conclusion was reached on the basis that the Group originates and purchases loans and
advances with the intention to collect contractual cash flows over the life of the originated or
purchased financial instrument. The Group considered recent transactions leading to the
derecognition of mortgages (see note 6) and concluded that the size and frequency of such
transactions did not affect the Group\u2019s overall business model.
The Group considers whether the contractual terms of a financial asset give rise on specified
dates to cash flows that are SPPI on the principal amount outstanding when applying the
classification criteria of IFRS 9. The majority of the Group\u2019s assets being loans and advances
to customers which have been accounted for under amortised cost with the exception of one
acquired mortgage book of \u00a311.6m (2024: \u00a312.9m) that is recognised at FVTPL.
Estimates
The Group has made the following estimates in the application of the accounting policies that
have a significant risk of material adjustment to the carrying amount of assets and liabilities
within the next financial year:
(i)Loan book impairments
Set out below are details of the critical accounting estimates which underpin loan impairment
calculations, with only those that may result in a material impact over the next 12 months
being disclosed. The Group has recognised total impairments of \u00a3123.6m (2024: \u00a3 126.9m) at
the reporting date as disclosed in note 20.
Modelled impairment
Modelled provision assessments are also subject to estimation uncertainty, underpinned by\u00a0a
number of estimates being made by management which are utilised within impairment
calculations. Key areas of estimation within modelled provisioning calculations include those
regarding PD, LGD and forward-looking macroeconomic scenarios.
Probability of default model
The Group has a number of PD models, which include estimates regarding scorecards, survival
rates, prepayment rates and lifetime curves. The PD is sensitive to the application of
unemployment rates, with an uplift of the unemployment rate by 1% seen as a reasonable
change when reviewing historical and expected 12-month outcomes. The table below shows
the resulting incremental provision required in a 1% uplift in unemployment rate (2024: an 1%
uplift in unemployment rate) applied to all scenarios in perpetuity.
2025
2024
\u00a3m
\u00a3m
OSB
11.5
6.5
CCFS
1.3
2.0
Group
12.8
8.5
The Group\u2019s forecasts of unemployment rates used in the impairment models are disclosed in
the Risk profile performance review on page 62.
Loss given default model
The Group has a number of LGD models, which include estimates regarding propensity to go
to possession given default (PPD), forced sale discount, time to sale and sale costs. The LGD is
sensitive to the application of the HPI, with an 8% haircut (2024: an 8% haircut) seen to be a
reasonable downside movement within observed market volatility and is broadly consistent
with adverse but plausible macroeconomic conditions. The table below shows the resulting
incremental provision required in an 8% house price haircut (2024: an 8% house price haircut)
being directly applied to all exposures at 31 December 2025 which not only adjust the sale
discount but also the propensity to go to possession.
2025
2024
\u00a3m
\u00a3m
OSB
19.3
22.3
CCFS
5.8
9.1
Group
25.1
31.4
The Group\u2019s forecasts of HPI movements used in the impairment models are disclosed in the
Risk profile performance review on page 62.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates continued
Forward-looking macroeconomic scenarios
The forward-looking macroeconomic scenarios affect all model components of the ECL thus
the calculation remains sensitive to both the scenarios utilised and their associated
probability\u00a0weightings.
The Group has adopted an approach which utilises four macroeconomic scenarios.
These\u00a0scenarios are provided by a reputable economics advisory firm, providing management
and the Board with advice on which scenarios to utilise and the probability weightings to
attach to each scenario. A base case forecast is provided, together with a plausible upside
scenario. Two downside scenarios are also provided (downside and a severe downside). The
Group\u2019s macroeconomic scenarios can be found on page 62.
The following tables detail the ECL scenario sensitivity analysis with each scenario weighted at
100% probability. The sensitivity analysis is performed without considering the staging shifts
driven by relative or absolute PD thresholds. The purpose of using multiple economic scenarios
is to model the non-linear impact of assumptions surrounding macroeconomic factors and
incorporate them into the ECL calculation:
As at 31 December 2025
Weighted (see
note 20)
100% Base
case scenario
100% Upside
scenario
100%
Downside
scenario
100% Severe
downside
scenario
Total loans before provisions, \u00a3m
26,032.6
26,032.6
26,032.6
26,032.6
26,032.6
Modelled ECL, \u00a3m
74.6
56.8
48.4
98.8
176.4
Individually assessed provisions
ECL, \u00a3m
44.3
44.3
44.3
44.3
44.3
Post model adjustments ECL, \u00a3m
4.7
3.8
3.2
5.9
10.3
Total ECL, \u00a3m
123.6
104.9
95.9
149.0
231.0
ECL coverage, %
0.47
0.40
0.37
0.57
0.89
As at 31 December 2024
Weighted (see
note 20)
100% Base
case
scenario
100%
Upside
scenario
100%
Downside
scenario
100% Severe
downside
scenario
Total loans before provisions, \u00a3m
25,240.3
25,240.3
25,240.3
25,240.3
25,240.3
Modelled ECL, \u00a3m
79.6
63.6
53.2
114.5
153.0
Individually assessed provisions ECL,
\u00a3m
37.6
37.6
37.6
37.6
37.6
Post model adjustments ECL, \u00a3m
9.7
7.2
4.3
15.9
23.5
Total ECL, \u00a3m
126.9
108.4
95.1
168.0
214.1
ECL coverage, %
0.50
0.43
0.38
0.67
0.85
The Group\u2019s assessment of ECL primarily focuses on scenarios where economic distress is
driven by weak demand. These scenarios typically involve low inflation accompanied by falling
interest rates.
While the Group acknowledges that economic distress can also stem from supply-side shocks
(characterised by high inflation and rising interest rates), the analysis suggested that the
impact of such scenarios on the ECL calculation is not currently significant. The Group will
continue to monitor the potential impact of supply-driven shocks on ECL and will incorporate
these considerations if they become material in future reporting periods.
(ii)Effective interest rate on lending
Estimates are made when calculating the EIR for loan assets. These include the likely customer
redemption profiles. Mortgage products offered by the Group include directly attributable net
fee income and a period on reversion rates after the fixed/discount period.
Products revert to the standard variable rate (SVR) or base rate plus a margin for the Kent
Reliance (OSB) brand, a SONIA/Base rate plus a margin for the Precise (CCFS) brand and a
LIBOR replacement rate/base rate for the InterBay brand. Subsequent to origination, changes
in actual and expected customer prepayment rates are reflected as increases or decreases in
the carrying value of loan assets with a corresponding increase or decrease in interest income.
The Group uses historical customer behaviours, expected take-up rate of retention products
and macroeconomic forecasts in its assessment of expected prepayment rates. Customer
prepayments in a fixed rate or incentive period can give rise to Early Repayment Charge
(ERC)\u00a0income.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates continued
Judgement is used in estimating the expected average life of a mortgage, to determine the
quantum and timing of redemptions that incur ERCs, the period over which net fee income is
recognised and the length of time customers spend on reversion after the fixed/discounted
period. Estimates are reviewed regularly and during 2025, the Group made small adjustments
to the average time on reversion reflecting latest observed behaviour. An additional adjustment
related to the intra-month recognition of received cash flows had the effect of removing 0.3
months in the average time spent in reversion across the Group\u2019s portfolios. The adverse EIR
adjustment for 2025 was \u00a310.5m (31 December 2024: adverse EIR adjustment of \u00a315.9m) which
reduced net interest income and loans and advances to customers.
The impact of a -/+ two months movement in time spent on reversion by Precise customers is -/
+ \u00a317.7m. \u00a313.9m of this total sensitivity relates to the \u00a32.5bn of loans with product terms
issued up to the end of 2022. These loans are from the annual cohorts identified as having
been written in a low-rate environment. The remaining \u00a33.8m sensitivity relates to the \u00a36.9bn in
loans with product terms issued from 2023 onwards, written in a higher-rate environment,
where the step-up in reversion is smaller.
As base rate increased throughout 2022 and 2023, using the EIR approach resulted in
additional monthly net interest income as the benefit of time spent on a reversion rate became
greater. Forward rates are used in the EIR calculation and a decrease greater than the current\u00a0
forward rate assumptions leads to a decrease in monthly net interest income. Based on the
loans and advances to customers, balance as at 31 December 2025, if there was a 50bps
parallel shift downwards in the forward curve, it is estimated that this would decrease monthly
interest income by \u00a31.3m across all mortgage portfolios.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccountingJudgementsAndEstimatesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-482": { "value": "
Estimates
The Group has made the following estimates in the application of the accounting policies that
have a significant risk of material adjustment to the carrying amount of assets and liabilities
within the next financial year:
(i)Loan book impairments
Set out below are details of the critical accounting estimates which underpin loan impairment
calculations, with only those that may result in a material impact over the next 12 months
being disclosed. The Group has recognised total impairments of \u00a3123.6m (2024: \u00a3 126.9m) at
the reporting date as disclosed in note 20.
Modelled impairment
Modelled provision assessments are also subject to estimation uncertainty, underpinned by\u00a0a
number of estimates being made by management which are utilised within impairment
calculations. Key areas of estimation within modelled provisioning calculations include those
regarding PD, LGD and forward-looking macroeconomic scenarios.
Probability of default model
The Group has a number of PD models, which include estimates regarding scorecards, survival
rates, prepayment rates and lifetime curves. The PD is sensitive to the application of
unemployment rates, with an uplift of the unemployment rate by 1% seen as a reasonable
change when reviewing historical and expected 12-month outcomes. The table below shows
the resulting incremental provision required in a 1% uplift in unemployment rate (2024: an 1%
uplift in unemployment rate) applied to all scenarios in perpetuity.
2025
2024
\u00a3m
\u00a3m
OSB
11.5
6.5
CCFS
1.3
2.0
Group
12.8
8.5
The Group\u2019s forecasts of unemployment rates used in the impairment models are disclosed in
the Risk profile performance review on page 62.
Loss given default model
The Group has a number of LGD models, which include estimates regarding propensity to go
to possession given default (PPD), forced sale discount, time to sale and sale costs. The LGD is
sensitive to the application of the HPI, with an 8% haircut (2024: an 8% haircut) seen to be a
reasonable downside movement within observed market volatility and is broadly consistent
with adverse but plausible macroeconomic conditions. The table below shows the resulting
incremental provision required in an 8% house price haircut (2024: an 8% house price haircut)
being directly applied to all exposures at 31 December 2025 which not only adjust the sale
discount but also the propensity to go to possession.
2025
2024
\u00a3m
\u00a3m
OSB
19.3
22.3
CCFS
5.8
9.1
Group
25.1
31.4
The Group\u2019s forecasts of HPI movements used in the impairment models are disclosed in the
Risk profile performance review on page 62.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates continued
Forward-looking macroeconomic scenarios
The forward-looking macroeconomic scenarios affect all model components of the ECL thus
the calculation remains sensitive to both the scenarios utilised and their associated
probability\u00a0weightings.
The Group has adopted an approach which utilises four macroeconomic scenarios.
These\u00a0scenarios are provided by a reputable economics advisory firm, providing management
and the Board with advice on which scenarios to utilise and the probability weightings to
attach to each scenario. A base case forecast is provided, together with a plausible upside
scenario. Two downside scenarios are also provided (downside and a severe downside). The
Group\u2019s macroeconomic scenarios can be found on page 62.
The following tables detail the ECL scenario sensitivity analysis with each scenario weighted at
100% probability. The sensitivity analysis is performed without considering the staging shifts
driven by relative or absolute PD thresholds. The purpose of using multiple economic scenarios
is to model the non-linear impact of assumptions surrounding macroeconomic factors and
incorporate them into the ECL calculation:
As at 31 December 2025
Weighted (see
note 20)
100% Base
case scenario
100% Upside
scenario
100%
Downside
scenario
100% Severe
downside
scenario
Total loans before provisions, \u00a3m
26,032.6
26,032.6
26,032.6
26,032.6
26,032.6
Modelled ECL, \u00a3m
74.6
56.8
48.4
98.8
176.4
Individually assessed provisions
ECL, \u00a3m
44.3
44.3
44.3
44.3
44.3
Post model adjustments ECL, \u00a3m
4.7
3.8
3.2
5.9
10.3
Total ECL, \u00a3m
123.6
104.9
95.9
149.0
231.0
ECL coverage, %
0.47
0.40
0.37
0.57
0.89
As at 31 December 2024
Weighted (see
note 20)
100% Base
case
scenario
100%
Upside
scenario
100%
Downside
scenario
100% Severe
downside
scenario
Total loans before provisions, \u00a3m
25,240.3
25,240.3
25,240.3
25,240.3
25,240.3
Modelled ECL, \u00a3m
79.6
63.6
53.2
114.5
153.0
Individually assessed provisions ECL,
\u00a3m
37.6
37.6
37.6
37.6
37.6
Post model adjustments ECL, \u00a3m
9.7
7.2
4.3
15.9
23.5
Total ECL, \u00a3m
126.9
108.4
95.1
168.0
214.1
ECL coverage, %
0.50
0.43
0.38
0.67
0.85
The Group\u2019s assessment of ECL primarily focuses on scenarios where economic distress is
driven by weak demand. These scenarios typically involve low inflation accompanied by falling
interest rates.
While the Group acknowledges that economic distress can also stem from supply-side shocks
(characterised by high inflation and rising interest rates), the analysis suggested that the
impact of such scenarios on the ECL calculation is not currently significant. The Group will
continue to monitor the potential impact of supply-driven shocks on ECL and will incorporate
these considerations if they become material in future reporting periods.
(ii)Effective interest rate on lending
Estimates are made when calculating the EIR for loan assets. These include the likely customer
redemption profiles. Mortgage products offered by the Group include directly attributable net
fee income and a period on reversion rates after the fixed/discount period.
Products revert to the standard variable rate (SVR) or base rate plus a margin for the Kent
Reliance (OSB) brand, a SONIA/Base rate plus a margin for the Precise (CCFS) brand and a
LIBOR replacement rate/base rate for the InterBay brand. Subsequent to origination, changes
in actual and expected customer prepayment rates are reflected as increases or decreases in
the carrying value of loan assets with a corresponding increase or decrease in interest income.
The Group uses historical customer behaviours, expected take-up rate of retention products
and macroeconomic forecasts in its assessment of expected prepayment rates. Customer
prepayments in a fixed rate or incentive period can give rise to Early Repayment Charge
(ERC)\u00a0income.
2.Judgements in applying accounting policies and critical
accounting\u00a0estimates continued
Judgement is used in estimating the expected average life of a mortgage, to determine the
quantum and timing of redemptions that incur ERCs, the period over which net fee income is
recognised and the length of time customers spend on reversion after the fixed/discounted
period. Estimates are reviewed regularly and during 2025, the Group made small adjustments
to the average time on reversion reflecting latest observed behaviour. An additional adjustment
related to the intra-month recognition of received cash flows had the effect of removing 0.3
months in the average time spent in reversion across the Group\u2019s portfolios. The adverse EIR
adjustment for 2025 was \u00a310.5m (31 December 2024: adverse EIR adjustment of \u00a315.9m) which
reduced net interest income and loans and advances to customers.
The impact of a -/+ two months movement in time spent on reversion by Precise customers is -/
+ \u00a317.7m. \u00a313.9m of this total sensitivity relates to the \u00a32.5bn of loans with product terms
issued up to the end of 2022. These loans are from the annual cohorts identified as having
been written in a low-rate environment. The remaining \u00a33.8m sensitivity relates to the \u00a36.9bn in
loans with product terms issued from 2023 onwards, written in a higher-rate environment,
where the step-up in reversion is smaller.
As base rate increased throughout 2022 and 2023, using the EIR approach resulted in
additional monthly net interest income as the benefit of time spent on a reversion rate became
greater. Forward rates are used in the EIR calculation and a decrease greater than the current\u00a0
forward rate assumptions leads to a decrease in monthly net interest income. Based on the
loans and advances to customers, balance as at 31 December 2025, if there was a 50bps
parallel shift downwards in the forward curve, it is estimated that this would decrease monthly
interest income by \u00a31.3m across all mortgage portfolios.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAssetsAndLiabilitiesWithSignificantRiskOfMaterialAdjustmentExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-481": { "value": "Estimates The Group has made the following estimates in the application of the accounting policies that have a significant risk of material adjustment to the carrying amount of assets and liabilities within the next financial year:(i)Loan book impairmentsSet out below are details of the critical accounting estimates which underpin loan impairment calculations, with only those that may result in a material impact over the next 12 months being disclosed. The Group has recognised total impairments of \u00a3123.6m (2024: \u00a3 126.9m) at the reporting date as disclosed in note 20.Modelled impairmentModelled provision assessments are also subject to estimation uncertainty, underpinned by\u00a0a number of estimates being made by management which are utilised within impairment calculations. Key areas of estimation within modelled provisioning calculations include those regarding PD, LGD and forward-looking macroeconomic scenarios. Probability of default model The Group has a number of PD models, which include estimates regarding scorecards, survival rates, prepayment rates and lifetime curves. The PD is sensitive to the application of unemployment rates, with an uplift of the unemployment rate by 1% seen as a reasonable change when reviewing historical and expected 12-month outcomes. The table below shows the resulting incremental provision required in a 1% uplift in unemployment rate (2024: an 1% uplift in unemployment rate) applied to all scenarios in perpetuity. 2025 2024 \u00a3m \u00a3m OSB 11.56.5CCFS 1.32.0Group 12.88.5The Group\u2019s forecasts of unemployment rates used in the impairment models are disclosed in the Risk profile performance review on page 62.Loss given default modelThe Group has a number of LGD models, which include estimates regarding propensity to go to possession given default (PPD), forced sale discount, time to sale and sale costs. The LGD is sensitive to the application of the HPI, with an 8% haircut (2024: an 8% haircut) seen to be a reasonable downside movement within observed market volatility and is broadly consistent with adverse but plausible macroeconomic conditions. The table below shows the resulting incremental provision required in an 8% house price haircut (2024: an 8% house price haircut) being directly applied to all exposures at 31 December 2025 which not only adjust the sale discount but also the propensity to go to possession.2025 2024 \u00a3m \u00a3m OSB 19.322.3CCFS 5.89.1Group 25.131.4The Group\u2019s forecasts of HPI movements used in the impairment models are disclosed in the Risk profile performance review on page 62.2.Judgements in applying accounting policies and critical accounting\u00a0estimates continuedForward-looking macroeconomic scenariosThe forward-looking macroeconomic scenarios affect all model components of the ECL thus the calculation remains sensitive to both the scenarios utilised and their associated probability\u00a0weightings.The Group has adopted an approach which utilises four macroeconomic scenarios. These\u00a0scenarios are provided by a reputable economics advisory firm, providing management and the Board with advice on which scenarios to utilise and the probability weightings to attach to each scenario. A base case forecast is provided, together with a plausible upside scenario. Two downside scenarios are also provided (downside and a severe downside). The Group\u2019s macroeconomic scenarios can be found on page 62.The following tables detail the ECL scenario sensitivity analysis with each scenario weighted at 100% probability. The sensitivity analysis is performed without considering the staging shifts driven by relative or absolute PD thresholds. The purpose of using multiple economic scenarios is to model the non-linear impact of assumptions surrounding macroeconomic factors and incorporate them into the ECL calculation:As at 31 December 2025 Weighted (see note 20) 100% Base case scenario100% Upside scenario100% Downside scenario 100% Severe downside scenarioTotal loans before provisions, \u00a3m 26,032.6 26,032.6 26,032.6 26,032.6 26,032.6 Modelled ECL, \u00a3m 74.6 56.8 48.4 98.8 176.4 Individually assessed provisions ECL, \u00a3m44.3 44.3 44.3 44.3 44.3 Post model adjustments ECL, \u00a3m 4.7 3.8 3.2 5.9 10.3 Total ECL, \u00a3m 123.6 104.9 95.9 149.0 231.0 ECL coverage, % 0.47 0.40 0.37 0.57 0.89 As at 31 December 2024 Weighted (see note 20) 100% Base case scenario100% Upside scenario100% Downside scenario 100% Severe downside scenarioTotal loans before provisions, \u00a3m 25,240.325,240.325,240.325,240.325,240.3Modelled ECL, \u00a3m 79.663.653.2114.5153.0Individually assessed provisions ECL, \u00a3m 37.637.637.637.637.6Post model adjustments ECL, \u00a3m 9.77.24.315.923.5Total ECL, \u00a3m 126.9 108.4 95.1 168.0 214.1 ECL coverage, % 0.50 0.43 0.38 0.67 0.85 The Group\u2019s assessment of ECL primarily focuses on scenarios where economic distress is driven by weak demand. These scenarios typically involve low inflation accompanied by falling interest rates.While the Group acknowledges that economic distress can also stem from supply-side shocks (characterised by high inflation and rising interest rates), the analysis suggested that the impact of such scenarios on the ECL calculation is not currently significant. The Group will continue to monitor the potential impact of supply-driven shocks on ECL and will incorporate these considerations if they become material in future reporting periods.(ii)Effective interest rate on lendingEstimates are made when calculating the EIR for loan assets. These include the likely customer redemption profiles. Mortgage products offered by the Group include directly attributable net fee income and a period on reversion rates after the fixed/discount period. Products revert to the standard variable rate (SVR) or base rate plus a margin for the Kent Reliance (OSB) brand, a SONIA/Base rate plus a margin for the Precise (CCFS) brand and a LIBOR replacement rate/base rate for the InterBay brand. Subsequent to origination, changes in actual and expected customer prepayment rates are reflected as increases or decreases in the carrying value of loan assets with a corresponding increase or decrease in interest income. The Group uses historical customer behaviours, expected take-up rate of retention products and macroeconomic forecasts in its assessment of expected prepayment rates. Customer prepayments in a fixed rate or incentive period can give rise to Early Repayment Charge (ERC)\u00a0income.2.Judgements in applying accounting policies and critical accounting\u00a0estimates continuedJudgement is used in estimating the expected average life of a mortgage, to determine the quantum and timing of redemptions that incur ERCs, the period over which net fee income is recognised and the length of time customers spend on reversion after the fixed/discounted period. Estimates are reviewed regularly and during 2025, the Group made small adjustments to the average time on reversion reflecting latest observed behaviour. An additional adjustment related to the intra-month recognition of received cash flows had the effect of removing 0.3 months in the average time spent in reversion across the Group\u2019s portfolios. The adverse EIR adjustment for 2025 was \u00a310.5m (31 December 2024: adverse EIR adjustment of \u00a315.9m) which reduced net interest income and loans and advances to customers. The impact of a -/+ two months movement in time spent on reversion by Precise customers is -/+ \u00a317.7m. \u00a313.9m of this total sensitivity relates to the \u00a32.5bn of loans with product terms issued up to the end of 2022. These loans are from the annual cohorts identified as having been written in a low-rate environment. The remaining \u00a33.8m sensitivity relates to the \u00a36.9bn in loans with product terms issued from 2023 onwards, written in a higher-rate environment, where the step-up in reversion is smaller.As base rate increased throughout 2022 and 2023, using the EIR approach resulted in additional monthly net interest income as the benefit of time spent on a reversion rate became greater. Forward rates are used in the EIR calculation and a decrease greater than the current\u00a0 forward rate assumptions leads to a decrease in monthly net interest income. Based on the loans and advances to customers, balance as at 31 December 2025, if there was a 50bps parallel shift downwards in the forward curve, it is estimated that this would decrease monthly interest income by \u00a31.3m across all mortgage portfolios.", "dimensions": { "concept": "ifrs-full:ExplanationOfAssumptionAboutFutureWithSignificantRiskOfResultingInMaterialAdjustments", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-488": { "value": "
3.Interest receivable and similar income
2025
2024
\u00a3m
\u00a3m
At amortised cost:
On OSB mortgages 1
946.4
858.6
On CCFS mortgages 2
579.6
627.4
On finance leases
26.4
17.9
On investment securities
44.4
30.7
On other liquid assets 3
117.9
173.7
Amortisation of fair value adjustments on CCFS loan book at
Combination
\u2013
(24.4)
Amortisation of fair value adjustments on hedged assets 4
23.0
20.5
1,737.7
1,704.4
At FVTPL:
Net income on derivative financial instruments \u2013 lending and
investment activities
144.5
384.3
On investment securities
18.5
1.6
163.0
385.9
At FVOCI:
On investment securities
14.1
9.0
1,914.8
2,099.3
1.Includes adverse EIR behavioural adjustment of \u00a33.4m ( 2024: \u00a33.1m adverse).
2.Includes adverse EIR behavioural adjustment of \u00a37.1m (2024: \u00a312.8m adverse).
3.Includes primarily interest income on BoE call account, call accounts with other banks and on cash margin with swap
counterparties.
4.The amortisation relates to hedged assets where the hedges were terminated before maturity and were effective at the
point of termination.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-487": { "value": "
3.Interest receivable and similar income
2025
2024
\u00a3m
\u00a3m
At amortised cost:
On OSB mortgages 1
946.4
858.6
On CCFS mortgages 2
579.6
627.4
On finance leases
26.4
17.9
On investment securities
44.4
30.7
On other liquid assets 3
117.9
173.7
Amortisation of fair value adjustments on CCFS loan book at
Combination
\u2013
(24.4)
Amortisation of fair value adjustments on hedged assets 4
23.0
20.5
1,737.7
1,704.4
At FVTPL:
Net income on derivative financial instruments \u2013 lending and
investment activities
144.5
384.3
On investment securities
18.5
1.6
163.0
385.9
At FVOCI:
On investment securities
14.1
9.0
1,914.8
2,099.3
1.Includes adverse EIR behavioural adjustment of \u00a33.4m ( 2024: \u00a33.1m adverse).
2.Includes adverse EIR behavioural adjustment of \u00a37.1m (2024: \u00a312.8m adverse).
3.Includes primarily interest income on BoE call account, call accounts with other banks and on cash margin with swap
counterparties.
4.The amortisation relates to hedged assets where the hedges were terminated before maturity and were effective at the
point of termination.
4.Interest payable and similar charges
2025
2024
\u00a3m
\u00a3m
At amortised cost:
On retail deposits
1,024.6
1,118.1
On BoE borrowings
40.6
113.8
On debt securities in issue
51.0
62.7
On senior notes
64.7
63.5
On subordinated debt liabilities
25.3
25.3
On wholesale borrowings
20.5
17.7
On Perpetual Subordinated Bonds
\u2013
0.5
On lease liabilities
0.2
0.3
1,226.9
1,401.9
At FVTPL:
Net expense on derivative financial instruments \u2013 savings
activities
4.7
20.5
Net expense on derivative financial instruments \u2013
subordinated debt liabilities and senior notes
1.4
7.2
Net expense on derivative financial instruments \u2013 structural
hedge
2.4
3.3
1,235.4
1,432.9
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExpenseExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-486": { "value": "
3.Interest receivable and similar income
2025
2024
\u00a3m
\u00a3m
At amortised cost:
On OSB mortgages 1
946.4
858.6
On CCFS mortgages 2
579.6
627.4
On finance leases
26.4
17.9
On investment securities
44.4
30.7
On other liquid assets 3
117.9
173.7
Amortisation of fair value adjustments on CCFS loan book at
Combination
\u2013
(24.4)
Amortisation of fair value adjustments on hedged assets 4
23.0
20.5
1,737.7
1,704.4
At FVTPL:
Net income on derivative financial instruments \u2013 lending and
investment activities
144.5
384.3
On investment securities
18.5
1.6
163.0
385.9
At FVOCI:
On investment securities
14.1
9.0
1,914.8
2,099.3
1.Includes adverse EIR behavioural adjustment of \u00a33.4m ( 2024: \u00a33.1m adverse).
2.Includes adverse EIR behavioural adjustment of \u00a37.1m (2024: \u00a312.8m adverse).
3.Includes primarily interest income on BoE call account, call accounts with other banks and on cash margin with swap
counterparties.
4.The amortisation relates to hedged assets where the hedges were terminated before maturity and were effective at the
point of termination.
4.Interest payable and similar charges
2025
2024
\u00a3m
\u00a3m
At amortised cost:
On retail deposits
1,024.6
1,118.1
On BoE borrowings
40.6
113.8
On debt securities in issue
51.0
62.7
On senior notes
64.7
63.5
On subordinated debt liabilities
25.3
25.3
On wholesale borrowings
20.5
17.7
On Perpetual Subordinated Bonds
\u2013
0.5
On lease liabilities
0.2
0.3
1,226.9
1,401.9
At FVTPL:
Net expense on derivative financial instruments \u2013 savings
activities
4.7
20.5
Net expense on derivative financial instruments \u2013
subordinated debt liabilities and senior notes
1.4
7.2
Net expense on derivative financial instruments \u2013 structural
hedge
2.4
3.3
1,235.4
1,432.9
19.Finance leases
The Group provides asset finance lending through InterBay Asset Finance Limited.
2025
2024
\u00a3m
\u00a3m
Gross investment in finance leases, receivable
Less than one year
160.2
120.3
Between one and two years
131.3
97.7
Between two and three years
94.6
74.0
Between three and four years
58.1
42.2
Between four and five years
25.3
18.9
More than five years
7.6
4.8
477.1
357.9
Unearned finance income
(52.9)
(41.0)
Net investment in finance leases
424.2
316.9
Net investment in finance leases, receivable
Less than one year
136.3
102.0
Between one and two years
115.7
85.6
Between two and three years
86.1
67.4
Between three and four years
54.4
39.3
Between four and five years
24.3
18.0
More than five years
7.4
4.6
424.2
316.9
The Group has recognised \u00a36.3m of ECLs on finance leases as at 31 December 2025 (2024:
\u00a34.1m). During the year, originations in InterBay Asset Finance Limited amounted to \u00a3242.1m
( 2024: \u00a3182.1m).
25.Property, plant and equipment
Freehold land
and buildings
Development
asset
Leasehold
improvements
Equipment and
fixtures
Plant
Right-of-use assets
Property leases
Other leases
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
As at 1 January 2024
20.3
\u2013
3.0
18.8
\u2013
15.8
5.7
63.6
Additions 1
\u2013
11.8
0.6
3.8
\u2013
0.9
\u2013
17.1
Transfer during the year
3.7
(4.1)
0.3
0.1
\u2013
\u2013
\u2013
\u2013
Disposals and write-offs 2
\u2013
\u2013
\u2013
(2.9)
\u2013
\u2013
\u2013
(2.9)
As at 31 December 2024
24.0
7.7
3.9
19.8
\u2013
16.7
5.7
77.8
Additions 1
0.1
1.2
0.4
1.9
2.0
\u2013
\u2013
5.6
Transfer during the year
\u2013
(8.6)
0.1
(0.9)
9.4
\u2013
\u2013
\u2013
Disposals and write-offs 2
(3.4)
\u2013
(1.0)
(2.0)
\u2013
(3.3)
\u2013
(9.7)
Foreign exchange difference
(1.8)
\u2013
\u2013
(0.8)
\u2013
\u2013
\u2013
(2.6)
As at 31 December 2025
18.9
0.3
3.4
18.0
11.4
13.4
5.7
71.1
Accumulated depreciation
As at 1 January 2024
2.0
\u2013
1.5
9.1
\u2013
6.8
0.4
19.8
Charged in year
0.3
\u2013
0.3
3.3
\u2013
2.4
\u2013
6.3
Disposals and write-offs 2
\u2013
\u2013
\u2013
(2.9)
\u2013
\u2013
\u2013
(2.9)
As at 31 December 2024
2.3
\u2013
1.8
9.5
\u2013
9.2
0.4
23.2
Charged in year
0.3
\u2013
0.4
3.3
0.3
2.4
\u2013
6.7
Disposals and write-offs 2
(0.8)
\u2013
(0.7)
(1.9)
\u2013
(2.6)
\u2013
(6.0)
Foreign exchange difference
\u2013
\u2013
\u2013
(0.6)
\u2013
\u2013
\u2013
(0.6)
As at 31 December 2025
1.8
\u2013
1.5
10.3
0.3
9.0
0.4
23.3
Net book value
As at 31 December 2025
17.1
0.3
1.9
7.7
11.1
4.4
5.3
47.8
As at 31 December 2024
21.7
7.7
2.1
10.3
\u2013
7.5
5.3
54.6
1.Additions include property lease modifications of nil (2024: \u00a30.5m) of right-of-use assets.
2.Disposals and write-offs include derecognition of fully depreciated assets and assets reclassified as held for sale.
31.Lease liabilities
2025
2024
\u00a3m
\u00a3m
As at 1 January
9.1
11.2
New leases
\u2013
0.6
Lease termination
(0.9)
\u2013
Lease modification
\u2013
(0.8)
Lease repayments
(2.1)
(2.2)
Interest accruals
0.2
0.3
As at 31 December
6.3
9.1
During the year, the Group incurred expenses of nil ( 2024: \u00a30.2m ) in relation to short-term
leases and \u00a30.1m (2024: \u00a30.1m) in relation to low value leases.
", "dimensions": { "concept": "ifrs-full:DisclosureOfLeasesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-485": { "value": "
3.Interest receivable and similar income
2025
2024
\u00a3m
\u00a3m
At amortised cost:
On OSB mortgages 1
946.4
858.6
On CCFS mortgages 2
579.6
627.4
On finance leases
26.4
17.9
On investment securities
44.4
30.7
On other liquid assets 3
117.9
173.7
Amortisation of fair value adjustments on CCFS loan book at
Combination
\u2013
(24.4)
Amortisation of fair value adjustments on hedged assets 4
23.0
20.5
1,737.7
1,704.4
At FVTPL:
Net income on derivative financial instruments \u2013 lending and
investment activities
144.5
384.3
On investment securities
18.5
1.6
163.0
385.9
At FVOCI:
On investment securities
14.1
9.0
1,914.8
2,099.3
1.Includes adverse EIR behavioural adjustment of \u00a33.4m ( 2024: \u00a33.1m adverse).
2.Includes adverse EIR behavioural adjustment of \u00a37.1m (2024: \u00a312.8m adverse).
3.Includes primarily interest income on BoE call account, call accounts with other banks and on cash margin with swap
counterparties.
4.The amortisation relates to hedged assets where the hedges were terminated before maturity and were effective at the
point of termination.
7.Other operating income
2025
2024
\u00a3m
\u00a3m
Interest received on mortgages held at FVTPL
0.7
0.9
Fees and commissions receivable
5.5
3.8
Other income
1.1
\u2013
7.3
4.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-484": { "value": "
3.Interest receivable and similar income
2025
2024
\u00a3m
\u00a3m
At amortised cost:
On OSB mortgages 1
946.4
858.6
On CCFS mortgages 2
579.6
627.4
On finance leases
26.4
17.9
On investment securities
44.4
30.7
On other liquid assets 3
117.9
173.7
Amortisation of fair value adjustments on CCFS loan book at
Combination
\u2013
(24.4)
Amortisation of fair value adjustments on hedged assets 4
23.0
20.5
1,737.7
1,704.4
At FVTPL:
Net income on derivative financial instruments \u2013 lending and
investment activities
144.5
384.3
On investment securities
18.5
1.6
163.0
385.9
At FVOCI:
On investment securities
14.1
9.0
1,914.8
2,099.3
1.Includes adverse EIR behavioural adjustment of \u00a33.4m ( 2024: \u00a33.1m adverse).
2.Includes adverse EIR behavioural adjustment of \u00a37.1m (2024: \u00a312.8m adverse).
3.Includes primarily interest income on BoE call account, call accounts with other banks and on cash margin with swap
counterparties.
4.The amortisation relates to hedged assets where the hedges were terminated before maturity and were effective at the
point of termination.
