Contingent liabilities, commitments and guarantees

6 Months Ended

Jun. 30, 2025

Contingent Liabilities, Commitments And Guarantees [Abstract]

Contingent liabilities, commitments and guarantees

Note 17: Contingent liabilities, commitments and guarantees

Contingent liabilities, commitments and guarantees arising from the banking business

At 30 June 2025 contingent liabilities, such as performance bonds and letters of credit, arising from the banking

business were £2,705 million (31 December 2024: £2,605 million).

The contingent liabilities of the Group arise in the normal course of its banking business and it is not practicable to

quantify their future financial effect. Total commitments and guarantees were £154,136 million (31 December

2024: £148,619 million), of which in respect of undrawn formal standby facilities, credit lines and other

commitments to lend, £85,195 million (31 December 2024: £79,518 million) was irrevocable.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 17: Contingent liabilities, commitments and guarantees (continued)

Capital commitments

Excluding commitments in respect of investment property, capital expenditure contracted but not provided for at

30 June 2025 amounted to £733 million (31 December 2024: £640 million) and related to assets to be leased to

customers under operating leases. Capital expenditure in respect of investment properties which had been

contracted for but not recognised in the financial statements was £392 million (31 December 2024: £236 million).

The Group’s management is confident that future net revenues and funding will be sufficient to cover these

commitments.

Interchange fees

With respect to multi-lateral interchange fees (MIFs), the Group is not a party in the ongoing or threatened

litigation which involves the card schemes Visa and Mastercard or any settlements of such litigation. However, the

Group is a member/licensee of Visa and Mastercard and other card schemes. The litigation in question is as follows:

•Litigation brought by or on behalf of retailers against both Visa and Mastercard in the English Courts, in which

retailers are seeking damages on grounds that Visa and Mastercard’s MIFs breached competition law (this

includes a final judgment of the Supreme Court in 2020 upholding the Court of Appeal’s finding in 2018 that

certain historic interchange arrangements of Mastercard and Visa infringed competition law and a subsequent

judgment of the Competition Appeal Tribunal in June 2025 finding that all default interchange fee rules of

Mastercard and Visa (including after the Interchange Fee Regulation), infringed competition law)

•Litigation brought on behalf of UK consumers in the English Courts against Mastercard (settlement of which was

approved by the Competition Appeal Tribunal in the first half of 2025)

Any impact on the Group of the litigation against Visa and Mastercard remains uncertain at this time, such that it is

not practicable for the Group to provide an estimate of any potential financial effect. Insofar as Visa is required to

pay damages to retailers for interchange fees set prior to June 2016, contractual arrangements to allocate liability

have been agreed between various UK banks (including the Group) and Visa Inc, as part of Visa Inc’s acquisition of

Visa Europe in 2016. These arrangements cap the maximum amount of liability to which the Group may be subject

and this cap is set at the cash consideration received by the Group for the sale of its stake in Visa Europe to Visa

Inc in 2016. In 2016, the Group received Visa preference shares as part of the consideration for the sale of its shares

in Visa Europe. A release assessment is carried out by Visa on certain anniversaries of the sale (in line with the Visa

Europe sale documentation) and as a result, some Visa preference shares may be converted into Visa Inc Class A

common stock from time to time. Any such release and any subsequent sale of Visa common stock does not

impact the contingent liability.

LIBOR and other trading rates

Certain Group companies, together with other panel banks, have been named as defendants in ongoing private

lawsuits, including purported class action suits, in the US in connection with their roles as panel banks contributing

to the setting of US dollar, Japanese yen and Sterling London Interbank Offered Rate.

Certain Group companies are also named as defendants in (i) UK-based claims, and (ii) two Dutch class actions,

raising LIBOR manipulation allegations. A number of claims against the Group in the UK relating to the alleged mis-

sale of interest rate hedging products also include allegations of LIBOR manipulation.

It is currently not possible to predict the scope and ultimate outcome on the Group of any private lawsuits or

ongoing related challenges to the interpretation or validity of any of the Group’s contractual arrangements,

including their timing and scale. As such, it is not practicable to provide an estimate of any potential financial

effect.

NOTES TO THE CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

Note 17: Contingent liabilities, commitments and guarantees (continued)

Tax authorities

The Group has an open matter in relation to a claim for group relief of losses incurred in its former Irish banking

subsidiary, which ceased trading on 31 December 2010. In 2020, HMRC concluded its enquiry into the matter and

issued a closure notice denying the group relief claim. The Group appealed to the First Tier Tax Tribunal. The

hearing took place in May 2023. In January 2025, the First Tier Tribunal concluded in favour of HMRC. The Group

believes it has applied the rules correctly and that the claim for group relief is correct. Having reviewed the

Tribunal’s conclusions and having taken appropriate advice the Group has appealed to the Upper Tier Tax

Tribunal, and does not consider this to be a case where an additional tax liability will ultimately fall due. If the final

determination of the matter by the judicial process is that HMRC’s position is correct, management believes that

this would result in an increase in current tax liabilities of approximately £975 million (including interest) and a

reduction in the Group’s deferred tax asset of approximately £275 million. Following the First Tier Tax Tribunal

outcome, the tax has been paid to HMRC and recognised as a current tax asset, given the Group’s view that the

tax liability will not ultimately fall due. It is unlikely that any appeal hearing will be held before 2026, and final

conclusion of the judicial process may not be for several years.

There are a number of other open matters on which the Group is in discussions with HMRC (including the tax

treatment of costs relating to HBOS Reading), none of which is expected to have a material impact on the

financial position of the Group.

Arena and Sentinel litigation claims

The Group is facing claims alleging breach of duty and/or mandate in the context of an underlying external fraud

matter involving Arena Television. The Group is defending the claims, which are at an early stage. As such, it is not

practicable to estimate the final outcome of the matter and its financial impact (if any) to the Group.

Other legal actions and regulatory matters

In addition, in the course of its business the Group is subject to other complaints and threatened or actual legal

proceedings (including class or group action claims) brought by or on behalf of current or former employees,

customers (including their appointed representatives), investors or other third parties, as well as legal and

regulatory reviews, enquiries and examinations, requests for information, audits, challenges, investigations and

enforcement actions, which could relate to a number of issues. This includes matters in relation to compliance with

applicable laws and regulations, such as those relating to prudential regulation, employment, consumer protection,

investment advice, business conduct, systems and controls, environmental, sustainability, competition/anti-trust,

tax, anti-bribery, anti-money laundering and sanctions, some of which may be beyond the Group’s control, both in

the UK and overseas. Where material, such matters are periodically reassessed, with the assistance of external

professional advisers where appropriate, to determine the likelihood of the Group incurring a liability. The Group

does not currently expect the final outcome of any such case to have a material adverse effect on its financial

position, operations or cash flows. Where there is a contingent liability related to an existing provision the relevant

disclosures are included within note 14.