Lloyds Banking Group Maps 2030 Growth Plan as U.K. Consumers Stay Resilient

Key Points

• Lloyds expects resilient but slower U.K. economic growth, forecasting real GDP expansion of 1% to 2% over the coming years while households and businesses continue to show stable finances and spending.
• Under its Accelerate 2030 strategy, Lloyds is targeting mid-single-digit revenue growth, high-single-digit growth in other operating income and a cost-income ratio below 45% by 2030, supported by payments, digital wallets, AI and new businesses.
• The bank plans to invest about £13 billion annually over the next four years while pursuing a further £2 billion in cost savings; mortgage customers and key lending portfolios remain resilient despite higher borrowing costs and intensified deposit competition.

Charlie Nunn, chief executive of Lloyds Banking Group NYSE: LYG, said U.K. households and businesses have remained resilient despite a slower-growth economic backdrop, while outlining the bank’s strategy for growth, investment and efficiency through 2030.

Speaking at a Bank of America event, Nunn said Lloyds’ view of the economy has remained consistent: a “resilient but slower growth economy.” The bank expects real GDP growth of 1% to 2% over the next several years, with potential for stronger growth if confidence improves and policy encourages investment.

Households have benefited from three to four years of real wage growth, he said, while businesses have maintained strong or stable cash flows, although some have slowed investment. Lloyds has also seen resilient discretionary spending, demand for larger purchases and mortgage-market activity.

Accelerate 2030 strategy

Nunn said the group’s previous strategy phase focused on de-risking legacy issues, restoring growth, gaining market share and improving cost efficiency and capital generation. The next phase, known as Accelerate 2030, is centered on defending leadership positions in retail and small-business banking, building more connected customer relationships and developing new businesses.

Among the growth areas cited were Connected Commerce, payments and digital-wallet offerings, digital assets and artificial intelligence-based services. Nunn reiterated the company’s targets for mid-single-digit revenue growth over the next four years, high-single-digit growth in other operating income and a cost-income ratio below 45% by 2030.

He said the bank’s assumptions include a 3.5% terminal interest rate and a weighted structural-hedge reinvestment return of about 3.7%. Using current market curves could produce a higher result for the structural hedge, he said. Faster adoption of AI by customers and regulators could also create upside to the plan.

Mortgage and deposit trends

Nunn described the U.K. mortgage market as “remarkably resilient,” with volumes broadly stable year over year despite changes in swap curves that influence mortgage pricing. First-time buyers and remortgages have been key sources of activity, he said.

Lloyds grew assets by £22 billion last year, but Nunn said the group expects slower, though still solid, asset growth this year as margins on both assets and liabilities have tightened. The bank has been more selective in mortgages while continuing to pursue growth where returns are appropriate.

The company is also seeking to expand its direct mortgage channel. Nunn said about 20% of mortgage applications and approximately 24% of completions are coming through Lloyds’ own broker channels. The approach can provide customers with a quicker process and allow the group to offer connected products, including home and life insurance.

Deposit competition has intensified, driven by slower money-supply growth, quantitative tightening, reduced liquidity through the TFSME program and competitors seeking funding, according to Nunn. He said Lloyds chose to limit participation in time deposits when pricing did not meet its return requirements.

Instead, the group is focused on gaining share in personal and business current accounts, which Nunn characterized as important both for customer relationships and for the structural hedge. Lloyds operates with a 98% loan-to-deposit ratio and does not intend to chase market share at unattractive returns, he added.

Fee income, investment and AI

Nunn said other operating income grew at an 8% compound annual rate during the prior strategy period and was up 11% year over year, partly reflecting the acquisition of Schroders Personal Wealth. Lloyds expects high-single-digit growth going forward, supported by businesses including transport finance, payments, workplace pensions, life protection, corporate services and rental-property operations.

The bank has increased other operating income to roughly 34% to 35% of total income from about 30%, he said, and is aiming toward 40% over the strategic-plan period, depending partly on net interest income.

Lloyds plans to spend about £13 billion annually over the next four years on investments across growth initiatives, technology, operating efficiency, risk management and resilience. Nunn said the group delivered more than £2 billion in gross cost savings in the prior phase and has committed to a further £2 billion.

On AI, Nunn said Lloyds is pursuing both efficiency and customer-service opportunities. The bank has launched an “Invest AI” agent intended to help customers understand investment concepts, risk appetite and financial planning. Lloyds is working in a regulatory sandbox and expects to move to targeted support in the coming months, with the potential to offer product recommendations by April if regulators are satisfied with customer outcomes.

He also cited fraud-card servicing as an example of AI-driven efficiency. Lloyds identified four steps that accounted for about half of the time spent handling declined debit-card fraud cases and developed an agent designed to identify customer issues and potential fraud more quickly.

Regulation and customer resilience

Nunn said the new U.K. government has emphasized growth and the role of profitable businesses, including financial services, in supporting the economy. He said Lloyds supports proposed ring-fencing reforms that could allow banks to use 10% of ring-fenced assets to support new growth.

On possible bank-tax changes, Nunn said the Chancellor had not raised the issue with him, though the government could still consider it. He estimated that each one-percentage-point increase in a bank surcharge would reduce Lloyds’ profit by about £75 million, but said a 2% to 3% increase would not change the group’s strategic guidance or investment plans.

Mortgage customers refinancing into higher rates are generally managing the increase, Nunn said. While some mortgage rates have risen to roughly 5.5% to 5.9%, Lloyds has not seen deterioration across its portfolios. He said mortgages had generally been stress-tested at rates between 7% and 9%, while cards, loans and small-business portfolios also remain resilient based on current data and early indicators.

About Lloyds Banking Group (NYSE:LYG)

Lloyds Banking Group plc is a major United Kingdom financial services provider whose shares trade on the New York Stock Exchange under the symbol LYG. The group serves individuals, families, small businesses and larger commercial customers through a range of banking, lending, insurance, investment and wealth-management services.

Its principal brands include Lloyds Bank, Halifax, Bank of Scotland and Scottish Widows. Products and services include current and savings accounts, mortgages, personal loans, credit cards, business banking, commercial lending, investment products, pensions and life insurance.

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