4.Interest payable and similar charges
2025
2024
\u00a3m
\u00a3m
At amortised cost:
On retail deposits
1,024.6
1,118.1
On BoE borrowings
40.6
113.8
On debt securities in issue
51.0
62.7
On senior notes
64.7
63.5
On subordinated debt liabilities
25.3
25.3
On wholesale borrowings
20.5
17.7
On Perpetual Subordinated Bonds
\u2013
0.5
On lease liabilities
0.2
0.3
1,226.9
1,401.9
At FVTPL:
Net expense on derivative financial instruments \u2013 savings
activities
4.7
20.5
Net expense on derivative financial instruments \u2013
subordinated debt liabilities and senior notes
1.4
7.2
Net expense on derivative financial instruments \u2013 structural
hedge
2.4
3.3
1,235.4
1,432.9
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceIncomeExpenseExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-483": { "value": "
3.Interest receivable and similar income
2025
2024
\u00a3m
\u00a3m
At amortised cost:
On OSB mortgages 1
946.4
858.6
On CCFS mortgages 2
579.6
627.4
On finance leases
26.4
17.9
On investment securities
44.4
30.7
On other liquid assets 3
117.9
173.7
Amortisation of fair value adjustments on CCFS loan book at
Combination
\u2013
(24.4)
Amortisation of fair value adjustments on hedged assets 4
23.0
20.5
1,737.7
1,704.4
At FVTPL:
Net income on derivative financial instruments \u2013 lending and
investment activities
144.5
384.3
On investment securities
18.5
1.6
163.0
385.9
At FVOCI:
On investment securities
14.1
9.0
1,914.8
2,099.3
1.Includes adverse EIR behavioural adjustment of \u00a33.4m ( 2024: \u00a33.1m adverse).
2.Includes adverse EIR behavioural adjustment of \u00a37.1m (2024: \u00a312.8m adverse).
3.Includes primarily interest income on BoE call account, call accounts with other banks and on cash margin with swap
counterparties.
4.The amortisation relates to hedged assets where the hedges were terminated before maturity and were effective at the
point of termination.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestIncomeExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-490": { "value": "
4.Interest payable and similar charges
2025
2024
\u00a3m
\u00a3m
At amortised cost:
On retail deposits
1,024.6
1,118.1
On BoE borrowings
40.6
113.8
On debt securities in issue
51.0
62.7
On senior notes
64.7
63.5
On subordinated debt liabilities
25.3
25.3
On wholesale borrowings
20.5
17.7
On Perpetual Subordinated Bonds
\u2013
0.5
On lease liabilities
0.2
0.3
1,226.9
1,401.9
At FVTPL:
Net expense on derivative financial instruments \u2013 savings
activities
4.7
20.5
Net expense on derivative financial instruments \u2013
subordinated debt liabilities and senior notes
1.4
7.2
Net expense on derivative financial instruments \u2013 structural
hedge
2.4
3.3
1,235.4
1,432.9
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinanceCostExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-489": { "value": "
4.Interest payable and similar charges
2025
2024
\u00a3m
\u00a3m
At amortised cost:
On retail deposits
1,024.6
1,118.1
On BoE borrowings
40.6
113.8
On debt securities in issue
51.0
62.7
On senior notes
64.7
63.5
On subordinated debt liabilities
25.3
25.3
On wholesale borrowings
20.5
17.7
On Perpetual Subordinated Bonds
\u2013
0.5
On lease liabilities
0.2
0.3
1,226.9
1,401.9
At FVTPL:
Net expense on derivative financial instruments \u2013 savings
activities
4.7
20.5
Net expense on derivative financial instruments \u2013
subordinated debt liabilities and senior notes
1.4
7.2
Net expense on derivative financial instruments \u2013 structural
hedge
2.4
3.3
1,235.4
1,432.9
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestExpenseExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-493": { "value": "
5.Fair value losses on financial instruments
2025
2024
\u00a3m
\u00a3m
Fair value changes in hedged assets
248.3
31.7
Hedging of assets
(251.8)
(53.6)
Fair value changes in hedged liabilities
(19.0)
37.9
Hedging of liabilities
20.8
(35.8)
Ineffective portion of hedges
(1.7)
(19.8)
Net (losses)/gains on unmatched swaps
(16.2)
21.2
Amortisation of inception adjustments
(9.4)
(5.5)
Amortisation of acquisition-related inception adjustments
\u2013
2.3
Amortisation of de-designated hedge relationships
3.9
(0.9)
Fair value movements on mortgages at FVTPL
0.3
0.7
Fair value movements on loans and advances to credit
institutions at FVTPL
\u2013
0.5
Fair value movements on investment securities at FVTPL
0.9
\u2013
Debit and credit valuation adjustment
0.1
\u2013
(22.1)
(1.5)
6.Gain/(loss) on sale of financial assets held at amortised cost
In September 2025, the Group sold its second charge portfolio for proceeds of \u00a3134.2m. The
Group recognised a profit on sale of \u00a33.4m from this transaction.
In December 2024, the Group completed PMF 2024-2 transaction which securitised \u00a31,249.9m
of CCFS Buy-to-Let (BTL) mortgages. The Group recognised a loss on sale of \u00a32.4m from this
transaction.
42.Financial instruments and fair values
i.Financial assets and financial liabilities
The following tables set out the classification of financial instruments in the Consolidated Statement of Financial Position:
2025
FVTPL 1
FVOCI
Amortised
cost
Total
carrying
amount
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Cash in hand
\u2013
\u2013
0.4
0.4
Loans and advances to credit
institutions
15
\u2013
\u2013
3,053.0
3,053.0
Investment securities
16
400.8
448.8
964.9
1,814.5
Loans and advances to customers
17
11.6
\u2013
25,909.0
25,920.6
Derivative assets
22
101.4
\u2013
\u2013
101.4
Other assets 2
24
\u2013
\u2013
2.2
2.2
513.8
448.8
29,929.5
30,892.1
Liabilities
Amounts owed to retail depositors
28
\u2013
\u2013
24,251.1
24,251.1
Amounts owed to credit institutions
27
\u2013
\u2013
1,838.1
1,838.1
Amounts owed to other customers
29
\u2013
\u2013
478.4
478.4
Debt securities in issue
30
\u2013
\u2013
1,010.0
1,010.0
Derivative liabilities
22
152.0
\u2013
\u2013
152.0
Other liabilities 3
32
\u2013
\u2013
70.4
70.4
Senior notes
34
\u2013
\u2013
723.4
723.4
Subordinated debt liabilities
35
\u2013
\u2013
260.1
260.1
152.0
\u2013
28,631.5
28,783.5
1.All FVTPL assets and liabilities are mandatorily measured as such.
2.Balance excludes prepayments.
3.Balance excludes deferred income.
2024
FVTPL 1
FVOCI
Amortised
cost
Total
carrying
amount
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Cash in hand
\u2013
\u2013
0.3
0.3
Loans and advances to credit
institutions
15
\u2013
\u2013
3,405.9
3,405.9
Investment securities
16
410.1
226.0
798.3
1,434.4
Loans and advances to customers
17
12.9
\u2013
25,113.4
25,126.3
Derivative assets
22
313.8
\u2013
\u2013
313.8
Other assets 2
24
\u2013
\u2013
1.7
1.7
736.8
226.0
29,319.6
30,282.4
Liabilities
Amounts owed to retail depositors
28
\u2013
\u2013
23,820.3
23,820.3
Amounts owed to credit institutions
27
\u2013
\u2013
1,935.2
1,935.2
Amounts owed to other customers
29
\u2013
\u2013
104.9
104.9
Debt securities in issue
30
\u2013
\u2013
1,018.3
1,018.3
Derivative liabilities
22
81.9
\u2013
\u2013
81.9
Other liabilities 3
32
\u2013
\u2013
56.2
56.2
Senior notes
34
\u2013
\u2013
722.7
722.7
Subordinated debt liabilities
35
\u2013
\u2013
259.8
259.8
81.9
\u2013
27,917.4
27,999.3
1.All FVTPL assets and liabilities are mandatorily measured as such.
2.Balance excludes prepayments.
3.Balance excludes deferred income.
The Group has no non-derivative financial assets or financial liabilities classified as held
for\u00a0trading.
The designation at FVTPL for all financial assets is applied at inception.
42.Financial instruments and fair values continued
ii.Fair values
The following tables summarise the carrying value and estimated fair value of financial
instruments not measured at fair value in the Consolidated Statement of Financial Position:
2025
2024
Carrying value
Estimated fair
value
Carrying value
Estimated fair
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Cash in hand
0.4
0.4
0.3
0.3
Loans and advances to credit
institutions
3,053.0
3,053.0
3,405.9
3,405.9
Investment securities
964.9
965.6
798.3
796.0
Loans and advances to
customers
25,909.0
25,738.4
25,113.4
24,843.5
Other assets 1
2.2
2.2
1.7
1.7
29,929.5
29,759.6
29,319.6
29,047.4
Liabilities
Amounts owed to retail
depositors
24,251.1
24,328.5
23,820.3
23,806.8
Amounts owed to credit
institutions
1,838.1
1,838.1
1,935.2
1,935.2
Amounts owed to other
customers
478.4
478.4
104.9
104.9
Debt securities in issue
1,010.0
1,010.0
1,018.3
1,018.3
Other liabilities 2
70.4
70.4
56.2
56.2
Senior notes
723.4
768.0
722.7
763.0
Subordinated debt liabilities
260.1
276.1
259.8
273.5
28,631.5
28,769.5
27,917.4
27,957.9
1.Balance excludes prepayments.
2.Balance excludes deferred income.
The fair values in these tables are estimated using the valuation techniques below.
The\u00a0estimated fair value is stated as at 31 December and may be significantly different
from\u00a0the amounts which will actually be paid on the maturity or settlement dates of each
financial instrument.
Cash in hand
This represents physical cash across the Group\u2019s branch network where fair value is
considered to be equal to carrying value.
Loans and advances to credit institutions
This mainly represents the Group\u2019s working capital current accounts and call accounts with
central governments and other banks with an original maturity of less than three months. Fair
value is not considered to be materially different to carrying value.
Investment securities
Investment securities\u2019 fair values are provided by a third party and are based on the market
values of the financial instruments.
Loans and advances to customers
This mainly represents secured mortgage lending to customers. The fair value of fixed rate
mortgages has been estimated by discounting future cash flows at current market rates of
interest based on the SONIA forward curve. Future cash flows include the impact of ECL. The
interest rate on variable rate mortgages is considered to be equal to current market product
rates and as such fair value is estimated to be equal to carrying value.
Other assets
Other assets disclosed in the table above exclude prepayments and the fair value is considered
to be equal to carrying value.
Amounts owed to retail depositors
The fair value of fixed rate retail deposits has been estimated by discounting future cash flows
at current market rates of interest based on the SONIA forward curve. Retail deposits at
variable rates and deposits payable on demand are considered to be at current market rates
and as such fair value is estimated to be equal to carrying value.
Amounts owed to credit institutions
This mainly represents amounts drawn down under the BoE TFSME, ILTR and commercial
repos. Fair value is considered to be equal to carrying value.
Amounts owed to other customers
This represents saving products to corporations and local authorities. The fair value of fixed
rate deposits is estimated by discounting future cash flows at current market rates of interest
based on the SONIA forward curve. Deposits at variable rates are considered to be at current
market rates and the fair value is estimated to be equal to carrying value.
42.Financial instruments and fair values continued
Debt securities in issue
While the Group\u2019s debt securities in issue are listed, the quoted prices for an individual note
may not be indicative of the fair value of the issue as a whole, due to the specialised nature of
the market in such instruments and the limited number of investors participating in it. Fair
value is not considered to be materially different to carrying value.
Other liabilities
Other liabilities disclosed in the table above exclude deferred income and the fair value is
considered to be equal to carrying value.
Senior notes and Subordinated debt liabilities
The senior notes and subordinated debt liabilities are listed on the London Stock Exchange
with fair value being the quoted market price at the reporting date.
iii.Fair value classification
The Group classifies fair value measurements using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The following tables provide an
analysis of financial assets and financial liabilities measured at fair value in the Consolidated
Statement of Financial Position grouped into Levels 1 to 3 based on the degree to which the fair
value is observable:
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Investment securities
849.6
842.4
299.9
549.6
0.1
849.6
Loans and advances
to customers
11.6
13.4
\u2013
\u2013
11.6
11.6
Derivative assets
101.4
16,448.7
\u2013
101.4
\u2013
101.4
962.6
17,304.5
299.9
651.0
11.7
962.6
Financial liabilities
Derivative liabilities
152.0
15,816.1
\u2013
152.0
\u2013
152.0
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Investment securities
636.1
638.3
226.0
409.8
0.3
636.1
Loans and advances
to customers
12.9
14.9
\u2013
\u2013
12.9
12.9
Derivative assets
313.8
16,474.8
\u2013
313.8
\u2013
313.8
962.8
17,128.0
226.0
723.6
13.2
962.8
Financial liabilities
Derivative liabilities
81.9
11,291.4
\u2013
81.9
\u2013
81.9
Level 1: Fair values that are based entirely on quoted market prices (unadjusted) in an actively
traded market for identical assets and liabilities that the Group has the ability to access.
Valuation adjustments and block discounts are not applied to Level 1 instruments. Since
valuations are based on readily available observable market prices, this makes them most
reliable, reduces the need for management judgement and estimation and also reduces the
uncertainty associated with determining fair values.
Level 2: Fair values that are based on one or more quoted prices in markets that are not active
or for which all significant inputs are taken from directly or indirectly observable market data.
These include valuation models used to calculate the present value of expected future cash
flows and may be employed either when no active market exists or when there are no quoted
prices available for similar instruments in active markets.
Level 3: Fair values for which any one or more significant input is not based on observable
market data and the unobservable inputs have a significant effect on the instrument\u2019s fair
value. Valuation models that employ significant unobservable inputs require a higher degree of
management judgement and estimation in determining the fair value. Management judgement
and estimation are usually required for the selection of the appropriate valuation model to be
used, determination of expected future cash flows on the financial instruments being valued,
determination of the probability of counterparty default and prepayments, determination of
expected volatilities and correlations and the selection of appropriate discount rates.
42.Financial instruments and fair values continued
The following tables provide an analysis of financial assets and financial liabilities not
measured at fair value in the Consolidated Statement of Financial Position grouped into Levels
1 to 3 based on the degree to which the fair value is observable:
Estimated fair value
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Cash in hand
0.4
0.4
\u2013
0.4
\u2013
0.4
Loans and advances
to credit institutions
3,053.0
3,048.4
\u2013
3,053.0
\u2013
3,053.0
Investment securities
964.9
954.6
\u2013
965.6
\u2013
965.6
Loans and advances
to customers
25,909.0
26,135.8
\u2013
2,044.4
23,694.0
25,738.4
Other assets 1
2.2
2.2
\u2013
2.2
\u2013
2.2
29,929.5
30,141.4
\u2013
6,065.6
23,694.0
29,759.6
Financial liabilities
Amounts owed to
retail depositors
24,251.1
23,894.4
\u2013
11,079.6
13,248.9
24,328.5
Amounts owed to
credit institutions
1,838.1
1,827.3
\u2013
1,838.1
\u2013
1,838.1
Amounts owed to
other customers
478.4
454.5
\u2013
\u2013
478.4
478.4
Debt securities in
issue
1,010.0
1,008.0
\u2013
1,010.0
\u2013
1,010.0
Other liabilities 2
70.4
70.4
\u2013
70.4
\u2013
70.4
Senior notes
723.4
700.0
\u2013
768.0
\u2013
768.0
Subordinated debt
liabilities
260.1
250.0
\u2013
276.1
\u2013
276.1
28,631.5
28,204.6
\u2013
15,042.2
13,727.3
28,769.5
1.Balance excludes prepayments.
2.Balance excludes deferred income.
Estimated fair value
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Cash in hand
0.3
0.3
\u2013
0.3
\u2013
0.3
Loans and advances
to credit institutions
3,405.9
3,400.1
\u2013
3,405.9
\u2013
3,405.9
Investment securities
798.3
793.2
\u2013
796.0
\u2013
796.0
Loans and advances
to customers
25,113.4
25,313.6
\u2013
2,183.0
22,660.5
24,843.5
Other assets 1
1.7
1.7
\u2013
1.7
\u2013
1.7
29,319.6
29,508.9
\u2013
6,386.9
22,660.5
29,047.4
Financial liabilities
Amounts owed to
retail depositors
23,820.3
23,412.5
\u2013
8,464.0
15,342.8
23,806.8
Amounts owed to
credit institutions
1,935.2
1,913.0
\u2013
1,935.2
\u2013
1,935.2
Amounts owed to
other customers
104.9
103.1
\u2013
\u2013
104.9
104.9
Debt securities in
issue
1,018.3
1,016.2
\u2013
1,018.3
\u2013
1,018.3
Other liabilities 2
56.2
56.2
\u2013
56.2
\u2013
56.2
Senior notes
722.7
700.0
\u2013
763.0
\u2013
763.0
Subordinated debt
liabilities
259.8
250.0
\u2013
273.5
\u2013
273.5
27,917.4
27,451.0
\u2013
12,510.2
15,447.7
27,957.9
1.Balance excludes prepayments.
2.Balance excludes deferred income.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-492": { "value": "
5.Fair value losses on financial instruments
2025
2024
\u00a3m
\u00a3m
Fair value changes in hedged assets
248.3
31.7
Hedging of assets
(251.8)
(53.6)
Fair value changes in hedged liabilities
(19.0)
37.9
Hedging of liabilities
20.8
(35.8)
Ineffective portion of hedges
(1.7)
(19.8)
Net (losses)/gains on unmatched swaps
(16.2)
21.2
Amortisation of inception adjustments
(9.4)
(5.5)
Amortisation of acquisition-related inception adjustments
\u2013
2.3
Amortisation of de-designated hedge relationships
3.9
(0.9)
Fair value movements on mortgages at FVTPL
0.3
0.7
Fair value movements on loans and advances to credit
institutions at FVTPL
\u2013
0.5
Fair value movements on investment securities at FVTPL
0.9
\u2013
Debit and credit valuation adjustment
0.1
\u2013
(22.1)
(1.5)
42.Financial instruments and fair values
i.Financial assets and financial liabilities
The following tables set out the classification of financial instruments in the Consolidated Statement of Financial Position:
2025
FVTPL 1
FVOCI
Amortised
cost
Total
carrying
amount
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Cash in hand
\u2013
\u2013
0.4
0.4
Loans and advances to credit
institutions
15
\u2013
\u2013
3,053.0
3,053.0
Investment securities
16
400.8
448.8
964.9
1,814.5
Loans and advances to customers
17
11.6
\u2013
25,909.0
25,920.6
Derivative assets
22
101.4
\u2013
\u2013
101.4
Other assets 2
24
\u2013
\u2013
2.2
2.2
513.8
448.8
29,929.5
30,892.1
Liabilities
Amounts owed to retail depositors
28
\u2013
\u2013
24,251.1
24,251.1
Amounts owed to credit institutions
27
\u2013
\u2013
1,838.1
1,838.1
Amounts owed to other customers
29
\u2013
\u2013
478.4
478.4
Debt securities in issue
30
\u2013
\u2013
1,010.0
1,010.0
Derivative liabilities
22
152.0
\u2013
\u2013
152.0
Other liabilities 3
32
\u2013
\u2013
70.4
70.4
Senior notes
34
\u2013
\u2013
723.4
723.4
Subordinated debt liabilities
35
\u2013
\u2013
260.1
260.1
152.0
\u2013
28,631.5
28,783.5
1.All FVTPL assets and liabilities are mandatorily measured as such.
2.Balance excludes prepayments.
3.Balance excludes deferred income.
2024
FVTPL 1
FVOCI
Amortised
cost
Total
carrying
amount
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Cash in hand
\u2013
\u2013
0.3
0.3
Loans and advances to credit
institutions
15
\u2013
\u2013
3,405.9
3,405.9
Investment securities
16
410.1
226.0
798.3
1,434.4
Loans and advances to customers
17
12.9
\u2013
25,113.4
25,126.3
Derivative assets
22
313.8
\u2013
\u2013
313.8
Other assets 2
24
\u2013
\u2013
1.7
1.7
736.8
226.0
29,319.6
30,282.4
Liabilities
Amounts owed to retail depositors
28
\u2013
\u2013
23,820.3
23,820.3
Amounts owed to credit institutions
27
\u2013
\u2013
1,935.2
1,935.2
Amounts owed to other customers
29
\u2013
\u2013
104.9
104.9
Debt securities in issue
30
\u2013
\u2013
1,018.3
1,018.3
Derivative liabilities
22
81.9
\u2013
\u2013
81.9
Other liabilities 3
32
\u2013
\u2013
56.2
56.2
Senior notes
34
\u2013
\u2013
722.7
722.7
Subordinated debt liabilities
35
\u2013
\u2013
259.8
259.8
81.9
\u2013
27,917.4
27,999.3
1.All FVTPL assets and liabilities are mandatorily measured as such.
2.Balance excludes prepayments.
3.Balance excludes deferred income.
The Group has no non-derivative financial assets or financial liabilities classified as held
for\u00a0trading.
The designation at FVTPL for all financial assets is applied at inception.
42.Financial instruments and fair values continued
ii.Fair values
The following tables summarise the carrying value and estimated fair value of financial
instruments not measured at fair value in the Consolidated Statement of Financial Position:
2025
2024
Carrying value
Estimated fair
value
Carrying value
Estimated fair
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Cash in hand
0.4
0.4
0.3
0.3
Loans and advances to credit
institutions
3,053.0
3,053.0
3,405.9
3,405.9
Investment securities
964.9
965.6
798.3
796.0
Loans and advances to
customers
25,909.0
25,738.4
25,113.4
24,843.5
Other assets 1
2.2
2.2
1.7
1.7
29,929.5
29,759.6
29,319.6
29,047.4
Liabilities
Amounts owed to retail
depositors
24,251.1
24,328.5
23,820.3
23,806.8
Amounts owed to credit
institutions
1,838.1
1,838.1
1,935.2
1,935.2
Amounts owed to other
customers
478.4
478.4
104.9
104.9
Debt securities in issue
1,010.0
1,010.0
1,018.3
1,018.3
Other liabilities 2
70.4
70.4
56.2
56.2
Senior notes
723.4
768.0
722.7
763.0
Subordinated debt liabilities
260.1
276.1
259.8
273.5
28,631.5
28,769.5
27,917.4
27,957.9
1.Balance excludes prepayments.
2.Balance excludes deferred income.
The fair values in these tables are estimated using the valuation techniques below.
The\u00a0estimated fair value is stated as at 31 December and may be significantly different
from\u00a0the amounts which will actually be paid on the maturity or settlement dates of each
financial instrument.
Cash in hand
This represents physical cash across the Group\u2019s branch network where fair value is
considered to be equal to carrying value.
Loans and advances to credit institutions
This mainly represents the Group\u2019s working capital current accounts and call accounts with
central governments and other banks with an original maturity of less than three months. Fair
value is not considered to be materially different to carrying value.
Investment securities
Investment securities\u2019 fair values are provided by a third party and are based on the market
values of the financial instruments.
Loans and advances to customers
This mainly represents secured mortgage lending to customers. The fair value of fixed rate
mortgages has been estimated by discounting future cash flows at current market rates of
interest based on the SONIA forward curve. Future cash flows include the impact of ECL. The
interest rate on variable rate mortgages is considered to be equal to current market product
rates and as such fair value is estimated to be equal to carrying value.
Other assets
Other assets disclosed in the table above exclude prepayments and the fair value is considered
to be equal to carrying value.
Amounts owed to retail depositors
The fair value of fixed rate retail deposits has been estimated by discounting future cash flows
at current market rates of interest based on the SONIA forward curve. Retail deposits at
variable rates and deposits payable on demand are considered to be at current market rates
and as such fair value is estimated to be equal to carrying value.
Amounts owed to credit institutions
This mainly represents amounts drawn down under the BoE TFSME, ILTR and commercial
repos. Fair value is considered to be equal to carrying value.
Amounts owed to other customers
This represents saving products to corporations and local authorities. The fair value of fixed
rate deposits is estimated by discounting future cash flows at current market rates of interest
based on the SONIA forward curve. Deposits at variable rates are considered to be at current
market rates and the fair value is estimated to be equal to carrying value.
42.Financial instruments and fair values continued
Debt securities in issue
While the Group\u2019s debt securities in issue are listed, the quoted prices for an individual note
may not be indicative of the fair value of the issue as a whole, due to the specialised nature of
the market in such instruments and the limited number of investors participating in it. Fair
value is not considered to be materially different to carrying value.
Other liabilities
Other liabilities disclosed in the table above exclude deferred income and the fair value is
considered to be equal to carrying value.
Senior notes and Subordinated debt liabilities
The senior notes and subordinated debt liabilities are listed on the London Stock Exchange
with fair value being the quoted market price at the reporting date.
iii.Fair value classification
The Group classifies fair value measurements using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The following tables provide an
analysis of financial assets and financial liabilities measured at fair value in the Consolidated
Statement of Financial Position grouped into Levels 1 to 3 based on the degree to which the fair
value is observable:
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Investment securities
849.6
842.4
299.9
549.6
0.1
849.6
Loans and advances
to customers
11.6
13.4
\u2013
\u2013
11.6
11.6
Derivative assets
101.4
16,448.7
\u2013
101.4
\u2013
101.4
962.6
17,304.5
299.9
651.0
11.7
962.6
Financial liabilities
Derivative liabilities
152.0
15,816.1
\u2013
152.0
\u2013
152.0
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Investment securities
636.1
638.3
226.0
409.8
0.3
636.1
Loans and advances
to customers
12.9
14.9
\u2013
\u2013
12.9
12.9
Derivative assets
313.8
16,474.8
\u2013
313.8
\u2013
313.8
962.8
17,128.0
226.0
723.6
13.2
962.8
Financial liabilities
Derivative liabilities
81.9
11,291.4
\u2013
81.9
\u2013
81.9
Level 1: Fair values that are based entirely on quoted market prices (unadjusted) in an actively
traded market for identical assets and liabilities that the Group has the ability to access.
Valuation adjustments and block discounts are not applied to Level 1 instruments. Since
valuations are based on readily available observable market prices, this makes them most
reliable, reduces the need for management judgement and estimation and also reduces the
uncertainty associated with determining fair values.
Level 2: Fair values that are based on one or more quoted prices in markets that are not active
or for which all significant inputs are taken from directly or indirectly observable market data.
These include valuation models used to calculate the present value of expected future cash
flows and may be employed either when no active market exists or when there are no quoted
prices available for similar instruments in active markets.
Level 3: Fair values for which any one or more significant input is not based on observable
market data and the unobservable inputs have a significant effect on the instrument\u2019s fair
value. Valuation models that employ significant unobservable inputs require a higher degree of
management judgement and estimation in determining the fair value. Management judgement
and estimation are usually required for the selection of the appropriate valuation model to be
used, determination of expected future cash flows on the financial instruments being valued,
determination of the probability of counterparty default and prepayments, determination of
expected volatilities and correlations and the selection of appropriate discount rates.
42.Financial instruments and fair values continued
The following tables provide an analysis of financial assets and financial liabilities not
measured at fair value in the Consolidated Statement of Financial Position grouped into Levels
1 to 3 based on the degree to which the fair value is observable:
Estimated fair value
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Cash in hand
0.4
0.4
\u2013
0.4
\u2013
0.4
Loans and advances
to credit institutions
3,053.0
3,048.4
\u2013
3,053.0
\u2013
3,053.0
Investment securities
964.9
954.6
\u2013
965.6
\u2013
965.6
Loans and advances
to customers
25,909.0
26,135.8
\u2013
2,044.4
23,694.0
25,738.4
Other assets 1
2.2
2.2
\u2013
2.2
\u2013
2.2
29,929.5
30,141.4
\u2013
6,065.6
23,694.0
29,759.6
Financial liabilities
Amounts owed to
retail depositors
24,251.1
23,894.4
\u2013
11,079.6
13,248.9
24,328.5
Amounts owed to
credit institutions
1,838.1
1,827.3
\u2013
1,838.1
\u2013
1,838.1
Amounts owed to
other customers
478.4
454.5
\u2013
\u2013
478.4
478.4
Debt securities in
issue
1,010.0
1,008.0
\u2013
1,010.0
\u2013
1,010.0
Other liabilities 2
70.4
70.4
\u2013
70.4
\u2013
70.4
Senior notes
723.4
700.0
\u2013
768.0
\u2013
768.0
Subordinated debt
liabilities
260.1
250.0
\u2013
276.1
\u2013
276.1
28,631.5
28,204.6
\u2013
15,042.2
13,727.3
28,769.5
1.Balance excludes prepayments.
2.Balance excludes deferred income.
Estimated fair value
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Cash in hand
0.3
0.3
\u2013
0.3
\u2013
0.3
Loans and advances
to credit institutions
3,405.9
3,400.1
\u2013
3,405.9
\u2013
3,405.9
Investment securities
798.3
793.2
\u2013
796.0
\u2013
796.0
Loans and advances
to customers
25,113.4
25,313.6
\u2013
2,183.0
22,660.5
24,843.5
Other assets 1
1.7
1.7
\u2013
1.7
\u2013
1.7
29,319.6
29,508.9
\u2013
6,386.9
22,660.5
29,047.4
Financial liabilities
Amounts owed to
retail depositors
23,820.3
23,412.5
\u2013
8,464.0
15,342.8
23,806.8
Amounts owed to
credit institutions
1,935.2
1,913.0
\u2013
1,935.2
\u2013
1,935.2
Amounts owed to
other customers
104.9
103.1
\u2013
\u2013
104.9
104.9
Debt securities in
issue
1,018.3
1,016.2
\u2013
1,018.3
\u2013
1,018.3
Other liabilities 2
56.2
56.2
\u2013
56.2
\u2013
56.2
Senior notes
722.7
700.0
\u2013
763.0
\u2013
763.0
Subordinated debt
liabilities
259.8
250.0
\u2013
273.5
\u2013
273.5
27,917.4
27,451.0
\u2013
12,510.2
15,447.7
27,957.9
1.Balance excludes prepayments.
2.Balance excludes deferred income.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueOfFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-491": { "value": "
5.Fair value losses on financial instruments
2025
2024
\u00a3m
\u00a3m
Fair value changes in hedged assets
248.3
31.7
Hedging of assets
(251.8)
(53.6)
Fair value changes in hedged liabilities
(19.0)
37.9
Hedging of liabilities
20.8
(35.8)
Ineffective portion of hedges
(1.7)
(19.8)
Net (losses)/gains on unmatched swaps
(16.2)
21.2
Amortisation of inception adjustments
(9.4)
(5.5)
Amortisation of acquisition-related inception adjustments
\u2013
2.3
Amortisation of de-designated hedge relationships
3.9
(0.9)
Fair value movements on mortgages at FVTPL
0.3
0.7
Fair value movements on loans and advances to credit
institutions at FVTPL
\u2013
0.5
Fair value movements on investment securities at FVTPL
0.9
\u2013
Debit and credit valuation adjustment
0.1
\u2013
(22.1)
(1.5)
10.Share-based payments
The share-based expense for the year includes a charge in respect of the Sharesave
Scheme,\u00a0DSBP and PSP. All charges are included in employee expenses within note 8
Administrative expenses.
A summary of the share-based schemes operated by the Group is set out below.
Sharesave Scheme
The Sharesave Scheme is a share option scheme which is available to all UK-based employees.
The Sharesave Scheme allows employees to purchase options by saving a fixed amount of
between \u00a310 and \u00a3500 per month over a period of three years at the end of which the options,
subject to leaver provisions, are usually exercisable. If not exercised, the amount saved is
returned to the employee. The Sharesave Scheme has been in operation since 2014 and an
invitation to join the scheme is usually extended annually, with the option price calculated
using the mid-market price of an OSBG ordinary share over the three dealing days prior to
the\u00a0Invitation Date and applying a discount of 20%.
Deferred Share Bonus Plan
DSBP awards are granted to Executive Directors and certain senior managers to allow a
portion of their performance bonuses to be deferred in shares for up to three to seven years for
Executive Directors and typically one year for senior managers. There are no further
performance or vesting conditions attached to deferred awards for senior managers, which
also applies to Executive Directors for awards granted from April 2021.The DSBP awards are
subject to clawback provisions and are expensed in the year services are received with a
corresponding increase in equity.
DSBP awards for senior managers carry entitlements to dividend equivalents, which are paid
when the awards vest. DSBP awards granted from April 2021 to Executive Directors are entitled
to dividend equivalents. Awards granted in prior years were not entitled to dividend
equivalents.
Performance Share Plan
PSP awards are typically made annually at the discretion of the Group Remuneration and
People Committee with Executive Directors and certain senior managers being eligible for
awards. The vesting of PSP awards is determined based on a mixture of internal financial
performance targets, risk-based measures, ESG targets and relative total shareholder returns
(TSR). The Group recognises the expense related to the PSP scheme over three years.
The performance conditions that apply to PSP awards are based on a combination of
weightings as follows:
2024 onwards
2020\u20132023
EPS %
30
35
TSR %
30
35
Risk based %
15
15
Return on equity (ROE) %
15
15
ESG %
10
\u2013
The PSP conditions are assessed independently. The EPS element assesses the EPS growth rate
over the performance period. For the TSR element, the performance of the Company\u2019s
ordinary shares is measured against the constituents of the FTSE 250 (excluding investment
trusts). The risk-based measure is assessed against the risk management performance with
regard to all relevant risks. The ROE element is assessed based on the Group\u2019s profit after
taxation as a percentage of average shareholders\u2019 equity. From 2025 this measure is based on
Return on Tangible Equity, as defined in Appendix 4. The ESG performance will be determined
based on the progress against the ESG strategy which will be informed by performance
against key employees and environmental metrics.
The share-based payment expense during the year comprised the following:
2025
2024
\u00a3m
\u00a3m
Sharesave Scheme
0.8
0.8
Deferred Share Bonus Plan
2.9
2.6
Performance Share Plan
3.2
2.9
6.9
6.3
10.Share-based payments continued
Movements in the number of share awards and their weighted average exercise prices are set
out below:
Sharesave Scheme
Deferred Share
Bonus Plan
Performance
Share Plan
Number
Weighted
average exercise
price, \u00a3
Number
Number
As at 1 January 2025
2,935,729
2.91
944,795
8,564,430
Granted
335,050
4.48
570,101
3,821,018
Exercised/Vested
(425,537)
3.37
(554,781)
(918,105)
Forfeited
(347,569)
2.98
(8,042)
(1,714,923)
As at 31 December 2025
2,497,673
3.03
952,073
9,752,420
Exercisable at:
31 December 2025
25,377
3.25
\u2013
\u2013
As at 1 January 2024
2,801,587
2.91
895,162
6,747,268
Granted
898,516
2.96
587,681
3,501,310
Exercised/Vested
(303,627)
2.47
(531,669)
(772,568)
Forfeited
(460,747)
3.29
(6,379)
(911,580)
As at 31 December 2024
2,935,729
2.91
944,795
8,564,430
Exercisable at:
31 December 2024
81,035
3.90
\u2013
\u2013
For the share-based awards granted during the year, the weighted average grant date fair
value was 338 pence (2024: 272 pence).
The range of exercise prices and weighted average remaining contractual life of outstanding
awards are as follows:
2025
2024
Exercise price
Number
Weighted
average
remaining
contractual life
(years)
Number
Weighted
average
remaining
contractual life
(years)
Sharesave Scheme
229\u2013448 pence (2024: 229\u2013429
pence)
2,497,673
1.5
2,935,729
2.0
Deferred Share Bonus Plan
Nil
952,073
0.9
944,795
1.1
Performance Share Plan
Nil
9,752,420
2.5
8,564,430
2.5
13,202,166
2.2
12,444,954
2.3
Sharesave Scheme
2025
2024
2023
2022
2021
2020
2019
Contractual life, years
3
3
3
3
3
5
5
Share price at issue, \u00a3
5.60
3.70
3.40
5.36
5.13
2.86
3.32
Exercise price, \u00a3
4.48
2.96
2.72
4.29
3.96
2.29
2.65
Expected volatility, %
34.0
51.9
46.5
31.4
37.9
57.6
31.9
Risk-free rate, %
3.5
3.7
4.8
5.3
1.3
0.2
0.8
Dividend yield, %\u00a0
6.1
8.1
9.9
7.3
4.5
3.3
4.8
Grant date fair value, \u00a3
1.33
1.28
0.85
0.68
1.46
1.34
0.91
The Sharesave Schemes are not entitled to dividends between the option and exercise date.
