Shawbrook Group PLC

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Shawbrook Group plc

Annual Report

and Accounts

Real world banking.

Sustainable

returns

Financial

Highlights

Note: Reconciliation from underlying to statutory results is provided on page 17.

The growth rate of 16% represents the loan book including originate to distribute (OTD) assets growing to £19.2 billion, however excludes

the £0.6 billion loan book acquired through the ThinCats acquisition. Including this loan book represents a growth rate of 20%.

Shawbrook provides specialist finance to

a broad and diverse range of customer

segments, each of which values the

flexibility, speed and certainty we deliver.

£340.5 million

Underlying profit before tax

(2024: £293.8 million)

£272.2 million

Statutory profit before tax

(2024: £295.1 million)

17.2%

Underlying return on tangible equity

(2024: 17.5%)

13.2%

Statutory return on tangible equity

(2024: 17.6%)

47 pence

Underlying basic EPS (2024: 40 pence)

35 pence

Statutory basic EPS (2024: 40 pence)

Disciplined growth

and efficiency

Robust, resilient

foundations

16%

Growth in loan book including OTD to

£19.2 billion (2024: £15.9 billion)

39.0%

Underlying cost to income ratio

(2024: 40.8%)

47.9%

Statutory cost to income ratio

(2024: 40.6%)

47bps

Underlying cost of risk (2024: 47bps)

51bps

Statutory cost of risk (2024: 47bps)

12.4%

CET1 ratio (2024: 13.0%)

14.8%

Total capital ratio (2024: 15.9%)

Shawbrook Group plc

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Contents

Strategic Report

Our Strategy

A specialist lending business model delivering

resilient returns through the cycle

Medium-term guidance

Chairman’s statement

Chief Executive Officer’s statement

AI spotlight

Financial review

Business reviews

Sustainability Report

Creating value for our stakeholders

(S172 statement)

Non-financial and sustainability

information statement

Group viability statement

Corporate Governance Report

Chairman’s introduction

Board of Directors

Corporate governance

Audit Committee Report

Risk Committee Report

Directors’ Remuneration Report

102

Nomination and Governance

Committee Report

105

Directors’ Report

109 Risk Report

110

Approach to risk management

113

Risk governance and oversight

117

Top and emerging risks

128

Principal risks

181

ICAAP, ILAAP and stress testing

182

Solvent Exit Analysis, Recovery

Plan and Resolution Pack

183 Climate Report

184

Strategy

194

Governance

196

Risk management

200

Metrics and targets

206 Financial Statements

207

Independent Auditor’s Report

216

Consolidated statement of profit and loss

217

Consolidated statement of

comprehensive income

218

Consolidated and Company statement

of financial position

219

Consolidated statement of changes in equity

220

Company statement of changes in equity

221

Consolidated and Company statement

of cash flows

222

Notes to the financial statements

282 Other Information

283

Abbreviations

285

Other performance indicators

286

Alternative Performance Measures (APMs)

291

Country-by-country reporting

shawbrook.co.uk

linkedin.com/company/shawbrook-bank

Shawbrook Group plc |

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Our Strategy

Diversified markets

We operate across a broad and growing total addressable market (TAM), providing

flexibility in capital deployment and access to multiple structural growth opportunities

across multiple asset classes and customer segments. This diversification enables us

to grow selectively and optimise returns through different economic conditions.

Specialist at scale

We deliver specialist lending through a multi-brand portfolio and diversified distribution model,

combining deep market expertise with the benefits of scale. Our unified operating platform,

increasingly supported by automation and AI, delivers efficiency, consistency and operating

leverage as the business grows.

Technology-enabled

Our scalable, technology and data-enabled platform enhances customer experiences and

supports operating leverage across both our lending and deposit businesses. This allows

us to scale at low incremental cost, strengthening efficiency, while maintaining robust

controls and resilience.

Credit discipline

Disciplined underwriting and forward-looking risk management underpin our approach

to credit, supported by deep specialist expertise and advanced data and technology.

This focus on credit excellence has delivered a low and stable cost of risk across varying

macroeconomic conditions.

Entrepreneurial culture

Our experienced management team and entrepreneurial culture enable agile decision-

making, disciplined execution and long-term value creation. We prioritise organic growth,

complemented by selective, value-accretive M&A in adjacent specialist markets where

opportunities meet our strategic, risk and returns criteria.

Diversified

markets

Specialist

at scale

Technology-

enabled

Credit

discipline

Entrepreneurial

culture

Our strategy is underpinned by five strategic

advantages that differentiate our business and

support consistent performance. Together, they

create a resilient and scalable specialist banking

model, enabling us to deploy capital selectively,

manage risk through the cycle, and deliver

sustainable shareholder returns.

•

47bps

median cost of risk

•

c.200

Early warning indicators

through

140

Power BI dashboards

•

18%

of FTE in digital roles

•

100%

access to AI-enabled tools

•

lending verticals

•

Multi-brand

portfolio

•

c.£300 billion

TAM

•

core segments

•

M&A transactions

since inception

•

8+ years

average tenure of

Senior Management Team

The Group’s lending TAM grew to c.£300 billion as at 31 December 2024 based on Group information (including data based on estimates from leading consulting firm).

Median cost of risk calculated over the period FY 2013 to FY 2025.

Shawbrook Group plc

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Multi-channel distribution

Direct

Digital

Partners

Inorganic

Disciplined capital

allocation

Balance sheet

optimisation

In-house markets

and funding expertise

Differentiated propositions

across diversified markets

Enabled by an efficient and

scalable operating model

Underpinned by capital strength

and balance sheet resilience

A specialist lending business model delivering

resilient returns through the cycle

•

Highly capital generative

model supporting robust

capital ratios

•

Disciplined deployment

aligned to risk appetite

and returns

•

Resilient balance sheet

with strong liquidity and

funding buffers

•

Active optimisation

across assets, funding

and liquidity

•

Deep in-house capability

across funding, liquidity

and risk

•

Flexible access to

diversified funding sources

£4.4bn

loan book

£6.1bn

loan book

£7.6bn

loan book

£1.0bn

loan book

SME

Retail

Mortgage

Brands

Real Estate

Consumer

Finance

Note: Segmental loan book splits presented on this page do not total the Group’s total loan book number due to rounding.

Including the carrying amount of all structured asset sales derecognised through our originate to distribute strategy.

Our differentiated proposition supports strong demand and attractive margins, funded

efficiently through our deposit franchise. Data-led risk management, scalable technology

and disciplined capital allocation underpin resilient growth and the consistent delivery

of sustainable, attractive risk-adjusted returns.

Credit excellence and disciplined

risk management

Specialist

teams

Data-driven

decisioning

Clear risk

ownership

Cross-functional

Modular

technology

AI and

automation

A resilient, deposit-led funding base supporting

lending growth through the cycle

£20.2bn

total

funding

£18.4bn

deposits

•

Financial

Category

Weighting

Target

Actual

Outcome

Financial

Underlying PBT

40%

£338.3m

£340.5m

40%

Underlying RoTE

(calculated using actual TNAV)

20%

16.1%

16.3%

20%

Risk Management

A qualitative assessment by the

Remuneration Committee as informed

by the CRO Risk Review.

20%

The Committee considered that Shawbrook had

demonstrated continued maturity across the Risk

Management Framework during the year and awarded the

maximum weighted outcome.

20%

Strategic Priorities

A qualitative assessment by the

Remuneration Committee of

achievement of the strategic priorities

for the year.

20%

Alongside the success of the IPO, the Committee recognised

strong performance against customer, people, technology,

sustainability and growth focused priorities during the year

and awarded the maximum weighted outcome.

20%

Total payout as a % of maximum opportunity.

100%

Taxable Benefits:

This includes private medical cover and, for 2025, the benefit of one-off, IPO-related transitional loans to facilitate the

winding-up of the Shawbrook’s pre-Admission holding company.

Annual bonus:

The Committee agreed that the structure of the annual bonus for the year ending 31 December 2025 would operate in

line with the remuneration policy in place prior to Admission. Executive Directors were eligible to participate in the annual bonus in 2025,

with a maximum annual opportunity of 120% of salary. When determining the bonus pool outcome, the Committee carefully reviewed

performance against each of the relevant financial and non financial measures as set out below, whilst also taking into account broader

considerations relating to overall Group and business area performance; and the impact of the listing.

Overall, the Committee considered that the Group had delivered strong financial and non-financial performance over the course of

2025 against the performance targets and in the context of listing. As a result of this and in recognition of their individual performance,

the Committee awarded a bonus of 120% of salary to Marcelino Castrillo and 120% of salary to Dylan Minto. In accordance with the

remuneration policy in force prior to Admission, 50% of any amount in excess of £100,000 payable to the individual will be subject to

deferral in cash and released in three equal tranches after one, two and three years.

Legacy share plans:

Both Marcelino Castrillo and Dylan Minto held

shares and options over shares in Marlin Bidco Limited (‘Marlin’),

Shawbrook’s pre-Admission holding company. These legacy share

plans comprised:

(i)

an arrangement under which Marcelino Castrillo and Dylan

Minto subscribed for shares in Marlin at their prevailing market

value. The value of the shares held was calculated (on the

same basis as all shareholders of the class) by reference to

the equity valuation of Shawbrook at IPO. The vesting of these

shares was conditional upon the occurrence of the IPO;

(ii)

an employee share plan under which nil-cost option awards

were granted over a pool of shares in Marlin with an aggregate

value linked to the equity valuation of Shawbrook implied by

the IPO. The value of the awards held by Marcelino Castrillo

and Dylan Minto was calculated (on the same basis as all

participants in this plan) by reference to the equity valuation

of Shawbrook at IPO. The vesting of these nil-cost option

awards was conditional upon the occurrence of the IPO; and

(iii)

an employee share plan under which a nil-cost option award

was granted to Dylan Minto over shares in Marlin with the

award’s value calculated by reference to his annual bonus in

respect of Shawbrook’s 2017 financial year that he gave up

in exchange for being granted the award. The vesting of this

nil-cost option award was conditional upon the occurrence of

the IPO and calculated by reference to the equity valuation of

Shawbrook at IPO.

All shares and options over shares in Marlin vested on the IPO

and all options over Marlin shares were then exercised shortly

following the IPO. As a result of the IPO, all shareholders in Marlin

subsequently received a pro-rata share of the cash assets and

Shawbrook shares held by Marlin. The value of these cash assets

and Shawbrook shares (upon vesting of all shares and options

over shares under the legacy share plans) is shown in the single

total figure table. Their value is calculated by reference to the

share price on Admission and does not include any share price

appreciation thereafter. Adjustments have been made to the values

disclosed to take account of the subscription price paid for shares.

Malus and clawback:

The circumstances in which the Committee

may apply malus and/or clawback to annual bonuses or PSP awards

are set out in the Directors’ Remuneration Policy. The Committee

considers the clawback period is appropriate on the basis that it

provides, given the nature of the Company’s business, sufficient time

for any relevant circumstances to come to light. The Committee has

not exercised any malus or clawback powers during 2025.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Shawbrook Group plc

Annual Report and Accounts 2025

Performance Share Plan (PSP) Awards granted during the year ended 31 December 2025

Following Admission, both Executive Directors were granted long term incentive awards in the form of nil cost options under the PSP.

The aim of this award was to incentivise and reward the delivery of long-term shareholder value through the achievement of long-

term financial and strategic objectives.

Executive Director

Salary

£000

Percentage of Salary

subject to award

Number of Shares subject

to award

Face Value

£000

Marcelino Castrillo

£1,025

100%

277,027

£1,025

Dylan Minto

£600

100%

162,162

£600

Non Executive Directors

2025

Fees £000

2024

Fees £000

John Callender

351

275

Lan Tu

135

124

Janet Connor

107

Derek Weir

137

Andrew Didham

129

118

Michele Turmore

132

121

Paul Lawrence

126

Lindsey McMurray

Cédric Dubourdieu

Performance Metric

Measurement Period

Weighting

Threshold

(25% of Maximum Vesting)

Maximum Vesting

Relative TSR

From Grant to Vest

35%

Median

Upper Quartile

Underlying PBT growth

CAGR between financial years 2024 and 2027

35%

7.5%

17.6%

Risk Management

From Grant to Vest

30%

Qualitative assessment (informed by CRO review

prepared each year) of risk management performance

taking into account key risk appetite areas alongside

a broader assessment of the risk management

framework embedding in line with strategy.

These awards broadly align with the PSP structure outlined in the proposed Directors’ Remuneration Policy and will vest on 1 April 2028

subject to the achievement of the performance conditions below and will be subject to a post vesting holding period. Individual

performance and conduct will also be assessed over the period.

Relative TSR measure:

The comparator group for the purposes of the relative TSR condition for this particular award is Arbuthnot

Banking Group plc; Barclays PLC; Close Brothers Group plc; Funding Circle Holdings plc; LendInvest plc; Lloyds Banking Group plc;

Metro Bank Holdings plc; NatWest Group plc; OSB Group plc; Paragon Banking Group PLC; S&U plc; Secure Trust Bank plc; and

Vanquis Banking Group plc, as varied from time to time.

Payments to Past Directors and for Loss of Office

Ian Cowie, who stepped down from the Board in 2021, also

participated in the legacy share plans that vested on IPO in

respect of his service as a Director. The value he received in

respect of his shares and share awards was £2,535k.

There were no other payments to former Directors or payments

for loss of office during the year.

Single total figure of remuneration for the Chair

of the Board and Non Executive Directors

Awards were calculated based on the IPO share price of £3.70.

During 2025, additional fees were paid to the Chair of the Board and Non Executive Directors to recognise the significant additional time commitment required as a consequence of the IPO. Such amounts are included in the table above.

Derek Weir was appointed on 1 July 2024.

4 Paul Lawrence’s appointment ended on 31 March 2025.

Lindsey McMurray and Cédric Dubourdieu are both Institutional Directors, and were both appointed by and represent the interests of Pollen Street Capital and BC Partners, respectively, both of which have been controlling shareholders

before and after the Group’s Admission. Whilst not paid directly to the individual, up until Admission, the Group incurred fees of £50,000 plus VAT per annum in relation to each Institutional Director appointed to the Board by the ultimate

parent company, as set out and agreed within the Framework Agreement with Pollen Street Capital and BC Partners. Following Admission, this amount was increased to £77,000 per annum as set out and agreed within

the relevant letters of appointment.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Shawbrook Group plc

Annual Report and Accounts 2025

Statement of Directors’ shareholdings and share interests

As outlined in the Directors’ Remuneration Policy, during employment, Executive Directors are expected

to build up over a five-year period, and then subsequently hold, a shareholding in the Group equivalent

to 200% of base salary. Post-employment, Executive Directors are expected to retain the lower of (i)

their actual shareholding on cessation of employment or (ii) 200% of base salary for a period of two years.

The interests of the Executive Directors (including those held by their connected persons) in the shares

of the Group as at 7 January 2026, immediately following the distribution of Shawbrook shares from

Shawbrook’s pre-Admission holding company following Admission were as below (at 31 December 2025,

neither Executive Director held shares in Shawbrook). Information in this section has been audited.

Executive Directors

Shareholdings

Marcelino Castrillo

(Number of shares)

Dylan Minto

(Number of shares)

Unvested Awards subject to performance conditions

PSP

277,027

162,162

Unvested Awards not subject to performance conditions

DBP

Shares beneficially held

Acquired through Legacy Share Plans

1,308,767

979,515

Total shares held counting towards requirements

1,308,767

979,515

Current Shareholding as % of Salary

621%

793%

Shareholding Guidelines met?

Yes

Marcelino Castrillo and Dylan Minto were also both awarded 418 free shares under the Share Incentive

Plan on 12 January 2026 on the same basis as all other employees.

The interests of the Non Executive Directors in the shares of

the Group as at 31 December 2025 (including those held by

their connected persons) were as below.

Non-Executive Director

Shares beneficially held

John Callender

Lan Tu

6,756

Janet Connor

Derek Weir

5,405

Andrew Didham

5,405

Michele Turmore

Lindsey McMurray

Cédric Dubourdieu

As at 10 March 2026, the last practicable date prior to this

report being approved, the Company had not been advised of

any other changes to the interest of the directors (and their

connected persons) as set out above.

Based on the closing share price of 486p and base salaries as at 31 December 2025.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Shawbrook Group plc

Annual Report and Accounts 2025

2026 Policy Implementation for Directors

This section details the proposed changes to the directors’ remuneration and intended application in 2026 of the new

Directors’ Remuneration Policy. The Policy will be subject to a binding shareholder vote at the 2026 Annual General Meeting.

Executive Directors

Fixed Pay

Having carefully considered market levels and reflected on the skills and experience that he

brings to the role of CEO and to support Shawbrook’s strategic ambitions, the Committee agreed

to exceptionally award Marcelino Castrillo a salary increase of 9.3%, which is above the average

increase applicable to the wider workforce. This increase will take effect on 1 March 2026. No

salary increase was awarded to Dylan Minto given that an exercise was undertaken to re-align

his remuneration to market during 2025. Going forward, base salaries of Executive Directors will

normally be reviewed on the same basis as for the wider workforce in accordance with the Policy.

Pension and benefits will operate in line with the Directors’ Remuneration Policy.

Annual Bonus

In line with the Policy, the maximum bonus opportunity for the 2026 financial year will be 200% of salary.

In combination with the PSP, the bonus will be delivered in line with regulatory requirements applicable

at that time.

The 2026 scorecard will be based 70% on financial measures and 30% on non-financial measures. The

financial element will include PBT, RoTE and cost measures (all on an underlying basis). The non-financial

element will include risk management and personal performance aligned to strategic priorities. The

Committee has elected not to disclose the precise targets associated with these measures in advance,

given their commercially sensitive nature. Full retrospective disclosure will however be provided in next

year’s Annual Report on Remuneration.

PSP

A PSP award of 300% of salary will be made to the Chief Executive Officer and Chief Financial Officer

in 2026, with performance measured over the three-year period to 31 December 2028. The intended

performance conditions and weightings are set out below, which have been determined to provide a

balanced assessment of business performance over the three- year period taking into account financial

performance alongside strong controls and a focus on building a resilient business that creates long term

value for shareholders and wider stakeholders. Individual performance and conduct will also be assessed

over the period.

There is no vesting for below Threshold performance. For financial measures, vesting rises from 25% at

Threshold to 100% at maximum on a straight-line basis. For the other measures, any outcome between

0% and 100% may be achieved, based on a qualitative assessment of performance.

Name

Salary from

March 2026

Salary as at

November 2025

(Admission)

Marcelino Castrillo

£1,120,000

£1,025,000

Dylan Minto

£600,000

Relative TSR:

Following the Group’s inclusion in the FTSE 250, the Committee has chosen to adopt a hybrid

approach to assessing Relative TSR, whereby 50% of the outcome will be determined relative to performance

against the FTSE 250 index and 50% will be assessed against the bespoke financial services comparator group

used for the PSP grant made in 2025. This will ensure that performance is assessed relative to sector and non

sector specific companies.

Performance Measure

Weighting

Threshold

(25% of Maximum Vesting)

Maximum Vesting

Financial

Relative TSR

35%

Median

Upper Quartile

Underlying EPS in 2028 (p)

35%

72.5

Risk Management

15%

Qualitative assessment (informed by Chief Risk

Officer review prepared each year) of risk

management performance focusing on risk

appetite measures, risk management framework

and regulatory, audit and control effectiveness.

Sustainability

15%

Qualitative assessment of progress around Talent

and Culture (including succession, engagement

and EDI) and Climate strategy, addressing risks and

opportunities.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Shawbrook Group plc

Annual Report and Accounts 2025

Chair of the Board and Non-Executive Director fees

The fee payable to the Chair of the Board was reviewed by the Committee and the Board and the fees

payable to NEDs were reviewed by the Board (excluding the NEDs). Having considered market insights

and in recognition of the increased governance related accountabilities and complexities of each role

following Admission, it was agreed that the Chair of the Board fee and the NED base fee would be

exceptionally increased by 9.9% and 7.8% respectively with effect from 1 March 2026. The Remuneration

Committee Chair fee will also be increased with effect from 1 March 2026 to ensure alignment with other

Committee Chair fees. No other changes will be made to wider Committee Chair and membership fees.

Name

Fee from March 2026

Fee as at November 2025

(Admission)

Chair of the Board Fee

£310,000

£282,000

Non-Executive Director base fee

£83,000

£77,000

Senior Independent Director fee

£20,000

Audit and Risk Committee Chair fee

£30,000

Remuneration Committee Chair fee

£30,000

£25,000

Audit, Risk and Remuneration

Committee membership fee

£8,000

Nomination and Governance

Committee membership fee

£5,000

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Shawbrook Group plc

Annual Report and Accounts 2025

Additional Information

This section provides information related to remuneration across the Group to provide

further context as to how the remuneration of Directors aligns with the interests of

wider stakeholders.

The table below summarises the Chief Executive Officer single figure for total remuneration, annual bonus

pay-outs and long-term incentive vesting levels as a percentage of maximum opportunity during 2025.

2025

Chief Executive Officer single figure total remuneration (£000)

9,948

(2,335 excluding legacy share plans)

Annual bonus payout (% of maximum opportunity)

100%

LTIP vesting out-turn (% of maximum opportunity)

N/A

Relative Importance of Spend on Pay

The table below shows the Group’s total employee remuneration. The Group did not make any

distributions by way of dividend or share buy back (or any other significant distributions) in either year.

Relative Importance of Spend

2025

£m

2024

£m

Total employee costs (See Note 17)

191.5

150.3

Distributions to shareholders

Performance Graph and Table

The chart below shows the TSR performance of £100 invested in Shawbrook from Admission in November

2025 to December 2025 (Year End) compared to the FTSE 250 index, which is considered to be the most

appropriate comparator index given its comparable size to Shawbrook.

04 Nov 2025

31 Dec 2025

100

110

120

130

Value (£)

Shawbrook Group Plc

FTSE 250

Please note that the pre-Admission legacy share plans have been excluded as they were not designed with a maximum opportunity.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

100

Shawbrook Group plc

Annual Report and Accounts 2025

2025 v 2024

Name

Salaries and fees

Pension, allowances and benefits

Bonus

Marcelino Castrillo

23%

Dylan Minto

13%

17%

71%

John Callender

28%

Lan Tu

Janet Connor

12%

Andrew Didham

10%

Michele Turmore

Average Employee

10%

13%

Comparison of annual change in directors pay compared with the

average employee

The table below shows the percentage change in the salary, benefits and bonuses of each of the

directors (excluding the institutional directors) who held office during the entirety of 2024 and 2025

using the information disclosed in the single figure tables. This is compared with the percentage

change in each of those components of pay for an average employee based on those who were

employed for the entirety of 2024 and 2025.

The year on year differences to salaries and pension, allowances and benefits for both Executive

Directors was impacted by an adjustment to pension contribution levels at Admission to ensure alignment

with the wider workforce, as well as the benefit of one-off, IPO-related transitional loans made in 2025 to

facilitate the winding-up of Shawbrook’s pre-Admission holding company.

In 2025, additional fees were paid to the Chair of the Board and Non-Executive Directors to recognise the

significant additional time commitment required as a consequence of the IPO. Such amounts are included

in the comparison above.

Calculation Basis

Lower Quartile

Median

Upper Quartile

Pay Ratio without legacy share plans

50:1

33:1

21:1

Pay ratio with legacy share plans

214:1

143:1

89:1

Remuneration Element

CEO single

figure

Lower

Quartile

Employee

Median

Upper

Quartile

Base Salary (£’000)

957

Total Remuneration without legacy

share plans (£’000)

2,335

112

Total Remuneration with legacy

share plans (£’000)

9,948

112

The base salaries and total remuneration for the CEO and relevant identified employees are shown below.

The Committee recognises that the legacy share plans had a significant impact on the pay ratio in 2025

and is comfortable that the underlying ratio (excluding the legacy share plans) is consistent with our

remuneration principles for the employees as a whole.

Chief Executive Officer Pay Ratio

UK regulations require companies with more than 250 UK employees to publish a ratio to show Chief

Executive Officer pay compared to that of other UK employees. In line with these regulations, we have

provided the ratio for the year ended 2025, which has been calculated using “Option A”, as the Committee

feels that this is the most statistically accurate option under the regulations.

The employee pay figures were calculated by reference to the year ending 31 December 2025, consistent

with the period used for the Single Figure Table remuneration calculated for the Directors. Salaries, variable

compensation, taxable benefits and pensions were annualised for employees who have not been with the

Group for the full financial year or grossed up on a full-time equivalent basis for part-time employees.

FINANCIAL STATEMENTS

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101

Shawbrook Group plc

Annual Report and Accounts 2025

Wider workforce remuneration

In line with our guiding reward principles, the Group rewards all its employees fairly

for their contribution and to motivate them to deliver the best outcomes for all our

stakeholders.

•

Salaries

are set with reference to the size and scope of an individual’s role,

the external market as well as the individual’s skills and experience.

•

We provide a competitive

pension

arrangement, alongside a comprehensive suite of

benefits

designed to support the wellbeing of our employees. Following our Admission

to the London Stock Exchange, we made an all-employee free share award to our

colleagues in January 2026 to celebrate Admission and are looking forward to being able

to provide them with the opportunity to participate in the Sharesave Plan from 2026.

•

Employees are eligible to be considered for an annual bonus as appropriate to their

role.

Long-term incentives

are also considered for selected senior individuals and key

talent to reward their contribution to the delivery of our long-term strategy.

The Committee receives and considers internal and external information as

appropriate to guide decisions on remuneration, including but not limited to, the

results of employee engagement surveys as well as feedback sought from the People

Engagement Forum and other internal (such as the Chief HR Officer and Head of

Reward) and external stakeholders.

The Committee will also consider progress against the Group’s EDI initiatives,

details of which can be found on our website. In 2025, we made progress in

strengthening our diverse leadership. As part of this, we expanded our Women in

Finance (WIF) senior manager definition to include two layers below the Executive

Committee. This provides us a more robust and transparent picture to measure the

progress of our female talent pipeline. While the reported figure of 28.1% female

representation in senior leadership is lower than in previous years, it reflects

genuine improvement across the expanded cohort.

Statement of Voting at General Meeting

As the 2026 AGM will be the Company’s first as a publicly listed entity, there is no

historical voting on Directors’ remuneration to report. Future reports will include

AGM voting outcomes.

The Board has reviewed and approved this report on 11 March 2026

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102

Shawbrook Group plc

Annual Report and Accounts 2025

Nomination and Governance

Committee Report

Shawbrook remains committed to EDI and

continues to be a signatory of the HM Treasury

Women in Finance Charter, Business in the

Community Race at Work and Progress Together.

Our Executive team sponsor this work, much of

which is delivered by our highly engaged and

passionate employee inclusion groups, covering

all areas of EDI.

Developing and hiring great talent remains a key

focus and the Committee supports the Executive

team in delivering good outcomes. During 2025

the Committee reviewed progress in relation to

the People Strategy, including senior leadership

succession, ongoing leadership capability

development and overall employee engagement,

to set us up for long term success.

Looking ahead, the Committee will continue

to keep the structure, size and composition of

the Board and its Committees under review, as

well as overseeing succession of the Executive

Management team and the Group’s corporate

governance arrangements. The Committee will

also monitor progress on embedding actions

arising from the Board effectiveness review.

Further information about the activities of the

Committee is provided in the following report.

John Callender

Chair of the Nomination and

Governance Committee

11 March 2026

“I am pleased to present the 2025 report as

Chair of the Nomination and Governance

Committee. The Committee continued to

focus on Board and Executive succession

planning, ensuring a desired mix of skills

and expertise is maintained across the

Board, its Committees, the Executive

and senior management to support

the delivery of the Group’s strategy.“

Membership, attendance, and responsibilities of the Committee can be found on pages 64 and 66.

The terms of reference for the Committee can be found on the Group’s website at:

www.shawbrook.co.uk/about-us/investors/corporate-governance/

Main activities during the year

Throughout the year, the Committee considered

the composition of the Board and its committees,

Board succession planning, appointments to

subsidiary boards, extent of compliance with the

principles within the UK Corporate Governance

Code 2024, Executive Management succession

planning, the Group’s leadership programme,

SM&CR appointments and EDI.

Effectiveness Review

The externally facilitated Board Effectiveness

Review also considered the effectiveness of the

Board’s committees. The review concluded that

the Nomination and Governance Committee

continued to operate effectively.

Board composition and

succession planning

The Committee monitors the membership of the

Board and its committees to ensure that there is a

suitable balance of diversity, skills and experience.

Consideration to the length of service of the

members is also undertaken. This ensures that

appropriate succession and development plans are

in place for appointments to the Board. During the

year, this work was complemented by a 360-degree

review of the independent Non-Executive Directors

carried out by the Chair.

The Committee is satisfied that the succession

planning structure in place is appropriate for the

size and nature of the Group.

There are currently no external firms engaged in

relation to Non-Executive Director recruitment.

The Committee was pleased to have recommended

to the Board further three year extensions to

the terms for Lan Tu, Janet Connor and Michele

Turmore. Short term extensions were also approved

for both John Callender and Andrew Didham, in

order to support timely recruitment and handover

processes. Whilst Andrew has now served in excess

of the 9 years recommended in the UK Corporate

Governance Code, the Board continues to believe

that he remains Independent. Paul Lawrence retired

from the Board in March 2025.

FINANCIAL STATEMENTS

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103

Shawbrook Group plc

Annual Report and Accounts 2025

Non-Executive Director time commitment

The Committee continued to keep under review the time commitment

of each Non-Executive Director to help ensure that the Board and

its committees had the appropriate representation and that the

Non-Executive Directors were able to commit the appropriate time

to their respective roles. This is on average at least five days per

month depending on business needs.

Re-electing Directors

Before recommending the proposed re-election of Directors at

the 2025 Annual General Meeting, the Committee reviewed the

independence of the Non-Executive Directors and concluded that

Andrew Didham, Derek Weir, Michele Turmore, Lan Tu and Janet

Connor met the criteria for independence. John Callender was

independent when he was appointed as Chairman. Lindsey McMurray

and Cédric Dubourdieu’s re-election as Institutional Non-Executive

Directors was made in line with the Framework Agreement which

was in place at the time.

Non-Executive Director contracts

Subject to annual re-election at each Annual General Meeting, the

contracts for Non-Executive Directors are reviewed every three years.

All appointment letters were reviewed and updated in line with best

practice upon listing in November 2025.

Executive and Non-Executive Director induction

All new Directors are required to undertake an induction programme,

which includes comprehensive training on their Senior Managers

and Certification Regime responsibilities. In addition, Directors are

required to undertake training in the regulatory and compliance

frameworks and are also required to gain an understanding of

relevant legal requirements, such as money laundering legislation.

Inductions include sessions with the Chairman, Directors, Executive

Management and external advisors to gain insight into the Group.

Training is tailored to the requirements of each Director’s role,

knowledge and experience.

Executive succession

We have a strong, talented and resilient Executive Management

team for whom we have 100% emergency succession cover in place.

Through transparent discussions and the deployment of development

plans, we continually invest in our Senior Management to ensure we

create internal candidates for Executive Management roles in the

future we create internal candidates for Executive Committee roles

where appropriate.

We also always ensure that we have an eye on the external market,

to enable us to add talent and experience beyond what we have

today, particularly where we are evolving into new markets. This

ensures that we take a best talent approach at all times.

The Committee supported the changes to the Executive Committee

in January (see page 68) and were particularly pleased to see two

new internal appointments in Chris Fallis as Chief Banking Risk Officer

and Sam Foskett as General Counsel. The Committee noted the

retirement of Daniel Rushbrook as General Counsel on 31 January

2026. We thank Daniel for his long and significant contribution to

the Group’s success to date.

Culture

Our success in 2025 was driven by a high-performance culture and

a talented workforce, which the Committee continues to assess

and monitor. We have focused on recruiting top talent, enhancing

employee propositions, investing in leadership development and

fostering a supportive environment which is reflected in an employee

engagement score of 78%. We continue to recognise exceptional

contributions through recognition awards and creating a culture of

inclusion and belonging through our employee led EDI groups. We

have repledged to the Women in Finance Charter, the Race at Work

Charter and Progress Together and have joined the Parker Review as

part of our ongoing commitment to EDI.

Senior Management Function appointment process

The Committee is also responsible for overseeing the appointment

of Senior Management Function holders, pursuant to the Senior

Managers and Certification Regime. Prior to such appointments,

the Committee evaluates the balance of skills, knowledge and

experience required for the role and provides suitable oversight of

the selection and appointment process. The Committee is pleased

with the appointments made in 2025, which will help the Group to

achieve its strategic aims.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

104

Shawbrook Group plc

Annual Report and Accounts 2025

Gender Diversity Reporting as at 31 December 2025

Board Members

Executive Management

Number

Percentage

Number of senior

positions on the

Board (CEO,CFO,

SID and Chair)

Number

Percentage

Men

60.00%

77.78%

Women

40.00%

22.22%

Other Categories

Not specified/prefer not to say

Ethnic Diversity Reporting as at 31 December 2025

Board Members

Executive Management

Number

Percentage

Number of senior

positions on the

Board (CEO,CFO,

SID and Chair)

Number

Percentage

White British or White

(including minority-white

groups)

70.00%

77.78%

Mixed/Multiple Ethnic Groups

Asian/British Asian

10.00%

11.11%

Black/African/Caribbean/Black

British

Not specified/prefer not to say

20.00%

11.11%

Diversity Statistics

The Committee gives careful consideration to how

it can promote ethnic and gender diversity as part

of ensuring an appropriate Board composition. The

tables here show the current composition of Board

and Executive Management (gender and ethnicity)

as at 31 December 2025.

Data relating to the gender identity and ethnic

diversity of the Board was collected by way

of a questionnaire. This questionnaire asked

all individual Board members to disclose their

gender identity and ethnic background, on a

voluntary self reporting basis, by selecting options

matching those in the table. There was an option

not to specify an answer. Employees (including

Executive Management, as defined in the table) are

asked to confirm their gender and ethnicity on a

voluntary basis. Data relating to gender, and ethnic

diversity through self-identification, of executive

management (as defined) was sourced from this

existing data.

The Board meets the ethnic diversity target of the

Parker Review of having at least one director from

an ethnic minority group.

Additional information

The Committee has unrestricted access

to the Executive, Senior Leadership and

external advisors to help discharge its

duties. It is satisfied that in 2025 it received

sufficient, reliable and timely information to

perform its responsibilities effectively.

The Board reviewed and approved this

report on 11 March 2026.

FINANCIAL STATEMENTS

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105

Shawbrook Group plc

Annual Report and Accounts 2025

Dividends

The Directors are not recommending a final dividend in

respect of the year ended 31 December 2025 (2024: £nil).

Employees with disabilities

Applications for employment by people with disability

are given full and fair consideration, bearing in mind

the respective aptitudes and abilities of the applicant

concerned and our ability to make reasonable

adjustments to the role and the work environment. In

the event of an existing employee becoming disabled,

all reasonable effort is made to ensure that appropriate

training is given and their employment with the Group

continues. Training, career development and promotion

of a disabled person is, as far as possible, identical to

that of an able-bodied person.

Appointment and retirement of Directors

The Company’s Articles of Association set out the rules

for the appointment and replacement of Directors and

expects that all Directors shall retire from office and

may offer themselves for re-appointment at the Annual

General Meeting.

Powers of Directors

The Directors’ powers are conferred on them by

UK legislation and by the Company’s Articles of

Association. Changes to the Company’s Articles of

Association must be approved by the Shareholder

passing a special resolution and must comply with

the provisions of the Companies Act 2006. The

Company’s Articles of Association were last updated

in November 2025 and can be viewed on the website:

www.shawbrook.co.uk/investors/

Directors’ interests

A summary of Directors’ interests can be found on page

96.

Directors’ indemnities

The Company’s Articles of Association provide that,

subject to the provisions of the Companies Act 2006, the

Group may indemnify any Director or former Director of

the Company, or any associated Company, against any

liability and may purchase and maintain for any Director

or former Director of the Company, or any associated

Company insurance against any liability.

The Directors of the Group have entered into individual

deeds of indemnity with the Group, which constitute

‘qualifying party indemnity provisions’ entered into

by the Directors and the Company. The deeds of

indemnity protect the Directors to the maximum extent

permitted by the law and by the Articles of Association

of the Company, in respect of any liabilities incurred

in connection with the performance of their duties as

a Director of the Company and any associated Group

company, as defined by the Companies Act 2006.

The Group has maintained appropriate Directors’ and

Officers’ liability insurance throughout 2025.

Company Secretary

All Directors have access to the services of the

Company Secretary in relation to the discharge of

their duties. Andrew Nicholson can be contacted at the

Company’s registered office, details of which are on

page 222.

Directors’ Report

Section 414 of the Companies Act 2006 requires the Directors to present a Strategic Report

in the Annual Report and Accounts. The information can be found on pages 2 to 56.

The Group has chosen, in accordance with Section 414C (11) of the Companies Act 2006,

and as noted in this Directors’ Report, to include certain matters in its Strategic Report that

would otherwise be disclosed in this Directors’ Report.

Corporate governance statement

The Directors of the Company present their report, together with the audited financial

statements, for the year ended 31 December 2025. Other information that is relevant to

the Directors’ Report, and which is incorporated by reference into this report, can be

located as follows:

Subject

Pages

Business activities and future development

Charitable donations

Corporate Governance Report

Directors’ biographical details

59 to 61

Employees

Employee share schemes

243

Environment

Events after the reporting period

281

Internal controls and financial risk management

Relationship with suppliers

Relationship with the shareholders

Results for the year

216

Risk management

110

Use of financial instruments

222 to 272

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

106

Shawbrook Group plc

Annual Report and Accounts 2025

Going concern

The financial statements are prepared on a going concern basis. To

assess the appropriateness of this basis, the Directors considered a

wide range of information relating to present and future conditions,

including the Group’s current financial position and future projections

of profitability, cash flows and capital resources. The Directors also

considered the Group’s Risk Management Framework and potential

impacts that the top and emerging risks identified (see page 117

of the Risk Report) may have on the Group’s financial position and

longer-term strategy.

The Directors have reviewed the Group’s capital and liquidity plans

under the Group’s approved budget and considered the results of

stress testing and scenario analysis performed as part of the going

concern assessment and the ILAAP and ICAAP processes. The stress

testing included a range of severe but plausible scenarios designed

to assess resilience across differing macroeconomic and interest

rate environments, together with additional idiosyncratic and

balance sheet stresses relevant to the Group. The assessment also

considered the effect of management actions that are within the

control of the Group.

Based on the assessment performed, including the outcomes

of base case forecasts and severe but plausible stresses, the

Directors have a reasonable expectation that the Group has

sufficient resources to continue in operational existence for a

period of at least 12 months from the date of approval of these

financial statements and to continue to meet its regulatory

capital and liquidity requirements. Accordingly, the Directors

have concluded that it is appropriate to adopt the going

concern basis in preparing these financial statements.

Political and charitable donations

The Group did not make any political donations during the year

(2024: £nil). Further information on charitable donations made

by the Group can be found on page 39.

Research and Development

The Group develops new products and services from time to time as

part of the ongoing activities of its different business franchises.

Share capital

The Group is a listed public company limited by shares.

Details of the Company’s issued share capital, together with details

of any movements in the Company’s issued share capital during the

year, are shown in Note 41 of the Financial Statements.

The Company’s share capital comprises one class of ordinary share

with a nominal value of £0.005 each. At 31 December 2025, 519,687,271

ordinary shares were in issue.

On 20 October 2025, the Company carried out a share split whereby

the ordinary share capital of 253,086,879 shares of £0.01 was divided

by a factor of two resulting in 506,173,758 shares of £0.005 each. On

4 November 2025 a further 13,513,513 new ordinary shares of £0.005

each were allotted resulting in a total of 519,687,271 ordinary shares

of £0.005 each.

The Company’s shares began conditional dealing on the London

Stock Exchange on 30 October 2025, with full admission taking place

on 4 November 2025.

Restrictions on the transfer of shares

According to the Articles of Association and prevailing legislation

there are no specific restrictions on the transfer of shares of

the Company.

Shares may be held in either certificated or uncertificated form.

Certificated shares may be transferred in writing in any usual form

signed by or on behalf of the transferor and (in the case of a partly

paid share) the transferee.

Transfers of uncertificated ordinary shares may be made by means

of a relevant system in the manner provided for, and subject as

provided in, the uncertificated securities.

The Board is not bound to register a transfer of any share which is not

a fully paid share.

The Board may also decline to register an instrument of transfer of

certificated ordinary shares unless (i) it is duly stamped, deposited

at the prescribed place and accompanied by the share certificate(s)

and such other evidence as reasonably required by the Board to

evidence right to transfer, (ii) it is in respect of one class of shares

only, and (iii) it is in favour of a single transferee or not more than

four joint transferees (except in the case of executors or trustees

of a member).

FINANCIAL STATEMENTS

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107

Shawbrook Group plc

Annual Report and Accounts 2025

Rights attaching to shares

On a show of hands, each member has the right to one vote at

General Meetings of the Company. On a poll, each member would be

entitled to one vote for every share held. The shares carry no rights to

fixed income. No one person has any special rights of control over the

Company’s share capital and all shares are fully paid.

Purchase of own shares by the Company

Under Section 701 of the Companies Act 2006, the Group may make a

purchase of its own shares if the purchase has first been authorised

by a resolution of the Shareholder.

Substantial shareholdings

PSC Marlin Holdco Limited and Marlinbass Limited each own 37.56%

of the issued share capital. Each are regarded as a “controlling

shareholder” of the Company under the UK Listing Rules as each holds

more than 30% of voting rights in the Company. The Board confirms

that the Company continues to be able to carry on its main business

activity independently from each of the controlling shareholders.

As at 31 December 2025, the Company had not been notified under

Rule 5 of the DTRs of any changes in holdings of voting rights in its

shares. Between 31 December 2025 and 11 March 2026 the Company

has not received any additional notifications pursuant to Rule 5 of the

DTRs.

UK Listing rule 6.6.1 R

The information to be disclosed in the Annual Report and Accounts

under Listing Rule 6.6.1 R is set out or cross-referenced in this

Directors’ Report.

Auditor

Resolutions to reappoint KPMG LLP as the Group’s auditor and to give

the Directors the authority to determine the auditor’s remuneration

will be proposed at the Annual General Meeting.

Disclosure of information to the auditor

The Directors confirm that:

•

so far as each of the Directors is aware, there is no relevant audit

information of which the auditor is

unaware; and

•

the Directors have taken all the steps that they ought to have

taken as Directors to make themselves aware of any relevant

audit information and to establish that the auditor is aware of that

information.

This confirmation is given and should be interpreted in accordance

with the provisions of the Companies Act 2006.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

108

Shawbrook Group plc

Annual Report and Accounts 2025

Directors’ responsibility statement

The Directors are responsible for preparing the Annual Report and

Accounts and the Group and Parent Company financial statements

in accordance with applicable law and regulations.

Company Law requires the Directors to prepare such financial

statements for each financial year. Under that law, the Directors

must prepare the Group financial statements in accordance with UK-

adopted international accounting standards in conformity with the

requirements of the Companies Act 2006 and have elected to prepare

the Parent Company financial statements on the same basis.

Under company law, the Directors must not approve the accounts

unless they are satisfied that they give a true and fair view of the

state of affairs of the Group and Parent Company and of their profit

or loss for that period.

In preparing the Group and Parent Company’s financial statements,

the Directors are required to:

• properly select and apply accounting policies and then apply them

consistently;

• make judgements and estimates that are reasonable, relevant and

reliable;

• state whether they have been prepared in accordance with UK

adopted international accounting standards;

• present information, including accounting policies, in a manner

that provides relevant, reliable, comparable and understandable

information;

• provide additional disclosures when compliance with the specific

requirements of the relevant accounting standard is insufficient to

enable an understanding of the impact of particular transactions,

other events and conditions on the entity’s financial position and

financial performance;

• assess the Group’s ability to continue as a going concern, disclosing

as applicable, matters related to going concern; and

• Use the going concern basis of accounting unless they either intend

to liquidate the Group or to cease operations, or have no realistic

alternative but to do so.

The Directors are responsible for keeping adequate accounting

records that are sufficient to show and explain the Group’s

transactions and disclose with reasonable accuracy, at any time, the

financial position of the Company, enabling them to ensure that its

financial statements comply with the Companies Act 2006.

Additionally, the Directors are responsible for safeguarding the

Group’s assets and, hence, take reasonable steps to prevent and

detect fraud and other irregularities.

Under applicable law and regulations, the Directors are also

responsible for preparing a Strategic Report, Directors’ Report,

Directors’ Remuneration Report and Corporate Governance

Statement that complies with that law and those regulations.

The Directors are responsible for maintaining and ensuring the

integrity of the corporate and financial information included on

the Group’s website at www.shawbrook.co.uk. Legislation in the UK

governing the preparation and dissemination of financial statements

may differ from legislation in other jurisdictions. In accordance

with Disclosure Guidance and Transparency Rule (“DTR”) 4.1.16R, the

financial statements will form part of the annual financial report

prepared under DTR 4.1.17R and 4.1.18R. The auditor’s report on

these financial statements provides no assurance over whether the

annual financial report has been prepared in accordance with those

requirements.

Responsibility statement of the Directors in respect of

the annual financial report

Each of the Directors, whose names and functions are listed on pages

59 to 61, confirms that, to the best of their knowledge:

• the financial statements, prepared in accordance with the applicable

set of accounting standards, give a true and fair view of the assets,

liabilities, financial position and profit or loss of the Group and the

undertakings included in the consolidation taken as a whole;

• the Strategic Report (on pages 2 to 56) and the Directors’ Report

(on pages 105 to 108) include a fair review of: (i) the business’s

development and performance and (ii) the position of the Group

and the undertakings included in the consolidation taken as a whole,

together with a description of the principal risks and uncertainties

that they face;

• the Annual Report and Accounts, taken as a whole, are fair, balanced

and understandable, and provide the information necessary for

shareholders to assess the Group’s position and performance,

business model and strategy.

This Directors’ Report was approved by the Board of Directors

on 11 March 2026.

By order of the Board.

Andrew Nicholson

Company Secretary

Risk Report

110

Approach to risk management

113

Risk governance and oversight

117

Top and emerging risks

128

Principal risks

181

ICAAP, ILAAP and stress testing

182

Solvent Exit Analysis, Recovery Plan and Resolution Pack

Contents

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

109

Shawbrook Group plc

Annual Report and Accounts 2025

Approach to risk management

Shawbrook Group plc and its subsidiaries (together, the ‘Group’)

seek to manage the risks inherent within its business activities and

operations through close and disciplined risk management. This

aims to quantify the risks taken, manage and mitigate them as far

as possible and price for them in order to produce an appropriate

commercial return through the cycle.

The Group’s risk management approach is continuously evolving

to reflect changes in its business model, product range, customer

engagement preferences, and external factors such as sustained high

interest rates and cost-of-living pressures affecting refinance risk.

Throughout 2025, further investment was made in key areas of risk

management. Notable activities and changes include the following:

•

The annual review of the Group’s Risk Management Framework

(RMF) and risk appetite were approved in April 2025. During the year,

the Group strengthened the Risk Function with the appointment

of a new Chief Compliance Officer, MLRO (SMF17), and Director

of Conduct & Compliance (SMF16).

•

The Group has continued to evolve its sustainability strategy,

focusing on those areas in which it can deliver the greatest impact.

This includes its climate strategy where the Group has continued

to invest in climate data in key areas such as a new climate base

case scenario to improve data quality and transform this into

actionable insights to support with physical and transition risk

assessments and opportunities across its portfolios. The Group

completed the design of its approach to lending emissions in

SME using a Partnership for Carbon Accounting Financials (PCAF)

aligned approach to increase coverage of the lending portfolio

which will help in setting net zero targets and transition plans.

The Group also approved some changes to its collateral and

valuation policy to ensure that physical risk is reflected consistently

in all valuation tools. The Group also added to its scenario analysis

with the implementation of a Pillar 2A assessment in its ICAAP.

•

Enhancements to the Group’s financial crime control environment

have continued with the Group’s financial crime and compliance

platform being embedded across all segments including acquisitions

to drive consistency and efficiency. The Group implemented new

financial crime risk appetite measures in November 2025 to reflect

the increase and size and complexity of the bank.

•

The Group continued to embed its unified and connected

risk, control, and assurance system and throughout 2025 has

progressed testing of design and operating effectiveness where

the key controls have operated. The Group approved its most

material controls where testing will support the Board in attesting

to the new requirements of the corporate governance code.

•

The Group has not sought an IRB permission to use its own models for

regulatory capital purposes but has continued to implement SS1/23

‘Model risk principles for banks’ in line with best practice given the

growth in size and complexity of the Group. This included the further

embedding of its digital Model Vault to manage the development,

monitoring, and validation of its new and existing models and

support the ongoing assessment of post model adjustments.

•

The Group understands the potential opportunities and risks

attached to Artificial Intelligence (AI) and has developed and

implemented an AI use case policy with applications included

within the model vault. A sub-committee of the Model Risk

Management Committee has been established to oversee the

implementation of AI applications to support ongoing governance.

•

The Group completed a reverse stress testing exercise across all

of its loan portfolio which has been used to inform risk appetite

and has led to the development of additional Board MI.

•

The Group completed the acquisition of ThinCats Group Limited

(ThinCats) in September 2025, a UK-based alternative finance provider

specialising in mid-sized businesses (SMEs) across the UK. ThinCats is

a wholly owned subsidiary of Shawbrook Bank Limited. The acquisition

is not material to the risk profile of the Group in 2025 but included

access to a proprietary credit grading and Loss Given Default (LGD)

model for this market which will support growth in SME lending in

2026.

•

The Group completed its first Solvent Exit Analysis (SEA) which was

Board approved in September and in advance of the 1 October 2025

compliance deadline.

•

Following completion of the IPO the Group implemented

mandatory role specific UK Market Abuse Regulation (UK MAR)

training to cover insider dealing, unlawful disclosure, market

manipulation, and closed periods. The Group maintained a

number of controls from its prior listing but has also updated its

Pillar 3 disclosures and Task Force on Climate-related Financial

Disclosures (TCFD) to align with the requirements of listed firms.

•

Within its Retail segment, the Group has signed up to the Freedom

to Buy scheme to support borrowers with small deposits to purchase

their first home. The Group also signed up new savings partners

and co-developed a tracker product with one of its largest savings

partners to diversify its funding strategy.

•

Within its Commercial segment, the Group has continued to

implement its end-to-end credit risk management platform as

part of its investment in its credit risk capability. The Group

has continued to implement risk distribution through a credit

insurance swap solution to help SME customers continue to

grow beyond its hold levels. The Group has also extended its

participation of the Enable Guarantee Programme to support

its Development finance customers.

•

In response to the ongoing changes in the economic environment,

the Group continues to maintain a focus on affordability, ensuring

its models and policies remain appropriate and closely aligned to

customer behaviour. The Group has continued to conduct regular

portfolio reviews, with the benefit of external information to ensure

that its risk appetite remains appropriate.

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Risk strategy

The risk strategy is an integral part of the Group’s strategy. It sets out the

strategic risk management objectives that will support the achievement

of the Group’s commercial goals and the operation and activities of each

customer segment that will facilitate the delivery of those aims. Short and

medium-term objectives outlined in the Group’s Risk Plan, which is approved

annually by the Board in January. The Group’s Risk Plan includes the risk

priorities for the Group’s risk function, together with the risk plans for the

customer segments and central functions.

The strategic risk management objectives are to:

•

Identify material risks arising in the day-to-day activities

and operations of the Group;

•

Quantify the risks attached to the execution of the Group’s business plans;

•

Set an appropriate risk appetite with calibrated measures and limits;

•

Optimise the risk/reward characteristics of business written;

•

Set minimum standards in relation to the acquisition

and management of risk;

•

Secure and organise the required level and capability of risk

infrastructure and resources;

•

Reflect the impact of internal controls;

•

Undertake remedial action where any weaknesses are identified; and

•

Scan the horizon for emerging risks.

Risk appetite

The level of risk that the Group is willing to tolerate in operating the various

elements of its business are defined in the RMF. This articulates the qualitative

and quantitative measures of risk that are cascaded across various areas of

the Group’s operations, calibrated by reference to the Group’s risk appetite

and absolute capacity for risk absorption.

During the year ended 31 December 2025, the Group completed the annual

review, together with interim updates, of the Group’s risk appetite where it

was appropriate to do so.

The Risk Appetite Statement is dynamic and evolves to support the Group’s

business objectives, the operating environment and risk outlook. Whilst the

Group Risk Appetite Report provides an aggregated measure of performance

against risk appetite, it is not just a reporting tool. It also provides a

framework that is used dynamically to inform strategic and operational

management decisions, as well as supporting the business planning process.

The Risk Appetite Statement is reviewed periodically by the Risk Committee

and agreed with the Board on an annual basis, or more frequently if required.

A dashboard with the status of each metric is monitored on a monthly basis

by the Executive Risk Committee (ExRC), its sub-committees and the Assets

and Liabilities Management Committee (ALCo). The ExRC, Risk Committee

and the Board exercise their judgement as to the appropriate action required

in relation to any threshold breach, dependent on the scenario at the time.

As set out in the table on the following page, the risk taxonomy is organised

into 11 Principal Risks and 35 level 2 risks. The Risk Appetite Statement

identifies 11 risk appetite objectives aligned to each Principal Risk that are

further subdivided into 29 unique risk appetite dimensions. The objective

assessment of each risk appetite dimension is supported by qualitative

statements and a series of quantitative measures that are weighted by

their importance to the overall appetite.

Approach to risk management

Key elements to risk management

Effective risk management is recognised as being

key to the execution of the Group’s strategy.

The Group’s approach to risk management

is underpinned by five key elements:

•

Risk strategy

•

Risk appetite

•

Risk Management Framework

•

Governance

•

Culture

The following information provides further

details about each of these key elements.

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Approach to risk management

Risk Management Framework

All of the Group’s business and support

service activities, including those outsourced

to third-party providers or originated via

brokers and other business intermediaries,

are managed within the parameters of a single

comprehensive RMF. This sets out minimum

requirements and ensures consistent standards

and processes are set across the Group. Risks

are identified, measured, managed, monitored,

reported and controlled using the RMF. The

design and effectiveness of the framework is

overseen and reviewed by the Risk Committee.

Responsibility for risk management sits at

all levels across the Group. The Board sets

the ‘tone from the top’ and all colleagues are

expected to adopt the role of ‘risk manager’

in all aspects of their role.

The RMF describes various activities,

techniques and tools that are mandated

to support the identification, measurement,

management, monitoring, reporting and

control of risk across the Group. It is designed

to provide an integrated, comprehensive,

consistent and scalable structure that is

capable of being communicated to and clearly

understood by all of the Group’s employees.

The RMF also incorporates the organisational

arrangements for managing risk with specific

responsibilities distributed to certain functions.

This ensures that there is clear accountability,

responsibility and engagement at appropriate

levels within the Group. Operationally, the RMF

is organised around a number of Principal Risks

(see page 128).

Governance

All of the Group’s risk activities are subject

to detailed and comprehensive governance

arrangements that set out how risk-based

authority is delegated from the Board to the

various risk management committees and

individuals. Risk governance and oversight

is detailed further below, starting on page 113.

Culture

The Group is led by an experienced

management team with a combination of

significant underwriting expertise, institutional

and regulatory banking experience at various

major financial institutions and specialist

lenders, and product engineering expertise.

This heritage provides the platform for a set

of values and behaviours where the customer

is at the heart of the decision-making process,

and the customer segments are held fully

accountable for risk performance. At the

individual level, this process begins with the

induction programme and job descriptions

and is carried into the setting of individual

objectives and performance reviews which

is ultimately reflected in the compensation

and reward structure. The Group conducts

regular surveys across all of its employees,

to help identify any emerging risks and

promote ongoing engagement.

Principal Risks

Level 2 risks

Strategic risk

•

Equality, diversity and inclusion risk

•

Governance risk

•

Sponsorships and partnerships risk

•

Communication

Transformation risk

•

Transformation risk

Credit risk

•

Concentration risk

•

In-life management risk

•

Losses due to default on

contractual obligations

•

Losses due to inadequate

security/collateral

•

Underwriting quality risk

Market, liquidity

and capital risk

•

Capital adequacy risk

•

Funding risk

•

Liquidity risk

•

Market risk

Operational risk

and resilience

•

Data quality and governance risk

•

Operational resilience risk

•

People risk

•

Physical assets availability, safety

and security risk

•

Statutory reporting and tax risk

•

Third party risk

•

Transaction processing risk

Technology

and cyber risk

•

Technology availability risk

•

Technology infrastructure risk

Conduct risk

•

Culture and market risk

•

Customer conduct risk

•

Lending to other lenders risk

Compliance and

regulatory risk

•

Data privacy risk

•

Regulatory management risk

•

Legal risk

Financial crime risk

•

Financial crime risk

•

Fraud risk

Model risk

•

Model design and implementation risk

•

Model governance risk

•

Model usage risk

Climate risk

•

Environmental and climate risk

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The monitoring and control of risk is a fundamental

part of the management process within the

Group. Risk governance describes the architecture

through which the Board allocates and delegates

primary accountability, responsibility and authority

for risk management across the Group.

Responsibility for risk oversight is delegated

from the Board to the Risk Committee and Audit

Committee. However, ultimate responsibility for

risk remains with the Board. An abbreviated Board

and Executive Committee structure is set out in

the Corporate Governance Report on pages 57

to 108, which further describes their roles and

responsibilities.

Accountability, responsibility and authority for risk

management is delegated to the Chief Executive

Officer and Chief Risk Officer, who in turn allocate

responsibility for oversight and certain approvals

across a number of management committees.

The Chief Banking Officer is assigned the

designated role of SMF18 (‘other overall

responsibility function’). In January 2026, the Group

appointed a Chief Banking Risk Officer to ExCo to

bring together the oversight of all first line risks.

Authority and responsibility for material operational

risk management, decision-making and risk monitoring

is vested in the Chief Risk Officer and the risk function.

Lesser levels of authority are cascaded to Senior

Management within the first line.

These bodies and senior officers are accountable

and responsible for ensuring that the day-to-

day risks are appropriately managed within the

agreed risk appetite and in accordance with the

requirements of the RMF.

Individuals are encouraged to adopt an open and

independent culture of challenge, which is important

in ensuring risk issues are fully surfaced and debated,

with views and decisions recorded. Risk governance

and culture is reinforced by the provisions of the

Senior Managers and Certification Regime.

Formal risk escalation and reporting requirements

are set out in risk policies, individual committee

terms of reference and the approved risk appetite

thresholds and limits.

Oversight of principal risks is illustrated as follows.

Risk governance and oversight

Compliance and

regulatory risk

Compliance

Non-Financial Risk

Oversight Committee

Conduct risk

Compliance

Non-Financial Risk

Oversight Committee

Technology

and cyber risk

Operational

risk

Non-Financial Risk

Oversight Committee

Operational risk

and resilience

Operational

risk

Non-Financial Risk

Oversight Committee

Non-Financial Risk

Oversight Committee

Market, liquidity

and capital risk

Prudential

risk

Asset and Liability

Committee

Credit risk

Credit Risk

Oversight Committee

Transformation

risk

Operational

risk

Strategic risk

Prudential

risk

Executive Risk

Committee

Principle risk

Oversight

Risk Committee

Board

Internal

audit

Second line

Third line

Audit

Committee

Executive Directors

and Senior Management

Executive Directors

and Senior Management

Credit management

in customer segments

Treasury

All customer segments

and central functions

Chief Technology Office

All customer segments

and central functions

All customer segments

and central functions

Financial

crime risk

Financial

crime

Non-Financial Risk

Oversight Committee

Model risk

Prudential

risk

Model Risk

Oversight Committee

Climate risk

Prudential

risk

Credit Risk

Oversight Committee

First line

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Risk governance and oversight

Additional information regarding the three lines

are provided in the following sections.

First line

Responsibility for risk management resides in the

frontline customer segments together with the

central functions. Line management is directly

accountable for identifying and managing the risks

that arise in their business or functional area. They

are required to establish effective controls in line

with the Group’s risk policies and act within the risk

appetite parameters set and approved by the Board.

The first line comprises the customer segments and

the central functions. The central functions include:

•

the finance function led by the Chief Financial

Officer;

•

the first line risk function led by the Chief Banking

Risk Officer;

•

the technology function led by the Chief

Technology Officer;

•

the human resources and marketing function led

by the Chief People and Marketing Officer; and

•

the legal function led by the General Counsel.

The Group created a Risk Services function in H1 2025

which brought together financial crime operations,

collections and recoveries, control testing, third

party risk management and operational resilience

to promote consistency of process and automation

across all parts of the business and sits within the

Risk Function.

Each functional area operates to set risk policies

to ensure that activities remain within the Board’s

stated risk appetite for that area of the Group. The risk

policies are approved by the appropriate committee

in accordance with their terms of reference and

are reviewed annually, with any material changes

requiring approval at committee level.

The first line has its own operational policy,

process and procedure manuals, and controls to

demonstrate and document how it conforms to

the approved policies. Likewise, it develops quality

control programmes to monitor and measure

adherence to and effectiveness of procedures.

All employees within a customer facing unit are

considered first line. Each employee is aware of

the risks to the Group of their activity, and the

customer segment and central function leadership

teams are responsible for ensuring there is a ‘risk

aware’ culture within the first line. For certain key

policies, employees within the customer segments

complete regular online training programmes to

ensure knowledge is refreshed and current.

Three lines model

The RMF is underpinned by the three lines model, which is summarised in the illustration below:

Risk strategy

Market, liquidity

and capital risk

Technology and

cyber risk

Conduct risk

Climate risk

Model risk

Credit risk

Operational risk

and resilience

Strategic risk

Compliance and

regulatory risk

Financial crime risk

Transformation risk

Internal audit

Led by the Chief Internal Auditor

Risk function

Led by the Chief Risk Officer

Second line

•

Designs, interprets and develops overall

Risk Management Framework and monitors

business as usual adherence

•

Reviews and provides oversight of top risks

•

Develops compliance policies, leads

requirements for regulatory change and

monitors horizon risks and regulatory issues.

Third line

•

Operates independently to provide an objective

evaluation of governance, risk management

and internal controls across the Group

•

Provides independent and objective

assurance to the Board and Executive

Management that the risk management

arrangements are operating as designed

Central functions

Customer segments

External audit

Regulator

First line

•

Owns the risk management process

and regulatory compliance

•

Identifies, measures, manages, monitors

and reports on risks

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Risk governance and oversight

Second line

The second line comprises the Group’s independent risk management

function led by the Chief Risk Officer. The Chief Risk Officer reports

to the Chief Executive Officer and laterally to the Chair of the Risk

Committee. The Chief Risk Officer is also provided with unfettered

access to the Chairman of the Board. The second line also includes

the General Counsel, who reports to the Chief Executive Officer.

The second line is necessarily and deliberately not customer facing

and has no responsibility for any business targets or performance.

It provides independent challenge and control of the first line, which

is delivered through the following:

•

the design and build of the various components of the RMF and

embedding these, together with the risk strategy and risk appetite,

across the Group;

•

independent monitoring of the Group’s activities against the

Board’s risk appetite and limits, and provision of monthly analysis

and reporting on the risk portfolio to the ExRC (or appropriate

sub-committee), the Risk Committee, and the Board;

•

issuing and maintaining the suite of Group risk policies and

associated standards;

•

in relation to outsourced services, the setting of policies and

subsequent assessment of policy conformance;

•

undertaking physical reviews of risk management, controls and

capability in the first line and providing risk monitoring reports

to the ExRC (or appropriate sub-committee), the Risk Committee

and the Board on all aspects of risk performance and compliance

with the RMF;

•

providing advice and support to the first line in relation to risk

management activities;

•

credit approvals between delegated authority and the threshold

for Credit Approval Committee; and

•

undertaking stress testing exercises and working with the finance

and treasury functions on the production of the Internal Capital

Adequacy Assessment Process (ICAAP), Internal Liquidity Adequacy

Assessment Process (ILAAP), Recovery Plan, Resolution Pack, and

Solvent Exit Analysis.

The Group’s high-level risk structure is illustrated below. ‘SMF’

references included in the below diagram refer to designated roles

stipulated by the Senior Managers and Certification Regime.

Chief Executive Officer SMF1 and SMF3

Chair of the Risk Committee

Prudential

Risk

Credit

Risk

Compliance

Risk

SMF16 and SMF17

Operational Risk

and Risk Services

General

Counsel

Legal

Chief Risk Officer

SMF4

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Third line

The third line comprises the internal audit function, led by the

Group’s Chief Internal Auditor.

The third line provides independent assurance directly to the Audit

Committee and Board on the activities of the Group, including

governance, the effectiveness of the RMF, and internal controls.

The internal audit function reports directly to the Chair of the Audit

Committee, as well as the Chief Executive Officer, and is independent

of the first and second lines.

The third line has access to the activities and records of both the first

and second lines. It can inspect and review adherence to policies and

controls in the first line, the monitoring of activities in the second line

and the setting of policies, standards and controls in the second line.

The third line does not independently establish policies or controls itself,

outside of those necessary to implement its recommendations with

respect to the other two lines. The third line may in some cases use the

reports and reviews compiled by the second line as a starting point but

is not restricted to them or necessarily influenced by their findings.

The scope of work of the third line is agreed with the Audit

Committee and is designed to provide an independent assessment

of the adequacy and effectiveness of governance, risk management

and the internal control frameworks operated by the Group and to note

the extent to which the Group is operating within its risk appetite. It does

this by reviewing aspects of the control environment, key processes and

specific risks and includes a review of the operation of the second line.

Risk policies and controls

The RMF is enacted through a comprehensive suite of policies and

associated standards that set out the minimum standards in relation

to the acquisition and management of lending assets and liabilities,

as well as the control of risks embedded in the Group’s operations,

activities and chosen markets.

The Group’s policies and associated standards are overseen by

the Group’s risk function, headed by the Chief Risk Officer and are

approved by the Board or, where delegated, the appropriate risk

oversight committee. The suite of policies and standards is grouped

according to importance and principal risk within a Board approved

policy hierarchy and framework.

Group-level policies and standards are supplemented, as required,

by customer segment specific policies, guides, processes and

procedures, which detail more specific and tailored criteria. The

customer segment and central function specific processes and

procedures are required to be compliant with Group policy and

dispensations or waivers are required where gaps are identified.

These process and procedure manuals provide employees at all

levels with day-to-day direction and guidance in the execution of

their duties.

The effectiveness of, and compliance with, risk policy frameworks

are evaluated on a continuous basis through the monthly reporting

requirements (including risk policy exceptions reporting).

Additionally, regular risk and control self-assessments, supplemented

by a programme of audits, thematic risk monitoring reviews and

control testing, is undertaken by each of the three lines. During 2025,

the Group ran an enhanced capability assessment to support the

annual attestation process, which confirms compliance with the

RMF and identifies risk management priorities over the duration of

the strategic planning cycle.

