2026 half year results

Bank of Scotland plc

2026 half year results

30 July 2026

Member of the Lloyds Banking Group

CONTENTS

Financial review		1
Principal risks and uncertainties		4
Condensed consolidated half-year financial statements (unaudited)
Condensed consolidated income statement (unaudited)		5
Condensed consolidated statement of comprehensive income (unaudited)		6
Condensed consolidated balance sheet (unaudited)		7
Condensed consolidated statement of changes in equity (unaudited)		8
Condensed consolidated cash flow statement (unaudited)		10
Notes to the condensed consolidated half-year financial statements (unaudited)
1	Basis of preparation and accounting policies	11
2	Critical accounting judgements and key sources of estimation uncertainty	12
3	Net fee and commission income	12
4	Operating expenses	12
5	Impairment	13
6	Tax	13
7	Fair values of financial assets and liabilities	13
8	Allowance for expected credit losses	19
9	Debt securities in issue	24
10	Provisions	25
11	Subordinated liabilities	26
12	Dividends on ordinary shares	26
13	Related party transactions	27
14	Contingent liabilities, commitments and guarantees	28
Statement of directors’ responsibilities		30
Forward-looking statements		31
Contacts

 

FINANCIAL REVIEW

 

Principal activities

Bank of Scotland plc (the Bank), together with its subsidiary undertakings (the Group), provide a wide range of banking and financial services. The Group’s revenue is earned through interest and fees on a broad range of financial services products including current and savings accounts, mortgages, credit cards and unsecured loans to retail customers and loans and other products to commercial clients.

 

Income statement

The Group’s profit before tax for the first half of 2026 was £1,127 million, compared to a profit before tax of £680 million for the first half of 2025, reflecting higher total income and lower operating expenses, partly offset by a higher impairment charge. Profit after tax was £828 million (half-year to 30 June 2025:  £524 million).

Total income for the first half of 2026 was £3,158 million, an increase of 20% on the first half of 2025. Net interest income was £2,810 million, compared to £2,281 million for the same period in 2025, driven by higher average interest-earning assets and a higher margin. Other income of £348 million was £5 million lower than the first half of 2025, reflecting higher net fee and commission income and the gain on the securitisation of primarily legacy mortgages, offset by lower net trading income.

Operating expenses of £1,780 million were 6% lower than in the first half of 2025 reflecting continued cost savings, a lower severance expense and plateauing investment as this strategic cycle culminates, partially offset by business growth costs and inflationary pressures. The Group recognised remediation costs of £13 million within operating expenses (half-year to 30 June 2025: £2 million), across a small number of rectification programmes.

The impairment charge was £251 million up from £60 million in the half-year to 30 June 2025. The higher charge includes a net charge from updated multiple economic scenarios (MES) reflecting the impact of the deterioration in economic outlook in the first quarter due to the Middle East conflict, net of modest second quarter updates. The MES impact for the half year captures a higher unemployment rate peak and softer house price outlook compared to the year end view. Credit performance remains strong and stable with arrears low and stable across portfolios.

The Group recognised a tax expense of £299 million in the first half of 2026 (half-year to 30 June 2025: £156 million). An explanation of the relationship between the tax expense and the Group’s accounting profit for the period is set out on page 13.

 

Balance sheet

Total assets of £354,511 million were £14,922 million higher (31 December 2025: £339,589 million). Financial assets at amortised cost were £15,466 million higher at £345,506 million. An increase in loans and advances to customers of £1,504 million to £314,359 million was primarily due to growth in UK mortgages, net of the impact of a securitisation of primarily legacy mortgages. Balances due from fellow Lloyds Banking Group undertakings increased by £14,327 million, largely reflecting the equitable assignment of mortgage assets to Lloyds Bank plc in support of its covered bonds programme. Within liabilities, there is a broadly corresponding increase in amounts due to fellow Lloyds Banking Group undertakings.

Total liabilities of £337,669 million increased by £14,413 million (31 December 2025: £323,256 million). Customer deposits decreased by £2,969 million in the period to £164,617 million, primarily due to disciplined pricing decisions throughout the tax year-end.

Total equity of £16,842 million increased by £509 million (31 December 2025: £16,333 million). The movement reflected profit for the period partially offset by an interim dividend of £480 million.