A Black Scholes model is used to determine the grant date fair value with three inputs:
\u2022 Expected volatility \u2013 based on the Company\u2019s share price.
\u2022 Risk-free rate \u2013 based on Government bonds.
\u2022 Dividend yield \u2013 based on the average dividend yield across external analyst reports for the
quarter prior to scheme grant date.
10.Share-based payments continued
Deferred Share Bonus Plan
For awards granted from 2021, there are no further performance or vesting conditions
attached to deferred awards, for further details see DSBP above.
For DSBP awards where conditions exist, these schemes carry no rights to dividend equivalents
and a Black Scholes model is used to determine the grant date fair value with a dividend yield
input applied \u2013 based on the average dividend yield across external analyst reports for the
quarter prior to scheme grant date.
Performance Share Plan
Non-market performance conditions also exist for the scheme, notably that a participant is
employed by the Company over the performance period with good leaver exceptions, and an
attrition rate is applied as an estimate of the actual number of awards that will meet the
related conditions at the vesting date.
The awards are not entitled to a dividend equivalent between grant date and vesting and a
Black Scholes model is used to determine the grant date fair value with a dividend yield input
applied \u2013 based on the average dividend yield across external analyst reports for the quarter
prior to the scheme grant date.
The fair value of the portion of awards that is subject to market conditions (i.e. the relative TSR
element of the PSP) is determined at the grant date using a Monte Carlo model.
The inputs into the models are as follows:
2025
2024
2023
2022
2021
Mid-market share price, \u00a3
4.46
3.86
5.01
5.58
4.94
Attrition rate, %
11.6
9.7
6.0
6.9
12.8
Expected volatility, %
42.0
49.8
35.4
37.4
59.5
Dividend yield, %\u00a0
7.5
7.3
8.7
4.7
3.8
Vesting rate \u2013 TSR %\u00a0
25.7
33.0
62.7
32.3
40.8
Grant date fair value, \u00a3
3.38
2.53
3.08
4.64
4.26
ii.Fair values
The following tables summarise the carrying value and estimated fair value of financial
instruments not measured at fair value in the Consolidated Statement of Financial Position:
2025
2024
Carrying value
Estimated fair
value
Carrying value
Estimated fair
value
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Cash in hand
0.4
0.4
0.3
0.3
Loans and advances to credit
institutions
3,053.0
3,053.0
3,405.9
3,405.9
Investment securities
964.9
965.6
798.3
796.0
Loans and advances to
customers
25,909.0
25,738.4
25,113.4
24,843.5
Other assets 1
2.2
2.2
1.7
1.7
29,929.5
29,759.6
29,319.6
29,047.4
Liabilities
Amounts owed to retail
depositors
24,251.1
24,328.5
23,820.3
23,806.8
Amounts owed to credit
institutions
1,838.1
1,838.1
1,935.2
1,935.2
Amounts owed to other
customers
478.4
478.4
104.9
104.9
Debt securities in issue
1,010.0
1,010.0
1,018.3
1,018.3
Other liabilities 2
70.4
70.4
56.2
56.2
Senior notes
723.4
768.0
722.7
763.0
Subordinated debt liabilities
260.1
276.1
259.8
273.5
28,631.5
28,769.5
27,917.4
27,957.9
1.Balance excludes prepayments.
2.Balance excludes deferred income.
The fair values in these tables are estimated using the valuation techniques below.
The\u00a0estimated fair value is stated as at 31 December and may be significantly different
from\u00a0the amounts which will actually be paid on the maturity or settlement dates of each
financial instrument.
Cash in hand
This represents physical cash across the Group\u2019s branch network where fair value is
considered to be equal to carrying value.
Loans and advances to credit institutions
This mainly represents the Group\u2019s working capital current accounts and call accounts with
central governments and other banks with an original maturity of less than three months. Fair
value is not considered to be materially different to carrying value.
Investment securities
Investment securities\u2019 fair values are provided by a third party and are based on the market
values of the financial instruments.
Loans and advances to customers
This mainly represents secured mortgage lending to customers. The fair value of fixed rate
mortgages has been estimated by discounting future cash flows at current market rates of
interest based on the SONIA forward curve. Future cash flows include the impact of ECL. The
interest rate on variable rate mortgages is considered to be equal to current market product
rates and as such fair value is estimated to be equal to carrying value.
Other assets
Other assets disclosed in the table above exclude prepayments and the fair value is considered
to be equal to carrying value.
Amounts owed to retail depositors
The fair value of fixed rate retail deposits has been estimated by discounting future cash flows
at current market rates of interest based on the SONIA forward curve. Retail deposits at
variable rates and deposits payable on demand are considered to be at current market rates
and as such fair value is estimated to be equal to carrying value.
Amounts owed to credit institutions
This mainly represents amounts drawn down under the BoE TFSME, ILTR and commercial
repos. Fair value is considered to be equal to carrying value.
Amounts owed to other customers
This represents saving products to corporations and local authorities. The fair value of fixed
rate deposits is estimated by discounting future cash flows at current market rates of interest
based on the SONIA forward curve. Deposits at variable rates are considered to be at current
market rates and the fair value is estimated to be equal to carrying value.
42.Financial instruments and fair values continued
Debt securities in issue
While the Group\u2019s debt securities in issue are listed, the quoted prices for an individual note
may not be indicative of the fair value of the issue as a whole, due to the specialised nature of
the market in such instruments and the limited number of investors participating in it. Fair
value is not considered to be materially different to carrying value.
Other liabilities
Other liabilities disclosed in the table above exclude deferred income and the fair value is
considered to be equal to carrying value.
Senior notes and Subordinated debt liabilities
The senior notes and subordinated debt liabilities are listed on the London Stock Exchange
with fair value being the quoted market price at the reporting date.
iii.Fair value classification
The Group classifies fair value measurements using a fair value hierarchy that reflects the
significance of the inputs used in making the measurements. The following tables provide an
analysis of financial assets and financial liabilities measured at fair value in the Consolidated
Statement of Financial Position grouped into Levels 1 to 3 based on the degree to which the fair
value is observable:
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Investment securities
849.6
842.4
299.9
549.6
0.1
849.6
Loans and advances
to customers
11.6
13.4
\u2013
\u2013
11.6
11.6
Derivative assets
101.4
16,448.7
\u2013
101.4
\u2013
101.4
962.6
17,304.5
299.9
651.0
11.7
962.6
Financial liabilities
Derivative liabilities
152.0
15,816.1
\u2013
152.0
\u2013
152.0
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Investment securities
636.1
638.3
226.0
409.8
0.3
636.1
Loans and advances
to customers
12.9
14.9
\u2013
\u2013
12.9
12.9
Derivative assets
313.8
16,474.8
\u2013
313.8
\u2013
313.8
962.8
17,128.0
226.0
723.6
13.2
962.8
Financial liabilities
Derivative liabilities
81.9
11,291.4
\u2013
81.9
\u2013
81.9
Level 1: Fair values that are based entirely on quoted market prices (unadjusted) in an actively
traded market for identical assets and liabilities that the Group has the ability to access.
Valuation adjustments and block discounts are not applied to Level 1 instruments. Since
valuations are based on readily available observable market prices, this makes them most
reliable, reduces the need for management judgement and estimation and also reduces the
uncertainty associated with determining fair values.
Level 2: Fair values that are based on one or more quoted prices in markets that are not active
or for which all significant inputs are taken from directly or indirectly observable market data.
These include valuation models used to calculate the present value of expected future cash
flows and may be employed either when no active market exists or when there are no quoted
prices available for similar instruments in active markets.
Level 3: Fair values for which any one or more significant input is not based on observable
market data and the unobservable inputs have a significant effect on the instrument\u2019s fair
value. Valuation models that employ significant unobservable inputs require a higher degree of
management judgement and estimation in determining the fair value. Management judgement
and estimation are usually required for the selection of the appropriate valuation model to be
used, determination of expected future cash flows on the financial instruments being valued,
determination of the probability of counterparty default and prepayments, determination of
expected volatilities and correlations and the selection of appropriate discount rates.
42.Financial instruments and fair values continued
The following tables provide an analysis of financial assets and financial liabilities not
measured at fair value in the Consolidated Statement of Financial Position grouped into Levels
1 to 3 based on the degree to which the fair value is observable:
Estimated fair value
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Cash in hand
0.4
0.4
\u2013
0.4
\u2013
0.4
Loans and advances
to credit institutions
3,053.0
3,048.4
\u2013
3,053.0
\u2013
3,053.0
Investment securities
964.9
954.6
\u2013
965.6
\u2013
965.6
Loans and advances
to customers
25,909.0
26,135.8
\u2013
2,044.4
23,694.0
25,738.4
Other assets 1
2.2
2.2
\u2013
2.2
\u2013
2.2
29,929.5
30,141.4
\u2013
6,065.6
23,694.0
29,759.6
Financial liabilities
Amounts owed to
retail depositors
24,251.1
23,894.4
\u2013
11,079.6
13,248.9
24,328.5
Amounts owed to
credit institutions
1,838.1
1,827.3
\u2013
1,838.1
\u2013
1,838.1
Amounts owed to
other customers
478.4
454.5
\u2013
\u2013
478.4
478.4
Debt securities in
issue
1,010.0
1,008.0
\u2013
1,010.0
\u2013
1,010.0
Other liabilities 2
70.4
70.4
\u2013
70.4
\u2013
70.4
Senior notes
723.4
700.0
\u2013
768.0
\u2013
768.0
Subordinated debt
liabilities
260.1
250.0
\u2013
276.1
\u2013
276.1
28,631.5
28,204.6
\u2013
15,042.2
13,727.3
28,769.5
1.Balance excludes prepayments.
2.Balance excludes deferred income.
Estimated fair value
Carrying
amount
Principal
amount
Level 1
Level 2
Level 3
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial assets
Cash in hand
0.3
0.3
\u2013
0.3
\u2013
0.3
Loans and advances
to credit institutions
3,405.9
3,400.1
\u2013
3,405.9
\u2013
3,405.9
Investment securities
798.3
793.2
\u2013
796.0
\u2013
796.0
Loans and advances
to customers
25,113.4
25,313.6
\u2013
2,183.0
22,660.5
24,843.5
Other assets 1
1.7
1.7
\u2013
1.7
\u2013
1.7
29,319.6
29,508.9
\u2013
6,386.9
22,660.5
29,047.4
Financial liabilities
Amounts owed to
retail depositors
23,820.3
23,412.5
\u2013
8,464.0
15,342.8
23,806.8
Amounts owed to
credit institutions
1,935.2
1,913.0
\u2013
1,935.2
\u2013
1,935.2
Amounts owed to
other customers
104.9
103.1
\u2013
\u2013
104.9
104.9
Debt securities in
issue
1,018.3
1,016.2
\u2013
1,018.3
\u2013
1,018.3
Other liabilities 2
56.2
56.2
\u2013
56.2
\u2013
56.2
Senior notes
722.7
700.0
\u2013
763.0
\u2013
763.0
Subordinated debt
liabilities
259.8
250.0
\u2013
273.5
\u2013
273.5
27,917.4
27,451.0
\u2013
12,510.2
15,447.7
27,957.9
1.Balance excludes prepayments.
2.Balance excludes deferred income.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFairValueMeasurementExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-497": { "value": "
7.Other operating income
2025
2024
\u00a3m
\u00a3m
Interest received on mortgages held at FVTPL
0.7
0.9
Fees and commissions receivable
5.5
3.8
Other income
1.1
\u2013
7.3
4.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfRevenueFromContractsWithCustomersExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-496": { "value": "
7.Other operating income
2025
2024
\u00a3m
\u00a3m
Interest received on mortgages held at FVTPL
0.7
0.9
Fees and commissions receivable
5.5
3.8
Other income
1.1
\u2013
7.3
4.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExpenseExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-495": { "value": "
7.Other operating income
2025
2024
\u00a3m
\u00a3m
Interest received on mortgages held at FVTPL
0.7
0.9
Fees and commissions receivable
5.5
3.8
Other income
1.1
\u2013
7.3
4.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfFeeAndCommissionIncomeExpenseExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-494": { "value": "
7.Other operating income
2025
2024
\u00a3m
\u00a3m
Interest received on mortgages held at FVTPL
0.7
0.9
Fees and commissions receivable
5.5
3.8
Other income
1.1
\u2013
7.3
4.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherOperatingIncomeExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-499": { "value": "
8.Administrative expenses
2025
2024
\u00a3m
\u00a3m
Staff costs
148.6
143.9
Support costs
53.3
49.3
Professional fees
25.3
25.7
Facilities costs
7.1
7.9
Depreciation (see note 25)
6.7
6.3
Amortisation (see note 26)
9.2
5.0
Marketing costs
5.6
5.0
Other costs
14.3
15.0
270.1
258.1
Included in professional fees are amounts paid to the Company\u2019s auditor as follows:
2025
2024
\u00a3'000
\u00a3'000
Fees payable to the Company's auditor for the audit of the
Company's annual accounts
87
83
Fees payable to the Company's auditor for the audit of the
accounts of subsidiaries
4,376
4,038
Total audit fees
4,463
4,121
Audit-related assurance services1
319
391
Other assurance services2
414
330
Other non-audit services3
1
73
Total non-audit fees
734
794
Total fees payable to the Company's auditor
5,197
4,915
1.Includes review of interim financial information and profit verifications.
2.Costs comprise assurance reviews of Alternative Performance Measures (APMs), ESG, European Single Electronic
Format (ESEF) tagging and AT1 issuance comfort letter.
3.2024 costs primarily comprise work related to the Euro Medium Term Note (EMTN) programme.
Staff costs comprise the following:
2025
2024
\u00a3m
\u00a3m
Salaries, incentive pay and other benefits
120.9
119.2
Share-based payments
6.9
6.3
Social security costs
15.2
12.7
Other pension costs
5.6
5.7
148.6
143.9
During the year \u00a36.9m ( 2024 : \u00a32.7m) of staff costs were capitalised to intangible assets as
part of the Group\u2019s transformation programme.
The average number of people employed by the Group (including Executive Directors) during
the year is analysed below.
2025
2024
UK
1,467
1,566
India
1,016
993
2,483
2,559
", "dimensions": { "concept": "ifrs-full:DisclosureOfGeneralAndAdministrativeExpenseExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-498": { "value": "
8.Administrative expenses
2025
2024
\u00a3m
\u00a3m
Staff costs
148.6
143.9
Support costs
53.3
49.3
Professional fees
25.3
25.7
Facilities costs
7.1
7.9
Depreciation (see note 25)
6.7
6.3
Amortisation (see note 26)
9.2
5.0
Marketing costs
5.6
5.0
Other costs
14.3
15.0
270.1
258.1
Included in professional fees are amounts paid to the Company\u2019s auditor as follows:
2025
2024
\u00a3'000
\u00a3'000
Fees payable to the Company's auditor for the audit of the
Company's annual accounts
87
83
Fees payable to the Company's auditor for the audit of the
accounts of subsidiaries
4,376
4,038
Total audit fees
4,463
4,121
Audit-related assurance services1
319
391
Other assurance services2
414
330
Other non-audit services3
1
73
Total non-audit fees
734
794
Total fees payable to the Company's auditor
5,197
4,915
1.Includes review of interim financial information and profit verifications.
2.Costs comprise assurance reviews of Alternative Performance Measures (APMs), ESG, European Single Electronic
Format (ESEF) tagging and AT1 issuance comfort letter.
3.2024 costs primarily comprise work related to the Euro Medium Term Note (EMTN) programme.
Staff costs comprise the following:
2025
2024
\u00a3m
\u00a3m
Salaries, incentive pay and other benefits
120.9
119.2
Share-based payments
6.9
6.3
Social security costs
15.2
12.7
Other pension costs
5.6
5.7
148.6
143.9
During the year \u00a36.9m ( 2024 : \u00a32.7m) of staff costs were capitalised to intangible assets as
part of the Group\u2019s transformation programme.
The average number of people employed by the Group (including Executive Directors) during
the year is analysed below.
2025
2024
UK
1,467
1,566
India
1,016
993
2,483
2,559
", "dimensions": { "concept": "ifrs-full:DisclosureOfExpensesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-500": { "value": "
2025
2024
\u00a3m
\u00a3m
Staff costs
148.6
143.9
Support costs
53.3
49.3
Professional fees
25.3
25.7
Facilities costs
7.1
7.9
Depreciation (see note 25)
6.7
6.3
Amortisation (see note 26)
9.2
5.0
Marketing costs
5.6
5.0
Other costs
14.3
15.0
270.1
258.1
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepreciationAndAmortisationExpenseExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-501": { "value": "
Included in professional fees are amounts paid to the Company\u2019s auditor as follows:
2025
2024
\u00a3'000
\u00a3'000
Fees payable to the Company's auditor for the audit of the
Company's annual accounts
87
83
Fees payable to the Company's auditor for the audit of the
accounts of subsidiaries
4,376
4,038
Total audit fees
4,463
4,121
Audit-related assurance services1
319
391
Other assurance services2
414
330
Other non-audit services3
1
73
Total non-audit fees
734
794
Total fees payable to the Company's auditor
5,197
4,915
1.Includes review of interim financial information and profit verifications.
2.Costs comprise assurance reviews of Alternative Performance Measures (APMs), ESG, European Single Electronic
Format (ESEF) tagging and AT1 issuance comfort letter.
3.2024 costs primarily comprise work related to the Euro Medium Term Note (EMTN) programme.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAuditorsRemunerationExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-502": { "value": "
Staff costs comprise the following:
2025
2024
\u00a3m
\u00a3m
Salaries, incentive pay and other benefits
120.9
119.2
Share-based payments
6.9
6.3
Social security costs
15.2
12.7
Other pension costs
5.6
5.7
148.6
143.9
During the year \u00a36.9m ( 2024 : \u00a32.7m) of staff costs were capitalised to intangible assets as
part of the Group\u2019s transformation programme.
43.Pension scheme
Defined contribution scheme
The amount charged to profit or loss in respect of contributions to the Group\u2019s defined
contribution and stakeholder pension arrangements is the contribution payable in the year.
The total pension cost in the year amounted to \u00a35.6m (2024: \u00a35.7m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfEmployeeBenefitsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-503": { "value": "
The average number of people employed by the Group (including Executive Directors) during
the year is analysed below.
2025
2024
UK
1,467
1,566
India
1,016
993
2,483
2,559
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutEmployeesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-504": { "value": "
9.Directors\u2019 emoluments and transactions
Restated 1
2025
2024
\u00a3'000
\u00a3'000
Short-term employee benefits 1
3,241
2,853
Post-employment benefits
126
102
Share-based payments 2
898
746
4,265
3,701
1.Short-term employee benefits comprise Directors\u2019 salary costs, Non-Executive Directors\u2019 fees and other short-term
incentive benefits, which are disclosed in the Annual Report on Remuneration. The 2024 comparative has been restated
to exclude deferred bonuses of \u00a3393k, which are disclosed separately in the paragraph below.
2.Share-based payments represent the amounts received by Directors for schemes that vested during the year.
In addition to the total Directors\u2019 emoluments above, the Executive Directors were granted
deferred bonuses of \u00a3542k (2024: \u00a3393k) in the form of shares.
9.Directors\u2019 emoluments and transactions continued
The Executive Directors received a further share award under the Performance Share Plan
(PSP) with a grant date fair value of \u00a31,613k (2024: \u00a31,613k) using a share price of \u00a33.58 (2024:
\u00a33.86) (the mid-market quotation on the day preceding the date of grant). These shares will
vest in line with regulatory requirements, with 75% to vest after three years and the remaining
25% to vest in year four. See page 155 of the Directors\u2019 Remuneration Report for further
information.
The Directors of the Company are employed and compensated by OneSavings Bank plc.
No compensation was paid for loss of office during 2025 and 2024.
There were no outstanding loans granted in the ordinary course of business to Directors and
their connected persons as at 31 December 2025 and 2024.
The Annual Report on Remuneration and note 10 Share-based payments provide further
details on Directors\u2019 emoluments.
48.Transactions with key management personnel
All related party transactions were made on terms equivalent to those that prevail in arm\u2019s
length transactions. During the year, there were no related party transactions between the key
management personnel and the Group other than as described below.
The Directors and Group Executive team are considered to be key management personnel.
Directors\u2019 remuneration is disclosed in note 9 and in the Directors\u2019 Remuneration Report on
page 146. The Group Executive team are all employees of OSB, the table below shows the
aggregate remuneration for members of the team who are non-directors:
2025
2024
\u00a3'000
\u00a3'000
Short-term employee benefits
5,124
4,770
Post-employment benefits
242
232
Share-based payments
1,794
1,371
7,160
6,373
Key management personnel and connected persons held deposits with the Group of \u00a31.7m
(2024: \u00a31.6m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutKeyManagementPersonnelExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-505": { "value": "
10.Share-based payments
The share-based expense for the year includes a charge in respect of the Sharesave
Scheme,\u00a0DSBP and PSP. All charges are included in employee expenses within note 8
Administrative expenses.
A summary of the share-based schemes operated by the Group is set out below.
Sharesave Scheme
The Sharesave Scheme is a share option scheme which is available to all UK-based employees.
The Sharesave Scheme allows employees to purchase options by saving a fixed amount of
between \u00a310 and \u00a3500 per month over a period of three years at the end of which the options,
subject to leaver provisions, are usually exercisable. If not exercised, the amount saved is
returned to the employee. The Sharesave Scheme has been in operation since 2014 and an
invitation to join the scheme is usually extended annually, with the option price calculated
using the mid-market price of an OSBG ordinary share over the three dealing days prior to
the\u00a0Invitation Date and applying a discount of 20%.
Deferred Share Bonus Plan
DSBP awards are granted to Executive Directors and certain senior managers to allow a
portion of their performance bonuses to be deferred in shares for up to three to seven years for
Executive Directors and typically one year for senior managers. There are no further
performance or vesting conditions attached to deferred awards for senior managers, which
also applies to Executive Directors for awards granted from April 2021.The DSBP awards are
subject to clawback provisions and are expensed in the year services are received with a
corresponding increase in equity.
DSBP awards for senior managers carry entitlements to dividend equivalents, which are paid
when the awards vest. DSBP awards granted from April 2021 to Executive Directors are entitled
to dividend equivalents. Awards granted in prior years were not entitled to dividend
equivalents.
Performance Share Plan
PSP awards are typically made annually at the discretion of the Group Remuneration and
People Committee with Executive Directors and certain senior managers being eligible for
awards. The vesting of PSP awards is determined based on a mixture of internal financial
performance targets, risk-based measures, ESG targets and relative total shareholder returns
(TSR). The Group recognises the expense related to the PSP scheme over three years.
The performance conditions that apply to PSP awards are based on a combination of
weightings as follows:
2024 onwards
2020\u20132023
EPS %
30
35
TSR %
30
35
Risk based %
15
15
Return on equity (ROE) %
15
15
ESG %
10
\u2013
The PSP conditions are assessed independently. The EPS element assesses the EPS growth rate
over the performance period. For the TSR element, the performance of the Company\u2019s
ordinary shares is measured against the constituents of the FTSE 250 (excluding investment
trusts). The risk-based measure is assessed against the risk management performance with
regard to all relevant risks. The ROE element is assessed based on the Group\u2019s profit after
taxation as a percentage of average shareholders\u2019 equity. From 2025 this measure is based on
Return on Tangible Equity, as defined in Appendix 4. The ESG performance will be determined
based on the progress against the ESG strategy which will be informed by performance
against key employees and environmental metrics.
The share-based payment expense during the year comprised the following:
2025
2024
\u00a3m
\u00a3m
Sharesave Scheme
0.8
0.8
Deferred Share Bonus Plan
2.9
2.6
Performance Share Plan
3.2
2.9
6.9
6.3
10.Share-based payments continued
Movements in the number of share awards and their weighted average exercise prices are set
out below:
Sharesave Scheme
Deferred Share
Bonus Plan
Performance
Share Plan
Number
Weighted
average exercise
price, \u00a3
Number
Number
As at 1 January 2025
2,935,729
2.91
944,795
8,564,430
Granted
335,050
4.48
570,101
3,821,018
Exercised/Vested
(425,537)
3.37
(554,781)
(918,105)
Forfeited
(347,569)
2.98
(8,042)
(1,714,923)
As at 31 December 2025
2,497,673
3.03
952,073
9,752,420
Exercisable at:
31 December 2025
25,377
3.25
\u2013
\u2013
As at 1 January 2024
2,801,587
2.91
895,162
6,747,268
Granted
898,516
2.96
587,681
3,501,310
Exercised/Vested
(303,627)
2.47
(531,669)
(772,568)
Forfeited
(460,747)
3.29
(6,379)
(911,580)
As at 31 December 2024
2,935,729
2.91
944,795
8,564,430
Exercisable at:
31 December 2024
81,035
3.90
\u2013
\u2013
For the share-based awards granted during the year, the weighted average grant date fair
value was 338 pence (2024: 272 pence).
The range of exercise prices and weighted average remaining contractual life of outstanding
awards are as follows:
2025
2024
Exercise price
Number
Weighted
average
remaining
contractual life
(years)
Number
Weighted
average
remaining
contractual life
(years)
Sharesave Scheme
229\u2013448 pence (2024: 229\u2013429
pence)
2,497,673
1.5
2,935,729
2.0
Deferred Share Bonus Plan
Nil
952,073
0.9
944,795
1.1
Performance Share Plan
Nil
9,752,420
2.5
8,564,430
2.5
13,202,166
2.2
12,444,954
2.3
Sharesave Scheme
2025
2024
2023
2022
2021
2020
2019
Contractual life, years
3
3
3
3
3
5
5
Share price at issue, \u00a3
5.60
3.70
3.40
5.36
5.13
2.86
3.32
Exercise price, \u00a3
4.48
2.96
2.72
4.29
3.96
2.29
2.65
Expected volatility, %
34.0
51.9
46.5
31.4
37.9
57.6
31.9
Risk-free rate, %
3.5
3.7
4.8
5.3
1.3
0.2
0.8
Dividend yield, %\u00a0
6.1
8.1
9.9
7.3
4.5
3.3
4.8
Grant date fair value, \u00a3
1.33
1.28
0.85
0.68
1.46
1.34
0.91
The Sharesave Schemes are not entitled to dividends between the option and exercise date.
A Black Scholes model is used to determine the grant date fair value with three inputs:
\u2022 Expected volatility \u2013 based on the Company\u2019s share price.
\u2022 Risk-free rate \u2013 based on Government bonds.
\u2022 Dividend yield \u2013 based on the average dividend yield across external analyst reports for the
quarter prior to scheme grant date.
10.Share-based payments continued
Deferred Share Bonus Plan
For awards granted from 2021, there are no further performance or vesting conditions
attached to deferred awards, for further details see DSBP above.
For DSBP awards where conditions exist, these schemes carry no rights to dividend equivalents
and a Black Scholes model is used to determine the grant date fair value with a dividend yield
input applied \u2013 based on the average dividend yield across external analyst reports for the
quarter prior to scheme grant date.
Performance Share Plan
Non-market performance conditions also exist for the scheme, notably that a participant is
employed by the Company over the performance period with good leaver exceptions, and an
attrition rate is applied as an estimate of the actual number of awards that will meet the
related conditions at the vesting date.
The awards are not entitled to a dividend equivalent between grant date and vesting and a
Black Scholes model is used to determine the grant date fair value with a dividend yield input
applied \u2013 based on the average dividend yield across external analyst reports for the quarter
prior to the scheme grant date.
The fair value of the portion of awards that is subject to market conditions (i.e. the relative TSR
element of the PSP) is determined at the grant date using a Monte Carlo model.
The inputs into the models are as follows:
2025
2024
2023
2022
2021
Mid-market share price, \u00a3
4.46
3.86
5.01
5.58
4.94
Attrition rate, %
11.6
9.7
6.0
6.9
12.8
Expected volatility, %
42.0
49.8
35.4
37.4
59.5
Dividend yield, %\u00a0
7.5
7.3
8.7
4.7
3.8
Vesting rate \u2013 TSR %\u00a0
25.7
33.0
62.7
32.3
40.8
Grant date fair value, \u00a3
3.38
2.53
3.08
4.64
4.26
", "dimensions": { "concept": "ifrs-full:DisclosureOfSharebasedPaymentArrangementsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-506": { "value": "
11.Taxation
The Group publishes its tax strategy on its corporate website. The table below shows the
components of the Group\u2019s tax charge for the year:
2025
2024
\u00a3m
\u00a3m
Current tax
Corporation tax
90.4
110.2
Corporation tax \u2013 prior year adjustments
(0.4)
(4.8)
Total current tax charge
90.0
105.4
Deferred tax
Deferred tax
6.5
5.4
Deferred tax \u2013 prior year adjustments
0.3
5.5
Release of deferred tax on CCFS Combination
\u2013
(6.3)
Total deferred tax charge
6.8
4.6
Total tax charge
96.8
110.0
11.Taxation continued
The charge for taxation on the Group\u2019s profit before taxation differs from the charge based on
the standard rate of UK Corporation Tax of 25.0% (2024: 25.0%) as follows:
2025
2024
\u00a3m
\u00a3m
Profit before taxation
382.5
418.1
Profit multiplied by the standard rate of UK Corporation Tax\u00a0
25% (2024: 25%)
95.6
104.5
Bank surcharge1
4.7
6.6
Tax effects of:
Income not taxable
(1.4)
(0.2)
Timing differences on capital items
(6.0)
(4.7)
Fair value adjustments on acquisition
\u2013
6.3
Adjustments in respect of earlier years
(0.4)
(4.8)
Tax on coupon paid on AT1 securities2
(2.5)
(2.3)
Total current tax charge
90.0
105.4
Movements in deferred taxes
6.5
5.4
Deferred tax \u2013 prior year adjustments
0.3
5.5
Release of deferred tax on CCFS Combination
\u2013
(6.3)
Total deferred tax charge
6.8
4.6
Total tax charge
96.8
110.0
1.In 2024 the tax charge for the two banking entities of \u00a37.4m was offset by the tax impact of unwinding CCFS
Combination items of \u00a30.8m.
2.The Group has issued AT1 capital instruments that are classified as Hybrid Capital Instruments (HCI) for tax purposes.
The coupons paid under HCI are deductible under UK tax legislation despite being charged to equity.
Factors affecting tax charge for the year
The standard rate of UK corporation tax applicable in the period was 25.0% (2024: 25.0%).
The\u00a0Group\u2019s banking entities also pay the bank surcharge at 3.0% (2024: 3.0%) on combined
profits for the full year above \u00a3100.0m (2024: \u00a3100.0m).
The effective tax rate for the year ended 31 December 2025, excluding the impact of
adjustments in respect of earlier years and the deferred tax rate change, was 25.3% (2024:
26.1%). This is higher than the standard rate of UK corporation tax, principally due to the
impact of the bank surcharge payable by the two banking entities, offset by the impact of
swap movements in securitisation companies that are not subject to tax, and deductions
available for the coupon paid on AT1 instruments that are charged to equity.
During the year a tax credit of \u00a32.8m (2024: \u00a30.3m) (comprising a deferred tax credit of \u00a32.2m
(2024: \u00a30.1m) and current tax credit of \u00a30.6m (2024: \u00a30.2m)) has been recognised directly
within equity relating to the Group's share-based payment schemes.
During the year a tax debit of \u00a30.2m (2024: nil) has been recognised within other
comprehensive income relating to investment securities classified as FVOCI.
Deferred taxation asset
The table below shows movements on deferred tax assets during the year.
2025
2024
\u00a3m
\u00a3m
As at 1 January 1
6.2
3.9
Profit or loss credit
0.6
1.2
Transferred from deferred tax liability 2
\u2013
1.0
Tax taken directly to OCI
(0.2)
\u2013
Tax taken directly to equity
2.2
0.1
As at 31 December 1
8.8
6.2
1.Deferred taxation assets are recognised on share-based payments, IFRS 9 transitional adjustments, losses carried
forward and accelerated depreciation.
2.In 2024 \u00a31.0m relating to accelerated depreciation previously shown within the deferred tax asset has been transferred
to the deferred tax liability.
As at 31 December 2025, the Group had \u00a33.5m (2024: \u00a33.5m) of losses for which a deferred
tax asset has not been recognised as the Group does not expect sufficient future profits in the
entity from which the deferred tax asset arises to be available to utilise the losses.
As at 31 December 2025, deferred tax assets of \u00a33.4m (2024: \u00a32.7m) are expected to be
utilised within 12 months and \u00a35.4m (2024: \u00a33.5m) utilised after 12 months.
11Taxation continued
Deferred taxation liability
The table below shows movements on deferred tax liability during the year.
2025
2024
\u00a3m
\u00a3m
As at 1 January 1
13.1
6.3
Profit or loss charge 2
7.1
0.3
Profit or loss charge \u2013 prior year
0.3
5.5
Transfer from deferred tax asset 3
\u2013
1.0
As at 31 December 1
20.5
13.1
1.Deferred taxation liability recognised on receipt of capital allowances in advance of associated depreciation, and on the
timing differences in the recognition of assets and liabilities at fair value on Combination.
2.In 2024, the profit or loss charge includes a release of \u00a36.6m relating to fair values unwound of assets and liabilities
recognised on Combination.
3.In 2024, \u00a31.0m relating to accelerated depreciation previously shown within the deferred tax asset was transferred to
the deferred tax liability.
As at 31 December 2025, deferred tax liabilities of \u00a32.9m (2024: \u00a31.1m) are expected to be due
within 12 months and \u00a317.6m (2024: \u00a312.0m) due after 12 months.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIncomeTaxExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-507": { "value": "
Deferred taxation asset
The table below shows movements on deferred tax assets during the year.
2025
2024
\u00a3m
\u00a3m
As at 1 January 1
6.2
3.9
Profit or loss credit
0.6
1.2
Transferred from deferred tax liability 2
\u2013
1.0
Tax taken directly to OCI
(0.2)
\u2013
Tax taken directly to equity
2.2
0.1
As at 31 December 1
8.8
6.2
1.Deferred taxation assets are recognised on share-based payments, IFRS 9 transitional adjustments, losses carried
forward and accelerated depreciation.
2.In 2024 \u00a31.0m relating to accelerated depreciation previously shown within the deferred tax asset has been transferred
to the deferred tax liability.
As at 31 December 2025, the Group had \u00a33.5m (2024: \u00a33.5m) of losses for which a deferred
tax asset has not been recognised as the Group does not expect sufficient future profits in the
entity from which the deferred tax asset arises to be available to utilise the losses.
As at 31 December 2025, deferred tax assets of \u00a33.4m (2024: \u00a32.7m) are expected to be
utilised within 12 months and \u00a35.4m (2024: \u00a33.5m) utilised after 12 months.
11Taxation continued
Deferred taxation liability
The table below shows movements on deferred tax liability during the year.
2025
2024
\u00a3m
\u00a3m
As at 1 January 1
13.1
6.3
Profit or loss charge 2
7.1
0.3
Profit or loss charge \u2013 prior year
0.3
5.5
Transfer from deferred tax asset 3
\u2013
1.0
As at 31 December 1
20.5
13.1
1.Deferred taxation liability recognised on receipt of capital allowances in advance of associated depreciation, and on the
timing differences in the recognition of assets and liabilities at fair value on Combination.