Asset class policies

The Group controls its lending activities through an established

Credit Risk Framework defined by eight Group credit policies and

18 individual asset class policies. This provides a stable, consistent

risk standard and control across the Group’s portfolio of loan assets.

Asset classes can also be aligned more readily with risk-weightings,

probability of default (PD), loss given default (LGD) and expected

credit loss (ECL) metrics, which facilitates risk reporting, risk adjusted

profitability analysis and modelling for stress testing and capital

adequacy purposes. During 2025, the Group continued to utilise a

matrix that sits above the asset class policies to highlight the key

criteria that are reserved for Board approval.

Asset class policies are structured on the basis of policy rules, which

must be adhered to, and guidelines, where an element of controlled

discretion is permitted. All planned exceptions to policy rules require

approval at the Group risk level and both planned and unplanned

exceptions to policy rules are reported monthly to the relevant risk

management committee.

Risk governance and oversight

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Top and emerging risks

The Group’s top and emerging risks are identified

through the process outlined in the RMF (see page

112) and are considered regularly by the risk oversight

committees, ExRC and subsequently by the Board

Risk Committee.

•

Top risks are those risks that could cause the delivery

of the Group’s strategy, results of operations,

financial condition and/or prospects to differ

materially from expectations.

•

Emerging risks are those that have unknown

components, the impact of which could crystallise

over a longer period and could include certain

other factors beyond the Group’s control, including

escalation of terrorism or global conflicts, natural

disasters, epidemic outbreaks and similar events.

As at 31 December 2025, the Group has identified

nine top risks and one emerging risk.

The nine themes identified as top risks are as follows:

Economic and

competitive environment

Intermediary, outsourcing

and operational resilience

Pace, scale of change

and people risk

Credit impairment

Technology, information

and cyber security risk

Financial crime

Geopolitical risk

Pace and scale of

regulatory change

Climate risk

Information on the following pages provides

a review of each of these themes. Links to key

performance metrics provided in these reviews

refer to those detailed in the ‘Shawbrook in

numbers’ summary.

In the following pages, the below symbols are

used to illustrate the change in risk environment

during the year for each of the Group’s top risks.

Risk increased

No change

Risk reduced

New

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Top risks

Economic and competitive environment

Overview

Business leaders remain concerned about the drag of weak

productivity and competitive position of the UK economy. Higher

personal taxes risk a further drag on consumer expenditure

with growth in 2026 revised down to just over 1.2% despite the

rise in government spending as firms look to pass on costs to

customers which may drive inflation.

The central view is that Bank Rate reduces to 3.25% in 2026

supported by a reduction in wages growth as the UK economy

struggles for growth and elevated unemployment. The risk is

that inflation lingers and the path to lower interest rates is

slower than planned which impacts growth.

Risks to residential and commercial property prices remain

in a challenging market with the outlook for 0.6% growth for

2026 given the monthly cost of new mortgages.

There are further concerns that political developments globally

remain a key source of uncertainty. In the UK the lower private

sector activity and the potential for unemployment as labour

becomes more expensive remains a key risk.

Links to key performance metrics

•

Loan book

•

Profit before tax

•

Earnings per share

•

Cost to income

•

CET1 capital ratio

•

Total capital ratio

How this could impact our

strategy or business model

•

Reduced gross lending from lower demand

as customers defer major purchases and

investment in light of higher interest rates

and lower real income leading to lower

buying power. This may be partly offset

by lower early repayments of loans.

•

Increased impairments if a significant

number of SMEs experience financial

distress or insolvency, or if consumers

experience an increase in unemployment.

•

A prolonged economic downturn may

impact the Group’s ability to fund

strategic investment to meet the needs

of customers and improve operations.

•

Rising competition, or a sudden reduction

in interest rates to support the economy,

may compress Group margins and impact

on target returns.

How we manage this risk

•

The Group continues its digital journey and, following the success

of the launch of the MyShawbrook portal for buy-to-let, bridging

and commercial investment product ranges have been included.

•

The Group completed the migration of Bluestone mortgages to

the same platform as mortgages originated through TML to simplify

the operation and drive consistency of customer outcomes for

owner occupied mortgages and specialist buy to let.

•

The Group has completed the migration to its savings digital

journey with enhanced self service capability aimed at improving

customer experience.

•

The Group continues to deploy its proprietary portfolio

management tool to provide powerful insights into monitoring

loan book risk and performance across its Retail and Commercial

segments. The Group has continued to evolve its early warning

indicators within its interactive dashboard, which now provides

a daily update on key emerging risk indicators.

•

The Group continues to consider its risk appetite in its selected

markets. In 2025, the Group hosted regular in-focus sessions with

external experts in its key markets and completed regular product

and sector reviews to identify any early warning indicators. The

Group completed the acquisition of ThinCats and Playter to expand

its SME portfolio.

•

Investment in additional resources in the first and second lines

of defence continues to strengthen the Group’s ability to identify

and manage potential problem loans.

•

The Group undertakes a comprehensive assessment of its risk

appetite under baseline and alternative scenarios to ensure that

it can meet its objectives in plausible economic conditions.

Focus areas for 2026

•

Targeted application of risk appetite in

carefully selected sectors to align with

the economic outlook as it emerges.

•

Scale the business through the

implementation of further automation

in lending, customer management

(particularly in SME lending), savings

operations and digital self-service.

•

Utilisation of third parties and technology

to increase capacity in originations,

servicing and collections activities in order

to position the Group to meet the needs

of its customers.

•

Continue to invest in outsourcing controls

and oversight to manage any additional

risk that the Group may be exposed to.

•

Support the wider adoption of Agile

methodologies through the embedding

of the product and engineering model

and additional transformation controls.

•

Investment in technology resources to

deliver the engineering requirements

of the accelerated digital strategy and

internal controls.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

118

Shawbrook Group plc

Annual Report and Accounts 2025

Top risks

Credit impairment

Overview

The Group’s growing loan book brings with it exposure to

credit impairment if customers are unable to repay loans

and any outstanding interest and fees.

The economic outlook will play a key role in shaping the

impairment profile in the foreseeable future. An environment

of elevated interest rates and inflation increasing

unemployment and persistently high living costs will likely

continue to pressure real income and business profits. These

factors could adversely affect affordability and liquidity for

both individuals and businesses, which in turn, may place

upward pressure on the Group’s cost of risk. Retail customers

and SMEs are particularly vulnerable to higher interest rates,

inflationary pressures and increased energy costs.

Links to key performance metrics

•

Profit before tax

•

Earnings per share

•

CET1 capital ratio

•

Total capital ratio

How this could impact our

strategy or business model

•

Increases in credit impairment could lead

to a material reduction in profitability and

retained earnings. In turn, this may impact

the Group’s capital ratios and its ability to

meet its objectives.

•

Lack of preparation for the transition from

origination to in-life management may

lead to missed opportunities to support

customers, potentially causing increased

impairment and customer harm.

How we manage this risk

•

The Group’s risk appetite is calibrated to facilitate achievement

of the business strategy and is modified as required to reflect

uncertainty in the economic and competitive landscape.

•

The Group continually reviews its underwriting guidelines and

affordability policy to ensure that it remains appropriate in the

current and emerging environment. Asset class policies have

also been reviewed to position the Group appropriately in the

current economic climate. The Group implemented an end-to-end

Credit Management Platform (CMP) to manage SME credit risk from

origination, through in-life management, and potential problem

loan management. The Group has also implemented a portfolio

management approach for individually material counterparties.

•

Additional investment in permanent employees to focus on

potential problem loans has ensured continued robust and

appropriate management of the watchlist and forbearance cases

and will continue to respond proactively to uncertainty in the

economic outlook.

•

The impact on impairment models is regularly monitored and

reported to internal committees and judgemental adjustments

to modelled ECLs based on the options and scenarios by way of

resolution, together with the probability attached to each are

reviewed by the Model Management Sub-Committee and approved

by the Group Impairment Committee.

•

The Group has continued to support hold levels for existing

customers through a credit insurance swap solution and has signed

up to extend the Enable Guarantee programme to support its

Development finance customers.

Focus areas for 2026

•

Continued focus on product and

sectoral risk to support the Group’s

evolution of risk appetite in an uncertain

economic environment.

•

Continue to develop strategic and data-led

credit management information to ensure

timely and accurate reflection of risk in the

Group’s lending segments, thus enhancing

the Group’s ability to make proactive

decisions.

•

Following the successful implementation

of the CMP in 2025 for SME lending we

intend to further embed across all SME

lending and consider for the Real Estate

loan book.

•

Continue to develop the granularity

and accuracy of the Group’s stress

testing capability.

•

Regular review of the evidence supporting

all key areas of judgement used in support

of the model-based ECL.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

119

Shawbrook Group plc

Annual Report and Accounts 2025

Top risks

Geopolitical risk

Overview

The global geopolitical environment remains highly volatile,

with the ongoing conflict in Ukraine, significant fragility in

parts of the Middle East, and growing tensions in East Asia.

Recent policy actions by the U.S. Administration, including the

introduction of selective tariffs, have the potential to disrupt

global supply chains and impact existing trade agreements.

Economic performance across key EU trading partners with

low growth in countries such as Germany and France is

contributing to continued uncertainty.

In the UK, there is now more certainty following the Budget, but

risks remain to the downside driven by the outlook for growth

and prospects for the labour market on consumer spending.

The Group operates predominantly in England, Wales, and

Scotland and has no direct exposure to Russia, the Ukraine,

the Middle East,or Asia. However, the Group is exposed to the

second order impacts on supply chains and the impact of

inflation, interest rates and unemployment on the real incomes

of its customers.

The Group continues to ensure all important business services

are operationally resilient in the event of geopolitical uncertainty.

Links to key performance metrics

•

Loan book

•

Profit before tax

•

Earnings per share

•

Cost to income ratio

•

CET1 capital ratio

•

Total capital ratio

How this could impact our

strategy or business model

•

Stagnant or lower economic growth,

labour shortages and disruption to supply

chains could impact the level of private

sector investment in the UK. In turn, this

could negatively impact on demand for

loans, funding and deposits.

•

Continued heightened trade tensions and

recently imposed selective tariffs by the

U.S. Administration are increasing cost

pressures, disrupting global supply chains

and resulting in additional inflation. These

inflationary pressures may prompt central

banks, including the Bank of England,

to keep interest rates higher for longer,

which in turn could reduce borrowers’

repayment capacity and raise the risk of

loan impairments. Credit spreads could

widen leading to reduced investor appetite

for the Group’s debt securities. This could

impact the Group’s cost of and/or access

to funding and the ability to grow its

loan portfolios.

•

The Group’s operational resilience may

be impacted by the need to transition

activities from non-UK firms.

How we manage this risk

•

The Group undertakes a comprehensive assessment of its risk

appetite and stress tests its lending and deposit portfolios to ensure

that it can meet its objectives in plausible economic conditions.

•

The Group regularly engages with its critical suppliers to foresee

and mitigate any impact on services provided to the Group.

•

The Group continues to strengthen and optimise its capital position

and pursue a diversified funding structure. The Group maintained

its Euro Medium Term Note (EMTN) programme to support capital

issuance to optimise the capital stack, markets permitting.

•

The Group monitors and screens for sanctions issued by the UK

(The Office of Financial Sanctions Implementation) and USA

(The Office of Foreign Assets Control).

•

The Group has reviewed its register of outsource providers and has

no gaps in EU General Data Protection Regulation Article 28 clauses.

•

The Group has identified all cross border data transfers recorded

within the Record of Processing Activities (ROPA) and issued contract

variations to all suppliers who process data outside the EEA.

•

The Group continues to test the resiliency of its key third parties

through business impact assessments and test of exit plans.

Focus areas for 2026

•

Ensure that all outsourcers and third

parties are operationally resilient in the

event of geopolitical uncertainty, including

the review of business continuity plans and

disaster recovery plans and regular tests

of technology resilience using tools such

as penetration testing.

•

Continue to develop a range of mitigating

actions, including the use of robust stress

tests that contain the risk of geopolitical

risk by comparing the economic scenarios

assessed in IFRS9 with those used in

the ICAAP.

•

Continue to closely monitor the

geopolitical situation. Although the Group

does not have any direct exposure, beyond

the UK, it does have indirect exposure,

for example the impacts of rising oil and

energy prices, cost of living and inflation,

potential supply chain issues faced by

customers and increased cyber security

threats. The Group regularly assesses its

affordability policy and will continue to

monitor to ensure that its lending remains

appropriate. The Group will continue to

closely monitor the cyber perimeter and

information security risks, as detailed on

page 46, and will continue to engage with

key third parties.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

120

Shawbrook Group plc

Annual Report and Accounts 2025

Top risks

Intermediary, outsourcing and operational resilience

Overview

The Group’s ability to maintain resilient operations is

fundamental to delivering its strategic objectives and meeting

customer and regulatory expectations through its Important

Business Services. We continue to enhance resilience

capabilities and strengthen our ability to prevent, respond

and recover within impact tolerances, protecting customers,

investors and stakeholders from disruption.

The Group uses a number of material third parties to support

the delivery of its objectives. The availability and resilience

of its services, core customer facing systems and ability to

operate in line with regulatory requirements play a key role

in supporting the Group’s reputation in its chosen markets.

Although the Group is not directly responsible for the

regulatory compliance of its intermediaries and brokers,

inadequate oversight can result in poor customer outcomes

and potential breaches of the Group’s own systems and

controls requirements. The Group relies on intermediaries and

brokers to provide sufficient information to enable compliance

with its own regulatory obligations, including the FCA’s

Consumer Duty, MCOB, financial crime prevention, and data

protection legislation. Within Consumer Finance, distribution

through intermediaries also increases the risk of mis-selling or

unfair customer relationships under the Consumer Credit Act.

Links to key performance metrics

•

Loan book

•

Cost to income ratio

How this could impact our

strategy or business model

•

Inability to recover Important Business

Services (IBS) within impact tolerances

could result in causing intolerable

customer harm and a risk to the safety

and soundness of the Group with

regulatory and reputational impact.

•

Failure of material third parties to deliver

on the Group’s policies and regulatory

obligations which may lead to increased

complaints, customer harm, redress costs

and damage to the Group’s reputation

through regulatory censure. This may also

lead to increased contingent liabilities in

certain areas where the Group is exposed,

which impacts on the Group’s profitability

and capital resources.

•

The Group, as a deposit taker, could be

impacted if a systems failure prevented

a significant number of payments being

made, which may lead to financial stability

being undermined. Failures by brokers

and intermediaries can damage customer

confidence and undermine the Group’s

reputation. Dependence on intermediaries

for information increases operational

complexity and may affect data integrity

and compliance oversight. Deterioration

in intermediaries’ standards could impact

the ability for the Group to scale safely

and reduce exposure to regulatory risk

under the Consumer Credit Act 1974.

How we manage this risk

•

The Group manages intermediary risk through strong governance,

clear contractual obligations, and ongoing oversight. Intermediaries

are subject to due diligence, monitoring and quality reviews

covering conduct, data protection and customer outcomes.

•

The Group continues to prioritise important business service

resilience investing in resources to improve controls and develop

contingency solutions and plans to help mitigate service disruption.

External threat monitoring and severe but plausible scenario testing,

including live testing of contingency solutions remain key features

of the annual operational resilience roadmap to identify emerging

risks and further opportunities to enhance service resilience.

•

The Group has further invested in both cloud and on-premise

technologies to increase the resilience of its core systems, provide

backup for core information and automate its key management

information. This has also included the onboarding of climate

related management information.

•

The Group has continued to invest in its relationships with its third

parties, with a focus on good customer outcomes, particularly as

customers deal with heightened cost of living pressures. This has

included increased reporting on the performance of material third

parties across Bank governance committees.

Focus areas for 2026

•

The annual operational resilience roadmap

for 2026 seeks to expand live scenario

testing across the IBS with greater

emphasis on more advanced cyber,

artificial intelligence, third party disruption

and change delivery. Involvement in

material IT change projects will continue

to ensure resilience by design is considered

as the Group continues to grow and evolve.

•

Continue to drive process simplification

and automation in third party risk

management to on-board suppliers

quickly but safely and ensure in-life service

delivery meets expectations and emerging

risks are mitigated.,

•

Continue to accelerate investment in

digital enhancements across the Group,

including tools to manage third party risk,

and automation of key controls.

•

The Group will enhance intermediary

oversight through automation and

analytics to identify emerging intermediary

risks in real time, while fully integrating

intermediary management into the wider

third-party risk framework to strengthen

operational resilience and compliance.

FINANCIAL STATEMENTS

CLIMATE REPORT

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STRATEGIC REPORT

121

Shawbrook Group plc

Annual Report and Accounts 2025

Top risks

Technology, information and cyber security risk

Overview

The cyber threat remains significant and high profile across

all industries. Cyber security and information risk continues

to be a focus area for regulators and is increasingly assessed

as an integral part of operational resilience. This includes

an increase in public awareness on cyber risk in the face

of increasingly targeted, destructive ransomware attacks

experienced over recent years in the market.

Information and cyber security risk is further heightened

by the continued conflict in Ukraine and the Middle East.

Links to key performance metrics

•

Loan book

•

Customers served

•

Cost to income ratio

•

CET1 capital ratio

•

Total capital ratio

How this could impact our

strategy or business model

•

Customer demand could exceed the Group’s

ability to provide highly reliable and widely

available systems and services, leading to

a fall in confidence and customer attrition.

•

The evolving nature and scale of criminal

activity could increase the likelihood and

severity of attacks on the Group’s systems.

•

Customer segment value and customer

trust could be significantly eroded by a

successful attack on the Group’s systems,

leading to a denial of access to systems,

a diversion of funds or the theft of

customer data.

How we manage this risk

•

The Group continually reviews its control environment for information

security to reflect the evolving nature of the threats to which the

Group is exposed.

•

The Group’s strategy for mitigating information security risk

is comprehensive, including: a documented cyber strategy,

ongoing threat assessments, regular penetration testing, the

wide deployment of preventative and detective controls and a

programme of cyber awareness education and training.

•

The Group continues to invest in its technology layer, including the

use of hybrid multi cloud computing resources to improve resilience

and the implementation of additional controls to support the

security of its core systems including continuous security monitoring

of critical third parties.

•

The Group has invested in additional Cyber Security focussed

resources to create a new Cyber Response Team. This has enabled

a more proactive approach and has provided the capacity to deliver

continuous security improvements in addition to providing the initial

support for any cyber event investigation. The team is managed by

the Head of Cyber Response, reporting directly into the CISO, with

technical security engineers in the broader CTO teams providing

expertise in Cloud, Systems & Network and Desktops.

•

In response to continued geopolitical tensions and the increase in

security threats, the Group’s Information Security team continues

to operate at a heightened state of awareness in response to

threat intelligence and security alerts. This includes regular

communications with employees to enhance vigilance and raise

cyber awareness and engagement with critical third parties to

understand their action plans in light of the increased risk.

Focus areas for 2026

•

Continue to invest in capabilities to

enhance the Group’s cyber resilience

position and reduce the exposure to a

cyber-attack. This includes performing

more cyber scenario testing with a focus

on higher severity impacts.

•

Continue to embed the Chief Technology

Office and information security controls

within the Group’s outsourcers and third

parties, utilising the Group’s third-party

security perimeter monitoring.

•

Continue to evaluate and deploy new and

emerging technology tools to identify and /

or mitigate cyber threats as well as to

increased awareness culturally.

•

Continue to mature the existing strong,

multi-faceted security testing programme,

with the addition of new tools and processes.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

122

Shawbrook Group plc

Annual Report and Accounts 2025

Top risks

Pace and scale of regulatory change

Overview

The prudential and conduct regulatory regimes are subject to change and could

lead to either an increase in the level and quality of financial resources or change

in policies and processes to meet regulatory requirements. The FCA continues to

prioritise the importance of effective culture and controls, and this is referenced

in their 2025 priorities.

In relation to financial risk, the final rules on the implementation of Basel 3.1

were published in 2025 with an implementation date of 1 January 2027.

The UK is entering a period of significant conduct regulatory flux. The combined

effect of the FCA’s work represents the most comprehensive recalibration of

retail lending regulation in over a decade. These initiatives collectively increase

compliance and conduct risk exposure through 2026, demanding greater agility

in governance, product oversight, and regulatory change management

The financial sector will also continue to embed climate risk regulation and

industry standards, which are subject to evolve over the coming years and will

form a key part of the business strategy. These include the expected impact of

ISSB regulations, which will require additional disclosures on the path to net zero

and interim targets. The PRA published SS5/25 which provided further guidelines

on its expectations for managing climate change.

In relation to non-financial risks, implementation of operational resilience and

third party and outsourcing regulations will continue, along with other high priority

regulatory initiatives as published in the Regulatory Initiatives Grid, including

regulatory reviews following the implementation of the new Consumer Duty.

Links to key performance metrics

•

Loan book

•

Cost to income ratio

•

CET1 capital ratio

•

Total capital ratio

How this could impact our

strategy or business model

•

An increase in minimum regulatory capital

requirements may directly impact on the

Group’s risk appetite and its ability to

support its lending to current and potential

future customers.

•

Changes in regulatory capital

requirements may lead the Group to

change its business mix, exit certain

business activities altogether, or not

expand in areas despite otherwise

attractive potential.

•

An increase in minimum regulatory capital

requirements may restrict distributions

on capital instruments. This may impact

upon the Group’s ability to issue new, or

refinance existing, capital instruments.

•

Frequent change in regulation could

also have wide ranging impacts beyond

financial resources reflected through

changes in internal policies and processes,

people and systems resources, product

offerings and the markets and customers

served by the Group

How we manage this risk

•

The Group engages with regulators, industry

bodies and advisors to actively engage in

consultation processes. The Group reviews

regulatory publications to assess their

implications for the business and oversees the

impact analysis through its horizon scanning

tools. Key regulatory updates are then cascaded

to relevant stakeholders throughout the business.

•

The Group restarted its programme to

implement Basel 3.1 on 1 January 2027.

•

The Group follows its prudential programme

to update its ICAAP, ILAAP, Recovery Plan and

Resolution Pack, and Solvent Exit Analysis and

considers the conclusions in the regular business

planning processes that have taken place during

the year.

•

Completion of £0.6 billion securitisation of

Buy to let and owner-occupied mortgages

originated by TML in May 2025 and completion

of a £0.3 billion securitisation of owner-occupied

mortgages originated through BML in December

2025 to further optimise the capital stack.

•

Following completion of the IPO, the Group

implemented mandatory role specific UK

Market Abuse Regulation (UK MAR) training

to cover insider dealing, unlawful disclosure,

market manipulation, and closed periods. The

Group maintained a number of controls from

its prior listing but has also updated its Pillar 3

disclosures and Task Force on Climate-related

Financial Disclosures (TCFD) to align with the

requirements of listed firms.

Focus areas for 2026

•

Basel 3.1 implementation in advance

of implementation on 1 January 2027

including the data requirements for an out

of cycle C-SREP.

•

Implementation of additional regulations to

reflect the Group’s status as a listed entity.

•

Ongoing stress testing of the Group’s

lending portfolios to quantify the impact

of any changes on the strategy and

business model.

•

Completion of the annual review of the

ICAAP and Recovery Plan and the Capital

Supervisory Review and Evaluation Process.

•

Ongoing monitoring of controls to support

compliance with the Consumer Duty and

the treatment of customers in Financial

Difficulty. Investment in the maturity

and automation of internal controls and

monitoring to support the Corporate

Governance Code.

•

Consideration of the Consumer Credit Act

reform, engagement in consumer duty

thematic reviews, consultation on the

motor finance commission redress scheme

and thematic review of mortgage lending

and affordability.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

123

Shawbrook Group plc

Annual Report and Accounts 2025

Top risks

Pace, scale of change and people risk

Overview

The Group needs to deliver a range of

strategic and regulatory related projects

over the duration of its 2026 plan in order to

deliver on its objectives. Failure to deliver the

required change may lead to disruptions in

the delivery of its objectives.

Sustainability is a key pillar of the Group’s

purpose-led strategy and reflects the

importance of sustainability, and equality,

diversity and inclusion (EDI) in driving the

long-term strategy and business model.

Links to key performance metrics

•

Loan book

•

Cost to income ratio

•

CET1 capital ratio

•

Total capital ratio

How this could impact our

strategy or business model

•

Delivering what customers need and in

the way that they want to engage with

the Group is essential to delivering the

Group’s objectives and failure to do this

may have an impact on originations,

customer retention and profitability.

•

People risk remains a key factor.

Improvement in technology continues

to create options for people to live and

work from a place of their choice and

firms that lag behind in their employee

value proposition might find it difficult

to attract the right talent.

•

Failure to protect employees and

promote mental health and wellbeing

could lead to higher absence and lead

to a reduction in employee engagement.

This in turn could impact upon the Group’s

ability to look after its existing customers.

•

A clear and purposeful sustainability

strategy is key to supporting long-term

sustainable performance, including

strong engagement from all employees.

How we manage this risk

•

The Group has further matured its technology and product change model in 2025,

centralising delivery within the Chief Technology Office, strengthening governance and risk

oversight, and embedding agile methodologies through an updated Change Delivery Policy.

•

Product Officers aligned to segments are now well established, with Product and

Technology teams fully integrated (including Engineering, QA and Delivery) to optimise

collaboration across Product, Data and Experience Design.

•

The Group continues to strengthen its employee value proposition through hybrid working,

expanded wellbeing support (including a wellbeing app and online GP access), workplace

assessments, and reasonable adjustments to attract and retain talent.

•

Employee engagement remains strong at 78% (October 2025), with ongoing focus on

EDI through the Sustainability Sub-Committee and external commitments such as the

Women in Finance Charter, Progress Together and the Business Disability Forum.

•

The Group partners with external organisations, including Saracens and the Saracens

Foundation, and Future First, to support community impact and improve opportunities

for disadvantaged young people.

Focus areas for 2026

•

The Group has organised its strategic

change priorities into a roadmap

through which to prioritise its

resources. Delivery of this roadmap is

key to the Group’s objectives and will

continue throughout 2026.

•

Continue to advance the digital

strategy through investment in people,

governance and delivery framework, and

technological resources to deliver the

Group’s objectives.

•

Continue to work with external partners

to further create opportunities to create

future leaders.

•

Continue to support colleagues with

leveraging AI safely in their roles.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

124

Shawbrook Group plc

Annual Report and Accounts 2025

Top risks

Financial crime

Overview

Financial crime is any kind of criminal conduct relating to

money or to financial services or markets. This includes any

offence involving:

•

fraud or dishonesty;

•

misconduct in, or misuse of information relating to,

a financial market;

•

handling

the proceeds of crime; or

•

the financing of terrorism.

Although the risk has always been present in the financial

services industry, the increased use of digital channels has

elevated the risk profile. With the development of technology,

the type and impact of financial crime activities is likely to

increase over the coming years.

Links to key performance metrics

•

Loan book

•

Cost to income ratio

How this could impact our

strategy or business model

•

An inadequate control environment for

financial crime could lead to increased

operational losses, credit impairment,

increased manual reviews and potentially

regulatory enforcement, restrictions

on business growth and acquisitions,

penalties and/or censure.

•

The reputational damage associated

with financial crime could cause loss of

customers and intermediaries, impacting

the Group’s revenues and financial position

and/or regulatory standing.

•

The current hybrid working environment

and the transition of resources to new

work activities may impact the

effectiveness of existing controls and

increase internal fraud opportunities.

How we manage this risk

•

The Group continues to enhance its control environment with

respect to financial crime. This is closely monitored by the Non-

Financial Risk Oversight Committee, ExRC, and Risk Committee.

•

An automated customer due diligence and in life management tool

is now fully embedded. The tool provides enhanced financial crime

management information and is supported by control testing.

•

The Group conducts a Group-wide financial crime risk assessment

to assess compliance with Group policies. This focuses on the

following risk categories: money laundering and terrorist financing

risk, bribery and corruption risk, sanctions risk, tax evasion risk and

fraud risk.

•

The Group uses a combination of mandatory reads of policy, online

training and communications to increase awareness of best practice.

Focus areas for 2026

•

Continue to focus on adherence to

economic sanctions and the shifting

regulatory environment, in line with new and

updated UK financial crime regulations.

•

Monitor the increasing complexity of

financial crime threats and any potential or

actual changes to the legislative framework

to manage the emerging threats.

•

Fully integrate subsidiaries into the Group

Financial Crime Framework ensuring

enhanced controls, resources and

automation are in place to mitigate the risk

of regulatory breach. Continue to leverage

the capabilities of the business intelligence

platform to ensure effective fraud and

financial crime management information

across the Group enabling identification

and monitoring of key trends and better

support impacted customers. Continue to

invest in relevant technology to ensure our

financial crime framework remains relevant

to the risks faced by the Group.

FINANCIAL STATEMENTS

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STRATEGIC REPORT

125

Shawbrook Group plc

Annual Report and Accounts 2025

Top risks

Climate risk

Overview

Climate change and society’s response to it, presents

financial risks which impact the Group’s objectives. The risks

arise through two primary channels: the physical effects of

climate change and the impact of changes associated with

the transition to a lower carbon economy.

Climate risk is an ongoing risk and a continued area of focus

for the Group. The impact of climate risk on the Group’s

policies, customers, markets and products will be closely

linked to the UK Government’s policies on the transition to

Net Zero and how other financial institutions embed climate

risk in their business models.

The PRA published SS5/25 to update supervisory statement

SS3/19 in December 2025 which sets out its expectations for

firms in relation to the management of climate risk.

Links to key performance metrics

•

Loan book

•

CET1 capital ratio

•

Total capital ratio

How this could impact our

strategy or business model

•

Physical risks could lead to real impacts

on the economy through business disruption,

asset destruction and migration. This may

drive market and credit losses to the Group

through lower property and corporate

asset values, lower household wealth and

lower corporate profits. It may also result

in potential for litigation where products do

not deliver good outcomes for customers

or there is a risk of greenwashing.

•

The transition to a lower carbon

economy could lead to lower growth

and productivity and the potential for

operational risks and underwriting losses.

•

The transition to a low carbon economy

presents an opportunity for the Group and

inadequate preparations or delayed actions

could impact on the Group’s reputation

with investors and the market, presenting

a strategic risk to the Group through

adverse selection.

How we manage this risk

•

The Group considers the embedding of climate related matters to

be a key initiative and, as such, has appointed the Chief Executive

Officer and Chief Risk Officer as the responsible executives to

oversee delivery of the Climate Change Plan.

•

Climate risk is a principal risk in the RMF, with a focus on high

materiality areas including strategic risk and credit risk, particularly

within the Real Estate and Retail Mortgage Brands segment.

•

The Group has developed a proportionate approach to climate

change in line with the requirements of SS3/19 and focuses its

assessment on term loans in the Commercial and Retail segments.

•

The group has delivered £740m of sustainability lending in 2025

leading to a total of £1.8 billion over the period 2023 to 2025.

•

The Group has partnered with leading climate data providers

and consultancies to develop its understanding of physical

and transition risk and has used this to develop its risk appetite

statement and measures together with metrics, measures and

sustainability required disclosures.

•

During 2025, the Group has continued tracking lending emissions

measures within its Real Estate and Retail Mortgage Brands

businesses and has completed the design of a PCAF aligned

methodology for an emissions intensity baseline for SME lending for

the first time. The Group has also further developed its quantitative

scenario analysis for its Commercial and Retail segments and has

included a climate risk assessment within its ICAAP together with

establishing a climate base case.

•

The Group has enhanced its collateral and valuation policy,

particularly in the application of physical risk and where models

are used to support the valuation.

Focus areas for 2026

•

Extending climate measurement into

all lending within scope of the Group’s

proportionate approach to climate

change. Further embed climate risk into

its lending policy and strategy.

•

Continue to consider the Group’s approach

to support financing to a low carbon

economy and how those plans align to

meeting net zero targets.

•

Deliver towards the £2 billion of sustainable

finance target for the period 2026 to 2028.

•

Delivery of a PRA SS5/25 implementation

plan by June 2026 and ongoing monitoring

of the FCA consultation on ISSB-aligned

reporting requirements for listed companies.

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Emerging risks

Artificial Intelligence (AI)

Overview

Artificial Intelligence (AI), including generative AI, is rapidly

advancing and is being utilised more widely across the

financial services industry. Shawbrook supports innovation

and recognises the value of AI and machine learning in

improving pricing, credit, and operational efficiency. However,

AI has the potential to heighten risks to the Group’s objectives

if not properly governed or data is inadequately secured.

Links to key performance metrics

•

Loan book

•

Cost to income ratio

•

Profit before tax

•

Earnings per share

•

CET1 capital ratio

•

Total capital ratio

How this could impact our

strategy or business model

•

AI has the potential to improve operational

efficiency, enhance the credit process, and

improving pricing.

•

AI could be used by fraudsters to

impersonate customers leading to

additional operational losses. It could

also lead to behavioural change which

could have implications for credit risk,

and internal risks linked to uncontrolled

or inappropriate use of AI capabilities

across the Group.

How we manage this risk

•

Shawbrook has established a responsible AI policy, which controls

the use and deployment of AI technology across the Group.

•

The Group has expanded its model risk management framework

to include AI and machine learning (ML) and all applications are

reviewed as part of a specific Model Risk Oversight Committee

which also draws membership from the Chief Compliance Officer

and the Data Protection Officer.

Focus areas for 2026

•

The Group is rolling out GPT licenses

to all staff in a controlled environment

to manage the risk of data loss through

the use of AI.

•

The Group is actively managing a

number of initiatives using AI with an

element of a human in the loop to

ensure consistency of outcomes whilst

leveraging efficiency benefits.

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Principal risks

Principal risk

Definition

Principal sources of exposure

Credit risk

(Audited)

See pages 130 - 159

The risk that a borrowing client or treasury counterparty fails to repay some, or all, of

the capital or interest advanced to them, due to lack of willingness to pay and/or lack of

ability to pay. This can include credit risks that materialise during the life of the asset such

as refinance risk or elevate due to deteriorating security/collateral value.

Credit risk can be further divided into customer credit risk (from core lending activity)

and treasury credit risk (from treasury activity).

Credit risk also includes credit concentration risk, which is the risk of exposure to particular

groups of customers, sectors or geographies that, uncontrolled, may lead to additional

losses that the Shareholder or the market may not expect.

The principal source of customer credit risk is the Group’s loans and advances to customers.

Treasury credit risk exposure is limited to short-term deposits placed with leading UK banks,

repo and reverse repo exposures and high-quality liquid assets purchased for inclusion in

the Group’s liquidity buffer.

Market, liquidity

and capital risk

(Partially audited)

See pages 160 to 171

Market risk:

The risk of financial loss through unhedged or mismatched asset and liability positions

that are sensitive to changes in interest rates or currencies.

Exposure to market risk arises from the Group’s core activities of offering loans and

deposits to customers.

All financial assets held by the Group are non-trading.

Liquidity risk:

The risk that the Group is unable to meet its current and future financial obligations as

they fall due and maintain stakeholder confidence or is only able to do so at excessive cost.

Liquidity risk includes funding risk, which is the risk that the Group is unable to maintain

diverse funding sources and manage retail funding risk that can arise from concentrations

of higher risk deposits.

The principal source of liquidity risk is the Group’s retail and wholesale deposits, as well

as affinity partnerships and bilateral/public securitisations.

Capital risk:

The risk that the Group has insufficient quantity and quality of capital to absorb losses

over the cycle, cover regulatory requirements and/or to support its own growth plans.

Exposure to capital risk could arise due to a depletion of the Group’s capital resources

as a result of the crystallisation of any of the risks to which it is exposed or an increase

in minimum capital requirements.

Principal risks refer to the key risks the Group is exposed to. Policies and associated standards are maintained to support principal risks and provide guidance on how to achieve strategic objectives whilst

managing the risk within defined risk appetite limits. The Group has identified eleven principal risks. These are summarised in the following table and signposts are provided to indicate where additional information

can be found. Oversight of the Group’s principal risks is outlined on page 113.

Certain information in the principal risks section is audited. Sections that are specifically marked as ‘audited’ are covered by the Independent Auditor’s Report starting on page 207. All other sections are unaudited.

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Principal risks

Principal risk

Definition

Principal sources of exposure

Operational risk

See page 172

The risk of loss resulting from inadequate or failed internal processes, people, data and management

information availability, system failures, or from external events.

The principal sources of operational risk, as per the year-end risk and control self-assessment, are

data, information, third-party suppliers and process execution.

Technology

and cyber risk

See page 173

The risk of loss arising from disruption to a business service or process due to an IT asset

or service becoming unavailable or due to malicious activity (including a cyber-attack).

The risk to business objectives or future growth trajectory by failing to ensure that system

requirements are aligned and fit for purpose.

The principal sources of technology and cyber risk are technology availability and infrastructure risk.

Strategic risk

See page 174

The risk that the Group is unable to meet its objectives through the inappropriate selection or

implementation of strategic plans. This includes the ability to ensure that the proposition, products and

services remain relevant, the embedding of appropriate governance, change prioritisation, management

of external partnerships and successful embedding of equality, diversion and inclusion (EDI).

The principal sources of strategic risk are lending growth, governance, management of partnerships

and products and propositions.

Transformation risk

See page 175

The risk that the Group is unable to effectively deliver or implement business change and fails to

appropriately manage change governance, prioritisation or oversight.

The principal sources of transformation risk relate to ineffective governance / oversight, inadequate

scope, lack of appropriate resourcing, increased delivery timelines, reduced quality of delivered

products and increased levels of spend.

Conduct risk

See page 176

The risk that the Group’s behaviour will result in poor customer outcomes through the delivery of the

Group’s products, propositions and services.

Conduct risk can manifest itself in a variety of ways including misconduct by employees, culture, the

provision of products and services that fail to meet customers’ needs in a fair manner, and failure to

address customer detriment quickly and fairly.

Compliance and

regulatory risk

See page 177

The risk of regulatory enforcement and sanction, material financial loss, or loss of reputation the

Group may suffer as a result of its failure to identify and comply with applicable laws, regulations,

codes of conduct and standards of good practice.

The Group conducts its activities in a highly regulated market, and the principal sources of exposure

are linked to its lending and savings activities, data privacy, legal risk, and regulatory management.

Climate risk

See page 178

The risk of financial loss, or loss of reputation, as a result of the Group’s failure to successfully embed

physical risk, transition risk, litigation risk and relevant industry standards.

The principal sources of exposure relate to financial and operational risks arising from physical risks,

and the transition risk to a lower carbon economy within its lending portfolios.

Financial crime risk

See page 179

The risk that the Group’s processes may be used to commit financial crime.

Financial crime risk arises when the Group’s systems and controls are circumvented for the purposes

of perpetrating financial crime, including bribery and corruption, money laundering, sanctions, tax

evasion, and the financing of terrorist activity.

Model risk

See page 180

The risk of financial loss due to the failure to appropriately design, implement, monitor, validate,

and use of models for their intended purpose.

The principal sources of exposure to model risk include the implementation of credit strategy in the

lending portfolios, the risk of inadequate impairment coverage arising, and reputation risk arising from

model design and implementation, model governance, and model usage.

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Managing credit risk

(audited)

Key aspects relating to the management of credit risk

are the implementation of robust credit risk approval

processes and the execution of credit monitoring

processes. These are detailed further below.

Credit risk approval processes

To manage credit risk, the Group operates a

hierarchy of lending authorities based principally

upon the size of the aggregated credit risk

exposure to counterparties, groups of connected

counterparties or, where applicable, a portfolio

of lending assets that are subject to a single

transaction. In addition to maximum amounts of

credit exposure, sole lending mandates may stipulate

sub-limits and/or further conditions and criteria.

During the year ended 31 December 2025, the Group

continued to implement new controls to support

the management of credit risk. These included

the implementation of additional early warning

indicators to support the identification of potential

problem loans, key portfolio review meetings and

the implementation of additional processes to

support capacity planning in collections and the

non-performing loans team to support the evolving

economic environment. The Group implemented

a new end to end CMP within the Commercial

segment and further implemented its risk

distribution capability to support additional lending

to existing customers through credit insurance. The

Group also completed the acquisition of ThinCats

to expand the Group’s SME portfolio and provided

access to a proprietary credit grading and LGD

model for SME exposures in this segment.

Lending is advanced subject to the Group lending

approval policy and specific credit criteria. When

evaluating the credit quality and covenant of the

borrower, significant emphasis is placed on the

nature of the underlying collateral. This process

also includes the review of the Board’s appetite

for concentration risk.

The Group is a responsible lender, and affordability

remains a key area of focus for the Group. The

Group’s approach to affordability is set out in the

Group’s affordability policy, which is embedded

within each of the customer segments lending

guides and systems. This policy has been updated

several times to ensure that it remains appropriate

in the current environment and adequately reflects

the increase in inflation, interest rate changes and

expenditure updates seen during the year. The Group

also uses a number of external systems to check

affordability and has the ability to refer to Open

Banking information, subject to policy and customer

consent. Open Banking is mandatory for certain

lending within the Consumer Finance business.

Credit monitoring

Approval and ongoing monitoring controls are

exercised both within the customer segments

and through oversight by the Group’s credit

risk function. This applies to both individual

transactions, as well as at the portfolio level,

by way of monthly credit information reporting,

measurement against risk appetite limits and

testing through risk monitoring reviews.

The Group’s risk function oversees collections

and arrears management processes, which are

managed internally or by selected third parties.

The Group has also implemented cloud contact centre

technology that uses AI to increase the Group’s data-

driven capability to support early identification of

potential problem loans and identify vulnerability.

Throughout 2025, the Group continued to invest in its

collection’s strategies and potential problem loan

management teams to ensure that the Group is well

positioned for a more challenging environment.

Impairment of financial assets (audited)

To reflect the potential losses that the Group might

experience due to credit risk, the Group recognises

impairment provisions on its financial assets in the

financial statements. In accordance with the Group’s

accounting policy (Note 7 of the Financial Statements),

impairments are calculated using a forward-looking

ECL model. ECLs are an unbiased probability-weighted

estimate of credit losses determined by evaluating a

range of possible outcomes.

The Group calculates ECLs and recognises a ‘loss

allowance’ in the statement of financial position

for its financial assets measured at amortised cost

and at fair value through other comprehensive

income (FVOCI) and for its loan commitments. At

31 December 2025, the Group recognised a provision

of £0.3 million for lending attached to its lending

pipeline where there is a probability of completion.

The following sections provide additional

information regarding the measurement and

calculation of ECLs, the application of judgemental

adjustments to modelled ECLs, analysis of the

loss allowance recognised in the statement of

financial position and an assessment of the critical

accounting judgements and estimates associated

with the impairment of financial assets.

Principal risks: Credit risk

In the following sections, information under

headings marked as ‘audited’ is covered

by the Independent Auditor’s Report.

All other information is unaudited.

This section specifically provides

information about:

Managing credit risk

Impairment of financial assets

Exposure to credit risk

Concentrations of credit risk

Use of collateral to mitigate

credit risk

Forbearance

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Principal risks: Credit risk

Measurement of expected credit

losses

(audited)

Measurement of ECLs depends on the stage the

financial asset is allocated to. Stage allocation is

based on changes in credit risk when comparing

credit risk at initial recognition to credit risk at the

reporting date, as follows:

•

Stage 1:

when a financial asset is first recognised

it is assigned to Stage 1. If there is no significant

increase in credit risk (SICR) from initial recognition

the financial asset remains in Stage 1. For financial

assets in Stage 1, a 12-month ECL is recognised.

•

Stage 2:

when a financial asset shows a SICR it

is moved to Stage 2. A financial asset in Stage 2

can be ‘cured’ and reclassified back to Stage 1

when there is no longer a SICR and any probation

period has been completed. For financial assets

in Stage 2, a lifetime ECL is recognised.

•

Stage 3:

when there is objective evidence of

impairment and the financial asset is considered

to be in default, or otherwise credit-impaired, it

is moved to Stage 3. A financial asset in Stage

3 can be ‘cured’ and reclassified back to Stage

2 when it is no longer in default, or otherwise

credit-impaired, and any probation period has

been completed. For financial assets in Stage 3,

a lifetime ECL is recognised.

For loan commitments, where the loan commitment

relates to the undrawn component of a facility,

it is assigned to the same stage as the drawn

component of the facility.

In relation to the above:

•

Lifetime ECL is defined as ECLs that result from

all possible default events over the expected

behavioural life of a financial instrument.

•

12-month ECL is defined as the portion of lifetime

ECL that will result if a default occurs in the

12 months after the reporting date, weighted

by the probability of that default occurring.

Assessing whether an asset shows a SICR and

determining whether an asset is considered to

be in default, or otherwise credit impaired, or is

considered to be ‘cured’, are all identified as areas

involving critical judgement and are detailed

further starting on page 144.

Financial assets may be separately allocated as

purchased or originated credit-impaired (POCI).

POCI assets are financial assets that are credit-

impaired on initial recognition. Once a financial

asset is assigned as POCI, it remains in this

category until derecognition irrespective of its

credit quality. For POCI assets, the ECL is always

measured on a lifetime basis. ECLs are only

recognised (or released) to the extent the ECL has

changed from the amount of credit impairment

recognised on initial recognition.

Calculation of expected credit

losses

(audited)

ECLs are the discounted product of the probability

of default (PD), exposure at default (EAD) and loss

given default (LGD). Each of these components are

detailed further below.

ECLs are determined by projecting the PD, EAD

and LGD for each future month for each exposure.

The three components are multiplied together and

adjusted to reflect forward-looking information.

This calculates an ECL for each future month, which

is then discounted back to the reporting date

and summed. The discount rate used in the ECL

calculation is the current effective interest rate, or

the original effective interest rate if appropriate.

Probability of default

PD is an estimate of the likelihood of default over

a given time horizon. A default may only happen

at a certain time over the assessed period if the

facility has not been previously derecognised and

is still in the portfolio.

In relation to loans and advances to customers

and loan commitments, the PD is based on

internal and external individual customer

information that is updated for each reporting

period. The Group operates both a model-based

PD and a slotting approach.

The model-based PD is used for high volume

portfolios such as those in Consumer Finance

and for mortgages within Real Estate and Retail

Mortgage Brands. Statistical modelling techniques

are used to determine which borrower and account

performance characteristics are predictive of default

behaviour based on supportable evidence observed

in historical data that is related to the group of

accounts to which the model will be applied.

The slotting approach has been developed and

implemented for the low volume and high value

obligors in SME and large ticket Real Estate loans.

Slotting in Real Estate lending applies to facilities

over a set threshold. Both processes deliver a

point-in-time measure of default.

During 2025, the Group developed a new credit

grading model for all Buy to Let mortgages originated

through Real Estate and the Retail Mortgage

Brands segment. This means that a coverage

ratio method is now only used for certain other

acquired mortgages in Real Estate. A credit grading

approach has also been embedded for motor finance

loans originated through JBR and through a

platform loan agreement in Consumer Finance.

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Principal risks: Credit risk

For the model-based portfolios, the measure of

PD is based on information available to the Group

from credit reference agencies and includes

information from a broad range of financial

services firms and internal product performance

data and is applied at the borrower level. For

the slotted portfolios, the measure of PD relates

to attributes relating to financial strength,

political and legal environment, asset/transaction

characteristics, strength of sponsor and security.

The Group has implemented new slotting models

for each of its SME lending categories in 2025. The

Group does not expect this to lead to a material

impact in ECL and will take 12 months to cover all

loans through the annual review, with any impact

considered a 2025 event and implemented through

a Post Model Adjustment (PMA).

For each asset class, the Group has a proprietary

approach to extrapolate its best estimate of the

point-in-time PD from 12 months to behavioural

maturity to derive the lifetime PD. This uses

economic response models that have been

developed specifically to forecast the sensitivity

of PD to key macroeconomic variables.

Exposure at default

EAD is an estimate of the exposure at a future

default date, taking into account expected

changes in the exposure after the reporting date,

including repayments of principal and interest,

whether scheduled by contract or otherwise,

expected drawdowns on committed facilities,

and accrued interest from missed payments.

EAD is designed to address increases in utilisation

of committed limits and unpaid interest and fees

that the Group would ordinarily expect to observe

to the point of default, or through to the point of

realisation of the collateral.

The Group determines EADs by modelling the range

of possible exposure outcomes at various points in

time, corresponding to the multiple scenarios.

Loss given default

LGD is an estimate of the loss arising in the case

where a default occurs at a given time. It is based

on the difference between the contractual cash

flows due and those that the lender would expect

to receive, including from the realisation of any

collateral. It is usually expressed as a percentage

of the EAD.

In relation to loans and advances to customers and

loan commitments, the Group segments its lending

products into smaller homogenous portfolios

based on the Group’s lending segments as detailed

on the following page. In all cases the LGD or its

components are tested against recent experience

to ensure that they remain current.

•

Real Estate and Retail Mortgage Brands:

the LGD

is generally broken down into two parts. These

include the Group’s estimate of the probability

of possession given default (PPGD), combined

with the loss given possession. The Group has

continued to focus on the proportion of accounts

that have not cured over an emergence period,

rather than the proportion of accounts that enter

possession in line with market best practice.

During 2025, the Group further segmented

its models for PPGD by LTV. The loss given

possession is based on the Group’s estimate of

a shortfall, based on the difference between the

property value after the impact of a forced sale

discount plus a scenario specific market value

decline and sale costs, and the loan balance

with the addition of unpaid interest and fees and

any first charge claims with regards to second

charge residential mortgages.

•

SME:

the LGD is based on experience of losses

on repossessed assets where the Group

has collateral, or management judgement

in situations where the Group has minimal

experience of actual losses. For cases in Stage 3,

the Group uses an individual impairment that

considers a weighted average of alternative

recovery options.

•

Consumer Finance:

the LGD for unsecured loans

uses an estimate of the expected write-off

based on an established debt sale agreements

supplemented by analysis of recoveries for loans

terminated or charged-off and the expected

write-off for loans held for deceased and

vulnerable customers or customers where there

are outstanding complaints. There is no recovery

portfolio. For motor finance the LGD reflects the

shortfall expected following the recovery of the

asset and net of any costs of recovery.

Basis of calculation

A number of complex models are used in the

calculation of ECLs, which utilise both the Group’s

historical data and external data inputs. The

Group uses a bespoke calculation engine to

estimate ECLs on either a collective or individual

basis depending on the nature of the underlying

portfolio and financial instruments. The collective

assessment groups loans with shared credit risk

characteristics through lines of business. The

engine captures model outputs from the 12-month

PD, Lifetime PD, LGD, EAD, macroeconomic models

and staging analysis to calculate an estimate for

each account.

Asset classes where the Group calculates ECLs

on an individual basis include:

•

Stage 3 and POCI assets where individual

impairments are reviewed and approved by the

customer segment specific impairment committees

and Group Watch and Impairment Committee;

•

large and unique slotted Stage 1 and Stage 2

loans in the Commercial segment; and

•

treasury and interbank relationships (such as

cash and balances at central banks, loans and

advances to banks and investment securities).

Asset classes where the Group calculates ECLs

on a collective basis include:

•

Stage 1 and Stage 2 loans and certain Stage

3 exposures within the Commercial segment

(except as identified above);

•

mortgages originated through Retail Mortgage

Brands; and

•

all loans within Consumer Finance.

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Principal risks: Credit risk

Using forward-looking information in the calculation

of expected credit losses

ECLs are required to reflect an unbiased probability-weighted

range of possible future outcomes. In order to do this, the Group

has developed a proprietary approach to assess the impact of the

changes in economic scenarios on the obligor level ECL. The Group

has mapped each asset class to an external long-run benchmark

series that is believed to behave in a similar way to the Group’s

portfolio over the economic cycle. For some low default portfolios,

internal data has been used to support this assessment.

The Group has developed econometric models to establish how

much of the historical series can be explained by movements in

UK macroeconomic factors. The models deliver an estimate of the

impact of a unit increase in default arising from a 1% increase in the

underlying macroeconomic factors.

The models are developed in line with the Group’s Model Risk

Governance Framework and are subject to review at least every six

months. The models are tested across multiple sets of scenarios

to ensure that they work in a range of scenarios, the output of the

scenarios is a series of scalars by asset class and a scenario that

can be applied to the underlying PDs to deliver a forward-looking

ECL. During 2025, the Group implemented additional benchmarking

to ensure that its economic response models were sufficiently

sensitive to macroeconomic factors with any additional risk

included as a PMA pending the development of new models.

The Group has developed a proprietary approach to extrapolating

its 12-month PDs over the behavioural maturity of the loans that the

scalars can be applied to. The nature of the scenarios means that

there will be an impact on both the PD and the number of obligors

moving from Stage 1 to Stage 2 in line with the SICR criteria.

Judgemental adjustments to modelled ECLs

(audited)

Limitations in the models used to calculate ECLs may be identified

through the ongoing performance monitoring and assessment and

validation of the outputs from the models. Consequently, in certain

circumstances, the Group makes judgemental adjustments to the

modelled output to ensure the overall loss allowance recognised

adequately reflects the risk in the portfolio.

Judgemental adjustments take the form of post-model adjustments

(PMAs) and overlays:

•

Post model adjustments:

PMAs are calculated at a granular level

through data driven analysis to take into account particular

attributes of the portfolio that have not been adequately captured

by the models.

•

Overlays:

overlays are adjustments to the modelled outputs that

do not meet the definition of a PMA. These include adjustments

that are not calculated through modelled or data driven analysis.

All judgemental adjustments are carefully monitored and are

reviewed and approved at least every six months by the Group

Impairment Committee, ExRC, and the Audit Committee, along with

other key impairment judgements. Where appropriate, the attributes

that drive the judgemental adjustments are incorporated into future

model development.

In the current environment, judgemental adjustments have the

potential to significantly impact the loss allowance recognised

and involve the application of significant management judgement.

Judgemental adjustments to modelled ECLs are therefore

considered to be an area of critical judgement (see page 144).

During the period the Group updated its PMA that reflects the risk of

future interest rate rises at the maturity of the mortgage product.

The PMA is assessed over a 36-month period in line with industry best

practice. The overall impact is due to a reduction in the number of

customers at risk reflecting the interest rate environment and product

transfers. For Buy to Let the impact also reflects the benefit of future

rental growth in the assessment.

The PMA for segment risk has increased by £0.3m from £2.7m to

£3.0m in the reporting period. Segment risk represents specific areas

of the lending segments where the models would not expect to pick

up the additional risk. The increase in Retail Mortgage Brands is to

reflect the implementation of an LTV based PPGD of £0.6m, offset

by the removal of the PMA for unsatisfied arrears (£0.1m) which is

addressed within the PD calibration. The reduction in Real Estate is

due to the removal of a PMA for slotting effectiveness. The increase

in SME of £0.3m reflects a reduction in uncollateralised lending

during the period offset by a new PMA for the implementation of a

new slotting model for Development finance which was calibrated

to a higher PD. The reduction of £0.1m in Consumer Finance reflects

a reduction in the test and learn segment as the loans have

continued to amortise or redeem.

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A new PMA of £0.9 million for Retail Mortgage Brands to reflect an increase in economic sensitivity in the

downside and severe downside scenarios in our new benchmarking group when compared to all market

UK Finance data.

As at 31 December 2025

As at 31 December 2024

Commercial

Retail

Commercial

Retail

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

Fixed rate

expiry

0.2

0.4

0.2

0.9

1.1

Segment risk

1.7

0.7

0.6

3.0

0.4

1.4

0.8

0.1

2.7

Economic

sensitivity

0.9

Total

judgemental

adjustments to

modelled ECLs

0.2

1.7

0.7

1.7

4.3

0.6

1.4

0.8

1.0

3.8

Analysis of the loss allowance recognised

(audited)

Analysis of loans and advance to customers and loss allowance

A summary of the loss allowance recognised in the statement of financial position in relation to each

financial asset class is provided in the following tables. Except where noted, the loss allowance is

recognised as a deduction from the gross carrying amount of the asset. Shawbrook POCI loans in

combination with ThinCats POCI loans have been presented separately from Stage 3 loans as at

31 December 2025. Accordingly, all prior-year comparatives, where POCI balances were previously

included within Stage 3, have been restated to align with the current year’s presentation.

Modelled

ECL

£m

Judgemental

adjustments

(See page 133)

£m

Total

£m

Of which:

As at 31 December 2025

Stage 1

£m

Stage 2

£m

Stage 3

£m

POCI

£m

Cash and balances at central banks

<0.1

Loans and advances to banks

<0.1

Loans and advances to customers at

amortised cost

186.4

3.0

189.4

59.8

31.5

93.3

4.8

Loans and advances to customers at

FVOCI (recognised in FVOCI reserve)

12.1

1.3

13.4

5.7

3.0

4.7

Investment securities

<0.1

Loan commitments (recognised as

a provision)

0.6

0.5

0.1

Total loss allowance recognised

199.1

4.3

203.4

66.0

34.6

98.0

4.8

Modelled

ECL

£m

Judgemental

adjustments

(See page 133)

£m

Total

£m

Of which:

As at 31 December 2024

Stage 1

£m

Stage 2

£m

Stage 3

(restated)

£m

POCI

£m

Cash and balances at central banks

<0.1

Loans and advances to banks

<0.1

Loans and advances to customers

at amortised cost

156.6

2.8

159.4

48.0

33.4

73.2

4.8

Loans and advances to customers at

FVOCI (recognised in FVOCI reserve)

11.0

1.0

12.0

6.6

2.5

2.9

Investment securities

<0.1

Loan commitments (recognised as

a provision)

0.6

0.5

0.1

Total loss allowance recognised

168.2

3.8

172.0

55.1

36.0

76.1

4.8

Principal risks: Credit risk

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

134

Shawbrook Group plc

Annual Report and Accounts 2025

2024 comparative report restated to show POCI separately from Stage 3 balance.

Principal risks: Credit risk

For loans and advances to customers at amortised cost, loans and advances to customers at fair value

through other comprehensive income (FVOCI), and loan commitments, additional analysis of the loss

allowance recognised is provided starting on pages 138, 141 and 143, respectively.

For cash and balances at central banks, loans and advances to banks and investment securities, the loss

allowance is immaterial, totalling less than £0.1 million in both reported years. Accordingly, no additional

analysis is provided.

The following tables provide a summary of the loss allowance recognised in the statement of financial

position in relation to loans and advances to customers. The increase in ECL is due to loan growth in all

segments, the acquisition of ThinCats and Playter, and the impact of loans migrating through the ECL

stages. Stage migration includes certain Development Finance loans originated in 2021 (£20.6m) and were

underwritten before the sharp increases in building costs and interest rates which impacted developers

from Q4 2022. These loans have continued to experience more challenges as they have been worked

out but outside of the loans currently in Stage 3 only 8% of the original lending remains. The increase is

offset by certain write-offs in SME lending and the completion of a £0.6 billion and a £0.3 billion OTD trade

consisting of loans originated through TML and BML that were derecognised.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

135

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Credit risk

Total loans and advances to customers

Commercial

Retail

As at 31 December 2025

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

Stage 1

7,080.4

3,797.5

963.2

4,036.7

15,877.8

Stage 2

380.6

421.6

75.7

504.1

1,382.0

Stage 3

202.3

167.2

14.8

176.8

561.1

POCI

13.9

20.4

1.3

4.7

40.3

Gross carrying amount

7,677.2

4,406.7

1,055.0

4,722.3

17,861.2

Stage 1

(11.8)

(31.2)

(16.4)

(6.6)

(66.0)

Stage 2

(4.3)

(17.3)

(8.9)

(4.1)

(34.6)

Stage 3

(34.1)

(49.4)

(6.7)

(7.8)

(98.0)

POCI

(4.2)

(0.1)

(0.4)

(0.1)

(4.8)

Loss allowance

(54.4)

(98.0)

(32.4)

(18.6)

(203.4)

Loss allowance coverage

Stage 1

0.2%

0.8%

1.7%

0.2%

0.4%

Stage 2

1.1%

4.1%

11.8%

0.8%

2.5%

Stage 3

16.9%

29.5%

45.3%

4.4%

17.5%

POCI

30.2%

0.5%

30.8%

2.1%

11.9%

Total loss allowance coverage

0.7%

2.2%

3.1%

0.4%

1.1%

Commercial

Retail

As at 31 December 2024

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

Stage 1

6,271.9

2,604.3

826.4

3,882.8

13,585.4

Stage 2

405.9

362.5

70.4

414.7

1,253.5

Stage 3 (restated)

184.3

187.2

14.8

153.9

540.2

POCI

14.2

5.1

4.0

5.7

29.0

Gross carrying amount

6,876.3

3,159.1

915.6

4,457.1

15,408.1

Stage 1

(10.1)

(21.3)

(16.4)

(7.3)

(55.1)

Stage 2

(6.2)

(15.3)

(11.0)

(3.5)

(36.0)

Stage 3 (restated)

(23.4)

(40.0)

(6.5)

(6.2)

(76.1)

POCI

(4.6)

(0.2)

(4.8)

Loss allowance

(44.3)

(76.8)

(33.9)

(17.0)

(172.0)

Loss allowance coverage

Stage 1

0.2%

0.8%

2.0%

0.2%

0.4%

Stage 2

1.5%

4.2%

15.6%

0.8%

2.9%

Stage 3 (restated)

12.7%

21.4%

43.9%

4.0%

14.1%

POCI

32.4%

3.9%

16.6%

Total loss allowance coverage

0.6%

2.4%

3.7%

0.4%

1.1%

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

136

Shawbrook Group plc

Annual Report and Accounts 2025

2024 comparative has been restated to show POCI separately from Stage 3 balance.

Principal risks: Credit risk

Additional analysis of loans and advances to customers at amortised cost

For loans and advances to customers at amortised cost, the loss allowance is £189.4 million (31 December 2024: £159.4 million). The loss allowance is recognised as a deduction from the gross carrying amount

of the asset (see Note 24 of the Financial Statements).

The following tables provide an analysis of loans and advances to customers at amortised cost by lending segment and the year-end stage classification:

Commercial

Retail

As at 31 December 2025

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

Stage 1

7,080.4

3,797.5

963.2

394.4

12,235.5

Stage 2

380.6

421.6

75.7

186.8

1,064.7

Stage 3

202.3

167.2

14.8

90.4

474.7

POCI

13.9

20.4

1.3

4.7

40.3

Gross carrying amount

7,677.2

4,406.7

1,055.0

676.3

13,815.2

Stage 1

(11.7)

(31.0)

(16.4)

(0.7)

(59.8)

Stage 2

(4.3)

(17.2)

(8.9)

(1.1)

(31.5)

Stage 3

(34.1)

(49.4)

(6.7)

(3.1)

(93.3)

POCI

(4.2)

(0.1)

(0.4)

(0.1)

(4.8)

Loss allowance

(54.3)

(97.7)

(32.4)

(5.0)

(189.4)

Carrying amount

7,622.9

4,309.0

1,022.6

671.3

13,625.8

Loss allowance coverage

Stage 1

0.2%

0.8%

1.7%

0.2%

0.5%

Stage 2

1.1%

4.1%

11.8%

0.6%

3.0%

Stage 3

16.9%

29.5%

45.3%

3.4%

19.7%

POCI

30.2%

0.5%

30.8%

2.1%

11.9%

Total loss allowance coverage

0.7%

2.2%

3.1%

0.7%

1.4%

Commercial

Retail

As at 31 December 2024

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

Stage 1

6,271.9

2,604.3

826.4

574.3

10,276.9

Stage 2

405.9

362.5

70.4

184.5

1,023.3

Stage 3 (restated)

184.3

187.2

14.8

91.5

477.8

POCI

14.2

5.1

4.0

5.7

29.0

Gross carrying amount

6,876.3

3,159.1

915.6

856.0

11,807.0

Stage 1

(10.1)

(20.8)

(16.4)

(0.7)

(48.0)

Stage 2

(6.2)

(15.2)

(11.0)

(1.0)

(33.4)

Stage 3 (restated)

(23.4)

(40.0)

(6.5)

(3.3)

(73.2)

POCI

(4.6)

(0.2)

(4.8)

Loss allowance

(44.3)

(76.2)

(33.9)

(5.0)

(159.4)

Carrying amount

6,832.0

3,082.9

881.7

851.0

11,647.6

Loss allowance coverage

Stage 1

0.2%

0.8%

2.0%

0.1%

0.5%

Stage 2

1.5%

4.2%

15.6%

0.5%

3.3%

Stage 3 (restated)

12.7%

21.4%

43.9%

3.6%

15.3%

POCI

32.4%

3.9%

16.6%

Total loss allowance coverage

0.6%

2.4%

3.7%

0.6%

1.4%

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

137

Shawbrook Group plc

Annual Report and Accounts 2025

2024 comparative has been restated to show POCI separately from Stage 3 balance.

Principal risks: Credit risk

The following table provides an analysis of loans and advances to customers at amortised cost by agreement type and the year-end stage classification:

As at 31 December 2025

Loan

receivables £m

Finance lease

receivables £m

Instalment

credit

receivables £m

Total

£m

Stage 1

11,423.8

20.8

790.9

12,235.5

Stage 2

1,035.8

0.9

28.0

1,064.7

Stage 3

453.6

0.5

20.6

474.7

POCI

40.3

Gross carrying amount

12,953.5

22.2

839.5

13,815.2

Stage 1

(55.6)

(0.1)

(4.1)

(59.8)

Stage 2

(30.7)

(0.1)

(0.7)

(31.5)

Stage 3

(87.7)

(0.4)

(5.2)

(93.3)

POCI

(4.8)

Loss allowance

(178.8)

(0.6)

(10.0)

(189.4)

Carrying amount

12,774.7

21.6

829.5

13,625.8

Loss allowance coverage

Stage 1

0.5%

Stage 2

3.0%

11.1%

2.5%

3.0%

Stage 3

19.3%

80.0%

25.2%

19.7%

POCI

11.9%

Total loss allowance coverage

1.4%

2.7%

1.2%

1.4%

As at 31 December 2024

Loan receivables

£m

Finance lease

receivables £m

Instalment

credit

receivables £m

Total

£m

Stage 1

9,544.4

21.3

711.2

10,276.9

Stage 2

1,006.8

0.8

15.7

1,023.3

Stage 3 (restated)

451.7

0.5

25.6

477.8

POCI

29.0

Gross carrying amount

11,031.9

22.6

752.5

11,807.0

Stage 1

(45.3)

(0.3)

(2.4)

(48.0)

Stage 2

(32.9)

0.0

(0.5)

(33.4)

Stage 3 (restated)

(66.4)

(0.4)

(6.4)

(73.2)

POCI

(4.8)

Loss allowance

(149.4)

(0.7)

(9.3)

(159.4)

Carrying amount

10,882.5

21.9

743.2

11,647.6

Loss allowance coverage

Stage 1

0.5%

1.4%

0.3%

0.5%

Stage 2

3.3%

0.0%

3.2%

3.3%

Stage 3 (restated)

14.7%

80.0%

25.0%

15.3%

POCI

16.6%

Total loss allowance coverage

1.4%

3.1%

1.2%

1.4%

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

138

Shawbrook Group plc

Annual Report and Accounts 2025

2024 comparative has been restated to show POCI separately from Stage 3 balance.