 

FINANCIAL REVIEW (continued)

Capital

The capital position of Bank of Scotland plc is presented on an unconsolidated basis. The Bank’s capital position as at 30 June 2026 is set out below.

Capital resources of the Bank

	At 30 Jun 2026 £m		At 31 Dec 2025 £m
Common equity tier 1
Shareholders’ equity per unconsolidated balance sheet	14,566		14,363
Adjustment to retained earnings for foreseeable dividends	–		(480)
Cash flow hedging reserve	76		90
Other adjustments	(1)		(1)
	14,641		13,972
less: deductions from common equity tier 1
Goodwill and other intangible assets	(765)		(746)
Prudent valuation adjustment	(32)		(39)
Excess of expected losses over impairment provisions and value adjustments	(385)		(295)
Removal of defined benefit pension surplus	(32)		(28)
Significant investments	–		(45)
Deferred tax assets	(1,677)		(1,736)
Common equity tier 1 capital	11,750		11,083
Additional tier 1
Additional tier 1 instruments	2,850		2,600
Total tier 1 capital	14,600		13,683
Tier 2
Tier 2 instruments	500		1,500
Total capital resources	15,100		15,183
Risk-weighted assets	83,201		82,357
Capital and leverage ratios
Common equity tier 1 capital ratio	14.1 %		13.5 %
Tier 1 capital ratio	17.5 %		16.6 %
Total capital ratio	18.1 %		18.4 %
UK leverage ratio	4.5 %		4.3 %

The Bank’s common equity tier 1 (CET1) capital ratio increased from 13.5% at 31 December 2025 to 14.1% at 30 June 2026. Profit for the first half of the year was partly offset by an increase in risk-weighted assets. The total capital ratio reduced to 18.1% (31 December 2025: 18.4%) reflecting the increase in risk-weighted assets and a reduction in total capital resources, with the increase in CET1 capital and AT1 instrument issuance more than offset by AT1 and Tier 2 instrument calls.

Risk-weighted assets increased by £844 million from £82,357 million at 31 December 2025 to £83,201 million at 30 June 2026, largely reflecting the impact of lending growth offset by optimisation activity, including a securitisation of primarily legacy mortgages.

The Bank’s UK leverage ratio of 4.5% at 30 June 2026 has increased from 4.3% at 31 December 2025, reflecting the increase in total tier 1 capital, partially offset by the increase in the leverage exposure measure following lending growth.

Pillar 3 Disclosures

The Bank will publish a condensed set of half-year Pillar 3 disclosures in the first half of August. A copy of the disclosures will be available to view at: www.lloydsbankinggroup.com/investors/financial-downloads.html.

 

PRINCIPAL RISKS AND UNCERTAINTIES

The most significant risks faced by the Group are detailed below. External risks may impact delivery against the Group’s recently updated long-term strategic objectives. They include, but are not limited to, macroeconomic and geopolitical uncertainties and inflation trends which could have implications for both consumers and businesses.

The Group’s credit performance remains strong and stable; the portfolios are well positioned amid macroeconomic uncertainty and are proactively monitored to identify signs of stress.

Ongoing oversight of operational resilience risks and continuous enhancements to controls remains critical, particularly in relation to cybersecurity, IT stability and supplier risk. The Group remains committed to ensuring lessons are learned from internal and external events of disruption, which may have an impact on the Group’s ability to continue operations.

The Group remains committed to modernising its technology and strengthening capabilities to ensure safe and responsible use of models and tools such as artificial intelligence.

Risk management is fundamental to our business model and strategy, and enables the Group to embrace opportunities responsibly and deliver sustainable growth. Our strong risk management culture, underpinned by Lloyds Banking Group’s risk management framework (RMF), is vital in safeguarding the Group, colleagues and customers against both existing and emerging risks.

During 2026, the Group has continued to make progress in its risk transformation journey by standardising practices and streamlining processes, enabling simplification and efficiency. The RMF ensures processes are in place to facilitate robust risk management and effective decision making to deliver good outcomes for our customers.

The Group has 10 principal risks, underpinned by a suite of level two risks which are reviewed and reported regularly to the Board. The principal risks consist of capital risk, climate risk, compliance risk, conduct risk, credit risk, economic crime risk, liquidity risk, market risk, model risk and operational risk.