2.In 2024, the profit or loss charge includes a release of \u00a36.6m relating to fair values unwound of assets and liabilities
recognised on Combination.
3.In 2024, \u00a31.0m relating to accelerated depreciation previously shown within the deferred tax asset was transferred to
the deferred tax liability.
As at 31 December 2025, deferred tax liabilities of \u00a32.9m (2024: \u00a31.1m) are expected to be due
within 12 months and \u00a317.6m (2024: \u00a312.0m) due after 12 months.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredTaxesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-508": { "value": "
12.Earnings per share
EPS is based on the profit for the year and the weighted average number of ordinary shares in
issue. Basic EPS are calculated by dividing profit attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the year. Diluted EPS take into
account share options and awards which can be converted to ordinary shares.
For the purpose of calculating EPS, profit attributable to ordinary shareholders is arrived at by
adjusting profit for the year for the coupon on securities classified as equity:
2025
2024
\u00a3m
\u00a3m
Profit after tax
285.7
308.1
Less: coupon paid on AT1 securities classified as equity
(10.1)
(9.0)
Profit attributable to ordinary shareholders
275.6
299.1
2025
2024
Weighted average number of shares, millions
Basic
364.6
385.6
Dilutive impact of share-based payment schemes
9.7
9.5
Diluted
374.3
395.1
Earnings per share, pence per share
Basic
75.6
77.6
Diluted
73.6
75.7
", "dimensions": { "concept": "ifrs-full:DisclosureOfEarningsPerShareExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-509": { "value": "
EPS is based on the profit for the year and the weighted average number of ordinary shares in
issue. Basic EPS are calculated by dividing profit attributable to ordinary shareholders by the
weighted average number of ordinary shares in issue during the year. Diluted EPS take into
account share options and awards which can be converted to ordinary shares.
For the purpose of calculating EPS, profit attributable to ordinary shareholders is arrived at by
adjusting profit for the year for the coupon on securities classified as equity:", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForEarningsPerShareExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-510": { "value": "
13.Dividends
2025
2024
\u00a3m
Pence per share
\u00a3m
Pence per share
Final dividend for the prior year
84.9
22.9
85.6
21.8
Interim dividend for the current
year
40.6
11.2
40.8
10.7
125.5
126.4
The Directors recommend a final dividend of \u00a385.8m , 24.1 pence per share (2024: \u00a385.2m,
22.9 \u00a0pence per share) payable on 13\u00a0May 2026 with an ex-dividend date of 2\u00a0April 2026 and a
record date of 7\u00a0April 2026. This dividend is not reflected in these financial statements as it is
subject to approval by shareholders at the Annual General Meeting on 7\u00a0May 2026 .
If the final dividend is approved, this will make up the total dividend for 2025 of \u00a3126.4m,
35.3\u00a0pence per share (2024: \u00a3126.0m, 33.6 pence per share).
A summary of the Company\u2019s distributable reserves is shown below:
2025
2024
\u00a3m
\u00a3m
Retained earnings
1,349.1
1,354.2
Own shares 1
(0.9)
(0.9)
Distributable reserves
1,348.2
1,353.3
1.Own shares comprises own shares held in the Group\u2019s EBT of \u00a30.9m ( 2024: \u00a30.9m) which are recognised within OSBG
under look-through accounting.
Further additional distributable reserves can be realised over time from dividend receipts from
profits generated from the subsidiaries including two regulated banks within the Group.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDividendsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-511": { "value": "
14.Cash and cash equivalents
The following table analyses the cash and cash equivalents disclosed in the consolidated
statement of cash flows:
2025
2024
\u00a3m
\u00a3m
Cash in hand
0.4
0.3
Unencumbered loans and advances to credit institutions (see
note 15)
2,798.3
3,231.1
2,798.7
3,231.4
", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-514": { "value": "
15.Loans and advances to credit institutions
2025
2024
\u00a3m
\u00a3m
Unencumbered:
BoE call account
2,429.6
3,053.9
Short-term reverse repurchase agreements
200.6
\u2013
Call accounts
83.4
58.5
Cash held in special purpose vehicles (SPVs) 1
58.9
99.5
Term deposits
25.8
19.2
2,798.3
3,231.1
Encumbered:
Cash held in SPVs 1
38.2
40.6
Cash margin given
216.5
134.2
254.7
174.8
3,053.0
3,405.9
1.Cash held in SPVs is ring-fenced for use in managing the Group\u2019s securitised debt facilities under the terms of
securitisation agreements. Cash held in SPVs is treated as unencumbered in proportion to the retained interest in the
SPV, based on the nominal value of the bonds held by the Group to total bonds in the securitisation, and is included in
cash and cash equivalents. Cash retained in SPVs designated as cash reserve credit enhancement is treated as
encumbered in proportion to the external holdings in the SPV and excluded from cash and cash equivalents.", "dimensions": { "concept": "ifrs-full:DisclosureOfLoansAndAdvancesToBanksExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-513": { "value": "
15.Loans and advances to credit institutions
2025
2024
\u00a3m
\u00a3m
Unencumbered:
BoE call account
2,429.6
3,053.9
Short-term reverse repurchase agreements
200.6
\u2013
Call accounts
83.4
58.5
Cash held in special purpose vehicles (SPVs) 1
58.9
99.5
Term deposits
25.8
19.2
2,798.3
3,231.1
Encumbered:
Cash held in SPVs 1
38.2
40.6
Cash margin given
216.5
134.2
254.7
174.8
3,053.0
3,405.9
1.Cash held in SPVs is ring-fenced for use in managing the Group\u2019s securitised debt facilities under the terms of
securitisation agreements. Cash held in SPVs is treated as unencumbered in proportion to the retained interest in the
SPV, based on the nominal value of the bonds held by the Group to total bonds in the securitisation, and is included in
cash and cash equivalents. Cash retained in SPVs designated as cash reserve credit enhancement is treated as
encumbered in proportion to the external holdings in the SPV and excluded from cash and cash equivalents.", "dimensions": { "concept": "ifrs-full:DisclosureOfCashAndBankBalancesAtCentralBanksExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-512": { "value": "
15.Loans and advances to credit institutions
2025
2024
\u00a3m
\u00a3m
Unencumbered:
BoE call account
2,429.6
3,053.9
Short-term reverse repurchase agreements
200.6
\u2013
Call accounts
83.4
58.5
Cash held in special purpose vehicles (SPVs) 1
58.9
99.5
Term deposits
25.8
19.2
2,798.3
3,231.1
Encumbered:
Cash held in SPVs 1
38.2
40.6
Cash margin given
216.5
134.2
254.7
174.8
3,053.0
3,405.9
1.Cash held in SPVs is ring-fenced for use in managing the Group\u2019s securitised debt facilities under the terms of
securitisation agreements. Cash held in SPVs is treated as unencumbered in proportion to the retained interest in the
SPV, based on the nominal value of the bonds held by the Group to total bonds in the securitisation, and is included in
cash and cash equivalents. Cash retained in SPVs designated as cash reserve credit enhancement is treated as
encumbered in proportion to the external holdings in the SPV and excluded from cash and cash equivalents.", "dimensions": { "concept": "ifrs-full:DisclosureOfRestrictedCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-515": { "value": "Cash held in SPVs is ring-fenced for use in managing the Group\u2019s securitised debt facilities under the terms of
securitisation agreements. Cash held in SPVs is treated as unencumbered in proportion to the retained interest in the
SPV, based on the nominal value of the bonds held by the Group to total bonds in the securitisation, and is included in
cash and cash equivalents. Cash retained in SPVs designated as cash reserve credit enhancement is treated as
encumbered in proportion to the external holdings in the SPV and excluded from cash and cash equivalents.", "dimensions": { "concept": "ifrs-full:DescriptionOfAccountingPolicyForRestrictedCashAndCashEquivalentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-516": { "value": "
16.Investment securities
2025
2024
\u00a3m
\u00a3m
Held at amortised cost:
RMBS loan notes
608.5
742.1
Covered bonds
209.1
56.2
UK Sovereign debt
147.3
\u2013
964.9
798.3
Held at FVOCI:
Supranational bonds
269.2
\u2013
Covered bonds
148.9
\u2013
UK Sovereign debt
30.7
226.0
448.8
226.0
Held at FVTPL:
RMBS loan notes
400.8
410.1
1,814.5
1,434.4
At 31 December 2025, the Group used \u00a3293.9m of RMBS loan notes (2024: nil ) as collateral in
repurchase agreements.
The Directors consider that the primary purpose of holding investment securities is prudential.
These securities are held as liquid assets with the intention of use on a continuing basis in the
Group\u2019s activities and are classified as amortised cost, FVOCI and FVTPL in accordance with
the Group\u2019s business model for each security.
The credit risk on investment securities held at amortised cost and FVOCI has not significantly
increased since initial recognition and is categorised as stage 1. At 31 December 2025, there
were no ECLs recognised on investment securities (2024: nil ) as set out in note 1(m)(vii).
Movements during the year in investment securities held by the Group are analysed as follows:
2025
2024
\u00a3m
\u00a3m
As at 1 January
1,434.4
621.7
Additions 1
932.7
1,597.3
Disposals and maturities
(558.0)
(789.1)
Movement in accrued interest
2.2
4.6
Changes in fair value
3.2
(0.1)
As at 31 December
1,814.5
1,434.4
1.2024 additions included \u00a3786.1m of notes received as part of PMF 2024-2 securitisation.
At 31 December 2025, investment securities included investments in unconsolidated structured
entities (see note 41) of \u00a3461.8m notes in PMF 2024-2 (2024: \u00a3472.5m notes in PMF 2024-2 and
\u00a392.6m notes in PMF 2020-1B). These investments represent the maximum exposure to loss
from unconsolidated structured entities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInvestmentsOtherThanInvestmentsAccountedForUsingEquityMethodExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-518": { "value": "
17.Loans and advances to customers
2025
2024
\u00a3m
\u00a3m
Held at amortised cost:
Loans and advances (see note 18)
25,608.4
24,923.4
Finance lease (see note 19)
424.2
316.9
26,032.6
25,240.3
Less: Expected credit losses (see note 20)
(123.6)
(126.9)
25,909.0
25,113.4
Held at FVTPL:
Residential mortgages
11.6
12.9
25,920.6
25,126.3
The Group has recognised \u00a36.3m of ECLs on finance leases as at 31 December 2025 (2024:
\u00a34.1m). During the year, originations in InterBay Asset Finance Limited amounted to \u00a3242.1m
( 2024: \u00a3182.1m).
20.Expected credit losses
The ECL has been calculated based on various scenarios as set out below:
2025
2024
ECL
provision
Weighting
Weighted
ECL
provision
ECL
provision
Weighting
Weighted
ECL
provision
\u00a3m
%
\u00a3m
\u00a3m
%
\u00a3m
Scenarios
Upside
48.4
30
14.5
53.2
30
16.0
Base case
56.8
40
22.7
63.6
40
25.4
Downside scenario
98.8
20
19.8
114.5
20
22.9
Severe downside
scenario
176.4
10
17.6
153.0
10
15.3
Total weighted
provisions
74.6
79.6
Other Provisions:
Individually assessed
provisions
44.3
37.6
Post model
adjustments
4.7
9.7
Total provision
123.6
126.9
The Group held \u00a34.7m (2024: \u00a39.7m) of ECL due to post model adjustments for risks not
sufficiently accounted for in the IFRS 9 framework.
20.Expected credit losses continued
The risk associated with the cost of borrowing, as interest rates have remained elevated, has
transitioned into the model framework (2024: \u00a32.1m). Similarly the PMA held to address the
observed elongated time to sales post the pandemic have also transitioned into the model
framework (2024: \u00a36.3m). PMAs continue to be recognised for the physical risk relating to
climate change and concerns around cladding amounting to \u00a32.0m (2024: \u00a31.3m). The
Development Finance PMA recognised at 30 June 2025 continues to consider the uncertainty
arising from a potential severe economic downturn at \u00a31.9m, with the addition of a new PMA
for the risk associated with the Renter's Rights Bill, which is expected to extend the time to sale,
amounting to \u00a30.8m.
The Group\u2019s ECL by segment and IFRS 9 stage is shown below:
2025
2024
OSB
CCFS
Total
OSB
CCFS
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Stage 1
17.3
1.0
18.3
11.8
1.9
13.7
Stage 2
23.2
5.1
28.3
29.6
9.7
39.3
Stage 3
63.7
12.2
75.9
58.6
13.1
71.7
Stage 3 (POCI)
0.3
0.8
1.1
1.1
1.1
2.2
104.5
19.1
123.6
101.1
25.8
126.9
The table below shows the movement in the ECL by IFRS 9 stage during the year. ECLs on
originations and acquisitions reflect the IFRS 9 stage of loans originated or acquired during the
year as at 31 December and not the date of origination. Re-measurement of loss allowance
relates to existing loans which did not redeem during the year and includes the impact of loans
moving between IFRS 9 stages.
Stage 1
Stage 2
Stage 3
Stage 3
(POCI)
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 1 January 2024
22.4
54.3
66.7
2.4
145.8
Originations
6.1
\u2013
\u2013
\u2013
6.1
Acquisitions
0.1
\u2013
\u2013
\u2013
0.1
Disposals1
(0.6)
(0.3)
\u2013
\u2013
(0.9)
Repayments and write-offs
(2.4)
(5.0)
(15.4)
(0.3)
(23.1)
Re-measurement of loss
allowance
(24.3)
13.0
18.5
(0.3)
6.9
Transfers:
- To Stage 1
15.3
(13.4)
(1.9)
\u2013
\u2013
- To Stage 2
(2.3)
3.9
(1.6)
\u2013
\u2013
- To Stage 3
(0.2)
(9.0)
9.2
\u2013
\u2013
Changes in assumptions and
model parameters
(0.4)
(4.2)
(3.8)
0.4
(8.0)
As at 31 December 2024
13.7
39.3
71.7
2.2
126.9
Originations
8.1
\u2013
\u2013
\u2013
8.1
Disposals1
(0.1)
(0.1)
(0.8)
(0.4)
(1.4)
Repayments and write-offs
(0.9)
(4.9)
(22.6)
(0.7)
(29.1)
Re-measurement of loss
allowance
(12.5)
17.6
27.3
\u2013
32.4
Transfers:
- To Stage 1
10.4
(9.1)
(1.3)
\u2013
\u2013
- To Stage 2
(1.0)
3.2
(2.2)
\u2013
\u2013
- To Stage 3
(0.4)
(6.6)
7.0
\u2013
\u2013
Changes in assumptions and
model parameters
1.0
(11.1)
(3.2)
\u2013
(13.3)
As at 31 December 2025
18.3
28.3
75.9
1.1
123.6
1.Disposals include ECL on the loans and advances to customers derecognised as part of sale of the second charge
portfolio (2024: PMF 2024-2 securitisation).
20Expected credit losses continued
The table below shows the stage 2 ECL balances by transfer criteria:
2025
2024
Carrying
value
ECL
Coverage
Carrying
value
ECL
Coverage
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
\u00a0 %
Criteria:
Relative/absolute PD
movement
3,456.7
24.3
0.70
3,998.9
35.7
0.89
Qualitative measures
278.3
3.5
1.26
283.6
3.3
1.16
30 days past due
backstop
86.3
0.5
0.58
70.4
0.3
0.43
Total
3,821.3
28.3
0.74
4,352.9
39.3
0.90
The Group has a number of qualitative measures to determine whether a SICR has taken
place. These triggers utilise both internal performance information, to analyse whether an
account is in distress but not yet in arrears, and external credit bureau information,
to\u00a0determine whether the customer is experiencing financial difficulty with an external
credit\u00a0obligation.
21.Impairment of financial assets
The charge/(credit) for impairment of financial assets in the Consolidated Statement of
Comprehensive Income comprises:
2025
2024
\u00a3m
\u00a3m
Write-offs in year, net of recoveries
20.2
10.7
Decrease in ECL provision
(7.2)
(22.4)
13.0
(11.7)
", "dimensions": { "concept": "ifrs-full:DisclosureOfAllowanceForCreditLossesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-517": { "value": "
17.Loans and advances to customers
2025
2024
\u00a3m
\u00a3m
Held at amortised cost:
Loans and advances (see note 18)
25,608.4
24,923.4
Finance lease (see note 19)
424.2
316.9
26,032.6
25,240.3
Less: Expected credit losses (see note 20)
(123.6)
(126.9)
25,909.0
25,113.4
Held at FVTPL:
Residential mortgages
11.6
12.9
25,920.6
25,126.3
18.Loans and advances
2025
2024
OSB
CCFS
Total
OSB
CCFS
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Gross carrying
amount
Stage 1
13,327.6
7,407.5
20,735.1
12,029.3
7,539.0
19,568.3
Stage 2
2,194.4
1,621.4
3,815.8
2,411.8
1,935.5
4,347.3
Stage 3
714.8
299.5
1,014.3
653.2
294.1
947.3
Stage 3 (POCI)
16.4
26.8
43.2
27.8
32.7
60.5
16,253.2
9,355.2
25,608.4
15,122.1
9,801.3
24,923.4
The mortgage loan balances pledged as collateral for liabilities are:
2025
2024
\u00a3m
\u00a3m
BoE under TFSME and ILTR
2,385.4
3,745.2
Securitisation
1,019.5
995.9
3,404.9
4,741.1
The Group\u2019s securitisation programmes and use of TFSME and ILTR result in certain assets
being encumbered as collateral against such funding. As at 31 December 2025, the
percentage of the Group\u2019s gross loans and advances to customers that are encumbered was
13% (2024: 19%).
The contractual amount outstanding on loans and advances that were written off during the
reporting period and were still subject to collections and recovery activity was \u00a39.9m at
31\u00a0December 2025 (2024: \u00a31.9m).
As at 31 December 2025, loans and advances of \u00a3305.9m (2024: \u00a3280.8m) were in a probation
period before they can move out of Stage 3, see note 1 (m) (vii) for further details.
Where a borrower has multiple facilities, all facilities are considered in default when a
minimum threshold of the borrower\u2019s exposure has been classified as defaulted. As at 31
December 2025, loans and advances of \u00a389.0m (2024: \u00a372.0m) were in this category of
default.
The table below shows the movement in loans and advances to customers by IFRS 9 stage
during the year:
Stage 1
Stage 2
Stage 3
Stage 3
(POCI)
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 1 January 2024
20,362.5
4,531.9
709.1
70.9
25,674.4
Originations1
3,771.6
\u2013
\u2013
\u2013
3,771.6
Acquisitions2
5.9
\u2013
\u2013
\u2013
5.9
Disposals4
(1,126.1)
(124.5)
(0.2)
\u2013
(1,250.8)
Repayments and write-offs3
(2,669.7)
(469.2)
(128.4)
(10.4)
(3,277.7)
Transfers:
- To Stage 1
1,244.4
(1,210.5)
(33.9)
\u2013
\u2013
- To Stage 2
(1,874.4)
1,933.5
(59.1)
\u2013
\u2013
- To Stage 3
(145.9)
(313.9)
459.8
\u2013
\u2013
As at 31 December 2024
19,568.3
4,347.3
947.3
60.5
24,923.4
Originations1
4,467.7
\u2013
\u2013
\u2013
4,467.7
Acquisitions2
11.8
\u2013
\u2013
\u2013
11.8
Disposals4
(88.2)
(26.8)
(14.8)
(4.3)
(134.1)
Repayments and write-offs3
(2,858.0)
(604.7)
(184.7)
(13.0)
(3,660.4)
Transfers:
- To Stage 1
1,047.5
(1,007.2)
(40.3)
\u2013
\u2013
- To Stage 2
(1,266.4)
1,384.3
(117.9)
\u2013
\u2013
- To Stage 3
(147.6)
(277.1)
424.7
\u2013
\u2013
As at 31 December 2025
20,735.1
3,815.8
1,014.3
43.2
25,608.4
1.Originations include further advances and drawdowns on existing commitments.
2.The Group repurchased \u00a311.8m (2024: \u00a35.9m) of own-originated UK residential and Buy-to-Let mortgages from
deconsolidated SPVs at par.
3.Repayments and write-offs include customer redemptions and \u00a320.2m (2024: \u00a310.7m) of write-offs during the year.
4.Disposals include loans and advances to customers derecognised as part of the sale of the second charge portfolio
(2024: PMF 2024-2 securitisation).", "dimensions": { "concept": "ifrs-full:DisclosureOfLoansAndAdvancesToCustomersExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-519": { "value": "
18.Loans and advances
2025
2024
OSB
CCFS
Total
OSB
CCFS
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Gross carrying
amount
Stage 1
13,327.6
7,407.5
20,735.1
12,029.3
7,539.0
19,568.3
Stage 2
2,194.4
1,621.4
3,815.8
2,411.8
1,935.5
4,347.3
Stage 3
714.8
299.5
1,014.3
653.2
294.1
947.3
Stage 3 (POCI)
16.4
26.8
43.2
27.8
32.7
60.5
16,253.2
9,355.2
25,608.4
15,122.1
9,801.3
24,923.4
The mortgage loan balances pledged as collateral for liabilities are:
2025
2024
\u00a3m
\u00a3m
BoE under TFSME and ILTR
2,385.4
3,745.2
Securitisation
1,019.5
995.9
3,404.9
4,741.1
The Group\u2019s securitisation programmes and use of TFSME and ILTR result in certain assets
being encumbered as collateral against such funding. As at 31 December 2025, the
percentage of the Group\u2019s gross loans and advances to customers that are encumbered was
13% (2024: 19%).
The contractual amount outstanding on loans and advances that were written off during the
reporting period and were still subject to collections and recovery activity was \u00a39.9m at
31\u00a0December 2025 (2024: \u00a31.9m).
As at 31 December 2025, loans and advances of \u00a3305.9m (2024: \u00a3280.8m) were in a probation
period before they can move out of Stage 3, see note 1 (m) (vii) for further details.
Where a borrower has multiple facilities, all facilities are considered in default when a
minimum threshold of the borrower\u2019s exposure has been classified as defaulted. As at 31
December 2025, loans and advances of \u00a389.0m (2024: \u00a372.0m) were in this category of
default.
The table below shows the movement in loans and advances to customers by IFRS 9 stage
during the year:
Stage 1
Stage 2
Stage 3
Stage 3
(POCI)
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 1 January 2024
20,362.5
4,531.9
709.1
70.9
25,674.4
Originations1
3,771.6
\u2013
\u2013
\u2013
3,771.6
Acquisitions2
5.9
\u2013
\u2013
\u2013
5.9
Disposals4
(1,126.1)
(124.5)
(0.2)
\u2013
(1,250.8)
Repayments and write-offs3
(2,669.7)
(469.2)
(128.4)
(10.4)
(3,277.7)
Transfers:
- To Stage 1
1,244.4
(1,210.5)
(33.9)
\u2013
\u2013
- To Stage 2
(1,874.4)
1,933.5
(59.1)
\u2013
\u2013
- To Stage 3
(145.9)
(313.9)
459.8
\u2013
\u2013
As at 31 December 2024
19,568.3
4,347.3
947.3
60.5
24,923.4
Originations1
4,467.7
\u2013
\u2013
\u2013
4,467.7
Acquisitions2
11.8
\u2013
\u2013
\u2013
11.8
Disposals4
(88.2)
(26.8)
(14.8)
(4.3)
(134.1)
Repayments and write-offs3
(2,858.0)
(604.7)
(184.7)
(13.0)
(3,660.4)
Transfers:
- To Stage 1
1,047.5
(1,007.2)
(40.3)
\u2013
\u2013
- To Stage 2
(1,266.4)
1,384.3
(117.9)
\u2013
\u2013
- To Stage 3
(147.6)
(277.1)
424.7
\u2013
\u2013
As at 31 December 2025
20,735.1
3,815.8
1,014.3
43.2
25,608.4
1.Originations include further advances and drawdowns on existing commitments.
2.The Group repurchased \u00a311.8m (2024: \u00a35.9m) of own-originated UK residential and Buy-to-Let mortgages from
deconsolidated SPVs at par.
3.Repayments and write-offs include customer redemptions and \u00a320.2m (2024: \u00a310.7m) of write-offs during the year.
4.Disposals include loans and advances to customers derecognised as part of the sale of the second charge portfolio
(2024: PMF 2024-2 securitisation).
22.Derivatives
The table below reconciles the gross amount of derivative contracts to the carrying balance
shown in the Consolidated Statement of Financial Position:
Gross amount
of recognised
financial
assets /
(liabilities)
Net amount of
financial
assets /
(liabilities)
presented in
the
Consolidated
Statement of
Financial
Position
Contracts
subject to
master netting
agreements
not offset in
the
Consolidated
Statement of
Financial
Position
Cash
collateral
paid /
(received) not
offset in the
Consolidated
Statement of
Financial
Position
Net amount
As at 31 December 2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets:
Interest rate risk hedging \u2013
product 1
90.0
90.0
(65.6)
(6.7)
17.7
Interest rate risk hedging \u2013
structural hedge
11.4
11.4
(0.1)
(11.3)
\u2013
101.4
101.4
(65.7)
(18.0)
17.7
Derivative liabilities:
Interest rate risk hedging \u2013
product1
(151.8)
(151.8)
65.6
83.1
(3.1)
Interest rate risk hedging \u2013
structural hedge
(0.2)
(0.2)
0.1
0.1
\u2013
(152.0)
(152.0)
65.7
83.2
(3.1)
22.Derivatives continued
Gross amount
of recognised
financial
assets /
(liabilities)
Net amount of
financial
assets /
(liabilities)
presented in
the
Consolidated
Statement of
Financial
Position
Contracts
subject to
master
netting
agreements
not offset in
the
Consolidated
Statement of
Financial
Position
Cash
collateral
paid /
(received) not
offset in the
Consolidated
Statement of
Financial
Position
Net amount
As at 31 December 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets:
Interest rate risk hedging \u2013
product1
312.7
312.7
(75.7)
(163.8)
73.2
Interest rate risk hedging \u2013
structural hedge
1.1
1.1
(1.1)
\u2013
\u2013
313.8
313.8
(76.8)
(163.8)
73.2
Derivative liabilities:
Interest rate risk hedging \u2013
product1
(77.0)
(77.0)
75.7
\u2013
(1.3)
Interest rate risk hedging \u2013
structural hedge
(4.9)
(4.9)
1.1
3.8
\u2013
(81.9)
(81.9)
76.8
3.8
(1.3)
1.Product relates to the hedging of loan assets, retail deposits, investment securities and debt issued, including pipeline
hedges.
Derivative assets and liabilities include an initial margin of \u00a3150.3m ( 2024: \u00a3131.7m) with swap
counterparties. Margin is posted daily in respect of derivatives transacted with
swap\u00a0counterparties.
Included within the Group\u2019s derivative assets is \u00a317.7m ( 2024: \u00a372.6m) and derivative liabilities
\u00a35.5m (2024: \u00a31.2m) relating to derivative contracts not covered by master netting agreements
on which no cash collateral has been paid.
The table below profiles the maturity of nominal amounts for interest rate risk hedging
derivatives based on contractual maturity:
Total nominal
Less than 3
months
3\u201312\u00a0 months
1\u20135 years
More than 5
years
As at 31 December 2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets
16,448.7
1,942.3
8,203.3
6,167.1
136.0
Derivative liabilities
15,816.1
473.5
2,495.3
12,596.3
251.0
32,264.8
2,415.8
10,698.6
18,763.4
387.0
As at 31 December 2024
Derivative assets
16,474.8
1,555.4
4,390.7
10,249.0
279.7
Derivative liabilities
11,291.4
711.0
4,696.8
5,773.6
110.0
27,766.2
2,266.4
9,087.5
16,022.6
389.7
The Group has 1,468 (2024: 1,111) derivative contracts with an average fixed rate of 3.64%
(2024:\u00a03.71%).
27.Amounts owed to credit institutions
2025
2024
\u00a3m
\u00a3m
BoE TFSME
\u2013
1,394.9
BoE ILTR
1,509.9
380.3
Commercial repo
328.2
\u2013
1,838.1
1,775.2
Cash collateral and margin received
\u2013
160.0
1,838.1
1,935.2
Credit risk \u2013 loans and advances to customers
Credit risk associated with mortgage lending is largely driven by the housing market and level
of unemployment. A recession and/or high interest rates could cause pressure within
the\u00a0market, resulting in rising levels of arrears and repossessions.
All loan applications are assessed in accordance with the Group\u2019s Lending Policies. Changes
to the policies are approved by the Group Risk Committee, with mandates set for the approval
of loan applications.
The Group Credit Committee and ALCO regularly monitor lending activity, taking appropriate
actions to reprice products and adjust lending criteria in order to control risk and manage
exposure. Where necessary and appropriate, changes to the Lending Policies
are\u00a0recommended\u00a0to the Group Risk Committee.
The following tables show the Group\u2019s maximum exposure to credit risk and the impact of
collateral held as security, capped at the gross exposure amount, by impairment stage.
Capped collateral excludes the impact of forced sale discounts and costs to sell. The collateral
value is determined by indexing against HPI data.
OSB
CCFS
Total
Gross
carrying
amount
Capped
collateral
held
Gross
carrying
amount
Capped
collateral
held
Gross
carrying
amount
Capped
collateral
held
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Stage 1
13,742.1
13,673.2
7,407.5
7,407.3
21,149.6
21,080.5
Stage 2
2,199.9
2,197.9
1,621.4
1,621.3
3,821.3
3,819.2
Stage 3
719.0
703.9
299.5
297.4
1,018.5
1,001.3
Stage 3 (POCI)
16.4
16.4
26.8
26.6
43.2
43.0
16,677.4
16,591.4
9,355.2
9,352.6
26,032.6
25,944.0
2024
Stage 1
12,338.1
12,290.5
7,539.0
7,538.4
19,877.1
19,828.9
Stage 2
2,417.4
2,416.0
1,935.5
1,935.0
4,352.9
4,351.0
Stage 3
655.7
649.6
294.1
294.1
949.8
943.7
Stage 3 (POCI)
27.8
27.4
32.7
32.6
60.5
60.0
15,439.0
15,383.5
9,801.3
9,800.1
25,240.3
25,183.6
The Group\u2019s main form of collateral held is property, based in the UK and the Channel Islands.
Liquidity risk \u2013 asset encumbrance
Asset encumbrance levels are monitored by ALCO. The following tables provide an analysis of
the Group\u2019s encumbered and unencumbered assets:
Encumbered
Unencumbered
Pledged as
collateral
Other 1
Available as
collateral
Other
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash in hand
\u2013
\u2013
0.4
\u2013
0.4
Loans and advances to credit
institutions
216.5
38.2
2,429.6
368.7
3,053.0
Investment securities
324.7
\u2013
1,489.8
\u2013
1,814.5
Loans and advances to
customers 2
3,404.9
\u2013
21,724.3
791.4
25,920.6
Derivative assets
\u2013
\u2013
\u2013
101.4
101.4
Non-financial assets
\u2013
\u2013
\u2013
232.8
232.8
3,946.1
38.2
25,644.1
1,494.3
31,122.7
2024
Cash in hand
\u2013
\u2013
0.3
\u2013
0.3
Loans and advances to credit
institutions
134.2
40.6
3,053.9
177.2
3,405.9
Investment securities
22.7
\u2013
1,411.7
\u2013
1,434.4
Loans and advances to
customers 2
4,741.1
\u2013
19,101.3
1,283.9
25,126.3
Derivative assets
\u2013
\u2013
\u2013
313.8
313.8
Non-financial assets
\u2013
\u2013
\u2013
(37.1)
(37.1)
4,898.0
40.6
23,567.2
1,737.8
30,243.6
1.Represents assets that are not pledged but that the Group believes it is restricted from using to secure funding for legal
or other reasons.
2.Unencumbered loans and advances to customers classified as other are restricted for use as collateral. These include
property registered outside of the UK (Jersey and Guernsey), loans and advances not secured by immovable property
and non-performing loans.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCollateralExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-520": { "value": "
22.Derivatives
The table below reconciles the gross amount of derivative contracts to the carrying balance
shown in the Consolidated Statement of Financial Position:
Gross amount
of recognised
financial
assets /
(liabilities)
Net amount of
financial
assets /
(liabilities)
presented in
the
Consolidated
Statement of
Financial
Position
Contracts
subject to
master netting
agreements
not offset in
the
Consolidated
Statement of
Financial
Position
Cash
collateral
paid /
(received) not
offset in the
Consolidated
Statement of
Financial
Position
Net amount
As at 31 December 2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets:
Interest rate risk hedging \u2013
product 1
90.0
90.0
(65.6)
(6.7)
17.7
Interest rate risk hedging \u2013
structural hedge
11.4
11.4
(0.1)
(11.3)
\u2013
101.4
101.4
(65.7)
(18.0)
17.7
Derivative liabilities:
Interest rate risk hedging \u2013
product1
(151.8)
(151.8)
65.6
83.1
(3.1)
Interest rate risk hedging \u2013
structural hedge
(0.2)
(0.2)
0.1
0.1
\u2013
(152.0)
(152.0)
65.7
83.2
(3.1)
22.Derivatives continued
Gross amount
of recognised
financial
assets /
(liabilities)
Net amount of
financial
assets /
(liabilities)
presented in
the
Consolidated
Statement of
Financial
Position
Contracts
subject to
master
netting
agreements
not offset in
the
Consolidated
Statement of
Financial
Position
Cash
collateral
paid /
(received) not
offset in the
Consolidated
Statement of
Financial
Position
Net amount
As at 31 December 2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets:
Interest rate risk hedging \u2013
product1
312.7
312.7
(75.7)
(163.8)
73.2
Interest rate risk hedging \u2013
structural hedge
1.1
1.1
(1.1)
\u2013
\u2013
313.8
313.8
(76.8)
(163.8)
73.2
Derivative liabilities:
Interest rate risk hedging \u2013
product1
(77.0)
(77.0)
75.7
\u2013
(1.3)
Interest rate risk hedging \u2013
structural hedge
(4.9)
(4.9)
1.1
3.8
\u2013
(81.9)
(81.9)
76.8
3.8
(1.3)
1.Product relates to the hedging of loan assets, retail deposits, investment securities and debt issued, including pipeline
hedges.
Derivative assets and liabilities include an initial margin of \u00a3150.3m ( 2024: \u00a3131.7m) with swap
counterparties. Margin is posted daily in respect of derivatives transacted with
swap\u00a0counterparties.
Included within the Group\u2019s derivative assets is \u00a317.7m ( 2024: \u00a372.6m) and derivative liabilities
\u00a35.5m (2024: \u00a31.2m) relating to derivative contracts not covered by master netting agreements
on which no cash collateral has been paid.
The table below profiles the maturity of nominal amounts for interest rate risk hedging
derivatives based on contractual maturity:
Total nominal
Less than 3
months
3\u201312\u00a0 months
1\u20135 years
More than 5
years
As at 31 December 2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Derivative assets
16,448.7
1,942.3
8,203.3
6,167.1
136.0
Derivative liabilities
15,816.1
473.5
2,495.3
12,596.3
251.0
32,264.8
2,415.8
10,698.6
18,763.4
387.0
As at 31 December 2024
Derivative assets
16,474.8
1,555.4
4,390.7
10,249.0
279.7
Derivative liabilities
11,291.4
711.0
4,696.8
5,773.6
110.0
27,766.2
2,266.4
9,087.5
16,022.6
389.7
The Group has 1,468 (2024: 1,111) derivative contracts with an average fixed rate of 3.64%
(2024:\u00a03.71%).