Principal risks: Credit risk

The following table provides an analysis of movements during the year in the loss

allowance associated with loans and advances to customers at amortised cost.

The table is compiled by aggregating the twelve individual monthly movement

tables for the loss allowance and carrying value of the loans. Transfers between

stages are deemed to have taken place where the loan is open at the start of the

month and remains open at the end of the month with the transition based on

the opening loss allowance or carrying amount, with all other movements shown

in the stage in which the asset is held at the end of the month. Where loans have

been added (including originations, purchases and acquisitions through business

combinations) or removed (including derecognitions and disposals) during the

year, the full year movement is reflected on the relevant addition/disposal row.

2025

2024

Stage 1

£m

Stage 2

£m

Stage 3

£m

POCI

£m

Total

£m

Stage 1

£m

Stage 2

£m

Stage 3

(restated)

£m

POCI

£m

Total

£m

As at 1 January

48.0

33.4

73.2

4.8

159.4

47.3

29.0

49.5

4.4

130.2

ECL charge/(credit) for the year

Transfer from Stage 1

(10.8)

10.5

0.3

(13.2)

12.9

0.3

Transfer from Stage 2

11.3

(34.1)

22.8

12.4

(35.5)

23.1

Transfer from Stage 3

0.6

13.7

(14.3)

8.0

7.3

(15.3)

New financial assets originated

or purchased

21.9

0.1

22.0

20.6

0.1

20.7

Financial assets derecognised

(excluding disposals)

(11.0)

(14.1)

(31.1)

(1.1)

(57.3)

(19.3)

(7.9)

(26.0)

0.2

(53.0)

Financial assets derecognised

on disposal

(0.1)

(0.4)

(0.5)

Changes in credit risk

(0.2)

22.1

39.7

1.1

63.1

(7.8)

27.5

41.6

0.2

61.5

Net ECL charge for the year

12.2

(1.9)

17.0

27.3

0.7

4.4

23.7

0.4

29.2

Other movements

Financial assets derecognised

on disposal

(0.4)

–

(0.4)

–

Other adjustments

–

3.1

–

3.1

–

Total other movements

(0.4)

–

3.1

–

2.7

–

Total movement in loss allowance

11.8

(1.9)

20.1

–

30.0

0.7

4.4

23.7

0.4

29.2

As at 31 December

59.8

31.5

93.3

4.8

189.4

48.0

33.4

73.2

4.8

159.4

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

139

Shawbrook Group plc

Annual Report and Accounts 2025

2024 comparative has been restated to show POCI separately from Stage 3 balance.

Principal risks: Credit risk

Movements in the gross carrying amount of loans and advances to customers at amortised cost during the year that

contributed to the changes in the associated loss allowance during the year are shown in the following table. The table

is compiled using the same methodology as described for the loss allowance movement table on the previous page.

2025

2024

Stage 1

£m

Stage 2

£m

Stage 3

£m

POCI

£m

Total

£m

Stage 1

£m

Stage 2

£m

Stage 3

(restated)

£m

POCI

£m

Total

£m

As at 1 January

10,276.9

1,023.3

477.8

29.0

11,807.0

9,281.0

997.5

322.0

30.1

10,630.6

Movements in gross carrying amount

Transfer from Stage 1

(1,150.4)

1,046.9

103.5

(1,128.5)

1,074.3

54.2

0.0

Transfer from Stage 2

564.7

(864.4)

299.7

538.1

(887.5)

349.4

0.0

Transfer from Stage 3

3.4

188.7

(192.1)

27.2

97.2

(124.4)

0.0

New financial assets originated

or purchased

5,232.5

0.7

18.5

5,251.7

3,865.5

7.0

10.8

3,883.3

Financial assets derecognised

(excluding disposals)

(2,207.8)

(257.0)

(147.9)

(3.2)

(2,615.9)

(1,770.9)

(217.8)

(73.6)

(8.7)

(2,071.0)

Financial assets derecognised

on disposal

(18.1)

(14.0)

(8.3)

(40.4)

(19.1)

(4.2)

(1.2)

(24.5)

Net changes in lending

(465.7)

(59.5)

(58.0)

(4.0)

(587.2)

(516.4)

(43.2)

(48.6)

(3.2)

(611.4)

Total movement in gross

carrying amount

1,958.6

41.4

(3.1)

11.3

2,008.2

995.9

25.8

155.8

(1.1)

1,176.4

As at 31 December

12,235.5

1,064.7

474.7

40.3

13,815.2

10,276.9

1,023.3

477.8

29.0

11,807.0

The net ECL charge for the year represents the amount recognised in the statement

of profit and loss within impairment losses on financial assets at amortised cost

(see Note 20 of the Financial Statements). An analysis of this charge by lending

segment is provided in the following table.

2025

£m

2024

£m

Real Estate

7.8

7.2

SME

20.6

18.9

Consumer Finance

(1.5)

3.8

Retail Mortgage Brands

0.4

(0.7)

Net ECL charge for the year

27.3

29.2

The net ECL charge in the current year reflects an increase in the loan book through

strong originations and the acquisition of ThinCats and Playter. The increase in SME

includes certain Development finance loans originated in 2021 (£20.6m) and were

underwritten before the sharp increases in building costs and interest rates which

impacted developers from Q4 2022. These loans have continued to experience more

challenges as they have been worked out but outside of the loans currently in Stage 3

only 8% of the original lending remains. The increase in Real Estate reflects book growth

and some stage migration and the release in consumer reflects the pivot towards

motor finance. The increase in Retail Mortgage Brands reflects an increase in the

loan book and includes the securitisation of loans originated by TML and BML

during the year.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

140

Shawbrook Group plc

Annual Report and Accounts 2025

Net changes in lending includes repayments, additional drawdowns and accrued interest.

2024 comparative has been restated to show POCI separately from Stage 3 balance.

Principal risks: Credit risk

Additional analysis of loans and advances to customers at FVOCI

For loans and advances to customers at FVOCI, the loss allowance is £13.4 million

(2024: £12.0 million). The loss allowance does not reduce the carrying amount of these assets,

which remain at fair value. Instead, the loss allowance is recognised in the FVOCI reserve.

The following table provides an analysis of loans and advances to customers at FVOCI

by year-end stage classification. All FVOCI loans are attributable to the Retail Mortgage

Brands

lending segment and all represent mortgage loan receivables.

2025

£m

2024

£m

Stage 1

3,642.3

3,308.5

Stage 2

317.3

230.2

Stage 3

86.4

62.4

POCI

Carrying amount

4,046.0

3,601.1

Stage 1

(5.7)

(6.6)

Stage 2

(3.0)

(2.5)

Stage 3

(4.7)

(2.9)

POCI

Loss allowance

(13.4)

(12.0)

Loss allowance coverage

Stage 1

0.2%

Stage 2

0.9%

1.1%

Stage 3

5.4%

4.6%

POCI

Total loss allowance coverage

0.3%

Loans originated from 1 January 2022 within Retail Mortgage Brands are considered under the Group’s originate

to distribute strategy. The following table provides an analysis of movements during the year in the loss allowance

associated with loans and advances to customers at FVOCI. The table is compiled in the same way as the amortised cost

table and reflects the same change in methodology for the current year.

2025

2024

Stage 1

£m

Stage 2

£m

Stage 3

£m

POCI

£m

Total

£m

Stage 1

£m

Stage 2

£m

Stage 3

£m

POCI

£m

Total

£m

As at 1 January

6.6

2.5

2.9

12.0

3.4

2.2

1.1

6.7

ECL charge/(credit) for the year

Transfer from Stage 1

(1.3)

1.2

0.1

(0.6)

0.5

0.1

Transfer from Stage 2

1.5

(5.2)

3.7

2.2

(4.0)

1.8

Transfer from Stage 3

0.1

3.2

(3.3)

1.0

1.5

(2.5)

New financial assets

originated or purchased

2.6

7.9

Financial assets derecognised

(excluding disposals)

(0.3)

(0.1)

(0.5)

(0.9)

Changes in credit risk

(1.8)

2.3

2.7

3.2

(6.0)

2.5

2.8

(0.7)

Net ECL charge for the year

0.8

1.4

2.7

4.9

3.6

0.5

2.2

6.3

Other movements

Financial assets derecognised

on disposal

(1.7)

(0.9)

(3.5)

(0.4)

(0.2)

(0.4)

(1.0)

Total other movements

(1.7)

(0.9)

(3.5)

(0.4)

(0.2)

(0.4)

(1.0)

Total movement in loss allowance

(0.9)

0.5

1.8

1.4

3.2

0.3

1.8

5.3

As at 31 December

5.7

3.0

4.7

13.4

6.6

2.5

2.9

12.0

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

141

Shawbrook Group plc

Annual Report and Accounts 2025

Excludes fair value adjustments for hedged risk recognised on loans and advances to customers.

Changes in credit risk includes changes resulting from net changes in lending, including repayments, additional drawdowns and accrued interest,

and changes resulting from adjustments to the models used in the calculation of ECLs, including model inputs and underlying assumptions.

Principal risks: Credit risk

The net ECL charge for the year represents the amount recognised in the statement

of profit and loss in the ‘impairment losses on financial assets’ line (see Note 20 of the

Financial Statements) and in the statement of comprehensive income in the ‘change in

loss allowance’ line.

The higher net ECL charge in the current period is predominantly attributable to growth

in the loan book due to originations and portfolio seasoning which is reflected in an

increase in arrears particularly in loans originated through BML. Changes in the economic

outlook included within the calculation of ECLs is another contributory factor. The

other movements reflect the loans derecognised as part of a securitisation which were

reclassified as part of the overall recognition of a gain on sale in the income statement.

Movements in the carrying amount of loans and advances to customers at FVOCI during

the year (excluding fair value adjustments for hedged risk) are shown in the following

table

. The table is compiled using the same methodology as described for the loss

allowance movement table above.

2025

2024

Stage 1

£m

Stage 2

£m

Stage 3

£m

POCI

£m

Total

£m

Stage 1

£m

Stage 2

£m

Stage 3

£m

POCI

£m

Total

£m

As at 1 January

3,308.5

230.2

62.4

3,601.1

2,546.4

239.3

26.3

2,812.0

Movements in gross carrying amount

Transfer from Stage 1

(302.0)

277.4

24.6

(294.1)

268.2

25.9

Transfer from Stage 2

176.9

(275.9)

99.0

276.0

(341.7)

65.7

Transfer from Stage 3

1.8

64.3

(66.1)

21.8

30.4

(52.2)

New financial assets originated

or purchased

1,560.7

1.5

1,562.2

1,388.8

Financial assets derecognised

(excluding disposals)

(213.3)

(16.1)

(12.3)

(241.7)

(245.2)

(4.7)

(3.6)

(253.5)

Financial assets derecognised

on disposal

(794.4)

(35.3)

(20.5)

(850.2)

(350.6)

(9.8)

(8.7)

(369.1)

Net changes in lending

(114.4)

71.2

(1.0)

(44.2)

(69.5)

48.0

8.8

(12.7)

Change in fair value

18.5

0.3

18.8

34.9

0.5

0.2

35.6

Total movement in carrying amount

333.8

87.1

24.0

444.9

762.1

(9.1)

36.1

789.1

As at 31 December

3,642.3

317.3

86.4

4,046.0

3,308.5

230.2

62.4

3,601.1

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

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Shawbrook Group plc

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Net changes in lending includes repayments, additional drawdowns and accrued interest.

Principal risks: Credit risk

Additional analysis of loan commitments

The loss allowance for loan commitments is £0.6 million (2024: £0.6 million). The loss allowance is

recognised as a provision (see Note 35 of the Financial Statements).

The following table provides an analysis of movements during the year in the loss allowance associated

with loan commitments. The table is compiled by comparing the position at the end of the year to that at

the beginning of the year. Transfers between stages are deemed to have taken place at the start of the

year, with all other movements shown in the stage in which the asset is held at the end of the year.

2025

2024

Stage 1

£m

Stage 2

£m

Stage 3

£m

POCI

£m

Total

£m

Stage 1

£m

Stage 2

£m

Stage 3

£m

POCI

£m

Total

£m

As at 1 January

0.5

0.1

0.6

2.3

0.5

1.0

3.8

ECL charge/(credit)

for the year

Transfer from Stage 1

(0.4)

0.4

Transfer from Stage 2

0.1

(0.1)

(0.2)

0.2

Transfer from Stage 3

New loan commitments

Loan commitments

derecognised

(0.3)

(0.2)

(0.5)

Changes in credit risk

(0.1)

0.1

(1.1)

(0.4)

(1.2)

(2.7)

Net ECL credit

for the year

(1.8)

(0.4)

(1.0)

(3.2)

As at 31 December

0.5

0.1

0.6

0.5

0.1

0.6

The net ECL credit for the year represents the amount recognised in the statement of profit and loss

within impairment losses on financial assets (see Note 20 of the Financial Statements).

Movements in the gross loan commitment during the year that contributed to the changes in the

associated loss allowance during the year are shown in the following table. The table is compiled

using the same methodology as described for the loss allowance movement table to the left.

2025

2024

Stage 1

£m

Stage 2

£m

Stage 3

£m

POCI

£m

Total

£m

Stage 1

£m

Stage 2

£m

Stage 3

£m

POCI

£m

Total

£m

As at 1 January

1,343.7

54.2

16.5

1,414.4

1,208.1

57.1

15.6

1,280.8

Movements in gross loan

commitments

Transfer from Stage 1

(9.2)

9.2

(46.7)

43.2

3.5

Transfer from Stage 2

12.3

(12.3)

0.7

(4.3)

3.6

Transfer from Stage 3

New loan commitments

168.6

1.4

170.0

498.2

2.3

500.5

Loan commitments

derecognised

(372.5)

(30.6)

(16.1)

(419.2)

(339.4)

(29.5)

(3.3)

(372.2)

Net changes in

commitments

313.9

(0.2)

0.3

314.0

22.8

(14.6)

(2.9)

5.3

Total movement in gross

loan commitments

113.1

(32.5)

(15.8)

64.8

135.6

(2.9)

0.9

133.6

As at 31 December

1,456.8

21.7

0.7

1,479.2

1,343.7

54.2

16.5

1,414.4

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

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143

Shawbrook Group plc

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Principal risks: Credit risk

Critical judgements relating to the impairment

of financial assets (audited)

The measurement of ECLs requires the Group to make a number of

judgements. The judgements that are considered to have the most

significant effect on the amounts in the financial statements are:

•

assessing whether there has been a SICR (resulting in the financial

asset being transferred to Stage 2);

•

determining whether a financial asset is in default or is credit-impaired

(resulting in the financial asset being transferred to Stage 3);

•

estimates and judgements used in setting individual impairments

in Stage 3 (resulting in an increase or decrease in the ECL using a

discounted cashflow approach); and

•

determining whether a financial asset is ‘cured’ (and is therefore

reclassified back to a lower stage).

These judgements have an impact upon the stage the financial asset

is allocated to and therefore whether a 12-month or lifetime ECL is

recognised. Additional details regarding each of these significant

judgement areas are provided in the following sections.

The impairment of cash and balances at central banks, loans and

advances to banks and investment securities is immaterial. As such, the

area where these judgements have the most significant effect specifically

relates to the impairment of loans and advances to customers.

A further area of judgement that is considered to have a significant

effect on amounts in the financial statements is the application of

judgemental adjustments to modelled ECLs. Judgemental adjustments

are applied to the modelled ECL amount when the Group judges that

the modelled ECL does not adequately reflect the expected risk in the

portfolio, or where there is a risk that the model cannot be expected

to pick up based on previous experience. Details of judgemental

adjustments to the modelled ECL are provided on page 133.

The Group reviews and updates these key judgements bi-annually,

in advance of the Interim Financial Report and the Annual Report

and Accounts. All key judgements are reviewed and recommended

to the Audit Committee for approval prior to implementation.

Assessing whether there has been a significant increase

in credit risk

If a financial asset shows a SICR, it is transferred to Stage 2 and

the ECL recognised changes from a 12-month ECL to a lifetime ECL.

The assessment of whether there has been a SICR requires a high

level of judgement as detailed below. The assessment of whether

there has been a SICR also incorporates forward-looking information

(see page 133).

For the purposes of the SICR assessment, the Group applies a series

of quantitative, qualitative and backstop criteria:

•

Quantitative criteria:

this considers the increase in an account’s

remaining lifetime PD at the reporting date compared to the

expected residual lifetime PD when the account was originated.

The Group segments its credit portfolios into PD bands and

has determined a relevant threshold for each PD band, where a

movement in excess of a threshold is considered to be significant.

These thresholds have been determined separately for each

portfolio based on historical evidence of delinquency.

•

Qualitative criteria:

this includes the observation of specific events

such as short-term forbearance, payment cancellation, historical

arrears or extension to customer terms (see following table for

further details).

•

Backstop criteria:

IFRS 9 includes a rebuttable presumption that

30 days past due is an indicator of a SICR. The Group considers

this to be an appropriate backstop measure and does not rebut

this presumption.

FINANCIAL STATEMENTS

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Principal risks: Credit risk

As a general indicator, there is deemed to be a SICR if the following criteria are identified based on the Group’s quantitative modelling:

Real Estate: residential and commercial investment mortgages

•

If external mortgage payments are in arrears in the last 12 months

from the credit reference agencies. The external arrears information

is statistically a lead indicator of financial difficulties and potential

arrears on the loan book;

•

if the loan account is forborne;

•

if the loan enters on to amber watchlist;

•

for short-term loans with a modelled PD: if the PD > 0.38% and the

absolute movement in remaining lifetime PD is 1.5 or more times the

estimate at origination;

•

for term loans with a modelled PD since origination: if the PD > 0.38%

and the absolute movement in remaining lifetime PD is two or more

times the estimate at origination;

•

for bullet repayment loans with a modelled PD since origination: if the

PD > 0.38% and the absolute movement in remaining lifetime PD is 4 or

more times the estimate at origination; or

•

for all portfolios originated as slotted, or that have ever been slotted

during its life: if the PD > 0.38% and the absolute movement in remaining

lifetime PD is three or more times the estimate at origination.

Real Estate: residential owner-occupied mortgages

•

All Real Estate exposures are graded under the modelled approach.

If the modelled PD > 1.76% and the absolute movement in remaining

lifetime PD is five or more times the estimate at origination;

•

if the customer has ever been six or more payments in arrears on

any fixed term account at the credit reference agency;

•

if the customer has missed more than one mortgage payment in the

last six months at the credit reference agency;

•

if the customer has missed 2 or more mortgage payments; or

•

if the loan account is forborne.

SME

•

For accounts within the digital SME portfolio: if the absolute movement in

the remaining lifetime PD is more than two times the estimate at origination;

•

For accounts within the ABL portfolio: if the absolute movement in the

remaining lifetime PD is more than three times the estimate at origination;

•

if the customer has missed 2 or more payments where contractual

repayments are expected;

•

if the loan account is forborne; or

•

if the loan enters onto amber watchlist.

Consumer Finance (excluding motor finance)

•

Partner Finance: if the PD > 0.38% and the absolute movement in

remaining lifetime PD is more than two times the estimate at origination;

•

Personal loans: if the PD > 0.38% and the absolute movement in remaining

lifetime PD is more than two times the estimate at origination;

•

if there are county court judgements registered at the credit reference

agencies of >= £150 in the last 12-months or > £1,000 in last three years;

•

if the customer has missed 2 or more mortgage payments; or

•

if the loan account is forborne.

Retail Mortgage Brands

•

All exposures are graded under the modelled approach.

•

If the modelled Bluestone PD > 0.76% and the absolute movement in

remaining lifetime PD is five or more times the estimate at origination;

•

If the modelled TML PD > 1.03% and the absolute movement in

remaining lifetime PD is five or more times the estimate at origination;

•

if the customer has missed 2 or more mortgage payments; or

•

if the loan account is forborne.

FINANCIAL STATEMENTS

CLIMATE REPORT

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Stage 2 criteria are designed to be effective indicators of a

significant deterioration in credit risk. As part of the bi-annual

review of key impairment judgements, the Group undertakes

detailed analysis to confirm that the Stage 2 criteria remain effective.

This includes (but is not limited to):

•

Criteria effectiveness:

this includes the emergence to default

for each Stage 2 criterion when compared to Stage 1, Stage 2

outflow as a percentage of Stage 2, percentage of new defaults

that were in Stage 2 in the months prior to default, time in Stage 2

prior to default and percentage of the book in Stage 2 that are not

progressing to default or curing.

•

Stage 2 stability:

this includes stability of inflows and outflows

from Stage 2 and 3.

•

Portfolio analysis:

this includes the percentage of the portfolio

that is in Stage 2 and not defaulted, the percentage of the Stage 2

transfer driven by Stage 2 criterion other than the backstops and

back-testing of the defaulted accounts.

For low credit risk exposures, the Group is permitted to assume,

without further analysis, that the credit risk on a financial asset has

not increased significantly since initial recognition if the financial

asset is determined to have low credit risk at the reporting date.

The Group has opted not to apply this low credit risk exemption.

Determining whether a financial asset is in default or is

credit-impaired

When there is objective evidence of impairment and the financial

asset is considered to be in default, or otherwise credit-impaired,

it is transferred to Stage 3. The Group’s definition of default is fully

aligned with the definition of credit impaired.

The Group applies a series of quantitative and qualitative criteria

to determine if an account meets the definition of default. These

criteria include:

•

when the borrower is unlikely to pay its credit obligations to the

Group in full, without recourse by the Group to actions such as

realising security (if any is held);

•

when the borrower is more than 90 days past due on any credit

obligation to the Group; and

•

when a credit obligation to the Group has gone past maturity or

there is doubt that the exit strategy for the obligation is likely.

Inputs into the assessment of whether a financial asset is in default and

their significance may vary over time to reflect changes in circumstances.

The assessment of ECL on Stage 3 Commercial loans is performed on

an individual basis. Significant management judgement is applied to

determine the valuation of recoveries and timing of forecast cash flows

on these loans in order to estimate the ECL. This includes the probability

of individual recovery scenarios occurring.

Determining whether a financial asset is cured

The Group considers a financial asset to be ‘cured’, and therefore

reclassifies back to a lower stage, when the assessed criteria that

caused movement into the higher stage are no longer present.

The following curing rules are applied by the Group:

•

For Stage 3 loans with forbearance arrangements in place: the loan

must first successfully complete its 12-month curing period to be

transferred to Stage 2. Following this, the loan must successfully

complete a 24-month forbearance probation period before the

forbearance classification can be discontinued and it can be

returned to Stage 1.

•

For Stage 3 loans that have cured without forbearance: the loan

must complete a 12-month probation in Stage 2 prior to returning

to Stage 1.

•

For loans in Stage 2 as a result of arrears: the arrears must be

cured for a period of 180 days prior to returning to Stage 1.

•

For loans in Stage 2 as a result of an increase in PD: a probation

period of 90 days from entry must be completed prior to returning

to Stage 1.

•

For Stage 2 loans with forbearance measures in place: the loan

must complete a 24-month forbearance probation period before

the forbearance classification can be discontinued and it can be

returned to Stage 1.

•

For loan products such as revolving credit facilities: the loan must

be in ‘amber watchlist’ (monitoring) for 180-days prior to returning

to Stage 1 and, if it has forbearance measures in place, it must

complete a 24-month forbearance probation period, throughout

which it must remain in ‘amber watchlist’, before the forbearance

classification can be discontinued and it can be returned to Stage 1.

The following table provides a breakdown of loans and advances to

customers (including both loans measured at amortised cost and

FVOCI) in Stage 2 and 3 to show the proportion that are in a cure period:

Stage 2

Stage 3

As at

31 December 2025

Gross

carrying

amount

£m

Loss

allowance

£m

Gross

carrying

amount

£m

Loss

allowance

£m

Not in cure period

1,241.7

(33.1)

588.6

(89.8)

In cure period

158.3

(1.6)

34.7

(3.3)

Total

1,400.0

(34.7)

623.3

(93.1)

Stage 2

Stage 3

As at

31 December 2024

Gross

carrying

amount

£m

Loss

allowance

£m

Gross

carrying

amount

£m

Loss

allowance

£m

Not in cure period

954.2

(39.6)

496.9

(80.2)

In cure period

133.9

(1.8)

35.8

(4.4)

Total

1,088.1

(41.4)

532.7

(84.6)

Principal risks: Credit risk

FINANCIAL STATEMENTS

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146

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Principal risks: Credit risk

Critical accounting estimates relating to the

impairment of financial assets

(audited)

The calculation of ECLs requires the Group to make a number of

assumptions and estimates. The accuracy of the ECL calculation

would be impacted by movements in the forward-looking economic

scenarios used, or the probability weightings applied to these

scenarios and by unanticipated changes to model assumptions

that differ from actual outcomes.

The key assumptions and estimates that, depending on a range of

factors, could result in a material adjustment in the next financial year

relate to the use of forward-looking information in the calculation

of ECLs and the inputs and assumptions used in the ECL models.

Additional information about both of these areas is set out below.

The impairment of cash and balances at central banks, loans and

advances to banks, investment securities, assets held for sale

and loan commitments is immaterial. As such, the area where the

assumptions and estimates set out below could have the most

significant impact specifically relates to the impairment of loans

and advances to customers.

Forward-looking information

The Group incorporates forward-looking information into the

calculation of ECLs and the assessment of whether there has been

a SICR. The use of forward-looking information represents a key

source of estimation uncertainty.

The Group uses four forward-looking economic scenarios: a base case

(central view), an alternative upside scenario, an alternative moderate

downside scenario and an alternative severe downside scenario.

Scenarios are developed to reflect the Group’s expectations based

on information available at the time (which may differ to actual

outcomes). The central view used is informed by the HM Treasury

Central forecast that is published quarterly and used as part of

the Group’s corporate planning activity. Intra-quarter, the Group

considers survey-based data and lead indicators to inform whether

the central view continues to be appropriate. The Group focuses its

view on the next five years as part of the narrative to the scenario

but has rate paths that extend out beyond the planning period for

the Group and up to 20 years.

For the alternative scenarios, the Group is not large enough to have

an internal economist and therefore works with a third party on the

narrative of the scenarios and the rate paths to ensure that they are

internally consistent using the UK Treasury model. The rate paths

used in the scenarios are consistent with the core UK macroeconomic

factors that are published by the Bank of England as part of the

annual stress testing exercise.

The nature and shape of the economic scenarios reflect the outlook

of the UK economy.

As at 31 December 2025, the economic scenarios used reflected

the Group’s expectations based on the information available at

the time. Assumptions embedded in the scenarios reflect that the

economy is expected to be 1.2% larger at 31 December 2026 than it

was at 31 December 2025 boosted in the short term by government

investment but offset by higher personal taxes that will be a drag on

consumer expenditure. Inflation remains sticky and with increases

in energy prices and the pass through of higher employment costs

to customers means that inflation remains above target during

2026. The Bank of England reduced Bank Rate by 0.25% to 3.75% in

December 2025 but there is sight to a potential future interest rate

path that reduces to 3.25% at 31 December 2026.

The peak in unemployment rate in the base case has risen to 5.2%.

While most of the rise to date reflects more people looking for jobs

rather than losing them, it appears that firms are still reducing

costs. Recovery is also more prolonged, and the long-run equilibrium

assumption is now 4.3% following a reflection on measures that make

the UK’s labour market less flexible, and the recent large rise in the

minimum wage for younger workers. In the downside, the peak has

been revised up to 6.2% given the compression with the base. But we

still view 8% as consistent with a plausible but severe scenario.

Affordability remains a key challenge for the housing market but

is expected to be reflected in weaker activity than any significant

fall in house prices. The downside scenario is a low inflation and

low interest rate scenario. Consumers sharply reduce discretionary

expenditure pushing the economy into recession and with inflation

well below target Bank Rate, which reduces sharply in Q3 2026. In the

severe downside scenario, a combination of shocks sees inflation rise

sharply, hitting a peak of 7.1% in Q1 2026. The Bank of England raises

interest rates to 6.25%, leading to a crash in asset prices. House

prices fall 20% peak to trough, reflecting a return to fundamentals

and forced selling. This reinforces the fall in spending through

reduced household wealth and its indirect impact on confidence.

The unemployment rate rises to 8.1%.

As at 31 December 2025, the economic scenarios used reflect that

the UK economy grows by 1.2% in 2026. The scenarios reflect a path

to lower interest rates in 2026 with Bank Rate expected to reduce

to 3.25% in Q4 2026. The risk outlook is impacted by geopolitical

tensions from the Middle East and Ukraine and the potential impacts

of tariffs on trade particularly in the EU and China.

The charts and tables that follow include longer term macroeconomic

considerations used in the calculation of the ECL.

FINANCIAL STATEMENTS

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147

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Annual Report and Accounts 2025

Principal risks: Credit risk

A summary of the economic variables used in both reported years are detailed in the following charts and tables:

UK Real GDP (Indexed Dec 2025 = 100)

UK Unemployment (%)

UK Residential Property Prices (Indexed Dec 2025 = 100)

Dec 21

Mar 22

Jun 22

Sep 22

Dec 22

Mar 23

Jun 23

Sep 23

Dec 23

Jun 24

Mar 24

Sep 24

Dec 24

Mar 25

Jun 25

Sep 25

Dec 25

Mar 26

Jun 26

Sep 26

Dec 26

Mar 27

Jun 27

Sep 27

Dec 27

Mar 28

Jun 28

Sep 28

Mar 29

Dec 28

Jun 29

Sep 29

Dec 29

Mar 30

Jun 30

Sep 30

Dec 30

Value (%)

Actual

Base

Upside

Downside

Servere

Downside

100

105

110

115

Dec 21

Mar 22

Jun 22

Sep 22

Dec 22

Mar 23

Jun 23

Sep 23

Dec 23

Jun 24

Mar 24

Sep 24

Dec 24

Mar 25

Jun 25

Sep 25

Dec 25

Mar 26

Jun 26

Sep 26

Dec 26

Mar 27

Jun 27

Sep 27

Dec 27

Mar 28

Jun 28

Sep 28

Mar 29

Dec 28

Jun 29

Sep 29

Dec 29

Mar 30

Jun 30

Sep 30

Dec 30

Value (%)

Actual

Base

Upside

Downside

Servere

Downside

Dec 21

Mar 22

Jun 22

Dec 22

Mar 23

Jun 23

Sep 23

Dec 23

Jun 24

Mar 24

Sep 24

Dec 24

Mar 25

Jun 25

Sep 25

Dec 25

Mar 26

Jun 26

Sep 26

Dec 26

Mar 27

Jun 27

Sep 27

Dec 27

Mar 28

Jun 28

Sep 28

Mar 29

Dec 28

Jun 29

Sep 29

Dec 29

Mar 30

Jun 30

Sep 30

Dec 30

100

110

120

130

Sep 22

Value (%)

Base

Upside

Downside

Servere

Downside

Actual

FINANCIAL STATEMENTS

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Principal risks: Credit risk

As at 31 December 2025

2026

2027

2028

2029

2030

GDP – % average change

year-on-year

Base

1.2%

1.5%

1.6%

Upside

1.7%

2.3%

1.7%

1.8%

1.9%

Downside

(1.0%)

(0.8%)

2.2%

2.32%

2.2%

Severe downside

(2.0%)

(2.3%)

1.4%

2.1%

2.5%

Bank Rate (%)

Base

3.25%

2.75%

Upside

3.25%

2.75%

Downside

2.00%

2.50%

2.75%

Severe downside

5.75%

5.25%

4.25%

3.00%

2.75%

UK Unemployment (%)

Base

5.1%

4.8%

4.5%

4.3%

Upside

4.1%

Downside

6.0%

5.4%

5.0%

4.8%

Severe downside

6.9%

8.0%

7.7%

6.8%

5.8%

Consumer Price Index –

% change year-on-year

Base

2.0%

Upside

1.4%

2.0%

Downside

0.7%

1.8%

2.0%

Severe downside

6.3%

3.7%

3.2%

2.7%

2.0%

UK Residential House Price

Index – % change year-on-year

Base

0.6%

1.3%

2.3%

2.8%

3.0%

Upside

4.9%

4.0%

3.9%

3.7%

3.9%

Downside

(7.8%)

(4.6%)

3.0%

3.6%

4.2%

Severe downside

(11.9%)

(9.0%)

3.6%

4.4%

4.3%

As at 31 December 2024

2025

2026

2027

2028

2029

GDP – % average change

year-on-year

Base

1.6%

1.5%

1.6%

Upside

2.2%

2.6%

1.5%

1.8%

Downside

(0.3%)

(1.4%)

2.4%

2.9%

2.6%

Severe downside

(0.9%)

(2.8%)

1.4%

3.3%

3.0%

Bank Rate (%)

Base

4.00%

3.50%

2.75%

Upside

3.50%

3.00%

2.75%

Downside

2.00%

2.50%

2.75%

Severe downside

6.25%

5.25%

4.25%

3.00%

2.75%

UK Unemployment (%)

Base

4.3%

4.1%

Upside

3.9%

3.8%

3.9%

Downside

5.7%

5.8%

5.0%

4.7%

4.6%

Severe downside

6.6%

8.0%

7.1%

6.3%

5.7%

Consumer Price Index –

% change year-on-year

Base

2.3%

2.0%

Upside

1.8%

2.0%

Downside

0.8%

1.9%

2.0%

Severe downside

6.5%

2.8%

2.0%

UK Residential House Price

Index – % change year-on-year

Base

0.0%

0.5%

1.3%

2.6%

3.0%

Upside

6.7%

4.0%

3.3%

3.4%

Downside

(8.1%)

(4.7%)

3.9%

3.7%

4.0%

Severe downside

(12.1%)

(9.0%)

3.8%

4.1%

4.2%

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

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149

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Credit risk

The probability weightings applied to the above scenarios are another area of estimation uncertainty.

They are generally set to ensure that there is an asymmetry in the ECL. The probability weightings applied

to the four economic scenarios used are as follows:

2025

2024

Base

50%

Upside

10%

Downside

30%

Severe downside

10%

In determining the probability weightings, the Group has regularly considered the nature and probability

of the alternative downside scenarios. The forecasts have largely evolved as expected since 30 June 2025

and there has been no change in weighting approved for 2025.

The Group undertakes a review of its economic scenarios and the probability weightings applied at

least quarterly and more frequently if required. The results of this review are recommended to the Audit

Committee and the Board prior to any changes being implemented.

The calculation of ECLs is sensitive to the assumptions made regarding the forward-looking scenarios

used and the probability weightings applied. The Group performs sensitivity analysis to assess the impact

on the loss allowance recognised on its loans and advances to customers.

The following table shows the loss allowance as at 31 December 2025 for loans and advances to

customers at amortised cost and FVOCI, and loan commitments based on the probability-weighted

multiple economic scenarios, as recognised in the statement of financial position, and the impact on

this loss allowance if each individual forward-looking scenario was weighted at 100%.

In relation to the below analysis, in each of the scenarios, judgemental adjustments to modelled ECLs

(PMAs, overlays, and individual impairments) are assumed to be constant and have been added back

into each of the scenarios.

Probability –

weighted loss

allowance per

statement of

financial position

£m

Increase/(decrease) in loss allowance

if scenario weighted at 100%

As at 31 December 2025

Base

£m

Upside

£m

Downside

£m

Severe

downside

£m

Real Estate

54.4

(6.7)

(12.8)

8.3

21.3

SME

98.0

(1.7)

(3.2)

1.5

7.0

Consumer Finance

32.4

(1.5)

(2.9)

1.2

6.8

Retail Mortgage Brands

18.6

(3.4)

(6.9)

4.3

10.6

Total

203.4

(13.3)

(25.8)

15.3

45.7

Probability –

weighted loss

allowance per

statement of

financial position

£m

Increase/(decrease) in loss allowance

if scenario weighted at 100%

As at 31 December 2024

Base

£m

Upside

£m

Downside

£m

Severe

downside

£m

Real Estate

44.3

(3.1)

(7.6)

4.0

10.8

SME

76.8

(1.6)

(3.4)

1.7

6.3

Consumer Finance

33.9

(0.7)

(1.2)

0.7

2.6

Retail Mortgage Brands

17.0

(1.2)

(2.5)

1.5

3.9

Total

172.0

(6.6)

(14.7)

7.9

23.6

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

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STRATEGIC REPORT

150

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Credit risk

Model estimations

ECL calculations are outputs of complex models with a number of underlying assumptions regarding

the choice of variable inputs and their interdependencies. The Group considers the key assumptions

impacting the ECL calculation to be within the probability of default (PD) and loss given default (LGD).

Sensitivity analysis is performed by the Group to assess the impact of changes in these key assumptions

on the loss allowance recognised on loans and advances to customers measured at amortised cost,

FVOCI and loan commitments.

A summary of the key assumptions and sensitivity analysis as at 31 December 2025 is provided in the

following table. These represent reasonably possible outcomes within the next financial year for loans

and advances to customers measured at amortised cost and FVOCI.

Assumption

Sensitivity analysis

•

A 10% increase in the PD for each customer would increase the total loss allowance

on loans and advances to customers at FVOCI and amortised cost by £7.6 million

(2024: £7.6 million).

LGD: Real Estate and

Retail Mortgages Brands

•

Property value

•

Forced sale discount

•

A 10% absolute reduction in property prices would increase the loss allowance on

loans and advances to customers at amortised cost in the Real Estate segments by

£11.4 million (2024: 11.7 million).

•

A 10% absolute reduction in property prices would increase the loss allowance on

loans and advances to customers at FVOCI and amortised cost in Retail Mortgage

Brands segments by £4.9 million (2024: £3.9 million).

•

A 5% absolute increase in the forced sale discount would increase the loss allowance

on loans and advances to customers at amortised cost in the Real Estate segments

by £7.6 million (2024: £8.3 million).

•

A 5% absolute increase in the forced sale discount would increase the loss allowance

on loans and advances to customers at FVOCI and amortised cost in Retail

Mortgage Brands segments by £3.2 million (2024: £2.6 million).

LGD: SME

•

Absolute LGD value

•

A 5% absolute increase in the LGD applied would increase the total loss allowance

on loans and advances to customers at amortised cost in SME by £7.7 million

(2024: £6.2 million).

LGD: Consumer Finance

•

Loss given charge-off

•

A 10% absolute increase in the loss given charge-off would increase the loss

allowance on loans and advances to customers at amortised cost in Consumer

Finance by £4.6 million (2024: 3.5 million).

Exposure to credit risk

(audited)

The following table presents the Group’s maximum exposure to credit risk before taking into account

any collateral held or other credit risk enhancements (unless such enhancements meet accounting

offsetting enhancements).

For financial assets, the maximum exposure to credit risk is the carrying amount. For the purposes of

this disclosure, fair value adjustments for hedged risk recognised on loans and advances to customers

are not included. For loan commitments, the maximum exposure to credit risk is the full amount of the

committed facilities.

2025

£m

2024

£m

Cash and balances at central banks

1,924.5

2,244.7

Loans and advances to banks

246.8

304.4

Loans and advances to customers at amortised cost

13,625.8

11,647.6

Loans and advances to customers at FVOCI

4,046.0

3,601.1

Investment securities at amortised cost

1,979.9

1,513.6

Investment securities at FVOCI

178.1

Derivative financial assets

87.5

227.1

Loan commitments

1,479.2

1,414.4

Maximum exposure to credit risk

23,567.8

20,952.9

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

151

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Credit risk

To assess exposure to credit risk, the Group has developed a credit risk grading system, as set out in the

table below, which maps to a common master grading scale. This credit risk grading system is applied to

the Group’s financial assets for which a loss allowance is recognised, together with loan commitments.

The grading system consists of 25 grades on a master grading scale, reflecting varying degrees of risk

and default. Responsibility for setting risk grades lies with the approval point for the risk or committee,

as appropriate. Risk grades are subject to regular reviews by the Group’s risk function. The grading system

remains unchanged compared to that used in the year ended 31 December 2024.

Credit risk grading

Master grading scale

PD range

Low risk

1-10

<=0.38%

Medium risk

11-15

>0.38% to <= 1.76%

High risk

16-25

>1.76%

The following information provides an analysis of the Group’s exposures to credit risk by credit risk grade

and year-end stage classification. The credit risk grade refers to the grades defined in the preceding

table. The year-end stage classification refers to the IFRS 9 stage, as defined on page 131. It should be noted

that the credit risk grading is a point-in-time assessment, whereas the year-end stage classification is

determined based on the change in credit risk since initial recognition. As such, for non-credit impaired

financial assets, there is not a direct relationship between the credit risk grade and stage classification.

For cash and balances at central banks, loans and advances to banks and investment securities, all

exposures are graded as low risk and are in Stage 1 in both reported years.

For loans and advances to customers at amortised cost, FVOCI, and loan commitments, analysis is

provided in the following tables.

Loans and advances to

customers at amortised cost

and at FVOCI

2025

2024

Stage 1

£m

Stage 2

£m

Stage 3

£m

Total

£m

Stage 1

£m

Stage 2

£m

Stage 3

£m

Total

£m

Low risk

1,410.8

359.0

0.3

1,770.1

1,493.0

257.2

3.5

1,753.7

Medium risk

8,632.4

101.6

8,734.0

6,218.0

123.1

3.6

6,344.7

High risk

5,053.0

909.7

598.8

6,561.5

3,410.8

836.7

539.1

4,786.6

Ungraded

781.6

11.7

2.3

795.6

2,463.6

36.5

23.0

2,523.1

Gross carrying amount

15,877.8

1,382.0

601.4

17,861.2

13,585.4

1,253.5

569.2

15,408.1

Loan commitments

2025

2024

Stage 1

£m

Stage 2

£m

Stage 3

£m

Total

£m

Stage 1

£m

Stage 2

£m

Stage 3

£m

Total

£m

Low risk

1,077.3

764.6

1.0

765.6

Medium risk

227.3

20.3

247.6

346.9

0.1

347.0

High risk

152.2

1.4

0.7

154.3

232.2

54.2

15.4

301.8

Total amount committed

1,456.8

21.7

0.7

1,479.2

1,343.7

54.2

16.5

1,414.4

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

152

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Credit risk

Concentrations of credit risk

(audited)

A concentration of credit risk exists when a number of counterparties

or collateral are located in a geographical region or are engaged

in similar activities and have similar economic characteristics that

would cause their ability to meet contractual obligations to be

similarly affected by changes in economic or other conditions. The

Group monitors concentrations of credit risk and implements limits

on concentrations where necessary in order to mitigate and control

credit concentration risk.

Additional analysis regarding concentrations of credit risk in relation

to loans and advances to customers, the principal source of credit

risk for the Group, is provided below. Amounts included in these

tables present the combined carrying amount of the Group’s loans

and advances to customers at amortised cost, and at FVOCI.

Concentrations of credit risk by geographic location

The following tables analyse the combined carrying amount of loans

and advances to customers at amortised cost and FVOCI by lending

segment and geographic location. The Group is predominantly a UK

lender and continues to maintain a geographically diverse portfolio

spanning across the UK. Outside of the UK, a small proportion of

loans are attributable to counterparties domiciled in the Channel

Islands, representing 0.5% of total loans (2024: 0.2% of total loans).

Commercial

Retail

As at 31 December 2025

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

East Anglia

231.6

125.7

42.8

166.7

566.8

East Midlands

584.1

257.8

70.5

303.2

1,215.6

Greater London

2,191.6

1,290.4

149.9

1,210.0

4,841.9

Guernsey/Jersey/Isle of Man

53.7

North East

245.9

62.4

47.3

143.4

499.0

North West

974.0

659.3

131.7

544.0

2,309.0

Northern Ireland

1.5

3.9

2.0

7.4

Scotland

412.4

84.3

76.2

307.5

880.4

South East

1,354.0

663.5

201.4

971.2

3,190.1

South West

474.2

492.8

66.1

261.7

1,294.8

Wales

192.1

108.7

47.4

140.2

488.4

West Midlands

513.1

294.2

103.4

356.0

1,266.7

Yorkshire/Humberside

448.4

212.3

83.9

313.4

1,058.0

Carrying amount

7,622.9

4,309.0

1,022.6

4,717.3

17,671.8

Commercial

Retail

As at 31 December 2024

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

East Anglia

182.6

110.6

33.5

157.7

484.4

East Midlands

404.0

177.8

59.8

278.0

919.6

Greater London

2,496.4

876.3

129.6

1,169.8

4,672.1

Guernsey/Jersey/Isle of Man

10.8

21.9

32.7

North East

127.3

26.8

39.4

122.9

316.4

North West

709.3

403.5

108.0

472.3

1,693.1

Northern Ireland

8.9

0.5

3.2

1.4

14.0

Scotland

310.1

35.0

76.6

292.9

714.6

South East

1,276.7

508.1

179.2

948.8

2,912.8

South West

410.6

413.7

59.4

259.8

1,143.5

Wales

149.6

63.8

38.1

132.4

383.9

West Midlands

430.8

244.7

84.3

335.5

1,095.3

Yorkshire/Humberside

314.9

200.2

70.6

280.6

866.3

Carrying amount

6,832.0

3,082.9

881.7

4,452.1

15,248.7

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

153

Shawbrook Group plc

Annual Report and Accounts 2025

Excludes fair value adjustments for hedged risk recognised on loans and advances to customers.

Principal risks: Credit risk

Concentrations of credit risk by loan size

The following tables present an analysis of the combined carrying amount of loans and advances to

customers at amortised cost and at FVOCI by lending segment and loan size. The Group continues to

manage concentration risk through product caps, restricting large exposures to higher credit graded

customers, and through specific risk appetite limits on exposure to larger counterparties. Loans with a

carrying amount exceeding £25.0 million represents 3.8% of total loans (2024: 1.5% of total loans), whilst

59.4% of total loans have a carrying amount of less than £1.0 million (2024: 63.2% of total loans).

Commercial

Retail

As at 31 December 2025

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

0 – £50k

88.1

46.3

722.7

53.4

910.5

£50k – £100k

277.3

67.6

125.4

497.2

967.5

£100k – £250k

1,086.5

148.8

145.8

2,132.6

3,513.7

£250k – £500k

1,584.5

146.4

18.5

1,557.2

3,306.6

£500k – £1.0 million

1,166.0

238.2

4.9

404.7

1,813.8

£1.0 million – £2.5 million

1,491.1

584.0

5.3

66.8

2,147.2

£2.5 million – £5.0 million

707.0

719.7

5.4

1,432.1

£5.0 million – £10.0 million

491.9

718.3

1,210.2

£10.0 million – £25.0 million

563.3

1,135.2

1,698.5

> £25.0 million

167.2

504.5

671.7

Carrying amount

7,622.9

4,309.0

1,022.6

4,717.3

17,671.8

Commercial

Retail

As at 31 December 2024

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

0 – £50k

105.8

36.5

663.1

45.7

851.1

£50k – £100k

304.5

62.4

100.4

451.5

918.8

£100k – £250k

1,041.8

108.7

98.5

2,089.4

3,338.4

£250k – £500k

1,379.8

113.1

17.8

1,429.9

2,940.6

£500k – £1.0 million

1,040.8

184.3

1.9

368.1

1,595.1

£1.0 million – £2.5 million

1,330.6

443.6

62.0

1,836.2

£2.5 million – £5.0 million

665.6

493.6

5.5

1,164.7

£5.0 million – £10.0 million

441.8

558.9

1,000.7

£10.0 million – £25.0 million

436.0

939.5

1,375.5

> £25.0 million

85.3

142.3

227.6

Carrying amount

6,832.0

3,082.9

881.7

4,452.1

15,248.7

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

154

Shawbrook Group plc

Annual Report and Accounts 2025

Excludes fair value adjustments for hedged risk recognised on loans and advances to customers.

Principal risks: Credit risk

Concentrations of credit risk by industry

The following tables present an analysis of the combined carrying amount of loans and advances to

customers at amortised cost and at FVOCI by lending segment and industry. The industry segmentation of

the Group’s loans and advances to customers remains focused on mortgages and real estate activities,

which represents 72.2% of total loans (2024: 72.5% of total loans).

Commercial

Retail

As at 31 December 2025

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

Agriculture, forestry and fishing

0.4

2.8

0.1

3.3

Manufacturing

7.1

276.6

4.2

287.9

Transport, storage and utilities

15.3

422.6

10.7

448.6

Construction

604.1

705.1

14.4

1,323.6

Wholesale and retail trade

20.3

261.4

16.2

297.9

Real estate activities

5,284.7

945.0

31.5

1,635.7

7,896.9

Financial and insurance activities

49.5

900.6

3.3

953.4

Services and other

127.0

794.7

16.3

1.8

939.8

Personal:

Mortgages

1,357.3

3,079.8

4,437.1

Other

157.2

0.2

925.9

1,083.3

Carrying amount

7,622.9

4,309.0

1,022.6

4,717.3

17,671.8

Commercial

Retail

As at 31 December 2024

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

Agriculture, forestry and fishing

0.4

3.2

0.5

4.1

Manufacturing

8.1

163.1

3.0

174.2

Transport, storage and utilities

16.2

409.4

8.1

0.2

433.9

Construction

577.9

602.8

11.9

1,192.6

Wholesale and retail trade

14.0

234.8

15.2

264.0

Real estate activities

4,509.5

688.0

22.0

1,379.9

6,599.4

Financial and insurance activities

40.1

698.3

2.8

741.2

Services and other

118.0

276.5

12.9

1.4

408.8

Personal:

Mortgages

1,332.1

3,070.6

4,402.7

Other

215.7

6.8

805.3

1,027.8

Carrying amount

6,832.0

3,082.9

881.7

4,452.1

15,248.7

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

155

Shawbrook Group plc

Annual Report and Accounts 2025

Excludes fair value adjustments for hedged risk recognised on loans and advances to customers.

Principal risks: Credit risk

Collateral held and other credit enhancements

(audited)

As a key method of mitigating credit risk, the Group holds collateral and other credit enhancements

against certain of its financial assets. The Group operates internal policies governing the acceptability

of specific classes of collateral or credit risk mitigation. The amount and type of collateral required

depends on an assessment of the credit risk of the counterparty.

The Group’s policies regarding obtaining collateral have not significantly changed during the year

and there has been no significant change in the overall quality of the collateral held by the Group

since the prior year.

Derivative financial assets

All new eligible derivative transactions with wholesale counterparties are centrally cleared with cash

posted as collateral to further mitigate credit risk. Residual and non-eligible trades are collateralised

under a Credit Support Annex in conjunction with the ISDA Master Agreement.

Non-derivative financial assets

For loans and advances to banks and investment securities, collateral is generally not held. However,

at times, certain securities are held as part of reverse repurchase agreements.

For loans and advances to customers, the Group obtains collateral for certain of its exposures.

The types of collateral obtained is dependent upon the loan type:

•

Loan receivables: amounts may be secured by a first or second charge over commercial and

residential property, or against debt receivables or other assets such as asset backed loans and

invoice receivables. Certain loans may also be non-asset backed, for example loans secured by virtue

of a guarantor, government guarantee (e.g. loans offered under the Coronavirus Business Interruption

Loan Scheme and Recovery Loan Scheme) or business covenant.

•

Finance lease receivables and instalment credit receivables: amounts are secured against the

underlying asset, which can be repossessed in the event of a default.

Collateral held in relation to secured loans is capped, after taking into account the first charge balance,

at the carrying amount of the loan.

The following tables set out the security profile of the Group’s loans and advances to customers by

lending segment. Amounts included in the tables present the combined carrying amount of loans and

advances to customers at amortised cost and at FVOCI.

Other secured loans include loans secured by other assets and non-asset backed loans.

Commercial

Retail

As at 31 December 2025

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

Secured on commercial

and residential property

7,622.9

842.4

4,717.3

13,182.6

Secured on debt receivables

1,968.6

Secured on finance lease assets

21.6

Secured on instalment credit assets

473.3

356.2

829.5

Other secured loans

944.0

293.2

1,237.2

Total secured loans and

advances to customers

7,622.9

4,249.9

649.4

4,717.3

17,239.5

Unsecured loan receivables

59.1

373.2

432.3

Carrying amount

7,622.9

4,309.0

1,022.6

4,717.3

17,671.8

Commercial

Retail

As at 31 December 2024

Real

Estate

£m

SME

£m

Consumer

Finance

£m

Retail

Mortgage

Brands

£m

Total

£m

Secured on commercial

and residential property

6,832.0

703.3

4,452.1

11,987.4

Secured on debt receivables

1,573.0

Secured on finance lease assets

21.9

Secured on instalment credit assets

474.2

269.0

743.2

Other secured loans

294.7

183.9

478.6

Total secured loans and

advances to customers

6,832.0

3,067.1

452.9

4,452.1

14,804.1

Unsecured loan receivables

15.8

428.8

444.6

Carrying amount

6,832.0

3,082.9

881.7

4,452.1

15,248.7

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

156

Shawbrook Group plc

Annual Report and Accounts 2025

Excludes fair value adjustments for hedged risk recognised on loans and advances to customers.

£183.9m of consumer finance balances previously classified as unsecured in 2024 should have been disclosed as other secured loans. The comparative has been restated accordingly.

Principal risks: Credit risk

Credit-impaired financial assets

The Group closely monitors collateral held for financial assets considered to be credit-impaired

(Stage 3 and POCI), reflecting the increased likelihood that the Group may need to take possession

of such collateral to mitigate credit losses.

The only asset categories with credit-impaired assets are loans and advances to customers

(including those measured at amortised cost and at FVOCI).

The below tables provide further information about the credit-impaired loans at amortised cost

and the related collateral held by lending segment. The fair value of collateral is capped at the

carrying amount of the loan.

Gross carrying amount

Loss allowance

Carrying amount

Fair value of

collateral

held

£m

As at 31 December 2025

Secured

£m

Unsecured

£m

Secured

£m

Unsecured

£m

Secured

£m

Unsecured

£m

Real Estate

216.2

(38.3)

177.9

SME

187.6

(49.5)

138.1

Consumer Finance

10.4

5.7

(2.3)

(4.8)

8.1

0.9

8.1

Retail Mortgage Brands

95.1

(3.2)

91.9

Total credit-impaired

loans at amortised cost

509.3

5.7

(93.3)

(4.8)

416.0

0.9

416.0

Gross carrying amount

Loss allowance

Carrying amount

Fair value of

collateral

held

£m

As at 31 December 2024

Secured

£m

Unsecured

£m

Secured

£m

Unsecured

£m

Secured

£m

Unsecured

£m

Real Estate

198.5

(28.0)

170.5

SME

192.3

(40.2)

152.1

Consumer Finance

10.2

8.6

(0.8)

(5.7)

9.4

2.9

9.4

Retail Mortgage Brands

97.2

(3.3)

93.9

Total credit-impaired

loans at amortised cost

498.2

8.6

(72.3)

(5.7)

425.9

2.9

425.9

Credit-impaired loans at FVOCI have a carrying amount of £86.4 million (2024: £62.4 million). These loans

are fully secured with the fair value of collateral deemed to be at least equal to the carrying amount.

The following tables show the distribution of loan-to-value ratios for the Group’s credit-impaired

mortgage assets held in the Real Estate and Retail Mortgage Brands lending segments. The loan-to-value

is calculated as the ratio of the customer loan balance to the value of the collateral at origination. Amounts

in the following tables reflect the carrying amount of the credit-impaired mortgage assets.

As at 31 December 2025

Credit-impaired mortgage assets

at amortised cost

Credit-impaired mortgage

assets at FVOCI

Real Estate

£m

Retail Mortgage Brands

£m

Retail Mortgage Brands

£m

Loan-to-value ratio

Less than 50%

3.6

7.4

50-70%

59.1

24.7

20.4

71-90%

115.1

63.6

53.9

91-100%

0.1

More than 100%

Total credit-impaired mortgage assets

177.9

91.9

81.7

As at 31 December 2024

Credit-impaired mortgage assets

at amortised cost

Credit-impaired mortgage

assets at FVOCI

Real Estate

£m

Retail Mortgage Brands

£m

Retail Mortgage Brands

£m

Loan-to-value ratio

Less than 50%

9.5

3.5

4.6

50-70%

62.4

29.1

19.8

71-90%

98.4

61.3

35.1

91-100%

0.2

More than 100%

Total credit-impaired mortgage assets

170.5

93.9

59.5

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

157

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Credit risk

Repossessions

The Group’s policy is to pursue the realisation of collateral in an orderly

manner. As at 31 December 2025, the Group held 84 repossessed

properties with a carrying amount of £92.1 million (2024: 52

repossessed properties with carrying amount of £64.1 million).

Forbearance

(audited)

The Group maintains a forbearance policy for the servicing and

management of customers who are in financial difficulty and require

some form of concession to be granted, even if this concession entails

a loss for the Group. A concession may be either of the following:

•

modification of previous terms and conditions of an agreement,

which the borrower is considered unable to comply with due to its

financial difficulties, to allow for sufficient debt service ability, that

would not have been granted had the borrower not been in

financial difficulty; or

•

total or partial refinancing of an agreement that would not have

been granted had the borrower not been in financial difficulty.

Forbearance in relation to an exposure can be temporary or

permanent depending on the circumstances, progress on financial

rehabilitation and the detail of the concession(s) agreed.

The Group excludes short-term repayment plans that are up to three

months in duration from its definition of forborne loans.

The Group applies the European Banking Authority (EBA)

Implementing Technical Standards on forbearance and

non-performing exposures as defined in Annex V of Commission

Implementing Regulation (EU) 2015/227. Under these standards,

loans are classified as performing or non-performing in accordance

with the EBA rules, as adopted by the PRA. Principal risks: Credit risk.

The EBA standards stipulate that a forbearance classification can be

discontinued when all of the following conditions have been met:

•

the exposure is considered to be performing, including where it

has been reclassified from the non-performing category, after an

analysis of the financial condition of the debtor showed that it no

longer met the conditions to be considered as non-performing;

•

a minimum two-year probation period has passed from the date the

forborne exposure was considered to be performing;

•

regular payments of more than an insignificant aggregate amount

of principal or interest have been made during at least half of the

probation period; and

•

none of the exposures to the debtor is more than 30 days past due at

the end of the probation period.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

158

Shawbrook Group plc

Annual Report and Accounts 2025

Excludes fair value adjustments for hedged risk recognised on loans and advances to customers.

Principal risks: Credit risk

The following tables provide a summary of the Group’s forborne loans and advances to customers by lending segment and year-end stage classification. This includes loans measured at amortised cost and those

measured at FVOCI. For FVOCI loans, the gross carrying amount column represents the carrying amount of these loans (i.e. including fair value adjustments). The increase in forbearance reflects the growth in the

loan portfolio and the Group’s proactive approach.

Gross amount of forborne loans

Loss allowance on forborne loans

As at

31 December 2025

Number

of loans

Performing

£m

Non-

performing

£m

Total

£m

Performing

£m

Non-

performing

£m

Total

£m

Coverage

Real Estate

Stage 2

5.6

0.5

6.1

Stage 3

296

17.1

(1.0)

5.8

Real Estate total

390

5.6

17.6

23.2

(1.0)

4.3

SME

Stage 2

85.4

(2.2)

2.6

Stage 3

65.9

(12.4)

18.8

SME total

103

85.4

65.9

151.3

(2.2)

(12.4)

(14.6)

9.6

Consumer Finance

Stage 2

426

0.6

2.7

3.3

(0.1)

(0.8)

(0.9)

27.3

Stage 3

592

2.9

(2.4)

82.8

Consumer Finance total

1,018

0.6

5.6

6.2

(0.1)

(3.2)

(3.3)

53.2

Retail Mortgage Brands

Stage 2

254

16.1

25.8

41.9

(0.1)

(0.4)

(0.5)

1.2

Stage 3

672

134.9

(6.7)

5.0

Retail Mortgage

Brands total

926

16.1

160.7

176.8

(0.1)

(7.1)

(7.2)

4.1

Total

Stage 2

791

107.7

29.0

136.7

(2.4)

(1.2)

(3.6)

2.6

Stage 3

1,646

220.8

(22.5)

10.2

Total

2,437

107.7

249.8

357.5

(2.4)

(23.7)

(26.1)

7.3

Gross amount of forborne loans

Loss allowance on forborne loans

As at

31 December 2024

Number

of loans

Performing

£m

Non-

performing

£m

Total

£m

Performing

£m

Non-

performing

£m

Total

£m

Coverage

Real Estate

Stage 2

5.7

2.6

8.3

(0.1)

1.2

Stage 3

468

40.5

(4.0)

9.9

Real Estate total

559

5.7

43.1

48.8

(0.1)

(4.0)

(4.1)

8.4

SME

Stage 2

54.5

(3.2)

5.9

Stage 3

105

44.5

(15.0)

33.7

SME total

164

54.5

44.5

99.0

(3.2)

(15.0)

(18.2)

18.4

Consumer Finance

Stage 2

296

1.2

1.1

2.3

(0.1)

(0.4)

(0.5)

21.7

Stage 3

606

2.6

(2.0)

76.9

Consumer Finance total

902

1.2

3.7

4.9

(0.1)

(2.4)

(2.5)

51.0

Retail Mortgage Brands

Stage 2

111

11.9

6.2

18.1

(0.1)

0.6

Stage 3

392

75.7

(3.0)

4.0

Retail Mortgage

Brands total

503

11.9

81.9

93.8

(3.1)

3.3

Total

Stage 2

557

73.3

9.9

83.2

(3.4)

(0.5)

(3.9)

4.7

Stage 3

1,571

163.3

(24.0)

14.7

Total

2,128

73.3

173.2

246.5

(3.4)

(24.5)

(27.9)

11.3

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

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STRATEGIC REPORT

159

Shawbrook Group plc

Annual Report and Accounts 2025

Managing market risk

The Group’s treasury function is responsible for managing the Group’s

exposure to all aspects of market risk within the limits set out in the

Group’s Market Risk Policy, with the overall objective of managing market

risk in line with the Group’s risk appetite. The Board approves the Group

Market Risk Policy and the Asset and Liability Committee approves the

Group’s treasury policies and receives regular reports on all aspects of

market risk exposure.

Additional details about managing the specific forms of market risk that

the Group is exposed to are provided in the following section.

Exposure to market risk

(audited)

The forms of market risk that the Group is exposed to can be further divided

into foreign exchange risk, basis risk and interest rate risk. Additional details

regarding each of these is provided in the following sections.

Foreign exchange risk

Foreign exchange risk is the risk that the value of, or net income arising

from, assets and liabilities changes as a result of movements in exchange

rates. The Group has low levels of foreign exchange risk that is managed

by appropriate financial instruments including derivatives.

The tables below set out the Group’s exposure to foreign exchange risk:

As at 31 December 2025

Euros

£m

Dollars

£m

Australian

Dollars

£m

Loans and advances to banks

4.2

7.8

0.2

Loans and advances to customers

6.9

19.1

FX swap

(10.2)

(26.3)

(0.2)

Net exposure

0.9

0.6

As at 31 December 2024

Euros

£m

Dollars

£m

Australian

Dollars

£m

Loans and advances to banks

4.5

3.7

0.2

Loans and advances to customers

(1.5)

20.0

FX swap

(3.7)

(23.5)

(0.2)

Net exposure

(0.7)

0.2

As illustrated by the preceding table, there are no currencies to which the

Group has a significant exposure. Accordingly, foreign exchange sensitivity

analysis is not provided, as the impact of foreign exchange movements,

particularly after taking into account the impact of derivative financial

instruments used to manage such risk, is not material.

Basis risk

Basis risk is the risk of loss arising from changes in the relationship

between interest rates that have similar but not identical characteristics

(for example, SONIA and the Bank of England Bank rate). This is monitored

closely and regularly reported to the ALCo. This risk is managed within

established risk limits by matching and, where appropriate and necessary,

through the use of derivatives and via other control procedures.

Interest rate risk

Interest rate risk is the risk of loss arising from adverse movements in

market interest rates. Interest rate risk arises from the loan and savings

products that the Group offers. This risk is managed through the use of

appropriate financial instruments, including derivatives, with established

risk limits, reporting lines, mandates and other control procedures.

The Group’s forecasts and plans take in to account the risk of interest

rate changes and are prepared and stressed accordingly in line with

PRA guidance.

Principal risks: Market, liquidity and capital risk

In the following sections, information

under headings marked as ‘audited’ is

covered by the Independent Auditor’s

Report. All other information is unaudited.

The ‘market, liquidity and capital’ principal risk

comprises three components, each with specific

disclosure requirements attached to them. As such,

each of the components are presented in turn.

Market risk

This section specifically provides information about:

•

Managing market risk

•

Exposure to market risk

•

Metrics used in assessing and monitoring

market risk

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

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STRATEGIC REPORT

160

Shawbrook Group plc

Annual Report and Accounts 2025

Prior year comparative has been restated to show the impact of the FX swap.

Principal risks: Market, liquidity and capital risk

As at 31 December 2025

Within

3 months

£m

3 months but

<6 months

£m

6 months

but <1 year

£m

1 year but

<5 years

£m

>5 years

£m

Non-interest

bearing

£m

Total

£m

Assets

Cash and balances at central banks

1,921.7

2.8

1,924.5

Loans and advances to banks

192.3

54.5

246.8

Loans and advances to customers

5,499.3

563.2

1,610.0

9,727.0

562.7

(192.1)

17,770.1

Investment securities

2,148.7

9.3

2,158.0

Derivative financial assets

87.5

Non-financial assets

1.4

1.5

3.0

16.1

2.7

257.3

282.0

Total assets

9,763.4

564.7

1,613.0

9,743.1

565.4

219.3

22,468.9

Equity and liabilities

Amounts due to banks

(1,411.4)

(19.2)

(1,430.6)

Customer deposits

(9,680.3)

(2,247.1)

(3,177.7)

(2,995.0)

(15.3)

(238.1)

(18,353.5)

Derivative financial liabilities

(93.2)

Debt securities in issue

(411.3)

(1.0)

(412.3)

Lease liabilities

(24.8)

Subordinated debt liability

(165.0)

(6.5)

(171.5)

Non-financial liabilities

(140.5)

Equity

(56.5)

(65.0)

(156.0)

(1,351.3)

(190.0)

(23.7)

(1,842.5)

Total equity and liabilities

(11,559.5)

(2,312.1)

(3,333.7)

(4,511.3)

(205.3)

(547.0)

(22,468.9)

Notional values of derivatives

1,856.9

1,559.2

1,797.2

(4,895.3)

(318.0)

Interest rate sensitivity gap

60.8

(188.2)

76.5

336.5

42.1

(327.7)

Cumulative gap

60.8

(127.4)

(50.9)

285.6

327.7

Metrics used in assessing and monitoring

market risk (audited)

The following tables provide a summary of the Group’s interest

rate gap position. Items are allocated to time bands by reference

to the earlier of the next contractual interest rate change and

the maturity date. A behavioural assumption is applied to loans

and advances to customers and customer deposits. Equity of the

Group is matched against originated long-term fixed loans and

the equity is spread across the time bands to match the profile

of these assets.