Further information regarding the Group’s principal risks is available on page 5 of the Group’s 2025 annual report and accounts.

 

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)

	Note		Half-year to 30 Jun 2026 £m			Half-year to 30 Jun 2025 £m
Interest income			7,585			7,382
Interest expense			(4,775)			(5,101)
Net interest income			2,810			2,281
Fee and commission income			340			342
Fee and commission expense			(151)			(165)
Net fee and commission income	3		189			177
Net trading income			35			114
Other operating income			124			62
Other income			348			353
Total income			3,158			2,634
Operating expenses	4		(1,780)			(1,894)
Impairment	5		(251)			(60)
Profit before tax			1,127			680
Tax expense	6		(299)			(156)
Profit after tax			828			524
Profit attributable to ordinary shareholders			701			404
Profit attributable to other equity holders			127			120
Profit after tax			828			524

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.

 

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

	Half-year to 30 Jun 2026 £m			Half-year to 30 Jun 20251 £m
Profit for the period	828			524
Other comprehensive income
Items that will not subsequently be reclassified to profit or loss:
Post-retirement defined benefit scheme remeasurements:
Remeasurements before tax	5			(9)
Deferred tax	(1)			3
	4			(6)
Items that may subsequently be reclassified to profit or loss:
Movements in cash flow hedging reserve:
Effective portion of changes in fair value taken to other comprehensive income	4			(16)
Deferred tax	(1)			3
	3			(13)
Net income statement transfers	17			(4)
Deferred tax	(5)			1
	12			(3)
	15			(16)
Movements in foreign currency translation reserve (tax: £nil)	(2)			1
	13			(15)
Total other comprehensive income (loss) for the period, net of tax	17			(21)
Total comprehensive income for the period	845			503
Total comprehensive income attributable to ordinary shareholders	718			383
Total comprehensive income attributable to other equity holders	127			120
Total comprehensive income for the period	845			503

¹ Deferred tax impacts, previously shown in aggregate for each reserve, are now presented alongside each line item. Comparatives are represented on a consistent basis.

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.

 

CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)

	Note	At 30 Jun 2026 £m				At 31 Dec 2025 £m
Assets
Cash and balances at central banks			2,706			2,767
Financial assets at fair value through profit or loss	7		240			253
Derivative financial instruments			1,951			2,214
Loans and advances to banks			117			121
Loans and advances to customers			314,359			312,855
Debt securities			680			1,041
Due from fellow Lloyds Banking Group undertakings			30,350			16,023
Financial assets at amortised cost			345,506			330,040
Goodwill			452			452
Current tax recoverable			335			377
Deferred tax assets			1,661			1,743
Retirement benefit assets			45			39
Other assets			1,615			1,704
Total assets			354,511			339,589
Liabilities
Deposits from banks			109			99
Customer deposits			164,617			167,586
Repurchase agreements at amortised cost			12,969			10,443
Due to fellow Lloyds Banking Group undertakings			143,889			128,036
Financial liabilities at fair value through profit or loss	7		17			17
Derivative financial instruments			1,984			3,016
Notes in circulation			2,177			2,118
Debt securities in issue at amortised cost	9		9,793			8,933
Other liabilities			1,223			1,068
Provisions	10		362			408
Subordinated liabilities	11		529			1,532
Total liabilities			337,669			323,256
Equity
Share capital			5,847			5,847
Other reserves			3,061			3,048
Retained profits			5,084			4,838
Ordinary shareholders’ equity			13,992			13,733
Other equity instruments			2,850			2,600
Total equity excluding non-controlling interests			16,842			16,333
Non-controlling interests			–			–
Total equity			16,842			16,333
Total equity and liabilities			354,511			339,589

The accompanying notes are an integral part of the condensed consolidated half-year financial statements.

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

Attributable to ordinary shareholders

Other equity instruments £m

Non- controlling interests £m

Share capital £m

Other reserves £m

Retained profits £m

Total £m

Total £m

At 1 January 2026

5,847

3,048

4,838

13,733

2,600

–

16,333

Comprehensive income

Profit for the period

–

–

701

701

127

–

828

&