23.Hedge accounting
2025
2024
\u00a3m
\u00a3m
Hedged assets
Current hedge relationships
93.7
(165.3)
Swap inception adjustment
5.0
23.5
Cancelled hedge relationships
(13.1)
(33.2)
De-designated hedge relationships
(0.5)
(4.3)
Fair value adjustments on hedged assets
85.1
(179.3)
Hedged liabilities
Current hedge relationships
(12.9)
9.0
Swap inception adjustment
1.0
(2.9)
Fair value adjustments on hedged liabilities
(11.9)
6.1
The swap inception adjustment relates to hedge accounting adjustments arising when hedge
accounting commences, reflecting the change in fair value on the hedged item due to the
hedged risk that occurred prior to being designated in a hedge accounting relationship. The
Group uses the associated swap value as a proxy for this initial value, based on derivative
instruments previously taken out on the mortgage pipeline or new retail deposits.
23Hedge accounting continued
De-designated hedge relationships relate to hedge accounting adjustments on failed hedge
relationships which are amortised over the remaining lives of the original hedged items and
also include the Group\u2019s equity structural hedge.
Cancelled hedge relationships predominantly represent the unamortised fair value adjustment
for interest rate risk hedges that have been cancelled and replaced due to IBOR transition,
securitisation activities, the equity structural hedge and legacy long-term fixed rate
mortgages (c. 25 years at origination).
The table below analyses the Group\u2019s portfolio hedge accounting for fixed rate loans and
advances to customers:
2025
2024
Hedged item
Hedging
instrument
Hedged item
Hedging
instrument
Loans and advances to customers
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Carrying amount of hedged
item/nominal value of hedging
instrument
17,348.2
17,275.9
13,123.0
13,809.9
Cumulative fair value
adjustments of hedged item/fair
value of hedging instrument
93.1
(89.4)
(165.3)
217.6
Changes in the fair value
adjustment of hedged item/
hedging instrument used for
recognising the hedge
ineffectiveness for the period
248.3
(251.8)
31.7
(53.6)
Cumulative fair value on
cancelled hedge relationships
(13.1)
\u2013
(33.2)
\u2013
In the Consolidated Statement of Financial Position, \u00a340.0m (2024: \u00a3265.9m) of hedging
instruments were recognised within derivative assets; and \u00a3129.4m (2024: \u00a348.3m) within
derivative liabilities.
The movement in cancelled hedge relationships is as follows:
2025
2024
Hedged assets
\u00a3m
\u00a3m
As at 1 January
(33.2)
(30.8)
New cancellations1
(2.9)
(22.9)
Amortisation
23.0
20.5
As at 31 December
(13.1)
(33.2)
1.The new cancellations are from the securitisation of mortgages during the year where the Group cancels swaps which
were effective prior to the event, replacing these with new swaps within SPV structures, with the designated hedge
moved to cancelled hedge relationships to be amortised over the remaining original life of the swap. Additionally,
in\u00a02024, cancellations occurred due to the commencement of the structural hedge programme.
The table below analyses the Group\u2019s portfolio hedge accounting for fixed rate amounts
owed\u00a0to retail depositors:
2025
2024
Hedged item
Hedging
instrument
Hedged item
Hedging
instrument
Customer deposits
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Carrying amount of hedged
item/nominal value of hedging
instrument
8,254.6
8,313.1
8,368.8
8,393.9
Cumulative fair value
adjustments of hedged item/fair
value of hedging instrument
(3.4)
11.5
6.5
(4.3)
Changes in the fair value
adjustment of hedged item/
hedging instrument used for
recognising the hedge
ineffectiveness for the period
(25.7)
8.9
24.9
(22.8)
In the Consolidated Statement of Financial Position, \u00a311.5m (2024: \u00a33.6m) of hedging
instruments were recognised within derivative assets; and nil (2024: \u00a37.9m) within derivative
liabilities.
23.Hedge accounting continued
The table below analyses the Group\u2019s portfolio hedge accounting for fixed rate investment
securities:
2025
2024
Hedged item
Hedging
instrument
Hedged item
Hedging
instrument
Investment Securities
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Carrying amount of hedged item/nominal
value of hedging instrument
279.5
276.0
\u2013
\u2013
Cumulative fair value adjustments of hedged
item/fair value of hedging instrument
0.6
(1.2)
\u2013
\u2013
In the Consolidated Statement of Financial Position, \u00a31.2m (2024: nil) of hedging instruments
were recognised within derivative liabilities.
The table below analyses the Group\u2019s \u2018micro\u2019 hedge accounting for fixed rate senior notes and
subordinated debt liabilities:
2025
2024
Senior notes and subordinated debt liabilities
Hedged item
Hedging
instrument
Hedged item
Hedging
instrument
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Carrying amount of hedged item/nominal
value of hedging instrument
765.0
765.0
765.0
765.0
Cumulative fair value adjustments of hedged
item/fair value of hedging instrument
(9.5)
10.9
2.5
(2.7)
Changes in the fair value adjustment of
hedged item/hedging instrument used for
recognising the hedge ineffectiveness for the
period
6.7
11.9
13.0
(13.0)
The Group has elected to partially hedge the senior notes up to the optional redemption date
which reflects management\u2019s expectations about the exercise of the call option.
In the Consolidated Statement of Financial Position, \u00a310.9m (2024: \u00a35.9m) of hedging
instruments were recognised within derivative assets, and nil (2024: \u00a38.6m) within derivative
liabilities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDerivativeFinancialInstrumentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-524": { "value": "
24.Other assets
2025
2024
\u00a3m
\u00a3m
Falling due within one year:
Prepayments
16.1
15.1
Other assets
1.6
1.1
Falling due more than one year:
Prepayments
2.7
1.0
Other assets
0.6
0.6
21.0
17.8
", "dimensions": { "concept": "ifrs-full:DisclosureOfPrepaymentsAndOtherAssetsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-523": { "value": "
24.Other assets
2025
2024
\u00a3m
\u00a3m
Falling due within one year:
Prepayments
16.1
15.1
Other assets
1.6
1.1
Falling due more than one year:
Prepayments
2.7
1.0
Other assets
0.6
0.6
21.0
17.8
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherCurrentAssetsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-522": { "value": "
24.Other assets
2025
2024
\u00a3m
\u00a3m
Falling due within one year:
Prepayments
16.1
15.1
Other assets
1.6
1.1
Falling due more than one year:
Prepayments
2.7
1.0
Other assets
0.6
0.6
21.0
17.8
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherAssetsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-521": { "value": "
24.Other assets
2025
2024
\u00a3m
\u00a3m
Falling due within one year:
Prepayments
16.1
15.1
Other assets
1.6
1.1
Falling due more than one year:
Prepayments
2.7
1.0
Other assets
0.6
0.6
21.0
17.8
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherNoncurrentAssetsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-525": { "value": "
25.Property, plant and equipment
Freehold land
and buildings
Development
asset
Leasehold
improvements
Equipment and
fixtures
Plant
Right-of-use assets
Property leases
Other leases
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
As at 1 January 2024
20.3
\u2013
3.0
18.8
\u2013
15.8
5.7
63.6
Additions 1
\u2013
11.8
0.6
3.8
\u2013
0.9
\u2013
17.1
Transfer during the year
3.7
(4.1)
0.3
0.1
\u2013
\u2013
\u2013
\u2013
Disposals and write-offs 2
\u2013
\u2013
\u2013
(2.9)
\u2013
\u2013
\u2013
(2.9)
As at 31 December 2024
24.0
7.7
3.9
19.8
\u2013
16.7
5.7
77.8
Additions 1
0.1
1.2
0.4
1.9
2.0
\u2013
\u2013
5.6
Transfer during the year
\u2013
(8.6)
0.1
(0.9)
9.4
\u2013
\u2013
\u2013
Disposals and write-offs 2
(3.4)
\u2013
(1.0)
(2.0)
\u2013
(3.3)
\u2013
(9.7)
Foreign exchange difference
(1.8)
\u2013
\u2013
(0.8)
\u2013
\u2013
\u2013
(2.6)
As at 31 December 2025
18.9
0.3
3.4
18.0
11.4
13.4
5.7
71.1
Accumulated depreciation
As at 1 January 2024
2.0
\u2013
1.5
9.1
\u2013
6.8
0.4
19.8
Charged in year
0.3
\u2013
0.3
3.3
\u2013
2.4
\u2013
6.3
Disposals and write-offs 2
\u2013
\u2013
\u2013
(2.9)
\u2013
\u2013
\u2013
(2.9)
As at 31 December 2024
2.3
\u2013
1.8
9.5
\u2013
9.2
0.4
23.2
Charged in year
0.3
\u2013
0.4
3.3
0.3
2.4
\u2013
6.7
Disposals and write-offs 2
(0.8)
\u2013
(0.7)
(1.9)
\u2013
(2.6)
\u2013
(6.0)
Foreign exchange difference
\u2013
\u2013
\u2013
(0.6)
\u2013
\u2013
\u2013
(0.6)
As at 31 December 2025
1.8
\u2013
1.5
10.3
0.3
9.0
0.4
23.3
Net book value
As at 31 December 2025
17.1
0.3
1.9
7.7
11.1
4.4
5.3
47.8
As at 31 December 2024
21.7
7.7
2.1
10.3
\u2013
7.5
5.3
54.6
1.Additions include property lease modifications of nil (2024: \u00a30.5m) of right-of-use assets.
2.Disposals and write-offs include derecognition of fully depreciated assets and assets reclassified as held for sale.
", "dimensions": { "concept": "ifrs-full:DisclosureOfPropertyPlantAndEquipmentExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-526": { "value": "
26.Intangible assets
Development
costs 1
Computer
software and
licences
Assets arising on
Combination
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cost
As at 1 January 2024
20.7
13.6
21.4
55.7
Additions
27.5
0.2
\u2013
27.7
Transfer during the year
(32.3)
32.3
\u2013
\u2013
Disposals and write-offs 2
\u2013
(1.3)
(21.4)
(22.7)
As at 31 December 2024
15.9
44.8
\u2013
60.7
Additions
27.3
\u2013
\u2013
27.3
Transfer during the year
(27.1)
27.1
\u2013
\u2013
Disposals and write-offs 2
\u2013
(2.4)
\u2013
(2.4)
Foreign exchange difference
\u2013
(0.1)
\u2013
(0.1)
As at 31 December 2025
16.1
69.4
\u2013
85.5
Accumulated amortisation
As at 1 January 2024
2.0
7.8
19.8
29.6
Transfer during the year
(2.0)
3.3
(1.3)
\u2013
Charged in year
\u2013
2.1
2.9
5.0
Disposals and write-offs 2
\u2013
(1.3)
(21.4)
(22.7)
As at 31 December 2024
\u2013
11.9
\u2013
11.9
Charged in year
\u2013
9.2
\u2013
9.2
Disposals and write-offs 2
\u2013
(2.4)
\u2013
(2.4)
Foreign exchange difference
\u2013
(0.1)
\u2013
(0.1)
As at 31 December 2025
\u2013
18.6
\u2013
18.6
Net book value
As at 31 December 2025
16.1
50.8
\u2013
66.9
As at 31 December 2024
15.9
32.9
\u2013
48.8
1.Development costs are largely related to the transformation project.
2.During the year the Group derecognised fully amortised assets.
The Directors have considered the carrying value of intangible assets and determined that
there are no indications of impairment at the year end.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIntangibleAssetsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-528": { "value": "
27.Amounts owed to credit institutions
2025
2024
\u00a3m
\u00a3m
BoE TFSME
\u2013
1,394.9
BoE ILTR
1,509.9
380.3
Commercial repo
328.2
\u2013
1,838.1
1,775.2
Cash collateral and margin received
\u2013
160.0
1,838.1
1,935.2
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepositsFromBanksExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-527": { "value": "
27.Amounts owed to credit institutions
2025
2024
\u00a3m
\u00a3m
BoE TFSME
\u2013
1,394.9
BoE ILTR
1,509.9
380.3
Commercial repo
328.2
\u2013
1,838.1
1,775.2
Cash collateral and margin received
\u2013
160.0
1,838.1
1,935.2
", "dimensions": { "concept": "ifrs-full:DisclosureOfBorrowingsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-529": { "value": "
28.Amounts owed to retail depositors
2025
2024
OSB
CCFS
Total
OSB
CCFS
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Fixed rate deposits
8,063.4
5,108.1
13,171.5
9,016.1
6,340.2
15,356.3
Variable rate
deposits
6,024.9
5,054.7
11,079.6
4,509.3
3,954.7
8,464.0
14,088.3
10,162.8
24,251.1
13,525.4
10,294.9
23,820.3
29.Amounts owed to other customers
2025
2024
\u00a3m
\u00a3m
Fixed rate deposits
223.7
102.3
Variable rate deposits
254.7
2.6
478.4
104.9
", "dimensions": { "concept": "ifrs-full:DisclosureOfDepositsFromCustomersExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-531": { "value": "
30.Debt securities in issue
2025
2024
\u00a3m
\u00a3m
Asset-backed loan notes at amortised cost
1,010.0
1,018.3
Amount due for settlement within 12 months
25.7
2.3
Amount due for settlement after 12 months
984.3
1,016.0
1,010.0
1,018.3
The asset-backed loan notes are secured on fixed and variable rate mortgages and are
redeemable in part from time to time, but such redemptions are mainly from the net principal
received from borrowers in respect of underlying mortgage assets. The maturity date of the
funds matches the contractual maturity date of the underlying mortgage assets. The Group
expects that a large proportion of the underlying mortgage assets, and therefore these notes,
will be repaid within five years.
Where the Group owns the call rights for a transaction, it may repurchase the asset-backed
loan notes on any interest payment date on or after the call dates, or on any interest payment
date when the current balance of the mortgages outstanding is less than or equal to 10% of
the principal amount outstanding on the loan notes on the date they were issued.
Interest is payable at fixed margins above SONIA.
The asset-backed loan notes were issued through the following funding vehicles:
2025
2024
\u00a3m
\u00a3m
PMF 2024-1 plc
417.1
441.2
CMF 2025-1 plc
241.7
\u2013
CMF 2024-1 plc
196.9
283.1
CMF 2023-1 plc
130.6
193.5
Canterbury Finance No.4 plc
23.7
100.5
1,010.0
1,018.3
34.Senior notes
The Group\u2019s outstanding senior notes are as follows:
2025
2024
Reset date
Spread
\u00a3m
\u00a3m
Fixed rate:
Senior notes 2028 (9.5%)
7 September 2027
4.985%
308.1
307.7
Senior notes 2030 (8.875%)
16 January 2029
5.252%
415.3
415.0
723.4
722.7
The senior notes comprise fixed rate notes denominated in pounds sterling and are listed on
the official list of the Financial Conduct Authority (FCA) and admitted to trading on the main
market of the London Stock Exchange plc.
The principal terms of the senior notes are as follows:
\u2022 Interest: Interest on the senior notes is fixed at an initial rate until the reset date. If the
senior notes are not redeemed prior to the reset date, the interest rate will be reset and fixed
based on a benchmark gilt rate plus the specified spread.
\u2022 Redemption: The Issuer may redeem the senior notes in whole (but not in part) in its sole
discretion on the reset date. Optional redemption may also take place for certain
regulatory or tax reasons. Any optional redemption requires the prior consent of the PRA.
\u2022 Ranking: The senior notes constitute direct, unsubordinated and unsecured obligations of
OSBG and rank at least pari passu, without any preference, among themselves as senior
notes. The notes rank behind the claims of depositors, but in priority to holders of Tier 1 and
Tier 2 capital instruments as well as equity holders of OSBG.
The table below shows a reconciliation of the Group\u2019s senior notes during the year:
2025
2024
\u00a3m
\u00a3m
As at 1 January
722.7
307.5
Additions 1
\u2013
398.0
Movement in accrued interest
0.7
17.2
As at 31 December
723.4
722.7
1.2024 additions includes \u00a32.0m towards transaction costs which has been amortised through the EIR of the loan\u00a0notes.
35.Subordinated debt liabilities
The Group\u2019s outstanding subordinated debt liabilities are summarised below:
2025
2024
Reset date
Spread
\u00a3m
\u00a3m
Fixed rate:
Subordinated debt liabilities
2033 (9.993%)
27 July 2028
6.296%
260.1
259.8
All subordinated debt liabilities are denominated in pounds sterling and are listed on the
official list of the FCA and admitted to trading on the main market of the London Stock
Exchange plc.
The principal terms of the subordinated debt liabilities are as follows:
\u2022 Interest: Interest on the subordinated debt liabilities is fixed at an initial rate until the reset
date. If the subordinated debt liabilities are not redeemed prior to the reset date, the
interest rate will be reset and fixed based on a benchmark gilt rate plus the specified
spread.
\u2022 Redemption: The Issuer may redeem the subordinated debt liabilities in whole (but not in
part) in its sole discretion on any day from (and including) 27 April 2028 to (and including)
27 July 2028 (the reset date) as specified in the terms of the agreement. Optional
redemption may also take place for certain regulatory or tax reasons. Any optional
redemption requires the prior consent of the PRA.
\u2022 Ranking: The subordinated debt liabilities constitute direct, unsecured and subordinated
obligations of OSBG and rank at least pari passu, without any preference, among
themselves as Tier 2 capital. The subordinated debt liabilities rank behind the claims of
depositors and other unsecured and unsubordinated creditors, but rank in priority to
holders of Tier 1 capital instruments and of equity holders of OSBG.
The table below shows a reconciliation of the Group\u2019s subordinated debt liabilities during
the\u00a0year:
2025
2024
\u00a3m
\u00a3m
As at 1 January
259.8
259.5
Movement in accrued interest
0.3
0.3
As at 31 December
260.1
259.8
", "dimensions": { "concept": "ifrs-full:DisclosureOfDebtSecuritiesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-530": { "value": "
30.Debt securities in issue
2025
2024
\u00a3m
\u00a3m
Asset-backed loan notes at amortised cost
1,010.0
1,018.3
Amount due for settlement within 12 months
25.7
2.3
Amount due for settlement after 12 months
984.3
1,016.0
1,010.0
1,018.3
The asset-backed loan notes are secured on fixed and variable rate mortgages and are
redeemable in part from time to time, but such redemptions are mainly from the net principal
received from borrowers in respect of underlying mortgage assets. The maturity date of the
funds matches the contractual maturity date of the underlying mortgage assets. The Group
expects that a large proportion of the underlying mortgage assets, and therefore these notes,
will be repaid within five years.
Where the Group owns the call rights for a transaction, it may repurchase the asset-backed
loan notes on any interest payment date on or after the call dates, or on any interest payment
date when the current balance of the mortgages outstanding is less than or equal to 10% of
the principal amount outstanding on the loan notes on the date they were issued.
Interest is payable at fixed margins above SONIA.
The asset-backed loan notes were issued through the following funding vehicles:
2025
2024
\u00a3m
\u00a3m
PMF 2024-1 plc
417.1
441.2
CMF 2025-1 plc
241.7
\u2013
CMF 2024-1 plc
196.9
283.1
CMF 2023-1 plc
130.6
193.5
Canterbury Finance No.4 plc
23.7
100.5
1,010.0
1,018.3
", "dimensions": { "concept": "ifrs-full:DisclosureOfRepurchaseAndReverseRepurchaseAgreementsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-535": { "value": "
32.Other liabilities
2025
2024
\u00a3m
\u00a3m
Falling due within one year:
Accruals
39.6
33.8
Other creditors
11.8
12.4
Share repurchase liability
19.0
10.0
Deferred income
0.4
0.2
70.8
56.4
On 14 March 2025, the Group commenced a share repurchase programme of up to \u00a3100.0m,
recognising a \u00a3100.7m (including incentive fees of \u00a30.7m) reduction in retained earnings and a
share repurchase liability. As at 31 December 2025, 15,590,331 shares had been purchased by
the Group\u2019s agent under the programme at a total cost of \u00a381.7m, reducing the share
repurchase liability to \u00a319.0m. Other creditors included \u00a32.2m for 350,015 shares purchased
by the agent prior to 31 December 2025 for which the Group has completed payment in
January 2026. Any share repurchases made under this programme were announced to the
market each day in line with regulatory requirements, see note 37 for further details.
", "dimensions": { "concept": "ifrs-full:DisclosureOfAccruedExpensesAndOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-534": { "value": "
32.Other liabilities
2025
2024
\u00a3m
\u00a3m
Falling due within one year:
Accruals
39.6
33.8
Other creditors
11.8
12.4
Share repurchase liability
19.0
10.0
Deferred income
0.4
0.2
70.8
56.4
On 14 March 2025, the Group commenced a share repurchase programme of up to \u00a3100.0m,
recognising a \u00a3100.7m (including incentive fees of \u00a30.7m) reduction in retained earnings and a
share repurchase liability. As at 31 December 2025, 15,590,331 shares had been purchased by
the Group\u2019s agent under the programme at a total cost of \u00a381.7m, reducing the share
repurchase liability to \u00a319.0m. Other creditors included \u00a32.2m for 350,015 shares purchased
by the agent prior to 31 December 2025 for which the Group has completed payment in
January 2026. Any share repurchases made under this programme were announced to the
market each day in line with regulatory requirements, see note 37 for further details.
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherCurrentLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-533": { "value": "
32.Other liabilities
2025
2024
\u00a3m
\u00a3m
Falling due within one year:
Accruals
39.6
33.8
Other creditors
11.8
12.4
Share repurchase liability
19.0
10.0
Deferred income
0.4
0.2
70.8
56.4
On 14 March 2025, the Group commenced a share repurchase programme of up to \u00a3100.0m,
recognising a \u00a3100.7m (including incentive fees of \u00a30.7m) reduction in retained earnings and a
share repurchase liability. As at 31 December 2025, 15,590,331 shares had been purchased by
the Group\u2019s agent under the programme at a total cost of \u00a381.7m, reducing the share
repurchase liability to \u00a319.0m. Other creditors included \u00a32.2m for 350,015 shares purchased
by the agent prior to 31 December 2025 for which the Group has completed payment in
January 2026. Any share repurchases made under this programme were announced to the
market each day in line with regulatory requirements, see note 37 for further details.
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-532": { "value": "
32.Other liabilities
2025
2024
\u00a3m
\u00a3m
Falling due within one year:
Accruals
39.6
33.8
Other creditors
11.8
12.4
Share repurchase liability
19.0
10.0
Deferred income
0.4
0.2
70.8
56.4
On 14 March 2025, the Group commenced a share repurchase programme of up to \u00a3100.0m,
recognising a \u00a3100.7m (including incentive fees of \u00a30.7m) reduction in retained earnings and a
share repurchase liability. As at 31 December 2025, 15,590,331 shares had been purchased by
the Group\u2019s agent under the programme at a total cost of \u00a381.7m, reducing the share
repurchase liability to \u00a319.0m. Other creditors included \u00a32.2m for 350,015 shares purchased
by the agent prior to 31 December 2025 for which the Group has completed payment in
January 2026. Any share repurchases made under this programme were announced to the
market each day in line with regulatory requirements, see note 37 for further details.
", "dimensions": { "concept": "ifrs-full:DisclosureOfDeferredIncomeExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-539": { "value": "
33.Provisions and contingent liabilities
Following the Group\u2019s review of its collection processes and how mortgage customers in
arrears are managed, a retrospective review of the Group\u2019s application of forbearance
measures and associated outcomes for certain cohorts of customers has been completed. This
review has led the Group continuing to recognise a provision of \u00a31.9m as of 31 December 2025
based on its estimated costs to redress the accounts in scope and the costs to operationalise
the activity, with redress expected to be applied in 2026.
Provisions also include immaterial provisions related to ECL on undrawn loan facilities and
dismantling costs.
The Group operates in a highly regulated environment and in the normal course of business,
may from time to time receive complaints and claims or be involved in legal proceedings that
could lead to a provision or contingent liability. This environment continues to evolve through
legislation, regulatory guidance and court rulings and the Group actively monitors these
developments. At the reporting date the Group considered that it had no material provisions or
contingent liabilities save as here.
An analysis of the Group\u2019s provisions is presented below:
2025
2024
\u00a3m
\u00a3m
As at 1 January
4.6
0.8
Additions
\u2013
1.1
Paid during the year
(3.6)
\u2013
Profit or loss charge
2.4
2.7
As at 31 December
3.4
4.6
", "dimensions": { "concept": "ifrs-full:DisclosureOfProvisionsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-538": { "value": "
33.Provisions and contingent liabilities
Following the Group\u2019s review of its collection processes and how mortgage customers in
arrears are managed, a retrospective review of the Group\u2019s application of forbearance
measures and associated outcomes for certain cohorts of customers has been completed. This
review has led the Group continuing to recognise a provision of \u00a31.9m as of 31 December 2025
based on its estimated costs to redress the accounts in scope and the costs to operationalise
the activity, with redress expected to be applied in 2026.
Provisions also include immaterial provisions related to ECL on undrawn loan facilities and
dismantling costs.
The Group operates in a highly regulated environment and in the normal course of business,
may from time to time receive complaints and claims or be involved in legal proceedings that
could lead to a provision or contingent liability. This environment continues to evolve through
legislation, regulatory guidance and court rulings and the Group actively monitors these
developments. At the reporting date the Group considered that it had no material provisions or
contingent liabilities save as here.
An analysis of the Group\u2019s provisions is presented below:
2025
2024
\u00a3m
\u00a3m
As at 1 January
4.6
0.8
Additions
\u2013
1.1
Paid during the year
(3.6)
\u2013
Profit or loss charge
2.4
2.7
As at 31 December
3.4
4.6
", "dimensions": { "concept": "ifrs-full:DisclosureOfOtherProvisionsContingentLiabilitiesAndContingentAssetsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-537": { "value": "
33.Provisions and contingent liabilities
Following the Group\u2019s review of its collection processes and how mortgage customers in
arrears are managed, a retrospective review of the Group\u2019s application of forbearance
measures and associated outcomes for certain cohorts of customers has been completed. This
review has led the Group continuing to recognise a provision of \u00a31.9m as of 31 December 2025
based on its estimated costs to redress the accounts in scope and the costs to operationalise
the activity, with redress expected to be applied in 2026.
Provisions also include immaterial provisions related to ECL on undrawn loan facilities and
dismantling costs.
The Group operates in a highly regulated environment and in the normal course of business,
may from time to time receive complaints and claims or be involved in legal proceedings that
could lead to a provision or contingent liability. This environment continues to evolve through
legislation, regulatory guidance and court rulings and the Group actively monitors these
developments. At the reporting date the Group considered that it had no material provisions or
contingent liabilities save as here.
An analysis of the Group\u2019s provisions is presented below:
2025
2024
\u00a3m
\u00a3m
As at 1 January
4.6
0.8
Additions
\u2013
1.1
Paid during the year
(3.6)
\u2013
Profit or loss charge
2.4
2.7
As at 31 December
3.4
4.6
40.Financial commitments and guarantees
a) The Group had \u00a33.8m (2024: \u00a34.9m) of contracted capital expenditure commitments not
provided for as at 31 December 2025.
b) The Group had \u00a30.1m (2024: \u00a30.1m) of minimum lease commitments under leases for low-
value assets and short-term leases of 12 months or less.
c) Undrawn loan facilities:
2025
2024
\u00a3m
\u00a3m
OSB mortgages
764.9
697.9
CCFS mortgages
384.0
289.1
1,148.9
987.0
Undrawn loan facilities are approved loan applications which have not yet been exercised.
They are payable on demand and are usually drawn down or expire within three months.
d) The Group did not have any issued financial guarantees as at 31 December 2025
(2024:\u00a0nil).
", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsAndContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-536": { "value": "
33.Provisions and contingent liabilities
Following the Group\u2019s review of its collection processes and how mortgage customers in
arrears are managed, a retrospective review of the Group\u2019s application of forbearance
measures and associated outcomes for certain cohorts of customers has been completed. This
review has led the Group continuing to recognise a provision of \u00a31.9m as of 31 December 2025
based on its estimated costs to redress the accounts in scope and the costs to operationalise
the activity, with redress expected to be applied in 2026.
Provisions also include immaterial provisions related to ECL on undrawn loan facilities and
dismantling costs.
The Group operates in a highly regulated environment and in the normal course of business,
may from time to time receive complaints and claims or be involved in legal proceedings that
could lead to a provision or contingent liability. This environment continues to evolve through
legislation, regulatory guidance and court rulings and the Group actively monitors these
developments. At the reporting date the Group considered that it had no material provisions or
contingent liabilities save as here.
An analysis of the Group\u2019s provisions is presented below:
2025
2024
\u00a3m
\u00a3m
As at 1 January
4.6
0.8
Additions
\u2013
1.1
Paid during the year
(3.6)
\u2013
Profit or loss charge
2.4
2.7
As at 31 December
3.4
4.6
", "dimensions": { "concept": "ifrs-full:DisclosureOfContingentLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-540": { "value": "
35.Subordinated debt liabilities
The Group\u2019s outstanding subordinated debt liabilities are summarised below:
2025
2024
Reset date
Spread
\u00a3m
\u00a3m
Fixed rate:
Subordinated debt liabilities
2033 (9.993%)
27 July 2028
6.296%
260.1
259.8
All subordinated debt liabilities are denominated in pounds sterling and are listed on the
official list of the FCA and admitted to trading on the main market of the London Stock
Exchange plc.
The principal terms of the subordinated debt liabilities are as follows:
\u2022 Interest: Interest on the subordinated debt liabilities is fixed at an initial rate until the reset
date. If the subordinated debt liabilities are not redeemed prior to the reset date, the
interest rate will be reset and fixed based on a benchmark gilt rate plus the specified
spread.
\u2022 Redemption: The Issuer may redeem the subordinated debt liabilities in whole (but not in
part) in its sole discretion on any day from (and including) 27 April 2028 to (and including)
27 July 2028 (the reset date) as specified in the terms of the agreement. Optional
redemption may also take place for certain regulatory or tax reasons. Any optional
redemption requires the prior consent of the PRA.
\u2022 Ranking: The subordinated debt liabilities constitute direct, unsecured and subordinated
obligations of OSBG and rank at least pari passu, without any preference, among
themselves as Tier 2 capital. The subordinated debt liabilities rank behind the claims of
depositors and other unsecured and unsubordinated creditors, but rank in priority to
holders of Tier 1 capital instruments and of equity holders of OSBG.
The table below shows a reconciliation of the Group\u2019s subordinated debt liabilities during
the\u00a0year:
2025
2024
\u00a3m
\u00a3m
As at 1 January
259.8
259.5
Movement in accrued interest
0.3
0.3
As at 31 December
260.1
259.8
", "dimensions": { "concept": "ifrs-full:DisclosureOfSubordinatedLiabilitiesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-541": { "value": "
36.Cash flows from financing activities
The table below shows a reconciliation of the Group\u2019s liabilities classified as financing activities
within the Consolidated Statement of Cash Flows:
Amounts
owed to
credit
institutions
(see note 27)
Debt
securities in
issue (see
note 30)
Senior notes
(see note 34)
Subordinated
debt
liabilities (see
note 35)
PSBs
Total
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
As at 1 January 2024
3,362.2
818.5
307.5
259.5
15.2
4,762.9
Cash movements
Principal drawdowns
594.4
744.1
398.0
\u2013
\u2013
1,736.5
Principal repayments
(2,153.4)
(548.4)
\u2013
\u2013
(15.0)
(2,716.8)
Interest paid
(142.7)
(58.6)
(46.3)
(25.0)
(0.7)
(273.3)
Non-cash
movements
Interest charged
114.7
62.7
63.5
25.3
0.5
266.7
As at 31 December
2024
1,775.2
1,018.3
722.7
259.8
\u2013
3,776.0
Cash movements
Principal drawdowns
2,228.4
248.8
\u2013
\u2013
\u2013
2,477.2
Principal repayments
(2,154.0)
(258.0)
\u2013
\u2013
\u2013
(2,412.0)
Interest paid
(53.3)
(50.1)
(64.0)
(25.0)
\u2013
(192.4)
Non-cash
movements
Interest charged
41.8
51.0
64.7
25.3
\u2013
182.8
As at 31 December
2025
1,838.1
1,010.0
723.4
260.1
\u2013
3,831.6
36.Cash flows from financing activities continued
The table below shows other financing activities:
2025
2024
Note
\u00a3m
\u00a3m
Coupon paid on AT1 securities
(10.1)
(9.0)
Net swap interest paid on subordinated debt liabilities
and senior notes
(3.7)
(5.0)
Net swap interest paid on structural hedge
(2.3)
(3.3)
Repayments of principal portion of lease liabilities
31
(1.9)
(1.9)
Proceeds from issuance of shares under employee Save
As You Earn (SAYE) schemes
1.4
0.8
Net cash from other financing activities
(16.6)
(18.4)
46.Adjustments for non-cash items and changes in operating assets
and\u00a0liabilities
2025
2024
\u00a3m
\u00a3m
Adjustments for non-cash and other items:
Depreciation and amortisation
15.9
11.3
Interest on investment securities
(77.0)
(41.3)
Interest on subordinated debt liabilities
25.3
25.3
Interest on PSBs
\u2013
0.5
Interest on securitised debt
51.0
62.7
Interest on senior notes
64.7
63.5
Interest on financing debt
41.8
114.7
Impairment charge/(credit) on loans
13.0
(11.7)
Interest on other liquid assets
(0.6)
\u2013
Administrative expenses
(2.0)
\u2013
Provisions
2.4
2.7
Net expense on derivative financial instruments\u2013subordinated debt
liabilities and senior notes
1.4
7.2
Net expense on derivative financial instruments\u2013structural hedge
2.4
3.3
Fair value losses on financial instruments
22.1
1.5
Share-based payments
6.9
6.3
Total adjustments for non-cash and other items
167.3
246.0
Changes in operating assets and liabilities:
(Increase)/decrease in loans and advances to credit institutions
(79.9)
125.7
Increase in loans and advances to customers1
(807.0)
(135.0)
Increase in amounts owed to retail depositors
430.8
1,693.7
Decrease in cash collateral and margin received
(160.0)
(52.8)
Net (increase)/decrease in other assets
(3.2)
9.8
Net increase in derivatives and hedged items
14.3
1.7
Net increase in amounts owed to other customers
373.5
41.6
Net increase in other liabilities
3.6
6.3
Exchange differences on working capital
(1.7)
\u2013
Total changes in operating assets and liabilities
(229.6)
1,691.0
1.In 2024, the movement in loans and advances to customers has been adjusted to reflect the effect of \u00a3786.1m of non-
cash consideration received initially as part of the PMF 2024-1 securitisation. The classification of the cash
consideration received, included in the movement, reflects the operating nature of the assets sold.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCashFlowStatementExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-543": { "value": "
37.Share capital
Number of shares
issued and fully
paid
Nominal value
Premium
Ordinary shares
\u00a3m
\u00a3m
As at 1 January 2024
393,187,681
3.9
3.8
Shares cancelled under repurchase programme
(22,595,996)
(0.2)
\u2013
Shares issued under OSBG employee share
plans
1,554,107
\u2013
0.7
As at 31 December 2024
372,145,792
3.7
4.5
Shares cancelled under repurchase programme
(18,070,090)
(0.2)
\u2013
Shares issued under OSBG employee share
plans
1,898,423
0.1
1.5
As at 31 December 2025
355,974,125
3.6
6.0
The Group commenced a share repurchase programme on 6 September 2024 which allowed the
Group to repurchase a maximum of 39,358,310 shares, restricted by a total cost of \u00a350.0m.
Since 1 January 2025, 2,365,661 shares were repurchased under the programme and 2,479,759
shares were cancelled. On completion,13,087,132 shares, representing 3.52% of the issued share
capital, were repurchased and cancelled at an average price of \u00a33.77 per share and a total cost
of \u00a349.3m excluding transaction costs.
Since the inception of a new share repurchase programme on 14 March 2025, 15,940,346 shares
were repurchased as at 31 December 2025 at an average price of \u00a35.12 per share and a total
cost of \u00a381.7m, of which 15,590,331 shares have been cancelled representing 4.19% of the issued
share capital. The programme allows the Group to repurchase a maximum of 26,271,178 shares,
restricted by a total cost of \u00a3100.0m excluding transaction costs.