FINANCIAL STATEMENTS

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161

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Market, liquidity and capital risk

As at 31 December 2024

Within

3 months

£m

3 months but

<6 months

£m

6 months

but <1 year

£m

1 year but

<5 years

£m

>5 years

£m

Non-interest

bearing

£m

Total

£m

Assets

Cash and balances at central banks

2,244.7

Loans and advances to banks

304.4

Loans and advances to customers

4,284.0

306.0

1,128.0

9,280.0

502.9

(324.3)

15,176.6

Investment securities

1,503.7

9.9

1,513.6

Derivative financial assets

227.1

Non-financial assets

1.7

1.4

3.0

12.4

0.9

236.9

256.3

Total assets

8,338.5

307.4

1,131.0

9,292.4

503.8

149.6

19,722.7

Equity and liabilities

Amounts due to banks

(1,359.9)

(16.2)

(1,376.1)

Customer deposits

(7,970.4)

(2,283.6)

(2,850.6)

(2,415.7)

(50.8)

(232.9)

(15,804.0)

Derivative financial liabilities

(117.1)

Debt securities in issue

(542.3)

(6.9)

(549.2)

Lease liabilities

(25.6)

Subordinated debt liability

(76.5)

(90.0)

(4.6)

(171.1)

Non-financial liabilities

(97.3)

Equity

(42.0)

(65.0)

(52.0)

(1,165.0)

(105.0)

(153.3)

(1,582.3)

Total equity and liabilities

(9,914.6)

(2,348.6)

(2,979.1)

(3,670.7)

(155.8)

(653.9)

(19,722.7)

Notional values of derivatives

2,296.4

1,745.6

1,451.0

(5,166.8)

(326.2)

Interest rate sensitivity gap

720.3

(295.6)

(397.1)

454.9

21.8

(504.3)

Cumulative gap

720.3

424.7

27.6

482.5

504.3

The Group considers a parallel 250 basis points (bps) movement in

interest rates to be appropriate for scenario testing given the current

economic outlook and industry expectations.

The Group estimates that a +/- 250 bps movement in interest rates

paid/received would impact the economic value as follows:

•

+ 250 bps:

£3.2 million negative (2024: £4.7 million positive).

•

- 250 bps:

£16.4 million negative (2024: £35.0 million negative).

In addition, the effect of the same two interest rate shocks is applied

to the statement of financial position at year end, to determine how

net interest income may change on an annualised basis for one year

(earnings at risk), as follows:

•

+ 250 bps:

£57.2 million positive (2024: £58.1 million positive).

•

- 250 bps

£9.5 million negative (2024: £18.6 million negative).

In preparing the above, the Group makes certain assumptions

(including floors where appropriate) consistent with expected and

contractual repricing behaviour as well as behavioural repayment

profiles of the underlying statement of financial position items in

relation to the specific scenarios. In addition, equity is allocated

to the specific reprice buckets consistent with the Group’s

reserves investment strategy. The results also include the impact

of hedge transactions.

FINANCIAL STATEMENTS

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CORPORATE GOVERNANCE REPORT

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162

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Market, liquidity and capital risk

Liquidity risk

This section specifically provides information about:

•

Managing liquidity risk

•

Maturity analysis for financial assets and liabilities

•

Metrics used in assessing and monitoring liquidity risk

Managing liquidity risk

The Group has developed comprehensive funding and liquidity policies to ensure that it maintains

sufficient liquid assets to be able to meet all of its financial obligations and maintain public confidence.

The Group’s treasury function is responsible for the day-to-day management of the Group’s liquidity and

wholesale funding. The Board sets limits over the level, composition and maturity of liquidity and deposit

funding balances, which are reviewed at least annually. Compliance with these limits is monitored on

a daily basis by finance and risk personnel that are independent of the treasury function.

Stress testing is a major component of liquidity risk management, and the Group has developed a diverse

selection of scenarios covering a range of market-wide and firm-specific factors. The Group performs

liquidity stress tests to ensure that the Group maintains adequate liquidity for business purposes even

under stressed conditions. The Group’s core liquidity stress test is performed on a daily basis by the

finance function, with a further series of liquidity stress tests performed on a monthly basis that are

formally reported to the ALCo and the Board.

A comprehensive review of the Group’s Liquidity Risk Framework, including stress testing, is conducted

at least annually through the ILAAP. The ALCo, Risk Committee and the Board is heavily involved in the

full ILAAP life cycle, with all challenges clearly documented. The ILAAP is used to demonstrate the Group’s

compliance with the PRA’s Overall Liquidity Adequacy Rule and assess funding and liquidity risk across the

actual and budgeted statement of financial position.

Maturity analysis for financial assets and liabilities

(audited)

The following tables segment the carrying amount of the Group’s financial assets and liabilities based

on the final contractual maturity date. In practice, the Group’s assets and liabilities may be repaid, or

otherwise mature, earlier or later than implied by their contractual tenor. Accordingly, this information

is not relied upon by the Group in managing liquidity.

In compiling these tables, the following points should be noted:

•

The ‘less than 1 month’ maturity group includes amounts repayable on demand;

•

For loans and advances to customers and customer deposits, the ‘more than 5 years’ maturity group

also includes the fair value adjustment for hedged risk;

•

Accrued interest is assigned to the maturity group based on when it is scheduled to be paid.

As at 31 December 2025

Less than

1 month

£m

1-3

months

£m

3 months

-1 year

£m

1-2

years

£m

2-5

years

£m

More than

5 years

£m

Total

£m

Financial assets

Cash and balances at central banks

1,924.5

Loans and advances to banks

246.8

Loans and advances to customers

261.6

539.1

1,458.6

1,196.0

2,706.1

11,608.7

17,770.1

Investment securities

39.5

44.4

106.9

292.2

1,636.4

38.6

2,158.0

Derivative financial assets

3.2

2.1

17.7

35.7

22.1

6.7

87.5

Total financial assets

2,475.6

585.6

1,583.2

1,523.9

4,364.6

11,654.0

22,186.9

Financial liabilities

Amounts due to banks

(927.4)

(252.8)

(250.4)

(1,430.6)

Customer deposits

(7,724.2)

(1,883.1)

(5,960.5)

(1,477.5)

(1,296.8)

(11.4)

(18,353.5)

Derivative financial liabilities

(4.9)

(0.3)

(10.2)

(16.4)

(59.8)

(1.5)

(93.1)

Debt securities in issue

(0.1)

(1.6)

(0.6)

(1.1)

(3.8)

(405.1)

(412.3)

Lease liabilities

(0.1)

(0.2)

(0.7)

(2.4)

(8.3)

(13.1)

(24.8)

Subordinated debt liability

(7.7)

(163.8)

(171.5)

Total financial liabilities

(8,656.7)

(2,138.0)

(6,230.1)

(1,497.4)

(1,368.7)

(594.9)

(20,485.8)

Cumulative gap

(6,181.1)

(7,733.5)

(12,380.4)

(12,353.9)

(9,358.0)

1,701.1

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Shawbrook Group plc

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Principal risks: Market, liquidity and capital risk

As at 31 December 2024

Less than

1 month

£m

1-3

months

£m

3 months

-1 year

£m

1-2

years

£m

2-5

years

£m

More than

5 years

£m

Total

£m

Financial assets

Cash and balances

at central banks

2,244.7

Loans and advances to banks

304.4

Loans and advances to customers

427.4

444.2

1,180.9

1,055.7

2,251.7

9,816.7

15,176.6

Investment securities

127.9

9.9

–

83.0

868.7

424.1

1,513.6

Derivative financial assets

1.7

4.3

13.1

39.2

148.2

20.6

227.1

Total financial assets

3,106.1

458.4

1,194.0

1,177.9

3,268.6

10,261.4

19,466.4

Financial liabilities

Amounts due to banks

(325.8)

(1,050.3)

(1,376.1)

Customer deposits

(6,821.8)

(1,877.7)

(5,088.6)

(998.6)

(969.5)

(47.8)

(15,804.0)

Derivative financial liabilities

(6.6)

(3.1)

(16.2)

(20.3)

(69.3)

(1.6)

(117.1)

Debt securities in issue

(3.0)

(2.7)

(7.7)

(3.0)

(10.3)

(522.5)

(549.2)

Lease liabilities

(0.1)

(0.2)

(0.8)

(1.0)

(8.3)

(15.2)

(25.6)

Subordinated debt liability

(7.0)

(164.1)

(171.1)

Total financial liabilities

(7,157.3)

(1,883.7)

(6,170.6)

(1,022.9)

(1,057.4)

(751.2)

(18,043.1)

Cumulative gap

(4,051.2)

(5,476.5)

(10,453.1)

(10,298.1)

(8,086.9)

1,423.3

The following tables segment the gross contractual cash flows of the Group’s financial liabilities into

relevant maturity groupings. Totals in the following table differ to the preceding tables, and do not

agree directly to the statement of financial position, as the table incorporates all cash flows on an

undiscounted basis, related to both principal and future coupon payments. Estimated future interest

payments are derived using interest rates and contractual maturities at the reporting date.

As at 31 December 2025

Less than

1 month

£m

1-3

months

£m

3 months

-1 year

£m

1-2

years

£m

2-5

years

£m

More than

5 years

£m

Total

£m

Amounts due to banks

927.6

252.8

250.4

1,430.8

Customer deposits

7,740.1

1,894.4

6,127.6

1,538.9

1,409.1

12.1

18,722.2

Derivative financial liabilities

4.9

0.3

10.2

16.4

59.8

1.6

93.1

Debt securities in issue

2.0

5.4

18.1

25.1

78.9

791.0

920.5

Lease liabilities

0.1

0.3

0.9

3.1

10.7

16.7

31.8

Subordinated debt liability

2.8

12.3

17.8

53.3

217.0

303.2

Total financial liabilities

8,677.5

2,153.2

6,419.5

1,601.3

1,611.8

1,038.4

21,501.7

As at 31 December 2024

Less than

1 month

£m

1-3

months

£m

3 months

-1 year

£m

1-2

years

£m

2-5

years

£m

More than

5 years

£m

Total

£m

Amounts due to banks

325.8

9.5

1,072.6

1,407.9

Customer deposits

6,841.8

1,891.1

5,260.6

1,052.7

1,116.1

58.2

16,220.5

Derivative financial liabilities

6.6

3.1

16.2

20.3

69.3

1.6

117.1

Debt securities in issue

5.6

7.9

31.6

34.8

109.3

1,084.5

1,273.7

Lease liabilities

0.1

0.3

1.1

1.3

10.9

20.1

33.8

Subordinated debt liability

2.8

12.3

17.8

53.3

217.0

303.2

Total financial liabilities

7,182.7

1,911.9

6,394.4

1,126.9

1,358.9

1,381.4

19,356.2

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Principal risks: Market, liquidity and capital risk

Metrics used in assessing and monitoring liquidity risk

Certain metrics that are used by the Group in assessing and monitoring liquidity risk are summarised below.

Liquidity buffer

The Group maintains a liquidity buffer of high-quality liquid assets, as defined by the EBA’s mandates and

adopted by the PRA. These assets can be monetised to meet stress requirements in line with internal stress

testing and the requirements of the Delegated Regulation on the Liquidity Coverage Ratio (LCR).

The average liquidity buffer, calculated as the simple average of the month end observations for the

preceding 12 months, is £3,009.7 million (2024: £3,480.5 million).

The composition of the Group’s liquidity buffer as at 31 December is as follows:

2025

£m

2024

£m

Cash and withdrawable central bank reserves (LCR level 1 assets)

1,880.4

2,241.0

Central government assets (LCR level 1 assets)

48.2

79.3

Extremely high quality covered bonds (LCR level 1 assets)

840.1

722.5

Asset backed securities (LCR level 2B assets)

207.0

118.7

Total liquidity buffer

2,975.7

3,161.5

Liquidity coverage ratio

The LCR is a regulatory metric that measures a set of standardised liquidity inflows and outflows over a

period of 30 days. The Group calculates the LCR in accordance with the EBA’s LCR standards, as adopted

by the PRA. The reduction in the LCR ratio reflects a change in the composition of the Group’s liquidity pool.

During the year, the Group increased its holdings of Bank of England eligible collateral. While these assets

are eligible for inclusion within the Bank’s internal Liquid Asset Buffer reporting, they do not qualify as

High-Quality Liquid Assets (HQLA) for the purposes of the LCR calculation.

2025

2024

Liquidity buffer (£m)

2,975.8

3,161.5

Total net cash outflows (£m)

2,022.0

1,796.1

Liquidity coverage ratio (%)

147.2

176.0

Net stable funding ratio

The net stable funding ratio (NSFR) is a regulatory metric that measures the amount of stable funding

available compared to the amount of stable funding required. From 1 January 2022, as part of the revised

Capital Requirements Regulation (CRR II), it became a binding requirement that the NSFR must remain

above the minimum level of 100%. The Group’s NSFR remains above this required level, with a ratio of

124.9% as at 31 December 2025 (2024: 134.3%).

Asset encumbrance

(audited)

A proportion of the Group’s assets have the potential to be used as collateral to support central bank

or other wholesale funding activities. Assets that have been committed for such purposes are classified

as encumbered assets and cannot be used for other purposes. The Group has Board imposed limits

setting out the percentage of assets that can be encumbered.

All other assets are defined as unencumbered assets. These comprise assets that are potentially

available to be used as collateral (‘available as collateral’) and assets that, due to their nature, are not

suitable to be used as collateral (‘other’).

The following tables and additional narrative set out the carrying amount of the Group’s encumbered

and unencumbered assets. The disclosure is designed to illustrate the availability of the Group’s assets

to support future funding and is not intended to identify assets that would be available in the event of

a resolution or bankruptcy.

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Principal risks: Market, liquidity and capital risk

Encumbered assets

Unencumbered assets

As at 31 December 2025

Pledged as

collateral

£m

Other

£m

Available as

collateral

£m

Other

£m

Total

£m

Cash and balances at central banks

1,924.5

Loans and advances to banks

156.9

38.3

51.6

246.8

Loans and advances to customers

4,360.7

13,409.4

17,770.1

Investment securities

390.2

35.3

1,732.5

2,158.0

Derivative financial assets

87.5

Non-financial assets

24.5

257.5

282.0

Total assets

4,907.8

73.6

15,218.0

2,269.5

22,468.9

Encumbered assets

Unencumbered assets

As at 31 December 2024

Pledged as

collateral

£m

Other

£m

Available as

collateral

£m

Other

£m

Total

£m

Cash and balances at central banks

2,244.7

Loans and advances to banks

191.8

49.2

63.4

304.4

Loans and advances to customers

4,561.8

10,614.8

15,176.6

Investment securities

64.3

1,442.9

6.4

1,513.6

Derivative financial assets

227.1

Non-financial assets

29.8

226.5

256.3

Total assets

4,753.6

113.5

12,150.9

2,704.7

19,722.7

Encumbered assets ‘pledged as collateral’ comprise:

Loans and advances to banks totalling £156.9 million (2024: £191.8 million), of which:

•

£156.9 million (2024: £191.8 million) is pledged as collateral against derivative contracts.

Loans and advances to customers totalling £4,360.7 million (2024: £4,561.8 million), of which:

•

£2,442.6 million (2024: £2,306.4 million) includes amounts encumbered through

access to the Bank of England’s Sterling Monetary Framework.

•

£1,918.1 million (2024: £2,255.4 million) is pledged to securitisation programmes.

Investment securities totalling £390.2 million (2024: £nil), of which:

•

£390.2 million (2024: £nil) includes amounts encumbered through access

to the

Bank of England’s Sterling Monetary Framework.

‘Other’ encumbered assets (assets that cannot be used for secured funding for legal or other reasons)

comprise:

•

£38.3 million (2024: £49.2 million) of securitisation cash, which represents cash balances of consolidated

structured entities.

•

£35.3 million (2024: £64.3 million) of investment securities, which represents restricted amounts invested

in short-term money market funds by consolidated structured entities.

The above tables do not include collateral received by the Group that are not recognised on the

statement of financial position, the vast majority of which the Group is permitted to repledge.

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Principal risks: Market, liquidity and capital risk

Capital risk

This section specifically provides information about:

•

Managing capital risk

•

Regulatory requirements

•

Regulatory developments

•

Metrics used in assessing and monitoring capital risk

Managing capital risk

(audited)

The Group’s objective in managing capital risk is to maintain

appropriate levels of capital to support the Group’s business

strategy and meet regulatory requirements. Capital risk is overseen

by the ALCo, who monitor the capital position against the Capital

Contingency Plan and Recovery Plan triggers and limits on a monthly

basis. The ALCo also regularly review the forward-looking capital

surplus in the context of its business plans and ensure that the

Group has advance warning of any potential capital challenges.

The Group’s risk function regularly reviews emerging regulatory

changes that may impact on the capital surplus and undertakes

impact assessments.

The Group’s approach to capital management is driven by strategic

and organisational requirements, whilst also taking into account

the regulatory and commercial environments in which it operates.

The principal objectives when managing capital are to:

•

address the expectation of the Shareholder and optimise business

activities to ensure return on capital targets are achieved through

efficient capital management;

•

ensure that sufficient risk capital is held. Risk capital caters for

unexpected losses that may arise, protects the Shareholder and

depositors and thereby supports the sustainability of the Group

through the business cycle; and

•

comply with capital supervisory requirements and related regulations.

The Group recognises the importance of allocating the correct risk-

weighting to its assets. The Regulatory Reporting Committee has the

oversight in respect of the application of risk weighted assets rules,

and ensuring the effectiveness of the regulatory reporting and the

related policies.

The PRA supervises the Company on a consolidated basis, with

capital requirements set for the Group as a whole and information on

capital adequacy provided to the PRA at a consolidated Group level

only. Shawbrook Bank Limited and its subsidiaries, The Mortgage Lender

Limited, Bluestone Mortgages Limited, JBR Capital Limited are the

only regulated subsidiaries within the Group. Shawbrook Bank Limited

is supervised by the PRA and the FCA, whilst The Mortgage Lender

Limited, Bluestone Mortgages Limited, and JBR Capital Limited are

regulated by the FCA.

The PRA has also identified the Company to be a ‘Financial

Holding Company’.

Regulatory requirements

The Group applies the regulatory framework defined by the

revised Capital Requirements Regulation (CRR II) and the Capital

Requirements Directive (CRD V). Directive requirements are

implemented in the UK by the PRA and supplemented through

additional regulation under the PRA Rulebook.

The aim of the regulatory framework is to promote safety and

soundness in the financial system. The regulatory framework

categorises the capital and prudential requirements under

three pillars:

•

Pillar 1:

defines the minimum capital requirements firms are

required to hold for credit, market and operational risks.

•

Pillar 2:

builds on Pillar 1 and incorporates the Group’s own

assessment of additional capital required to cover specific

risks that are not covered by the minimum regulatory capital

requirement set out under Pillar 1. Under Pillar 2, the Group

completes an annual self-assessment of these risks as part

of its ICAAP. The ICAAP is reviewed by the PRA every three years

(or earlier if required) and culminates in the PRA setting a firm-

specific requirement of the level of capital required to be held,

known as the ‘Total Capital Requirement’.

•

Pillar 3:

requires the Group to publish a set of disclosures that

allow market participants to assess information on the Group’s

capital, risk exposures and risk assessment process. The Group’s

Pillar 3 Disclosures can be found on the Group’s website

www.shawbrook.co.uk/investors/

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Principal risks: Market, liquidity and capital risk

Minimum requirements set out by the regulatory framework are

summarised in the following table. The minimum capital requirements

increased between reporting periods following the outcome of the

Capital Supervisory Review and Evaluation Process (C-SREP).

2025

2024

Minimum capital requirements

CET1

Total

capital

CET1

Total

capital

Pillar 1

4.50%

8.00%

4.50%

8.00%

Pillar 2A

0.70%

1.24%

0.70%

1.24%

Total Capital Requirement

5.20%

9.24%

5.20%

9.24%

Regulatory capital buffers

Capital conservation buffer

2.50%

Countercyclical capital buffer

2.00%

Overall Capital Requirement

9.70%

13.74%

9.70%

13.74%

Additional systemic buffers provided for by CRD V do not apply

to the Group.

The regulatory minimum for the UK leverage ratio also remains

unchanged compared to 31 December 2025 at 3.25%. Whilst the Group

is not required to comply with the PRA’s UK Leverage Ratio Framework

until its retail deposits exceed the £75 billion threshold, the PRA has

stated its expectation that all UK firms should manage their leverage

risk so that the ratio does not ordinarily fall below 3.25%. Consequently,

the Group treats 3.25% as its minimum requirement.

The Group (including its regulated subsidiaries) maintains an

adequate capital base and has complied with all externally imposed

capital requirements. The Total Capital Requirement set by the PRA

has been met at all times and capital adequacy and leverage ratios

are well in excess of the minimum regulatory requirements.

Regulatory developments

During the year ended 31 December 2025, the following regulatory

changes came into effect:

•

PS3/25 was published on 20 February 2025 sets out how the

PRA will make and communicate policy under the updated UK

framework (FSMA).

•

PS8/25 was published on 3 July 2025 which is the final policy to

streamline and amend the UK capital buffers framework which

impacts capital planning and buffer-setting.

•

Solvent Exit Analysis (SEA) requirements became a regulatory

requirement for non-systemic banks on 1 October 2025.

•

PS7/25 published 12 November 2025 sets out the PRAs approach

to offset the SME and infrastructure lending adjustments through

the capital stack. The PRA held an industry roundtable in

October 2025 to introduce the changes.

•

PS13/25 published on 16 July 2025 sets out the PRA’s

implementation of the Bank Resolution (Recapitalisation Act)

which sets out the thresholds for migration to a partial transfer

or bail-in resolution strategy.

•

PS19/25 published on 28 October 2025 restates the remainder

of the CRR into the PRA rulebook with consequential changes

tied to 2026/2027 implementations.

•

PS24/25 published on 8 November 2025 confirms the intent to

increase the FSCS limit to £120k and recapitalisation for partial

transfer firms.

•

PS22/25 published on 12 November 2025 sets out the increase in

the retail deposits threshold for the application of the leverage

ratio rules from £50 billion to £75 billion.

•

SS25/25 published on 3 December 2025 sets out the PRA’s

expectations for firms’ approaches to managing climate-related

risks to ensure that firms build the capabilities and resilience

needed to effectively manage these risks.

Future regulatory changes that are relevant to the Group are as follows:

•

In January 2025, the PRA announced a delay to the implementation

of Basel 3.1 in the UK by one year until 1 January 2027 to allow

more time for greater clarity to emerge about plans for its

implementation in the US.

•

On 1 January 2026, the PRA announced that firms will now be

subject to the leverage ratio requirement if they have £75 billion

or more in retail deposits, up from the previous £50 billion. The

threshold for non-UK assets remains unchanged at £10 billion.

Metrics used in assessing and monitoring capital risk

Certain disclosures relating to the Group’s capital position are shown

on the following pages. The disclosures present the consolidated

capital position for the Group, as reported to the PRA. Disclosures

for the Group’s regulated subsidiaries (Shawbrook Bank Limited and

its subsidiaries, The Mortgage Lender Limited, Bluestone Mortgages

Limited, and JBR Capital Limited), and Shawbrook Bank Limited’s

unregulated subsidiaries, ThinCats Group Limited and Playter, are not

separately disclosed and can be found in Shawbrook Bank Limited’s

own Annual Report and Accounts, which is available on the Group’s

website at:

www.shawbrook.co.uk/investors/

Disclosures are presented on a CRD V basis after applying IFRS 9

transitional arrangements until 2024 when Transitional Adjustment

was phased out and no longer applicable to 2025. A comparison of

the reported capital metrics (including transitional adjustments) to

the capital metrics as if IFRS 9 transitional arrangements had not

been applied (the ‘fully loaded’ basis) is provided on page 171.

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Annual Report and Accounts 2025

Principal risks: Market, liquidity and capital risk

Regulatory capital

(audited)

Composition of the Group’s regulatory capital as at 31 December is as follows:

2025

£m

2024

£m

Share capital

2.6

2.5

Share premium

134.7

87.3

Capital contribution reserve

19.9

Retained earnings

1,513.7

1,307.2

Intangible assets

(145.8)

(124.0)

Transitional adjustment for IFRS 9 (unaudited)

10.4

Deferred Tax Assets

(23.5)

Accumulated Other Comprehensive Income

(0.5)

Prudent valuation adjustment (unaudited)

(4.4)

(3.6)

Securitisation position which alternatively be subject to

1,250.0% risk weight (unaudited)

(6.9)

(6.6)

Common Equity Tier 1 capital

1,489.8

1,293.1

Capital securities

123.1

Additional Tier 1 capital

123.1

Total Tier 1 capital

1,612.9

1,416.2

Subordinated debt liability

163.8

163.6

Tier 2 capital

163.8

163.6

Total regulatory capital

1,776.7

1,579.8

Regulatory capital

(audited)

The Group’s total regulatory capital reconciles to the Group’s total equity per the statement of financial

position as follows:

2025

£m

2024

£m

Total regulatory capital

1,776.7

1,579.8

Subordinated debt liability

(163.8)

(163.6)

Intangible assets

145.8

124.0

Transitional adjustment for IFRS 9 (unaudited)

(10.4)

Prudent valuation adjustment (unaudited)

4.4

3.6

Accumulated Other Comprehensive Income

0.5

Securitisation position which alternatively be subject to

1,250.0% risk weight (unaudited)

6.9

6.6

Cash flow hedging reserve

4.7

12.7

Deferred tax deductible

23.5

Fair value through other comprehensive income reserve

43.8

29.6

Total equity

1,842.5

1,582.3

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For the purpose of regulatory capital calculations, capitalised interest and other accounting adjustments of £7.7 million are excluded (2024: £7.5 million).

Principal risks: Market, liquidity and capital risk

Movement in the Group’s total regulatory capital during the year is as follows:

2025 £m

2024 £m

Total regulatory capital as at 1 January

1,579.8

1,424.9

Movement in Common Equity Tier 1 capital

Increase in capital contribution reserve

Share issuance (net of issuance related expenses)

47.5

Increase/(decrease) in retained earnings:

Profit for the year

195.5

219.9

Share-based payments

26.1

0.7

Coupon paid on capital securities

(15.1)

Increase in intangible assets

(21.8)

(16.8)

Deferred Tax deduction

(23.5)

Accumulated OCI

(0.6)

Decrease in transitional adjustment for IFRS 9

(10.4)

(7.1)

Decrease in prudent valuation adjustment

(0.7)

(0.6)

Decrease in securitisation position which alternatively be subject to 1,250.0% risk

(0.3)

(6.6)

Total movement in Common Equity Tier 1 capital

196.7

174.4

Movement in Additional Tier 1 capital

Increase in capital securities

Total movement in Additional Tier 1 capital

Movement in Tier 2 capital

Issue of subordinated debt

75.0

Redemption of subordinated debt

(76.5)

(20.0)

Other movements in subordinated debt

1.7

0.5

Total movement in Tier 2 capital

0.2

(19.5)

Total regulatory capital as at 31 December

1,776.7

1,579.8

Risk-weighted assets

The following table sets out the risk-weighted assets for the Group. The Group applies the standardised

approach to measure credit risk, counterparty credit risk and securitisation exposures and the basic

indicator approach to measure operational risk.

2025

£m

2024

£m

Credit risk

Real Estate

3,615.8

3,155.4

SME

4,389.7

3,178.4

Consumer Finance

743.0

655.6

Retail Mortgage Brands

1,768.9

1,661.5

Other

224.0

268.5

Total credit risk

10,741.4

8,919.4

Counterparty credit risk: credit valuation adjustment

2.5

4.2

Securitisation exposures in the banking book

213.8

117.3

Operational risk

1,045.5

905.7

Total risk-weighted assets

12,003.2

9,946.6

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170

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Market, liquidity and capital risk

Capital ratios

2025

2024

Common Equity Tier 1 capital ratio

12.4

13.0

Total Tier 1 capital ratio

13.4

14.2

Total capital ratio

14.8

15.9

Leverage ratio

2025

£m

2024

£m

Total Tier 1 capital

1,612.9

1,416.2

Exposure measure

Total statutory assets

22,468.9

19,722.7

Regulatory adjustments to statutory assets

(379.8)

(402.6)

Central bank claims

(1,924.5)

(2,244.7)

Off-balance sheet items

504.2

396.0

Exposure value for derivatives

115.6

126.7

Securities financial transactions

11.0

18.4

Transitional adjustment for IFRS 9

10.4

Regulatory deductions

(185.3)

(146.9)

Total exposures

20,610.1

17,480.0

UK Leverage ratio (%)

7.8%

8.1%

IFRS 9 transitional arrangements impact analysis

As detailed on page 168, the Group had elected to use a transitional approach when recognising the

impact of adopting IFRS 9. The period to apply this approach ended in 2024 and was no longer applicable

to 2025. This is illustrated in the following table by providing the adjustment made in 2024 whilst no

adjustments were applied in 2025.

2025

2024

Including

transitional

adjustments

Transitional

adjustments

not applied

Including

transitional

adjustments

Transitional

adjustments

not applied

Capital resources

Common Equity Tier 1 capital (£m)

1,489.8

1,293.1

1,282.7

Total Tier 1 capital (£m)

1,612.9

1,416.2

1,405.8

Total regulatory capital (£m)

1,776.7

1,579.8

1,569.4

Risk-weighted assets

Total risk-weighted assets (£m)

12,003.2

9,946.6

9,937.3

Capital ratios

Common Equity Tier 1 capital ratio (%)

12.4

13.0

12.9

Total Tier 1 Capital Ratio (%)

13.4

14.2

Total capital ratio (%)

14.8

15.9

15.8

Leverage

UK Leverage ratio (%)

7.8

8.1

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

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Managing operational risk

Developments during the year

The Group manages operational risk across eight level two risk categories, with the

Risk Committee receiving regular reports across the spectrum of these operational

risks. These reports present the operational risk profile, including incidents that have

arisen and the movement of key indicators. This allows the Risk Committee to assess

the Group’s risk response and proposed remedial actions, including oversight of

change projects.

The risk and control self-assessment process is utilised by the Group as a key risk

management tool for non-financial risks, including operational risk. This exercise

is owned and completed by each customer segment and function and takes into

consideration control effectiveness and residual risk score across the Group’s

non-financial risks.

The risk and control self-assessments are maintained in conjunction with the

Group’s operational risk team who provide challenge and oversight. Risk and control

self-assessments are aligned to top risk profile reporting. To enable effective

risk management, the Group focuses on identifying, monitoring and managing

operational risk events in each business area, driving appropriate actions, and

where needed re-engineering and/or automating processes and controls to

minimise recurrence.

All business areas have business continuity and resilience plans

in place, supported by business impact assessments, with enhanced controls

and documentation in place for important business services. The Group has an

Incident Management Framework in place that continues to identify and respond

to operational disruption incidents to help maintain service continuity and prevent

impact tolerance breaches. In addition, the Group uses external disaster recovery

sites as back-up locations for IT servers.

During 2025, the Group continued to invest in its operational risk framework, with the continued embedding of the

Governance, Risk and Compliance (GRC) tool launched in 2023. All three lines of defence use the tool to record and monitor

issues, risks and controls across all customer segments and functions. Data and insights from the tool are used to inform

the Non-Financial Risk Oversight Committee of significant risks, events, control issues or themes impacting business areas.

Throughout 2025, the Group has delivered its operational resiliency roadmap and enhanced scenario testing to meet

the regulatory compliance. The Risk Committee approved the fourth annual operational resilience self-assessment

in January 2025, ahead of the March 2025 milestone. Scenario testing was enhanced to include more live technology

environment and important business service testing, providing assurance in the strength of resilience controls. The Risk

Committee noted regular management updates on risk events and incidents through the year and management

proposals to improve resiliency.

To further connect the risk data and analysis universe third party risk management and operational resilience are live in the

GRC system, systemising data capture and analysis for more proactive risk identification, governance rigour and supporting

more timely incident impact analysis and response.

A key focus area for 2025 was the continued simplification of the Group’s control environment, and the identification of

material controls in line with expectations of the UK Corporate Governance Code. IT change continued to be a key focus

for 2025, including oversight of non-delivery risks related to material projects and embedding enhancements to change

delivery processes and governance.

Principal risks: Operational risk

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

172

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Technology and cyber risk

Managing technology and cyber risk

Developments during the year

Customer expectations for service availability continue to rise with the rapid pace

of new technologies, leading to a significantly lower tolerance for service disruption.

The Group recognises that, in order to continue to be recognised for offering very

high levels of customer satisfaction, it needs to continually monitor systems risk

and ensure that change is delivered with minimum disruption to customers.

The Group has continued to invest in its digital capability to improve customer

experience, investing in hybrid multi cloud technologies to increase the scale,

stability and resilience of its systems.

The technology, data and cyber security controls were aligned to the Group’s new

risk and control taxonomies which has enabled more effective, data driven risk and

control assessments.

During 2025, the Group completed the transition of customers to the new digital savings experience, and all customer,

business and operational indicators have reported normally.

The Group has ensured that Internal Audit reviews are regularly conducted and, in 2025, this comprised: two reviews

assessing maturity against the NIST 2.0 Cyber Security Framework covering Detect & Govern (completed) and Respond

& Recover (in-progress), embedding of the updated and enhanced Change Framework and data controls in regulatory

reporting. All historic Internal Audit items were closed in the period and open audit observations are progressing in line

with agreed timescales.

Technology and data remain a core competency for the Group, with strong capabilities and foundations already in

place. The Group continued to progress its hybrid multi cloud strategy, supported by investment in server and storage

refreshes in the on-premise data centres, enabling flexibility and agility on hosting decisions.

The Group continued to perform annual penetration testing and project specific penetration testing linked to the go live

of new systems (or major code / version / infrastructure changes). Additionally, further assurance exercises included an

External Threat Attack Surface review and an External Network Security review.

The embedding of the Group’s software application security testing matured further during 2025 with the adoption of

new tooling and test automation capabilities. This positions the Group well for increased pace of delivery of digital change

while maintaining the highest standards of quality and resilience.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

173

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Strategic risk

Managing strategic risk

Developments during the year

Strategic risk focuses on large, long-term risks that could become a material

issue for the delivery of the Group’s goals and objectives. Management of

strategic risk is primarily the responsibility of the Group’s senior management

team. The management of strategic risk is intrinsically linked to the corporate

planning and stress testing processes and is further supported by the regular

provision of consolidated business performance and risk reporting to the

Executive Committee and the Board. Strategic risk also includes the Group’s

progress on equality, diversity and inclusion.

During 2025, the Group continued regular portfolio reviews, with a focus on what could go wrong in order to identify

whether any changes in risk appetite were appropriate or updates to key controls. This was supported by the

implementation of further early warning indicators to identify potential problem loans and to support key areas of

operational readiness such as arrears and non-performing loans. The Group also implemented an end-to-end credit risk

management platform in SME to leverage data and technology in support of credit management.

The Group continued to leverage its risk distribution capability to support existing customers as they grow and extended

the Enable Guarantee programme to support Development finance customers. The Group also implemented a new portfolio

management model to support Real Estate customers with lending in excess of £2.5 million.

The Group made further progress on its Real Estate and Retail Mortgage Brands emission intensity and exceeded its

sustainable finance commitment of £1.2 billion of originations for the period 2023 to 2025. In addition, the Group signed an

agreement with an external partner to deliver a PCAF aligned methodology for the calculation of SME lending emissions.

The Group also signed an agreement to receive an updated climate base case to support more realistic alternative climate

scenarios at a more detailed level than before.

During the year, the Board received and approved a number of reports, including the strategy update. It has also actively

engaged in the compilation of the Group’s risk appetite, ICAAP, ILAAP, Recovery Plan and Resolution Pack, and Solvent Exit

Analysis which are critical tools to managing strategic risk.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

174

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Transformation risk

Managing transformation risk

Developments during the year

Transformation risk management focuses on risks that could become

material issues during the execution of technology or platform changes being

implemented for organisational, regulatory or strategic purposes. Management

of transformation risk is primarily the responsibility of the Group’s senior

management team.

The management of transformation risk is closely linked to corporate planning

processes and is further supported by the regular provision of consolidated

business performance and risk reporting to the Executive Committee, the Board

and material IT projects to the PRA.

During 2025, there has been a continued strong focus on improving the robustness of digital transformation governance

and risk management within the Group via enhancements to the Change Delivery Framework. Responsibility for digital

transformation risk sits with the Risk & Governance function in the Chief Technology Office providing clear accountability

for risk management and facilitating a consistent and standardised approach to the delivery of transformation initiatives.

The delivery efforts are closely supported by the technology teams in the Chief Technology Office.

Working in close collaboration with second line risk, the Delivery function has continued to evolve and enhance the

transformation risk management model, refining and building on the significant overhaul of the governance model that

was introduced at the end of 2024 into Q1 2025.

Group Risk Appetite reporting for transformation risk provides portfolio-wide status reporting for the Executive Committee

and Board covering Material IT Projects, ensuring robust oversight of strategically important transformation initiatives.

Against the backdrop of improvements in governance and oversight, over 250 change releases of various sizes were

successfully delivered into production. This is across digital products, projects, infrastructure and platform related

changes group-wide.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

175

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Conduct risk

Managing conduct risk

Developments during the year

The Group continually reviews its risk management approach to reflect the

regulatory and legal environment in which it operates. The Group acts to deliver

good outcomes for customers and is committed to acting in good faith for our

customers, avoiding causing them foreseeable harm and enabling them to pursue

their financial objectives.

In 2025 the Group further strengthened its conduct-risk framework to align with the Consumer Duty, mapping key controls

to the customer lifecycle. The Group consolidated controls into a streamlined structure, deployed it across control and

testing platforms, and introduced new Customer Outcome definitions embedded in testing, MI and automated monitoring

to improve oversight and customer outcomes.

The Group is aware of the potential impacts that increased cost of living pressures may have upon its customers. In

response, the Group continues to prioritise the management of conduct risks including ongoing review of the forbearance

measures suite to support customers in financial difficulty and ongoing improvement to lending journeys to prevent

customers becoming the victims of fraud.

Ongoing monitoring of compliance with the Consumer Duty continues to be monitored through reports to Board, an

updated risk appetite report, a customer experience dashboard, second- and third-line assurance activities and part

of the existing annual RMF attestation each year.

Further details on conduct matters the Group is involved in are provided in Note 35 and Note 49 of the Financial Statements.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

176

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Compliance and regulatory risk

Managing compliance and regulatory risk

Developments during the year

The Group continually reviews its risk management approach to reflect the

regulatory and legal environment in which it operates. The Group has no appetite

for behaving inappropriately resulting in poor outcomes for its customers or

reputation through non-compliance with regulation or standards of good practice.

The Group has implemented safeguards and controls to prevent the misuse of its

personal data which may constitute a breach of data privacy regulations. The

Group continually reviews its data privacy framework to ensure it complies with

any evolving regulatory and or legislative changes.

A new regulatory horizon scanning tool was rolled out in 2025 to enable more efficient tracking of regulatory change and

provide the Group with management information including an up-to-date schedule of regulatory changes and tracking of

implementation activities across the Group. This tool leverages AI technology, which in combination with human judgement

supports the Group in proactive horizon scanning.

The Group’s Speak Up Policy has been enhanced in 2025 to reflect the latest regulatory guidance, supported by a new

independent online tool to allow concerns to be raised and managed effectively. This enhances the Group’s Whistleblowing

Framework, encouraging employees to raise concern where they identify or observe behaviours that are inconsistent with

the Group’s values and ways of working.

The Group enhanced its Conflicts of Interest management through implementation of a Conflicts of Interest Framework

enabling individuals to declare both internal and external conflicts of interest relating to any activities undertaken within

the Group in a consistent and transparent manner, ensuring alignment with regulatory expectations and the Group’s

governance standards.

Following the Basel Committee’s publication of the final Basel 3.1 standards in September 2024, the PRA in January 2025

confirmed the UK implementation date as 1 January 2027 and published near-final policy proposals and consultations —

including consequential changes to Pillar 2A and regulatory reporting — to support firms’ transition. The Group continues

to manage a programme of work to implement the changes required to ensure compliance with the rules as well as any

data requests required by the PRA.

The SMF 16 functions for TML, BML and JBR were transitioned to the SMF 16 for the Group, creating one SMF 16 function

that governs all group regulated entities. This was approved by the FCA in March 2025.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

177

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Climate risk

Managing climate risk

Developments during the year

The risks associated with climate change are subject to rapidly increasing societal,

regulatory, and political focus. In line with regulatory requirements, the Group has

embedded climate risk as a principal risk in the RMF to address the risks associated

with physical risk and the risk from the transition to a low-carbon economy.

The Group has continued to invest in its climate data capability, transitioning to a more frequent assessment of its

physical and transitional risk profile. This analysis has confirmed the ongoing improvement in EPC profile and a reduction

in lending emissions for the residential and commercial investment portfolios. The dependency on wider policy actions is

clear and will influence lending emissions targets in the medium term.

The Group has engaged with an additional third party to establish baseline lending emissions numbers for its

Commercial SME portfolio and to further increase its coverage over in-scope portfolios.

The Group originated £1.8 billion of sustainable finance for the period 2023 to 2025, against its target of £1.2 billion of

sustainability financing by 2025.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

178

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Financial crime risk

Managing financial crime risk

Developments during the year

The Group operates in a highly regulated market and has proportionate procedures

in place to mitigate the risk of the Group’s services being used to facilitate financial

crime. The Group continues to monitor the increasing complexity of financial crime

threats and any changes to the legislative and regulatory framework to manage

any emerging risks.

During 2025 the Group accelerated the maturity and roll-out of its financial-crime capability. We expanded use of our

core financial-crime tooling across the business — including onboarding JBR onto our core financial crime system and

enhancing MI and the move towards automated transaction monitoring for motor finance — and launched a programme

to implement a single Financial Crime Orchestration Platform to centralise detection, case management and reporting.

We also revised and issued Group Financial Crime Standards and delivered targeted anti-fraud and specialist training for

key roles alongside mandatory, bank-wide financial crime training.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

179

Shawbrook Group plc

Annual Report and Accounts 2025

Principal risks: Model risk

Managing model risk

Developments during the year

Model risk is the risk of an adverse outcome as a direct result of weaknesses or

failures in the development, implementation or use of a model. There is an inherent

risk associated with models because, by their very nature, they are imperfect and

incomplete representations that rely on assumptions and theoretical methodologies

and use historic data which may not represent future outcomes.

Models are relied on to support a broad range of business and risk management

activities across the Group including credit approval process, ECLs, stress

testing, financial planning, pricing strategies, Asset and Liability Management,

measurement of fair value for loans, and climate change. Model errors can arise

when models are implemented incorrectly or misused, for instance when applied

to uses that they were not designed for, or where there is a failure to update key

assumptions when required.

Model risk remains heightened due to inflation pressures, interest rate changes

and market volatility experienced in recent years.

The Board has supported the implementation and embedding of SS1/23 with the appointment of the Chair of Risk

Committee as model risk champion, with a focus on data and model risk culture.

Responsibility for model risk is delegated from the ExRC and the Chief Risk Officer (SMF for model risk) and oversight is

provided by a Model Risk Oversight Committee (MRC).

The Group has digitally enabled its model inventory to support the implementation of SS1/23 and has updated its model

risk policies and standards to reflect the emergence of AI and machine learning. The policies and framework have also

been updated to reflect Dear CFO letters on Model Risk and post model adjustments. The Group has leveraged its cloud

native analytical environment using SAS Viya to support enhanced visualisation and support the implementation of machine

learning applications that are currently in monitoring phase prior to a decision to go live for portfolio management.

Economic uncertainty may lead to some models operating outside of their development boundaries and the Group

continues to monitor and consider potential actions on calibration or post model adjustments.

During 2025, the MRC oversaw the redevelopment and implementation of all its slotting models within the Commercial

segment to align more closely with best practice and simplify the number of slotting models to reflect the target market.

A new credit grading model was implemented for Buy to Let loans across all segments and was expanded to cover more

annual reviews.

The Group updated its stress testing capability to include loans acquired through ThinCats and created its first model for

the assessment of climate change in Pillar 2A in its ICAAP. New models for ECL were implemented for the Group’s motor

finance loans to increase coverage of the loan book.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

180

Shawbrook Group plc

Annual Report and Accounts 2025

ICAAP, ILAAP and stress testing

The ICAAP, ILAAP and associated stress testing exercises represent important elements of the Group’s ongoing risk

management processes. The results of the risk assessment contained in these documents are embedded in the strategic

planning process and risk appetite to ensure that sufficient capital and liquidity are available to support the Group’s

growth plans, as well as cover its regulatory requirements at all times and under varying circumstances.

The ICAAP and ILAAP are reviewed at least annually, and more often in the event of a material change in the Group’s

business, its capital or liquidity. Ongoing stress testing and scenario analysis outputs are used to inform the formal

assessments and determination of required buffers, the strategy and planning for capital and liquidity management

as well as the setting of risk appetite limits.

The Board, Risk Committee, ExRC and ALCo have engaged in a number of exercises that have considered and developed

stress test scenarios. The analysis enables the Group to evaluate its capital and funding resilience in the face of severe

but plausible risk shocks. In addition to the Annual Cyclical Scenario prescribed by the PRA, the stress tests have included

a range of market-wide and idiosyncratic stress tests, as well as operational risk scenario analyses. Stress testing is an

integral part of the adequacy assessment processes for liquidity and capital, and the setting of tolerances under

the annual review of the Group risk appetite.

The Group also performed reverse stress tests to help assess the full continuum of adverse impacts and, therefore,

the level of stress at which the Group would breach its individual capital and liquidity guidance requirements as set

by the PRA under the ICAAP and ILAAP processes. The reverse stress test in 2025 led to some further development

of risk appetite and MI for the Board.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

181

Shawbrook Group plc

Annual Report and Accounts 2025

Solvent Exit Analysis, Recovery

Plan and Resolution Pack

The Group has prepared a Solvent Exit Analysis, Recovery Plan and Resolution Pack in accordance with

PRA Supervisory Statements SS2/24 ‘Solvent Exit Planning for Non-Systemic Banks and Building Societies’,

SS9/17 ‘Recovery planning’ and SS19/13 ‘Resolution planning’. These documents represent the Group’s

‘Contingency Planning and Living Will’ and examine in detail:

•

the consequences of severe levels of stress (i.e. beyond those in the ICAAP) impacting the Group

at a future date;

•

the state of preparedness and contingency plan to respond to and manage such a set of

circumstances; and

•

the options available to the Group to either withstand and recover from such an environment or exit

the market in an orderly manner while remaining solvent.

The Solvent Exit Analysis, Recovery Plan and Resolution Pack is updated annually and was last approved

by the Board in September 2025. The Solvent Exit Analysis, Recovery Plan or Resolution Pack can be updated

more frequently in the event of a material change in the Group’s status, capital or liquidity position.

The Solvent Exit and Recovery Plan triggers are updated annually. The Board is fully engaged in

considering the scenarios and options available for remedial actions to be undertaken.

The Board considers that the Group’s business model and the diversified nature of its business markets,

provide it with the flexibility to consider selective business or portfolio disposals, credit appetite

tightening, loan book run-off, equity raising, or a combination of these actions. The Group would

invoke the Solvent Exit Execution Plan or Recovery Plan in the event that it is required.

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

182

Shawbrook Group plc

Annual Report and Accounts 2025

Climate Report

184

Strategy

194

Governance

196

Risk management

200

Metrics and targets

183

Shawbrook Group plc

Annual Report and Accounts 2025

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

2025 marked a pivotal year for

Shawbrook following our return

to the public markets.

With new stakeholders on board, we

reaffirm our commitment to addressing

climate risks and opportunities in a matter

that is proportionate and aligned to

long-term value creation. This report explains

how climate considerations are embedded

into our governance, risk management and

strategic decision-making, and summarises

the progress made during the year.

This report is consistent with the Task Force

on Climate-related Financial Disclosure’s

(TCFD) 2017 Recommendations across all four

pillars and, where feasible, incorporates the

2021 Annex to the Implementing Guidance.

It also complies with both the FCA Listing

Rule 9.8.6R(8) and amendments made to the

Companies Act 2006 requirements by The

Companies (Strategic Report) (Climate-related

Financial Disclosure) Regulations 2022. We

continue to monitor regulatory developments,

including the UK Government’s adoption of the

International Sustainability Standards Board

(ISSB) IFRS S1 and IFRS S2 standards as UK

Sustainability Reporting Standards (UK SRS

S1 and S2), and will evolve our reporting in

line with future requirements.

“The Board remains committed to a proportionate

and disciplined approach to climate. This year,

climate metrics have improved, with a continued

reduction in financed emissions across our Group

Property Portfolios against the agreed baseline

and sustainable finance originations exceeding

our stated target. The Board has agreed updated

metrics and targets to ensure climate considerations

remain embedded within our governance, strategy

and risk management, strengthening the Group’s

resilience to climate-related risks and supporting

sustainable, long-term resilience as the transition

progresses.”

John Callender

Chairman

Our climate strategy supports our customers’ transition to

net zero while managing the associated financial risks and

opportunities. We take a proportionate approach, focusing on

areas which have the greatest materiality and influence, and will

continue to evolve our strategy in line with best practice.

The transition to net zero requires a coordinated global effort and it depends on

multiple factors including government policies, grid decarbonisation, supply chain

transformation and shifts in consumer behaviour. Against this backdrop, our climate

strategy adopts a proportionate and disciplined approach, focusing our efforts and

short-term targets on areas where climate risk is financially material and we can have

the greatest influence. Our approach prioritises portfolio segments where climate-

related transition and physical risks have the greatest potential impact on credit

quality, collateral values and long-term resilience, while maintaining a scope that is

proportionate to our specialist banking model. We engage with customers, industry

bodies and policymakers to address challenges such as data availability and quality,

and to support a transition aligned with the objectives of the Paris Agreement.

To support our short-term climate goals, during 2025, we continued to progress our

transition planning across three priority areas, Group Property Lending Portfolios, SME

Portfolios and Own Operations. High-level summaries of our approach and progress are

provided on page 186.

These summaries are intentionally high-level and are intended to support our

preparation for future alignment with the UK Transition Plan Framework, as

expectations on transition planning and disclosure continue to evolve. Other areas

of our loan book, including motor finance, unsecured personal loans and savings, are

not currently included within our net-zero pathway due to their short tenors, limited

balance sheet materiality and constraints in assessing climate impact, aligning with

our proportionate approach. Unsecured lending and savings have immaterial physical

and transition risk, and there is limited ability to measure emissions given the lack of

influence over the use of proceeds. Motor finance represents 3.9% of the balance sheet,

which is not considered financially material. These portfolios will be kept under review

as methodologies, data availability and regulatory expectations develop.

Strategy

184

Shawbrook Group plc

Annual Report and Accounts 2025

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Target

Metric

Our climate strategy

What we achieved in 2025

✓

Introduced a new platform partnership focused on improving

customer retention and reinforcing the proportion of higher

EPC-rated properties in our portfolio through early engagement

and product transfer options.

✓

Originated over £740 million in sustainable finance in 2025,

bringing total sustainable lending since 2023 to over £1.8 billion.

✓

Improved the EPC mix across our owner-occupied and buy-to-let

portfolios, with EPC C+ rated properties comprising 50.3% and

50.8% of the respective portfolios at the end of 2025.

What we achieved in 2025

✓

Continued to reduce our emissions intensity for our Group Property

Portfolios against our 2021 baseline, driven by improvements in our

overall EPC mix.

✓

58% of our suppliers are net zero aligned.

✓

Achieved carbon neutrality for our own operations.

What we achieved in 2025

✓

Approved new climate requirements within the Group’s collateral

and valuation policy for Property Portfolios, standardising

physical risk assessment and ensuring high flood risk assets

have appropriate mitigants.

✓

Continued to enhance and embed climate governance

including disclosures with positive engagement from

stakeholders across the Group.

Support the climate transition

•

Sustainable finance lending

•

Energy efficient mortgages and retrofit proposition

•

Engagement with customers, partnerships

and collaboration with industry bodies

Reduce our environmental impact

•

Reduce financed emissions

•

Reduce own operational emissions

Embed environmental considerations

into our corporate DNA

•

Climate considerations embedded into lending,

strategic and financial decisions

•

Colleagues, Management and Board engaged

on climate through awareness and training

Metrics and targets

Sustainable finance

£2 billion of originations

by the end of 2028

% EPC C+ rated properties

Annual disclosure for

owner-occupied and

buy-to-let portfolio

Our focus

•

Utilise and expand

existing product offerings

to facilitate EPC C+

acquisitions, retentions,

and property improvements.

•

Engage with customers to

help them understand their

climate impact.

Our focus

•

Continue to improve data

quality and coverage

of financed emissions

calculations.

•

Reduce own operational

emissions through climate

objectives and considerations

built into sourcing and

procurement process.

Our focus

•

Develop climate-related

communications and

engagement plan.

•

Provide ongoing climate

and net zero training.

•

Further enhance due

diligence guidance for our

identified sensitive sectors.

For the period 1 January 2026 to 31 December 2028. Lending

that aligns with the environmental criteria within our Sustainable

Finance Framework. This has been developed using best

practice and industry guidance.

We originated over £1.1 billion for the period from 1 January 2023

to 31 December 2024.

Covers Scope 1 and Scope 2, Scope 3 category 3 fuel-and-energy related

activities, category 5: waste, category 6: business travel, category 7:

employee commuting and category 15: financed emissions for the Group’s

Property Lending Portfolios (as defined on page 200) and SME portfolios.

This excludes Scope 3 category 1: purchased goods and services.

Covers Scope 1 and Scope 2 emissions using location-based methodology.

Excludes all relevant Scope 3 emissions.

Number of suppliers, with annual spend of over £200,000, that either have

a net zero target for their own operations or have aligned to the Science

Based Targets initiative (SBTi) approach for net zero.

Through the purchase of verified carbon credits.

Metrics and targets

Net zero by 2050

Net zero by 2035

For own operations

Carbon neutral

Maintain for own operations

Net zero aligned suppliers

At least half by the end

of 2028

Metrics and targets

Executive remuneration

Tracking climate strategy

progress through variable

remuneration performance

measures

Climate risk

Annual disclosure on

how we embed climate

risk in the Group

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Group Property Lending Portfolios

SME Portfolios

Own Operations

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Improve EPC mix across our portfolios by facilitating EPC C+

acquisitions, retentions and property improvements.

Support customers’ net zero transition through understanding

their priorities and plans, exploring partnerships, and providing

financing through existing products.

Invest in energy improvements for our existing offices

and implement climate criteria for all new or renewed

leases that meet defined energy efficiency and broader

sustainability standards.

Leverage our lending product range and expand

current offering to provide financing solutions for

the net zero transition.

Reduce emissions intensity for our SME portfolios to

achieve net zero financed emissions by 2050.

Understand transition plans and implement climate

assessments for our top suppliers.

Reduce emissions intensity across our Property Lending

Portfolios to achieve net zero financed emissions by 2050.

Support the transition by leveraging enhanced due

diligence for businesses operating in our identified

sensitive sectors, including evaluation of transition plans.

Develop colleague engagement strategies to support

implementation of employee behavioural change

initiatives that support our climate ambitions.

Develop engagement strategies, including through

partnerships, to support customers with their energy

efficient home improvements.

Develop engagement strategies, including

through partnerships, to support customers

with their net zero transition.

Offsetting strategy through purchase of high quality

verified carbon credits.

Collaborate with industry bodies and partners to raise

customer awareness and collectively advocate for energy

efficiency improvements in the built environment.

Collaborate with industry bodies and partners to amplify

the SME voice on net zero and jointly overcome challenges

such as data limitations.

Reduce own operational emissions to achieve

net zero by 2035.

Our high-level transition plans

Progress update

•

In 2025, we continued to finance higher EPC-rated properties.

We provided over £1.3 billion in lending to properties with an

EPC rating of C or higher. We achieved this through existing

product offerings like simplified discounted fees and higher

LTV for EPC C+ rated properties and new propositions such

as a platform partnership with Eligible to support retention

of higher-rated EPC properties.

•

Improved the EPC mix across our Residential Property portfolios,

with 50.7% of properties rated EPC C+, supporting a reduction in

our Residential Properties finance emissions.

•

Continued to collaborate with industry bodies to advocate for

energy efficiency improvements, providing input towards recent

consultations and roundtable on Warm Homes Plan and Minimum

Energy Efficiency Standards for the Private Rented Sector.

Progress update

•

Agreed methodology to assess financed emissions

and implementation underway to establish baseline

and complete measurement during 2026.

•

Embedded our sensitive-sector lending process, completing

enhanced due diligence on 40 cases to assess environmental

risks and transition plans, and no escalations to the

Sustainability Panel.

•

Continued to work with industry bodies and external partners to

explore solutions to support our customers’ net zero transition.

Progress update

•

Continued to optimise office utilisation and drive energy

efficiencies across our sites, while investing in core-estate

energy improvements and engaging colleagues on energy

use and recycling.

•

Delivered our first ESOS compliance update which included

reducing energy consumption in server rooms by adjusting

air conditioning settings.

•

Continued to enhance data quality for business travel

and purchased goods and services, resulting in a better

understanding of our actual emissions.

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Climate-related risk

Area impacted

Time horizon

Description

Expected impact

Mitigations

Description type

Shawbrook business area

Short-term:

Before 2030

(aligned with financial planning)

Medium-term:

2030-2035

(aligned with scenario analysis)

Long-term:

Beyond 2035 (outside

current planning horizon)

Climate-related risk or opportunity

High:

Impacts within the financial

planning horizon

Medium:

Impacts within the scenario

planning horizon

Low:

Impacts beyond 2035

Current or in plan mitigating actions or key initiatives

Risk: Transition

Policy – Enhanced

reporting and

regulatory

requirements

•

Own Operations

Short-term

Current metrics and disclosures

could be considered

insufficient or misleading

as reporting requirements

continue to evolve.

High

Reputational damage and

compliance issues

•

Climate expertise embedded within the organisation to understand and

comply with current and upcoming requirements.

•

Developing data to report carbon footprint and reduction targets to meet

future reporting requirements.

Market – Customer

behaviour

•

Real Estate and Retail

Mortgage Brands

•

SME

•

Motor finance

Medium-term

Consumer appetite for

sustainable lending continues

to change. There is a risk

of misunderstanding what

customers need when

structuring our products.

Medium

Reduced demand due to shift

in customer preferences

•

Regular customer and broker engagement.

•

Deep market expertise embedded within the business to understand

customer needs and regularly review customer behaviour, with the aim

of providing solutions that serve their financial needs.

Technology – Costs

to transition to lower

emissions technology

•

Real Estate and Retail

Mortgage Brands

•

SME

•

Motor Finance

Medium-term

New technology could

be required across all

sectors intended to reduce

emissions, which could

result in devaluation of

existing technology.

Medium

Increased credit risk and

collateral valuations

decreases

•

Continue working with industry bodies to increase customer awareness

of the benefits of reducing emissions to mitigate the perception of retrofit

solutions or the transition to electric vehicles being too expensive in the

short-term.

Policy – Energy

efficiency regulation

•

Real Estate and Retail

Mortgage Brands

•

SME

Medium-term

We are dependent on effective

government policy to help

drive financed emissions

reductions. There is a risk that

policies will not be in line with

the UK’s net zero commitment.

Medium

Reputational damage

including potential legal risk

of not meeting targets and

increased customer credit risk

•

Agreed restrictions on new lending for properties rated below EPC E,

unless exempt.

•

Quarterly monitoring of EPC distribution including originations, retentions

and redemptions of EPC C or higher rated properties.

•

All lending within Development Finance must have plans to meet EPC C

or higher.

Climate-related risks and opportunities

We have identified several climate-related transition and physical

risks that could impact the Group, alongside potential opportunities.

These have been considered as part of our strategic and financial

planning processes.

Climate-related risks and opportunities are prioritised based on

their potential financial impact and time horizon. The table below

summarises the most material transition and physical risks identified

across the Group, alongside associated opportunities, mitigations

and management actions.

Further details on the outputs of our quantitative assessment

can be found in the Risk Report section of these disclosures

on pages 109 to 182.

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Climate-related risk

Area impacted

Time horizon

Description

Expected impact

Mitigations

Risk: Transition

Reputational –

Increased scrutiny of

our role in transition

from lending

(financing) and

business (operations)

•

Real Estate and Retail

Mortgage Brands

•

SME

•

Motor Finance

•

Own Operations

Medium-term

Current exposure to high

emissions sectors and our

role in the transition to net

zero including impacts on

our customers and our own

business.

Medium

Reputational damage and

reduction in demand for our

products

•

Active monitoring and enhanced due-diligence requirements for new

lending to high climate risk sectors.

•

Climate considerations are embedded in all credit papers and in key

own operations processes, including supplier onboarding and requirements

for new offices.

•

Climate oversight at Board to ensure we are progressing against our

climate strategy.

Policy – Customer

ability to increase

efficiency

•

Real Estate and Retail

Mortgage Brands

•

SME

•

Motor finance

Short to Medium-term

Customers may struggle

to fund energy efficiency

improvements. This could

mean customers’ ability to

repay loans reduces and

asset valuations may fall.

Medium

Increased credit risk and

collateral valuations decreases

•

Controls and flags in place to notify customers when lending on EPC D

or lower properties to consider future improvements to achieve EPC C

or higher.

•

Plans to identify energy efficiency improvements and/or transition plans

through customer engagement.

•

Actively monitor the market for signs and trends of falling property values

and EPC ratings.

•

Customer engagement to support their transition towards electric vehicles

and hybrid vehicles in the short-term.

Policy – Carbon tax

•

Real Estate and Retail

Mortgage Brands

•

SME

•

Motor finance

•

Own Operations

Long-term

Increased carbon pricing

on our own emissions and

customers’ operational

emissions. This could mean

increased operational costs

for the Group and customers’

ability to repay loans reduces

and asset valuations may fall.

Low

Increased operational costs

and customer credit risk

•

Engage with customers to understand their plans to reduce emissions and

the potential impact of increased carbon costs. This will also support in

improving business continuity risk.

•

Enhanced due diligence carried out for high carbon sector transactions to

understand decarbonisation plans.

•

Engage customers to support their transition towards electric and hybrid

vehicles.

•

Implement carbon savings and energy efficiency improvements in existing

offices to reduce own operational emissions.

•

Climate and energy efficiency principles built into sourcing process for

new offices.

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Climate-related risk

Area impacted

Time horizon

Description

Expected impact

Mitigations

Risk: Physical

Acute – Severe

weather events

•

Real Estate and Retail

Mortgage Brands

•

SME

•

Own Operations

Long-term

Disruption due to physical

events; damaged assets and/

or business disruption due to

physical impacts.

Low

Increased credit risk and

collateral asset valuations

•

Monitoring of flood risk for property exposure across the Group.

•

Customers are required to maintain valid property insurance throughout

the duration of their loan.

•

Flood risk monitoring for our own operations and key suppliers.

•

Scenario analysis includes physical impact scenario on our property

portfolio.

•

Integration of climate risk into business resilience scenarios as part

of scenario analysis.

Chronic – Changes in

precipitation patterns

and temperatures

Opportunity

Partnerships

•

Real Estate and Retail

Mortgage Brands

•

SME

•

Motor Finance

•

Own Operations

Short-term

Collaboration enables

acceleration of key

opportunities.

High

Increased revenue through

additional funding provided

•

We are members of trade bodies that seek to advance the UK’s net zero

agenda and have participated in various industry forums on this agenda.

•

We plan to continue to collaborate with partners across the industry to

further develop opportunities to enable the net zero transition.

Products and services

•

Real Estate and Retail

Mortgage Brands

•

SME

•

Motor Finance

Medium-term

Financing the net zero

transition focusing on the

delivery of energy efficient

and low carbon solutions.

Medium

Increased revenue through

additional funding provided

•

Actions have been taken across the Group to develop our sustainable

finance proposition which includes providing a discount for buy-to-let

mortgages to properties rated EPC C or higher.

•

Further new sustainable lending opportunities are being explored.

Energy source

and efficiencies

•

Own Operations

Medium-term

Increase use of renewable

energy and energy efficiency

within our property portfolio.

Medium

Reduced exposure to

greenhouse gas (GHG)

emissions and reduced

sensitivity to changes in

cost of carbon

•

Offices we occupy and have operational control over are on

renewables tariffs.

•

We continue to focus on increasing energy efficiency across our

own operations, working with landlords to implement energy

efficiency improvements.

•

We have incorporated energy efficiency principles into the

procurement process for new offices.

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Process to identify risks and opportunities

We utilise a suite of tools and processes to identify risks and opportunities presented by climate change relating to our lending activities.

These cover emissions measurement and both qualitative and quantitative scenario analysis.

Measuring building

emissions and EPC

data gathering

At an individual property level, we use EPC data to measure emissions

and ascertain issues affecting transition, as well as a view of each financed

property’s potential energy efficiency. During 2025, we strengthened our data

capabilities, increasing coverage of financed emissions measurement for the

Group Property Portfolios by improving data quality and coverage.

Measuring SME-

linked financed

emissions

Our SME customers are typically small companies who are not mandated

to produce emissions figures under current regulation. In 2025, we defined

our approach to measuring emissions by strengthening our assessment of

climate risk across SME portfolios. This included identifying customers’ trading

locations to support business continuity assessments and transition-financing

opportunities, which are now at proof-of-concept stage. We also aligned

our measurement methodology with the Partnership for Carbon Accounting

Financials (PCAF).

Building on the agreed methodology, planned actions for 2026 include

establishing a sector-based climate base case to support planning,

forecasting, and climate-informed decision-making, alongside insights to

support customers’ net zero plans. We will also develop sector-based net zero

pathways for our most material sectors. Due to current data limitations, this

approach results in a PCAF score of 4. We plan to improve this over time as

additional data becomes available.

Qualitative

scenario analysis

We have analysed climate risks using the 2021 Climate Biennial Exploratory

Scenario (CBES) (early, late action, and no action) over 30 years. These

scenarios assumed varying levels of policy intervention to reduce carbon

emissions. The analysis helped us to understand potential transition risks

that could impact our business. Using a proportionate approach based on

exposure levels, we selected five sectors for in-depth transition risk analysis.

These sectors made up c.90% of our Real Estate and Retail Mortgage Brands,

and SME business areas.

Quantitative

scenario analysis

We have followed up on our two previous full quantitative scenarios using

CBES with a focussed severe one-year stress using climate data at 2030

under the late action scenario which assumes a disorderly transition.

The purpose of this scenario was to support the Group’s Internal Capital

Adequacy Assessment Process (ICAAP) and assess whether physical and

transition risk is adequately covered within Pillar 1 without double counting

risks covered elsewhere in the ICAAP.

This analysis is consistent with the cumulative losses used in our

quantitative scenario and are broadly consistent with the conclusions

of the 2021 CBES late action scenario versus the counterfactual scenario,

considering property-related lending.

Physical risk

assessments –

lending

We have engaged with climate-related data partners, CLSQ and D-Risk

to measure potential flood damage across the Group’s Property Lending

Portfolios and SME operating addresses. We have used the floodability index

which uses a Green, Amber, Red, Black 1 and Black 2 rating to categorise the

risk of flooding. This is widely used by lenders and valuation surveyors to

provide a consistent view across the property market. We have considered

FloodRe

implications from 2039 onwards and how the market is beginning

to regulate insurance pricing. We decided to tighten policy by strengthening

automated decisioning with floodability ratings and plan to complete

embedding of the forward-looking risk-based approach in 2026.