The holders of ordinary shares are entitled to receive dividends as declared from time to time,
and are entitled to one vote per share at meetings of the Company. All ordinary shares rank
equally with regard to the Company\u2019s residual assets.
All ordinary shares issued in the current and prior year were fully paid.
38.Other equity instruments
The Group\u2019s other equity instruments are as follows:
2025
2024
Additional Tier 1 securities
\u00a3m
\u00a3m
6% Perpetual subordinated contingent convertible securities
17.1
150.0
7.75% Perpetual subordinated contingent convertible
securities
150.0
\u2013
167.1
150.0
AT1 Securities
On 5 October 2021, OSBG issued AT1 securities which comprise \u00a3150.0m of Fixed Rate Resetting
Perpetual Subordinated Contingent Convertible Securities that qualify as AT1 capital under CRD IV.
The securities will be subject to full conversion into ordinary shares of OSBG in the event that the
Group\u2019s Common Equity Tier 1 (CET1) capital ratio falls below 7%. The securities pay interest at a
rate of 6% per annum until the first reset date of 7 April 2027, with the reset interest rate equal to
539.3 basis points over the five-year Gilt Rate (benchmark gilt) for such a period. Interest is paid
semi-annually in April and October. OSBG may, at any time, cancel any interest payment at its full
discretion and must cancel interest payments in certain circumstances specified in the terms and
conditions of the securities. On 27 November 2025, following a tender offer, \u00a3132.9m of these AT1
securities were redeemed with \u00a317.1m remaining outstanding. The securities are perpetual with no
fixed redemption date. OSBG may, at its option, redeem the securities, in whole but not in part, (i)
on any day falling in the period commencing on (and including) 7 October 2026 and ending on
(and including) the first reset date or (ii) on any reset date thereafter at 100% of their principal
amount, together with any accrued but unpaid interest (which excludes any interest cancelled or
deemed cancelled as described above) to (but excluding) the date fixed for redemption.
On 25 November 2025, OSBG issued AT1 securities which comprise \u00a3150.0m of Fixed Resetting
Perpetual Subordinated Contingent Convertible Securities that qualify as AT1 capital under CRD IV.
The securities will be subject to full conversion into ordinary shares of OSBG in the event that the
Group\u2019s Common Equity Tier 1 (CET1) capital ratio falls below 7%. The securities pay interest at a
rate of 7.75% per annum until the first reset date of 25 May 2031, with the reset interest equal to
380.1 basis points over the five-year Gilt Rate (benchmark gilt) for such a period. Interest is paid
semi-annually in May and November. OSBG may, at any time, cancel any interest payment at its
full discretion and must cancel interest payments in certain circumstances specified in the terms
and conditions of the securities. The securities are perpetual with no fixed redemption date. OSBG
may at its option, redeem the securities, in whole but not in part, (i) on any day falling in the period
commencing on (and including) 25 November 2030 and ending on (and including) the first reset
date or (ii) on any reset date thereafter at 100% of their principal amount, together with any
accrued but unpaid interest (which excludes any interest cancelled or deemed cancelled as
described above) to (but excluding) the date fixed for redemption.
39.Other reserves
The Group\u2019s other reserves are as follows:
2025
2024
\u00a3m
\u00a3m
Share-based payment
20.9
16.2
Capital redemption & transfer
(1,354.3)
(1,354.5)
Own shares
(0.9)
(0.9)
FVOCI
1.5
0.1
Foreign exchange
(4.2)
(2.1)
(1,337.0)
(1,341.2)
Capital redemption and transfer reserve
The capital redemption reserve represents the shares cancelled through the Group\u2019s share
repurchase programme.
On 27 November 2020, a new ultimate parent company was inserted into the Group, being
OSBG. The share capital generated from issuing 447,304,198 nominal shares at \u00a33.04 per
share, replacing the nominal shares of \u00a30.01 in OSB previously recognised in share capital at
the consolidation level, created a transfer reserve of \u00a31,355.3m.
Own shares
The Company has adopted the look-through approach for the EBT, including the EBT within
the Company. As at 31 December 2025, the EBT held 134,349 OSBG shares (2024: 134,349
OSBG shares). The Group and Company show these shares as a deduction from equity,
being\u00a0the cost at which the shares were acquired of \u00a30.9m (2024: \u00a30.9m).
FVOCI reserve
The FVOCI reserve represents the cumulative net change in the fair value of investment
securities measured at FVOCI.
Foreign exchange reserve
The foreign exchange reserve relates to the revaluation of the Group\u2019s Indian subsidiary,
OSB\u00a0India Private Limited.
", "dimensions": { "concept": "ifrs-full:DisclosureOfShareCapitalReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-542": { "value": "
37.Share capital
Number of shares
issued and fully
paid
Nominal value
Premium
Ordinary shares
\u00a3m
\u00a3m
As at 1 January 2024
393,187,681
3.9
3.8
Shares cancelled under repurchase programme
(22,595,996)
(0.2)
\u2013
Shares issued under OSBG employee share
plans
1,554,107
\u2013
0.7
As at 31 December 2024
372,145,792
3.7
4.5
Shares cancelled under repurchase programme
(18,070,090)
(0.2)
\u2013
Shares issued under OSBG employee share
plans
1,898,423
0.1
1.5
As at 31 December 2025
355,974,125
3.6
6.0
The Group commenced a share repurchase programme on 6 September 2024 which allowed the
Group to repurchase a maximum of 39,358,310 shares, restricted by a total cost of \u00a350.0m.
Since 1 January 2025, 2,365,661 shares were repurchased under the programme and 2,479,759
shares were cancelled. On completion,13,087,132 shares, representing 3.52% of the issued share
capital, were repurchased and cancelled at an average price of \u00a33.77 per share and a total cost
of \u00a349.3m excluding transaction costs.
Since the inception of a new share repurchase programme on 14 March 2025, 15,940,346 shares
were repurchased as at 31 December 2025 at an average price of \u00a35.12 per share and a total
cost of \u00a381.7m, of which 15,590,331 shares have been cancelled representing 4.19% of the issued
share capital. The programme allows the Group to repurchase a maximum of 26,271,178 shares,
restricted by a total cost of \u00a3100.0m excluding transaction costs.
The holders of ordinary shares are entitled to receive dividends as declared from time to time,
and are entitled to one vote per share at meetings of the Company. All ordinary shares rank
equally with regard to the Company\u2019s residual assets.
All ordinary shares issued in the current and prior year were fully paid.
", "dimensions": { "concept": "ifrs-full:DisclosureOfIssuedCapitalExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-544": { "value": "
38.Other equity instruments
The Group\u2019s other equity instruments are as follows:
2025
2024
Additional Tier 1 securities
\u00a3m
\u00a3m
6% Perpetual subordinated contingent convertible securities
17.1
150.0
7.75% Perpetual subordinated contingent convertible
securities
150.0
\u2013
167.1
150.0
AT1 Securities
On 5 October 2021, OSBG issued AT1 securities which comprise \u00a3150.0m of Fixed Rate Resetting
Perpetual Subordinated Contingent Convertible Securities that qualify as AT1 capital under CRD IV.
The securities will be subject to full conversion into ordinary shares of OSBG in the event that the
Group\u2019s Common Equity Tier 1 (CET1) capital ratio falls below 7%. The securities pay interest at a
rate of 6% per annum until the first reset date of 7 April 2027, with the reset interest rate equal to
539.3 basis points over the five-year Gilt Rate (benchmark gilt) for such a period. Interest is paid
semi-annually in April and October. OSBG may, at any time, cancel any interest payment at its full
discretion and must cancel interest payments in certain circumstances specified in the terms and
conditions of the securities. On 27 November 2025, following a tender offer, \u00a3132.9m of these AT1
securities were redeemed with \u00a317.1m remaining outstanding. The securities are perpetual with no
fixed redemption date. OSBG may, at its option, redeem the securities, in whole but not in part, (i)
on any day falling in the period commencing on (and including) 7 October 2026 and ending on
(and including) the first reset date or (ii) on any reset date thereafter at 100% of their principal
amount, together with any accrued but unpaid interest (which excludes any interest cancelled or
deemed cancelled as described above) to (but excluding) the date fixed for redemption.
On 25 November 2025, OSBG issued AT1 securities which comprise \u00a3150.0m of Fixed Resetting
Perpetual Subordinated Contingent Convertible Securities that qualify as AT1 capital under CRD IV.
The securities will be subject to full conversion into ordinary shares of OSBG in the event that the
Group\u2019s Common Equity Tier 1 (CET1) capital ratio falls below 7%. The securities pay interest at a
rate of 7.75% per annum until the first reset date of 25 May 2031, with the reset interest equal to
380.1 basis points over the five-year Gilt Rate (benchmark gilt) for such a period. Interest is paid
semi-annually in May and November. OSBG may, at any time, cancel any interest payment at its
full discretion and must cancel interest payments in certain circumstances specified in the terms
and conditions of the securities. The securities are perpetual with no fixed redemption date. OSBG
may at its option, redeem the securities, in whole but not in part, (i) on any day falling in the period
commencing on (and including) 25 November 2030 and ending on (and including) the first reset
date or (ii) on any reset date thereafter at 100% of their principal amount, together with any
accrued but unpaid interest (which excludes any interest cancelled or deemed cancelled as
described above) to (but excluding) the date fixed for redemption.
39.Other reserves
The Group\u2019s other reserves are as follows:
2025
2024
\u00a3m
\u00a3m
Share-based payment
20.9
16.2
Capital redemption & transfer
(1,354.3)
(1,354.5)
Own shares
(0.9)
(0.9)
FVOCI
1.5
0.1
Foreign exchange
(4.2)
(2.1)
(1,337.0)
(1,341.2)
Capital redemption and transfer reserve
The capital redemption reserve represents the shares cancelled through the Group\u2019s share
repurchase programme.
On 27 November 2020, a new ultimate parent company was inserted into the Group, being
OSBG. The share capital generated from issuing 447,304,198 nominal shares at \u00a33.04 per
share, replacing the nominal shares of \u00a30.01 in OSB previously recognised in share capital at
the consolidation level, created a transfer reserve of \u00a31,355.3m.
Own shares
The Company has adopted the look-through approach for the EBT, including the EBT within
the Company. As at 31 December 2025, the EBT held 134,349 OSBG shares (2024: 134,349
OSBG shares). The Group and Company show these shares as a deduction from equity,
being\u00a0the cost at which the shares were acquired of \u00a30.9m (2024: \u00a30.9m).
FVOCI reserve
The FVOCI reserve represents the cumulative net change in the fair value of investment
securities measured at FVOCI.
Foreign exchange reserve
The foreign exchange reserve relates to the revaluation of the Group\u2019s Indian subsidiary,
OSB\u00a0India Private Limited.
", "dimensions": { "concept": "ifrs-full:DisclosureOfReservesAndOtherEquityInterestExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-545": { "value": "
2025
2024
\u00a3m
\u00a3m
Share-based payment
20.9
16.2
Capital redemption & transfer
(1,354.3)
(1,354.5)
Own shares
(0.9)
(0.9)
FVOCI
1.5
0.1
Foreign exchange
(4.2)
(2.1)
(1,337.0)
(1,341.2)
Own shares
The Company has adopted the look-through approach for the EBT, including the EBT within
the Company. As at 31 December 2025, the EBT held 134,349 OSBG shares (2024: 134,349
OSBG shares). The Group and Company show these shares as a deduction from equity,
being\u00a0the cost at which the shares were acquired of \u00a30.9m (2024: \u00a30.9m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfTreasurySharesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-546": { "value": "-900000.0", "decimals": -5, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2026-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:TreasurySharesMember", "unit": "iso4217:GBP" }, "links": { "ftTyp_fact-footnote": { "ftGrp_default": [ "fn-2" ] } } }, "f-547": { "value": "-900000.0", "decimals": -5, "dimensions": { "concept": "ifrs-full:Equity", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00", "ifrs-full:ComponentsOfEquityAxis": "ifrs-full:TreasurySharesMember", "unit": "iso4217:GBP" }, "links": { "ftTyp_fact-footnote": { "ftGrp_default": [ "fn-2" ] } } }, "f-548": { "value": "
40.Financial commitments and guarantees
a) The Group had \u00a33.8m (2024: \u00a34.9m) of contracted capital expenditure commitments not
provided for as at 31 December 2025.
b) The Group had \u00a30.1m (2024: \u00a30.1m) of minimum lease commitments under leases for low-
value assets and short-term leases of 12 months or less.
c) Undrawn loan facilities:
2025
2024
\u00a3m
\u00a3m
OSB mortgages
764.9
697.9
CCFS mortgages
384.0
289.1
1,148.9
987.0
Undrawn loan facilities are approved loan applications which have not yet been exercised.
They are payable on demand and are usually drawn down or expire within three months.
d) The Group did not have any issued financial guarantees as at 31 December 2025
(2024:\u00a0nil).
", "dimensions": { "concept": "ifrs-full:DisclosureOfCommitmentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-549": { "value": "
41.Risk management
Overview
Financial instruments form the vast majority of the Group\u2019s assets and liabilities. The Group
manages risk on a consolidated basis and risk disclosures that follow are provided on
this\u00a0basis.
Types of financial instruments
Financial instruments are a broad definition that includes financial assets, financial liabilities and
equity instruments. The main financial assets of the Group are loans to customers and liquid
assets, which in turn consist of cash in the BoE call accounts, call accounts with other credit
institutions, RMBS, covered bonds, supranational bonds and UK sovereign debt. These are
funded by a combination of financial liabilities and equity instruments. Financial liability funding
comes predominantly from retail deposits and drawdowns under BoE facilities including ILTR,
supported by debt securities, senior notes, subordinated debts, wholesale and other funding.
Equity instruments include own shares and AT1 securities meeting the equity classification
criteria. The Group\u2019s main activity is mortgage lending; it raises funds or invests in particular
types of financial assets to meet customer demand and manage the risks arising from its
operations. The Group does not trade in financial instruments for speculative purposes.
The Group uses derivative instruments to manage its financial risks. Derivatives are used by
the\u00a0Group solely to reduce (hedge) the risk of loss arising from changes in market rates.
Derivatives are not used for speculative purposes.
41.Risk management continued
Types of derivatives and uses
The derivative instruments used by the Group in managing its risk exposures are interest rate
swaps. Interest rate swaps convert fixed interest rates to floating or vice versa. As with other
derivatives, the underlying product is not sold and payments are based on notional
principal\u00a0amounts.
Unhedged fixed rate liabilities create the risk of paying above-the-market rate if interest rates
subsequently decrease. Unhedged fixed rate mortgages and liquid assets bear the opposite
risk of income below-the-market rate when rates go up. While fixed rate assets and liabilities
naturally hedge each other to a certain extent, this hedge is usually never perfect because of
maturity mismatches and principal amounts.
The Group uses swaps to convert its instruments, such as mortgages, deposits and issued
debt, from fixed or base rate-linked rates to reference linked variable rates. This ensures a
guaranteed margin between the interest income and interest expense, regardless of changes
in\u00a0the market rates.
Types of risk
The principal financial risks to which the Group is exposed are credit, liquidity and market
risks, the latter comprising interest and exchange rate risk. In addition to financial risks, the
Group is exposed to various other risks, most notably operational, conduct and compliance/
regulatory, which are covered in the Risk review on pages 44 to 65.
Credit risk
Credit risk is the risk that losses may arise as a result of the Group\u2019s borrowers or market
counterparties failing to meet their obligations to repay.
The Group has adopted the Standardised Approach for assessment of credit risk regulatory
capital requirements. This approach considers risk weightings as defined under Basel II and
Basel III principles.
The classes of financial instruments to which the Group is most exposed are loans and
advances to customers, loans and advances to credit institutions, cash in the BoE call account,
call and current accounts with other credit institutions and investment securities. The
maximum credit risk exposure equals the total carrying amount of the above categories plus
off-balance sheet undrawn committed mortgage facilities.
The change, during the year and cumulatively, in the fair value of investments in debt
securities and loans and advances to customers at FVOCI and FVTPL that is attributable
to\u00a0changes in credit risk is not material.
Credit risk \u2013 loans and advances to customers
Credit risk associated with mortgage lending is largely driven by the housing market and level
of unemployment. A recession and/or high interest rates could cause pressure within
the\u00a0market, resulting in rising levels of arrears and repossessions.
All loan applications are assessed in accordance with the Group\u2019s Lending Policies. Changes
to the policies are approved by the Group Risk Committee, with mandates set for the approval
of loan applications.
The Group Credit Committee and ALCO regularly monitor lending activity, taking appropriate
actions to reprice products and adjust lending criteria in order to control risk and manage
exposure. Where necessary and appropriate, changes to the Lending Policies
are\u00a0recommended\u00a0to the Group Risk Committee.
The following tables show the Group\u2019s maximum exposure to credit risk and the impact of
collateral held as security, capped at the gross exposure amount, by impairment stage.
Capped collateral excludes the impact of forced sale discounts and costs to sell. The collateral
value is determined by indexing against HPI data.
OSB
CCFS
Total
Gross
carrying
amount
Capped
collateral
held
Gross
carrying
amount
Capped
collateral
held
Gross
carrying
amount
Capped
collateral
held
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Stage 1
13,742.1
13,673.2
7,407.5
7,407.3
21,149.6
21,080.5
Stage 2
2,199.9
2,197.9
1,621.4
1,621.3
3,821.3
3,819.2
Stage 3
719.0
703.9
299.5
297.4
1,018.5
1,001.3
Stage 3 (POCI)
16.4
16.4
26.8
26.6
43.2
43.0
16,677.4
16,591.4
9,355.2
9,352.6
26,032.6
25,944.0
2024
Stage 1
12,338.1
12,290.5
7,539.0
7,538.4
19,877.1
19,828.9
Stage 2
2,417.4
2,416.0
1,935.5
1,935.0
4,352.9
4,351.0
Stage 3
655.7
649.6
294.1
294.1
949.8
943.7
Stage 3 (POCI)
27.8
27.4
32.7
32.6
60.5
60.0
15,439.0
15,383.5
9,801.3
9,800.1
25,240.3
25,183.6
The Group\u2019s main form of collateral held is property, based in the UK and the Channel Islands.
41.Risk management continued
The Group uses indexed loan to value (LTV) ratios to assess the quality of the uncapped collateral held. Property values are updated to reflect changes in the HPI. A breakdown of loans and
advances to customers by indexed LTV is as follows:
2025
2024
OSB
CCFS
Total
OSB
CCFS
Total
Band
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
\u00a3m
%
0%\u201350%
2,066.3
933.4
2,999.7
11
2,375.0
1,091.3
3,466.3
14
50%\u201360%
2,108.4
931.8
3,040.2
12
2,291.2
1,312.7
3,603.9
14
60%\u201370%
4,092.8
2,264.5
6,357.3
24
4,548.2
3,035.8
7,584.0
30
70%\u201380%
6,369.0
4,212.8
10,581.8
41
4,624.2
3,881.3
8,505.5
34
80%\u201390%
1,335.3
885.8
2,221.1
9
1,043.7
461.5
1,505.2
6
90%\u2013100%
255.7
110.2
365.9
1
221.0
14.8
235.8
1
>100%
449.9
16.7
466.6
2
335.7
3.9
339.6
1
Total loans before provisions
16,677.4
9,355.2
26,032.6
100
15,439.0
9,801.3
25,240.3
100
The table below shows the LTV banding for the OSB segments\u2019 two major lending streams:
2025
2024
OSB
BTL/SME 1
Residential
Total
BTL/SME 1
Residential
Total
Band
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
\u00a3m
%
0%\u201350%
931.9
1,134.4
2,066.3
12
1,037.4
1,337.6
2,375.0
15
50%\u201360%
1,890.4
218.0
2,108.4
13
2,021.2
270.0
2,291.2
15
60%\u201370%
3,925.3
167.5
4,092.8
25
4,345.0
203.2
4,548.2
29
70%\u201380%
6,185.2
183.8
6,369.0
37
4,430.7
193.5
4,624.2
31
80%\u201390%
1,108.4
226.9
1,335.3
8
799.1
244.6
1,043.7
7
90%\u2013100%
227.8
27.9
255.7
2
190.8
30.2
221.0
1
>100%
441.3
8.6
449.9
3
331.6
4.1
335.7
2
Total loans before provisions
14,710.3
1,967.1
16,677.4
100
13,155.8
2,283.2
15,439.0
100
1.Includes net investment in finance leases.
41.Risk management continued
The tables below show the LTV analysis of the OSB BTL/SME sub-segment:
OSB
Band
Buy-to-Let 1
Commercial
Residential
development
Funding lines
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
0%\u201350%
798.6
127.8
4.6
0.9
931.9
50%\u201360%
1,529.1
236.6
118.1
6.6
1,890.4
60%\u201370%
3,345.0
391.1
181.8
7.4
3,925.3
70%\u201380%
5,391.6
756.0
37.6
\u2013
6,185.2
80%\u201390%
901.2
207.2
\u2013
\u2013
1,108.4
90%\u2013100%
139.5
88.3
\u2013
\u2013
227.8
>100%
381.1
59.1
1.0
0.1
441.3
Total loans before
provisions
12,486.1
1,866.1
343.1
15.0
14,710.3
2024
0%\u201350%
925.7
107.0
3.9
0.8
1,037.4
50%\u201360%
1,819.0
128.7
66.1
7.4
2,021.2
60%\u201370%
3,951.9
207.2
184.0
1.9
4,345.0
70%\u201380%
3,918.8
495.5
7.0
9.4
4,430.7
80%\u201390%
562.0
237.1
\u2013
\u2013
799.1
90%\u2013100%
100.8
90.0
\u2013
\u2013
190.8
>100%
239.9
90.5
1.0
0.2
331.6
Total loans before
provisions
11,518.1
1,356.0
262.0
19.7
13,155.8
1.Includes net investment in finance leases.
The table below shows the LTV analysis of the OSB Residential sub-segment:
2025
2024
First charge
Second
charge
Total
First charge
Second
charge
Total
OSB
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Band
0%\u201350%
1,134.4
\u2013
1,134.4
1,272.8
64.8
1,337.6
50%\u201360%
218.0
\u2013
218.0
248.6
21.4
270.0
60%\u201370%
167.5
\u2013
167.5
192.9
10.3
203.2
70%\u201380%
183.8
\u2013
183.8
189.5
4.0
193.5
80%\u201390%
226.9
\u2013
226.9
244.0
0.6
244.6
90%\u2013100%
27.9
\u2013
27.9
29.8
0.4
30.2
>100%
8.6
\u2013
8.6
3.6
0.5
4.1
Total loans before
provisions
1,967.1
\u2013
1,967.1
2,181.2
102.0
2,283.2
41.Risk management continued
The tables below show the LTV analysis of the four CCFS sub-segments:
CCFS
Band
Buy-to-Let
Residential
Bridging
Second
charge
lending
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
0%\u201350%
224.5
496.9
212.0
\u2013
933.4
10
50%\u201360%
437.6
386.3
107.9
\u2013
931.8
10
60%\u201370%
1,316.9
767.0
180.6
\u2013
2,264.5
24
70%\u201380%
3,283.9
842.5
86.4
\u2013
4,212.8
45
80%\u201390%
347.8
534.5
3.5
\u2013
885.8
10
90%\u2013100%
7.6
101.2
1.4
\u2013
110.2
1
>100%
11.7
2.5
2.5
\u2013
16.7
\u2013
Total loans before
provisions
5,630.0
3,130.9
594.3
\u2013
9,355.2
100
2024
0%\u201350%
335.2
607.7
123.8
24.6
1,091.3
11
50%\u201360%
714.9
508.1
73.1
16.6
1,312.7
13
60%\u201370%
2,024.9
896.5
101.4
13.0
3,035.8
31
70%\u201380%
3,099.8
713.3
60.3
7.9
3,881.3
40
80%\u201390%
183.0
275.7
1.2
1.6
461.5
5
90%\u2013100%
7.4
3.6
3.7
0.1
14.8
\u2013
>100%
2.1
0.8
1.0
\u2013
3.9
\u2013
Total loans before
provisions
6,367.3
3,005.7
364.5
63.8
9,801.3
100
Forbearance measures undertaken
The Group has a range of options available where borrowers experience financial difficulties
that impact their ability to service their financial commitments under the loan agreement.
These options are explained in the Risk review on page 63.
A summary of the forbearance measures undertaken during the year is shown below. The
balances disclosed reflect the year-end balance of the accounts where a forbearance measure
was undertaken during the year.
Number of
accounts
As at
31 December
2025
Number of
accounts
As at
31 December
2024
Forbearance type
2025
\u00a3m
2024
\u00a3m
Interest-only switch
756
49.3
1,081
127.3
Interest rate reduction
790
71.4
1,077
85.6
Payment deferral
792
119.7
747
104.5
Others
181
24.5
108
30.8
Total
2,519
264.9
3,013
348.2
Loan type
First charge owner-occupier
1,924
118.3
2,322
226.1
Second charge owner-occupier
\u2013
\u2013
169
4.9
Buy-to-Let
522
108.0
460
104.0
Commercial
73
38.6
62
13.2
Total
2,519
264.9
3,013
348.2
41.Risk management continued
Geographical analysis by region
An analysis of loans, excluding asset finance leases, by region is provided below:
2025
2024
OSB
CCFS
Total
OSB
CCFS
Total
Region
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
\u00a3m
%
East Anglia
454.0
1,016.0
1,470.0
6
447.4
1,084.7
1,532.1
6
East Midlands
821.6
659.7
1,481.3
6
756.7
674.3
1,431.0
6
Greater London
6,940.0
2,503.7
9,443.7
37
6,329.8
2,769.6
9,099.4
36
Guernsey
14.0
\u2013
14.0
\u2013
17.0
\u2013
17.0
\u2013
Jersey
54.7
\u2013
54.7
\u2013
63.2
\u2013
63.2
\u2013
North East
239.7
283.4
523.1
2
224.4
282.4
506.8
2
North West
1,099.0
861.8
1,960.8
8
1,017.1
890.1
1,907.2
8
Northern Ireland
4.9
\u2013
4.9
\u2013
7.9
\u2013
7.9
\u2013
Scotland
13.8
283.6
297.4
1
23.5
282.1
305.6
1
South East
3,652.2
1,532.3
5,184.5
20
3,419.1
1,577.6
4,996.7
20
South West
1,118.6
678.8
1,797.4
7
1,047.7
680.1
1,727.8
7
Wales
356.3
279.1
635.4
2
345.1
289.4
634.5
3
West Midlands
962.5
746.4
1,708.9
7
907.4
755.9
1,663.3
7
Yorks and Humberside
521.9
510.4
1,032.3
4
515.8
515.1
1,030.9
4
Total loans before provisions
16,253.2
9,355.2
25,608.4
100
15,122.1
9,801.3
24,923.4
100
Approach to measurement of credit quality
The Group categorises the credit quality of loans and advances to customers into internal risk grades based on the 12-month PD calculated at the reporting date. The PDs include a combination
of internal behavioural and credit bureau characteristics and where possible are aligned with capital models to generate the risk grades which are then further grouped into the following credit
quality segments:
\u2022 Excellent \u2013 where there is a very high likelihood the asset will be recovered in full with a negligible or very low risk of default.
\u2022 Good \u2013 where there is a high likelihood the asset will be recovered in full with a low risk of default.
\u2022 Satisfactory \u2013 where the assets demonstrate a moderate default risk.
\u2022 Lower \u2013 where the assets require closer monitoring and the risk of default is of greater concern.
41.Risk management continued
The following tables disclose the credit risk quality ratings of loans and advances to customers by IFRS 9 stage. The assessment of whether credit risk has increased significantly since initial
recognition is performed for each reporting period for the life of the loan. Loans and advances to customers initially booked on very low PDs and graded as excellent quality loans can experience
SICR and therefore be moved to Stage 2. Similarly, loans and advances to customers initially booked on high PDs having lower credit quality can remain in stage 1 if subsequently SICR is not
experienced or triggered.
Stage 1
Stage 2
Stage 3
Stage 3
(POCI)
Total
PD lower range
PD upper range
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
OSB
Excellent
5,736.4
100.6
\u2013
\u2013
5,837.0
\u2013
0.3
Good
7,106.3
1,056.8
\u2013
\u2013
8,163.1
0.3
2.0
Satisfactory
771.4
442.5
\u2013
\u2013
1,213.9
2.0
7.4
Lower
128.0
600.0
\u2013
\u2013
728.0
7.4
100.0
Impaired
\u2013
\u2013
719.0
\u2013
719.0
100.0
100.0
POCI
\u2013
\u2013
\u2013
16.4
16.4
100.0
100.0
CCFS
Excellent
4,373.4
429.9
\u2013
\u2013
4,803.3
\u2013
0.3
Good
2,727.9
606.9
\u2013
\u2013
3,334.8
0.3
2.0
Satisfactory
257.9
211.1
\u2013
\u2013
469.0
2.0
7.4
Lower
48.3
373.5
\u2013
\u2013
421.8
7.4
100.0
Impaired
\u2013
\u2013
299.5
\u2013
299.5
100.0
100.0
POCI
\u2013
\u2013
\u2013
26.8
26.8
100.0
100.0
21,149.6
3,821.3
1,018.5
43.2
26,032.6
2024
OSB
Excellent
5,426.9
212.9
\u2013
\u2013
5,639.8
\u2013
0.3
Good
6,199.2
1,135.3
\u2013
\u2013
7,334.5
0.3
2.0
Satisfactory
633.0
503.1
\u2013
\u2013
1,136.1
2.0
7.4
Lower
79.0
566.1
\u2013
\u2013
645.1
7.4
100.0
Impaired
\u2013
\u2013
655.7
\u2013
655.7
100.0
100.0
POCI
\u2013
\u2013
\u2013
27.8
27.8
100.0
100.0
CCFS
Excellent
4,623.4
622.3
\u2013
\u2013
5,245.7
\u2013
0.3
Good
2,682.2
740.7
\u2013
\u2013
3,422.9
0.3
2.0
Satisfactory
220.1
242.5
\u2013
\u2013
462.6
2.0
7.4
Lower
13.3
330.0
\u2013
\u2013
343.3
7.4
100.0
Impaired
\u2013
\u2013
294.1
\u2013
294.1
100.0
100.0
POCI
\u2013
\u2013
\u2013
32.7
32.7
100.0
100.0
19,877.1
4,352.9
949.8
60.5
25,240.3
41.Risk management continued
The tables below show the Group\u2019s other financial assets and derivatives by credit risk rating
grade. The credit grade is based on the external credit rating of the counterparty; AAA to AA-
are rated Excellent; A+ to A- are rated Good; and BBB+ to BBB- are rated Satisfactory.
Excellent
Good
Satisfactory
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment securities
1,810.4
1.9
2.2
1,814.5
Loans and advances to credit
institutions
2,723.7
304.7
24.6
3,053.0
Derivative assets
55.5
45.9
\u2013
101.4
4,589.6
352.5
26.8
4,968.9
2024
Investment securities
1,434.4
\u2013
\u2013
1,434.4
Loans and advances to credit
institutions
3,127.2
264.4
14.3
3,405.9
Derivative assets
174.7
139.1
\u2013
313.8
4,736.3
403.5
14.3
5,154.1
Credit risk \u2013 loans and advances to credit institutions and investment securities
The Group holds treasury instruments in order to meet liquidity requirements and for general
business purposes. The credit risk arising from these investments is closely monitored and
managed by the Group\u2019s Treasury function. In managing these assets, Group Treasury
operates within guidelines laid down in the Group Market and Liquidity Risk Policy approved
by ALCO and performance is monitored and reported to ALCO monthly, including through the
use of an\u00a0internally developed rating model based on counterparty credit default
swap\u00a0spreads.
The Group has limited exposure to emerging markets (Indian operations) and non-investment
grade debt. ALCO is responsible for approving treasury counterparties.
During the year, the average balance of cash in hand, loans and advances to credit
institutions and investment securities on a monthly basis was \u00a34,371.2m (2024: \u00a34,081.1m).
The table below shows the industry sector of the Group\u2019s loans and advances to credit
institutions and investment securities:
2025
2024
\u00a3m
%
\u00a3m
%
BoE
2,429.6
49
3,053.9
63
Other banks
623.4
13
352.0
7
Central government
178.0
4
226.0
5
Securitisation
1,367.3
28
1,208.4
25
Supranationals
269.2
6
\u2013
\u2013
Total
4,867.5
100
4,840.3
100
The table below shows the geographical exposure of the Group\u2019s loans and advances to credit
institutions and investment securities:
2025
2024
\u00a3m
%
\u00a3m
%
United Kingdom
4,841.7
99
4,821.1
100
India
25.8
1
19.2
\u2013
Total
4,867.5
100
4,840.3
100
The Group monitors exposure concentrations against a variety of criteria, including asset
class, sector and geography. To avoid refinancing risks associated with any one counterparty,
sector or geographical region, the Board has set appropriate limits.
For further information on Credit risk please refer to pages 60.
41.Risk management continued
Liquidity risk
Liquidity risk is the risk of having insufficient liquid assets to fulfil obligations as they become
due or the cost of raising liquid funds becoming too expensive.
The Group\u2019s approach to managing liquidity risk is to maintain sufficient liquid resources to
cover cash flow imbalances and fluctuations in funding in order to retain full public confidence
in the solvency of the Group and to enable the Group to meet its financial obligations as they
fall due. This is achieved through maintaining a prudent level of liquid assets and control of the
growth of the business. The Group has established call accounts with the BoE and has access
to its contingent liquidity facilities.
The Board has delegated the responsibility for liquidity management to the Chief Executive
Officer, assisted by ALCO, with day-to-day management delegated to Treasury as detailed in
the Group Market and Liquidity Risk Policy. The Board is responsible for setting risk appetite
limits over the level and maturity profile of funding and for monitoring the composition of the
Group financial position.
The Group also monitors a range of triggers which are designed to capture liquidity stresses in
advance in order to allow sufficient time for management action to take effect. These are
monitored daily, with breaches immediately reported to the Group Chief Risk Officer, Chief
Executive Officer, Chief Financial Officer and the Group Treasurer.