Flood Re is a UK government-backed reinsurance scheme that supports the affordability of household flood insurance for high-risk properties.

It is intended as a temporary measure and is scheduled to end in 2039, after which flood insurance pricing is expected to become fully risk-reflective.

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Physical risk

assessment –

own operations

We have completed a physical risk assessment of our own operations under flood, subsidence and

coastal erosion climate perils. This includes the operational centres of our UK material outsourcers.

The following scenarios were assessed:

•

Flood risks under four climate scenarios (RCP

2.6, 6 and 8.5) at three points in time

(2030, 2050, 2080):

One of our sites and one outsourcer site identified.

•

Coastal erosion rates for locations within 1km of the coastline up to 2100:

No office locations or current material outsourcers.

•

Subsidence risks from a historical perspective (1961-90) and future perspective

(2020-49; 2040-69):

A number of sites were identified as subject to elevated subsidence risk.

Our Third-Party Risk Management team within Risk Services engaged with internal Supplier

Relationship Owners to determine what business continuity plans are in place to support an

assessment of residual risk, of which none are outside of risk appetite.

Transition risk

assessment –

own operations

We have measured our Scope 1 and 2 emissions, as well as the relevant Scope 3 emissions for our

own operations. We developed a plan to support our ambition of achieving net zero for our own

operations by 2035. This plan, subject to evolution in line with our progress and wider business

plans, includes a focus on renewable energy use, estate planning and the purchase of carbon

offsets which we intend to reduce over time.

Stands for representative concentration pathway.

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Outputs from qualitative

risk assessment

We have undertaken qualitative

scenario analysis, using the

scenarios published as part of

the 2021 CBES and developed

and implemented our approach

to embed the impact of climate

change quantitatively within the

ICAAP. We have assessed the

impact of sector-related physical

and transition risks on us.

In addition, we completed

a detailed review of assets

and liabilities as part of the

ILAAP, including sensitivity

analysis to assess potential

stress impacts, materiality and

interconnectedness of climate,

concluding that the impact is

immaterial. Going forward, we

plan to expand our approach

to ILAAP to include enhanced

documentation of assumptions

and proportionality, embedding

climate-driven liquidity stress

testing and the integration

of climate risk into the

Recovery Plan and testing.

The table below outlines the risk impacts for our key sectors which influence collateral values and the ability of

customers to repay loans:

Sector

Potential risk impacts

Property and

construction

•

Property at risk from flooding, subsidence, extreme weather events and chronic effects. This

will impact asset valuations and owners may have costs to implement adaptation measures.

•

Properties which have poor energy efficiency could lead to falls in asset values. Owners have

increased costs to remedy and may impact ability to repay loans.

Financial services

•

The risks here lie in the look through to our financial services customers’ own clients.

The majority of those clients are in the property (as above) and the automotive sectors

and will need to comply with the transition in those sectors as applicable (e.g. move to

electric and hybrid vehicles). This may impact vehicle collateral values and ability to repay loans.

Manufacturing and

supply chain

•

Assets can be moved to less risky areas of buildings or other sites but remain high risk whilst

kept in the property.

•

Manufacturing is likely to see large shifts in policy (e.g. carbon taxes) and consumer

preferences (e.g. desire for lower carbon products). Failure to adequately respond to these

challenges may impact demand and increase costs, reducing the ability to repay loans.

Transport and storage

•

Transport and storage are likely to see large shifts in policy (e.g. carbon taxes) and consumer

preferences (e.g. desire for lower carbon products). Failure to adequately respond to these

challenges may impact demand and increase costs, leading to a lower ability to repay loans.

The results of the analysis were broadly in line with expectations that under a more disruptive ‘late policy’ scenario,

greater stressors would be faced by customers in the sectors in focus. These stressors were translated into specific

steps we may take under each scenario for the relevant sectors, providing actionable insights that can be applied in the

short term. Policy action is a highly rated driver for the property sector, with shifts in EPC requirements acting as a key

indicator of the direction of travel in the decarbonisation of property in the UK. Technology change is expected to be

a significant driver for lowering emissions in the manufacturing and supply chain sectors, whilst consumer behaviour is

expected to drive demand for greener vehicles and other low-carbon, consumer-focussed sectors. We have considered

these impacts as we have developed our transition plans outlined on page 186.

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Strategic resilience

Our strategy is aimed at supporting our customers’ transition

to net zero and is impacted by climate-specific risks. We see

the transition as an opportunity, particularly in our Commercial

business and Retail Mortgage Brands, where policy interventions

including a minimum EPC level and updates to our terms and

conditions, have already been implemented. There are inherent

risks in not recognising technological change and shifts in consumer

demand, which may lead to adverse selection and a portfolio that is

less re-financeable and exposed to reduced collateral values and/

or increased customer defaults. To support this, we are developing

our retention capability, including product transfers and further

advances, to provide the products needed to support the transition.

We recognise that technology plays a significant role in assessing

climate risk, and we are undertaking a pilot using smart-meter data

to explore opportunities to improve the PCAF rating for property-

related climate risk, enhance measurement accuracy and enable

more granular risk assessments.

We completed our annual quantitative assessment of the climate-

related scenarios using data that we have received from our climate

data partners. We have used the data to identify specific physical

and climate-related adjustments to customer default and collateral

valuations, enabling us to apply our stress-testing approaches to

assess the impact of the late-policy-action scenario within our Pillar

2B assessment as part of our ICAAP. Pillar 2B is an assessment of

risks over a 3-to-5 year period that are not currently picked up under

Pillar 1 capital rules. For 2025, we also completed an assessment

of the impact on expected credit losses (ECL) in line with recent

Dear CFO letters on climate and completed a Pillar 2A assessment

of climate risk, given that Pillar 1 assumes risks are internationally

perfectly diversified.

Input into financial planning

Qualitative horizon scanning relating

to climate change forms part of our

macroeconomic trends analysis that

accompanies our financial plan. In 2025,

we followed up on our full quantitative

scenario with a focussed severe one-year

stress as part of our ICAAP. This scenario

was designed to test that the Group

was adequately capitalised in Pillar 1 for

the transition and physical risks that its

lending on property generate. This scenario

was focussed on identifying the physical

and transition risk without duplicating

macroeconomic risk that is addressed in

other parts of the ICAAP.

We will further embed climate risk into our

planning during 2026 as part of SS25/25

implementation by using a more granular

base case and sector-specific scenarios.

This will help us to incorporate climate

considerations into our financial planning.

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Governance

Oversight and management of

climate-related risks and

opportunities are embedded

within the Group’s governance

framework. A summary of the

arrangements is shown in the

chart opposite.

Further information on the respective

roles of the Board and Management in

overseeing, assessing and managing

climate-related risks and opportunities

is set out in the sections that follow.

Shawbrook Group Board

Responsible for setting the strategic aims and promoting the long-term sustainable success of the Group.

Climate Working Group

Responsible for delivery of strategy related to climate-related

risks and opportunities. Focused on key themes: capability, governance

and leadership, risk management, reporting and KPIs, climate data

and measurement, operations, sustainable (green) finance

and external engagement.

Emissions Measurement Working Group

Responsible for delivery of strategy related to climate-related

emissions, including measurement and assurance activities

for both financed and operational emissions.

Audit Committee

Responsible for overseeing internal controls

and financial reporting including non-financial

disclosures impacting financial statements.

Executive Committee

Supports the Chief Executive Officer in

discharging their accountabilities including

consideration of sustainability strategy,

trends and targets.

Sustainability Sub-Committee

Responsible for developing and overseeing the delivery and implementation of the sustainability strategy. It also acts as the principal forum overseeing

the activities of the Climate Working Group, and the Emissions Measurement Working Group, and supports programme related decision-making as

appropriate. Reporting/escalations are made to the Board via the Executive Committee.

Sustainability Panel

Evaluates transactions identified as having

high environmental and/or social risk.

Comprises the Chief Executive Officer, Chief

Financial Officer and Chief Risk Officer.

Executive Risk Committee

Supports the Chief Risk Officer in

considering enterprise-wide risks including

climate risk reporting and delivery against

regulatory requirements.

Remuneration Committee

Responsible for reviewing and approving

performance measures including those

relating to climate.

Risk Committee

Responsible for advising the Board on current

and future risks and determination of risk

appetite including climate and strategic risk.

Key

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Board level committees

Executive level committees

Working Groups

The Board’s role and activities

The Board sets the Group’s strategic goals, including

climate priorities, to promote the long-term sustainable

success of the Group for the benefit of all our

stakeholders. The Board is responsible for overseeing

our approach and response to climate change,

including oversight of progress against agreed targets.

The Board discusses climate-related matters throughout

the year, with formal updates received at least twice a

year, focusing on material risks, progress against agreed

targets and implications for strategy and risk appetite.

The Board also receives periodic external training to

remain informed on the evolving external and regulatory

landscape. Certain aspects of climate governance are

delegated to Management committees, as shown in the

governance structure chart on page 194.

During 2025, the Board (including Independent

Directors) actively oversaw and challenged the Group’s

climate strategy, including the following engagement:

•

Reviewed and approved the Group’s 2024 Climate

Report within the 2024 Annual Report and Accounts.

•

Reviewed the Group’s half-year progress update on

key metrics and targets and agreed new internal and

external climate metrics and targets for the period

2026 to 2028.

•

Received external training on the evolving landscape

of climate-related disclosure requirements and

regulatory expectations.

•

Approved the climate risk appetite statement and a

set of property-based risk appetite limits that provide

a framework for future risk appetite limits that are

aligned to interim targets and measures.

•

Reviewed the outcomes of the climate quantitative

scenario analysis as part of the Group’s ICAAP process.

Management’s role and activities

The Board delegates responsibility for the delivery and

execution of the Group’s climate strategy to the Chief

Executive Officer, supported by the Executive Committee,

which is responsible for ensuring that the climate strategy

is embedded across the Group. With oversight from

the Board, Management is responsible for identifying,

measuring, managing, monitoring, reporting on and

challenging climate-related risks and opportunities. To

ensure climate action remains a top priority, climate metrics

were integrated within the 2025 variable remuneration

performance measures and mandatory climate training has

been implemented for all employees, including new joiners,

embedding climate awareness across the organisation.

During 2025, the Sustainability Sub-Committee

continued to steer key aspects of the climate

strategy, including:

•

Discussed and reviewed operational carbon

footprint results and the 2024 Climate Report.

•

Reviewed progress against climate-related

metrics ahead of discussion with the Executive

Committee and the Board.

•

Reviewed plans to evolve and deliver climate

targets, including those relating to own operations

and sustainable finance lending commitments.

•

Discussed post-2025 climate targets and

implications for the Group’s net zero ambitions

for own operations by 2035 and financed

emissions by 2050.

Separately, Management undertook external

training on developing a realistic climate transition

base case, to further support delivery of transition

plans and to meet the PRA’s SS5/25 requirements on

managing climate-related risks.

Chief Risk Officer

The Chief Risk Officer is the Senior Manager accountable under the PRA’s

Senior Managers and Certification Regime for identifying and managing the

risks arising from climate change. Climate considerations are included in

the regular updates to the Executive Risk Committee.

Chief Financial

Officer

The Chief Financial Officer has accountability for measuring financed

emissions and integration of climate considerations into financial planning.

Chief Banking

Officer, Chief

Banking Risk Officer

The Chief Banking Officer and Chief Banking Risk Officer are responsible for

aligning their strategic actions to respond to climate change by managing

associated risks and opportunities, including meeting climate commitments.

Sustainability

team

The Sustainability team (reporting into the Chief of Staff) works in

partnership with key stakeholders across the Group to develop and

deliver the climate strategy and has accountability for measuring

emissions from own operations.

Executive

Committee

The Executive Committee is supported in climate-related matters by the

Sustainability Sub-Committee, chaired by the Chief of Staff, and its working

groups. The Sustainability Sub-Committee has delegated responsibility to

steer and provide oversight of the Group’s sustainability strategy including

climate-related components. The Sustainability Sub-Committee convenes

key senior representatives at least quarterly to oversee implementation of

the Group’s climate strategy and embedding of climate-related deliveries

into business-as-usual activities, and to track progress against internal and

external climate metrics and targets.

Chief

Executive Officer

The Chief Executive Officer is accountable for the development and delivery

of the Group’s sustainability strategy, including overall accountability for

climate-related risks and opportunities. Through the Executive Committee

meetings, climate-related matters are discussed throughout the year, with

spotlight sessions held at least twice a year.

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Risk management

We are aware that climate

change represents an inherent

risk to the Group, including the

impact on the UK economy,

asset values, customer

affordability and operational

resilience. Our objective is to

continue to measure and embed

climate risk within the Group

thereby evolving our assessment

of the risks and identify and

deliver opportunities arising from

climate change.

Physical risks can manifest in various ways, impacting

organisations through water scarcity and quality issues, food

security and extreme temperature changes affecting premises,

operations, supply chains, transport and employee safety.

Two main types:

•

Acute physical risks:

Event-driven such as cyclones,

hurricanes or floods.

•

Chronic physical risks:

Long-term shifts in climate

patterns (e.g. sustained higher temperatures) that

may cause rising sea levels or persistent heatwaves.

We classify climate-related risks as follows:

Physical

risk

Transition

risk

Litigation

risk

The transition to a lower-carbon economy may entail extensive policy, legal, technology and market changes to address

mitigation and adaptation requirements related to climate change.

•

Policy risks:

Regulations aimed at climate mitigation

(e.g. carbon pricing) and adaptation can create

uncertainty and constrains on business operations.

•

Legal risks:

Companies may face legal action by individuals or

entities seeking compensation from losses incurred due to the

failure to mitigate or sufficiently adapt to the impacts and/or the

inadequate disclosure of climate-related financial risks.

•

Technology risks:

The development and use of emerging

technologies (e.g. renewable energy, battery storage and

carbon capture and storage) can impact some companies’

competitiveness, costs and business models.

•

Market risk:

Shifts in supply and demand for certain

commodities, products and services driven by climate

change can disrupt markets and create new challenges.

•

Reputational risks:

Public perception of a company’s

climate action can adversely impact its brand and

customer relationships.

Litigation risk is defined as the risk of legal activity arising as a result of climate change. The risk arises from people or

businesses seeking compensation for losses they may have suffered from physical or transition risks.

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1. Identification

4. Monitoring

2. Measurement

5. Reporting

3. Management

6. Challenge

1. Identification

Identifying risks that could impact the Group requires in-depth

knowledge of our strategic objectives, business operations, target

markets, and organisational structure. This process includes:

•

Obtaining portfolio-level climate risk data, on a proportionate

basis, covering physical risks (including coastal erosion,

surface water flooding and subsidence) across multiple IPCC

RCP pathways, average building damage ratios, and transition

risk metrics such as actual and potential EPCs, improvement

options and indicative costs. The data also includes key property

characteristics and emissions, with quarterly back-book review

capability and API integration to support implementation into

lending strategies.

•

Procuring operating location data for SME customers to enable

comprehensive physical and transitional risk assessment. We

have also worked with an external consultant to support the

development of a PCAF aligned methodology for SME emissions

measurement, with further analysis to be completed in 2026.

•

Testing the use of smart meter data to improve accuracy of

emissions measurement for our property portfolios.

2. Measurement

Risk measurement quantifies the risks to the Group to enable

assessment and selection of the appropriate means of managing

the risk and to enable appropriate resources to be dedicated to its

management. Appropriate systems, methodologies and models are

selected for risk measurement and their limitations are understood

and taken into account where possible. We consider the consistent

application of planned and stressed conditions into the tools and

measurement of risk.

Risk Management Framework (RMF)

We recognise the cross-cutting causal nature of climate risk and

have designated climate risk as a principal risk in the Group’s risk

taxonomy. This ensures the RMF is able to support the Group’s

growth and manage the associated risks. Refer to the Risk Report on

page 112 to see how climate risk is embedded within our overall RMF.

In addition to the annual review of the RMF and risk appetite in 2025,

the Group has taken a number of initiatives to strengthen its RMF.

Climate risk specific highlights include a new climate base case

scenario to improve data quality and transform this into actionable

insights to support the assessment of physical and transition risks

and opportunities across its portfolios. The Group completed the

design of its approach to lending emissions in SME using a PCAF

aligned approach to increase coverage of the lending portfolio

which will help in setting net zero targets and transition plans. The

Group approved some changes to its collateral and valuation policy

to ensure that physical risk is reflected consistently in all valuation

tools. The Group also added to its scenario analysis with the

implementation of a Pillar 2A assessment in its ICAAP.

To promote embedding, our climate risk standard supports principal

risk owners with the identification, management and reporting of

climate risk. The process for identifying, assessing and managing

climate-related risks follows the six stages set out in the Group’s

RMF and are reflected in all risk policies and include:

Risk appetite

Our risk appetite statement defines the types and levels of risks

the Group is willing to accept or avoid within our risk capacity

to achieve our business objectives. This is annually reviewed and

approved by the Board alongside the budget and five-year plan.

The Board approves and reviews performance against the Group’s

risk appetite limits, including climate measures which continue

to evolve alongside the development of new measures. Our risk

appetite statement includes a qualitative statement supported

by several objectives and dimensions, and a series of quantitative

triggers and limits. Each measure in our risk appetite report is

weighted to ensure that the most material measures are escalated

in the event of a breach. In the context of climate risk, we have

triggers for specific metrics such as potential EPC ratings on the

buy-to-let and owner-occupied mortgage portfolios. These triggers

serve as an ‘early-warning indicator’ to prompt timely action and

prevent breaches of our risk appetite.

Risk management plays an active role in our strategic planning

process. As part of this process, the Risk function compares

the impact of the Group’s plan to the risk appetite and has the

authority to independently challenge and escalate initiatives that

are not in line with the risk appetite statement.

For further information on our risk appetite statement, objectives

and dimensions please refer to page 111 within the Risk Report.

Our climate risk appetite statement:

“The Group is committed to understanding the impacts

its activities can have on the environment and embeds

this understanding of physical and transition risks within

its sustainability strategy. The Group will support its

customers with financing for their transition to a low

carbon economy and play its part in supporting the

government’s commitment to net zero by 2050.”

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3. Management

Risk management involves identifying an

appropriate strategy to address a specific risk

which could include the following responses:

•

Accept the risk

– this is normally selected where

the cost of mitigating the risk exceeds the loss if

the risk were to materialise;

•

Avoid the risk

– by terminating the activity that

generates the risk;

•

Transfer the risk

– by transferring to a third party,

for example by taking insurance; or

•

Mitigate the risk

– by putting effective controls

in place to reduce the risk.

Our primary risk management strategy for climate

risk is to use the data and insights from scenario

testing to mitigate the risk. We implement policies to

support customers in the transition to a low carbon

economy through our lending. In some instances,

we will seek to avoid the risk. This could be due to

non-alignment with the net zero trajectory or where

the physical risk is not within our risk appetite.

4. Monitoring

We use physical and transition risk management

information to monitor the evolution of climate risk

within our lending portfolio. This includes setting

targets for EPC mix and physical risk exposure. We

also use management information to assess the

strategic risk through adverse selection. For SME

customers this may include continuity or resiliency

scores to support customer engagement to help

them understand climate risk to their strategy in

addition to the other risks attached to the lending.

5. Reporting

We report on climate risks regularly through the

Executive Risk Committee and onwards to the Risk

Committee and Board. This includes performance

against risk appetite metrics and the results of our

quantitative scenario analysis through the ICAAP.

6. Challenge

Challenge of the climate strategy is provided by

the Board governance process and supported by

assurance reviews provided through the Group’s

internal audit function.

Some examples of work completed during 2025

to incorporate climate risk into existing principal

risks include:

•

Improved data quality to increase EPC

coverage across property portfolios.

•

Regulatory compliance to include climate

risk assessment under Pillar 2A in line with

PRA feedback.

•

Developed an agreed SME measurement

methodology, with support from external

consultants, with further analysis and

measurement planned in 2026.

•

Assessment of Consumer Duty implications

relating to the use of smart meter data for

residential households.

•

Development of a new and realistic climate

base case scenario to support assessment of

physical and transition risks and opportunities

across all portfolios.

We have undertaken qualitative scenario

analysis using the scenarios published as part

of the 2021 CBES and developed and implemented

our approach to embed the impact of climate

change quantitatively within the ICAAP.

Risk management lifecycle

Climate risk impacts different risk types. Our risk analysis of assets and liabilities identified strategic,

credit and liquidity risk as primary areas of focus for embedding climate risk in the RMF, followed by

operational and conduct risk.

Strategic risk

Strategic risk is a risk that arises from the failure to execute the Board approved strategy. In the

context of climate risk, this may manifest through adverse selection, leading to concentration in a

particular area that may threaten our long-term viability as a business or misalign with external market

expectations. To address this, we have developed a series of key risk indicators and metrics (e.g. the

percentage of buy-to-let and owner-occupied properties currently at or with the potential to improve to

an EPC rating of C or higher) to monitor and quantify the impact of adverse selection on performance.

Credit risk

We have developed a bespoke and proportionate approach to prioritise and assess climate risk

within credit risk, aligning to the previous requirements of the PRA SS3/19. We intend to update our

approach to align with the recently published PRA SS5/25 during 2026. This involves utilising four

strategies covering 94% (2024: 96%) of the net loan book. The graphic on page 199 summarises

our exposure against each strategy. Exclusions relate mainly to acquired portfolios or loans

with a short tenor where there is very limited physical or transition risk.

Impact against other risk types

We continue to extend our climate risk management process to other principal risks as part

of our approach to embed climate risk in the way we do business. This includes the delivery of

climate-related opportunities and embedding of policy changes to ensure there is no climate

arbitrage across the Group.

Top and emerging risks

Our top and emerging risks are identified through the process outlined in the RMF and are considered

regularly by the Executive Risk Committee and subsequently by the Board Risk Committee. These are

set out in the Risk Report on pages 117 to 127. The Board has considered the top and emerging risks

and concluded that climate risk remains a top risk in 2025.

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Operating segments

Portfolio approach

£13,185m

74.6%

Customer climate strategy

Net Exposure

Real Estate

SME

We have developed a bespoke and proportionate approach to prioritise and assess climate risk within credit risk, aligning to loans with a short tenor where there is very limited physical or transition risk.

£1,123m

6.4%

£2,367m*

13.4%

£997m

5.6%

Data-led customer climate strategy

Our data and API driven climate strategy focuses on long-term lending through term loans. For these asset classes

(except Motor Finance) we obtain physical and transition risk data from our climate data partner for our entire back book every

quarter. This helps us review physical risks such as flooding and subsidence, and transition risks related to property EPCs, and

emissions derived from energy costs. Insights from this data have supported product developments, strategy enhancements

and policy rules including supporting customers in their transition to an EPC rating of C or higher and ensuring appropriate

valuation for investment properties. We deliver climate data through an API to facilitate a frictionless origination journey and

provide more certainty to customers on the outcome of the lending journey. These changes complement the work we’ve

completed on our external portal for brokers supporting our Real Estate customers.

Policy and assurance strategy

Building regulations and the development of policies promoting modern building techniques are crucial for sustainable housing.

We use independent monitoring surveyors to confirm property development aligns with our policy at each stage. We also have

the benefit of a portal to assess physical risk including flood and subsidence risk. This ensures completed properties can be

refinanced at exit under normal insurance terms.

Individual counterparty strategy

We apply a climate lens to our lending strategy, adopting a more tailored approach in certain situations. To support this,

we refine our approach to material counterparties to include questions that identify the key climate risks. The climate

data from climate portal and back book analysis is made available through a portal which helps to inform our relationship

management teams prior to engaging with customers.

Exclusions with low climate risk/net zero impact

We have taken a proportionate approach to our climate risk assessment, excluding short tenor products where physical or

transition risk is not material and/ or where financial materiality is limited. This applies to savings, unsecured personal loans,

motor finance and loans that are in run-off.

Consumer

Finance

Source: Shawbrook net loan book at 31 December 2025.

*Includes ThinCats.

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Metrics and targets

Our ambition is to reach

net zero by 2050

Financed emissions

Our most significant GHG emissions relate

to Scope 3: category 15 –financed emissions

associated with our lending portfolios. To

inform our reduction strategy and achieve

net zero by 2050, we measure emissions

using the PCAF methodology for consistent,

transparent and comparable results across

the financial services sector. At present,

we have measured financed emissions for

the Group’s Property Lending Portfolios. A

methodology has been agreed to assess

emissions across our SME portfolios, which

we will implement during 2026 to establish a

baseline and complete initial measurement.

We will continue to improve data quality

and expand coverage across our loan book

where proportionate and material. This is

expected to include our motor portfolio in the

future, subject to balance sheet materiality.

Other asset classes remain outside the

current measurement boundary but will be

kept under review as methodologies and

regulatory expectations evolve.

Property Lending Portfolios

Of the Group’s £17.6 billion total exposure, £12.1 billion (69%) relates to the Group Property Portfolios

Within this, £8.6 billion (71%) is currently in scope for financed emissions measurement, where sufficient

data exists to calculate emissions in line with PCAF requirements. This results in a PCAF data quality score

of 3

. Emissions are primarily estimated using available EPC data, adjusted for UK grid decarbonisation

and unregulated emission sources (e.g. appliances) to improve accuracy. The remaining £3.5 billion (29%)

is temporarily out of scope due to data limitations. A structured data remediation plan is underway to

address these gaps and increase portfolio coverage over time.

The table below sets out how the Group’s Property Lending Portfolios are segmented in line with PCAF

guidance on building classification. Bridging and acquired portfolios are excluded from this analysis

Property Lending Portfolios

Property type classification

Operating

segment

Asset classes included in scope

Residential Properties

Real Estate

•

Buy-to-let

(secured against residential property)

•

Owner-occupied mortgages

Retail Mortgage

Brands

•

Buy-to-let

(secured against residential property)

•

Owner-occupied mortgages

Commercial Properties

Real Estate

•

Commercial investment

(including semi-commercial)

lending

Clear metrics and targets

are fundamental to tracking

progress and managing

climate-related impacts.

We report Scope 1, 2 and relevant Scope

3 emissions in line with the PCAF and the

GHG Protocol, providing transparent and

comprehensive disclosure.

Emissions are fully disaggregated by

category and clearly split between

operational (non-financed) and financed

emissions. Scope 1, Scope 2 and Scope 3

emissions excluding financed emissions

are disclosed in the SECR report on

page 43, with both current and prior

year comparatives. Scope 3 financed

emissions are presented separately in

the following section, reflecting emissions

associated with our lending activities.

Data as of November 2025. This is used for financed emissions measurement for the Group’s Property Lending Portfolios.

Defined by PCAF as using “Estimated building energy consumption per floor area based on official building energy labels and the floor area are available”.

The Group’s acquired portfolios include certain buy-to-let and commercial investment lending that is in run-off.

This includes second charge mortgages within our back book.

Where the commercial element of the property accounts for more than 50% of its value it is classified as a Commercial Investment mortgage.

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Attribution factor

Financed emissions

Outstanding amount

Property value at origination

Attribution

factor

Building emissions

(with b = building)

Measurement of emissions for the Group’s Property Lending Portfolios

We measure these emissions using EPC data, adjusting for UK grid decarbonisation and unregulated

emissions sources such as appliances to improve accuracy, resulting in a PCAF data quality score of 3

Our progress

Emissions intensity relative to our 2021 baseline

has continued to reduce for both Residential

Properties and Commercial Properties, by 17.4%

and 36.8%, respectively. The main drivers have

been improvements in the overall EPC mix across

both portfolios, enhanced data matching and

accuracy, and external factors such as annual

updates to emission factors, which were lower

than the previous year reflecting ongoing grid

decarbonisation in the UK.

Data limitations and

methodology enhancements

Our measurement of property emissions is

subject to data and methodological limitations,

including incomplete EPC coverage and

reliance on standardised and sometimes

outdated assumptions rather than actual

energy consumption. Where available, EPC

data is matched to the property portfolio and

supplemented with updated grid and unregulated

emissions assumptions, in line with current

market practice. EPC coverage is expected to

improve over time through continued customer

engagement and methodological enhancements.

We will also assess the use of property-level

energy consumption data, where this becomes

publicly available, to further improve accuracy

and support transition planning.

Type

Absolute emissions (tCO2e)

Emissions intensity (kgCO2e/m2)

2025

2024

2021

(baseline)

2025

2024

2021

(baseline)

Residential

Properties

80,646

78,497

46,993

Commercial

Properties

26,632

25,453

21,598

103

133

Defined by PCAF as using “Estimated building energy consumption per floor area based on official building energy labels and the floor area are available”.

Total GHG emissions associated with the Property Lending Portfolios.

To understand the efficiency of the Property Lending Portfolios in terms of emissions per unit, which allows for portfolio growth.

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Residential Properties risk assessment

Energy risk assessment

As part of our approach to managing energy-related transition risk

across our property portfolios, we receive energy risk assessments

during the origination process. This informs credit decision-making

and supports the identification and management of both climate-

related transition risk and opportunities. Our partnership with

CLSQ and D-Risk provides valuable insights into property-level

energy performance, including potential EPC ratings, enabling us to

proactively address climate risk. We have also continued to improve

EPC data coverage across the back book. Current EPC coverage

for the Group’s buy-to-let mortgage portfolio is 81% (2024: 71%)

and owner-occupied mortgage portfolio is 88% (2024: 85%).

2025

2024

Exposure to buy-to-let mortgages by EPC

Exposure to owner-occupied

by EPC

This includes second-charge mortgages within our back book.

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Flood risk assessment

We continue to monitor physical

risk data to assess the proportion

of our buy-to-let and owner-occupied

mortgage portfolios exposed to

climate risk. Through our climate

data partnership, we evaluate

surface water, coastal and river

flood hazards at a property level

using location-specific data.

This model considers flood type,

frequency and depth of flooding

to determine potential damage.

Our analysis shows that 1.0% of total

loan exposure across both portfolios

are located in areas classified as high

or very high flood risk zones. To date,

the Group has not had any losses

attributed to flooding, indicating

appropriate and robust controls

within our underwriting process

to mitigate this risk. We have also

modelled future flood risk projections

to 2055 under a high physical risk

scenario assuming current defences

remain in place. While this analysis

indicates a potential increase in risk

over time, the projected increase

is not considered material to the

Group’s risk profile.

% of total regional

loans at high risk

% of total regional

loans at very high risk

Illustration key

Flood exposure by region

0.4%

1.3%

1.7%

2.1%

South East

South West

0.7%

0.9%

3.0%

3.7%

Wales

2.8%

2.6%

2.2%

2.4%

West Midlands

0.4%

0.5%

1.1%

Yorkshire &

Humberside

1.4%

2.6%

4.4%

Scotland

0.6%

0.7%

1.1%

1.2%

North West

0.7%

0.9%

1.1%

North East

0.2%

0.6%

0.5%

Greater London

0.9%

1.4%

2.0%

East Midlands

1.2%

1.3%

1.2%

1.1%

East Anglia

1.2%

1.1%

1.7%

1.4%

2025

2024

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Carbon-related exposure risk assessment

We have assessed our climate-related transition and physical

risks across our lending portfolios using a proportionate,

portfolio-specific approach. Metrics used include financed

emissions measurement, where data is available, and

portfolio-level physical and transition risk analysis applied

on both a quantitative and qualitative basis. Property-related

exposures, representing approximately 70% of the loan book,

have been assessed using these metrics and are considered

to have very low physical and transition risks. For SME

portfolios, the Group has developed a PCAF-aligned, sector-

based methodology using external data for Great Britain and

pending completion of emissions measurement, a high-level

qualitative assessment of physical and transition risks has

been undertaken for these portfolios. The remaining exposures

have been assessed qualitatively for physical and transition

risks only and will not be assessed quantitatively, in line with

the Group’s proportionate approach.

A summary of the assessment by exposure is set out in the table below.

31 December 2025

Net Exposure

Transition Risk

Physical Risk

£m

Commercial Bank

Commercial Bank - Real Estate

Commercial Real Estate

7,622.9

43.1

Very low

Low

Commercial Bank - SME

Agriculture, forestry and fishing

2.8

Low

Very low

Mining and quarrying

Low

Very low

Manufacturing

276.6

1.6

Very low

Low

Transport, storage and utilities

422.6

2.4

Low

Very low

Construction

705.1

4.0

Very low

Low

Wholesale and retail trade

261.4

1.5

Very low

Real estate activities

945.0

5.3

Very low

Financial and insurance activities

900.6

5.1

Very low

Services and other

794.7

4.5

Very low

Personal: Other

0.2

Very low

Retail Bank

Retail Mortgage Brands

4,717.3

26.7

Very low

Low

Consumer Lending

330.8

1.9

Low

Very low

Motor Finance

691.8

3.9

Low

Very low

Total Shawbrook

17,671.8

100

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We have committed to provide

£2 billion sustainable finance

originations

between 1 January

2026 and 31 December 2028.

We originated £475 million and £640 million of sustainable finance in 2023 and 2024 respectively.

More information can be found on our website.

Sustainable finance originations

In 2025, we originated over £740 million in sustainable finance, supporting our customers’ transition to

net zero. This brings our total sustainable financing from 1 January 2023 to 31 December 2025

to over

£1.8 billion, surpassing our current target of £1.2 billion sustainable finance originations. Looking ahead,

we have renewed our commitment for the period 2026 to 2028, targeting £2 billion of sustainable finance

originations. Sustainable finance originations are assessed against the environmental eligibility criteria

set out in the Group’s sustainable finance framework

Own operational footprint

We measure and manage GHG emissions from our operational activities using a third-party climate

management and carbon accounting platform. In line with the GHG Protocol, emissions are reported across

Scopes 1, 2, and 3 (categories 1–14), with financed emissions (Scope 3, category 15) reported separately

on page 201. In 2025, our total operational emissions were calculated at 12,434.3 tonnes of carbon dioxide

equivalent (tCO2e), of which 162.2 tCO2e relate to our own operations. To offset emissions associated with

our own operations, we have invested in high-quality, verified carbon credits, maintaining carbon neutrality

as we progress towards our net-zero target through ongoing emissions reduction initiatives. A detailed

breakdown of emissions by scope is provided in the Group’s SECR Report on page 43.

Our ambition is to reach

net zero

by 2035 for our own operations

and maintain carbon neutrality

in the meantime.

Purchased goods and services

We recognise that our climate impact extends across our supply chain, with purchased goods and

services representing the majority of our operational emissions. As at 31 December 2025, 57.5% of

our suppliers were assessed as having commitments aligned with net zero objectives.

We have extended our commitment relating to supplier net zero alignment to the end of 2028, and

plan to continue engaging with our key suppliers with an ambition to increase the proportion aligned

to net zero, in support of the wider transition.

We remain committed to ensuring that

at least 50% of suppliers with annual

spend above £200,000 are net zero

aligned through to the end of 2028.

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CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

xxx

Independent Auditor’s Report

xxxx

for the year ended 31 December 2025

Financial

Statements

207

Independent Auditor’s Report

216

Consolidated statement of profit and loss

217

Consolidated statement of comprehensive income

218

Consolidated and Company statement of financial position

219

Consolidated statement of changes in equity

220

Company statement of changes in equity

221

Consolidated and Company statement of cash flows

222

Notes to the financial statements

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STRATEGIC REPORT

Independent Auditor’s Report

to the members of Shawbrook Group plc

1. Our opinion is unmodified

We have audited the financial statements of Shawbrook Group plc

(the ‘parent Company’ or the ‘Company’) and its subsidiaries (together

referred to as the ‘Group’) for the year ended 31 December 2025 which

comprise the Consolidated statement of profit and loss, Consolidated

statement of comprehensive income, Consolidated and Company

statement of financial position, Consolidated statement of changes

in equity, Company statement of changes in equity, Consolidated and

Company statement of cash flows, and the related notes, including

the accounting policies in note 7.

In our opinion:

•

the financial statements give a true and fair view of the state of the

Group’s and of the parent Company’s affairs as at 31 December

2025 and of the Group’s profit for the year then ended;

•

the Group financial statements have been properly prepared in

accordance with UK-adopted international accounting standards;

•

the parent Company financial statements have been properly

prepared in accordance with UK-adopted international accounting

standards and as applied in accordance with the provisions of the

Companies Act 2006; and

•

the financial statements have been prepared in accordance with

the requirements of the Companies Act 2006.

Basis for opinion

We conducted our audit in accordance with International Standards

on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities

are described below. We believe that the audit evidence we have

obtained is a sufficient and appropriate basis for our opinion. Our

audit opinion is consistent with our report to the Board Audit.

We were first appointed as auditor by the directors in June 2011.

The period of total uninterrupted engagement is for the fifteen

financial years ended 31 December 2025. We have fulfilled our ethical

responsibilities under, and we remain independent of the Group in

accordance with, UK ethical requirements including the FRC Ethical

Standard as applied to public interest entities. No non-audit services

prohibited by that standard were provided.

Key audit matters: our assessment of risks of

material misstatement

Key audit matters are those matters that, in our professional

judgement, were of most significance in the audit of the financial

statements and include the most significant assessed risks of

material misstatement (whether or not due to fraud) identified by

us, including those which had the greatest effect on: the overall

audit strategy; the allocation of resources in the audit; and directing

the efforts of the engagement team. We summarise below the key

audit matters (unchanged from 2024), in decreasing order of audit

significance, in arriving at our audit opinion above, together with

our key audit procedures to address those matters and, as required

for public interest entities, our results from those procedures. These

matters were addressed, and our results are based on procedures

undertaken, in the context of, and solely for the purpose of, our audit

of the financial statements as a whole, and in forming our opinion

thereon, and consequently are incidental to that opinion, and we do

not provide a separate opinion on these matters:

Overview

Materiality:

Group financial

statements as

a whole

£14.7m (2024: £12.7m)

4.6% of normalised Group profit before tax

(2024: 4.3% of Group profit before tax)

Key audit matters

vs 2024

Recurring risks

Expected credit losses on loans and

advances to customers

Measurement of loans and advances

to customers at fair value through

other comprehensive income

IT user access management

Recoverability of parent Company’s

investment in subsidiary

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FINANCIAL STATEMENTS

CLIMATE REPORT

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RISK REPORT

STRATEGIC REPORT

Independent Auditor’s Report

to the members of Shawbrook Group plc

Key Audit Matter

The risk

Our response

Expected credit

losses on loans and

advances

to customers

£203.4m;

2024: £172.0m

Refer to Audit

Committee report,

Risk Report and

Notes to the

financial statements.

Subjective Estimate

The estimation of expected credit losses (‘ECL’) of loans to customers involves significant

judgement and estimates with a high degree of uncertainty. The key areas where we have

identified greater levels of Group’s judgement and therefore increased levels of audit

focus in the estimation of ECL are:

•

Model estimations – Inherently judgemental modelling is used to estimate ECL,

particularly in determining the Probability of Default (‘PD’) in certain portfolios. ECL may

be inappropriate if certain models or underlying assumptions do not accurately predict

defaults or recoveries over time, become out of line with wider industry experience, or

fail to reflect the credit risk of financial assets. As a result, certain IFRS 9 models and

model assumptions are the key drivers of complexity and uncertainty in the Group’s

calculation of the ECL estimate.

•

Economic scenarios – IFRS 9 requires the Group to measure ECL on an unbiased forward-

looking basis reflecting a range of future economic conditions. Significant judgement

is applied by the Group in determining the economic scenarios used, particularly in the

current economic environment, and the probability weightings applied to them.

•

Post-model adjustments – Adjustments to the model-driven ECL results are made by

the Group to address known impairment model limitations or emerging trends. The

identification of a complete set of adjustments is inherently subjective and significant

judgement is involved in estimating these amounts.

•

Significant Increase in Credit Risk (‘SICR’) – The staging criteria selected to identify

a significant increase in credit risk is a key area of judgement within the Group’s ECL

calculation as these criteria determine whether a 12-month or a lifetime provision is

recorded.

•

Individually assessed – Stage 3 – The measurement of SME Stage 3 assets is an

inherently judgemental area within the financial statements. Lifetime expected credit

losses on Commercial customer exposures in Stage 3 are individually determined

based on certain assumptions about the recovery of the asset using various key inputs

including the expected future cash flows, and discount rates.

The effect of these matters is that, as part of our risk assessment, we determined that

ECL provisioning has a high degree of estimation uncertainty, with a potential range of

reasonable outcomes greater than our materiality for the financial statements as a

whole, and possibly many times that amount.

Disclosure quality

Disclosure quality – The disclosures regarding the Group’s application of IFRS 9 are

important in explaining the key judgements and material inputs to the IFRS 9 ECL

results, as well as sensitivity of the ECL results.

We performed the tests below rather than seeking to rely on any of the Group’s controls because the

nature of the balance is such that we would expect to obtain audit evidence primarily through the detailed

procedures described.

Our credit risk modelling expertise:

We involved our own credit risk modelling team who assisted us in the following:

•

evaluating the Group’s impairment methodologies for compliance with IFRS 9;

•

for models which were changed or updated during the year, evaluating whether the changes were appropriate

by assessing the updated model methodology against IFRS 9;

•

for a selection of models, independently evaluating the model output by inspecting the corresponding model

functionality and independently implementing the model by rebuilding the model code and comparing our

independent output with the Group’s output;

•

independently assessing and reperforming certain ECL model calibrations; and

•

assessing the appropriateness of the staging methodology in accordance with IFRS 9 and incorporating

the staging logic within our independent ECL calculation.

Our economics expertise:

We involved our own economic specialists who assisted us in:

•

assessing the reasonableness of the Group’s methodology and models for determining the economic

scenarios used and the probability weightings applied to them;

•

assessing key economic variables by comparing the economic variables to external sources; and

•

assessing the overall reasonableness of the economic forecasts by comparing the Group’s forecasts

to our own modelled forecasts.

Tests of details:

Other key areas of our testing in addition to those set out above included:

•

critically evaluating the Group’s assumptions which are applied to determine the basis of post

model adjustments;

•

assessing the completeness of post model adjustments identified;

•

reperforming the calculation of the post model adjustments to assess consistency with the

Group’s methodologies;

•

evaluating the completeness of SICR criteria in capturing new risks due to changes in the economic

environment; and

•

evaluating selected individually assessed impairments. This involves challenging the recovery scenarios and

underlying assumptions by incorporating disconfirming or contradictory evidence into the recalculation of ECL.

Assessing transparency:

We assessed whether the disclosures appropriately reflect and describe the uncertainty

which exists when determining the expected credit losses. In addition, we assessed whether the disclosure of the

key judgements and assumptions made is sufficiently clear.

Our results:

We found the resulting estimate of the Expected credit losses on loans and advances to customers

and the associated disclosures made to be acceptable (2024: acceptable).

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STRATEGIC REPORT

Independent Auditor’s Report

to the members of Shawbrook Group plc

Key Audit Matter

The risk

Our response

Measurement of

loans and advances

to customers at fair

value through other

comprehensive

income

£4,068.0m;

2024: £3,580.2m

Refer to Audit

Committee report,

Risk Report and

Notes to the

financial statements.

Subjective estimate

Loans and advances to customers originated under the ‘held to collect and sell’ business

model are classified in accordance with IFRS 9 as measured at fair value through other

comprehensive income.

The fair value model uses unobservable inputs and as such the loans are classified

as level 3 in the fair value hierarchy under IFRS 13.

For fair value measurement, there is subjectivity in pricing the significant unobservable

inputs. Where significant pricing inputs are unobservable, management has limited

reliable, relevant market data available in determining the fair value, and hence estimation

uncertainty can also be high which leads to a significant risk of fraud and error.

We determined that the risk-adjusted discount rate applied in the calculation has a high

degree of estimation uncertainty, with a potential range of reasonable outcomes on the

fair valuation of loans and advances to customers greater than our materiality for the

financial statements as a whole, and possibly many times that amount. As a result, a

significant risk of error and fraud was identified in respect of the risk-adjusted discount

rate determined by the Group.

Disclosure quality

The disclosures regarding the application of IFRS 13 are key to explaining the key

judgements and material inputs to the fair value estimate, including sensitivity analysis

on changes in significant unobservable inputs estimated by the Group and Bank.

We performed the tests below rather than seeking to rely on any of the Group’s controls because

the nature of the balance is such that we would expect to obtain audit evidence primarily through

the detailed procedures described.

Methodology choice:

We assessed the appropriateness of the methodology used to value the loans,

including suitability of the model and key assumptions used around the risk-adjusted discount rate.

Our valuation expertise:

We engaged our internal valuation specialists to reprice the fair value portfolio

using an independent credit risk-adjusted discount factor, developed based on the risk characteristics

of each product and data on similar instruments in the market and recalculate the underlying cash flows.

Sensitivity analysis:

Our valuation specialists also calculated the impact on fair value for sensitivity over

the key assumptions such as the risk-adjusted discount factor and prepayment curves.

Test of details:

We performed tests of details over the completeness and accuracy of the data that feeds

into the model primarily by tracing the relevant data elements to the original source documentation.

Assessing transparency:

We critically assessed the adequacy of the disclosures regarding the degree

of estimation uncertainty involved in arriving at the valuation including sensitivity analysis and fair

value hierarchy disclosure.

Our results:

We found the measurement of the loans and advances to customers at fair value through

other comprehensive income, and associated disclosures made to be acceptable (2024: acceptable).

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Key Audit Matter

The risk

Our response

IT user access

management

Refer to Risk Report.

Control performance

The Group’s accounting and reporting processes are dependent on automated controls

enabled by IT systems.

User access management controls are an important component of the IT control

environment that ensure that unauthorised access and changes to systems and

data does not impact the effective operation of the automated controls in the

financial reporting processes.

Our audit approach relies on the effectiveness of IT access and change management

controls. Our audit procedures identified deficiencies in certain IT access controls for

systems relevant to financial reporting, like those identified in the prior years.

Management continues to remediate open deficiencies around user access management.

Since some of these deficiencies remained open during the year and as at year end,

we performed additional procedures to respond to the risk of unauthorised changes to

automated controls over financial reporting, such as an assessment of compensating

controls implemented and operated by management during the period or performing

substantive procedures.

Our audit procedures included:

Control testing:

at the Group and relevant third parties including service organisations, we tested the design,

implementation and operating effectiveness of relevant controls related to user access management including:

•

Authorising access rights for new access provision;

•

Authorising modified access;

•

Timely removal of user access rights;

•

Privileged user and developer access to production systems, the procedures to assess granting, potential use,

and the removal of these access rights; and

•

Segregation of duties including access to multiple systems that could circumvent segregation controls.

Test of details:

For certain account balances we responded to the deficient general IT controls by performing

additional substantive testing. This included increasing sample testing over certain account balances. We also

compared selected data to external sources (such as third-party contracts and / or bank statements), to test the

integrity of the transactional level data that is flowing into and contained within the Group’s financial statements.

Our Results:

Based on our testing and the additional procedures performed in response to the IT deficiencies identified, we

concluded that none of the IT deficiencies impacted the effective operation of automated controls that we

placed reliance on in our audit (2024: acceptable).

Key Audit Matter

The risk

Our response

Recoverability of

parent Company’s

investment in

subsidiary

(£508.4m;

2024: £432.5m)

Refer to Notes to the

financial statements.

Low risk, high value

The carrying amount of the parent Company’s investment in its subsidiary

represents 75% (31 Dec 2024: 71%) of the parent Company’s total assets.

The investment’s recoverability is not at a high risk of material misstatement

or subject to significant judgement or estimation uncertainty.

However, due to the materiality in the context of the parent Company’s financial

statements, this is considered to be the area that has the greatest effect on our

overall parent Company audit.

We performed the following audit procedure rather than seeking to rely on any of the Company’s controls

because the nature of the balance is such that we would expect to obtain audit evidence primarily through the

detailed procedures described below.

Test of details:

We compared the carrying amount of 100% of investments with the relevant subsidiary’s financial

statements to identify whether its net tangible assets, being an approximation of its minimum recoverable

amount, were in excess of its carrying value. We also considered the subsidiary’s track record of generating

profits when assessing indicators of recoverability.

Our results:

We found the parent Company’s conclusion that there is no impairment of its investments in subsidiary to be

acceptable (2024: acceptable).

Independent Auditor’s Report

to the members of Shawbrook Group plc

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Independent Auditor’s Report

to the members of Shawbrook Group plc

3. Our application of materiality and an

overviewof the scope of our audit

Our application of materiality

Materiality for the Group financial statements as a whole

was set at £14.7m (2024 £12.7m), determined with reference

to a benchmark of Group profit before tax, normalised to

add back an accelerated share-based payment expense

of £25.0m (2024: £nil) following the Group’s initial public

offering (‘IPO’), and administrative expenses which were

directly attributable to the IPO of £20.3m (2024: £nil), of

which it represents 4.6% (2024: 4.3%). We adjusted for

these items because they do not represent the normal,

continuing operations of the Group. We performed risk

assessment procedures on the share-based expense

and further audit procedures on the IPO costs excluded

from the normalised Group profit before tax used as the

benchmark for our materiality.

Materiality for the parent Company financial statements

as a whole was set at £6.0m (2024: £6.0m), determined

with reference to a benchmark of Company total assets, of

which it represents 0.9% (2024: 1.0%).

In line with our audit methodology, our procedures

on individual account balances and disclosures were

performed to a lower threshold, performance materiality,

so as to reduce to an acceptable level the risk that

individually immaterial misstatements in individual account

balances add up to a material amount across the financial

statements as a whole.

Performance materiality was set at 65% for the Group

financial statements and 75% for the parent financial

statements (2024: 65% for Group and parent) of materiality

for the financial statements as a whole, which equates to

£9.6m (2024: £8.3m) for the Group and £4.5m (2024: £3.9m)

for the parent Company.

We applied these percentages in our determination of

performance materiality based on the level of identified

misstatements and control deficiencies during the prior

period impacting the Group financial statements with

a lower performance materiality applied to the parent

Company owing to those misstatements and control

deficiencies being less prevalent in the parent Company.

We agreed to report to the Audit Committee any corrected

or uncorrected identified misstatements exceeding £0.7m

(2024: £0.6m), in addition to other identified misstatements

that warranted reporting on qualitative grounds. We

agreed to report misstatements related to the parent

Company exceeding £0.3m (2024: £0.3m).

Overview of the scope of our audit

We performed risk assessment procedures to determine

which of the Group’s components are likely to include

risks of material misstatement to the Group financial

statements and which procedures to perform at these

components to address those risks.

In total, we identified 8 components (2024: 6), having

considered our evaluation of the Group’s operational and

legal structure, existence of common information systems,

existence of common risk profile across entities/business

units/functions/business activity and our ability to perform

audit procedures centrally.

Of those, we identified 1 (2024: 1) quantitatively significant

component, which is Shawbrook Bank Limited, which

contained the largest percentages of either total income

or total assets of the Group, for which we performed audit

procedures.

We also performed the audit of the parent Company and

selected one component with accounts contributing to

the specific risks of material misstatement of the Group

financial statements, based on qualitative and quantitative

considerations. Accordingly, we performed audit

procedures on 3 components (2024: 2).

We set the component materialities, ranging from £7.0m

to £14.4m (2024: £8.3m to £11.5m), having regard to size

and risk profile.

Normalised PBT

Group materiality

£14.7m (2024: £12.7m)

£14.4m

Component materiality

(2024: £11.5m)

£14.7m

Whole financial

statements materiality

(2024: £12.7m)

£9.6m

Whole financial statements

performance materiality

(2024: £8.3m)

£0.7m

Misstatements reported

to the audit committee

(2024: £0.6m)

Group normalised profit

before tax (PBT)

£317.5m (2024: £295.1m)

96%

(2024: 96%)

100%

(2024: 100%)

90%

(2024: 92%)

Our audit procedures covered the

following percentage of Group total

income:

We performed audit procedures

in relation to components that

accounted for the following

percentages of Group profit before

tax and Group total assets:

Group PBT

Group total

assets

We performed analysis at an aggregated

Group level to re-examine our assessment

that there is not a reasonable possibility

of a material misstatement in these

components.

Group total income

Impact of controls on our group audit

The scope of the audit work performed

was predominately substantive as we

placed limited reliance upon the Group’s

internal control over financial reporting.

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Independent Auditor’s Report

to the members of Shawbrook Group plc

4. Going concern

The directors have prepared the financial statements on the going

concern basis as they do not intend to liquidate the Group or the

parent Company or to cease their operations, and as they have

concluded that the Group’s and the parent Company’s financial

position means that this is realistic. They have also concluded that

there are no material uncertainties that could have cast significant

doubt over their ability to continue as a going concern for at least

a year from the date of approval of the financial statements (‘the

going concern period’). We used our knowledge of the Group and

parent Company, its industry and the general economic environment

to identify the inherent risks to its business model and analysed how

those risks might affect the Group’s and parent Company’s financial

resources or ability to continue operations over the going

concern period.

The risks that we considered most likely to adversely affect the

Group’s and parent Company’s available financial resources

over this period were:

•

The availability of funding and liquidity in the event of

a market-wide stress scenario; and

•

Insufficient regulatory capital to meet minimum regulatory

capital levels.

We considered whether these risks could plausibly affect

regulatory capital and liquidity in the going concern period by

comparing severe, but plausible, downside scenarios that could

arise from these risks individually and collectively against the level

of available financial resources indicated by the Group’s and parent

Company’s financial forecasts.

We considered whether the going concern disclosure in the financial

statements gives a full and accurate description of the Director’s

assessment of going concern.

Our conclusions based on this work:

•

we consider that the directors’ use of the going concern basis

of accounting in the preparation of the financial statements is

appropriate;

•

we have not identified, and concur with the directors’ assessment

that there is not, a material uncertainty related to events or

conditions that, individually or collectively, may cast significant

doubt on the Group’s or parent Company’s ability to continue as

a going concern for the going concern period;

•

we have nothing material to add or draw attention to in relation to

the directors’ statement in note 3 to the financial statements on

the use of the going concern basis of accounting with no material

uncertainties that may cast significant doubt over the Group and

Company’s use of that basis for the going concern period, and we

found the going concern disclosure in note 3 to be acceptable; and

•

the related statement under the UK Listing Rules set out on page

108 is materially consistent with the financial statements and our

audit knowledge.

However, as we cannot predict all future events or conditions and as

subsequent events may result in outcomes that are inconsistent with

judgements that were reasonable at the time they were made, the

above conclusions are not a guarantee that the Group or the parent

Company will continue in operation.

Fraud and breaches of laws and regulations –

ability to detect

Identifying and responding to risks of material misstatement

due to fraud

To identify risks of material misstatement due to fraud (‘fraud risks’)

we assessed events or conditions that could indicate an incentive or

pressure to commit fraud or provide an opportunity to commit fraud.

Our risk assessment procedures included:

•

Enquiring of directors, internal audit, executive management and

inspection of policy documentation as to the Group’s high-level

policies and procedures to prevent and detect fraud, including the

internal audit function, and the Group’s channel for ‘whistleblowing’,

as well as whether they have knowledge of any actual, suspected

or alleged fraud;

•

Reading Board, Audit Committee and Risk Committee

meeting minutes;

•

Considering remuneration incentive schemes and performance

targets for management and directors; and

•

Using analytical procedures to identify any unusual or

unexpected relationships.

We communicated identified fraud risks throughout the audit team

and remained alert to any indications of fraud throughout the audit.

As required by auditing standards, and taking into account possible

pressures to meet profit targets and our overall knowledge of the

control environment, we perform procedures to address the risk

of management override of controls, in particular the risk that

management may be in a position to make inappropriate accounting

entries and the risk of bias in accounting estimates and judgements

such as expected credit losses on loans and advances to customers

and measurement of loans and advances to customers at fair value

through other comprehensive income. On this audit we do not believe

there is a fraud risk related to revenue recognition because there

is limited complexity and judgement involved in calculation and

recognition of revenue.

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to the members of Shawbrook Group plc

We also identified a fraud risk related to expected credit losses on

loans and advances to customers and measurement of loans and

advances at fair value through other comprehensive income due

to the fact these involve significant estimation uncertainty and

subjective judgements that are difficult to corroborate.

Further detail in respect of expected credit losses on loans and

advances to customers and measurement of loans and advances

at fair value through other comprehensive income is set out in the

key audit matter disclosures in Section 2 of this report as the

procedures relating to those estimates and judgements also

address the risk of fraud.

We performed procedures including:

•

identifying journal entries and other adjustments to test based

on risk criteria and comparing the identified entries to supporting

documentation. These included journal entries posted by senior

management, journals posted to seldom used accounts, and those

including a specific description;

•

assessing whether the judgements made in making accounting

estimates are indicative of a potential bias.

•

evaluating the business purpose of significant unusual transactions.

Identifying and responding to risks of material misstatement

due to non-compliance with laws and regulations

We identified areas of laws and regulations that could reasonably be

expected to have a material effect on the financial statements from

our general commercial and sector experience, through discussion

with the directors and other management (as required by auditing

standards), and from inspection of the Group’s regulatory and

legal correspondence and discussed with the directors and other

management the policies and procedures regarding compliance

with laws and regulations.

As the Group is regulated, our assessment of risks involved gaining

an understanding of the control environment including the entity’s

procedures for complying with regulatory requirements.

We communicated identified laws and regulations throughout our

team and remained alert to any indications of non-compliance

throughout the audit.

The potential effect of these laws and regulations on the financial

statements varies considerably.

Firstly, the Group is subject to laws and regulations that directly

affect the financial statements including financial reporting

legislation (including related companies legislation), distributable

profits legislation and taxation legislation and we assessed the

extent of compliance with these laws and regulations as part

of our procedures on the related financial statement items.

Secondly , the Group is subject to many other laws and regulations

where the consequences of non-compliance could have a material

effect on amounts or disclosures in the financial statements, for

instance through the imposition of fines or litigation or the loss

of the Group’s license to operate. We identified the following

areas as those most likely to have such an effect: specific areas

of regulatory capital and liquidity, conduct (including consumer

duty), money laundering and financial crime and certain aspects

of company legislation recognising the financial and regulated

nature of the Group’s activities. Auditing standards limit the required

audit procedures to identify non-compliance with these laws and

regulations to enquiry of the directors and other management and

inspection of regulatory and legal correspondence, if any. Therefore

if a breach of operational regulations is not disclosed to us or evident

from relevant correspondence, an audit will not detect that breach.

Context of the ability of the audit to detect fraud or breaches

of law or regulation

Owing to the inherent limitations of an audit, there is an unavoidable

risk that we may not have detected some material misstatements

in the financial statements, even though we have properly planned

and performed our audit in accordance with auditing standards.

For example, the further removed non-compliance with laws and

regulations is from the events and transactions reflected in the

financial statements, the less likely the inherently limited procedures

required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk of non-

detection of fraud, as these may involve collusion, forgery, intentional

omissions, misrepresentations, or the override of internal controls.

Our audit procedures are designed to detect material misstatement.

We are not responsible for preventing non-compliance or fraud and

cannot be expected to detect non-compliance with all laws

and regulations.

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CORPORATE GOVERNANCE REPORT

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STRATEGIC REPORT

We have nothing to report on the other

information in the Annual Report

The directors are responsible for the other information presented in

the Annual Report together with the financial statements. Our opinion

on the financial statements does not cover the other information and,

accordingly, we do not express an audit opinion or, except as explicitly

stated below, any form of assurance conclusion thereon.

Our responsibility is to read the other information and, in doing so,

consider whether, based on our financial statements audit work,

the information therein is materially misstated or inconsistent with

the financial statements or our audit knowledge. Based solely on

that work we have not identified material misstatements in the

other information.

Strategic report and directors’ report

Based solely on our work on the other information:

•

we have not identified material misstatements in the strategic

report and the directors’ report;

•

in our opinion the information given in those reports for the

financial year is consistent with the financial statements; and

•

in our opinion those reports have been prepared in accordance

with the Companies Act 2006.

Directors’ remuneration report

In our opinion the part of the Directors’ Remuneration Report to

be audited has been properly prepared in accordance with the

Companies Act 2006.

Disclosures of emerging and principal risks and

longer-term viability

We are required to perform procedures to identify whether there is a

material inconsistency between the directors’ disclosures in respect

of emerging and principal risks and the viability statement, and the

financial statements and our audit knowledge.

Based on those procedures, we have nothing material to add or

draw attention to in relation to:

•

the directors’ confirmation within the Group Viability Statement

page 56 that they have carried out a robust assessment of the

emerging and principal risks facing the Group, including those that

would threaten its business model, future performance, solvency

and liquidity;

•

the Emerging and Principal Risks disclosures describing these risks

and how emerging risks are identified, and explaining how they are

being managed and mitigated; and

•

the directors’ explanation in the Group Viability Statement of

how they have assessed the prospects of the Group, over what

period they have done so and why they considered that period

to be appropriate, and their statement as to whether they have a

reasonable expectation that the Group will be able to continue in

operation and meet its liabilities as they fall due over the period

of their assessment, including any related disclosures drawing

attention to any necessary qualifications or assumptions.

We are also required to review the Group Viability Statement, set out on

page 56 under the UK Listing Rules. Based on the above procedures, we

have concluded that the above disclosures are materially consistent

with the financial statements and our audit knowledge.

Our work is limited to assessing these matters in the context of only

the knowledge acquired during our financial statements audit. As we

cannot predict all future events or conditions and as subsequent events

may result in outcomes that are inconsistent with judgements that

were reasonable at the time they were made, the absence of anything

to report on these statements is not a guarantee as to the Group’s and

Company’s longer-term viability.

Corporate governance disclosures

We are required to perform procedures to identify whether there is a

material inconsistency between the directors’ corporate governance

disclosures and the financial statements and our audit knowledge.

Based on those procedures, we have concluded that each of the

following is materially consistent with the financial statements and

our audit knowledge:

•

the directors’ statement that they consider that the annual report

and financial statements taken as a whole is fair, balanced and

understandable, and provides the information necessary for

shareholders to assess the Group’s position and performance,

business model and strategy;

•

the section of the annual report describing the work of the Audit

Committee, including the significant issues that the audit committee

considered in relation to the financial statements, and how these

issues were addressed; and

•

the section of the annual report that describes the review of

the effectiveness of the Group’s risk management and internal

control systems.

We are required to review the part of the Corporate Governance

Statement relating to the Group’s compliance with the provisions of

the UK Corporate Governance Code specified by the UK Listing Rules

for our review. We have nothing to report in this respect.

Independent Auditor’s Report

to the members of Shawbrook Group plc

214

Shawbrook Group plc

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Independent Auditor’s Report

to the members of Shawbrook Group plc

We have nothing to report on the other matters

on which we are required to report by exception

Under the Companies Act 2006, we are required to report to you

if, in our opinion:

•

adequate accounting records have not been kept by the parent

Company, or returns adequate for our audit have not been

received from branches not visited by us; or

•

the parent Company financial statements and the part of

the Directors’ Remuneration Report to be audited are not

in agreement with the accounting records and returns; or

•

certain disclosures of directors’ remuneration specified by

law are not made; or

•

we have not received all the information and explanations

we require for our audit.

We have nothing to report in these respects.

8. Respective responsibilities

Directors’ responsibilities

As explained more fully in their statement set out on page 108,

the directors are responsible for: the preparation of the financial

statements including being satisfied that they give a true and fair

view; such internal control as they determine is necessary to enable

the preparation of financial statements that are free from material

misstatement, whether due to fraud or error; assessing the Group

and parent Company’s ability to continue as a going concern,

disclosing, as applicable, matters related to going concern; and

using the going concern basis of accounting unless they either

intend to liquidate the Group or the parent Company or to cease

operations, or have no realistic alternative but to do so.

Auditor’s responsibilities

Our objectives are to obtain reasonable assurance about whether

the financial statements as a whole are free from material

misstatement, whether due to fraud or error, and to issue our

opinion in an auditor’s report. Reasonable assurance is a high level

of assurance, but does not guarantee that an audit conducted

in accordance with ISAs (UK) will always detect a material

misstatement when it exists. Misstatements can arise from fraud

or error and are considered material if, individually or in aggregate,

they could reasonably be expected to influence the economic

decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s

website at

www.frc.org.uk/auditorsresponsibilities

The Company is required to include these financial statements in

an annual financial report prepared under Disclosure Guidance and

Transparency Rule 4.1.17R and 4.1.18R. This auditor’s report provides

no assurance over whether the annual financial report has been

prepared in accordance with those requirements.

The purpose of our audit work and to whom we

owe our responsibilities

This report is made solely to the Company’s members, as a body,

in accordance with Chapter 3 of Part 16 of the Companies Act 2006.

Our audit work has been undertaken so that we might state to the

Company’s members those matters we are required to state to them

in an auditor’s report and for no other purpose. To the fullest extent

permitted by law, we do not accept or assume responsibility to anyone

other than the Company and the Company’s members, as a body, for

our audit work, for this report, or for the opinions we have formed.

Simon Clark (Senior Statutory Auditor)

for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants

15 Canada Square

London

E14 5GL

11 March 2026

215

Shawbrook Group plc

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Consolidated statement of profit and loss

for the year ended 31 December 2025

Note

2025

£m

2024

£m

Interest

income calculated using the effective interest rate method

1,284.6

1,199.3

Other interest and similar income

137.3

187.7

Interest expense and similar charges

(775.0)

(796.1)

Net interest income

646.9

590.9

Operating lease rental income

7.3

8.7

Depreciation on operating leases

(6.2)

(7.4)

Net other operating

lease income

0.1

Net operating lease income

1.2

1.4

Fee and commission income

17.3

16.2

Fee and commission expense

(18.7)

(16.1)

Net fee and commission

(expense)/income

(1.4)

0.1

Net

gains on structured asset sales

34.8

14.1

Net

(losses)/gains on derivative financial instruments and hedge accounting

(2.2)

1.9

Net gains on loans and advances measured at FVTPL

0.3

Net other operating income

2.5

1.4

Net operating income

682.1

609.8

Administrative expenses

(326.1)

(252.8)

Impairment losses on financial assets

(83.0)

(67.2)

Provisions

(0.8)

5.3

Total operating expenses

(409.9)

(314.7)

Profit before tax

272.2

295.1

Tax

(76.7)

(75.2)

Profit after tax

195.5

219.9

2025

2024

Earnings per share

Basic

(pence)

Diluted (pence)

The notes on pages 222 to 281 are an integral part of these financial statements.

216

Shawbrook Group plc

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Consolidated statement of comprehensive income

for the year ended 31 December 2025

Note

2025

£m

2024

£m

Profit after tax

195.5

219.9

Items that may be reclassified subsequently to the statement of profit and loss:

Cash flow hedging reserve

Net

(loss)/gains from effective portion of changes in fair value

(4.4)

17.6

Reclassifications to statement of profit and loss

(6.6)

(6.2)

Related tax

3.0

(3.2)

Movement

in cash flow hedging reserve

(8.0)

8.2

Fair value through other comprehensive income reserve

Net gains

from changes in fair value

18.3

35.6

Change in loss allowance

1.4

5.3

Related tax

(5.5)

(11.0)

Movement in fair value through other comprehensive income reserve

14.2

29.9

Total items that may be reclassified

subsequently to the statement of profit and loss

6.2

38.1

Other comprehensive income, net of tax

6.2

38.1

Total comprehensive income

201.7

258.0

Attributable to

Shareholders

186.6

242.9

Other equity owners

15.1

The notes on pages 222 to 281 are an integral part of these financial statements.

217

Shawbrook Group plc

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Consolidated and Company statement of financial position

as at 31 December 2025

Group

Company

Note

2025

£m

2024

£m

2025

£m

2024

£m

Assets

Cash and balances at central banks

1,924.5

2,244.7

–

Loans and advances to banks

246.8

304.4

–

Loans and advances to customers

17,770.1

15,176.6

–

Investment securities

2,158.0

1,513.6

–

Derivative financial assets

87.5

227.1

–

Current tax receivable

7.9

14.5

–

0.4

Property, plant and equipment

54.6

65.5

–

Intangible assets

145.8

124.0

–

Deferred tax assets

23.8

16.0

–

Other assets

49.9

36.3

0.5

0.4

Investment in subsidiaries

–

508.4

432.5

Subordinated debt receivable

–

172.7

172.1

Total assets

22,468.9

19,722.7

681.6

605.4

Liabilities

Amounts due to banks

1,430.6

1,376.1

–

Customer deposits

18,353.5

15,804.0

–

Provisions

8.3

11.5

–

Derivative financial liabilities

93.2

117.1

–

Debt securities in issue

412.3

549.2

–

Lease liabilities

24.8

25.6

–

Other liabilities

132.2

85.8

8.2

8.0

Subordinated debt liability

171.5

171.1

172.7

171.1

Total liabilities

20,626.4

18,140.4

180.9

179.1

Group

Company

Note

2025

£m

2024

£m

2025

£m

2024

£m

Equity

Share capital

2.6

2.5

2.6

2.5

Share premium account

134.7

87.3

134.7

87.3

Capital securities

123.1

Capital contribution reserve

19.9

Cash flow hedging reserve

4.7

12.7

–

Fair value through other comprehensive

income reserve

43.8

29.6

–

Retained earnings

1,513.7

1,307.2

220.4

193.5

Total equity

1,842.5

1,582.3

500.7

426.3

Total equity and liabilities

22,468.9

19,722.7

681.6

605.4

The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its

individual statement of comprehensive income and related notes that form a part of these financial statements. The

Company’s profit for the year 2025 was £15.9 million (2024: profit of £14.9 million).

The notes on pages 222 to 281 are an integral part of these financial statements.

These financial statements were approved by the Board of Directors on 11 March 2026 and were signed on its behalf by:

Marcelino Castrillo

Dylan Minto

Chief Executive Officer

Chief Financial Officer

Registered number 07240248

218

Shawbrook Group plc

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Consolidated statement of changes in equity

for the year ended 31 December 2025

capital

£m

premium

account

£m

Capital

securities

£m

Capital

contribution

reserve

£m

Cash flow

hedging

reserve

£m

FVOCI

reserve

£m

Retained

earnings

£m

Total

equity

£m

As at 1 January

2025

2.5

87.3

123.1

19.9

12.7

29.6

1,307.2

1,582.3

Profit for the

year

–

195.5

Movement in cash flow

hedging reserve

–

(8.0)

–

(8.0)

Movement in fair value

through other

comprehensive income

reserve

–

14.2

–

14.2

Total comprehensive

income

–

(8.0)

14.2

195.5

201.7

Issue of ordinary shares

0.1

49.9

–

50.0

Share issue related costs

–

(2.5)

–

(2.5)

Equity

-settled share-based

payments

–

26.1

Coupon paid on capital

securities

–

(15.1)

As at

31 December 2025

2.6

134.7

123.1

19.9

4.7

43.8

1,513.7

1,842.5

capital

£m

premium

account

£m

Capital

securities

£m

Capital

contribution

reserve

£m

Cash flow

hedging

reserve

£m

FVOCI

reserve

£m

Retained

earnings

£m

Total

equity

£m

As at

1 January 2024

2.5

87.3

123.1

19.9

4.5

(0.3)

1,101.7

1,338.7

Profit for the year

–

219.9

Movement in cash flow

hedging reserve

–

8.2

–

8.2

Movement in fair value

through other

comprehensive income

reserve

–

29.9

–

29.9

Total comprehensive

income

–

8.2

29.9

219.9

258.0

Equity

-settled share-based

payments

–

0.7

Coupon paid on capital

securities

–

(15.1)

As at 31 December

2024

2.5

87.3

123.1

19.9

12.7

29.6

1,307.2

1,582.3

The notes on pages 222 to 281 are an integral part of these financial statements.

219

Shawbrook Group plc

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Company statement of changes in equity

for the year ended 31 December 2025

capital

£m

premium

account

£m

Capital

securities

£m

Capital

contribution

reserve

£m

Retained

earnings

£m

Total

equity

£m

As at 1 January

2025

2.5

87.3

123.1

19.9

193.5

426.3

Profit

for the year

–

15.9

Total comprehensive income

–

15.9

Issue of ordinary shares

0.1

49.9

–

50.0

Share issue related costs

–

(2.5)

–

(2.5)

Equity

-settled share-based

payments

–

26.1

Coupon paid on capital

securities

–

(15.1)

As at

31 December 2025

2.6

134.7

123.1

19.9

220.4

500.7

capital

£m

premium

account

£m

Capital

securities

£m

Capital

contribution

reserve

£m

Retained

earnings

£m

Total

equity

£m

As at 1 January

2024

2.5

87.3

123.1

19.9

193.0

425.8

Profit for the year

–

14.9

Total comprehensive income

–

14.9

Equity

-settled share-based

payments

–

0.7

Coupon paid on capital

securities

–

(15.1)

As at 31 December

2024

2.5

87.3

123.1

19.9

193.5

426.3

The notes on pages 222 to 281 are an integral part of these financial statements.

220

Shawbrook Group plc

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Consolidated and Company statement of cash flows

for the year ended 31 December 2025

Group

Company

Note

2025

£m

2024

£m

2025

£m

2024

£m

Cash flows from operating activities

Profit before tax

272.2

295.1

15.9

14.9

Adjustments for non

-cash items and other adjustments

included in the statement of profit and loss

250.6

82.7

3.0

0.4

(Increase) in

operating assets

(1,951.8)

(1,544.0)

(0.1)

(0.4)

Increase

in operating liabilities

2,559.8

2,182.3

0.2

0.6

Tax

(paid) / recovered

(62.9)

(85.5)

0.4

(0.4)

Net cash

generated/(used by) from operating activities

1,067.9

930.6

19.4

15.1

Cash flows from investing activities

Purchase of investment securities

(1,211.9)

(898.8)

–

Disposals and maturities of investment securities

470.2

184.0

–

Purchase of property, plant and equipment

(0.6)

(2.7)

–

Purchase and development of intangible assets

(18.0)

(15.1)

–

Other movements in intangible assets

3.2

–

Purchase of subordinated debt

–

(75.0)

–

Redemption of subordinated debt receivable

–

76.6

20.0

Investment in right

-of-use asset

–

(6.9)

–

Investment in subsidiary

(49.8)

Purchase of subsidiary, net of cash acquired

(12.1)

–

Net cash (used by)/generated from investing activities

(769.2)

(739.5)

(48.2)

20.0

Group

Company

Note

2025

£m

2024

£m

2025

£m

2024

£m

Cash flows from financing activities

Increase/(Decrease)

in amounts due to banks

54.5

(28.9)

–

Issue of debt securities

–

250.0

–

Repurchase and redemption of debt securities

(697.0)

(453.7)

–

Costs arising on issue of debt securities

(0.2)

(1.0)

–

Payment of principal portion of lease liabilities

(0.8)

(2.2)

–

Issue of subordinated debt

12.0

–

75.0

–

Net p

roceeds from issue of share capital

47.5

–

47.5

–

Redemption of subordinated debt

(76.5)

(20.0)

(76.5)

(20.0)

Costs arising on issue of subordinated debt

(0.9)

–

(2.1)

–

Capital contribution

–

Coupon paid to holders of capital securities

(15.1)

Net cash (used by)/generated from financing activities

(676.5)

(270.9)

28.8

(35.1)

Net

(decrease)/increase in cash and cash equivalents

(377.8)

(79.8)

–

Cash and cash equivalents as at 1 January

2,549.1

2,628.9

–

Cash and cash equivalents as at 31 December

2,171.3

2,549.1

–

Additional information on operational cash flows from interest

Interest paid

(777.7)

(747.5)

(17.5)

(16.3)

Interest received

1,463.0

1,396.7

17.5

16.3

The notes on pages 222 to 281 are an integral part of these financial statements.

221

Shawbrook Group plc

Annual Report and Accounts 2025

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

222

1. Reporting entity

Shawbrook Group plc (the ‘Company’) is a public limited company incorporated

and domiciled in the UK. The Company is registered in England and Wales

(company number 07240248) and the registered office is Lutea House, Warley

Hill Business Park, The Drive, Great Warley, Brentwood, Essex, CM13 3BE.

The consolidated financial statements comprise the results of the Company

and its subsidiaries (together, the ‘Group’), including its principal subsidiary,

Shawbrook Bank Limited. Details of subsidiary companies included in the

Group are provided in Note 45.

The ultimate parent company is Marlin Bidco Limited, at the reporting date, as

detailed in Note 44.

On 7 January 2026, Marlin Bidco Limited entered into Guernsey Members’

Voluntary Liquidation.

The principal activities of the Group are lending and savings. Further details

regarding the nature of the Group’s operations are provided in the Strategic

Report (starting on page 2).

Basis of accounting and measurement

Both the consolidated and Company financial statements are prepared in

accordance with UK-adopted international accounting standards, as defined by

the UK Endorsement Board. New and revised standards and interpretations

adopted by the Group during the year are detailed in Note 6. Material

accounting policies applied by the Group are detailed in Note 7.

The reporting period for the Consolidated and Company financial statements is

the 12 months ended 31 December 2025.

No individual statement of profit and loss or related notes are presented for the

Company, as permitted by Section 408 of the Companies Act 2006.

The financial statements are prepared on a going concern basis (see Note 3)

and on a historical cost basis, except for the following material items, which are

carried at fair value: derivative financial instruments, certain loan receivables

measured at fair value through profit and loss (FVTPL) and fair value through

other comprehensive income (FVOCI), and certain investment securities

measured at FVOCI.

3. Going concern

The financial statements are prepared on a going concern basis. In assessing

the appropriateness of this basis, the Directors considered the Group’s current

financial position and forward-looking projections of profitability, cash flows and

capital resources over a period of at least 12 months from the date of approval

of the financial statements.

In forming this assessment, the Directors also considered the Group’s risk

assessment framework, including the identification and assessment of top and

emerging risks (see page 117 of the Risk Report) through management and

Board risk governance, and the potential impacts of these risks on the Group’s

financial position and business model.

The Directors have reviewed the Group’s capital and liquidity plans under the

Group’s approved budget and considered the results of stress testing and

scenario analysis performed as part of the going concern assessment and the

ILAAP and ICAAP processes. The stress testing included a range of severe but

plausible scenarios designed to assess resilience across differing

macroeconomic and interest rate environments, together with additional

idiosyncratic and balance sheet stresses relevant to the Group. The

assessment also considered the effect of management actions that are within

the control of the Group.

Based on the assessment performed, including the outcomes of base case

forecasts and severe but plausible stresses, the Directors have a reasonable

expectation that the Group has sufficient resources to continue in operational

existence for a period of at least 12 months from the date of approval of these

financial statements and to continue to meet its regulatory capital and liquidity

requirements. Accordingly, the Directors have concluded that it is appropriate to

adopt the going concern basis in preparing these financial statements.

Functional and presentation currency

Both the consolidated and Company financial statements are presented in

pounds sterling, which is the functional currency of the Company and all of its

subsidiaries. All amounts are rounded to the nearest million (to one decimal

place), except where otherwise indicated.

Foreign currency transactions are translated into the functional currency using

the spot exchange rate at the date of the transaction.

Monetary assets and liabilities denominated in foreign currencies are translated

into the functional currency using the spot exchange rate at the reporting date.

Foreign exchange gains and losses resulting from the restatement and

settlement of such transactions are recognised in the statement of profit and

loss.

Non-monetary assets and liabilities measured on a historical cost basis and

denominated in foreign currencies are translated into the functional currency

using the spot exchange rate at the date of the transaction. Non-monetary

assets and liabilities measured at fair value and denominated in foreign

currencies are translated into the functional currency at the spot exchange rate

at the date of valuation. Where these assets and liabilities are held at FVTPL,

exchange differences are reported as part of the fair value gain or loss.

Presentation of risk and capital management

disclosures

Disclosures required under IFRS 7 ‘Financial Instruments: Disclosures’

concerning the nature and extent of risks relating to financial instruments are

included within the principal risks section of the Risk Report. Specifically, this

section includes updates and additional information about credit risk (starting

on page 130), market, liquidity and capital risk (starting on page 160).

Disclosures required under IAS 1 ‘Presentation of Financial Statements’

concerning the management of capital are also included within the principal

risks section of the Risk Report (starting on page 167).

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

223

New and revised standards and interpretations

Adoption of new and revised standards and interpretations during the

current reporting period

During the year ended 31 December 2025, the amendment to IAS 21 Lack of

Exchangeability became effective for annual reporting periods beginning on or

after 1 January 2025. This amendment did not have a material effect on the

Group’s financial statements, as the Group’s operations are predominantly

‑

focused and therefore not exposed to significant currency or

hyperinflationary risk.

Future developments

A number of amendments to existing accounting standards have been issued

as at 31 December 2025 but are not yet effective and have not been early

adopted by the Group. Based on current assessments, none of these

forthcoming changes are expected to have a material impact on the Group’s

financial statements, although the Group continues to assess their impact as

implementation approaches. Key upcoming developments include:

•

Amendments to IFRS 9 and IFRS 7: Classification and Measurement of

Financial Instruments

Effective 1 January 2026. These amendments address derecognition of

financial liabilities settled via electronic transfers, clarify the SPPI test,

provide guidance on non-recourse features, and introduce new disclosure

requirements, including for ESG-linked features.

•

Amendments to IFRS 9 and IFRS 7: Contracts Referencing Nature-

Dependent Electricity

Effective 1 January 2026. The amendments clarify own-use criteria for

nature-dependent electricity contracts, update cash flow hedge designation

rules, and introduce new disclosures on their impact on financial

performance and cash flows.

•

Annual Improvements to IFRS Accounting Standards – Volume 11

Effective 1 January 2026. These include minor clarifications and corrections

to IFRS 1, IFRS 7, IFRS 9, IFRS 10, and IAS 7.

•

IFRS 18: Presentation and Disclosure in Financial Statements

Effective 1 January 2027, with early adoption permitted. IFRS 18 introduces

new requirements for presentation within the statement of profit or loss,

including specified totals and subtotals, it requires entities to classify all

income and expenses into five categories: operating, investing, financing,

income tax and discontinued operations, and introduces defined subtotals,

including operating profit. It also requires clearer definitions and

reconciliations of management-defined performance measures. The Group

is currently assessing the impact of this standard on the presentation of its

financial statements.

•

IFRS 19: Subsidiaries Without Public Accountability – Disclosures

Effective 1 January 2027. The standard permits eligible subsidiaries without

public accountability, whose parent prepares

IFRS consolidated statements, to apply reduced disclosures instead of full

IFRS requirements.

The Group will continue to monitor these developments and will apply the

relevant standards and amendments when they become effective.

7. Material accounting policies

Except where otherwise indicated, the Group has consistently applied the

following accounting policies to all periods presented in these financial

statements.

Basis of consolidation

Subsidiaries

See disclosures at Note 45

Subsidiaries are entities, including structured entities, that are controlled by the

Group. Control is achieved when the Group has power over the entity, is

exposed or has rights to variable returns from its involvement with the entity

and can use its power over the entity to affect its returns. The Group

reassesses whether it controls the entity if facts and circumstances indicate

that there are changes to one or more of these three elements of control.

Subsidiaries are consolidated from the date on which control is transferred to

the Group and are deconsolidated from the date that control ceases.

Accounting policies are applied consistently across the Group and intragroup

transactions and balances are eliminated in full on consolidation.

Business combinations

Business combinations are accounted for using the acquisition method.

Consideration transferred and the identifiable assets acquired and liabilities

assumed as part of the business combination are generally, with some limited

exceptions, recognised at their acquisition date fair values.

The cost of acquisition is the aggregate of the fair value of consideration

transferred, amount recognised for non-controlling interests and the fair value

of any previous interest held. If the cost of acquisition exceeds the fair value of

identifiable net assets acquired, goodwill is recognised and is treated in

accordance with the policies set out in Note 7(m). If the fair value of identifiable

net assets acquired exceeds the cost of acquisition (a ‘bargain purchase’), a

gain is recognised in the statement of profit and loss.

Acquisition-related costs are expensed as incurred and are included in

administrative expenses in the statement of profit and loss, except if related to

the issue of debt or equity securities, whereby any incremental direct

transaction costs are recognised as a deduction from the instrument.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Material accounting policies (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

224

Operating segments

See disclosures at Note 11

Operating segments are identified based on internal reports and components

of the Group that 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 for the Group is the Executive

Committee. Operating segments may be included as a reportable operating

segment even when quantitative thresholds stipulated in IFRS 8 ‘Operating

segments’ are not met, if the Group deems that such information is useful to

users of the financial statements in understanding the performance of the

different customer segments it operates within.

The Group determines operating segments according to similar economic

characteristics and the nature of its products and services. No operating

segments are aggregated to form the Group’s reportable operating segments.

Interest income and expense

See disclosures at Note 12 and Note 13

Interest on financial instruments measured at amortised cost, FVOCI and

FVTPL

For interest-bearing financial instruments measured at amortised cost or

FVOCI, interest income and expense is recognised using the effective interest

rate (EIR) method, which allocates interest over the expected life of the

financial instrument.

In calculating interest under the EIR method, the Group applies its established

accounting policy in relation to financial instruments that revert from a fixed to

variable rate of interest, whereby the EIR is based on the fixed rate for the fixed

period and does not take account of any reversionary interest post the end of

the fixed date. The Group monitors actual and expected customer repayment

behaviour and periodically adjusts the recognition profile to reflect significant

changes.

The EIR is the rate that exactly discounts the estimated future cash flows over

the expected life of the financial instrument to the gross carrying amount of a

financial asset, or the amortised cost of a financial liability.

When calculating the EIR, future cash flows are estimated by considering all

contractual terms of the financial instrument, excluding the loss allowance

recognised on financial assets. The calculation includes all fees paid or

received between parties to the contract that are an integral part of the EIR,

transaction costs and all other premiums or discounts. Transaction costs

include incremental costs that are directly attributable to the acquisition or

issue of the financial instrument.

For non-credit impaired financial assets (i.e. a ‘Stage 1’ or ‘Stage 2’ asset per

page 131 of the Risk Report), interest income is calculated by applying the

calculated EIR to the gross carrying amount of the financial asset.

For financial assets that become credit-impaired after initial recognition (i.e. a

‘Stage 3’ asset per page 131 of the Risk Report), interest income is calculated

by applying the calculated EIR to the amortised cost of the financial asset. If

the asset is no longer credit-impaired, the calculation of interest income reverts

to the gross basis.

For financial assets that were credit-impaired on initial recognition (i.e. a ‘POCI’

asset per page 131 of the Risk Report), interest income is calculated by applying

a credit-adjusted EIR to the amortised cost of the financial asset. The calculation

of interest income does not revert to the gross basis, even if the credit risk of the

asset improves. For financial liabilities, interest expense is calculated by applying

the calculated EIR to the amortised cost of the financial liability.

Interest income and interest expense on loans and advances held at FVTPL are

presented as other interest income within NII.

Interest on derivative financial instruments

For derivative financial instruments forming part of a qualifying hedging

relationship, net interest income or expense is recognised based on the

underlying hedged items. For derivative financial instruments hedging assets,

the net interest income or expense is recognised in interest income. For

derivative financial instruments hedging liabilities, the net interest income or

expense is recognised in interest expense.

For derivative financial instruments not in a qualifying hedging relationship,

interest is presented in accordance with whether it represents interest income

or interest expense.

Interest on leases

Interest relating to lease and instalment credit agreements is recognised in a

manner that achieves a constant rate of interest on the remaining balance of

the receivable/liability.

Fee and commission income and expense

See disclosures at Note 14

Fee and commission income includes amounts from contracts with customers

that are not included in the EIR calculation. These amounts are recognised

when performance obligations attached to the fee or commission have been

satisfied. The income streams included in fee and commission income all have

a single performance obligation attached to them.

Where income is earned from the provision of a service, such as an account

maintenance fee or a non-utilisation fee, the performance obligation is deemed

to have been satisfied when the service is delivered. In general, services are

provided each month, thus the performance obligation is satisfied and the

income recognised on a monthly basis. Where income is earned upon the

execution of a significant act, such as fees for executing a payment, the

performance obligation is deemed to have been satisfied and the income

recognised when the act is completed.

Incremental costs incurred to generate fee and commission income are charged

to fee and commission expense as they are incurred.

Administrative expenses

See disclosures at Note 16

Administrative expenses are recognised on an accruals basis. Accounting

policies for expenses relating to intangible assets are set out in Note 7(m).

Accounting policies for payroll related costs, are set out below:

Salaries and social security costs are recognised over the period the

employees provide the services to which the payments relate.

Cash bonus awards are recognised to the extent that there is a present

obligation to employees that can be reliably measured and are recognised over

the period the employees are required to provide services.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Material accounting policies (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

225

For long-term incentive plans, benefits are recognised at the present value of

the obligation at the reporting date, reflecting the best estimate of the effect of

the associated performance conditions. Costs are recognised over the period

until which all vesting conditions are considered to have been reasonably

achieved, which takes into account the period the employees are required to

provide services.

For defined contribution pension arrangements, the Group pays fixed

contributions into employees’ personal pension plans, with no further payment

obligations once the contributions have been paid. The Group’s contributions to

such arrangements are recognised as an expense when they fall due.

Tax

See disclosures at Note 21 and Note 30

Tax comprises current tax and deferred tax. Tax is generally recognised in the

statement of profit and loss, except where it relates to items recognised directly

in equity, in which case the tax is also recognised in equity. An exception to this

is distributions to holders of capital securities, whereby the distribution is

recognised directly in equity, but the tax relief is recognised in the statement of

profit and loss, to align with where the transactions and events that generated

the distributable profits are recognised. The liability for current tax is calculated

using tax rates that have been enacted or substantively enacted by the end of

the reporting period.

Deferred tax

Deferred tax is recognised in respect of temporary differences between the

carrying amounts of assets and liabilities for financial reporting purposes and

the amounts used for tax purposes.

Deferred tax liabilities are generally recognised for all taxable temporary

differences. Deferred tax assets are only recognised for all deductible timing

differences to the extent that it is probable that taxable profits will be available

against which those deductible temporary differences can be utilised. The

carrying amount of deferred tax assets is reviewed at the end of each reporting

period and reduced to the extent that it is no longer probable that sufficient

taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax assets and liabilities are netted off where there is a legally

enforceable right to set off current tax assets against current tax liabilities and

the deferred tax assets and deferred tax liabilities relate to income taxes levied

by the same taxation authority on either the same taxable entity or different

taxable entities which intend to settle current tax liabilities and assets on a net

basis. The measurement of deferred tax reflects the expected manner of

realisation or settlement of the carrying amount of assets and liabilities, using

tax rates enacted or substantively enacted at the reporting date.

Cash and cash equivalents

See disclosures at Note 23

Cash and cash equivalents is the aggregate of cash and balances at central

banks, loans and advances to banks and short-term highly liquid debt

securities with less than three months to maturity from the date of acquisition.

All components of cash and cash equivalents are classified as financial assets

measured at amortised cost (see Note 7(t)).

Loans and advances to banks include cash collateral paid under terms that are

usual and customary for such activities.

Loans and advances to customers

See disclosures at Note 24

Loans and advances to customers include loan receivables, finance lease

receivables and instalment credit receivables.

Loan receivables are financial assets measured at amortised cost, FVOCI and

FVTPL (see Note 7(t)).

Finance lease receivables and instalment credit receivables are accounted for

as detailed in Note 7(r). For presentational purposes, they are included within

loans and advances to customers at amortised cost.

Certain assets included in loans and advances to customers are pledged as

collateral under terms that are usual and customary for such activities, whilst

others have been transferred to structured entities as part of securitisation

transactions. These assets do not meet the derecognition criteria outlined in

Note 7(t) and therefore continue to be recognised in their entirety in the

statement of financial position.

Certain loans are designated as the hedged item in hedge relationships. The

total carrying amount of loans and advances to customers includes the

cumulative fair value adjustment to the carrying amount of the hedged item in

relation to fair value hedges (see Note 7(l)).

i) Securitisation transactions

See disclosures at Note 25 and Note 36

Certain loans included within loans and advances to customers are securitised,

by transferring the beneficial interest in the loans to a bankruptcy remote

structured entity. A structured entity is an entity designed so that its activities

are not governed by way of voting rights.

An assessment is performed to determine whether the Group controls such

structured entities, in accordance with the criteria set out in Note 7(a). In

performing this assessment, factors considered include: the purpose and

design of the entity; its practical ability to direct the relevant activities of the

entity; the nature of the relationship with the entity; and the size of its exposure

to the variability of returns of the entity. Where the Group is assessed to control

the structured entity, it is treated as a subsidiary and is fully consolidated.

A further assessment is performed to determine whether the securitised loans

meet the derecognition criteria outlined in Note 7(t). If the derecognition criteria

are met, the transferred loans are treated as sales, referred to as ‘structured

asset sales’ and a gain or loss on derecognition is recognised in the statement

of profit and loss. If the derecognition criteria are not met, the transfer of loans

is not treated as a sale and the loans continue to be recognised in their entirety

in the statement of financial position.

Securitisations involve the simultaneous issue of debt securities by the

associated structured entity to investors. In securitisation transactions where

the structured entity is consolidated, the issued debt securities are classified on

initial recognition as financial liabilities, as the substance of the contractual

arrangements are such that there is an obligation to deliver the cash flows

generated from the underlying securitised loans to the debt security holder.

These financial liabilities are measured at amortised cost (see Note 7(t)) and

are presented in debt securities in issue in the statement of financial position.

Certain debt securities issued by structured entities are retained by the Group.

Where retained debt securities are issued by consolidated structured entities,

they are eliminated in full on consolidation. Where retained debt securities are

issued by unconsolidated structured entities, they are recognised in investment

securities in the statement of financial position.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Material accounting policies

(continued)

Shawbrook Group plc

Annual Report and Accounts 2025

226

Investment securities

See disclosures at Note 26

Investment securities are classified as financial assets measured at amortised

cost and FVOCI (see Note 7(t)).

Certain investment securities are pledged as collateral under terms that are

usual and customary for such activities. These assets do not meet the

derecognition criteria outlined in Note 7(t) and therefore continue to be

recognised in their entirety in the statement of financial position.

Investment securities may be sold subject to a commitment to repurchase them

at a predetermined price (a ‘repurchase agreement’). The terms of these

transactions are such that the derecognition criteria outlined in Note 7(t) are not

met and, accordingly, the sold assets continue to be recognised in their entirety

in the statement of financial position.

Consideration received as part of repurchase agreements is recognised as a

liability in amounts due to banks in the statement of financial position, reflecting

that there is an obligation to repurchase the assets for a fixed price at a future

date. The difference between the sale and repurchase price is treated as

interest and is accrued over the life of the agreement using the EIR method.

Investment securities may also be swapped via linked repurchase and reverse

repurchase agreements with the same counterparty (a ‘security swap’). In such

transactions, no cash consideration is exchanged, the transferred assets are

not derecognised and there is no associated liability as the non-cash collateral

received is not recognised in the statement of financial position (i.e. the

transaction is off-balance sheet). Net fees are treated as interest and are

accrued over the life of the agreement using the EIR method.

Derivative financial instruments

See disclosures at Note 27

Derivative financial instruments are classified as FVTPL (see Note 7(t)).

Derivatives are classified as financial assets when their fair value is positive

and financial liabilities when their fair value is negative. Where there is the legal

right and intention to settle net, the derivative is classified as a net asset or net

liability, as appropriate.

To calculate fair values, discounted cash flow models using yield curves that

are based on observable market data are typically used. For collateralised

positions, discount curves based on overnight indexed swap rates are used.

For non-collateralised positions, discount curves based on Sterling Overnight

Index Average rate (SONIA) are used.

For measuring derivatives that might change the classification from being an

asset to a liability or vice versa, fair values do not take into consideration the

credit valuation adjustment, debit valuation adjustment or the funding valuation

adjustment because the impact on any uncollateralised position is deemed to

be immaterial.

Where derivatives are not designated as part of an accounting hedge

relationship, gains and losses arising from changes in the clean fair value are

recognised in net gains/(losses) on derivative financial instruments and hedge

accounting in the statement of profit and loss. Where derivatives are

designated within an accounting hedge relationship, the treatment of changes

in fair value is as described in Note 7(l).

The Group enters into master netting and margining agreements with

derivative counterparties.

In general, under such master netting agreements, the amounts owed by each

counterparty that are due on a single day in respect of all transactions

outstanding under the agreement are aggregated into a single net amount

payable by one party to the other.

In certain circumstances, for example when a credit event such as a default occurs,

all outstanding transactions under the agreement are aggregated into a single net

amount payable by one party to the other and the agreements terminated.

Under margining agreements, where there is a net asset position valued at

current market values in respect of derivatives with a counterparty, then that

counterparty will place collateral, usually cash, with the Group to cover the

position. Similarly, where there is a net liability position, the Group will place

collateral, usually cash, with the counterparty.

Hedge accounting

See disclosures at Note 27

The Group has elected, as an accounting policy choice permitted under IFRS 9

‘Financial Instruments’, to continue to apply the hedge accounting rules set out

in IAS 39 ‘Financial Instruments – Recognition and measurement’. However,

additional hedge accounting disclosures introduced by IFRS 9’s consequential

amendments to IFRS 7 are provided.

Hedge accounting is permitted when documentation, eligibility and testing

criteria are met. Accordingly, at the inception of a hedge relationship, the Group

formally designates and documents the hedge relationship that it wishes to

apply hedge accounting to and the risk management objective and strategy for

undertaking the hedge. The method to be used to assess the effectiveness of

the hedge relationship is also documented.

At inception, and on a monthly basis thereafter, an assessment is performed to

determine whether the hedging instrument is highly effective in offsetting

changes in the fair value or cash flows of the hedged item. For this

assessment, the dollar-offset method is used, except for trades designated in

dynamic hedge accounting relationships, whereby the regression method is

used. The hedge is deemed to be highly effective where the actual results of

the hedge are within a range of 80-125%. If it is concluded that the hedge is no

longer highly effective, hedge accounting is discontinued. The Group’s hedging

strategy incorporates the use of both fair value hedges and cash flow hedges,

as detailed below:

Fair value hedges

Certain derivatives are designated as hedging instruments to hedge interest

rate risk. The hedged items are portfolios of loans and advances to customers

or customer deposits that are identified as part of the risk management

process.

The portfolios comprise either fixed rate loans, or fixed rate deposits, in respect

of the designated benchmark interest rate (e.g. SONIA). Each portfolio is

grouped into repricing time periods based on expected repricing dates, by

scheduling cash flows into the periods in which they are expected to occur. The

hedging instruments are designated to those repricing time periods.

Changes in the fair value of the derivatives designated as hedging instruments,

together with changes in the fair value of the hedged item attributable to the

hedged risk, are recognised in net gains/(losses) on derivative financial

instruments and hedge accounting in the statement of profit and loss.

Movement in the fair value of the hedged item is recognised as an adjustment

to the carrying amount of the hedged asset or liability.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Material accounting policies

(continued)

Shawbrook Group plc

Annual Report and Accounts 2025

227

If the hedge no longer meets the criteria for hedge accounting, hedge

accounting is discontinued prospectively. The cumulative fair value adjustment

to the carrying amount of the hedged item is amortised to the statement of

profit and loss over the remaining period to maturity.

If the hedged item is derecognised, the cumulative fair value adjustment to the

carrying amount of the hedged item is recognised immediately in the statement

of profit and loss.

Cash flow hedges

Certain derivatives are designated as hedging instruments to hedge variability

in cash flows attributable to interest rate risk. The hedged cash flows may be

highly probable future cash flows attributable to a recognised asset or liability,

or a highly probable forecast transaction.

The effective portion of changes in the fair value of derivatives designated as

hedging instruments is recognised in other comprehensive income and is

presented in the cash flow hedging reserve in the statement of financial

position. The ineffective portion is recognised immediately in the statement of

profit and loss in net gains/(losses) on derivative financial instruments and

hedge accounting. The carrying amount of the hedged item is not adjusted.

Amounts accumulated in the cash flow hedging reserve are reclassified to the

statement of profit and loss in the periods in which the hedged cash flows affect

profit and loss.

When a hedging instrument expires or is sold, or when a hedge no longer

meets the criteria for hedge accounting, any cumulative gain or loss remains in

the cash flow hedging reserve and is subsequently reclassified to the

statement of profit and loss when the forecast transaction affects profit and

loss.

When a forecast transaction is no longer expected to occur, any cumulative

gain or loss included in the cash flow hedging reserve is immediately

reclassified to the statement of profit and loss. When reclassifying amounts to

the statement of profit and loss they are recognised in net gains/(losses) on

derivative financial instruments and hedge accounting.

Intangible assets and amortisation

See disclosures at Note 29

Goodwill

Goodwill may arise on the acquisition of subsidiaries and represents the

excess of the cost of acquisition over the fair value of identifiable net assets

acquired. Goodwill is stated at cost less any accumulated impairment losses.

Goodwill is not amortised but is tested for impairment annually and whenever

there is an indication that impairment may exist. For the purpose of impairment

testing, goodwill is allocated to cash generating units (CGUs). A CGU is the

smallest identifiable group of assets that generates cash inflows that are

largely independent of the cash inflows from other assets or groups of assets.

If the carrying amount of a CGU exceeds the recoverable amount, an

impairment loss is recognised in administrative expenses in the statement of

profit and loss.

Other intangible assets

Other intangible assets are measured at cost less accumulated amortisation

and any accumulated impairment losses. For externally acquired intangible

assets, cost includes the original purchase price of the asset and any directly

attributable costs of preparing the asset for its intended use. For internally

developed intangible assets, cost includes all costs directly attributable in

preparing the asset so that it is capable of operating in its intended manner.

For internally developed intangible assets costs may only be capitalised when

it can be demonstrated that: the expenditure can be reliably measured; the

product or process is technically and commercially feasible; future economic

benefits are probable; and there is the intention and ability to complete

development and subsequently use or sell the asset. Until the point that all

conditions are regarded as met, costs are recognised in administrative

expenses in the statement of profit and loss as incurred.

Subsequent expenditure is capitalised only when it increases the future

economic benefits embodied in the specific asset it relates to. All other

expenditure is recognised in administrative expenses in the statement of profit

and loss as incurred.

Intangibles arising from acquisitions are measured at fair value at the

acquisition date and then amortised subsequently. The estimated useful life

adopted is based on Shawbrook’s policy depending on the type of intangibles.

Amortisation is calculated to write off the cost of the asset less its estimated

residual value on a straight-line basis over its estimated useful life and is

charged to administrative expenses in the statement of profit and loss. The

estimated useful life is three to seven years. The amortisation method, useful

lives and residual values are reviewed at each reporting date and adjusted if

appropriate.

Assets are reviewed for indicators of impairment at each reporting date and if

indicators are present, an impairment review is performed. If the carrying

amount exceeds the recoverable amount, an impairment loss is recognised in

administrative expenses in the statement of profit and loss.

On the disposal of an asset, the net disposal proceeds are compared with the

carrying amount of the asset and any gain or loss included in administrative

expenses in the statement of profit and loss.

Investment in subsidiaries

See disclosures at Note 32

The Company’s investments in controlled entities are valued at cost less any

accumulated impairment losses.

Investments are reviewed for indicators of impairment at each reporting date

and if indicators are present, an impairment review is performed. If the carrying

amount exceeds the recoverable amount, an impairment loss is recognised in

the statement of profit and loss.

Amounts due to banks

See disclosures at Note 33

Amounts due to banks are classified as financial liabilities measured at

amortised cost (see Note 7(t)).

Amounts due to banks may include liabilities recognised as part of repurchase

agreements (see Note 7(j)) and cash collateral received under terms that are

usual and customary for such activities.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Material accounting policies

(continued)

Shawbrook Group plc

Annual Report and Accounts 2025

228

Customer deposits

See disclosures at Note 34

Customer deposits are classified as financial liabilities measured at amortised

cost (see Note 7(t)).

Certain deposits are designated as the hedged item in hedge relationships.

The total carrying amount of customer deposits includes the cumulative fair

value adjustment to the carrying amount of the hedged item in relation to fair

value hedges (see Note 7(l)).

Provisions

See disclosures at Note 35

Provisions are recognised when there is a present obligation arising as a result

of a past event, it is probable that an outflow of resources will be required to

settle the obligation and the amount of the obligation can be reliably estimated.

Provisions for levies are recognised when the conditions that trigger the

payment of the levy are met.

When it is expected that some or all of a provision will be reimbursed, for

example, under an insurance contract, the reimbursement is recognised as a

separate asset, but only when the reimbursement is virtually certain. The

expense relating to a provision is presented in the statement of profit and loss

net of any reimbursement.

Provisions also include the loss allowance recognised on loan commitments

(see Note 7(u)).

Leases

See disclosures at Note 37

Group as a lessor: finance leases

Lease and instalment credit agreements in which the Group transfers

substantially all the risks and rewards of ownership of the underlying asset to

the lessee are treated as finance leases.

A receivable equal to the net investment in the lease is recognised in loans and

advances to customers in the statement of financial position. This amount

represents the future lease payments less profit and costs allocated to future

periods. The receivable is subject to impairment, as detailed in Note 7(u).

Lease payments are apportioned between interest income in the statement of

profit and loss and a reduction of the receivable in order to achieve a constant

rate of interest on the remaining balance of the receivable.

Group as a lessor: operating leases

Lease agreements in which the Group does not transfer substantially all the

risks and rewards of ownership of the underlying asset to the lessee are

treated as operating leases.

The leased asset is recognised in property, plant and equipment in the statement

of financial position at the lower of its fair value less costs to sell and the carrying

amount of the lease (net of impairment allowance) at the date of exchange.

Depreciation is calculated to write off the cost of the asset less its estimated

residual value on a straight-line basis over the life of the lease and is charged

to depreciation on operating leases in the statement of profit and loss.

Assets are reviewed for indicators of impairment at each reporting date and if

indicators are present, an impairment review is performed. If the carrying

amount exceeds the recoverable amount, an impairment loss is recognised in

net other operating lease income/(expense) in the statement of profit and loss.

Operating lease rental income is recognised in the statement of profit and loss

on a straight-line basis over the lease term.

Where an agreement is classified as an operating lease at inception but is

subsequently reclassified as a finance lease following a change to the

agreement or an extension beyond the primary term, then the agreement is

accounted for as a finance lease.

Group as a lessee

At the lease commencement date a right-of-use asset and a lease liability is

recognised.

Subordinated debt

See disclosures at Note 39

Subordinated debt liabilities are classified as financial liabilities measured at

amortised cost (see Note 7(t)).

Subordinated debt receivables in the Company are classified as financial

assets measured at amortised cost (see Note 7(t)).

Financial assets and financial liabilities

See disclosures at Note 40

Recognition of financial assets and financial liabilities

Financial assets and financial liabilities are recognised when the Group

becomes a party to the contractual provisions of the instrument. Regular way

purchases and sales of financial assets are recognised on trade date.

Classification and measurement of financial assets

To classify financial assets, two assessments are performed:

•

The ‘business model assessment’:

this assessment determines whether

the Group’s objective is to generate cash flows from collecting contractual

cash flows (‘hold-to-collect’), by both collecting contractual cash flows and

selling financial assets (‘hold-to-collect-and-sell’) or neither. The

assessment is performed at a portfolio level and is based on expected

scenarios. In making this assessment, information considered includes:

sales in prior periods, expected sales in future periods and the reasons for

such sales. If cash flows are realised in a manner that is different from the

original expectation, the classification of the remaining financial assets in

that portfolio is not changed, but such information is used when assessing

new financial assets going forward.

•

The ‘SPPI test’:

this assessment determines whether the contractual cash

flows of the financial asset are solely payments of principal and interest on

the principal amount outstanding (SPPI) (i.e. whether the contractual cash

flows are consistent with a basic lending arrangement). For the purposes

of this test, principal is defined as the fair value of the financial asset at

initial recognition.

Interest is defined as consideration for the time value of money and credit risk

associated with the principal amount outstanding and for other basic lending

risks and costs (e.g. liquidity risk and administrative costs), as well as a

reasonable profit margin. The SPPI test is performed at an instrument level

based on the contractual terms of the instrument at initial recognition. In

performing the SPPI test, terms that could change the contractual cash flows

so that they are not SPPI are considered, such as: contingent and leverage

features, non-recourse arrangements and features that could modify the time

value of money.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Material accounting policies

(continued)

Shawbrook Group plc

Annual Report and Accounts 2025

229

Based on the two assessments, financial assets are classified as amortised

cost, FVOCI or FVTPL, as follows:

•

Amortised cost

: when the financial asset is held in a hold-to-collect

business model and its contractual terms give rise on specified dates to

cash flows that are SPPI.

•

FVOCI

: when the financial asset is held in a hold-to-collect-and-sell

business model and its contractual terms give rise on specified dates to

cash flows that are SPPI.

•

FVTPL

: when the financial asset does not meet the criteria to be classified

as amortised cost or FVOCI.

Derivatives embedded in contracts where the host is a financial asset are

never separated. Instead, the hybrid financial instrument as a whole is

assessed for classification.

For financial assets that meet the requirements to be classified as amortised

cost or FVOCI, on initial recognition, the Group may irrevocably designate the

financial asset as FVTPL, if doing so eliminates or significantly reduces an

accounting mismatch that would otherwise arise.

Investments in equity instruments are normally classified as FVTPL. However, on

initial recognition of an equity instrument that is not held for trading, the Group may

irrevocably elect, on an investment-by-investment basis, to present subsequent

changes in fair value in the statement of other comprehensive income.

After initial recognition, financial assets are reclassified only under the rare

circumstances that the Group changes its business model for managing

financial assets.

Financial assets classified as amortised cost are initially measured at fair value

plus incremental direct transaction costs. Subsequent measurement is at

amortised cost using the EIR method (see Note 7(c)). Amortised cost is

reduced by impairment losses (see Note 7(u)). Interest income, foreign

exchange gains and losses and impairment losses are recognised in the

statement of profit and loss.

Financial assets classified as FVOCI are initially measured at fair value plus

incremental direct transaction costs. Subsequent measurement is at fair value,

with changes in fair value recognised in other comprehensive income and

presented in the FVOCI reserve in the statement of financial position. Interest

income, foreign exchange gains and losses and impairment losses are

recognised in the statement of profit and loss.

Financial assets classified as FVTPL are initially measured at fair value and are

subsequently remeasured at fair value. Net gains and losses, including any

interest or dividend income, are recognised in the statement of profit and loss.

Classification and measurement of financial liabilities

Financial instruments are classified as a financial liability when the substance of

the contractual arrangements result in the Group having a present obligation to

deliver cash, another financial asset or a variable number of equity instruments.

Financial liabilities are classified at initial recognition as FVTPL or amortised

cost as follows:

•

FVTPL:

when the financial liability meets the definition of held for trading,

or when the financial liability is designated as such to eliminate or

significantly reduce an accounting mismatch that would otherwise arise.

•

Amortised cost:

when the financial liability is not classified as FVTPL.

Financial liabilities classified as FVTPL are initially measured at fair value and

are subsequently remeasured at fair value. Net gains and losses, including any

interest, are recognised in the statement of profit and loss.

Financial liabilities classified as amortised cost are initially measured at fair

value minus incremental direct transaction costs. Subsequent measurement is

at amortised cost using the EIR method (see Note 7(c)). Interest expense is

recognised in the statement of profit and loss.

Derecognition of financial assets and financial liabilities

Derecognition is the point at which the Group ceases to recognise a financial

asset or a financial liability on its statement of financial position.

A financial asset (or a part of a financial asset) is derecognised when:

•

the contractual rights to the cash flows from the financial asset have

expired;

•

the financial asset is transferred in a transaction in which substantially all

the risks and rewards of ownership of the financial asset are transferred; or

•

the financial asset is transferred in a transaction in which substantially all

the risks and rewards of ownership of the financial asset are neither

transferred nor retained and control of the asset is not retained. If control

of the asset is retained, the transferred asset continues to be recognised

only to the extent of the Group’s continuing involvement, with the

remainder being derecognised.

A financial liability (or a part of a financial liability) is derecognised when the

contractual obligations are extinguished (i.e. discharged, cancelled, or expired).

On derecognition, the difference between the carrying amount (or the carrying

amount allocated to the portion being derecognised) and the sum of the

consideration received/paid (including any new asset obtained less any new

liability assumed) is recognised in the statement of profit and loss.

For financial assets classified as FVOCI, any gains/losses accumulated in the

FVOCI reserve are reclassified to the statement of profit and loss.

Modification of financial assets and financial liabilities

When a financial asset or financial liability is modified, a quantitative and

qualitative evaluation is performed to assess whether or not the new terms are

substantially different to the original terms.

For financial assets, the Group considers the specific circumstances including:

•

if the borrower is in financial difficulty, whether the modification merely

reduces the contractual cash flows to amounts the borrower is expected to

be able to pay;

•

whether any substantial new terms are introduced that substantially affects

the risk profile of the loan;

•

significant extension of the loan term when the borrower is not in financial

difficulty;

•

significant change in the interest rate; and

•

insertion of collateral, other security or credit enhancements that

significantly affect the credit risk associated with the loan.

For financial liabilities, the Group specifically, but not exclusively, considers the

outcome of the ‘10% test’. This involves a comparison of the cash flows before

and after the modification, discounted at the original EIR, whereby a difference

of more than 10% indicates the modification is substantial.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Material accounting policies

(continued)

Shawbrook Group plc

Annual Report and Accounts 2025

230

If the terms and cash flows of the modified financial instrument are deemed to

be substantially different, the derecognition criteria are met and the original

financial instrument is derecognised and a ‘new’ financial instrument is

recognised at fair value. The difference between the carrying amount of the

derecognised financial instrument and the new financial instrument with

modified terms is recognised in the statement of profit and loss.

If the terms and cash flows of the modified financial instrument are not deemed

to be substantially different, the financial instrument is not derecognised and

the Group recalculates the ‘new’ gross carrying amount of the financial

instrument based on the revised cash flows of the modified financial instrument

discounted at the original EIR and recognises any associated gain or loss in

the statement of profit and loss. Any costs and fees incurred are recognised as

an adjustment to the carrying amount of the financial instrument and are

amortised over the remaining term of the modified financial instrument by

recalculating the EIR on the financial instrument.

In relation to financial assets, where a modification is granted due to the

financial difficulty of the borrower, the objective of the modification is usually to

maximise recovery of the original contractual terms rather than to originate a

new asset with substantially different terms. Under such circumstances, it is

first considered whether a portion of the asset should be written off before the

modification takes place. This approach impacts the result of the quantitative

evaluation and usually means the derecognition criteria are not met.

Fair value of financial assets and financial liabilities

Fair value is defined as 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. The fair

value of a liability reflects its non-performance risk.

Where possible, fair value is determined with reference to quoted prices in an

active market or dealer price quotations. 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. Where quoted

prices are not available, generally accepted valuation techniques are used to

estimate fair value, including discounted cash flow models and Black-Scholes

option pricing. Where possible these valuation techniques use independently

sourced market parameters, such as interest rate yield curves, option

volatilities and currency rates.

On initial recognition, the best evidence of the fair value of a financial

instrument is normally transaction price (i.e. the fair value of the consideration

given or received). If it is determined that the fair value on initial recognition

differs from the transaction price, such differences are accounted for as follows:

•

if fair value is evidenced by a quoted price in an active market for an

identical asset or liability, or based on a valuation technique that uses only

data from observable markets, the difference is recognised in the

statement of profit and loss on initial recognition (i.e. day one profit and

loss);

•

in all other cases, the fair value will be adjusted to bring it in line with the

transaction price (i.e. day one profit and loss will be deferred by including it

in the initial carrying amount of the asset or liability). Subsequently, the

deferred gain or loss will be released to the statement of profit and loss on

an appropriate basis over the life of the instrument, but no later than when

the valuation is wholly supported by observable market data or the

transaction is closed out.

If an asset or liability measured at fair value has a bid price and an ask price,

assets are measured at bid price and liabilities are measured at ask price.

A fair value hierarchy is used that categorises financial assets and financial

liabilities into three different levels, as detailed in Note 40(b). Levels are reviewed

at each reporting date to determine whether transfers between levels are required.

Further details of the fair value calculation of derivative financial instruments

are set out in Note 7(k).

Offsetting financial assets and financial liabilities

Financial assets and financial liabilities are offset and the net amount reported

in the statement of financial position when there is a legally enforceable right to

offset the recognised amounts and there is an intention to settle on a net basis,

or realise the asset and settle the liability simultaneously.

Income and expenses are presented on a net basis only when permitted by

accounting standards, or for gains and losses arising from a group of similar

transactions.

Impairment of financial assets

See disclosures at Note 20

Impairment of financial assets is calculated using a forward-looking expected

credit loss (ECL) model. ECLs are an unbiased probability-weighted estimate

of credit losses determined by evaluating a range of possible outcomes. A

summary of ECL measurement is as follows:

•

Financial assets that are not credit-impaired at the reporting date:

the present value of all cash shortfalls. Cash shortfalls are the difference

between the contractual cash flows due and the cash flows that are

expected to be received.

•

Financial assets that are credit-impaired at the reporting date:

as the

difference between the gross carrying amount and the present value of

estimated future cash flows discounted at the financial asset’s original EIR.

•

Loan commitments:

as the present value of the difference between the

contractual cash flows due if the commitment is drawn down and the cash

flows that are expected to be received.

ECLs are measured in a manner that reflects the time value of money and

uses reasonable and supportable information that is available at the reporting

date, without undue cost or effort, about past events, current conditions and

forecasts of future economic conditions.

ECLs are calculated and a loss allowance recorded for all financial assets not held

at FVTPL (i.e. those at amortised cost and FVOCI) and for loan commitments.

Assets held at FVTPL and equity instruments are not subject to impairment.

Loss allowances are presented in the statement of financial position as follows:

•

Financial assets measured at amortised cost:

as a deduction from the

gross carrying amount of the financial asset.

•

Financial assets measured at FVOCI:

in other comprehensive income in

the FVOCI reserve. It does not reduce the carrying amount of the financial

asset, which remains at fair value.

•

Loan commitments:

generally, as a provision.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Material accounting policies

(continued)

Shawbrook Group plc

Annual Report and Accounts 2025

231

Where a financial instrument includes both a drawn and an undrawn

component, and the loss allowance on the undrawn component cannot be

separately identified from the drawn component, a combined loss allowance is

presented as a deduction from the gross carrying amount of the drawn

component. Any excess of the loss allowance over the gross carrying amount

of the drawn component is presented as a provision.

The calculation of ECLs is dependent upon the ‘stage’ the asset is assigned to

(Stage 1, 2 or 3). The stage is determined based on changes in credit risk

when comparing credit risk at initial recognition to credit risk at the reporting

date, or whether the asset was POCI.

Details of the ‘staging’ of assets and POCI assets, the calculation of ECLs and

the key judgements and estimates associated with this, are provided in the

credit risk section of the Risk Report starting on page 130.

It is possible to elect, as an accounting policy choice, to use the ‘simplified

approach’ for trade receivables, contract assets and lease receivables. The

Group has elected not to use this simplified approach.

Modifications

If a financial asset is modified, an assessment is made to determine whether it

meets the derecognition criteria outlined in Note 7(t).

If the modification does not result in derecognition of the existing asset, the

expected cash flows arising from the modified financial asset are included in

calculating the cash shortfalls from the existing asset.

If the modification does result in derecognition of the existing asset, the

expected fair value of the ‘new’ asset is treated as the final cash flow from the

existing financial asset at the time of its derecognition. This amount is included

in calculating the cash shortfalls from the existing financial asset that are

discounted from the expected date of derecognition to the reporting date using

the original EIR of the existing financial asset. The date of renegotiation is

considered to be the date of initial recognition for impairment calculation

purposes, including in determining whether a significant increase in credit risk

has occurred and whether the new financial asset is deemed to be a POCI

asset.

Write-offs

Loans and debt securities are written off (either partially or in full) when there is

no realistic prospect of recovery. This is generally the case when it is

determined that the borrower does not have assets or sources of income that

could generate sufficient cash flows to repay the amounts subject to the write-

off. Write-offs constitute a derecognition event, as detailed in Note 7(t).

Financial assets that are written off can still be subject to enforcement activities

in order to comply with the Group’s procedures for recovery of amounts due.

Amounts subsequently recovered on assets written off are recognised in

impairment losses on financial assets in the statement of profit and loss.

Capital securities

See disclosures at Note 42

Capital securities are classified as equity instruments, as the substance of the

contractual arrangements are such that there is no present obligation to deliver

cash, another financial asset or a variable number of equity instruments. The

capital securities are measured at the fair value of the proceeds from the

issuance less any costs that are incremental and directly attributable to the

issuance (net of applicable tax).

Distributions to holders of the capital securities are recognised when they

become irrevocable and are deducted from retained earnings in equity.

Loan commitments

See disclosures at Note 48

Loan commitments are firm commitments to provide credit under pre-specified

terms and conditions. Certain uncommitted facilities are included within

reported loan commitments where the terms are such that there is an

obligation to the customer should the customer get into financial distress.

A loss allowance is recognised on loan commitments in accordance with the

policies set out in Note 7(u). The loss allowance is included within provisions in

the statement of financial position.

Contingent assets and contingent liabilities

See disclosures at Note 49

Contingent assets are possible assets that arise from past events whose

existence will be confirmed only by the occurrence, or non-occurrence, of one

or more uncertain future events not wholly within the control of the Group.

Contingent assets are not recognised in the financial statements, but they are

disclosed if an inflow of economic benefits is probable.

Contingent liabilities are possible obligations that arise from past events whose

existence will be confirmed only by the occurrence, or non-occurrence, of one

or more uncertain future events not wholly within the control of the Group.

Alternatively, they are present obligations that have arisen from past events

where the outflow of resources is uncertain or cannot be reliably measured.

Contingent liabilities are not recognised in the financial statements, but they

are disclosed unless the probability of settlement is remote.

Earnings per share

See disclosures at Note 22

Basic earnings per share is calculated by dividing the profit attributable to

ordinary equity shareholders by the weighted average number of ordinary

shares outstanding during the period. Diluted earnings per share adjusts the

basic earnings per share for the effects of all dilutive potential ordinary shares,

which may arise from share options, convertible instruments, or other equity-

based arrangements. The Group presents both basic and diluted earnings per

share in accordance with IAS 33 Earnings per Share.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Material accounting policies

(continued)

Shawbrook Group plc

Annual Report and Accounts 2025

232

Share based payments

See disclosures at Note 18

For equity-settled share-based payments, the grant date fair value of the

share-based payment transaction is recognised as an expense, with a

corresponding increase in retained earnings in equity, on a straight-line basis

over the period the employees become unconditionally entitled to the awards

(the ‘vesting period’).

The grant date fair value is estimated using a generally accepted valuation

method. Where there are market conditions or non-vesting conditions, the

grant date fair value is measured to reflect such conditions and there is no true-

up for differences between expected and actual outcomes.

Where the vesting period is dependent on achieving a non-market performance

condition, the length of the expected vesting period at grant date is estimated

based on the most likely outcome. Subsequently, the estimated vesting period

is revised until the actual outcome is known.

The amount recognised as an expense is adjusted to reflect the number of

awards for which the non-market vesting conditions are expected to be met,

such that the amount ultimately recognised as an expense is based on the

number of awards that will eventually vest.

For cash-settled share-based payments, the fair value of the amount payable

to employees is recognised as an expense, with a corresponding increase in

other liabilities, over the vesting period. The fair value of the liability is

remeasured at each reporting date and at the date of settlement, with any

changes recognised as an expense.

In the Company’s financial statements, the equity-settled share-based payment

transaction is recognised as an increase in its investment in subsidiaries, with a

corresponding increase in retained earnings in equity.

The Group operated an equity settled Management Incentive Plan (MIP), which

was originally introduced for a set of individuals in April 2019. This scheme

vested upon listing.

During the year ended 31 December 2025, the Group adopted a new equity

settled scheme for selected key employees in the form of an option to acquire

A2 shares in Marlin Bidco Limited (Marlin) for nil consideration, subject to

performance outcomes linked to a prescribed exit event. As with the MIP, the

IPO and subsequent liquidation of Marlin resulted in the vesting of this

arrangement with assets distributed to A2 shareholders in the same form as

the MIP.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

233

Critical accounting judgements and estimates

The preparation of financial statements requires the Group to make judgements and estimates that affect the application

of accounting policies and the reported results and financial position.

Estimates, and the underlying assumptions driving these estimates, are reviewed by the Group on an ongoing basis.

Due to the inherent uncertainty in making estimates, actual results reported in the future may differ from the amounts

estimated. Revisions to estimates are recognised in the period in which the estimates are revised and in any future

periods affected.

In the reported year, the areas involving the most complex and subjective judgements, and areas where estimates are

considered to have the most significant effect on the financial statements, are set out in the following sections.

Impairment losses on financial assets

See accounting policies at Note 7(u) and disclosures at Note 20

Impairment of financial assets is calculated using a forward-looking ECL model. The calculation and measurement of

ECLs requires the use of complex judgements and represents a key source of estimation uncertainty.

Judgements

Judgements considered to have the most significant effect on amounts in the financial statements are:

•

determining the stage the financial asset is allocated to and therefore whether a 12-month or lifetime ECL is

recognised in the financial statements. This involves judgements over whether the financial asset has had a

significant increase in credit risk since initial recognition, whether the financial asset is in default or whether the

financial asset is ‘cured’; and

•

application of judgemental adjustments to modelled ECLs when the Group judges that the modelled ECL amount

does not adequately reflect the expected outcome.

Estimates

Underlying assumptions used in estimating ECLs that, depending on a range of factors, could result in a material

adjustment in the next financial year are:

•

the forward-looking economic scenarios used;

•

probability weightings applied to these scenarios; and

•

model assumptions used, such as the probability of default and loss given default.

Additional details of the critical judgements and estimates, including sensitivity analysis, are included in the credit risk

section of the Risk Report on pages 144 to 151.

Provisions for customer remediation and conduct issues

See accounting policies at Note 7(q) and disclosures at Note 35

Provisions have been recognised in respect of potential claims for instances of misrepresentation, breaches of contract

or other wrongdoing by suppliers, in circumstances where the Group may have a liability under consumer credit

legislation for the acts or omissions of suppliers (although the Group continues to pursue recovery from such suppliers).

Calculating the amount of the provision requires judgement and represents a source of estimation uncertainty.

Judgements

In prior years, significant judgement was required to assess whether past events resulted in a present obligation and

whether it was probable that an outflow of resources would be required in respect of customer complaints relating to

holiday ownership (timeshare) products. As the provision has been established for some time, this judgement is

considered largely historical in nature.

No new judgement has arisen in the current year that would materially alter the assessment of the existence of an

obligation.

Estimates

The timeshare model splits the portfolio into cohorts reflecting the loans that were impacted by the different outcomes of

the Judicial Review. Each cohort has different assumptions (referred to as the base case) for number of complaints

expected, the uphold rate and the amount of redress. For alternate scenario, where the sensitivity would result in the

revised assumption being lower than the base case assumption, the sensitivity assumption has been floored at the base

case assumption.

The following table sets out the underlying assumptions used in estimating the provision that, depending on a range of

factors, could result in a material adjustment in the next financial year. Sensitivity analysis to illustrate the impact of, what

the Group considers to be, reasonable changes to these underlying assumptions, is also provided.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Critical accounting judgements and estimates (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

234


Assumption	Sensitivity analysis
Number of complaints	The impact of a +/- 5 percentage point change
In deriving this figure the Group takes into account:	in the absolute number of complaints would
• the status of current claims and projected potential future claims based on	result in a £0.2 million increase or a £0.2
existing complaint data; and	million decrease in the provision, respectively.
• the statutory limitation period.
Number of upheld claims	The impact of a +/-10 percentage point change
Once the number of complaints has been estimated, it is necessary to estimate	in the average uphold rate per complaint
how many of these claims will be upheld. The sensitivity is driven by the fact that	would result in a £3.3 million increase or a
we have limited claims that have completed the full review process including	£3.3 million decrease in the provision,
where customers m ight appeal to FOS for the claim to be reviewed. Therefore,	respectively.
the final upheld number could be higher depending on final outcomes on
complaints received but not yet processed to completion.
Redress costs on upheld claims	The impact of a +/-10 percentage point change
This reflects the expected average customer compensation on the estimated	in the average redress per complaint would
number of upheld claims, based on agreed redress strategies (inclusive of loan	result in a £0.6 million increase or decrease in
balance adjustments and cash payments). This is based on actual claim data.	the provisions, respectively.

The Group has commenced work to pursue recoveries on timeshare products from either original suppliers or, failing

that, the Group’s insurers. In accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, such

reimbursements are recognised as an asset only when they are virtually certain. The Group typically considers a

reimbursement claim to be virtually certain once it has been accepted by the other party.

Additional information about provisions for customer remediation and conduct issues are provided in Notes 35 and 49.

Fair value of loans measured at fair value through other comprehensive income

See accounting policies at Note 7(t) and disclosures at Note 40(b)

The Group holds certain mortgage loans that are measured at FVOCI. In valuing these loans, the Group makes use

of unobservable inputs (i.e. Level 3 in the fair value hierarchy) and the calculation represents a source of estimation

uncertainty.

Estimates

To calculate the fair value of the loans measured at FVOCI, the Group uses the discounted cash flow method, in which

the significant unobservable inputs are the risk-adjusted discount rate and prepayment curve used.

Additional details, including sensitivity analysis, are provided in Note 40(b).

Fair value of loans measured at fair value through profit and loss

See accounting policies at Note 7(t) and disclosures at Note 40(b)

Details of the critical judgements and estimates, including sensitivity analysis, are included in Note 40.

ThinCats deferred tax assets

See accounting policies at Note 7(f) and disclosures at Note 30.

Details of the critical judgements and estimates are included in Note 30.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

235

9. Other judgements

Securitisations

See accounting policies at Note 7(i) and disclosures at Note 25

Securitisation transactions involve the transfer of certain customer loans to a structured entity. In determining the

accounting treatment to be applied for such transactions the Group must perform a number of complex assessments,

which necessitates the application of judgement.

Judgements

Judgements considered to have the most significant effect on amounts in the financial statements are:

•

assessing whether the Group controls the structured entity and whether it should therefore be treated as a

subsidiary by virtue of control and consolidated; and

•

assessing whether the securitised loans should be derecognised.

The outcome of these assessments significantly impacts the resulting accounting treatment and amounts recognised in

the financial statements.

In making such assessments the structure and terms of the contractual arrangements are scrutinised, with particular

consideration given to matters such as: who will service and manage the securitised loans and the ownership of any ‘X’

notes and residual certificates issued by the structured entity (which represents the ‘equity’ investment in the securitised

loans, giving the rights to any excess spread and the risk of losses associated with any defaults).

During the year, the Group completed two securitisation transactions. Judgement was applied to conclude that both

structured entities should not be consolidated and the securitised loans met the criteria for derecognition from the

statement of financial position. Additional details are provided in Note 25.

10. Acquisition of subsidiary

See accounting policies in Note 7(a)

Acquisition of ThinCats Group

On 30 September 2025, Shawbrook Bank Limited, the Group’s principal subsidiary, completed the acquisition of 100% of

the ordinary shares of ThinCats Group Limited (ThinCats), including its 8 wholly owned subsidiaries, making it a wholly

owned subsidiary of the Group (see Note 45).

ThinCats is a specialist lender providing bespoke funding solutions to established, growth-oriented small and medium-

sized enterprises (SME) in the UK. The acquisition strengthens the Group’s strategic position in the SME lending market

and is expected to accelerate growth in this segment by leveraging its technology enabled platform, origination

capabilities, and established distribution network.

The consolidation began on 30 September 2025, the date on which control transferred to the Group. For the three-month

period from acquisition to the reporting date, ThinCats contributed net operating income of £10.6 million and profit before

tax of (£4.4) million to the Group’s results. If the acquisition had occurred on 1 January 2025, it is estimated that the

consolidated net operating income for the Group for the year ended 31 December 2025 would have been £719.5 million

and consolidated profit before tax for the Group would have been £292.8 million. In determining these amounts,

management has assumed that the fair value adjustments that arose on the date of acquisition would have been the

same if the acquisition had occurred on 1 January 2025.

As detailed below, the Group has determined provisional fair values at the date of acquisition for the consideration

transferred and the identifiable assets acquired, and liabilities assumed. The Group continues to assess these amounts,

in particular the fair value of identifiable net assets acquired, to determine if any additional information existed at the date

of acquisition that would alter these amounts. This assessment will be completed by September 2026.

Consideration transferred

The total fair value of consideration transferred for the acquisition was £46.0 million.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

10. Acquisition of subsidiary (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

236

Identifiable assets acquired and liabilities assumed

The following table sets out information about the net assets acquired at the date of acquisition, including the carrying

amount, fair value adjustments recognised and the resultant fair value.


		Fair value adjustment
	Carrying amount	(See note below table)		Fair value
	£m	£m		£m
Cash and cash equivalents	50.3	–		50.3
Loan s and advances to customers	623.1	15.9	a	639.0
Derivative financial assets	0.4	–		0.4
Intangible assets	1.8	2.7	b	4.5
Deferred tax asset s	–	19.8	c	19.8
Other assets	11.6	(7.6)	d	4.0
Intercompany loan	(128.2)	–		(128.2)
Debt securities in issue	(472.5)	(0.3)	e	(472.8)
Deferred tax liabilities	–	(1.3)	f	(1.3)
Other liabilities	(19.6)	11.6	g	(8.0)
Subordinated debt liability	(63.0)	–		(63.0)
Total identifiable net assets acquired	3.9	40.8		44.7

Fair value adjustments per above table:

a) ThinCats’ pre

‑

acquisition ECL allowances have been unwound as the acquisition date fair value of the loan portfolios

becomes the new gross carrying amount under IFRS 9. Post

‑

acquisition ECLs have been recognised through

Shawbrook’s framework and any Day 1 impact recorded in profit or loss.