The tables below show the maturity profile for the Group\u2019s financial assets and liabilities based
on contractual maturities at the reporting date:
Carrying
amount
On demand
Less than 3
months
3\u201312 months
1\u20135 years
More than 5
years
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial asset by
type
Cash in hand
0.4
0.4
\u2013
\u2013
\u2013
\u2013
Loans and advances
to credit institutions
3,053.0
2,825.4
211.8
15.6
0.2
\u2013
Investment securities
1,814.5
\u2013
6.4
44.7
1,763.4
\u2013
Loans and advances
to customers
25,920.6
\u2013
253.9
670.1
2,048.4
22,948.2
Derivative assets
101.4
\u2013
4.6
30.2
66.4
0.2
Total assets
30,889.9
2,825.8
476.7
760.6
3,878.4
22,948.4
Financial liability
by type
Amounts owed to
retail depositors
24,251.1
10,091.4
6,678.5
5,823.1
1,658.1
\u2013
Amounts owed to
credit institutions
1,838.1
\u2013
684.3
1,153.8
\u2013
\u2013
Amounts owed to
other customers
478.4
9.2
289.9
166.7
12.6
\u2013
Derivative liabilities
152.0
\u2013
1.1
8.8
141.3
0.8
Debt securities in
issue
1,010.0
\u2013
2.0
23.7
984.3
\u2013
Lease liabilities
6.3
\u2013
0.3
1.3
3.4
1.3
Senior notes
723.4
\u2013
25.3
\u2013
698.1
\u2013
Subordinated debt
liabilities
260.1
\u2013
10.7
\u2013
249.4
\u2013
Total liabilities
28,719.4
10,100.6
7,692.1
7,177.4
3,747.2
2.1
Cumulative
liquidity gap
(7,274.8)
(14,490.2)
(20,907.0)
(20,775.8)
2,170.5
41.Risk management continued
Carrying
amount
On demand
Less than 3
months
3\u201312 months
1\u20135 years
More than 5
years
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial asset by
type
Cash in hand
0.3
0.3
\u2013
\u2013
\u2013
\u2013
Loans and advances
to credit institutions
3,405.9
3,386.5
12.5
6.7
0.2
\u2013
Investment securities
1,434.4
\u2013
606.2
127.2
647.4
53.6
Loans and advances
to customers
25,126.3
\u2013
212.6
480.7
1,831.3
22,601.7
Derivative assets
313.8
\u2013
11.3
25.5
274.8
2.2
Total assets
30,280.7
3,386.8
842.6
640.1
2,753.7
22,657.5
Financial liability
by type
Amounts owed to
retail depositors
23,820.3
7,314.5
7,267.6
8,125.9
1,112.3
\u2013
Amounts owed to
credit institutions
1,935.2
160.0
321.5
1,453.7
\u2013
\u2013
Amounts owed to
other customers
104.9
1.4
5.2
98.3
\u2013
\u2013
Derivative liabilities
81.9
\u2013
1.2
9.4
71.2
0.1
Debt securities in
issue
1,018.3
\u2013
2.3
\u2013
1,016.0
\u2013
Lease liabilities
9.1
\u2013
0.4
1.4
6.0
1.3
Senior notes
722.7
\u2013
25.3
\u2013
697.4
\u2013
Subordinated debt
liabilities
259.8
\u2013
10.7
\u2013
249.1
\u2013
Total liabilities
27,952.2
7,475.9
7,634.2
9,688.7
3,152.0
1.4
Cumulative
liquidity gap
(4,089.1)
(10,880.7)
(19,929.3)
(20,327.6)
2,328.5
Liquidity risk \u2013 undiscounted contractual cash flows
The following tables provide an analysis of the Group\u2019s gross contractual undiscounted cash
flows, derived using interest rates and contractual maturities at the reporting date
and\u00a0excluding impacts of early payments or non-payments:
Carrying
amount
Gross inflow/
outflow
Up to 3
months
3 - 12 months
1 - 5 years
More than 5
years
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial asset by
type
Cash in hand
0.4
0.4
0.4
\u2013
\u2013
\u2013
Loans and advances
to credit institutions
3,053.0
3,054.6
3,038.8
15.6
0.2
\u2013
Investment securities
1,814.5
2,087.6
15.7
109.7
1,962.2
\u2013
Loans and advances
to customers
25,920.6
62,806.2
598.2
2,187.3
9,258.0
50,762.7
Derivative assets
101.4
103.9
19.2
54.9
29.7
0.1
Total assets
30,889.9
68,052.7
3,672.3
2,367.5
11,250.1
50,762.8
Off-balance sheet
loan commitments
1,148.9
1,148.9
1,148.9
\u2013
\u2013
\u2013
Financial liability
by type
Amounts owed to
retail depositors
24,251.1
25,015.5
17,221.7
6,050.6
1,743.2
\u2013
Amounts owed to
credit institutions
1,838.1
1,860.4
688.9
1,171.5
\u2013
\u2013
Amounts owed to
other customers
478.4
478.5
299.2
166.7
12.6
\u2013
Derivative liabilities
152.0
161.1
7.6
53.0
100.7
(0.2)
Debt securities in
issue
1,010.0
1,128.0
30.1
38.4
1,059.5
\u2013
Lease liabilities
6.3
6.3
0.3
1.3
3.4
1.3
Senior notes
723.4
881.2
32.0
32.0
817.2
\u2013
Subordinated debt
liabilities
260.1
318.7
12.5
12.5
293.7
\u2013
Total liabilities
28,719.4
29,849.7
18,292.3
7,526.0
4,030.3
1.1
41.Risk management continued
Carrying
amount
Gross inflow/
outflow
Up to 3
months
3 - 12 months
1 - 5 years
More than 5
years
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial asset by
type
Cash in hand
0.3
0.3
0.3
\u2013
\u2013
\u2013
Loans and advances
to credit institutions
3,405.9
3,406.0
3,399.1
6.7
0.2
\u2013
Investment securities
1,434.4
1,558.2
619.0
159.0
725.4
54.8
Loans and advances
to customers
25,126.3
62,539.2
553.6
1,849.2
9,284.6
50,851.8
Derivative assets
313.8
325.1
63.9
139.4
121.8
\u2013
Total assets
30,280.7
67,828.8
4,635.9
2,154.3
10,132.0
50,906.6
Off-balance sheet
loan commitments
987.0
987.0
987.0
\u2013
\u2013
\u2013
Financial liability
by type
Amounts owed to
retail depositors
23,820.3
25,520.8
15,413.9
8,929.7
1,177.2
\u2013
Amounts owed to
credit institutions
1,935.2
1,991.6
484.1
1,507.5
\u2013
\u2013
Amounts owed to
other customers
104.9
104.9
1.4
5.2
98.3
\u2013
Derivative liabilities
81.9
88.4
11.6
14.3
62.5
\u2013
Debt securities in
issue
1,018.3
1,177.0
32.4
95.4
1,049.2
\u2013
Lease liabilities
9.1
9.0
0.4
1.4
5.9
1.3
Senior notes
722.7
945.3
32.0
32.0
881.3
\u2013
Subordinated debt
liabilities
259.8
343.7
12.5
12.5
318.7
\u2013
Total liabilities
27,952.2
30,180.7
15,988.3
10,598.0
3,593.1
1.3
The actual repayment profile of loans and advances to customers may differ from the analysis
above since many mortgage loans are repaid prior to the contractual end date.
The actual repayment profile of retail deposits may differ from the analysis above due to the
option of early withdrawal with a penalty.
Liquidity risk \u2013 asset encumbrance
Asset encumbrance levels are monitored by ALCO. The following tables provide an analysis of
the Group\u2019s encumbered and unencumbered assets:
Encumbered
Unencumbered
Pledged as
collateral
Other 1
Available as
collateral
Other
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash in hand
\u2013
\u2013
0.4
\u2013
0.4
Loans and advances to credit
institutions
216.5
38.2
2,429.6
368.7
3,053.0
Investment securities
324.7
\u2013
1,489.8
\u2013
1,814.5
Loans and advances to
customers 2
3,404.9
\u2013
21,724.3
791.4
25,920.6
Derivative assets
\u2013
\u2013
\u2013
101.4
101.4
Non-financial assets
\u2013
\u2013
\u2013
232.8
232.8
3,946.1
38.2
25,644.1
1,494.3
31,122.7
2024
Cash in hand
\u2013
\u2013
0.3
\u2013
0.3
Loans and advances to credit
institutions
134.2
40.6
3,053.9
177.2
3,405.9
Investment securities
22.7
\u2013
1,411.7
\u2013
1,434.4
Loans and advances to
customers 2
4,741.1
\u2013
19,101.3
1,283.9
25,126.3
Derivative assets
\u2013
\u2013
\u2013
313.8
313.8
Non-financial assets
\u2013
\u2013
\u2013
(37.1)
(37.1)
4,898.0
40.6
23,567.2
1,737.8
30,243.6
1.Represents assets that are not pledged but that the Group believes it is restricted from using to secure funding for legal
or other reasons.
2.Unencumbered loans and advances to customers classified as other are restricted for use as collateral. These include
property registered outside of the UK (Jersey and Guernsey), loans and advances not secured by immovable property
and non-performing loans.
41.Risk management continued
Liquidity risk \u2013 liquidity reserves
The tables below analyse the Group\u2019s liquidity reserves, where carrying value is considered to
be equal to fair value:
2025
2024
\u00a3m
\u00a3m
Unencumbered balances with central banks
2,429.6
3,053.9
Unencumbered cash and balances with other banks
368.7
177.2
Other cash and cash equivalents
0.4
0.3
Unencumbered investment securities
1,489.8
1,411.7
4,288.5
4,643.1
Market risk
Market risk is the risk of an adverse change in the Group\u2019s income or the Group\u2019s net worth
arising from movement in interest rates, exchange rates or other market prices. Market risk
exists, to some extent, in all the Group\u2019s businesses. The Group recognises that the effective
management of market risk is essential to the maintenance of stable earnings and
preservation of shareholder value.
Interest rate risk
The primary market risk faced by the Group is interest rate risk. Interest rate risk is the risk
of\u00a0loss from adverse movement in the overall level of interest rates. It arises from mismatches in
the timing of repricing of assets and liabilities, both on and off-balance sheet. The Group does
not run a trading book, with all interest rate risk residing in the banking book (interest rate risk
in the banking book (IRRBB)). Through prudent management, the Group seeks to minimise its
IRRBB exposures, typically through matching assets and liabilities with similar tenors,
executing offsetting interest rate swaps and maintaining a structural hedge programme.
OSB and CCFS Banks apply an economic value (EV) at risk approach as well as an earnings-
at-risk approach for interest rate risk and basis risk. The interest rate sensitivity is impacted by
behavioural assumptions used by the Group; the most significant of which are prepayments
and mortgage offer pipeline take up. Expected prepayments and offer conversions are
monitored and modelled on a regular basis based upon historical analysis.
The EV measure of duration risk quantifies risk by applying six shaped interest rate shock
scenarios to the current forward curve. Scenarios are reviewed on semi-annual basis and
approved by ALCO and are based on three \u2018shapes\u2019 of curve movement (parallel, twist, flex)
using historical data to calibrate the severity of the shocks applied. The most detrimental net
present value to these scenarios is measured against the Board risk appetite of 1.5% of Tier 1
capital. The table below shows the maximum decreases to economic value under these
scenarios after taking into account the effect of hedging:
2025
2024
\u00a3m
\u00a3m
OSB
8.6
9.2
CCFS
4.4
2.9
13.0
12.1
The earnings measure of duration risk (EaR) quantifies the impact of changes in interest rates
to the net interest income of the Bank within a given 12-month time horizon. A parallel shock of
+/-100bps is applied to interest rate sensitive instruments to determine EaR sensitivity of the
Group, assuming a constant balance sheet. EaR risk appetite limits are approved by the
Board, and currently set at 4% of full-year net interest income (NII). The table below shows the
maximum decreases after taking into account the effect of hedging:
2025
2024
\u00a3m
\u00a3m
OSB
6.7
1.1
CCFS
6.0
6.5
12.7
7.6
EaR quantifies the impact of changes in interest rates to the net interest income within a given
three-year time horizon. A parallel shock of +/-100bps is applied to interest rate sensitive
instruments to determine EaR sensitivity of the Group, assuming a constant balance sheet.
EaR risk appetite limits are approved by the Board, and currently set at 4% of three-year net
interest income.
2025
2024
\u00a3m
\u00a3m
OSB
24.1
14.2
CCFS
17.4
19.0
41.5
33.2
41.Risk management continued
Basis risk measures the degree to which the Bank is sensitive to exposures repricing by varying
degrees, even where their duration is the same, due to them being linked to different indices.
These indices may be market rates (e.g. BBR or SONIA) or administered (e.g. the Group\u2019s SVR,
other discretionary variable rates, or that received on call accounts with other banks). The
Group measures basis risk using the impact of four scenarios on net interest income over a
one-year period, with the largest negative impact across the scenarios being the basis risk
exposure assessed against risk appetite. Dislocations between the bases are calculated on a
one in 20-year confidence interval level and include increasing, decreasing and static base
rate environment, as well as a fourth scenario (in a decreasing rate environment) which
measures the impact of the timing lag between the repricing of administered rate savings
against SVR linked mortgages. The Board has set a limit on basis risk exposure for CCFS at 3%
of full-year net interest income and 2.5% for OSB. The table below shows the maximum
decreases to net interest income at 31 December 2025 and 2024:
2025
2024
\u00a3m
\u00a3m
OSB
5.9
6.7
CCFS
5.4
4.1
11.3
10.8
Foreign exchange rate risk
The Group has limited exposure to foreign exchange risk in respect of its Indian operations.
A\u00a05% increase in the GBP/INR exchange rate would result in a \u00a31.1m (2024: \u00a30.7m) effect in
profit or loss and \u00a30.8m (2024: \u00a31.0m) in equity.
Structured entities
The structured entities consolidated within the Group at 31 December 2025 were Canterbury
Finance No.2 plc, Canterbury Finance No.3 plc, Canterbury Finance No.4 plc, Canterbury
Finance No.5 plc, CMF 2023-1 plc, CMF 2024-1 plc, PMF 2024-1 plc, CMF 2025-1 plc and CSC
Shelf 2025-1 plc. These entities hold legal title to a pool of mortgages which are used as a
security for issued debt. The transfer of mortgages fails derecognition criteria because the
Group retained the subordinated notes and residual certificates issued and as such did not
transfer substantially the risks and rewards of ownership of the securitised mortgages.
Therefore, the Group is exposed to credit, interest rate and other risks on the securitised
mortgages.
Cash flows generated from the structured entities are ring-fenced and are used to pay interest
and principal of the issued debt securities in a waterfall order according to the seniority of the
bonds. The structured entities are self-funded and the Group is not contractually or
constructively obliged to provide further liquidity or financial support.
The structured entities consolidated within the Group at 31 December 2024 were Canterbury
Finance No.2 plc, Canterbury Finance No.3 plc, Canterbury Finance No.4 plc, Canterbury
Finance No.5 plc, CMF 2020-1 plc, CMF 2023-1 plc, Keys Warehouse No.1 Limited, CMF
2024-1 plc and PMF 2024-1 plc.
Unconsolidated structured entities
Structured entities, which were sponsored by the Group comprise Precise Mortgage Funding
2019-1B plc, Precise Mortgage Funding 2020-1B plc, PMF\u00a02024-2 plc and Rochester Financing
No.3 plc.
The structured entities are considered sponsored by the Group if any of the following
conditions are met:
\u2022 the Group had a key role in establishing the entity;
\u2022 the Group transferred assets to the entity;
\u2022 the entity\u2019s name includes a reference to the Group; or
\u2022 the Group provides guarantees on the entity\u2019s performance.
These structured entities are not consolidated by the Group, as the Group does not control the
entities and is not exposed to the risks and rewards of ownership from the securitised
mortgages. The Group has no contractual arrangements with the unconsolidated structured
entities other than the investments disclosed in note 16 and servicing the structured entities\u2019
mortgage portfolios.
The Group has not provided any support to the unconsolidated structured entities listed and
has no obligation or intention to do so.
During 2025 the Group received \u00a326.2m interest income (2024: \u00a38.1m) and \u00a34.0m servicing
income (2024: \u00a32.1m) from unconsolidated structured entities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialRiskManagementExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-550": { "value": "
Credit risk
Credit risk is the risk that losses may arise as a result of the Group\u2019s borrowers or market
counterparties failing to meet their obligations to repay.
The Group has adopted the Standardised Approach for assessment of credit risk regulatory
capital requirements. This approach considers risk weightings as defined under Basel II and
Basel III principles.
The classes of financial instruments to which the Group is most exposed are loans and
advances to customers, loans and advances to credit institutions, cash in the BoE call account,
call and current accounts with other credit institutions and investment securities. The
maximum credit risk exposure equals the total carrying amount of the above categories plus
off-balance sheet undrawn committed mortgage facilities.
The change, during the year and cumulatively, in the fair value of investments in debt
securities and loans and advances to customers at FVOCI and FVTPL that is attributable
to\u00a0changes in credit risk is not material.
Credit risk \u2013 loans and advances to customers
Credit risk associated with mortgage lending is largely driven by the housing market and level
of unemployment. A recession and/or high interest rates could cause pressure within
the\u00a0market, resulting in rising levels of arrears and repossessions.
All loan applications are assessed in accordance with the Group\u2019s Lending Policies. Changes
to the policies are approved by the Group Risk Committee, with mandates set for the approval
of loan applications.
The Group Credit Committee and ALCO regularly monitor lending activity, taking appropriate
actions to reprice products and adjust lending criteria in order to control risk and manage
exposure. Where necessary and appropriate, changes to the Lending Policies
are\u00a0recommended\u00a0to the Group Risk Committee.
The following tables show the Group\u2019s maximum exposure to credit risk and the impact of
collateral held as security, capped at the gross exposure amount, by impairment stage.
Capped collateral excludes the impact of forced sale discounts and costs to sell. The collateral
value is determined by indexing against HPI data.
OSB
CCFS
Total
Gross
carrying
amount
Capped
collateral
held
Gross
carrying
amount
Capped
collateral
held
Gross
carrying
amount
Capped
collateral
held
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Stage 1
13,742.1
13,673.2
7,407.5
7,407.3
21,149.6
21,080.5
Stage 2
2,199.9
2,197.9
1,621.4
1,621.3
3,821.3
3,819.2
Stage 3
719.0
703.9
299.5
297.4
1,018.5
1,001.3
Stage 3 (POCI)
16.4
16.4
26.8
26.6
43.2
43.0
16,677.4
16,591.4
9,355.2
9,352.6
26,032.6
25,944.0
2024
Stage 1
12,338.1
12,290.5
7,539.0
7,538.4
19,877.1
19,828.9
Stage 2
2,417.4
2,416.0
1,935.5
1,935.0
4,352.9
4,351.0
Stage 3
655.7
649.6
294.1
294.1
949.8
943.7
Stage 3 (POCI)
27.8
27.4
32.7
32.6
60.5
60.0
15,439.0
15,383.5
9,801.3
9,800.1
25,240.3
25,183.6
The Group\u2019s main form of collateral held is property, based in the UK and the Channel Islands.
41.Risk management continued
The Group uses indexed loan to value (LTV) ratios to assess the quality of the uncapped collateral held. Property values are updated to reflect changes in the HPI. A breakdown of loans and
advances to customers by indexed LTV is as follows:
2025
2024
OSB
CCFS
Total
OSB
CCFS
Total
Band
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
\u00a3m
%
0%\u201350%
2,066.3
933.4
2,999.7
11
2,375.0
1,091.3
3,466.3
14
50%\u201360%
2,108.4
931.8
3,040.2
12
2,291.2
1,312.7
3,603.9
14
60%\u201370%
4,092.8
2,264.5
6,357.3
24
4,548.2
3,035.8
7,584.0
30
70%\u201380%
6,369.0
4,212.8
10,581.8
41
4,624.2
3,881.3
8,505.5
34
80%\u201390%
1,335.3
885.8
2,221.1
9
1,043.7
461.5
1,505.2
6
90%\u2013100%
255.7
110.2
365.9
1
221.0
14.8
235.8
1
>100%
449.9
16.7
466.6
2
335.7
3.9
339.6
1
Total loans before provisions
16,677.4
9,355.2
26,032.6
100
15,439.0
9,801.3
25,240.3
100
The table below shows the LTV banding for the OSB segments\u2019 two major lending streams:
2025
2024
OSB
BTL/SME 1
Residential
Total
BTL/SME 1
Residential
Total
Band
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
\u00a3m
%
0%\u201350%
931.9
1,134.4
2,066.3
12
1,037.4
1,337.6
2,375.0
15
50%\u201360%
1,890.4
218.0
2,108.4
13
2,021.2
270.0
2,291.2
15
60%\u201370%
3,925.3
167.5
4,092.8
25
4,345.0
203.2
4,548.2
29
70%\u201380%
6,185.2
183.8
6,369.0
37
4,430.7
193.5
4,624.2
31
80%\u201390%
1,108.4
226.9
1,335.3
8
799.1
244.6
1,043.7
7
90%\u2013100%
227.8
27.9
255.7
2
190.8
30.2
221.0
1
>100%
441.3
8.6
449.9
3
331.6
4.1
335.7
2
Total loans before provisions
14,710.3
1,967.1
16,677.4
100
13,155.8
2,283.2
15,439.0
100
1.Includes net investment in finance leases.
41.Risk management continued
The tables below show the LTV analysis of the OSB BTL/SME sub-segment:
OSB
Band
Buy-to-Let 1
Commercial
Residential
development
Funding lines
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
0%\u201350%
798.6
127.8
4.6
0.9
931.9
50%\u201360%
1,529.1
236.6
118.1
6.6
1,890.4
60%\u201370%
3,345.0
391.1
181.8
7.4
3,925.3
70%\u201380%
5,391.6
756.0
37.6
\u2013
6,185.2
80%\u201390%
901.2
207.2
\u2013
\u2013
1,108.4
90%\u2013100%
139.5
88.3
\u2013
\u2013
227.8
>100%
381.1
59.1
1.0
0.1
441.3
Total loans before
provisions
12,486.1
1,866.1
343.1
15.0
14,710.3
2024
0%\u201350%
925.7
107.0
3.9
0.8
1,037.4
50%\u201360%
1,819.0
128.7
66.1
7.4
2,021.2
60%\u201370%
3,951.9
207.2
184.0
1.9
4,345.0
70%\u201380%
3,918.8
495.5
7.0
9.4
4,430.7
80%\u201390%
562.0
237.1
\u2013
\u2013
799.1
90%\u2013100%
100.8
90.0
\u2013
\u2013
190.8
>100%
239.9
90.5
1.0
0.2
331.6
Total loans before
provisions
11,518.1
1,356.0
262.0
19.7
13,155.8
1.Includes net investment in finance leases.
The table below shows the LTV analysis of the OSB Residential sub-segment:
2025
2024
First charge
Second
charge
Total
First charge
Second
charge
Total
OSB
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Band
0%\u201350%
1,134.4
\u2013
1,134.4
1,272.8
64.8
1,337.6
50%\u201360%
218.0
\u2013
218.0
248.6
21.4
270.0
60%\u201370%
167.5
\u2013
167.5
192.9
10.3
203.2
70%\u201380%
183.8
\u2013
183.8
189.5
4.0
193.5
80%\u201390%
226.9
\u2013
226.9
244.0
0.6
244.6
90%\u2013100%
27.9
\u2013
27.9
29.8
0.4
30.2
>100%
8.6
\u2013
8.6
3.6
0.5
4.1
Total loans before
provisions
1,967.1
\u2013
1,967.1
2,181.2
102.0
2,283.2
41.Risk management continued
The tables below show the LTV analysis of the four CCFS sub-segments:
CCFS
Band
Buy-to-Let
Residential
Bridging
Second
charge
lending
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
0%\u201350%
224.5
496.9
212.0
\u2013
933.4
10
50%\u201360%
437.6
386.3
107.9
\u2013
931.8
10
60%\u201370%
1,316.9
767.0
180.6
\u2013
2,264.5
24
70%\u201380%
3,283.9
842.5
86.4
\u2013
4,212.8
45
80%\u201390%
347.8
534.5
3.5
\u2013
885.8
10
90%\u2013100%
7.6
101.2
1.4
\u2013
110.2
1
>100%
11.7
2.5
2.5
\u2013
16.7
\u2013
Total loans before
provisions
5,630.0
3,130.9
594.3
\u2013
9,355.2
100
2024
0%\u201350%
335.2
607.7
123.8
24.6
1,091.3
11
50%\u201360%
714.9
508.1
73.1
16.6
1,312.7
13
60%\u201370%
2,024.9
896.5
101.4
13.0
3,035.8
31
70%\u201380%
3,099.8
713.3
60.3
7.9
3,881.3
40
80%\u201390%
183.0
275.7
1.2
1.6
461.5
5
90%\u2013100%
7.4
3.6
3.7
0.1
14.8
\u2013
>100%
2.1
0.8
1.0
\u2013
3.9
\u2013
Total loans before
provisions
6,367.3
3,005.7
364.5
63.8
9,801.3
100
Forbearance measures undertaken
The Group has a range of options available where borrowers experience financial difficulties
that impact their ability to service their financial commitments under the loan agreement.
These options are explained in the Risk review on page 63.
A summary of the forbearance measures undertaken during the year is shown below. The
balances disclosed reflect the year-end balance of the accounts where a forbearance measure
was undertaken during the year.
Number of
accounts
As at
31 December
2025
Number of
accounts
As at
31 December
2024
Forbearance type
2025
\u00a3m
2024
\u00a3m
Interest-only switch
756
49.3
1,081
127.3
Interest rate reduction
790
71.4
1,077
85.6
Payment deferral
792
119.7
747
104.5
Others
181
24.5
108
30.8
Total
2,519
264.9
3,013
348.2
Loan type
First charge owner-occupier
1,924
118.3
2,322
226.1
Second charge owner-occupier
\u2013
\u2013
169
4.9
Buy-to-Let
522
108.0
460
104.0
Commercial
73
38.6
62
13.2
Total
2,519
264.9
3,013
348.2
41.Risk management continued
Geographical analysis by region
An analysis of loans, excluding asset finance leases, by region is provided below:
2025
2024
OSB
CCFS
Total
OSB
CCFS
Total
Region
\u00a3m
\u00a3m
\u00a3m
%
\u00a3m
\u00a3m
\u00a3m
%
East Anglia
454.0
1,016.0
1,470.0
6
447.4
1,084.7
1,532.1
6
East Midlands
821.6
659.7
1,481.3
6
756.7
674.3
1,431.0
6
Greater London
6,940.0
2,503.7
9,443.7
37
6,329.8
2,769.6
9,099.4
36
Guernsey
14.0
\u2013
14.0
\u2013
17.0
\u2013
17.0
\u2013
Jersey
54.7
\u2013
54.7
\u2013
63.2
\u2013
63.2
\u2013
North East
239.7
283.4
523.1
2
224.4
282.4
506.8
2
North West
1,099.0
861.8
1,960.8
8
1,017.1
890.1
1,907.2
8
Northern Ireland
4.9
\u2013
4.9
\u2013
7.9
\u2013
7.9
\u2013
Scotland
13.8
283.6
297.4
1
23.5
282.1
305.6
1
South East
3,652.2
1,532.3
5,184.5
20
3,419.1
1,577.6
4,996.7
20
South West
1,118.6
678.8
1,797.4
7
1,047.7
680.1
1,727.8
7
Wales
356.3
279.1
635.4
2
345.1
289.4
634.5
3
West Midlands
962.5
746.4
1,708.9
7
907.4
755.9
1,663.3
7
Yorks and Humberside
521.9
510.4
1,032.3
4
515.8
515.1
1,030.9
4
Total loans before provisions
16,253.2
9,355.2
25,608.4
100
15,122.1
9,801.3
24,923.4
100
Approach to measurement of credit quality
The Group categorises the credit quality of loans and advances to customers into internal risk grades based on the 12-month PD calculated at the reporting date. The PDs include a combination
of internal behavioural and credit bureau characteristics and where possible are aligned with capital models to generate the risk grades which are then further grouped into the following credit
quality segments:
\u2022 Excellent \u2013 where there is a very high likelihood the asset will be recovered in full with a negligible or very low risk of default.
\u2022 Good \u2013 where there is a high likelihood the asset will be recovered in full with a low risk of default.
\u2022 Satisfactory \u2013 where the assets demonstrate a moderate default risk.
\u2022 Lower \u2013 where the assets require closer monitoring and the risk of default is of greater concern.
41.Risk management continued
The following tables disclose the credit risk quality ratings of loans and advances to customers by IFRS 9 stage. The assessment of whether credit risk has increased significantly since initial
recognition is performed for each reporting period for the life of the loan. Loans and advances to customers initially booked on very low PDs and graded as excellent quality loans can experience
SICR and therefore be moved to Stage 2. Similarly, loans and advances to customers initially booked on high PDs having lower credit quality can remain in stage 1 if subsequently SICR is not
experienced or triggered.
Stage 1
Stage 2
Stage 3
Stage 3
(POCI)
Total
PD lower range
PD upper range
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
%
%
OSB
Excellent
5,736.4
100.6
\u2013
\u2013
5,837.0
\u2013
0.3
Good
7,106.3
1,056.8
\u2013
\u2013
8,163.1
0.3
2.0
Satisfactory
771.4
442.5
\u2013
\u2013
1,213.9
2.0
7.4
Lower
128.0
600.0
\u2013
\u2013
728.0
7.4
100.0
Impaired
\u2013
\u2013
719.0
\u2013
719.0
100.0
100.0
POCI
\u2013
\u2013
\u2013
16.4
16.4
100.0
100.0
CCFS
Excellent
4,373.4
429.9
\u2013
\u2013
4,803.3
\u2013
0.3
Good
2,727.9
606.9
\u2013
\u2013
3,334.8
0.3
2.0
Satisfactory
257.9
211.1
\u2013
\u2013
469.0
2.0
7.4
Lower
48.3
373.5
\u2013
\u2013
421.8
7.4
100.0
Impaired
\u2013
\u2013
299.5
\u2013
299.5
100.0
100.0
POCI
\u2013
\u2013
\u2013
26.8
26.8
100.0
100.0
21,149.6
3,821.3
1,018.5
43.2
26,032.6
2024
OSB
Excellent
5,426.9
212.9
\u2013
\u2013
5,639.8
\u2013
0.3
Good
6,199.2
1,135.3
\u2013
\u2013
7,334.5
0.3
2.0
Satisfactory
633.0
503.1
\u2013
\u2013
1,136.1
2.0
7.4
Lower
79.0
566.1
\u2013
\u2013
645.1
7.4
100.0
Impaired
\u2013
\u2013
655.7
\u2013
655.7
100.0
100.0
POCI
\u2013
\u2013
\u2013
27.8
27.8
100.0
100.0
CCFS
Excellent
4,623.4
622.3
\u2013
\u2013
5,245.7
\u2013
0.3
Good
2,682.2
740.7
\u2013
\u2013
3,422.9
0.3
2.0
Satisfactory
220.1
242.5
\u2013
\u2013
462.6
2.0
7.4
Lower
13.3
330.0
\u2013
\u2013
343.3
7.4
100.0
Impaired
\u2013
\u2013
294.1
\u2013
294.1
100.0
100.0
POCI
\u2013
\u2013
\u2013
32.7
32.7
100.0
100.0
19,877.1
4,352.9
949.8
60.5
25,240.3
41.Risk management continued
The tables below show the Group\u2019s other financial assets and derivatives by credit risk rating
grade. The credit grade is based on the external credit rating of the counterparty; AAA to AA-
are rated Excellent; A+ to A- are rated Good; and BBB+ to BBB- are rated Satisfactory.
Excellent
Good
Satisfactory
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Investment securities
1,810.4
1.9
2.2
1,814.5
Loans and advances to credit
institutions
2,723.7
304.7
24.6
3,053.0
Derivative assets
55.5
45.9
\u2013
101.4
4,589.6
352.5
26.8
4,968.9
2024
Investment securities
1,434.4
\u2013
\u2013
1,434.4
Loans and advances to credit
institutions
3,127.2
264.4
14.3
3,405.9
Derivative assets
174.7
139.1
\u2013
313.8
4,736.3
403.5
14.3
5,154.1
Credit risk \u2013 loans and advances to credit institutions and investment securities
The Group holds treasury instruments in order to meet liquidity requirements and for general
business purposes. The credit risk arising from these investments is closely monitored and
managed by the Group\u2019s Treasury function. In managing these assets, Group Treasury
operates within guidelines laid down in the Group Market and Liquidity Risk Policy approved
by ALCO and performance is monitored and reported to ALCO monthly, including through the
use of an\u00a0internally developed rating model based on counterparty credit default
swap\u00a0spreads.
The Group has limited exposure to emerging markets (Indian operations) and non-investment
grade debt. ALCO is responsible for approving treasury counterparties.
During the year, the average balance of cash in hand, loans and advances to credit
institutions and investment securities on a monthly basis was \u00a34,371.2m (2024: \u00a34,081.1m).
The table below shows the industry sector of the Group\u2019s loans and advances to credit
institutions and investment securities:
2025
2024
\u00a3m
%
\u00a3m
%
BoE
2,429.6
49
3,053.9
63
Other banks
623.4
13
352.0
7
Central government
178.0
4
226.0
5
Securitisation
1,367.3
28
1,208.4
25
Supranationals
269.2
6
\u2013
\u2013
Total
4,867.5
100
4,840.3
100
The table below shows the geographical exposure of the Group\u2019s loans and advances to credit
institutions and investment securities:
2025
2024
\u00a3m
%
\u00a3m
%
United Kingdom
4,841.7
99
4,821.1
100
India
25.8
1
19.2
\u2013
Total
4,867.5
100
4,840.3
100
The Group monitors exposure concentrations against a variety of criteria, including asset
class, sector and geography. To avoid refinancing risks associated with any one counterparty,
sector or geographical region, the Board has set appropriate limits.
For further information on Credit risk please refer to pages 60.
", "dimensions": { "concept": "ifrs-full:DisclosureOfCreditRiskExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-551": { "value": "
Liquidity risk
Liquidity risk is the risk of having insufficient liquid assets to fulfil obligations as they become
due or the cost of raising liquid funds becoming too expensive.
The Group\u2019s approach to managing liquidity risk is to maintain sufficient liquid resources to
cover cash flow imbalances and fluctuations in funding in order to retain full public confidence
in the solvency of the Group and to enable the Group to meet its financial obligations as they
fall due. This is achieved through maintaining a prudent level of liquid assets and control of the
growth of the business. The Group has established call accounts with the BoE and has access
to its contingent liquidity facilities.
The Board has delegated the responsibility for liquidity management to the Chief Executive
Officer, assisted by ALCO, with day-to-day management delegated to Treasury as detailed in
the Group Market and Liquidity Risk Policy. The Board is responsible for setting risk appetite
limits over the level and maturity profile of funding and for monitoring the composition of the
Group financial position.
The Group also monitors a range of triggers which are designed to capture liquidity stresses in
advance in order to allow sufficient time for management action to take effect. These are
monitored daily, with breaches immediately reported to the Group Chief Risk Officer, Chief
Executive Officer, Chief Financial Officer and the Group Treasurer.