The adjustment includes £4.5 million for identifiable intangible assets recognised on acquisition (customer

relationships £2.6 million, brand £0.8 million, technology £1.1 million), offset by £1.8 million of ThinCats’ pre

‑

existing

goodwill written off on acquisition because IFRS 3 prohibits carrying forward acquiree goodwill.

c) A deferred tax asset has been recognised for ThinCats’ carried

‑

forward tax losses in accordance with IFRS 3.24 and

IAS 12, where future taxable profits are considered probable.

d) Comprises: (i) £4.1 million derecognition of fair value gains previously recognised by ThinCats on loans measured at

FVTPL, removed to avoid double counting as the acquisition

‑

date fair value supersedes prior measurement; (ii)

£2.3 million fair

‑

value adjustment to a contractual exit

‑

fee right using a 50% haircut for uncertainty; and (iii)

£1.2 million derecognition of prepayments and accruals for transaction

‑

related costs that do not meet recognition

criteria.

e) £0.3 million adjustment to debt securities in issue relates to fair value adjustment to funding liabilities.

Deferred tax relates to the identifiable intangible assets mentioned in b) above, recognised on acquisition.

Deferred completion fees of £11.6 million, representing EIR

‑

related balances on origination fees, have been

derecognised as they do not generate contractual cash inflows and would not be recognised separately by a market

participant. These amounts have been removed through the acquisition fair value adjustments.

Acquisition of Imployapp Limited (trading as Playter)

On 2 December 2025, Shawbrook Bank Limited, the Group’s principal subsidiary, acquired 100% of the ordinary shares

of Imployapp Limited (“Playter”), a fintech lender providing short term credit and working capital facilities to UK SMEs.

Playter became a wholly owned subsidiary from this date.

The acquisition enhances the Group’s SME lending capabilities by combining Playter’s technology and team with

Shawbrook’s digital infrastructure, distribution network and funding resources. This is expected to broaden the Group’s

access to fast, flexible finance for UK SMEs and support continued growth in this segment.

Playter commenced being consolidated as a subsidiary of the Group from 2 December 2025, the date when control

transferred to the Group. From acquisition to the reporting date, Playter has contributed net operating income of £0.6

million and loss before tax of £0.1 million. If the acquisition had occurred on 1 January 2025, it is estimated that the net

operating income for the Group for the year ended 31 December 2025 would have been £686.8 million and the

consolidated profit before tax for the Group would have been £273.6 million. In determining these amounts, management

has assumed that the fair value adjustments that arose on the date of acquisition would have been the same if the

acquisition had occurred on 1 January 2025.

Provisional fair values have been assigned to the consideration transferred and the identifiable assets and liabilities.

These remain subject to review, particularly the valuation of acquired net assets. The final assessment will be completed

by December 2026.

Consideration transferred

The total fair value of consideration transferred for the acquisition was £18.7 million.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

10. Acquisition of subsidiary (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

237

Identifiable assets acquired and liabilities assumed

The following table sets out information about the net assets acquired at the date of acquisition, including the carrying

amount, fair value adjustments recognised and the resultant fair value.



		Fair value adjustment
	Carrying amount	(See note below table)	Fair value
	£m	£m	£m
Cash and cash equivalents	2.3	–	2.3
Loans and advances to customers	19.0	3. 7 a	22. 7
Intangible assets	–	3.1 b	3.1
Other assets	1.9	0.1 c	2.0
Debt securities in issue	(22.0 )	–	(22.0 )
Deferred tax liabilities	–	(1.5) d	(1.5)
Other liabilities	(0.6)	0.1 e	(0.5)
Total identifiable net assets acquired	0. 6	5 .5	6.1

Fair value adjustments per above table:

£3.7 million comprises a £3.0 million fair value gain recognised on re-measuring the loan book at acquisition, plus the

reversal of £0.7 million pre-acquisition loan impairment.

b) £3.1 million represents intangible assets in the form of Playter’s proprietary lending and servicing platform. The asset

has been recognised as part of the purchase price allocation.

c) £0.1 million reflects the reversal of an impairment provision on accounts receivable.

d) The £1.5 million fair value adjustment to deferred tax liabilities comprises £0.7 million relating to the loan book (as

noted in a) and £0.8 million arising from the recognition of separately identifiable intangible assets (as noted in b)

e) £0.1 million relates to the removal of pre

‑

acquisition EIR income deferrals.

Goodwill

Goodwill arising from the two acquisitions has been recognised as follows:



	ThinCats	Playter	Total
	£m	£m	£m
Fair value of consideration transferred	46.0	18.7	64.7
Fair value of identifiable net assets acquired	(44.7)	(6.1)	(50.8)
Goodwill recognised	1.3	12.6	13.9

The goodwill recognised on both acquisitions reflects the expected synergies arising from integrating the acquired

businesses into the Group.

None of the goodwill recognised is expected to be tax deductible for trading purposes.

In the year ended 31 December 2024, the Group completed the acquisition of 100% of the ordinary shares of JBR Auto

Holdings Limited (“JBR”) for total consideration of £22.0 million, making it a wholly owned subsidiary. In 2025, following a

measurement period adjustment in accordance with IFRS 3, the identifiable net assets acquired were revised to £17.4

million (31 December 2024: £14.2 million), resulting in goodwill of £4.6 million (31 December 2024: £7.8 million).

Acquisition related costs

In the year ended 31 December 2025, acquisition related costs of £5.7 million for ThinCats and £0.8 million for Playter

are recognised in administrative expenses in the statement of profit and loss.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

238

11. Segmental analysis

See accounting policies in Note 7(b)

The following section provides information regarding the operating segments of the Group. Substantially all of the

Group’s activities are in the UK and, as such, segmental analysis on geographical lines is not presented. The Group is

not reliant on any single customer and therefore information about major customers is also not provided.

On 30 September 2025, the Group completed the acquisition of ThinCats and its subsidiaries (see Note 10). ThinCats

is a UK-based alternative lending platform that provides bespoke business loans to mid-sized SMEs. Since the

acquisition date, the company and its subsidiaries have been reported within the SME reportable operating segment.

On 2 December 2025, the Group completed the acquisition of Playter and its subsidiaries (see Note 10). Playter is a

fintech lender providing short term credit and working capital facilities to UK SMEs. Since the acquisition date, the

company and its subsidiaries have been reported within the SME reportable operating segment.



Reportable
operating segments		Description
		Provides specialist commercial and residential mortgage products to professional landlords,
Commercial	Real Estate	investors and homeowners.
	SME	Provides a range of innovative and tailored solutions to support UK small and medium-sized
		enterprises (SME) with their event-driven needs.
	Consumer	Provides unsecured personal loans, unsecured loans through strategic partnerships, and
Retail	Finance	motor finance loans via JBR Auto Holdings Limited.
	Retail	Comprised of the Group’s subsidiaries, The Mortgage Lender Limited and Bluestone
	Mortgage	Mortgages Limited. Provides residential mortgages for those with complex income profiles,
	Brands	including the self-employed, entrepreneurs and first-time buyers, and buy-to-let mortgages.

Any income or expense not allocated to the above reportable operating segments is included in ‘Other’, which does not

represent a reportable operating segment.

The following tables provide summarised information regarding the results of each reportable operating segment based

on the new presentation for reportable operating segments to reflect how results are provided to the chief operating

decision maker. The tables have been updated to reflect the revised naming conventions for operating segments,

including the prior year comparative table.

Where applicable, segment results are presented on an underlying basis, with underlying adjustments presented

separately to allow reconciliation to the statutory results of the Group.

Underlying performance represents the basis on which the chief operating decision maker (CODM) assesses segment

performance. Underlying adjustments comprise items of income or expense that are material by size and/or nature and

are typically non-recurring. These include provisions for motor finance commission redress, corporate activity and

integration costs associated with acquisitions, IPO-related costs and the IFRS 2 modification charge recognised on

vesting of legacy share-based arrangements.

Underlying adjustments are determined at a Group level and are not allocated to operating segments. These items are

presented separately in order to facilitate comparison of the Group’s underlying performance from period to period.

Further details are provided on page 17.

The results for each segment are presented on a consolidated basis, as reviewed by the CODM. Intra-group transactions

between segments are minimal and are not separately disclosed. Intra-group transactions are conducted under terms

that are usual and customary for such activities.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

11. Segmental analysis (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

239


	Commercial		Retail
				Retail
	Real		Consumer	Mortgage		Underlying	Underlying	Statutory
	Estate	SME	Finance	Brands	Other	total	adjustment	total
Year ended 31 December 2025	£m	£m	£m	£m	£m	£m	s £m	£m
Interest and similar income	455.2	362.8	96.8	268.7	238.4	1,421.9		1,421.9
Interest expense and similar charges	(270.3)	(143.9)	(33.4)	(177.1)	(148.0)	(772.7)	(2.3)	(775.0)
Net interest income	184.9	218.9	63.4	91.6	90.4	649.2	(2.3)	646.9
Net operating lease income	–	1.2	–	–	–	1.2	–	1.2
Net fee and commission
	(1.9)	9.0	(2.6)	0.1	(6.0)	(1.4)	–	(1.4)
(expense) /income
Net gains on structured asset sales	–	–	–	33.2	1.6	34.8	–	34.8
Net losses on derivative financial
	–	–	–	–	(2.2)	(2.2)	–	(2.2)
instruments and hedge accounting
Net other operating income	–	–	–	–	2.5	2.5	–	2.5
Net gains on loans and advances at
	–	0.3	–	–	–	0.3	–	0.3
FVTPL
Net operating income	183.0	229.4	60.8	124.9	86.3	684.4	(2.3)	682.1
Administrative expenses	(25.5)	(44.6)	(23.2)	(26.0)	(148.1)	(267.4)	(58.7)	(326.1)
Impairment losses on financial assets	(7.8)	(46.3)	(17.9)	(4.7)	–	(76.7)	(6.3)	(83.0)
Provisions	–	–	0.2	–	–	0.2	(1.0)	(0.8)
Total operating expenses	(33.3)	(90.9)	(40.9)	(30.7)	(148.1)	(343.9)	(66.0)	(409.9)
Profit/(loss) before tax	149.7	138.5	19.9	94.2	(61.8)	340.5	(68.3) 1	272.2

For details of the underlying adjustments, refer to page 17, Summary of statutory results for the period table in Strategic Report.


	Commercial		Retail
				Retail
	Real		Consumer	Mortgage		Underlying	Underlying	Statutory
	Estate	SME	Finance	Brands	Other	total	adjustments	total
Year ended 31 December 2024	£m	£m	£m	£m	£m	£m	£m	£m
Interest and similar income	403.1	327.6	74.3	251.2	330.8	1,387.0	–	1,387.0
Interest expense and similar charges	(235.1)	(138.6)	(22.4)	(160.5)	(239.5)	(796.1)	–	(796.1)
Net interest income	168.0	189.0	51.9	90.7	91.3	590.9	–	590.9
Net operating lease income	–	1.4	–	–	–	1.4	–	1.4
Net fee and commission
(expense) /income	(1.9)	10.0	(5.1)	0.4	(3.3)	0.1	–	0.1
Net gains on structured asset sales	–	–	–	14.1	–	14.1	–	14.1
Net gains on derivative financial
instruments and hedge accounting	–	–	–	–	1.9	1.9	–	1.9
Net other operating income	–	–	–	–	1.4	1.4	–	1.4
Net operating income	166.1	200.4	46.8	105.2	91.3	609.8	–	609.8
Administrative expenses	(24.0)	(40.6)	(17.4)	(39.6)	(127.2)	(248.8)	(4.0)	(252.8)
Impairment losses on financial assets	(7.9)	(25.8)	(27.8)	(5.7)	–	(67.2)	–	(67.2)
Provisions	–	–	–	–	–	–	5.3	5.3
Total operating expenses	(31.9)	(66.4)	(45.2)	(45.3)	(127.2)	(316.0)	1.3	(314.7)
Profit/(loss) before tax	134.2	134.0	1.6	59.9	(35.9)	293.8	1.3	295.1

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

11. Segmental analysis (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

240

The following tables present summarised information about the Group’s assets and liabilities based on the reportable

operating segments. Loans and advances to customers and assets on operating leases (i.e. the Group’s ‘loan book’)

are allocated to the relevant lending segments. All other assets and liabilities are allocated to ‘Other’.



	Commercial		Retail
				Retail
	Real		Consumer	Mortgage
	Estate	SME	Finance	Brands	Other	Total
As at 3 1 December 2025	£m	£m	£m	£m	£m	£m
Assets	7,625.5	4,396.5	1,021.8	4,750.9	4,674.2	22,468.9
Liabilities	–	–	–	–	(20,626.4)	(20,626.4)
Net assets/(liabilities)	7,625.5	4,396.5	1,021.8	4,750.9	(15,952.2)	1,842.5



	Commercial		Retail
				Retail
	Real		Consumer	Mortgage
	Estate	SME	Finance	Brands	Other	Total
As at 31 December 2024	£m	£m	£m	£m	£m	£m
Assets	6,777.7	3,112.7	880.0	4,436.0	4,516.3	19,722.7
Liabilities	–	–	–	–	(18,140.4)	(18,140.4)
Net assets/(liabilities)	6,777.7	3,112.7	880.0	4,436.0	(13,624.1)	1,582.3

12. Interest and similar income

See accounting policies in Note 7(c)



	2025	2024
	£m	£m
Interest income calculated using the effective interest rate method
C ash and balances at central banks	87.4	135.0
L oans and advances to customers: loan receivables measured at amortised cost	886.7	805.9
Loans and advances to customers: loan receivables measured at FVOCI	219.5	193.1
I nvestment securities	91.0	65.3
Total interest income calculated using the effective interest rate method	1,284.6	1,199.3
Other interest and similar income
L oans and advances to customers: finance lease and instalment credit receivables	72.3	50.5
Loans and advances to customers: loan receivables measured at FVTPL	1.8	-
D erivative financial instruments	63.2	137.2
Total other interest and similar income	137.3	187.7
Total interest and similar income	1,421.9	1,387.0

Interest

ncome calculated using the effective interest rate (EIR) method is attributable to financial assets measured at

amortised cost and at FVOCI.

Interest income on derivative financial instruments includes interest income of £57.8 million attributable to derivative

financial instruments in qualifying hedging relationships hedging assets (2024: £129.0 million of interest income).

For financial assets measured at FVTPL, interest income is determined using the EIR method together with any

additional returns that reflect the specific features of the loan.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

241

13. Interest expense and similar charges

See accounting policies in Note 7(c)



	2025	2024
	£m	£m
Amounts due to banks	47.3	65.4
Customer deposits	673.1	647.0
Derivative financial instruments	3.3	25.1
Debt securities in issue	31.4	39.3
Lease liabilities	1.2	0.3
Subordinated debt liability	18.7	19.0
Total interest expense and similar charges	775.0	796.1

Except for interest on derivative financial instruments and lease liabilities, amounts in the above table are calculated

using the EIR method and are attributable to financial liabilities measured at amortised cost.

Interest expense on derivative financial instruments includes interest expense of £1.3 million attributable to derivative

financial instruments in qualifying hedging relationships hedging liabilities (2024: £19.8 million of interest expense).

14. Net fee and commission income

See accounting policies in Note 7(d)



	2025	2024
	£m	£m
Fee income on loans and advances to customers	9.6	10.9
Credit facility related fees	7.6	5.3
Other fee income	0.1	-
F ee and commission income	17.3	16.2
Fee and commission expense	(18.7)	(16.1)
N et fee and commission (expense)/income	(1.4)	0.1

15. Net gains on structured asset sales

See accounting policies in Note 7(i)



	2025	2024
	£m	£m
Net gains on structured asset sales	34.8	14.1
N et gains on structured asset sales	34.8	14.1

Structured asset sales

The net gain on structured asset sales is attributable to securitised loan portfolios. The securitised loans were transferred

to unconsolidated structured entities and met the criteria to be derecognised from the statement of financial position (see

Note 25 and Note 26).

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

242

16. Administrative expenses

See accounting policies in Note 7(e)



		2025	2024
	Note	£m	£m
Payroll costs	17	191.5	150.3
Depreciation of property, plant and equipment 1	28	6.3	4.6
Amortisation of intangible assets	29	14.1	9.8
IPO transaction costs		20.3	-
Other administrative expenses		93.9	88.1
Total administrative expenses		326.1	252.8

Other administrative expenses include fees paid to the Group’s auditor (excluding VAT), KPMG LLP, as detailed below.



	2025	2024
	£000	£000
Audit of these annual accounts	198.7	170.0
Audit of the annual accounts of subsidiary companies	4,002.3	3,832.2
Audit related assurance services	335.8	309.0
IPO related assurance services	1,905.0	-
Other assurance services	50.0	50.0
Total auditor’s remuneration	6,491.8	4,361.2

Includes depreciation of all asset categories except for assets on operating leases. Depreciation of assets on operating leases is presented as a separate line item

in the statement of profit and loss, forming part of the net operating lease income total.

17. Employees

See accounting policies in Note 7(e)

Aggregate payroll costs included in administrative expenses (see Note 16) are as follows:



	2025	2024
	£m	£m
Wages and salaries	139.4	129.1
Social security costs	17.9	12.8
Pension costs	8.1	7.7
Share -based remuneration	26.1	0.7
Total p ayroll costs	191.5	150.3

In the table above, share

‑

based remuneration is presented separately from wages and salaries. The prior

‑

year

comparative has been represented to align with the current

‑

year presentation. Further details regarding share-based

remuneration transactions are provided in Note 18.

Pension costs represent contributions to defined contribution pension schemes. The Group does not operate any defined

benefit pension schemes.

Details of Directors’ remuneration are provided on page 82.

The average number of persons employed by the Group on a full-time equivalent basis by reportable operating segment

is set out in the following table.



	2025	2024
Real Estate	199	208
SME	279	299
Consumer Finance	83	95
Retail Mortgage Brands	259	323
Other	663	594
Average number of employees (on a full-time equivalent basis)	1,483	1,519

Figures in the above tables include contracted employees of the Group only and do not include contractors.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

243

18. Employee share-based payment transactions

See accounting policies in Note 7(z)

During the year, the Group operated various share-based payment arrangements, as set out below. Further information

is provided in the Directors’ Remuneration Report starting on page 82.

The share-based payment expense during the year comprised the following:



	2025	2024
	£m	£m
Management Incentive Plan	–	0.7
2025 Share Plan	26.1	–
Total share -based payment expense	26.1	0.7

Legacy Share Plans

Management Incentive Plan

Prior to the IPO, the Group operated an equity settled Management Incentive Plan (MIP), which was originally introduced

for a set of individuals in April 2019. Individuals selected for inclusion in the equity settled MIP were initially entitled to

acquire non-voting ‘B’ class ordinary shares (‘B shares’) in Marlin Bidco Limited (Marlin), which was the ultimate parent

company of the Group.

In January 2025, all 9,150 B shares (2024: 9,150) were converted into a new class of A shares in

Marlin, namely 6,016,857 A6 shares. The conversion was effected by sub dividing and reclassifying B shares into A6

shares. This involved amending the rights attaching to shares rather than the transfer, disposal, acquisition or issue of

shares. The IPO resulted in the vesting of the MIP (there having been no movement in the number of A6 shares ahead of

this).

As a result of the vesting, the assets distributed to A6 shareholders consisted of their pro-rata share of the cash

proceeds Marlin received following the sale of Shawbrook shares as part of the IPO and the Shawbrook shares Marlin

did not sell as part of the IPO.

During the year ended 31 December 2025, the charge recognised in payroll costs for MIP is £nil (2024: £0.7 million).

2025 Share Plan

In January 2025, the Company adopted a new equity settled incentive arrangement for selected key employees in the

form of an option to acquire A2 shares in Marlin for nil consideration, subject to performance outcomes linked to a

prescribed exit event. The IPO resulted in the vesting of this arrangement with assets distributed to A2 shareholders.

Given that the Plan vested on listing, the expense of £26.1 million (2024: £nil) was fully recognised during the year

ended 31 December 2025.

Post IPO Share Plans

Performance Share Plan (PSP)

Following the IPO, the Group adopted the PSP under which the Remuneration Committee may grant awards to

executive directors and selected key employees as part of their variable remuneration.

Awards will typically comprise of

a right to acquire ordinary shares in the Company for nil (or nominal) consideration and will vest subject to continued

employment (other than in ‘good leaver’ circumstances) and the achievement of performance criteria set at the time of

grant.

Awards may be exercised from the point of vesting to the tenth anniversary of the grant date.

The first grant under the PSP was made on 12 December 2025 (with an expected vesting date of 1 April 2028). The

expense for the year ended 31 December 2025 is immaterial.

All Employee share-based arrangements

In January 2026, the Group awarded all eligible employees 418 Free shares each in the Company under the Share

Incentive Plan (“SIP”), which is subject to a three-year holding period for the award date.

The Group also intends to make the first grants under the Sharesave in 2026, which will vest in the ordinary course, after

the completion of service and savings period requirements.

Further information in respect of these arrangements will be provided in the Group’s Annual Report and Accounts for the

year ending 31 December 2026.

19. Directors’ remuneration

Information in respect of Directors’ Remuneration is provided in the single total figure of remuneration within the

Directors’ Remuneration Report on page 93.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

244

20. Impairment losses on financial assets

See accounting policies in Note 7(u)

Impairment losses on financial assets are attributable to the Group’s loans and advances to customers and loan

commitments. Impairment losses for the Group’s other financial asset categories that are in scope of IFRS 9

impairments (cash and balances at central banks, loans and advances to banks and investment securities) are

immaterial, totalling less than £0.1 million in both reported years.

The following table provides analysis of impairment losses on financial assets by financial asset category.



	2025	2024
	£m	£m
Impairment losses on loans and advances to customers at amortised cost
Net ECL charge for the year	27.3	29.2
Loan balances written off in the year	65.8	47.2
Amounts recovered in the year in respect of loan balances previously written off	(15.0)	(12.3)
Total impairment losses on loans and advances to customers at amortised cost	78.1	64.1
Impairment losses on loans and advances to customers at FVOCI
Net ECL charge for the year 1	4.9	6.3
Total impairment losses on loans and advances to customers at FVOCI	4.9	6.3
Impairment on loan commitments
Net ECL (credit) for the year	–	(3.2)
Total impairment on loan commitments	–	(3.2)
Total impairment losses on financial assets	83.0	67.2

In the 12 months ended 31 December 2025, the change in the loss allowance of £1.4 million included in the consolidated statement of comprehensive income is presented after

deducting £3.5 million (2024: £1.0 million) of loss allowance attributable to securitised loan portfolios transferred to unconsolidated structured entities at the date of derecognition

from the statement of financial position (see Note 25).

Further analysis of the net ECL charge for the year in respect of loans and advances to customers at amortised cost,

loans and advances to customers at FVOCI and loan commitments is provided in the credit risk section of the Risk

Report on page 137, 141 and 143, respectively.

Critical accounting judgements and estimates

The impairment of financial assets is an area identified as involving critical accounting judgements and estimates.

Additional details are provided in Note 8(a) and in the credit risk section of the Risk Report on pages 144 to 151.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

245

21. Tax

See accounting policies in Note 7(f)

A summary of the tax charge recognised in the statement of profit and loss is as follows:

| | | |
| --- | --- | --- |
| | |
| | 2025 | 2024 |
| | £m | £m |
| Current tax | | |
| Current year | 70.5 | 74.6 |
| Adjustment in respect of prior years | (4.1) | (3.9) |
| Total current tax | 66.4 | 70.7 |
| Deferred tax | | |
| Origination and reversal of temporary differences | 8.6 | 3.0 |
| Adjustment in respect of prior years | 1.7 | 1.5 |
| Total deferred tax | 10.3 | 4.5 |
| Total

tax charge | 76.7 | 75.2 |

Additional information about the Group’s deferred tax assets is provided in Note 30.

A reconciliation of profit before tax to the total tax charge is shown in the following table. The effective tax rate is 28.2%

(2024: 25.5%). This is higher than the UK corporation tax rate due to the combined impact of the banking surcharge and

the other adjustments set out in the table below.



	2025	2024
	£m	£m
Profit before tax	272.2	295.1
Implied tax charge thereon at 25% (2024: 25%)	68.1	73.8
Adjustments
Banking surcharge	4.0	5.5
Tax relief on coupon paid on capital securities	(4.1)	(4.0)
Adjustment in respect of prior years	(2.4)	(2.4)
Capital expenses related to IPO	4.8	–
Capital expenses related to acquisitions	0.7	0.9
Group structuring capital expenses	0.6	0.5
Entertaining and other disallowable expenses	0.2	0.3
Non -deductible share scheme costs	0.3	0.2
Exempt dividends	(5.2)	–
SPV fair value and consolidation adjustments	9.0	–
Other permanent differences	0.7	0.4
Total tax charge	76.7	75.2

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

246

22. Earnings per share

See accounting policies in Note 7(y)

The table below shows the earnings per share (EPS) for 2025 and 2024. The calculation is based on the profit after tax

attributable to equity shareholders less coupon paid on capital securities divided by the number of weighted average

ordinary shares.

For the purposes of basic and diluted earnings per share, the weighted average number of ordinary shares in issue

during the year has been used, with shares issued during the year included from the date of issue and time-apportioned

accordingly. Although share options were in issue during the year, they were newly granted and did not vest during the

year. Accordingly, these instruments had no dilutive effect and diluted earnings per share is the same as basic earnings

per share.



	2025	2024
	£m	£m
Profit attributable to equity holders	195.5	219.9
Coupon paid on capital securities	(15.1)	(15.1)
Profit attributable to ordinary shareholders	180.4	204.8
Average number of shares ( million)
Basic	508.5	506.2
Effect of dilutive share options and awards	–	–
Diluted	508.5	506.2
Basic (pence)	35	40
Diluted (pence)	35	40

23. Cash and cash equivalents

See accounting policies in Note 7(g)



	2025	2024
	£m	£m
Cash and balances at central banks	1,924.5	2,244.7
Loans and advances to banks	246.8	304.4
Total cash and cash equivalents	2,171.3	2,549.1

The Group’s cash and cash equivalents balance includes:

•

£156.9 million (2024: £191.8 million) of cash collateral paid against derivative contracts.

•

£38.3 million (2024: £49.2 million) of securitisation cash, which represents the cash balances of consolidated

structured entities.

The loss allowance for both cash and balances at central banks and loans and advances to banks is immaterial in both

reported years, totalling less than £0.1 million.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

247

24. Loans and advances to customers

See accounting policies in Note 7(h)

The following tables analyse the carrying amount of loans and advances to customers by loan classification and

agreement type. Finance lease and instalment credit receivables are presented within loans and advances to customers

at amortised cost.


	Loans and advances to customers at
	amortised cost
				Loans and	Loans and
	Gross			advances to	advances to
	carrying	Loss	Carrying	customers	customers
	amount	allowance	amount	at FVOCI	at FVTPL	Total
As at 31 December 2025	£m	£m	£m	£m	£m	£m
Loan receivables	12,953.5	(178.8)	12,774.7	4,046.0	62.9	16,883.6
Finance lease receivables	22.2	(0.6)	21.6	–	–	21.6
Instalment credit receivables	839.5	(10.0)	829.5	–	–	829.5
Fair value adjustments for hedged risk	13,815.2	(189.4)	13,625.8	4,046.0	62.9	17,734.7
( see Note 27)			13.4	22.0	–	35.4
Total loans and advances to customers			13,639.2	4,068.0	62.9	17,770.1

The FVTPL loans are new in 2025 and arise from the acquisition of ThinCats. These loans have cash flows that do not

meet the Solely Payments of Principal and Interest (SPPI) criteria.


	Loans and advances to customers at
	amortised cost
				Loans and	Loans and
	Gross			advances to	advances to
	carrying	Loss	Carrying	customers	customers
	amount	allowance	amount	at FVOCI	at FVTPL	Total
As at 31 December 2024	£m	£m	£m	£m	£m	£m
Loan receivables	11,031.9	(149.4)	10,882.5	3,601.1	–	14,483.6
Finance lease receivables	22.6	(0.7)	21.9	–	–	21.9
Instalment credit receivables	752.5	(9.3)	743.2	–	–	743.2
Fair value adjustments for hedged risk	11,807.0	(159.4)	11,647.6	3,601.1	–	15,248.7
(see Note 2 7)			(51.2)	(20.9)	–	(72.1)
Total loans and advances to customers			11,596.4	3,580.2	–	15,176.6

Additional analysis of the Group’s loans and advances to customers at amortised cost and loans and advances to

customers at FVOCI and the associated loss allowance is provided in the credit risk section of the Risk Report starting

on page 137 and 141, respectively.

Loans and advances to customers include the following pledged and transferred assets. Amounts represent the carrying

amount (after loss allowance deducted).

•

£2,442.6 million (2024: £2,306.4 million) includes amounts encumbered through access to the Bank of England’s

Sterling Monetary Framework.

•

£1,918.1 million (2024: £2,255.4 million) transferred to consolidated structured entities as part of securitisation

programmes, which are pledged as collateral against debt securities in issue.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

24. Loans and advances to customers (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

248

Loans and advances to customers also include loans with a carrying amount (after loss allowance deducted) of £2.3

million (2024: £6.2 million) that were offered under COVID-19 related business support schemes. The UK Government

provides a guarantee to protect 80% of any post-recovery loss in the event of default on these loans. Details of claims

made against the government guarantee are as follows:


	2025	2024
Number of claims made during the year	–	–
Amount pending receipt as at 1 January (£m)	–	0.2
Amount claimed during the year (£m)	–	–
Amount received on claims during the year (£m)	–	(0.2)
Amount pending receipt as at 31 December (£m)	–	–

Finance lease and instalment credit receivables

Finance lease and instalment credit receivables relate to agreements issued by the Group to customers for a variety of

assets, predominantly plant and machinery. The following table sets out a maturity analysis, showing the undiscounted

payments to be received after the reporting date and a reconciliation to the gross carrying amount of the receivable.


	2025		2024
	Finance lease	Instalment credit	Finance lease	Instalment credit
	receivables	receivables	receivables	receivables
	£m	£m	£m	£m
Undiscounted payments receivable
Within one year	8.8	518.3	9.5	448.5
Between one and two years	6.6	168.1	7.0	203.3
Between two and three years	3.5	94.9	5.4	122.6
Between three and four years	2.0	136.8	2.3	33.2
Between four and five years	1.7	14.1	0.8	11.2
After five years	2.7	0.8	0.6	2.6
Total undiscounted payments receivable	25.3	933.0	25.6	821.4
Unearned finance income	(3.1)	(93.5)	(3.0)	(68.9)
Gross carrying amount	22.2	839.5	22.6	752.5

Instalment credit receivables include block discounting facilities of £365.0 million (2024: £311.4 million).

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

24. Loans and advances to customers (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

249

The cost of assets acquired by the Group during the year, for the purpose of letting to customers under finance lease

and instalment credit agreements, is as follows:



	2025	2024
	£m	£m
Finance lease agreements	4.8	6.6
Instalment credit agreements	358.3	133.7
Total cost of assets acquired during the year	363.1	140.3

Modifications

The Group sometimes modifies the terms of loans provided to customers due to commercial renegotiations, or for

distressed loans with a view to maximising recovery. Modifications occurring due to the customer encountering financial

difficulties are referred to as forbearance activities. Details of forborne loans are provided in the credit risk section of

the Risk Report starting on page 158.

Modification gains or losses during the year were immaterial.

Write-offs still under enforcement activity

Loans that are written off can still be subject to enforcement activities in order to comply with the Group’s procedures

for recovery of amounts due. The contractual amount outstanding on loans and advances to customers that were

written off during the reporting period, and are still subject to enforcement activity, is £104.9 million (2024: £84.4

million).

25. Securitisations and structured entities

See accounting policies in Note 7(i)

Consolidated structured entities

The Group includes consolidated structured entities relating to securitisation programmes. These securitisations involve

the transfer of certain mortgage loans included within loans and advances to customers to bankruptcy remote structured

entities. The Group continues to service the transferred loans in return for an administration fee and is entitled to any

residual income from the structured entity after the debt obligations and senior expenses of the securitisation programme

have been met.

Based on the structure of these securitisations, for accounting purposes, it is assessed that the Group controls the

structured entities and they are therefore treated as subsidiaries and are fully consolidated (see Note 45). The transfer of

loans does not meet the derecognition criteria and they therefore continue to be recognised in their entirety in loans and

advances to customers in the statement of financial position.

The securitisations involve the simultaneous issue of debt securities by the structured entities to investors. The debt

securities may be issued to external investors, which provides a form of long-term funding to the Group. Alternatively,

some, or all, of the debt securities may be purchased by a subsidiary of the Group, Shawbrook Bank Limited. These

internally held debt securities are used for funding and liquidity purposes. For example, they may be exchanged for UK

gilts, referred to as a ‘security swap’, or they may be positioned with the Bank of England for use as collateral against

amounts drawn under its funding schemes.

During the year ended 31 December 2025, the following transactions with consolidated structured entity took place:

•

In September 2025, the Group acquired ThinCats Group Limited which included four subsidiaries by virtue of control

relating to securitisation transactions, TC Funding I Limited, TC Funding III Limited, TC Funding V DAC and TC

Funding Limited (only three of the deemed separate entity silos). Following acquisition, the Group repurchased all

assets previously held by TC Funding I Limited and TC Funding V DAC and simultaneously repaid all outstanding

liabilities. TC Funding V DAC is liquidated and TC Funding I Limited is currently undergoing the formal liquidation

process, while TC Funding III Limited and TC Funding Limited remain active. Having performed an assessment, the

Group has concluded that it controls the three active entities, consequently, the assets and liabilities of the entities

have been consolidated into the Group’s financials.

In the comparative year ended 31 December 2024, the following transactions with consolidated structured entities

took place:

•

In May 2024, loans with a gross carrying amount (before loss allowance) of £557.4 million and a carrying amount

(after loss allowance) of £556.2 million were transferred to Lanebrook Mortgage Transaction 2024-1 plc. The

structured entity simultaneously issued mortgage-backed debt securities of £557.4 million and £5.5 million of

uncollateralised ‘X’ notes, £250.0 million of which was issued to external investors (see Note 36), with the remainder

retained by the Group and eliminated on consolidation.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

25. Securitisations and structured entities (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

250

The following table summarises the carrying amount of securitised loans that continue to be recognised in the statement

of financial position and the associated debt securities issued by consolidated structured entities.


	2025		2024
	Loans and	Debt	Loans and
	advances	securities	advances	Debt securities
	securitised	in issue	securitised	in issue
	£m	£m	£m	£m
	(Note 24)	(Note 36)	(Note 24)	(Note 36)
Ealbrook Mortgage Funding 2022 -1 plc	101.2	113.4	146.0	161.4
Lanebrook Mortgage Transaction 2022-1 plc	283.3	288.3	292.1	299.3
Shawbrook Mortgage Funding 2022 -1 plc	340.4	347.7	426.6	431.4
Genesis Mortgage Funding 2022 -1 plc	–	–	108.0	112.3
Holbrook Mortgage Transaction 2023 -1 plc	261.8	268.3	353.8	393.9
Lanebrook Mortgage Transaction 2023 -1 plc	375.7	387.4	387.1	398.6
Lanebrook Mortgage Transaction 2024 -1 plc	521.7	528.1	548.9	554.4
ThinCats Funding Limited	39.5	44.0
	1,923.6	1,977.2	2,262.5	2,351.3
L ess: loss allowance on securitised loans	(5.5)		(7.1)
Less: held by the Group (and eliminated on consolidation)		(1,564.9)		(1,802.1)
Total recognised in statement of financial position	1,918.1	412.3	2,255.4	549.2

Based on unaudited management information provided by the unconsolidated structured entities.

Unconsolidated structured entities

The Group has interests in four unconsolidated structured entities associated with securitisation programmes. These

securitisations involve the transfer of certain mortgage loans included within loans and advances to customers to

bankruptcy remote structured entities. The residual certificates, representing the rights to receive residual income from

the structured entity, are sold as part of these transactions.

Based on the structure of these securitisations, for accounting purposes, it is assessed that the Group does not control

the structured entities and they are therefore not consolidated. The transfer of loans meets the criteria for derecognition

and they are therefore derecognised in their entirety from the statement of financial position, referred to as ‘structured

asset sales’.

In May 2025, loans with a carrying amount of £563.5 million (net of £1.7 million loss allowance), comprising loans held at

amortised cost of £10.9 million and loans held at FVOCI of £552.6 million, were transferred to an unconsolidated

structured entity. Upon transfer, a net gain on derecognition of £22.9 million was recognised in the statement of profit and

loss. The Group paid up-front expenses incurred in forming the unconsolidated structured entity of £0.9 million, including

amounts to capitalise the entity, all bank and legal expenses. The Group has no intention to provide any further financial

or other support following these initial set-up costs.

In December 2025, loans with a carrying amount of £335.1 million (net of £2.2 million loss allowance), comprising loans

held at amortised cost of £29.2 million and loans held at FVOCI of £305.9 million, were transferred to an unconsolidated

structured entity. Upon transfer, a net gain on derecognition of £10.3 million was recognised in the statement of profit and

loss. The Group paid up-front expenses incurred in forming the unconsolidated structured entity of £1.4 million, including

amounts to capitalise the entity, all bank and legal expenses. The Group has no intention to provide any further financial

or other support following these initial set-up costs.

During the year ended 31 December 2024, loans with a carrying amount of £412.6 million (net of £1.0 million loss

allowance), comprising loans held at amortised cost of £24.6 million and loans held at FVOCI of £388.0 million, were

transferred to an unconsolidated structured entity. Upon transfer, a net gain on derecognition of £14.1 million was

recognised in the statement of profit and loss (see Note 15). The Group paid up-front expenses incurred in forming the

unconsolidated structured entity of £1.4 million, including amounts to capitalise the entity, all bank and legal expenses.

The Group has no intention to provide any further financial or other support following these initial set-up costs.

A portion of the debt securities issued by unconsolidated structured entities as part of these securitisation transactions

were purchased by a subsidiary of the Group, Shawbrook Bank Limited. The Group therefore has a direct interest in

these unconsolidated structured entities. As at 31 December 2025, the carrying amount of the Group’s investment in

debt securities issued by unconsolidated structured entities is £735.8 million (2024: £392.2 million) (see Note 26). This

amount represents the Group’s maximum exposure to loss from its interests in unconsolidated structured entities.

As at 31 December 2025, the total asset value

of the unconsolidated structured entities that the Group has a direct

interest in, including the portion in which the Group has no interest, is £1,476.6 million (2024: £706.4 million).

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

25. Securitisations and structured entities (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

251

The Group does not provide any ongoing financial support to any of the unconsolidated structured entities that it has a

direct interest in.

Other accounting judgements

For each securitisation transaction completed, the assessments involved in determining whether the Group controls

the structured entity and whether the loans meet the criteria to be derecognised are identified as involving accounting

judgements. Additional details are provided in Note 9(a).

26. Investment securities

See accounting policies in Note 7(j)



	2025			2024
	Covered	Debt		Covered	Debt
	bonds	securities	Total	bonds	securities	Total
	£m	£m	£m	£m	£m	£m
As at 1 January	780.3	733.3	1,513.6	517.0	305.1	822.1
Additions	172.6	1,039.3	1,211.9	366.9	531.9	898.8
Maturities /Disposals	(47.0)	(423.2)	(470.2)	(104.7)	(79.3)	(184.0)
Other movements	(0.3)	(97.0)	(97.3)	1.1	(24.4)	(23.3)
As at 31 December	905.6	1,252.4	2,158.0	780.3	733.3	1,513.6

Debt securities represent mortgage-backed debt securities, of which £735.8 million (2024: £392.2 million) were issued by

unconsolidated structured entities as part of securitisation transactions that were retained by the Group.

The Group's investment securities balance includes:

•

£390.2 million (2024: £nil) includes amounts encumbered through access to the

Bank of England’s Sterling

Monetary Framework.

•

£178.1 million (2024: £nil) classified as FVOCI.

•

£35.3 million (2024: £64.3 million) of restricted amounts invested in short-term money market funds by consolidated

structured entities.

•

During the year ended 31 December 2025, the Group sold £390 million of debt securities issued by unconsolidated

structured entities, and a net gain on derecognition of £1.2 million was recognised in the statement of profit and loss.

The loss allowance for investment securities is immaterial, totalling less than £0.1 million in both reported years.

27. Derivative financial instruments and hedge accounting

See accounting policies in Note 7(k) and Note 7(l)

Derivative financial instruments

Derivative financial instruments are used by the Group for risk management purposes to minimise or eliminate the

impact of movements in interest rates and foreign exchange rates. Derivatives are not used for trading or speculative

purposes. The Group uses the International Swaps and Derivatives Association Master Agreement to document these

transactions in conjunction with a Credit Support Annex.

Unhedged positions principally arise from securitisation programmes where the transferred loans do not meet the

derecognition criteria and therefore continue to be recognised in their entirety within loans and advances to customers,

together with their associated centrally cleared derivatives and hedge accounting relationships. Within the consolidated

structured entities, interest rate risk is managed with over-the-counter (OTC) derivatives, and the Group enters into

economically offsetting centrally cleared derivatives to remove the duplicated hedging effect on consolidation, ensuring

that only the intended interest rate exposure is reflected within the Group.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

27. Derivative financial instruments and hedge accounting

(continued)

Shawbrook Group plc

Annual Report and Accounts 2025

252

The following table analyses the Group’s derivative financial instruments by instrument type and whether the instrument

is designated as a hedging instrument in a qualifying hedging relationship.


	Assets		Liabilities
	Nominal	Carrying	Nominal	Carrying
	amount	amount	amount	amount
As at 3 1 December 2025	£m	£m	£m	£m
Instruments not in hedging relationships
Interest rate swaps	2,220.5	26.2	3,642.1	26.3
Spot and forward foreign exchange swaps	70.9	0.3	34.7	0.1
Total instruments not in hedging relationships	2,291.4	26.5	3,676.8	26.4
Instruments in fair value hedging relationships
Interest rate swaps	8,348.8	60.7	6,241.0	65.2
Balance guaranteed swaps	–	–	–	–
Total instruments in fair value hedging relationships	8,348.8	60.7	6,241.0	65.2
Instruments in cash flow hedging relationships
Interest rate swaps	432.0	0.3	549.0	1.6
Total instruments in cash flow hedging relationships	432.0	0.3	549.0	1.6
Total derivative financial instruments	11,072.2	87.5	10,466.8	93.2


	Assets		Liabilities
	Nominal	Carrying	Nominal	Carrying
	amount	amount	amount	amount
As at 31 December 2024	£m	£m	£m	£m
Instruments not in hedging relationships
Interest rate swaps	2,131.2	74.1	5,181.0	73.3
Spot and forward foreign exchange swaps	3.9	–	23.5	0.1
Total instruments not in hedging relationships	2,135.1	74.1	5,204.5	73.4
Instruments in fair value hedging relationships
Interest rate swaps	9,394.5	144.7	3,950.0	43.4
Balance guaranteed swaps	69.9	3.3	–	–
Total instruments in fair value hedging relationships	9,464.4	148.0	3,950.0	43.4
Instruments in cash flow hedging relationships
Interest rate swaps	485.0	5.0	70.0	0.3
Total instruments in cash flow hedging relationships	485.0	5.0	70.0	0.3
Total derivative financial instruments	12,084.5	227.1	9,224.5	117.1

Interest rate swaps are used to manage interest rate risk associated with the Group’s loans and advances to

customers (including pipeline loans) and customer deposits (including offers/ pipeline for savings). Spot and forward

foreign exchange swaps are used to manage foreign exchange risk associated with the Group’s loans and advances

to customers and loans and advances to banks.

As part of the ThinCats acquisition in September 2025, the Group acquired derivative financial assets, comprising of

swap contracts with a fair value of £0.4 million. These derivatives were closed immediately following acquisition.

Balance guaranteed swaps were acquired as part of the BML acquisition in May 2023 and fair value hedge accounting

was designated on acquisition. Fair value hedge accounting was de-designated following the termination of balance

guaranteed swaps in June 2025.

In respect of the derivative financial instruments set out above, cash collateral totalling £156.9 million has been paid

(2024: £191.8 million) and £61.0 million has been received (2024: £157.9 million) (see Note 23 and Note 33,

respectively). There was also securitisation collateral received in the form of Gilts with a nominal value of £28.6 million

(2024: £75.9 million) and a market value of £27.1 million (2024: £79.8 million).

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

27. Derivative financial instruments and hedge accounting (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

253

Additional information about market risk, and the use of derivatives in managing such risk, is included in the Risk Report

starting on page 160.

All of the Group’s GBP derivatives are cleared through the London Clearing House via ABN Amro and Barclays. FX

derivatives are over-the-counter (OTC) with Lloyds. SPV swaps are over-the-counter (OTC) derivatives with Lloyds,

Barclays and Santander. The following tables split out the total nominal amount of derivative financial instruments into

cleared and OTC.


	Assets			Liabilities
	Cleared	OTC	Total	Cleared	OTC	Total
As at 3 1 December 2025	£m	£m	£m	£m	£m	£m
Instruments not in hedging relationships
Interest rate swaps	341.1	1,879.4	2,220.5	3,642.1	–	3,642.1
Spot and forward foreign exchange swaps	–	70.9	70.9	–	34.7	34.7
Total instruments not in hedging relationships	341.1	1,950.3	2,291.4	3,642.1	34.7	3,676.8
Instruments in fair value hedging relationships
Interest rate swaps	8,348.8	–	8,348.8	6,241.0	–	6,241.0
Balance guaranteed swaps	–	–	–	–	–	–
Total instruments in fair value hedging
relationships	8,348.8	–	8,348.8	6,241.0	–	6,241.0
Instruments in cash flow hedging relationships
Interest rate swaps	432.0	–	432.0	549.0	–	549.0
Total instruments in cash flow hedging
relationships	432.0	–	432.0	549.0	–	549.0
Total derivative financial instruments	9,121.9	1,950.3	11,072.2	10,432.1	34.7	10,466.8


	Assets			Liabilities
	Cleared	OTC	Total	Cleared	OTC	Total
As at 31 December 2024	£m	£m	£m	£m	£m	£m
Instruments not in hedging relationships
Interest rate swaps	27.7	2,103.5	2,131.2	5,181.0	–	5,181.0
Spot and forward foreign exchange swaps	–	3.9	3.9	–	23.5	23.5
Total instruments not in hedging relationships	27.7	2,107.4	2,135.1	5,181.0	23.5	5,204.5
Instruments in fair value hedging relationships
Interest rate swaps	9,394.5	–	9,394.5	3,950.0	–	3,950.0
Balance guaranteed swaps	–	69.9	69.9	–	–	–
Total instruments in fair value hedging	9,394.5	69.9	9,464.4	3,950.0	–	3,950.0
relationships
Instruments in cash flow hedging relationships
Interest rate swaps	485.0	–	485.0	70.0	–	70.0
Total instruments in cash flow hedging	485.0	–	485.0	70.0	–	70.0
relationships
Total derivative financial instruments	9,907.2	2,177.3	12,084.5	9,201.0	23.5	9,224.5

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

27. Derivative financial instruments and hedge accounting (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

254

Hedge accounting

The Group holds certain derivative financial instruments as hedging instruments in fair value hedges and cash flow

hedges in order to hedge exposures to changes in interest rates. Additional details of these hedges are provided in the

following sections.

All hedge accounting relationships have remained highly effective throughout both reported years.

Fair value hedges

Details of the Group’s fair value hedges are presented in the following tables.


	Maturity
	Less than	1 - 3	3 months –	1 - 5	More than
As at 31 December 2025	1 month	months	1 year	years	5 years	Total
Interest rate swaps
Nominal amount (£m)	737.0	1,380.0	5,523.0	6,919.8	30.0	14,589.8
Average fixed interest rate , %	4.11	4.11	3.68	3.69	0.69	3.74
Balance guaranteed swaps
Nominal amount (£m)	–	–	–	–	–	–
Average fixed interest rate , %	–	–	–	–	–	–


	Maturity
	Less than	1 - 3	3 months –	1 - 5	More than
As at 31 December 2024	1 month	months	1 year	years	5 years	Total
Interest rate swaps
Nominal amount (£m)	747.0	1,294.0	4,542.7	6,629.6	131.2	13,344.5
Average fixed interest rate , %	4.42	4.58	4.53	3.54	2.58	4.02
Balance guaranteed swaps
Nominal amount (£m)	–	–	–	69.9	–	69.9
Average fixed interest rat e, %	–	–	–	1.07	–	1.07

Amounts relating to items designated as hedging instruments and hedge ineffectiveness are set out in the following

tables. The carrying amount of assets and liabilities included in these tables are presented in the statement of financial

position on the lines derivative financial assets and derivative financial liabilities, respectively. Ineffectiveness is

recognised in the statement of profit and loss on the line net gains/(losses) on derivative financial instruments and hedge

accounting. The main sources of ineffectiveness in these hedge relationships relate to the modelled

prepayment/repayment behaviour and the assumptions that are used in modelling this behaviour.


		Carrying amount		Change in fair value	Ineffectiveness
				of hedging instrument	recognised in
	Nominal			used for calculating	statement of profit
	amount	Assets	Liabilities	ineffectiveness	and loss
As at 31 December 2025	£m	£m	£m	£m	£m
Interest rate swaps	14,589.8	60.7	65.2	(112.0)	(5.5)
Balance guaranteed swaps	–	–	–	(1.4)	–


		Carrying amount		Change in fair value of
				hedging instrument	Ineffectiveness
	Nominal			used for calculating	recognised in statement
	amount	Assets	Liabilities	ineffectiveness	of profit and loss
As at 31 December 2024	£m	£m	£m	£m	£m
Interest rate swaps	13,344.5	144.7	43.4	37.3	(0.4)
Balance guaranteed swaps	69.9	3.3	–	(2.4)	–

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FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

27. Derivative financial instruments and hedge accounting (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

255

Amounts relating to items designated as hedged items are as follows:


		Accumulated fair value hedge	Change in fair
		adjustments included in the	value used for
	Carrying	carrying amount	calculating
	amount	of the hedged item 1	ineffectiveness
As at 31 December 2025	£m	£m	£m
Assets
Fixed rate mortgage loans included in loans and advances to
customers hedged by interest rate swaps	8,130.6	32.6	116.5
Fixed rate mortgage loans included in loans and advances to
customers hedged by balance guaranteed swaps	–	2.8	1.4
Liabilities
Fixed rate customer deposits included in customer deposits	6,846.0	(15.1)	(10.0)


		Accumulated fair value	Change in fair
		hedge adjustments	value used for
	Carrying	included in the carrying amount	calculating
	amount	of the hedged item 1	ineffectiveness
As at 31 December 2024	£m	£m	£m
Assets
Fixed rate mortgage loans included in loans and advances to
customers hedged by interest rate swaps	7,109.1	(75.4)	(35.6)
Fixed rate mortgage loans included in loans and advances to
customers hedged by balance guaranteed swaps	3.2	3.3	2.4
Liabilities
Fixed rate customer deposits included in customer deposits	6,530.3	(5.0)	(2.2)

The accumulated amount of fair value adjustments remaining in the statement of financial position for hedged items that have been de-designated, for which the fair value hedged

item adjustment is being amortised into the statement of profit and loss is £5.4 million (2024: £9.3 million).

Cash flow hedges

Details of the Group’s cash flow hedges are presented in the following tables.


	Maturity
	Less than	1 - 3	3 months –	1 - 5	More than
As at 31 December 2025	1 month	months	1 year	years	5 years	Total
Interest rate swaps (pay fixed)
Nominal amount (£m)	–	–	–	358.0	288.0	646.0
Average fixed interest rate , %	–	–	–	3.58	3.68	3.63
Interest rate swaps
( receive fixed)
Nominal amount (£m)	–	–	180.0	155.0	–	335.0
Average fixed interest rate , %	–	–	3.61	3.57	–	3.59


	Maturity
	Less than	1 - 3	3 months –	1 - 5	More than
As at 31 December 2024	1 month	months	1 year	years	5 years	Total
Interest rate swaps (pay fixed)
Nominal amount (£m)	–	–	–	360.0	195.0	555.0
Average fixed interest rate , %	–	–	–	3.78	3.82	3.79
Interest rate swaps
(receive fixed)
Nominal amount (£m)	–	–	–	–	–	–
Average fixed interest rate , %	–	–	–	–	–	–

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FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

27. Derivative financial instruments and hedge accounting (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

256

Amounts relating to items designated as hedging instruments and hedge ineffectiveness are set out in the following

tables. The carrying amount of assets and liabilities included in these tables are presented in the statement of financial

position on the lines derivative financial assets and derivative financial liabilities, respectively. Ineffectiveness recognised

in the statement of profit and loss and amounts reclassified from the cash flow hedging reserve to the statement of profit

and loss are both presented on the line net gains/(losses) on derivative financial instruments and hedge accounting. The

main source of ineffectiveness in these hedge relationships relate to differences in the timing of cash flows between the

hedged item and hedging instrument.


		Carrying amount		Change in fair
				value of			Amount
				hedging	Change in value of		reclassified from
				instrument	hedged item used	Ineffectiveness	cash flow hedging
				used for	for ineffectiveness	recognised in	reserve to
	Nominal			ineffectiveness	measurement	statement of	statement of
As at 31	amount	Assets	Liabilities	measurement	(recognised in OCI)	profit and loss	profit and loss
December 2025	£m	£m	£m	£m	£m	£m	£m
Interest rate
swaps (pay fixed)	646.0	0.2	1.6	(7.9)	(7.9)	–	4.9
Interest rate
swaps (receive	335.0	0.2	–	2.9	3.5	(0.6)	1.7
fixed)


		Carrying amount		Change in fair
				value of hedging	Change in value of		Amount reclassified
				instrument used	hedged item used for	Ineffectiveness	from cash flow
				for	ineffectiveness	recognised in	hedging reserve to
	Nominal			ineffectiveness	measurement	statement of	statement of profit
As at 31	amount	Assets	Liabilities	measurement	(recognised in OCI)	profit and loss	and loss
December 2024	£m	£m	£m	£m	£m	£m	£m
Interest rate
swaps (pay	555.0	5.0	0.3	17.7	17.8	(0.1)	6.4
fixed)
Interest rate
swaps (receive	–	–	–	(2.3)	(0.2)	(2.1)	(0.2)
fixed)

Amounts relating to items designated as hedged items are as follows:


		Cash flow hedging reserve
	Change in value used
	for calculating hedge	Continuing	Discontinued
	ineffectiveness	hedges	hedges
As at 31 December 2025	£m	£m	£m
Liabilities
Floating rate debt securities included in debt securities in issue
and floating rate borrowings included in amounts due to banks	7.9	(1.5)	6.0
Floating rate covered bonds and asset finance floating rate assets	(3.5)	0.2	1.6


		Cash flow hedging reserve
	Change in value used
	for calculating hedge	Continuing	Discontinued
	ineffectiveness	hedges	hedges
As at 31 December 2024	£m	£m	£m
Liabilities
Floating rate debt securities included in debt securities in issue
and floating rate borrowings included in amounts due to banks	(17.8)	4.6	12.7
Floating rate covered bonds and asset finance floating rate assets	0.2	–	0.1

Net gains and losses on derivative financial instruments and hedge accounting

Gains and losses on derivative financial instruments and hedge accounting recognised in the statement of profit and

loss are summarised as follows:



	2025	2024
	£m	£m
Net fair value (losses) /gains on derivative financial instruments	(121.1)	48.4
Net fair value gains/(losses) on hedged risk	118.9	(46.5)
Net (losses)/gains on derivative financial instruments and hedge accounting	(2.2)	1.9

Net fair value gains/(losses) on derivative financial instruments includes foreign exchange gains and losses.

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FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

257

28. Property, plant and equipment

| | | | | | |
| --- | --- | --- | --- | --- | --- |
| | |
| | Right-of-use | | Fixtures, | Assets on | |
| | leasehold | Leasehold | fittings and | operating | |
| | property | property | equipment | leases | Total |
| Year ended 31 December

2025 | £m | £m | £m | £m | £m |
| Cost | | | | | |
| As at 1 January 2025 | 38.5 | 3.0 | 19.0 | 59.2 | 119.7 |
| Additions | 0.2 | 0.1 | 0.3 | 6.6 | 7.2 |
| Acquisitions through business combinations | – | – | – | – | – |
| Disposals | (1.5) | – | (0.2) | (7.4) | (9.1) |
| Transfer to finance leases | – | – | – | (11.2) | (11.2) |
| As at 31 December

2025 | 37.2 | 3.1 | 19.1 | 47.2 | 106.6 |
| Accumulated depreciation | | | | | |
| As at

1 January 2025 | 7.5 | 1.8 | 15.5 | 29.4 | 54.2 |
| Charge for the year | 4.4 | 0.4 | 1.5 | 6.2 | 12.5 |
| Disposals | (1.5) | – | (0.2) | (6.0) | (7.7) |
| Transfer to finance leases | – | – | – | (7.0) | (7.0) |
| As at 31 December

2025 | 10.4 | 2.2 | 16.8 | 22.6 | 52.0 |
| Carrying amount | | | | | |
| As at

1 January 2025 | 31.0 | 1.2 | 3.5 | 29.8 | 65.5 |
| As at 31 December

2025 | 26.8 | 0.9 | 2.3 | 24.6 | 54.6 |



	Right-of-use		Fixtures,	Assets on
	leasehold	Leasehold	fittings and	operating
	property	property	equipment	leases	Total
Year ended 31 December 2024	£m	£m	£m	£m	£m
Cost
As at 1 January 2024	12.8	2.3	16.9	60.8	92.8
Additions	28.1	0.7	2.0	7.4	38.2
Acquisitions through business combinations	0.4	–	0.1	–	0.5
Disposals	(2.8)	–	–	(5.3)	(8.1)
Transfer to finance leases	–	–	–	(3.7)	(3.7)
As at 31 December 2024	38.5	3.0	19.0	59.2	119.7
Accumulated depreciation
As at 1 January 2024	7.7	1.5	13.8	29.3	52.3
Charge for the year	2.6	0.3	1.7	7.4	12.0
Disposals	(2.8)	–	–	(4.4)	(7.2)
Transfer to finance leases	–	–	–	(2.9)	(2.9)
As at 31 December 2024	7.5	1.8	15.5	29.4	54.2
Carrying amount
As at 1 January 2024	5.1	0.8	3.1	31.5	40.5
As at 31 December 2024	31.0	1.2	3.5	29.8	65.5

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FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

258

29. Intangible assets

See accounting policies in Note 7(m)



	2025			2024
		Other			Other
	Goodwill	intangibles	Total	Goodwill	intangibles	Total
	£m	£m	£m	£m	£m	£m
Cost
As at 1 January	86.0	101.7	187.7	78.2	82.9	161.1
Additions	–	18.0	18.0	–	15.1	15.1
Acquisitions through business combinations	13.9	7.6	21.5	7.8	3.7	11.5
Disposals	–	(1.7)	(1.7)	–	–	–
Adjustments	(3.2)	–	(3.2)	–	–	–
As at 31 December	96.7	125.6	222.3	86.0	101.7	187.7
Accumulated amortisation and
impairment
As at 1 January	1.1	62.6	63.7	1.1	52.8	53.9
Amortisation charge for the year	–	14.1	14.1	–	9.8	9.8
Disposals	–	(1.3)	(1.3)	–	–	–
As at 31 December	1.1	75.4	76.5	1.1	62.6	63.7
Carrying amount
As at 1 January	84.9	39.1	124.0	77.1	30.1	107.2
As at 31 December	95.6	50.2	145.8	84.9	39.1	124.0

During the year, the Group recognised a £3.2 million reduction to goodwill in respect of the acquisition of JBR Auto

Holdings Limited, completed on 30 September 2024.

The adjustment arises from the recognition of a Deferred Tax Asset relating to tax losses that existed at the acquisition

date. Sufficient information to recognise this asset was not available at the acquisition date, however, additional evidence

obtained during 2025 confirmed that recovery of the losses is probable.

In accordance with IFRS 3 Business Combinations, this represents a measurement period adjustment as it relates to

facts and circumstances that existed at the acquisition date.

The adjustment has no material impact on the Group’s current or prior year profit and loss, and therefore has been

recognised in the current year.

Other intangibles comprise internally generated software and development costs, together with intangible assets

recognised on acquisition, including brands, customer relationships and technology assets.

Internally generated intangible assets primarily relate to capitalised development expenditure on banking systems, digital

platforms and credit management infrastructure that meet the recognition criteria set out in IAS 38.57.

As at 31 December 2025, internally generated intangible assets had additions of £17.1 million (2024: £14.6 million),

totalling to a gross cost of £110.3 million (2024: £78.9 million) with an accumulated amortisation was £72.1 million (2024:

£59.4 million). The net book value of internally generated intangible assets is £38.2 million (2024: £34.2 million).

Amortisation of internally generated software is recognised within administrative expenses over useful economic lives of

three to seven years.

Acquisition-related intangible assets are amortised over their estimated useful lives in accordance with the Group’s

policy.

Goodwill impairment testing

The Group performed its annual assessment to identify any impairment to goodwill. For the purposes of impairment

testing, goodwill is allocated to the Group’s cash-generating units (CGUs). As at 31 December 2025, the identified CGUs

include Real Estate, SME, TML, BML and JBR.

No separate goodwill impairment assessment has been performed for the two acquisitions during the year. Goodwill for

these acquisitions are provisional, as permitted under IFRS 3.45. A full assessment will be undertaken during the year

ending 31 December 2026, or earlier if objective indicators of impairment arise.

Goodwill is impaired if the carrying amount of a CGU exceeds the recoverable amount. Determining the recoverable

amount involves the calculation of the CGU’s value in use, which is derived by discounting the forecast cash flows (post-

tax profits) to be generated from its continuing use, as described below.

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FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

29. Intangible assets (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

259

Forecast cash flows are based on the Board approved budget and assumptions regarding the long-term pattern of

sustainable cash flows thereafter. Five years of forecast cash flows (post-tax profits) are included in the discounted

cash flow model (2024: five years). A terminal value growth rate of 2.0% is then applied into perpetuity to extrapolate

cash flows beyond the cash flow period (2024: 1.5%). The terminal value growth rate is estimated by the Group

taking into account rates disclosed by comparable institutions.

To discount the forecast cash flows, the Group derives a CGU specific discount rate. These discount rates are an

estimate of the return that investors would require if they were to choose an investment that would generate cash

flows of amount, timing and risk profile equivalent to those that the entity expects to derive from the CGU. The Group

calculates the discount rates using the price-to-book ratio method, which incorporates target return on equity, growth

rate and the price-to-book ratio. The discount rate for each CGU is adjusted to reflect the risks inherent to the

individual CGU.

Discount rates used for each CGU are as follows:



	2025		2024
	Post-tax	Pre-tax 1	Post-tax	Pre-tax 1
Real Estate	11.7%	15.5%	12.6%	16.9%
SME	13.2%	17.7%	14.1%	18.8%
TML	13.7%	18.9%	14.1%	18.9%
BML	14.2%	19.1%	15.6%	21.3%
JBR	15.2%	20.4%	16.1%	21.1%

In both reported years, impairment testing indicated the recoverable amount of each CGU was in excess of its

carrying amount and, as such, no impairment losses have been recognised. Reasonably possible changes in forecast

cash flows and the applied post-tax discount rate would not result in the recoverable amount of any CGU reducing

below the carrying amount, as verified by sensitivity analysis.

The Group applies post-tax discount rates to post-tax cash flows when testing CGUs for impairment. The pre-tax discount rate is disclosed in accordance with IAS 36

‘Impairment of Assets’.

A summary of the carrying amount of goodwill by CGU is as follows:



	2025						2024
	Real						Real				JBR
	Estate	SME	TML	BML	JBR	Total	Estate	SME	TML	BML		Total
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
As at 1 January	9.0	34.7	10.0	23.4	7.8	84.9	9.0	34.7	10.0	23.4	–	77.1
Acquisitions through
business combinations	–	13.9	–	–	–	13.9	–	–	–	–	7.8	7.8
Adjustment	–	–	–	–	(3.2)	(3.2)	–	–	–	–	–	–
As at 31 December	9.0	48.6	10.0	23.4	4.6	95.6	9.0	34.7	10.0	23.4	7.8	84.9

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FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

260

30. Deferred tax assets

See accounting policies in Note 7(f)

Deferred tax assets are attributable to the following items:



	2025	2024
	£m	£m
Decelerated tax depreciation	3.4	4.1
IFRS 9 adjustment	0.8	1.1
Tax losses in subsidiary companies	38.3	14.5
Tax on gains within SPVs	–	8.5
Fair value through other comprehensive income reserve	(16.3)	(10.8)
Other	(2.4)	(1.4)
Total deferred tax assets	23.8	16.0

Movements in deferred tax assets are as follows:



	2025	2024
	£m	£m
As at 1 January	16.0	35.7
Amounts recognised in statement of profit and loss (see Note 21):
Current year movement	(8.6)	(3.0)
Adjustment in respect of prior years	(1.7)	(1.5)
Amounts recognised in other comprehensive income:
Current year movement in cash flow hedging reserve	3.0	(3.2)
Current year movement in fair value through other comprehensive income reserve	(5.5)	(11.0)
Other:
Acquisitions through business combinations	19.8	(1.0)
Adjustments	0.8	–
As at 31 December	23.8	16.0

The Group’s business plans project future profits that are sufficient to fully recognise the deferred tax assets. The Group

has recognised a deferred tax asset of £19.8 million on the acquisition of ThinCats in relation to historic trading losses

(see Note 10).

Based on the analysis of the forecasted future taxable profits for the ThinCats brand the Group has

concluded it is more likely than not that the deferred tax asset will be recovered through future taxable income.

Deferred tax assets have been calculated based on an aggregation rate of 27.0% (2024: 27.0%), which is the estimated

rate of recovery that will unwind over the remaining life of the underlying assets with which they are associated.

31. Other assets

| | | | | |
| --- | --- | --- | --- | --- |
| | |
| | Group | | Company | |
| | 2025 | 2024 | 2025 | 2024 |
| | £m | £m | £m | £m |
| Other debtors | 21.5 | 18.0 | – | – |
| Prepayments | 27.9 | 17.4 | 0.5 | 0.4 |
| Accrued income | 0.5 | 0.9 | – | – |
| Total other assets | 49.9 | 36.3 | 0.5 | 0.4 |

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FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

261

32. Investment in subsidiaries

See accounting policies in Note 7(n)

The investment in subsidiary in the Company statement of financial position relates to the Company’s investment in

Shawbrook Bank Limited and is attributable to the following components:



	2025	2024
	£m	£m
Equity shares	267.8	267.8
Capital securities	125.0	125.0
Capital contribution	19.9	19.9
Share -based payments	45.9	19.8
Issue of share capital in Shawbrook Bank Limited	49.8	–
Total investment in subsidiaries	508.4	432.5

Movements in the Company’s investment in subsidiaries are as follows:



	2025	2024
	£m	£m
As at 1 January	432.5	431.8
Share issuance	49.8	–
Share -based payments	26.1	0.7
As at 31 December	508.4	432.5

Details of the capital securities transactions between Shawbrook Bank Limited and the Company are provided in

Note 42.