The tables below show the maturity profile for the Group\u2019s financial assets and liabilities based
on contractual maturities at the reporting date:
Carrying
amount
On demand
Less than 3
months
3\u201312 months
1\u20135 years
More than 5
years
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial asset by
type
Cash in hand
0.4
0.4
\u2013
\u2013
\u2013
\u2013
Loans and advances
to credit institutions
3,053.0
2,825.4
211.8
15.6
0.2
\u2013
Investment securities
1,814.5
\u2013
6.4
44.7
1,763.4
\u2013
Loans and advances
to customers
25,920.6
\u2013
253.9
670.1
2,048.4
22,948.2
Derivative assets
101.4
\u2013
4.6
30.2
66.4
0.2
Total assets
30,889.9
2,825.8
476.7
760.6
3,878.4
22,948.4
Financial liability
by type
Amounts owed to
retail depositors
24,251.1
10,091.4
6,678.5
5,823.1
1,658.1
\u2013
Amounts owed to
credit institutions
1,838.1
\u2013
684.3
1,153.8
\u2013
\u2013
Amounts owed to
other customers
478.4
9.2
289.9
166.7
12.6
\u2013
Derivative liabilities
152.0
\u2013
1.1
8.8
141.3
0.8
Debt securities in
issue
1,010.0
\u2013
2.0
23.7
984.3
\u2013
Lease liabilities
6.3
\u2013
0.3
1.3
3.4
1.3
Senior notes
723.4
\u2013
25.3
\u2013
698.1
\u2013
Subordinated debt
liabilities
260.1
\u2013
10.7
\u2013
249.4
\u2013
Total liabilities
28,719.4
10,100.6
7,692.1
7,177.4
3,747.2
2.1
Cumulative
liquidity gap
(7,274.8)
(14,490.2)
(20,907.0)
(20,775.8)
2,170.5
41.Risk management continued
Carrying
amount
On demand
Less than 3
months
3\u201312 months
1\u20135 years
More than 5
years
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial asset by
type
Cash in hand
0.3
0.3
\u2013
\u2013
\u2013
\u2013
Loans and advances
to credit institutions
3,405.9
3,386.5
12.5
6.7
0.2
\u2013
Investment securities
1,434.4
\u2013
606.2
127.2
647.4
53.6
Loans and advances
to customers
25,126.3
\u2013
212.6
480.7
1,831.3
22,601.7
Derivative assets
313.8
\u2013
11.3
25.5
274.8
2.2
Total assets
30,280.7
3,386.8
842.6
640.1
2,753.7
22,657.5
Financial liability
by type
Amounts owed to
retail depositors
23,820.3
7,314.5
7,267.6
8,125.9
1,112.3
\u2013
Amounts owed to
credit institutions
1,935.2
160.0
321.5
1,453.7
\u2013
\u2013
Amounts owed to
other customers
104.9
1.4
5.2
98.3
\u2013
\u2013
Derivative liabilities
81.9
\u2013
1.2
9.4
71.2
0.1
Debt securities in
issue
1,018.3
\u2013
2.3
\u2013
1,016.0
\u2013
Lease liabilities
9.1
\u2013
0.4
1.4
6.0
1.3
Senior notes
722.7
\u2013
25.3
\u2013
697.4
\u2013
Subordinated debt
liabilities
259.8
\u2013
10.7
\u2013
249.1
\u2013
Total liabilities
27,952.2
7,475.9
7,634.2
9,688.7
3,152.0
1.4
Cumulative
liquidity gap
(4,089.1)
(10,880.7)
(19,929.3)
(20,327.6)
2,328.5
Liquidity risk \u2013 undiscounted contractual cash flows
The following tables provide an analysis of the Group\u2019s gross contractual undiscounted cash
flows, derived using interest rates and contractual maturities at the reporting date
and\u00a0excluding impacts of early payments or non-payments:
Carrying
amount
Gross inflow/
outflow
Up to 3
months
3 - 12 months
1 - 5 years
More than 5
years
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial asset by
type
Cash in hand
0.4
0.4
0.4
\u2013
\u2013
\u2013
Loans and advances
to credit institutions
3,053.0
3,054.6
3,038.8
15.6
0.2
\u2013
Investment securities
1,814.5
2,087.6
15.7
109.7
1,962.2
\u2013
Loans and advances
to customers
25,920.6
62,806.2
598.2
2,187.3
9,258.0
50,762.7
Derivative assets
101.4
103.9
19.2
54.9
29.7
0.1
Total assets
30,889.9
68,052.7
3,672.3
2,367.5
11,250.1
50,762.8
Off-balance sheet
loan commitments
1,148.9
1,148.9
1,148.9
\u2013
\u2013
\u2013
Financial liability
by type
Amounts owed to
retail depositors
24,251.1
25,015.5
17,221.7
6,050.6
1,743.2
\u2013
Amounts owed to
credit institutions
1,838.1
1,860.4
688.9
1,171.5
\u2013
\u2013
Amounts owed to
other customers
478.4
478.5
299.2
166.7
12.6
\u2013
Derivative liabilities
152.0
161.1
7.6
53.0
100.7
(0.2)
Debt securities in
issue
1,010.0
1,128.0
30.1
38.4
1,059.5
\u2013
Lease liabilities
6.3
6.3
0.3
1.3
3.4
1.3
Senior notes
723.4
881.2
32.0
32.0
817.2
\u2013
Subordinated debt
liabilities
260.1
318.7
12.5
12.5
293.7
\u2013
Total liabilities
28,719.4
29,849.7
18,292.3
7,526.0
4,030.3
1.1
41.Risk management continued
Carrying
amount
Gross inflow/
outflow
Up to 3
months
3 - 12 months
1 - 5 years
More than 5
years
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Financial asset by
type
Cash in hand
0.3
0.3
0.3
\u2013
\u2013
\u2013
Loans and advances
to credit institutions
3,405.9
3,406.0
3,399.1
6.7
0.2
\u2013
Investment securities
1,434.4
1,558.2
619.0
159.0
725.4
54.8
Loans and advances
to customers
25,126.3
62,539.2
553.6
1,849.2
9,284.6
50,851.8
Derivative assets
313.8
325.1
63.9
139.4
121.8
\u2013
Total assets
30,280.7
67,828.8
4,635.9
2,154.3
10,132.0
50,906.6
Off-balance sheet
loan commitments
987.0
987.0
987.0
\u2013
\u2013
\u2013
Financial liability
by type
Amounts owed to
retail depositors
23,820.3
25,520.8
15,413.9
8,929.7
1,177.2
\u2013
Amounts owed to
credit institutions
1,935.2
1,991.6
484.1
1,507.5
\u2013
\u2013
Amounts owed to
other customers
104.9
104.9
1.4
5.2
98.3
\u2013
Derivative liabilities
81.9
88.4
11.6
14.3
62.5
\u2013
Debt securities in
issue
1,018.3
1,177.0
32.4
95.4
1,049.2
\u2013
Lease liabilities
9.1
9.0
0.4
1.4
5.9
1.3
Senior notes
722.7
945.3
32.0
32.0
881.3
\u2013
Subordinated debt
liabilities
259.8
343.7
12.5
12.5
318.7
\u2013
Total liabilities
27,952.2
30,180.7
15,988.3
10,598.0
3,593.1
1.3
The actual repayment profile of loans and advances to customers may differ from the analysis
above since many mortgage loans are repaid prior to the contractual end date.
The actual repayment profile of retail deposits may differ from the analysis above due to the
option of early withdrawal with a penalty.
Liquidity risk \u2013 asset encumbrance
Asset encumbrance levels are monitored by ALCO. The following tables provide an analysis of
the Group\u2019s encumbered and unencumbered assets:
Encumbered
Unencumbered
Pledged as
collateral
Other 1
Available as
collateral
Other
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Cash in hand
\u2013
\u2013
0.4
\u2013
0.4
Loans and advances to credit
institutions
216.5
38.2
2,429.6
368.7
3,053.0
Investment securities
324.7
\u2013
1,489.8
\u2013
1,814.5
Loans and advances to
customers 2
3,404.9
\u2013
21,724.3
791.4
25,920.6
Derivative assets
\u2013
\u2013
\u2013
101.4
101.4
Non-financial assets
\u2013
\u2013
\u2013
232.8
232.8
3,946.1
38.2
25,644.1
1,494.3
31,122.7
2024
Cash in hand
\u2013
\u2013
0.3
\u2013
0.3
Loans and advances to credit
institutions
134.2
40.6
3,053.9
177.2
3,405.9
Investment securities
22.7
\u2013
1,411.7
\u2013
1,434.4
Loans and advances to
customers 2
4,741.1
\u2013
19,101.3
1,283.9
25,126.3
Derivative assets
\u2013
\u2013
\u2013
313.8
313.8
Non-financial assets
\u2013
\u2013
\u2013
(37.1)
(37.1)
4,898.0
40.6
23,567.2
1,737.8
30,243.6
1.Represents assets that are not pledged but that the Group believes it is restricted from using to secure funding for legal
or other reasons.
2.Unencumbered loans and advances to customers classified as other are restricted for use as collateral. These include
property registered outside of the UK (Jersey and Guernsey), loans and advances not secured by immovable property
and non-performing loans.
41.Risk management continued
Liquidity risk \u2013 liquidity reserves
The tables below analyse the Group\u2019s liquidity reserves, where carrying value is considered to
be equal to fair value:
2025
2024
\u00a3m
\u00a3m
Unencumbered balances with central banks
2,429.6
3,053.9
Unencumbered cash and balances with other banks
368.7
177.2
Other cash and cash equivalents
0.4
0.3
Unencumbered investment securities
1,489.8
1,411.7
4,288.5
4,643.1
", "dimensions": { "concept": "ifrs-full:DisclosureOfLiquidityRiskExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-552": { "value": "
Market risk
Market risk is the risk of an adverse change in the Group\u2019s income or the Group\u2019s net worth
arising from movement in interest rates, exchange rates or other market prices. Market risk
exists, to some extent, in all the Group\u2019s businesses. The Group recognises that the effective
management of market risk is essential to the maintenance of stable earnings and
preservation of shareholder value.
Interest rate risk
The primary market risk faced by the Group is interest rate risk. Interest rate risk is the risk
of\u00a0loss from adverse movement in the overall level of interest rates. It arises from mismatches in
the timing of repricing of assets and liabilities, both on and off-balance sheet. The Group does
not run a trading book, with all interest rate risk residing in the banking book (interest rate risk
in the banking book (IRRBB)). Through prudent management, the Group seeks to minimise its
IRRBB exposures, typically through matching assets and liabilities with similar tenors,
executing offsetting interest rate swaps and maintaining a structural hedge programme.
OSB and CCFS Banks apply an economic value (EV) at risk approach as well as an earnings-
at-risk approach for interest rate risk and basis risk. The interest rate sensitivity is impacted by
behavioural assumptions used by the Group; the most significant of which are prepayments
and mortgage offer pipeline take up. Expected prepayments and offer conversions are
monitored and modelled on a regular basis based upon historical analysis.
The EV measure of duration risk quantifies risk by applying six shaped interest rate shock
scenarios to the current forward curve. Scenarios are reviewed on semi-annual basis and
approved by ALCO and are based on three \u2018shapes\u2019 of curve movement (parallel, twist, flex)
using historical data to calibrate the severity of the shocks applied. The most detrimental net
present value to these scenarios is measured against the Board risk appetite of 1.5% of Tier 1
capital. The table below shows the maximum decreases to economic value under these
scenarios after taking into account the effect of hedging:
2025
2024
\u00a3m
\u00a3m
OSB
8.6
9.2
CCFS
4.4
2.9
13.0
12.1
The earnings measure of duration risk (EaR) quantifies the impact of changes in interest rates
to the net interest income of the Bank within a given 12-month time horizon. A parallel shock of
+/-100bps is applied to interest rate sensitive instruments to determine EaR sensitivity of the
Group, assuming a constant balance sheet. EaR risk appetite limits are approved by the
Board, and currently set at 4% of full-year net interest income (NII). The table below shows the
maximum decreases after taking into account the effect of hedging:
2025
2024
\u00a3m
\u00a3m
OSB
6.7
1.1
CCFS
6.0
6.5
12.7
7.6
EaR quantifies the impact of changes in interest rates to the net interest income within a given
three-year time horizon. A parallel shock of +/-100bps is applied to interest rate sensitive
instruments to determine EaR sensitivity of the Group, assuming a constant balance sheet.
EaR risk appetite limits are approved by the Board, and currently set at 4% of three-year net
interest income.
2025
2024
\u00a3m
\u00a3m
OSB
24.1
14.2
CCFS
17.4
19.0
41.5
33.2
41.Risk management continued
Basis risk measures the degree to which the Bank is sensitive to exposures repricing by varying
degrees, even where their duration is the same, due to them being linked to different indices.
These indices may be market rates (e.g. BBR or SONIA) or administered (e.g. the Group\u2019s SVR,
other discretionary variable rates, or that received on call accounts with other banks). The
Group measures basis risk using the impact of four scenarios on net interest income over a
one-year period, with the largest negative impact across the scenarios being the basis risk
exposure assessed against risk appetite. Dislocations between the bases are calculated on a
one in 20-year confidence interval level and include increasing, decreasing and static base
rate environment, as well as a fourth scenario (in a decreasing rate environment) which
measures the impact of the timing lag between the repricing of administered rate savings
against SVR linked mortgages. The Board has set a limit on basis risk exposure for CCFS at 3%
of full-year net interest income and 2.5% for OSB. The table below shows the maximum
decreases to net interest income at 31 December 2025 and 2024:
2025
2024
\u00a3m
\u00a3m
OSB
5.9
6.7
CCFS
5.4
4.1
11.3
10.8
Foreign exchange rate risk
The Group has limited exposure to foreign exchange risk in respect of its Indian operations.
A\u00a05% increase in the GBP/INR exchange rate would result in a \u00a31.1m (2024: \u00a30.7m) effect in
profit or loss and \u00a30.8m (2024: \u00a31.0m) in equity.
Structured entities
The structured entities consolidated within the Group at 31 December 2025 were Canterbury
Finance No.2 plc, Canterbury Finance No.3 plc, Canterbury Finance No.4 plc, Canterbury
Finance No.5 plc, CMF 2023-1 plc, CMF 2024-1 plc, PMF 2024-1 plc, CMF 2025-1 plc and CSC
Shelf 2025-1 plc. These entities hold legal title to a pool of mortgages which are used as a
security for issued debt. The transfer of mortgages fails derecognition criteria because the
Group retained the subordinated notes and residual certificates issued and as such did not
transfer substantially the risks and rewards of ownership of the securitised mortgages.
Therefore, the Group is exposed to credit, interest rate and other risks on the securitised
mortgages.
Cash flows generated from the structured entities are ring-fenced and are used to pay interest
and principal of the issued debt securities in a waterfall order according to the seniority of the
bonds. The structured entities are self-funded and the Group is not contractually or
constructively obliged to provide further liquidity or financial support.
The structured entities consolidated within the Group at 31 December 2024 were Canterbury
Finance No.2 plc, Canterbury Finance No.3 plc, Canterbury Finance No.4 plc, Canterbury
Finance No.5 plc, CMF 2020-1 plc, CMF 2023-1 plc, Keys Warehouse No.1 Limited, CMF
2024-1 plc and PMF 2024-1 plc.
Unconsolidated structured entities
Structured entities, which were sponsored by the Group comprise Precise Mortgage Funding
2019-1B plc, Precise Mortgage Funding 2020-1B plc, PMF\u00a02024-2 plc and Rochester Financing
No.3 plc.
The structured entities are considered sponsored by the Group if any of the following
conditions are met:
\u2022 the Group had a key role in establishing the entity;
\u2022 the Group transferred assets to the entity;
\u2022 the entity\u2019s name includes a reference to the Group; or
\u2022 the Group provides guarantees on the entity\u2019s performance.
These structured entities are not consolidated by the Group, as the Group does not control the
entities and is not exposed to the risks and rewards of ownership from the securitised
mortgages. The Group has no contractual arrangements with the unconsolidated structured
entities other than the investments disclosed in note 16 and servicing the structured entities\u2019
mortgage portfolios.
The Group has not provided any support to the unconsolidated structured entities listed and
has no obligation or intention to do so.
During 2025 the Group received \u00a326.2m interest income (2024: \u00a38.1m) and \u00a34.0m servicing
income (2024: \u00a32.1m) from unconsolidated structured entities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfMarketRiskExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-553": { "value": "
Structured entities
The structured entities consolidated within the Group at 31 December 2025 were Canterbury
Finance No.2 plc, Canterbury Finance No.3 plc, Canterbury Finance No.4 plc, Canterbury
Finance No.5 plc, CMF 2023-1 plc, CMF 2024-1 plc, PMF 2024-1 plc, CMF 2025-1 plc and CSC
Shelf 2025-1 plc. These entities hold legal title to a pool of mortgages which are used as a
security for issued debt. The transfer of mortgages fails derecognition criteria because the
Group retained the subordinated notes and residual certificates issued and as such did not
transfer substantially the risks and rewards of ownership of the securitised mortgages.
Therefore, the Group is exposed to credit, interest rate and other risks on the securitised
mortgages.
Cash flows generated from the structured entities are ring-fenced and are used to pay interest
and principal of the issued debt securities in a waterfall order according to the seniority of the
bonds. The structured entities are self-funded and the Group is not contractually or
constructively obliged to provide further liquidity or financial support.
The structured entities consolidated within the Group at 31 December 2024 were Canterbury
Finance No.2 plc, Canterbury Finance No.3 plc, Canterbury Finance No.4 plc, Canterbury
Finance No.5 plc, CMF 2020-1 plc, CMF 2023-1 plc, Keys Warehouse No.1 Limited, CMF
2024-1 plc and PMF 2024-1 plc.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInformationAboutConsolidatedStructuredEntitiesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-554": { "value": "
Unconsolidated structured entities
Structured entities, which were sponsored by the Group comprise Precise Mortgage Funding
2019-1B plc, Precise Mortgage Funding 2020-1B plc, PMF\u00a02024-2 plc and Rochester Financing
No.3 plc.
The structured entities are considered sponsored by the Group if any of the following
conditions are met:
\u2022 the Group had a key role in establishing the entity;
\u2022 the Group transferred assets to the entity;
\u2022 the entity\u2019s name includes a reference to the Group; or
\u2022 the Group provides guarantees on the entity\u2019s performance.
These structured entities are not consolidated by the Group, as the Group does not control the
entities and is not exposed to the risks and rewards of ownership from the securitised
mortgages. The Group has no contractual arrangements with the unconsolidated structured
entities other than the investments disclosed in note 16 and servicing the structured entities\u2019
mortgage portfolios.
The Group has not provided any support to the unconsolidated structured entities listed and
has no obligation or intention to do so.
During 2025 the Group received \u00a326.2m interest income (2024: \u00a38.1m) and \u00a34.0m servicing
income (2024: \u00a32.1m) from unconsolidated structured entities.
", "dimensions": { "concept": "ifrs-full:DisclosureOfInterestsInUnconsolidatedStructuredEntitiesExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-555": { "value": "
42.Financial instruments and fair values
i.Financial assets and financial liabilities
The following tables set out the classification of financial instruments in the Consolidated Statement of Financial Position:
2025
FVTPL 1
FVOCI
Amortised
cost
Total
carrying
amount
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Cash in hand
\u2013
\u2013
0.4
0.4
Loans and advances to credit
institutions
15
\u2013
\u2013
3,053.0
3,053.0
Investment securities
16
400.8
448.8
964.9
1,814.5
Loans and advances to customers
17
11.6
\u2013
25,909.0
25,920.6
Derivative assets
22
101.4
\u2013
\u2013
101.4
Other assets 2
24
\u2013
\u2013
2.2
2.2
513.8
448.8
29,929.5
30,892.1
Liabilities
Amounts owed to retail depositors
28
\u2013
\u2013
24,251.1
24,251.1
Amounts owed to credit institutions
27
\u2013
\u2013
1,838.1
1,838.1
Amounts owed to other customers
29
\u2013
\u2013
478.4
478.4
Debt securities in issue
30
\u2013
\u2013
1,010.0
1,010.0
Derivative liabilities
22
152.0
\u2013
\u2013
152.0
Other liabilities 3
32
\u2013
\u2013
70.4
70.4
Senior notes
34
\u2013
\u2013
723.4
723.4
Subordinated debt liabilities
35
\u2013
\u2013
260.1
260.1
152.0
\u2013
28,631.5
28,783.5
1.All FVTPL assets and liabilities are mandatorily measured as such.
2.Balance excludes prepayments.
3.Balance excludes deferred income.
2024
FVTPL 1
FVOCI
Amortised
cost
Total
carrying
amount
Note
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Assets
Cash in hand
\u2013
\u2013
0.3
0.3
Loans and advances to credit
institutions
15
\u2013
\u2013
3,405.9
3,405.9
Investment securities
16
410.1
226.0
798.3
1,434.4
Loans and advances to customers
17
12.9
\u2013
25,113.4
25,126.3
Derivative assets
22
313.8
\u2013
\u2013
313.8
Other assets 2
24
\u2013
\u2013
1.7
1.7
736.8
226.0
29,319.6
30,282.4
Liabilities
Amounts owed to retail depositors
28
\u2013
\u2013
23,820.3
23,820.3
Amounts owed to credit institutions
27
\u2013
\u2013
1,935.2
1,935.2
Amounts owed to other customers
29
\u2013
\u2013
104.9
104.9
Debt securities in issue
30
\u2013
\u2013
1,018.3
1,018.3
Derivative liabilities
22
81.9
\u2013
\u2013
81.9
Other liabilities 3
32
\u2013
\u2013
56.2
56.2
Senior notes
34
\u2013
\u2013
722.7
722.7
Subordinated debt liabilities
35
\u2013
\u2013
259.8
259.8
81.9
\u2013
27,917.4
27,999.3
1.All FVTPL assets and liabilities are mandatorily measured as such.
2.Balance excludes prepayments.
3.Balance excludes deferred income.
The Group has no non-derivative financial assets or financial liabilities classified as held
for\u00a0trading.
The designation at FVTPL for all financial assets is applied at inception.
", "dimensions": { "concept": "ifrs-full:DisclosureOfFinancialInstrumentsAtFairValueThroughProfitOrLossExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-556": { "value": "
43.Pension scheme
Defined contribution scheme
The amount charged to profit or loss in respect of contributions to the Group\u2019s defined
contribution and stakeholder pension arrangements is the contribution payable in the year.
The total pension cost in the year amounted to \u00a35.6m (2024: \u00a35.7m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfDefinedContributionPlansExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-557": { "value": "
44.Operating segments
The Group segments its lending business and operates under two segments in line with internal
reporting to the Board:
\u2022 OSB
\u2022 CCFS
The Group applies consistent accounting policies across all segments. The Group separately
discloses the impact of Combination accounting but does not consider this a business
segment.
The financial position and results of operations of the above segments are summarised below:
OSB
CCFS
Combination
Total
2025
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Balances at the reporting
date
Gross loans and advances to
customers
16,677.4
9,366.8
\u2013
26,044.2
Expected credit losses
(104.5)
(19.1)
\u2013
(123.6)
Loans and advances to
customers
16,572.9
9,347.7
\u2013
25,920.6
Capital expenditure
32.9
\u2013
\u2013
32.9
Depreciation and amortisation
14.1
1.8
\u2013
15.9
Profit or loss for the year
Net interest income
413.9
265.5
\u2013
679.4
Other expense
(11.0)
(0.4)
\u2013
(11.4)
Total income
402.9
265.1
\u2013
668.0
Impairment of financial assets
(16.3)
3.3
\u2013
(13.0)
Contribution to profit
386.6
268.4
\u2013
655.0
Administrative expenses
(163.0)
(107.1)
\u2013
(270.1)
Provisions
(2.3)
(0.1)
\u2013
(2.4)
Profit before taxation
221.3
161.2
\u2013
382.5
Taxation
(56.7)
(40.1)
\u2013
(96.8)
Profit for the year
164.6
121.1
\u2013
285.7
OSB
CCFS
Combination
Total
2024
\u00a3m
\u00a3m
\u00a3m
\u00a3m
Balances at the reporting
date
Gross loans and advances to
customers
15,439.0
9,814.2
\u2013
25,253.2
Expected credit losses
(101.1)
(25.8)
\u2013
(126.9)
Loans and advances to
customers
15,337.9
9,788.4
\u2013
25,126.3
Capital expenditure
43.7
0.2
\u2013
43.9
Depreciation and amortisation
7.5
3.1
0.7
11.3
Profit or loss for the year
Net interest income/
(expense)
389.0
301.6
(24.2)
666.4
Other (expense)/income
(3.5)
3.1
1.2
0.8
Total income/(expense)
385.5
304.7
(23.0)
667.2
Impairment of financial assets
2.9
9.9
(1.1)
11.7
Contribution to profit
388.4
314.6
(24.1)
678.9
Administrative expenses
(149.9)
(107.5)
(0.7)
(258.1)
Provisions
(2.7)
\u2013
\u2013
(2.7)
Profit/(loss) before taxation
235.8
207.1
(24.8)
418.1
Taxation
(65.3)
(51.6)
6.9
(110.0)
Profit/(loss) for the year
170.5
155.5
(17.9)
308.1
", "dimensions": { "concept": "ifrs-full:DisclosureOfEntitysReportableSegmentsExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-558": { "value": "
45.Country by country reporting (CBCR)
CBCR was introduced through Article 89 of CRD IV, aimed at the banking and capital markets industry. The name, nature of activities and geographic location of the Group\u2019s companies are
presented below:
Jurisdiction
Country
Name
Activities
UK 1
England
OSB GROUP PLC
Holding company
OneSavings Bank plc
Mortgage lending and deposit taking
5D Finance Limited
Mortgage servicer and provider
Broadlands Finance Limited 2
Mortgage administration services
CCFSG Holdings Limited
Holding company
Charter Court Financial Services Limited
Mortgage lending and deposit taking
Charter Mortgages Limited
Mortgage administration and analytical services
Easioption Limited
Intermediate holding company
Exact Mortgage Experts Limited
Group service company
Guernsey Home Loans Limited
Mortgage provider
Heritable Development Finance Limited
Mortgage originator and servicer
Inter Bay Financial I Limited
Holding company
InterBay Asset Finance Limited
Asset finance and mortgage provider
Interbay Funding, Ltd
Mortgage servicer
Interbay ML, Ltd
Mortgage provider
Jersey Home Loans Limited
Mortgage provider
Prestige Finance Limited
Mortgage originator and servicer
Reliance Property Loans Limited
Mortgage provider
Rochester Mortgages Limited
Mortgage provider
Guernsey
Guernsey Home Loans Limited
Mortgage provider
Jersey
Jersey Home Loans Limited
Mortgage provider
45.Country by country reporting (CBCR) continued
Jurisdiction
Country
Name
Activities
UK
England
Canterbury Finance No. 2 plc
Special purpose vehicle
Canterbury Finance No. 3 plc
Canterbury Finance No. 4 plc
Canterbury Finance No. 5 plc
CMF 2023-1 plc
CMF 2024-1 plc
PMF 2024-1 plc
CMF 2025-1 plc
CSC Shelf 2025-1 plc
Keys Warehouse No.1 Limited
UK
England
WSE Bourton Road Limited
Land lease investment
India
India
OSB India Private Limited
Back office processing
1.Guernsey Home Loans Limited (Guernsey) and Jersey Home Loans Limited (Jersey) are incorporated in Guernsey and Jersey respectively but are considered to be located in the UK as they are managed and controlled in the UK with no permanent
establishments in Guernsey or Jersey.
2. Broadlands Finance Limited was dissolved on 27 January 2026.
Other disclosures required by the CBCR directive are provided below:
2025
UK
India
Consolidation 2
Total
Average number of employees
1,467
1,016
\u2013
2,483
Turnover 1, \u00a3m
666.4
24.3
(22.7)
668.0
Profit/(loss) before tax, \u00a3m
380.9
4.3
(2.7)
382.5
Corporation tax paid, \u00a3m
71.8
1.2
\u2013
73.0
2024
Average number of employees
1,566
993
\u2013
2,559
Turnover 1, \u00a3m
666.1
21.9
(20.8)
667.2
Profit/(loss) before tax, \u00a3m
417.1
3.5
(2.5)
418.1
Corporation tax paid, \u00a3m
118.5
0.9
\u2013
119.4
1.Turnover represents total income before impairment of financial and intangible assets, regulatory provisions and operating costs, but after net interest income, gains and losses on financial instruments and other operating income.
2.Relates to a management fee to Indian subsidiaries from OneSavings Bank plc for providing back-office processing.
45.Country by country reporting (CBCR) continued
The tables below reconcile tax charged and tax paid during the year.
UK
India
Total
2025
\u00a3m
\u00a3m
\u00a3m
Tax charge
95.7
1.1
96.8
Effects of:
Other timing differences
(6.7)
\u2013
(6.7)
Tax outside of profit or loss
(0.5)
\u2013
(0.5)
Prior year tax included within tax charge
0.3
\u2013
0.3
Prior year tax repaid during the year
\u2013
(0.1)
(0.1)
Tax in relation to this period prepaid
(16.5)
0.2
(16.3)
R&D tax claim
(0.5)
\u2013
(0.5)
Tax paid
71.8
1.2
73.0
2024
Tax charge
109.1
0.9
110.0
Effects of:
Other timing differences
0.9
\u2013
0.9
Tax outside of profit or loss
(0.2)
\u2013
(0.2)
Prior year tax included within tax charge
4.8
\u2013
4.8
Tax in relation to future periods prepaid
3.9
\u2013
3.9
Tax paid
118.5
0.9
119.4
", "dimensions": { "concept": "ifrs-full:DisclosureOfGeographicalAreasExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-559": { "value": "
47.Controlling party
As at 31 December 2025 there was no controlling party of the ultimate parent company of the
Group, OSB GROUP PLC.
", "dimensions": { "concept": "osbgroupplc:DisclosureOfControllingParty", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-560": { "value": "
48.Transactions with key management personnel
All related party transactions were made on terms equivalent to those that prevail in arm\u2019s
length transactions. During the year, there were no related party transactions between the key
management personnel and the Group other than as described below.
The Directors and Group Executive team are considered to be key management personnel.
Directors\u2019 remuneration is disclosed in note 9 and in the Directors\u2019 Remuneration Report on
page 146. The Group Executive team are all employees of OSB, the table below shows the
aggregate remuneration for members of the team who are non-directors:
2025
2024
\u00a3'000
\u00a3'000
Short-term employee benefits
5,124
4,770
Post-employment benefits
242
232
Share-based payments
1,794
1,371
7,160
6,373
Key management personnel and connected persons held deposits with the Group of \u00a31.7m
(2024: \u00a31.6m).
", "dimensions": { "concept": "ifrs-full:DisclosureOfRelatedPartyExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-561": { "value": "
49.Capital management
The Group\u2019s capital management approach is to provide a sufficient capital base to cover
business risks and support future business development. The Group remained, throughout the
year, compliant with its capital requirements as set out by the PRA, the Group\u2019s primary
prudential supervisor.
The Group manages and reports its capital at a number of levels including Group level and for
the two regulated banking entities within the Group, on an individual consolidation basis (OSB
solo) and on an individual entity basis (Charter Court Financial Services Limited). OSB solo
consists of OneSavings Bank plc and its UK subsidiaries except for the CCFS entities acquired
in 2019 and other selected subsidiaries. The capital position of the two regulated banking
entities is not separately disclosed.
The Group\u2019s capital management is based on the three \u2018pillars\u2019 of Basel III.
Under Pillar 1, the Group calculates its minimum capital requirements based on 8% of risk-
weighted assets.
Under Pillar 2, the Group, and its regulated entities, complete an annual self-assessment of
risks known as the Internal Capital Adequacy Assessment Process (ICAAP). The PRA applies
additional requirements to this assessment amount to cover risks under Pillar 2 to generate
a\u00a0Total Capital Requirement and also sets capital buffers for the Group.
Pillar 3 requires firms to publish a set of disclosures which allow market participants to assess
information on the Group\u2019s capital, risk exposures and risk assessment process. The Group\u2019s
Pillar 3 disclosures can be found on the Group\u2019s website.
On 20 January 2026, the PRA issued its final rules on the implementation of Basel 3.1 in the UK
and confirming 1 January 2027 as its commencement date. The\u00a0Group has taken account of
this in planning for future capital requirements.
The ultimate responsibility for capital adequacy rests with the Board of Directors. The Group\u2019s
ALCO is responsible for the management of the capital process within the risk appetite defined
by the Board, including approving policy, overseeing internal controls and setting internal
limits over capital ratios.
The Group actively manages its capital position and reports this on a regular basis to the
Board and senior management via ALCO and other governance committees. Capital
requirements are included within budgets, forecasts and strategic plans with initiatives being
executed against this plan.
49.Capital management continued
The Group\u2019s Pillar 1 capital information is presented below:
(Unaudited)
2025
(Unaudited)
2024
\u00a3m
\u00a3m
Common Equity Tier 1 (CET1) capital
Called up share capital
3.6
3.7
Share premium
6.0
4.5
Retained earnings
3,457.0
3,406.4
Foreseeable dividends
(85.8)
(85.2)
Other reserves
(1,337.0)
(1,341.2)
CET1 capital: instruments and reserves
2,043.8
1,988.2
Regulatory Adjustments
Prudent valuation adjustment 1
(1.0)
(0.4)
Intangible assets
(66.9)
(48.8)
Deferred tax asset
(0.1)
(0.2)
COVID-19 ECL transitional adjustment
\u2013
7.6
Total CET1 capital
1,975.8
1,946.4
AT1 capital
AT1 securities
167.1
150.0
Total Tier 1 capital
2,142.9
2,096.4
Tier 2 capital
Tier 2 securities
250.0
250.0
Total Tier 2 capital
250.0
250.0
Total regulatory capital
2,392.9
2,346.4
Risk-weighted assets (unaudited)
12,541.7
11,915.7
1.The Group has adopted the simplified approach under the Prudent Valuation rules, recognising a deduction equal to the
sum of absolute value equal to 0.1% (2024: 0.1%) of fair value assets and liabilities excluding offsetting fair valued assets
and liabilities.
The movement in CET1 during the year was as follows:
(Unaudited)
2025
(Unaudited)
2024
\u00a3m
\u00a3m
As at 1 January
1,946.4
1,905.7
Movement in retained earnings
50.6
76.2
Share premium from Sharesave Scheme vesting
1.5
0.7
Movement in other reserves
4.1
2.0
Movement in foreseeable dividends
(0.6)
0.5
COVID-19 ECL transitional adjustment
(7.6)
(16.2)
Movement in prudent valuation adjustment
(0.6)
0.1
Net increase in intangible assets
(18.1)
(22.7)
Movement in deferred tax asset for carried forward losses
0.1
0.1
As at 31 December
1,975.8
1,946.4
The Group\u2019s MREL information is presented below:
(Unaudited)
2025
(Unaudited)
2024
\u00a3m
\u00a3m
Total regulatory capital
2,392.9
2,346.4
Eligible liabilities
700.0
700.0
Total own funds and eligible liabilities
3,092.9
3,046.4
The Group has not issued any MREL debt during 2025 (2024: \u00a3400.0m).
Through to the end of 2025 the Group had been assigned a preferred Resolution Strategy of
single point of entry (SPE) Bail-In from the Holding Company, (OSB GROUP PLC) and had met
both its interim state loss absorbing capacity, (MREL) plus buffers of 22% RWAs and had also
achieved the end state required levels of 2x Minimum Capital Requirement plus buffers, (for
which it had a deadline of 13 July 2026).
In the Group\u2019s year-end Resolution Letter, it was determined that from 1 January 2026, the
Group would move to a Transfer Strategy, based on which, moving forwards, the Group is
only required to meet Minimum Capital Requirements - the loss absorption amount which is
equal to:
i.Minimum capital requirements (i.e. Pillar 1 + Pillar 2A); or,
ii. If higher, any applicable leverage ratio requirement.
", "dimensions": { "concept": "ifrs-full:DisclosureOfObjectivesPoliciesAndProcessesForManagingCapitalExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-562": { "value": "
50.Events after the reporting date
The Board has authorised a share repurchase of up to \u00a3100.0m of shares in the market from 6
March 2026. Any purchases made under this programme will be announced to the market
each day in line with regulatory requirements.
", "dimensions": { "concept": "ifrs-full:DisclosureOfEventsAfterReportingPeriodExplanatory", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "f-563": { "value": "OSB HouseQuayside Chatham Maritime Chatham Kent, ME4 4QZ", "dimensions": { "concept": "ifrs-full:AddressOfRegisteredOfficeOfEntity", "language": "en", "entity": "scheme:213800ZBKL9BHSL2K459", "period": "2025-01-01T00:00:00/2026-01-01T00:00:00" } }, "fn-3": { "value": "
3.Includes \u00a399.3m ( 2024: \u00a3100.0m ) for shares repurchased and \u00a31.1m (2024: \u00a31.1m) for transaction costs and fees.
", "dimensions": { "concept": "xbrl:note", "noteId": "fn-3", "language": "en" } }, "fn-2": { "value": "
2.The Group has adopted look-through accounting (see note 1 (c)) and recognised the Employee Benefit Trust (EBT) within OSB GROUP PLC (OSBG).
", "dimensions": { "concept": "xbrl:note", "noteId": "fn-2", "language": "en" } }, "fn-1": { "value": "
1.Comprises Capital redemption reserve of \u00a31.0m (2024: \u00a30.8m ) and Transfer reserve of \u00a3(1,355.3)m (2024: \u00a3(1,355.3)m).
", "dimensions": { "concept": "xbrl:note", "noteId": "fn-1", "language": "en" } } } }