Share-based payments are attributable to the scheme detailed in Note 18.

33. Amounts due to banks

See accounting policies in Note 7(o)



	2025	2024
	£m	£m
Amounts due to banks	1,369.2	1,216.2
Derivative collateral received	61.0	157.9
Other	0.4	2.0
Total amounts due to banks	1,430.6	1,376.1

The Group maintains access to the Bank of England’s Sterling Monetary Framework, including a reserves account.

Amounts due to banks include:

•

£nil (2024: £800 million) drawn under the Bank of England’s Term Funding Scheme with additional incentives for

SMEs, which fell due for repayment in 2025. These amounts are collateralised by customer loan assets and

investment securities.

•

£61.0 million (2024: £157.9 million) of cash collateral received against derivative contracts. £0.4 million (2024: 2.0

million) of cash collateral received against repurchase agreement.

•

£0.4 million (2024: £2.0 million) of cash collateral received against repurchase agreements.

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FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

262

34. Customer deposits

See accounting policies in Note 7(p)



	2025	2024
	£m	£m
Retail customers:
Instant access	7,052.4	6,007.9
Term deposits and notice accounts	11,227.5	9,764.1
Corporate customers:
Term deposits	58.5	27.0
Fair value adjustments for hedged risk	15.1	5.0
Total customer deposits	18,353.5	15,804.0

35. Provisions

See accounting policies in Note 7(q)



	2025			2024
	Loss	Other		Loss	Other
	provision	provisions	Total	provision	provisions	Total
	£m	£m	£m	£m	£m	£m
As at 1 January	0.6	10.9	11.5	3.8	12.1	15.9
Provisions utilised	–	(4.2)	(4.2)	–	(1.5)	(1.5)
Provisions made/(released)	–	1.0	1.0	(3.2)	0.3	(2.9)
As at 31 December	0.6	7.7	8.3	0.6	10.9	11.5

Loss provision

The loss provision represents the loss allowance on loan commitments (see Note 48). Provisions released represent

the net ECL credit for the year on loan commitments and is recognised in impairment losses on financial assets in the

statement of profit and loss (see Note 20).

Other provisions

Other provisions represent provisions made in relation to customer remediation and conduct issues and provisions for

legal costs to defend cases brought against the Group. Provisions made are recognised in provisions in the statement of

profit and loss.

A reconciliation of the net amount recognised in provisions in the statement of profit and loss is as follows:



	2025	2024
	£m	£m
Other p rovisions made	1.0	0.3
Other provisions recovered	(0.2)	(5.6)
Net charge/(credit) for provisions	0.8	(5.3)

The Group has received a number of complaints from customers about holiday ownership (timeshare) products, where

the Group provided finance to customers to fund the purchase of those products.

Based on the information available at the reporting date, the Group has updated its provision of £6.3 million (2024: £9.2

million), reflecting the best estimate of probable outflows associated with timeshare claims. Ultimately redress will

depend on claim rates. At this time, the Group believes the provision recognised is adequate.

The Group has commenced work to pursue recoveries from either original suppliers or, failing that, the Group’s insurers,

however, in accordance with IAS 37 ‘Provisions, Contingent Liabilities and Contingent Assets’, such reimbursement

cannot be recognised as an asset unless it is virtually certain. The Group typically does not deem a reimbursement claim

to be virtually certain until it has been accepted by the other party. As at 31 December 2025, the Group recognised a

reimbursement asset of £5.6 million (2024: £5.6 million) on a subset of Timeshare claims relating to an anticipated

recovery from the Group’s insurers, which is included in Other assets.

In addition to previously disclosed provisions, most recently relating to timeshare complaints, the Group is recognising a

new provision of £1.0 million (2024: £nil) for redress liabilities around motor finance commissions arrangements.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

35. Provisions (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

263

Following the commencement of the FCA’s consultation paper on a possible motor finance consumer redress scheme in

October 2025, and considering the FCA’s draft proposals, the Group considers that some redress is likely to be due to

customers in relation to historical commission arrangements on regulated motor finance agreements. While the

estimated financial impact of the proposed scheme would not be material to the Group, a provision has been recognised

reflecting a degree of uncertainty around any final scheme rules. This will be updated once any final scheme rules are

published.

Critical accounting judgements and estimates

The calculation of other provisions relating to customer remediation and conduct issues is an area identified as

involving critical accounting judgements and estimates. Additional details are provided in Note 8(b).

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

264

36. Debt securities in issue

See accounting policies in Note 7(i)

Debt securities in issue comprise asset-backed notes issued to external investors by consolidated structured entities as

part of securitisation transactions (see Note 25). The notes are secured on the underlying portfolio of securitised loans

and recourse under the notes is limited to the structured entity only.

A summary of notes in issue is provided in the following table. Amounts included in the table include accrued interest

and unamortised capitalised costs.


				Optional
				redemption		2025	2024
	Issued	Issuer	Listing	date	Maturity date	£m	£m
Class A -E mortgage-
backed floating rate	May 2022	Genesis Mortgage	Euronext	Jun 2025	Sept 2059	–	112.3
notes		Funding 2022 -1 plc	Dublin
Class A mortgage -
backed floating rate	Nov 2023	Lanebrook Mortgage	Euronext	May 2027	Aug 2060	177.5	190.4
notes		Transaction 2023 -1 plc	Dublin
Class A mortgage -
backed floating rate	May 2024	Lanebrook Mortgage	Euronext	Dec 2027	Mar 2061	234.8	246.5
notes		Transaction 2024 -1 plc	Dublin
Total debt securities in issue						412.3	549.2

Movements in the year are summarised in the following table:


	2025	2024
	£m	£m
As at 1 January	549.2	462.8
Issuances	–	250.0
Acquisitions through business combinations	560.1	289.1
Repurchases and redemptions	(697.0)	(453.7)
Costs capitalised	(0.2)	(1.0)
Other movements	0.2	2.0
As at 31 December	412.3	549.2

During the year ended 31 December 2025, the Group sold £390.0 million of debt securities issued by unconsolidated

structured entities, a net gain on derecognition of £1.2m million was recognised in the statement of profit and loss.

During the year ended 31 December 2025, Class A-E mortgage backed floating rate notes issued by Genesis Mortgage

Funding 2022-1 plc have been fully redeemed following the optional redemption date.

As part of the ThinCats acquisition in 2025, the Group acquired issued debt securities totalling £538.1 million, comprised

of senior and mezzanine notes issued to external investors by a consolidated structured entities. The notes were

redeemed shortly after the acquisition date.

During the year ended 31 December 2024, issuances comprised £250.0 million Class A mortgage-backed floating rate

notes due 2027. These notes were issued to external investors in May 2024 by a consolidated structured entity,

Lanebrook Mortgage Transaction 2024-1 plc, and are listed on Euronext Dublin.

As part of the JBR acquisition in 2024, the Group acquired issued debt securities totalling £289.1 million, comprised of

senior and mezzanine notes issued to external investors by a consolidated structured entity, JBR Capital DD Limited.

The notes were redeemed shortly after the acquisition date.

During the year ended 31 December 2024, senior notes issued by Wandle Mortgage Funding Limited were fully

redeemed following the optional redemption date.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

265

37. Leases

See accounting policies in Note 7(r)

Group as a lessor: finance leases

Assets leased to customers under finance lease and instalment credit agreements are predominantly plant and

machinery. The underlying asset provides security against the gross receivable and the Group provides no residual

value guarantees in order to mitigate risk.

Details of the Group’s finance lease and instalment credit receivables are set out in Note 24. This includes a maturity

analysis showing the gross investment in the lease (the undiscounted lease payments receivable) and a

reconciliation to the net investment in the lease (the gross carrying amount of the receivable).

Finance income recognised during the year on finance lease and instalment credit receivables is included in other

interest and similar income (see Note 12).

Group as a lessor: operating leases

Assets leased to customers under operating leases are predominantly plant and machinery. The carrying amount of

the Group’s assets on operating leases and the movements during the year are set out in Note 28.

Net income from operating leases is presented on the face of the statement of profit and loss.

Future minimum rentals receivable under non-cancellable operating leases as at 31 December are as follows:



	2025	2024
	£m	£m
Within one year	5.7	6.1
Between one and two years	4.2	4.8
Between two and three years	3.3	3.6
Between three and four years	2.0	2.8
Between four and five years	1.2	1.2
After five years	0.7	0.9
Total future minimum rentals receivable	17.1	19.4

Group as a lessee: finance leases

The Group has lease contracts for several buildings. These leases typically have lease terms of between 5 and 10 years.

The Group does not sublease any of these leased assets.

Details of right-of-use assets recognised in relation to these leases, including the carrying amount and movements

during the year, are set out in Note 28.

The carrying amount of associated lease liabilities and movements during the year are as follows:



	2025	2024
	£m	£m
As at 1 January	25.6	6.1
Additions	–	21.3
Acquisitions through business combinations	–	0.4
Interest expense	1.2	0.3
Payments	(2.0)	(2.5)
As at 31 December	24.8	25.6

A maturity analysis of lease liabilities is presented in the liquidity risk section of the Risk Report on page 163.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

37. Leases (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

266

The Group also has a number of low value lease contracts for office equipment, for which the Group applies the

recognition exemption for leases of low value assets. For such leases, no right-of-use asset is recognised and lease

payments are charged to administrative expenses in the statement of profit and loss.

The following table provides a summary of the amounts recognised in the statement of profit and loss:



	2025			2024
	Administrative	Interest		Administrative	Interest
	expenses	expense	Total	expenses	expense	Total
	£m	£m	£m	£m	£m	£m
Depreciation expense on right -of-use assets	3.9	–	3.9	2.6	–	2.6
Interest expense on lease liabilities	–	1.2	1.2	–	0.3	0.3
Rental expense on low value assets	0.3	–	0.3	0.5	–	0.5
Total	4.2	1.2	5.4	3.1	0.3	3.4

Cash outflows from leases in the statement of cash flows are as follows:



	2025	2024
	£m	£m
Payment of the interest portion of the lease liability (cash flows from operating activities)	–	0.3
Payment of the principal portion of the lease liability (cash flows from financing activities)	0.8	2.2
Total cash outflows from leases	0.8	2.5

38. Other liabilities

| | | | | |
| --- | --- | --- | --- | --- |
| | |
| | Group | | Company | |
| | 2025 | 2024 | 2025 | 2024 |
| | £m | £m | £m | £m |
| Other creditors (including sundry creditors and other taxes) | 50.3 | 22.1 | – | – |
| Accruals | 81.9 | 63.7 | 7.3 | – |
| Amounts

owed to Group companies | – | – | 0.9 | 8.0 |
| Total other

liabilities | 132.2 | 85.8 | 8.2 | 8.0 |

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

267

39. Subordinated debt

See accounting policies in Note 7(s)

Subordinated debt liability

Subordinated debt liabilities comprise notes issued by the Company, as summarised in the following table. Amounts

included in the table include accrued interest and unamortised capitalised costs.


			Call	Maturity	2025	2024
	Issued	Listing	date 1	date	£m	£m
9.0% fixed rate reset callable	Jul 2020	Global Exchange Market	Jul 2025	Oct 2030	–	76.5
subordinated notes		of Euronext Dublin
		International Securities
12.25 % fixed rate reset callable	Oct 2023	Market of London Stock	Oct 2028	Jan 2034	94.9	94.6
subordinated notes		Exchange
		International Securities
9.25% fixed rate reset callable	June 2025	Market of London Stock	Jun 2030	Sep 2035	76.6	–
subordinated notes		Exchange
Total subordinated liabilities					171.5	171.1

Movements in the year are summarised in the following table:



	2025	2024
	£m	£m
As at 1 January	171.1	188.5
Issuances	75.0	–
Redemptions	(76.5)	(20.0)
Costs capitalised	(0.9)	–
Other movements	2.8	2.6
As at 31 December	171.5	171.1

The call date may be a fixed date or a defined period of time. Where it relates to a period of time, the date listed reflects the start of the period, thus reflecting the earliest date

the call option may be exercised.

During the year ended 31 December 2025, the Company issued a £75.0 million 12.25% fixed rate reset callable

subordinated notes, under the £1 billion Euro Medium Term Note (EMTN) Programme. The notes are listed on the

International Securities Market of the London Stock Exchange.

In July 2025, the Group redeemed 9.0% fixed rate reset callable subordinated notes issued in July 2020, with a nominal

value of £75.0 million, at par. No gains or losses were recognised on redemption.

The principal terms of the subordinated debt liabilities are as follows:

•

Interest:

interest on the notes is fixed at an initial rate until the reset date. On the reset date, the interest rate will be

reset and fixed based on a set margin above a defined market rate.

•

Redemption:

the Company may elect to redeem all, but not part, of the notes by exercising its call option 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.

•

Ranking:

the notes constitute direct, unsecured and subordinated obligations of the Company and rank at least pari

passu, without any preference, among themselves as Tier 2 capital. The notes rank behind the claims of depositors

and other unsecured and unsubordinated creditors, but rank in priority to holders of Tier 1 capital and of equity in the

Company.

Subordinated debt receivable

The subordinated debt receivable in the Company statement of financial position represents subordinated debt issued to

the Company by the Group’s principal subsidiary, Shawbrook Bank Limited. The notes issued by Shawbrook Bank

Limited are on terms consistent with the listed notes issued by the Company.

As at 31 December 2025, the subordinated debt receivable in the Company statement of financial position is £172.7

million (2024: £171.1 million). The loss allowance recognised on the subordinated debt receivable is £nil in both reported

years.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

268

40. Financial assets and financial liabilities

See accounting policies in Note 7(t)

Classification of financial assets and financial liabilities

The following table analyses the carrying amount of the Group’s financial assets and financial liabilities by measurement

classification. There were no reclassifications between classification categories during either of the reported years.



	2025				2024
	Amortised			Carrying	Amortised			Carrying
	cost	FVOCI	FVTPL	amount	cost	FVOCI	FVTPL	amount
	£m	£m	£m	£m	£m	£m	£m	£m
Financial assets
Cash and balances
at central banks	1,924.5	–	–	1,924.5	2,244.7	–	–	2,244.7
Loans and advances to banks	246.8	–	–	246.8	304.4	–	–	304.4
Loans and advances
to customers 1	13,639.2	4,068.0	62.9	17,770.1	11,596.4	3,580.2	–	15,176.6
Investment securities	1,979.9	178.1	–	2,158.0	1,513.6	–	–	1,513.6
Derivative financial assets	–	–	87.5	87.5	–	–	227.1	227.1
Total financial assets	17,790.4	4,246.1	150.4	22,186.9	15,659.1	3,580.2	227.1	19,466.4
Financial liabilities
Amounts due to banks	1,430.6	–	–	1,430.6	1,376.1	–	–	1,376.1
Customer deposits	18,353.5	–	–	18,353.5	15,804.0	–	–	15,804.0
Derivative financial liabilities	–	–	93.2	93.2	–	–	117.1	117.1
Debt securities in issue	412.3	–	–	412.3	549.2	–	–	549.2
Lease liabilities 2	24.8	–	–	24.8	25.6	–	–	25.6
Subordinated debt liability	171.5	–	–	171.5	171.1	–	–	171.1
Total financial liabilities	20,392.7	–	93.2	20,485.9	17,926.0	–	117.1	18,043.1

The loans and advances to customers balance includes finance lease and instalment credit receivables, which are measured in accordance with IFRS 16 ‘Leases’.

These are included in the amortised cost column.

Lease liabilities, which are measured in accordance with IFRS 16 ‘Leases’, are included in the amortised cost column.

Fair value of financial assets and financial liabilities

A summary of the valuation methods used by the Group to calculate the fair value of its financial assets and financial

liabilities is as follows:

•

Cash and balances at central banks and loans and advances to banks:

fair value approximates the carrying

amount as balances have minimal credit losses and are either short-term in nature or re-price frequently.

•

Loans and advances to customers at:

•

Amortised cost and FVOCI:

fair value is calculated based on the present value of future principal and interest cash

flows, discounted at the market rate of interest at the reporting date, and adjusted for future credit losses if

considered material.

•

FVTPL:

These loans and advances were acquired as part of the ThinCats acquisition. In the absence of market

comparables, they are valued using internal models and classified as Level 3.

•

Investment securities, debt securities in issue and subordinated debt liability:

fair value is based on quoted

prices where available or by discounting cash flows using market rates.

•

Derivative financial instruments:

fair value is obtained from quoted market prices in active markets and, where

these are not available, from valuation techniques including discounted cash flows.

•

Amounts due to banks and customer deposits:

fair value is estimated using discounted cash flows applying

either market rates where practicable, or rates offered with similar characteristics by other financial institutions. The

fair value of floating rate placements, fixed rate placements with less than six months to maturity and overnight

deposits is considered to approximate the carrying amount.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

40. Financial assets and financial liabilities (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

269

In accordance with IFRS 7, fair value disclosures are not required for lease liabilities. As such, the Group does not

calculate a fair value for lease liabilities and they are not included in the following fair value disclosures.

The Group uses a fair value hierarchy which reflects the significance of the inputs used in making fair value

measurements. There are three levels to the hierarchy as follows:

•

Level 1:

quoted prices in active markets for identical assets or liabilities that the entity can access at the

measurement date;

•

Level 2:

inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either

directly (i.e. as prices) or indirectly (i.e. derived from prices). A Level 2 input must be observable for substantially the

full term of the instrument. Level 2 inputs include quoted prices for similar assets or liabilities in active markets,

quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted

prices that are observable for the asset or liability, such as interest rates and yield curves observable at commonly

quoted intervals, implied volatilities and credit spreads. Assets and liabilities classified as Level 2 have been valued

using models whose inputs are observable in an active market; and

•

Level 3:

inputs for the asset or liabilities that are not based on observable market data (unobservable inputs).

In assessing whether a market is active, factors such as the scale and frequency of trading activity, the availability of

prices and the size of bid/offer spreads are considered. If, in the opinion of the Group, a significant proportion of an

instrument’s carrying amount is driven by unobservable inputs, the instrument, in its entirety, is classified as Level 3 of

the fair value hierarchy. Level 3 in this context means that there is little or no current market data available from which

to determine the level at which an arm’s length transaction would be likely to occur. It generally does not mean that

there is no market data available at all upon which to base a determination of fair value (for example, consensus pricing

data may be used).

Financial assets and financial liabilities measured at amortised cost

The following table analyses the Group’s financial assets and financial liabilities measured at amortised cost into the

fair value hierarchy. There were no transfers between levels of the fair value hierarchy during either of the reported

years.


	2025			2024
	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
	£m	£m	£m	£m	£m	£m
Financial assets at amortised cost
Cash and balances at central banks	1,924.5	–	–	2,244.7	–	–
Loans and advances to banks	–	246.8	–	–	304.4	–
Loans and advances to customers	–	–	13,639.2	–	–	11,596.4
Investment securities	1,394.3	585.6	–	1,121.4	392.2
Financial liabilities at amortised cost
Amounts due to banks	–	1,430.6	–	–	1,376.1	–
Customer deposits	–	18,353.5	–	–	15,804.0	–
Debt securities in issue	–	412.3	–	–	549.2	–
Subordinated debt liability	–	171.5	–	–	171.1	–

The following table provides a comparison of the carrying amount per the statement of financial position and the

calculated fair value for the Group’s financial assets and financial liabilities measured at amortised cost.

For cash and balances at central banks, loans and advances to banks, the carrying amount is considered to be a

reasonable approximation of fair value and, as such, these are not included in the following table.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

40. Financial assets and financial liabilities (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

270


	2025		2024
	Carrying		Carrying
	amount	Fair value	amount	Fair value
	£m	£m	£m	£m
Financial assets at amortised cost
Loans and advances to customers	13,639.2	13,966.4	11,596.4	11,912.2
Investment securities	1,979.9	1,983.7	1,513.6	1,515.5
Financial liabilities at amortised cost
Amounts due to banks	1,430.6	1,430.6	1,376.1	1,376.1
Customer deposits	18,353.5	18,373.4	15,804.0	15,815.0
Debt securities in issue	412.3	413.9	549.2	552.5
Subordinated debt liability	171.5	189.9	171.1	179.8

Financial assets and financial liabilities measured at fair value

The following table analyses the Group’s financial assets and financial liabilities measured at fair value into the fair

value hierarchy. There were no transfers between levels of the fair value hierarchy during either of the reported years.

All financial assets and financial liabilities measured at fair value are recurring fair value measurements.


	2025			2024
	Level 1	Level 2	Level 3	Level 1	Level 2	Level 3
	£m	£m	£m	£m	£m	£m
Financial assets at fair value
Loans and advances to customers	–	–	4,130.9	–	–	3,580.2
Investment securities	27.9	150.2	–	–	–	–
Derivative financial assets	–	87.5	–	–	227.1	–
Financial liabilities at fair value
Derivative financial liabilities	–	93.2	–	–	117.1	–

Additions include new financial assets originated or purchased, additional drawdowns and accrued interest.

Financial assets and financial liabilities measured at fair value: Level 3 analysis

The following section provides additional analysis of the Group’s financial assets and financial liabilities measured at fair

value that are categorised as Level 3.

Movements in the fair value of Level 3 financial assets and financial liabilities are as follows:


	2025		2024
	Loans and	Loans and	Loans and	Loans and
	advances to	advances to	advances to	advances to
	customers	customers	customers	customers
	at FVOCI	at FV TPL	at FVOCI	at FV TPL
	£m	£m	£m	£m
As at 1 Januar y	3,580.2	–	2,815.3	–
Additions 1	1,518.0	84.6	1,376.1	–
Net fair value gains/(losses) recognised in the				–
statement of profit and loss	42.9	0.3	(24.2)
Net fair value gains recognised in other				–
comprehensive income	18.8	–	35.6
Settlements/repayments	(1,091.9)	(22.0)	(622.6)	–
As at 3 1 December	4,068.0	62.9	3,580.2	–

In relation to the above table:

•

Net fair value gains/(losses) on FVOCI loans and advances recognised in the statement of profit and loss are

included in net gains/(losses) on derivative financial instruments and hedge accounting. The net gains/(losses)

attributable to loans and advances to customers at FVOCI represent unrealised gains/(losses) on hedged items,

which are largely offset by unrealised gains/(losses) on the derivative financial instruments in the hedge accounting

relationship.

•

Net fair value gains/(losses) recognised in other comprehensive income are included in net gains/(losses) from

changes in fair value in relation to the FVOCI reserve. All gains/(losses) recognised are unrealised.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

40. Financial assets and financial liabilities

(continued)

Shawbrook Group plc

Annual Report and Accounts 2025

271

For the Level 3 loans and advances to customers at FVOCI, the fair value is calculated using the discounted cash flow

method. The significant unobservable inputs used in this calculation are the risk-adjusted discount rate, which is derived

from cost of replacement assets based on comparable market rates, and the prepayment curve. As at 31 December

2025, the following risk-adjusted discount rates are used in the calculation of fair value on loans and advances to

customers at FVOCI: TML Buy to Let portfolio – 5.27%, TML owner occupied portfolio – 5.51% and BML portfolio –

6.59% (31 December 2024: 6.08%, 6.36% and 6.88%).

The fair value of Level 3 loans and advances to customers measured at FVTPL is determined using a discounted cash

flow approach. The significant unobservable inputs include the risk-adjusted discount rate, comprising a risk-free rate

based on the forward SONIA curve over the remaining weighted average life of the loan, and a risk premium derived

from the loan’s origination IRR, adjusted for any increase in credit risk since origination. The discount rate is updated at

each reporting date to reflect changes in market interest rates and credit risk.

As at 31 December 2025, a risk-adjusted

discount rate of 16.4% is used in the calculation of fair value.

Critical accounting estimates

The valuation of loans and advances to customers at FVOCI and FVTPL is an area identified as involving critical

accounting estimates.

Additional details are provided in Note 7(t), 8(c) and 40(b) respectively.

The Group believes that the calculated fair values are appropriate, however, the following table provides sensitivity

analysis to illustrate the impact that reasonably possible changes could have on the asset value and total equity

recognised at the end of the reporting period. There would be immaterial impact to the statement of profit and loss as a

result of these changes.


	2025		2024
	Increase/(decrease)	Increase/(decrease)	Increase/(decrease)	Increase/(decrease)
	to asset value and	to asset value and	to asset value and	to asset value and
Change in significant unobservable	FVOCI reserve	profit and loss	FVOCI reserve	profit and loss
input	£m	£m	£m	£m
Decrease in discount rate by 50 bps	51.9	0.5	49.5	–
Increase in discount rate by 50 bps	(50.7)	(0.5)	(48.3)	–
Decrease in prepayment curve by 10%	31.6	1.0	21.8	–
Increase in prepayment curve by 10%	(20.6)	(1.0)	(13.7)	–

Offsetting financial assets and financial liabilities

The disclosures set out in the following tables include financial assets and financial liabilities that are either offset in the

statement of financial position, or are subject to an enforceable master netting arrangement or similar agreement,

irrespective of whether they are offset in the statement of financial position.

Financial collateral amounts disclosed in the tables are limited to the net balance sheet exposure for the instrument in

order to exclude any over collateralisation. Financial collateral amounts disclosed exclude initial margin cash collateral

with central clearing houses. Financial collateral amounts disclosed as at 31 December 2025 do not include securities

received with a notional of £28.6 million and a market value of £27.1 million (31 December 2024: notional of £75.9 million

and a market value of £79.8 million).


				Related amounts not offset
			Net amount
			presented on		Financial
			statement of	Subject to	collateral
	Gross	Amount	financial	master netting	received/	Net
	amount	offset	position	arrangements	pledged	amount
As at 31 December 2025	£m	£m	£m	£m	£m	£m
Financial assets
Derivative financial assets	87.5	–	87.5	(0.3)	(60.7)	26.5
Total financial assets	87.5	–	87.5	(0.3)	(60.7)	26.5
Financial liabilities
Derivative financial liabilities	93.2	–	93.2	–	(90.0)	3.2
Total financial liabilities	93.2	–	93.2	–	(90.0)	3.2

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

40. Financial assets and financial liabilities

(continued)

Shawbrook Group plc

Annual Report and Accounts 2025

272

| | | | | | | |
| --- | --- | --- | --- | --- | --- | --- |
| | |
| | | | Net amount | Related amounts not offset | | |
| | | | presented on | | Financial | |
| | | | statement of | Subject to master | collateral | |
| | Gross | Amount | financial | netting | received/ | |
| | amount | offset | position | arrangements | pledged | Net amount |
| As at 31 December

2024 | £m | £m | £m | £m | £m | £m |
| Financial assets | | | | | | |
| Derivative financial assets | 227.1 | – | 227.1 | (4.1) | (153.7) | 69.3 |
| Total financial assets | 227.1 | – | 227.1 | (4.1) | (153.7) | 69.3 |
| Financial liabilities | | | | | | |
| Derivative financial liabilities | 117.1 | – | 117.1 | – | (117.1) | – |
| Total financial liabilities | 117.1 | – | 117.1 | – | (117.1) | – |

Net of £2.5 million issuance costs.

41. Share capital

In November 2025, the Group successfully completed its Initial Public Offering (IPO) on the London Stock Exchange

(LSE). Prior to the IPO, the Company undertook a share split of each ordinary share from a nominal value of £0.01 to

£0.005.

As part of the IPO, the Group issued 13,513,513 new ordinary shares at a price of 370 pence per share, raising gross

proceeds of £50 million. In addition, 80,493,537 existing ordinary shares were sold by the parent company, Marlin Bidco

Limited.

Following admission to the LSE, the Company had 519,687,271 ordinary shares of £0.005 each in issue. The new share

issuance resulted in an increase in share capital of £67,568, with the balance of the proceeds credited to the share

premium account, thereby strengthening the Group’s overall capital position.



	Number of ordinary shares
As at 1 January 2025	506,173,758
Issued during the year	13,513,513
As at 31 December 2025	519,687,271



	2025	2024
	£m	£m
Share capital	2.6	2.5
Share premium account	134.7 1	87.3
Total s hare capital and share premium	137.3	89.8

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

273

42. Capital securities

See accounting policies in Note 7(v)

Capital securities comprise securities issued by the Company, as summarised in the following table. Amounts included

in the table are presented net of transaction costs of £1.9 million (2024: £1.9 million).


			Next call	2025	2024
	Issued	Listing	date 1	£m	£m
		International Securities
12.103% fixed rate reset perpetual Additional	Oct 2022	Market of London	Dec 2027	122.1	122.1
Tier 1 write down capital securities		Stock Exchange
10.298 % fixed rate reset perpetual Additional		Global Exchange
Tier 1 write down capital securities (interest	Dec 2017	Market of Euronext	Dec 2027	1.0	1.0
rate reset from 7.875% in December 2022)		Dublin
Total capital securities				123.1	123.1

In both reported years, the Group paid all interest when scheduled. Distributions made to holders of the capital

securities, recognised directly in equity, totalled £15.1 million (2024: £15.1 million).

The principal terms of the capital securities are as follows:

•

Interest:

interest is fully discretionary and the Company may elect to, or in certain circumstances is obliged to,

cancel (in whole or in part) any interest otherwise scheduled to be paid. Any interest not paid when scheduled is

cancelled. The capital securities bear a fixed rate of interest until the first reset date. On the first reset date, and on

each fifth anniversary thereafter, the interest rate will be reset and fixed based on a set margin above a defined

market rate.

•

Redemption:

the capital securities are perpetual with no fixed redemption date. The Company may elect to redeem

all, but not part, of the capital securities by exercising its call option on certain dates, or during defined periods, 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.

•

Write-down:

in the event of the Group’s Common Equity Tier 1 capital ratio falling below 7.0%, an automatic and

permanent write down shall occur, resulting in the full reduction and cancellation of all capital securities and the

cancellation of any interest which is accrued and unpaid.

The call date may be a fixed date or a defined period of time. Where it relates to a period of time, the date listed reflects the start of the period, thus reflecting the earliest date

the call option may be exercised.

•

Ranking:

the capital securities constitute direct, unsecured and subordinated obligations of the Company and rank

pari passu, without any preference, among themselves. The capital securities also rank pari passu with the most

senior class of issued preference shares in the Company, if any, and rank ahead of the holders of all other classes

of issued shares of the Company, but rank junior to the claims of unsubordinated and subordinated creditors, other

than those creditors whose claims rank, or are expressed to rank, pari passu with, or junior to, the claims of holders

of the capital securities.

In conjunction with each transaction between the Company and external investors, equivalent transactions take place

between the Company and its principal subsidiary, Shawbrook Bank Limited. The capital securities issued by Shawbrook

Bank Limited are on terms consistent with the equivalent listed capital securities issued by the Company. This is

recognised in the Company statement of financial position as part of the investment in subsidiaries (see Note 32).

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

274

43. Notes to the cash flow statement

Adjustments for non-cash items and other adjustments included in the statement of profit and loss



	Group		Company
	2025	2024	2025	2024
	£m	£m	£m	£m
ECL charge on loans and advances to customers
at amortised cost	27.3	29.2	–	–
ECL charge on loans and advances to customers at FVOCI	4.9	6.3	–	–
ECL (credit)/charge on loan commitments	–	(3.2)	–	–
Net (gains)/losses on loans and advances at FVTPL	(0.3)	–	–	–
Other movements on investment securities	97.3	23.3	–	–
Depreciation of property, plant and equipment	12.5	12.0	–	–
Amortisation of intangible assets	14.1	9.8	–	–
Other movements on subordinated debt receivable	–	–	(2.2)	(2.2)
Other movements on subordinated debt payable	2.8	2.6	5.2	2.6
Disposal of intangible assets	0.4	–	–	–
Other movements on debt securities in issue	65.5	2.0	–	–
Other movements on capital securities	–	–	–	–
Equity -settled share-based payments	26.1	0.7	–	–
Total non -cash items and other adjustments	250.6	82.7	3.0	0.4

Net change in operating assets



	Group		Company
	2025	2024	2025	2024
	£m	£m	£m	£m
D ecrease in mandatory deposits with central banks	–	39.9	–	–
( Increase) in loans and advances to customers	(2,072.2)	(1,609.4)	–	–
Decrease in derivative financial assets	129.0	37.0	–	–
( Increase) in operating lease assets	(1.0)	(5.7)	–	–
( Increase) in other assets	(7.6)	(5.8)	(0.1)	(0.4)
(Increase) in operating assets	(1,951.8)	(1,544.0)	(0.1)	(0.4)

Net change in operating liabilities



	Group		Company
	2025	2024	2025	2024
	£m	£m	£m	£m
Increase in customer deposits	2,549.5	2,241.3	–	–
Decrease) in other provisions	( (3.2)	(1.2)	–	–
Decrease) in derivative financial liabilities	( (23.9)	(67.4)	–	–
Increase in other liabilities	37.4	9.6	0.2	0.6
Increase in operating liabilities	2,559.8	2,182.3	0.2	0.6

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

275

44. Ultimate parent company

The ultimate parent and controlling party of the Group is Marlin Bidco Limited at the reporting date. Marlin Bidco Limited

is a company jointly owned by PSCM Pooling LP and Marlinbass Limited. Both companies are incorporated in Guernsey

and are investment vehicles of Pollen Street Capital Limited and BC Partners LLP, respectively. However, the parent

company, Marlin Bidco Limited, has been liquidated in January 2026.

The largest company in which the results of the Group are consolidated is that headed by Shawbrook Group plc (see

Note 1). No other financial statements include the results of the Group.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

276

45. Subsidiary companies

See accounting policies in Note 7(a)

Wholly owned subsidiary companies

As at 31 December 2025, the Group includes the following subsidiary companies whose results are included in the consolidated financial statements. The Company’s investment in subsidiaries is detailed in Note 32.



					Registered address	Audit status
Name	Country of incorporation	Class of shares	Ownership%	Principal activity	(see below)	(see below)
Shawbrook Bank Limited and its subsidiaries, as follows:	England and Wales	Ordinary	100	Banking	a	i
The Mortgage Lender Limited (company number: 09280057)	England and Wales	Ordinary	100	Mortgage finance	a	ii
Bluestone Mortgages Limited (company number: 02305213) and its subsidiaries, as follows:	England and Wales	Ordinary	100	Mortgage finance	b	ii
Bluestone Mortgage Finance No. 3 Limited (company number: 10863328)	England and Wales	Ordinary	100	Special purpose vehicle	b	ii
Bluestone Mortgage Finance No. 5 Limited (company number: 13177731)	England and Wales	Ordinary	100	Special purpose vehicle	b	ii
Bluestone Mortgage Retention Finance No. 1 Limited (company number: 12087164)	England and Wales	Ordinary	100	Risk retention holder	b	ii
Bluestone Mortgage Retention Finance No. 2 Limited (company number: 13904329)	England and Wales	Ordinary	100	Risk retention holder	b	ii
JBR Auto Holdings Limited (company number: 09349929) and its subsidiaries, as follows:	England and Wales	Ordinary	100	Motor finance	d	ii
JBR Capital Limited (company number: 07520989)	England and Wales	Ordinary	100	Motor finance	d	ii
JBR Auto Finance Limited (company number: 09352159)	England and Wales	Ordinary	100	Holding company	d	ii
JBR Auto Services Limited (company number: 09361616)	England and Wales	Ordinary	100	Administrative services	d	ii
		Ordinary
ThinCats Group Limited (company number: 13393055) and its subsidiaries, as follows:	England and Wales	Preference	100	Holding company	e	ii
		Deferred
ThinCats Limited (company number: 09707863) and its subsidiaries, as follows:	England and Wales	Ordinary	100	Employing entity and loan	e	ii
				origination
ESF Loans Limited (company number: 10725890)	England and Wales	Ordinary	100	Dormant	e	iii
TC Loans Limited (company number: 13031559)	England and Wales	Ordinary	100	Facility agent and security	e	ii
				trustee
TC Loans I Limited (company number: 09721235)	England and Wales	Ordinary	100	Dormant	e	iii
Business Loan Capital Limited (company number: 09867563) and its subsidiaries, as follows:	England and Wales	Ordinary	100	SME lender	e	ii
TC Loans II Limited (company number: 11680000)	England and Wales	Ordinary	100	Dormant	e	iii
TC Security Trustee Limited (company number: 12633574)	England and Wales	Ordinary	100	Dormant	e	iii
Imployapp Limited (company number: 11376064)	England and Wales	Ordinary	100	Financial intermediation	f	iii

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

277


					Registered address	Audit status
Name	Country of incorporation	Class of shares	Ownership%	Principal activity	(see below)	(see below)
Singers Corporate Asset Finance Limited (company number: 06863223)	England and Wales	Ordinary	100	Dormant	a	iii
Singers Healthcare Finance Limited (company number: 00983790)	England and Wales	Ordinary	100	Dormant	a	iii
Coachlease Limited (company number: 03462512)	England and Wales	Ordinary	100	Dormant	a	iii
Hermes Group Limited (company number: 02452917)	England and Wales	Ordinary	100	Dormant	a	iii
Singer & Friedlander Commercial Finance Limited (company number: SC053939)	Scotland	Ordinary	100	Dormant	c	iii
Link Loans Limited (company number: 06642090)	England and Wales	Ordinary	100	Dormant	a	iii
Centric SPV 1 Limited (company number: 06441060)	England and Wales	Ordinary	100	Dormant	a	iii
Resource Partners SPV Limited (company number: 03817443)	England and Wales	Ordinary	100	Dormant	a	iii

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

45. Subsidiary companies (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

278

The following changes took place during the year ended 31 December 2025:

ThinCats Group Limited became a wholly owned subsidiary of Shawbrook Bank Limited, the Group’s principal

subsidiary, in September 2025 (see Note 10). ThinCats Group Limited has seven wholly owned direct and indirect

subsidiary companies, as detailed in above table, all of which became indirect subsidiary companies of the Group as part

of the acquisition.

Imployapp became a wholly owned subsidiary of Shawbrook Bank Limited, the Group’s principal subsidiary, in

December 2025 (see Note 10).

Registered addresses of the subsidiary companies included in the above table are as follows:

Lutea House, Warley Hill Business Park, The Drive, Great Warley, Brentwood, Essex, England, CM13 3BE.

Floor 10 40 Leadenhall Street, London, England, EC3A 2BJ.

8 Nelson Mandela Place, Glasgow, Scotland, G2 1BT.

773 Finchley Road, London, England, NW11 8DN.

2 Snowhill, Snowhill Queensway, Birmingham, B4 6GA

Fox Court, 14 Gray’s Inn Road, London, England, WC1X 8HN

The audit status of the subsidiary companies included in the above table is as follows:

audited accounts are prepared for the subsidiary company.

ii:

an exemption from audit has been applied and the Group guarantees all outstanding liabilities of the exempted

subsidiary company in accordance with Section 479A-C of the Companies Act 2006.

iii:

an exemption from audit for dormant companies has been applied in accordance with Section 480 of the Companies

Act 2006.

Subsidiaries by virtue of control

As at 31 December 2025, the Group includes the following structured entities relating to securitisation programmes

(see Note 25). Shares of these entities are ultimately beneficially owned through an independent trust. However, for

accounting purposes, the entities are controlled by the Group and, as such, they are treated as subsidiaries and are

fully consolidated (except in the case of TC Funding Limited which is only partially consolidated as noted below).

As at the reporting date, Genesis Mortgage Funding 2022-1 PLC, JBR Capital DD Limited and TC Funding V DAC are in the process of being liquidated.


			Registered	Audit
	Country of		address	status
Name	incorporation	Principal activity	(see below)	(see below)
Shawbrook Mortgage Funding Holdings Limited	England and Wales	Holding company	a	i
Ealbrook Mortgage Funding 2022 -1 plc	England and Wales	Special purpose vehicle	a	i
Ealbrook Mortgage Funding 2022-1 Holdings Limited	England and Wales	Holding company	a	i
Lanebrook Mortgage Transaction 2022 -1 plc	England and Wales	Special purpose vehicle	a	i
Shawbrook Mortgage Funding 2022 -1 plc	England and Wales	Special purpose vehicle	a	i
Genesis Mortgage Funding 2022 -1 PLC 1	England and Wales	Special purpose vehicle	b	i
Holbrook Mortgage Transaction 2023 -1 plc	England and Wales	Special purpose vehicle	a	i
Lanebrook Mortgage Transaction 2023-1 plc	England and Wales	Special purpose vehicle	a	i
Lanebrook Mortgage Transaction 2024 -1 plc	England and Wales	Special purpose vehicle	a	i
JBR Capital DD Limited (company number: 09335526) 1	England and Wales	Special purpose vehicle	c	ii
TC Funding I Limited (company number: 11266885)	England and Wales	Special purpose vehicle	d	iv
TC Funding III Limited (company number: 12677970)	England and Wales	Special purpose vehicle	d	iii
TC Funding Limited (company number: 12428334)	England and Wales	Special purpose vehicle	d	iii
TC Funding V DAC (company number: 739818) 1	Ireland	Special purpose vehicle	e	iv

The following changes took place during the year ended 31 December 2025:

ThinCats Group Limited became a wholly owned subsidiary of Shawbrook Bank Limited. The acquisition means that the

Group’s indirect share in the assets and liabilities of the following are also consolidated in the preparation of the

consolidated financial statements of the Group:

•

TC Funding I Limited

•

TC Funding III Limited

•

3 silos of TC Funding Limited. Silo accounting has been applied to consolidate the Group’s share in the assets and

liabilities of TC Funding Limited in the consolidated financial statements. TC Funding Limited is an SPV specifically

created to administer CBILS and RLS lending. Three of the seven silos of TC Funding Ltd hold assets which are

effectively owned by the Group, via TC Funding I limited, TC Funding III limited and ThinCats Limited, and are

consolidated in preparation of the consolidated financial statements of the Group.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

45. Subsidiary companies (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

279

Registered addresses of the subsidiary companies included in the above table are as follows:

5 Churchill Place, 10th Floor, London, United Kingdom, E14 5HU.

18a Capricorn Centre Cranes Farm Road, Basildon, Essex, SS14 3JJ.

7th Floor 21 Lombard Street, London, EC3V 9AH

C/O Tmf Group, 13th Floor, One Angel Court, London, United Kingdom, EC2R 7HJ

31-32 Leeson Street Lower, Dublin 2, Dublin, Dublin, D02 Ka62, Ireland

The audit status of the subsidiary companies included in the above table is as follows:

audited accounts are prepared for the company.

ii:

an exemption from audit for dormant companies has been applied in accordance with Section 480 of the Companies

Act 2006.

iii:

an exemption from audit for small companies has been applied in accordance with Sections 476-477 of the

Companies Act 2006.

: an exemption from audit for small Designated Activity Companies has been applied in accordance with Part 16 of the

Companies Act 2014.

46. Related party transactions

Transactions with key management personnel

Key management personnel refer to the Executive Management team and the Directors of the Group.

Total compensation for the year for key management personnel employed by the Group is as follows:



	2025	2024
	£m	£m
Short -term employee benefits	8.3	7.3
Other long -term benefits	2.3	1.9
Post -employment benefits	0.1	0.1
Termination benefits	0.2	–
Share based payments	18.7	–
Total compensation for employed key management personnel	29.6	9.3

In addition to the above, in the year ended 31 December 2025, the Group incurred fees in relation to the Institutional

Directors appointed to the Board as set out and agreed within the Framework Agreement prior to IPO and within the

letters of appointment following the IPO. This totalled £0.1 million (2024: £0.1 million). The institutional Directors are not

employed by the Group and, accordingly, their fees are not included in the above table.

Further details of compensation paid to the Directors of the Group are provided in the Directors’ Remuneration Report on

page 82.

The Group provides employee loans to certain key management personnel. As at 31 December 2025, the amount

outstanding in respect of these loans was £10.8 million (2024: £0.5 million), of which £10.4 million was in respect of

interest free IPO related transitional loans, provided to facilitate the winding up of Shawbrook’s pre Admission holding

company Marlin, which were repaid on 7 January 2026.

The non IPO related loans to the value of £0.4 million remain outstanding and are subject to interest in accordance with

the beneficial loan arrangements rate set by HMRC. These loans do not involve more than the normal risk of

collectability or present other unfavourable features. Interest income recognised in respect of these loans is less than

£0.1 million in both reported years.

No provisions have been recognised in respect of these loans and no balances have been written off or forgiven during

either of the reported years.

The Group holds savings deposits from certain key management personnel and their close family members. Such

deposits are held in the ordinary course of business on normal commercial terms. As at 31 December 2025, the amount

held in respect of these deposits is £0.8 million (2024: £0.6 million). Interest expense recognised in respect of these

deposits is less than £0.1 million in both reported years.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

46. Related party transactions (continued)

Shawbrook Group plc

Annual Report and Accounts 2025

280

The Group also issued subordinated notes listed on various stock exchanges. The key management personnel have

subscribed for £50,000 aggregate principal amount of Fixed Rate Reset Callable Tier 2 Capital Notes due January 2034

(2024: £50,000) and £150,000 aggregate principal amount of Fixed Rate Reset Subordinated Notes due September

2035 (2024: £nil).

Transactions with the ultimate parent

The ultimate parent and controlling party of the Group is Marlin Bidco Limited (see Note 44).

As at 31 December 2025, the balance owed to Marlin Bidco Limited is £0.8 million (2024: £0.8 million).

Details of employee share based payment schemes relating to Marlin Bidco Limited are outlined in Note 18.

Transactions between the Company and subsidiary companies

Transactions during the year between the Company and Shawbrook Bank Limited, recognised in the Company

statement of profit and loss, are as follows:



	2025	2024
	£m	£m
Coupon on capital securities 1	15.1	15.1
Interest on subordinated debt receivable	18.2	18.5
Management fee	1.0	0.8
Total income from subsidiary	34.3	34.4

Subsidiary companies of the Group are detailed in Note 45.

Amounts due to the Company from its principal subsidiary, Shawbrook Bank Limited, and recognised in the Company

statement of financial position, are as follows:



		2025	2024
	Note	£m	£m
Other amounts receivable/payable	31	1.6	(8.0)
Subordinated debt receivable 2	39	172.7	171.1
Total amounts due from subsidiary		174.3	163.1

The coupon on capital securities relates to capital securities issued to the Company by Shawbrook Bank Limited, which are included as part of the investment in subsidiaries

(see Note 32).

The total subordinated debt receivable per Note 39 is £171.5 million (2024: £171.1 million). The difference compared to the amount presented in this table of £1.2 million

(2024: £nil million) relates to capitalised amounts (capitalised costs and a modification loss), which do not constitute amounts owing between the parties.

The total subordinated debt receivable per Note 39 is £172.7 million (2024: £172.1 million). The difference compared to the amount presented in this table of £nil million

(2024: £1.0 million) relates to capitalised amounts (capitalised costs and a modification loss), which do not constitute amounts owing between the parties.

STRATEGIC REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

CLIMATE REPORT

FINANCIAL STATEMENTS

Notes to the financial statements

for the year ended 31 December 2025

Shawbrook Group plc

Annual Report and Accounts 2025

281

47. Capital commitments

As at 31 December 2025, the Group has no capital commitments (2024: £nil).

48. Loan commitments

See accounting policies in Note 7(w)

As at 31 December 2025, the Group has loan commitments, which are not recognised in the statement of financial

position, of £1,479.2 million (2024: £1,414.4 million). A loss allowance of £0.6 million (2024: £0.6 million) is held against

these loan commitments, which is recognised in provisions in the statement of financial position (see Note 35).

Additional analysis of the Group’s loan commitments and the associated loss allowance is provided in the credit risk

section of the Risk Report starting on page 143.

49. Contingent assets and contingent liabilities

See accounting policies in Note 7(x)

Part of the Group’s business is regulated by the Consumer Credit Act (CCA), a piece of UK legislation designed to

protect the rights of consumers. The Group’s Consumer franchise is exposed to risk under Section 75 and Section 140A

of the CCA, in relation to any misrepresentations, breaches of contract or other failures by suppliers of goods and

services to customers, where the purchase of those goods and services is financed by the Group. While the Group

would have recourse to the supplier in the event of such liability, if the supplier became insolvent, that recourse would

have limited value.

The Group continues to undertake reviews of its compliance with the CCA and other consumer regulations. The Group

has identified some areas of potential non-compliance, which, based on current information, are not considered to be

material. However, in light of the uncertainties involved in such matters, there can be no assurance that the outcome of a

particular matter will not result in a material liability.

Timeshare complaints

Please refer to Provisions (Note 35) for updates in relation to timeshare complaints.

Motor finance commission arrangements

Please refer to Provisions (Note 35) for updates in relation to motor finance commissions arrangements.

50. Events after the reporting period

On 7 January 2026 the Group’s Controlling Shareholder, Marlin Bidco Limited, entered into Guernsey Members’

Voluntary Liquidation. Following the share transfers that took place on the same date, the interests of Pollen Street

Capital and BC Partners are now represented through PSC Marlin Holdco Limited and Marlinbass Limited, respectively.

Other Information

283

Abbreviations

285

Other performance indicators

286

Alternative Performance Measures (APMs)

291

Country-by-country reporting

282

Shawbrook Group plc

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Throughout this document:

‘

Company

’ refers to:

Shawbrook Group plc

‘

Group

’ refers to:

the ‘Company’ and its subsidiaries

‘

Shawbrook

’ refers to:

the ‘Group’

‘

Shareholder

’ refers to:

Marlin Bidco Limited

Abbreviations

ABL

Asset Backed Lending

ABP

Annual Bonus Plan

AGM

Annual General Meeting

Artificial Intelligence

ALCo

Assets and Liabilities Sub-Committee

APE

Average Principal Employed

API

Application Programme Interface

AVM

Automated Valuation Model

bps

Basis point

BML

Bluestone Mortgages Limited

C-SREP

Capital Supervisory Review and Evaluation Process

CBES

Climate Biennial Exploratory Scenario

CCA

Consumer Credit Act

CET1

Common Equity Tier 1

CGU

Cash generating unit

CISO

Chief Information Security Officer

CMP

Credit Management Platform

the ‘Code’

UK Corporate Governance Code 2018

COVID-19

Coronavirus disease

CRD

Cash Ratio Deposit

CRD V

Capital Requirements Directive

CRM

Customer relationship management

CRR/CRR II

Capital Requirements Regulation

CSF

Cybersecurity Framework

CTO

Chief Technology Officer

DEFRA

Department for Environment, Food & Rural Affairs

DTR

Disclosure Guidance and Transparency Rule

DWF

Discount Window Facility

EAD

Exposure at default

EBA

European Banking Authority

ECL

Expected credit loss

EDD

Enhanced Due Diligence

EDI

Equality, diversity and inclusion

EEA

European Economic Area

EIR

Effective interest rate

EMTN

Euro Medium Term Note

EPC

Energy performance certificate

EPS

Earnings per share

ESG

Environmental, social and governance

ESOS

Energy Savings Opportunity Scheme

European Union

The following abbreviations are used within this document:

ExRC

Executive Risk Committee

FCA

Financial Conduct Authority

FSCS

Financial Services Compensation Scheme

FSMA

Financial Services and Markets Act

FTE

Full time equivalent

FTSE

Financial Times Stock Exchange

FVOCI

Fair value through other comprehensive income

FVTPL

Fair value through profit or loss

GDPR

General Data Protection Regulation

GHG

Greenhouse gas

GRC

Governance, Risk and Compliance

HMRC

HM Revenue and Customs

HQLA

High-Quality Liquid Assets

IAS

International Accounting Standards

IBS

Important Business Services

ICAAP

Internal Capital Adequacy Assessment Process

ICMA

International Capital Market Association

IEA

International Energy Agency

IFRS

International Financial Reporting Standards

ILAAP

Internal Liquidity Adequacy Assessment Process

IPO

Initial Public Offering

IRB

Internal Rating Based

IRR

Internal Rate of Return

ISA

Individual Savings Account

ISDA

International Swaps and Derivatives Association

ISSB

International Sustainability Standards Board

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FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

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STRATEGIC REPORT

Time periods referred to within this document are defined as follows:

Full year: 12 months from 1 January to 31 December

First half: six month period from 1 January to 30 June

Second half: six month period from 1 July to 31 December

First quarter: three month period from 1 January to 31 March

Second quarter: three month period from 1 April to 30 June

Third quarter: three month period from 1 July to 30 September

Fourth quarter: three month period from 1 October to 31 December

JBR

JBR Auto Holdings Ltd

LCR

Liquidity coverage ratio

LGD

Loss given default

LMA

Loan Market Association

LSE

London Stock Exchange

LTV

Loan to Value

M&A

Mergers and Acquisitions

MCOB

Mortgages and Home Finance: Conduct of Business

Management Information

MIP

Management Incentive Plan

Machine Learning

MLRO

Money Laundering Reporting Officer

MRC

Model Risk Oversight Committee

MRIO

Multi-regional input-output

NED

Non-Executive Directors

NIST

National Institute of Standards and Technology

NSFR

Net stable funding ratio

OTC

Over-the-counter

OTD

Originate to Distribute

PBT

Profit Before Tax

PCAF

Partnership for Carbon Accounting Financials

Probability of default

PMA

Post-model adjustment

POCI

Purchased or originated credit-impaired

PPGD

Probability of Possession Given Default

PRA

Prudential Regulation Authority

PSP

Performance Share Plan

Quality Assurance

RCP

Representative Concentration Pathways

RMF

Risk Management Framework

ROPA

Record of Processing Activities

ROTE

Return on Tangible Equity

SAS

Statistical Analysis System

SEA

Solvent Exit Analysis

SECR

Streamlined energy and carbon reporting

SDDT

Small Domestic Deposit Taker

SICR

Significant increase in credit risk from initial recognition

SIP

Share Incentive Plan

SMEs

Small and medium-sized enterprises

SMF

Senior Management Function

SM&CR

Senior Managers and Certification Regime

SONIA

Sterling Overnight Index Average rate

SPPI

Solely payments of principal and interest on the principal

amount outstanding

SPV

Special Purpose Vehicle

TAM

Total addressable Market

TCFD

Task Force on Climate-related Financial Disclosures

TFSME

Term Funding Scheme with additional incentives for SMEs

TML

The Mortgage Lender Limited

TNAV

Total Net Asset Value

TSR

Total Shareholder Return

United Kingdom

UK MAR

UK Market Abuse Regulation

UN SDGs

United Nations Sustainable Development Goals

USA

United States of America

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FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Arrears ratio

The Group calculates its arrears measure by including all accounts that are greater than 3 contractual payments

down at month end but excluding loans that are term expired. This is then divided by the total loan book, excluding

term expired loans. ABL and Development Finance loans are excluded from the arrears measure given there is no

concept of arrears in these products. POCI loans are also excluded.

Common Equity Tier 1 (CET1) capital ratio

Common Equity Tier 1 capital, divided by, risk-weighted assets.

Leverage ratio

Total Tier 1 capital, divided by, total leverage ratio exposure measure.

Liquidity coverage ratio

Liquidity buffer, divided by, total 30-day net cash outflows in a standardised stress scenario.

Risk-weighted assets

A measure of assets adjusted for their associated risks. Risk weightings are established in accordance with

Prudential Regulation Authority rules and are used to assess capital requirements and adequacy under Pillar 1.

Total capital ratio

Total regulatory capital, divided by, risk-weighted assets.

Total Tier 1 capital ratio

Total Tier 1 capital, divided by, risk-weighted assets.

Other performance indicators

Certain financial measures disclosed in the Annual Report and Accounts do not have a standardised meaning prescribed by international

accounting standards and may not therefore be comparable to similar measures presented by other issuers. These measures are considered

‘alternative performance measures’ (non-GAAP financial measures) and are not a substitute for measures prescribed by international accounting

standards. Definitions of financial performance indicators referred to in the Strategic Report (in alphabetical order) are set out below:

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FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Alternative Performance Measures (APMs)

Throughout this report, the Group presents a range of key performance indicators, including Alternative Performance Measures (APMs),

which management use to assess performance, monitor trends and support decision-making.

Certain measures presented are not defined under IFRS and may therefore not be directly comparable with similarly titled measures used by other entities.

The Directors believe these non-IFRS measures provide useful supplementary information to aid understanding of the Group’s underlying performance.

Definitions and reconciliations are set out below:

Loan book

The loan book is calculated as the sum of loans and advances to

customers (net of loss allowance and fair value adjustments for

hedged risk) and the carrying amount of assets on operating leases.

Loans and advances to customers includes loans and advances to

customers at amortised cost, loans and advances to customers

at FVOCI and loans and advances to customers measured at fair

value through profit and loss (FVTPL), along with loans transferred

to assets held for sale, which are still considered to be part of the

Group’s overall loan book until derecognised.

(£m)

2025

2024

Loans and advances to customers

17,770.1

15,176.6

Carrying amount of assets on operating leases

24.6

29.8

Total loan book

17,794.7

15,206.4

Loan book (including originate to distribute

(OTD) assets)

This measure comprises the loan book (as defined above) plus the

carrying amount of all structured asset sales derecognised through

our originate to distribute (OTD) strategy.

(£m)

2025

2024

Loans and advances to customers

17,770.1

15,176.6

Carrying amount of assets on operating leases

24.6

29.8

Amounts involved in originate to distribute

(OTD) assets

1,372.5

721.4

Total loan book (including OTD assets)

19,167.2

15,927.8

Average principal employed

Average principal employed is calculated as the average of monthly

closing loans and advances to customers (net of loss allowance

and fair value adjustments for hedged risk) and assets on operating

leases included in property, plant and equipment.

Wholesale funding

Wholesale funding is calculated as the sum of amounts due to banks

and debt securities in issue.

(£m)

2025

2024

Amounts due to banks

1,430.6

1,376.1

Debt securities in issue

412.3

549.2

Wholesale funding

1,842.9

1,925.3

Tangible net asset value

Tangible net asset value is calculated as total assets less total

liabilities, intangible assets and capital securities.

(£m)

2025

2024

Total assets

22,468.9

19,722.7

Less:

Total liabilities

(20,626.4)

(18,140.4)

Less:

Intangible assets

(145.8)

(124.0)

Less:

Capital securities

(123.1)

Tangible net asset value

1,573.6

1,335.2

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FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Earnings per share

Profit attributable to ordinary shareholders divided by the

weighted average number of ordinary shares in issue during the

financial year. The table below reconciles the ratio on both an

underlying and statutory basis.

Underlying

Statutory

(£m)

2025

2024

2025

2024

Profit after tax

251.5

219.0

195.5

219.9

Coupon paid to holders

of capital securities

(15.1)

Profit after tax less AT1

coupon (A)

236.4

203.9

180.4

204.8

Weighted average number of

ordinary shares (B)

508.3

506.2

508.3

506.2

Earnings per share (A/B) (pence)

Gross asset yield

Gross asset yield is calculated as net operating income less interest

expense and similar charges, divided by average principal employed.

Underlying

Statutory

(£m)

2025

2024

2025

2024

Net operating income

684.4

609.8

682.1

609.8

Less:

underlying interest

expense and similar charges

(772.7)

(796.1)

(775.0)

(796.1)

Total (A)

1,457.1

1,405.9

1,457.1

1,405.9

Average principal employed (B)

16,182.2

14,290.4

16,182.2

14,290.4

Gross asset yield (A/B) (%)

9.0

9.8

9.0

9.8

Liability yield

Liability yield is calculated as interest expense and similar charges

divided by average principal employed.

Underlying

Statutory

(£m)

2025

2024

2025

2024

Interest expense and

similar charges

(775.0)

(796.1)

(775.0)

(796.1)

Total statutory results

adjustments

2.3

Total (A)

(772.7)

(796.1)

(775.0)

(796.1)

Average principal employed (B)

16,182.2

14,290.4

16,182.2

14,290.4

Liability yield (A/B) (%)

(4.8)

(5.6)

(4.8)

(5.6)

Net interest margin

Net interest margin is calculated as net operating income divided by

average principal employed.

Underlying

Statutory

(£m)

2025

2024

2025

2024

Net operating income

682.1

609.8

682.1

609.8

Total statutory results

adjustments

2.3

Total (A)

684.4

609.8

682.1

609.8

Average principal employed (B)

16,182.2

14,290.4

16,182.2

14,290.4

Net interest margin (A/B) (%)

4.2

4.3

4.2

4.3

287

Shawbrook Group plc

Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Total statutory results adjustments include incremental funding costs of £2.3m incurred in respect of the ThinCats acquisition. As the adjustment increases net operating income and reduces interest

expense by an equal amount, it does not impact the numerator used in the calculation of gross asset yield.

Cost to APE efficiency ratio

Cost to APE efficiency ratio is calculated as the sum of: (i)

administrative expenses; (ii) provisions in the statement of profit and

loss; and (iii) total statutory results adjustments (when calculating

the measure on an underlying basis), divided by average principal

employed. The table below reconciles the ratio on both an underlying

and statutory basis.

Underlying

Statutory

(£m)

2025

2024

2025

2024

Administrative expenses

(326.1)

(252.8)

(326.1)

(252.8)

Provisions

(0.8)

5.3

(0.8)

5.3

Total statutory results

adjustments

59.7

(1.3)

Total (A)

(267.2)

(248.8)

(326.9)

(247.5)

Average principal employed (B)

16,182.2

14,290.4

16,182.2

14,290.4

Cost to APE efficiency ratio

(A/B) (%)

(1.7)

(2.0)

(1.7)

Cost to income ratio

Cost to income ratio is calculated as the sum of: (i) administrative

expenses; (ii) provisions in the statement of profit and loss; and (iii)

total statutory results adjustments (when calculating the measure

on an underlying basis), divided by net operating income. The table

below reconciles the ratio on both an underlying and statutory basis.

Underlying

Statutory

(£m)

2025

2024

2025

2024

Administrative expenses

(326.1)

(252.8)

(326.1)

(252.8)

Provisions

(0.8)

5.3

(0.8)

5.3

Total statutory results

adjustments

59.7

(1.3)

Total (A)

(267.2)

(248.8)

(326.9)

(247.5)

Net operating income (B)

684.4

609.8

682.1

609.8

Cost to income ratio

(A/B) (%)

(39.0)

(40.8)

(47.9)

(40.6)

Cost of risk

Cost of risk is calculated as impairment losses on financial assets,

divided by average principal employed. The table below reconciles

the ratio on both an underlying and statutory basis.

Underlying

Statutory

(£m)

2025

2024

2025

2024

Impairment losses on

financial assets (A)

(83.0)

(67.2)

(83.0)

(67.2)

Total statutory results adjustments

6.3

Total (A)

(76.7)

(67.2)

(83.0)

(67.2)

Average principal employed (B)

16,182.2

14,290.4

16,182.2

14,290.4

Cost of risk (A/B) (%)

(0.47)

(0.51)

(0.47)

Total statutory adjustments include (i) for the year ended 31 December 2025, £29.8 million IFRS 2 modification costs, £20.3 million IPO related costs, £8.6 million corporate activity costs and £1.0 million motor finance provision

charge, and (ii) for the year ended 31 December 2024, £4.0 million of corporate activity costs primarily in relation to the acquisition of JBR and £5.3 million of provision recovery in relation to the Timeshare Provision.

Total statutory adjustments include (i) for the year ended 31 December 2025 the recognition on acquisition of ThinCats of a £6.3 million expected credit loss allowance in respect of the acquired loan portfolio, reflecting alignment

to the Group’s IFRS 9 provisioning methodology (ii) for the year ended 31 December 2024 (£nil).

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CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Return on lending assets before tax

Return on lending assets before tax is calculated as the sum of (i)

profit before tax; and (ii) total statutory results adjustments (when

calculating the measure on an underlying basis), divided by average

principal employed. The table below reconciles the measure on both

an underlying and statutory basis.

Underlying

Statutory

(£m)

2025

2024

2025

2024

Profit before tax

272.2

295.1

272.2

295.1

Total statutory results

adjustments

68.3

(1.3)

Profit before tax, before

statutory adjustments (A)

340.5

293.8

272.2

295.1

Average principal employed (B)

16,182.2

14,290.4

16,182.2

14,290.4

Return on lending assets before

tax (A/B) (%)

2.1

1.7

2.1

Return on tangible equity

Return on tangible equity is calculated as profit after tax, plus total statutory results adjustments (when calculating the

measure on an underlying basis), less distributions made to holders of capital securities, divided by the product of average

risk-weighted assets multiplied by 12.5 per cent., which is the target CET1 ratio. Average risk-weighted assets is calculated

as risk-weighted assets at the beginning of the period, plus risk-weighted assets at the end of the period, divided by two.

The table below reconciles the measure on both an underlying and statutory basis.

Underlying

Statutory

(£m)

2025

2024

2025

2024

Profit after tax

195.5

219.9

195.5

219.9

Total statutory results adjustments

56.0

(0.9)

Profit after tax before statutory adjustments (A)

251.5

219.0

195.5

219.9

Coupon paid to holders of capital securities (B)

(15.1)

A+B

236.4

203.9

180.4

204.8

Risk-weighted assets at the beginning of the period (C1)

9,946.6

8,701.3

9,946.6

8,701.3

Risk-weighted assets at the end of the period (C2)

12,003.2

9,946.6

12,003.2

9,946.6

Average risk-weighted assets ((C1+C2)/2) (D)

10,974.9

9,324.0

10,974.9

9,324.0

D * 12.5 per cent.

1,371.9

1,165.5

1,371.9

1,165.5

Return on tangible equity (%)

17.2

17.5

13.2

17.6

Total statutory adjustments include (i) for the year ended 31 December 2025, £29.8 million IFRS 2 modification costs, £20.3 million IPO related costs, £17.2 million corporate activity costs and £1.0 million provision charge, and (ii) for

the year ended 2024, £4.0 million of corporate activity costs primarily in relation to the acquisition of JBR and £5.3 million of provision recovery in relation to the Timeshare Provision.

Total statutory adjustments include (i) for the year ended 31 December 2025, £12.7 million of corporate activity costs, £22.3 million of IFRS 2 modification, £20.3 million IPO-related costs and £0.7 million Motor finance provision, and

(ii) for the year ended 31 December 2024, £3.0 million of corporate activity costs primarily in relation to the acquisition of JBR and £3.9 million of provision recovery in relation to the Timeshare Provision.

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FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

Return on tangible equity (calculated using actual TNAV)

Return on tangible equity is calculated as profit after tax, (adjusted to deduct distributions made to holders of capital securities), divided by

average tangible equity. Average tangible equity is calculated as total equity less capital securities and intangible assets at the beginning

of the period, plus total equity less capital securities and intangible assets at the end of the period, divided by two. The table below

reconciles the measure on both an underlying and statutory basis.

Underlying

Statutory

(£m)

2025

2024

2025

2024

Profit after tax

195.5

219.9

195.5

219.9

Total statutory results adjustments

56.0

(0.9)

Profit after tax before statutory adjustments (A)

251.5

219.0

195.5

219.9

Coupon paid to holders of capital securities (B)

(15.1)

A+B

236.4

203.9

180.4

204.8

Total equity at the beginning of the period (C1)

1,582.3

1,338.7

1,582.3

1,338.7

Capital securities (at the beginning of the period) (D1)

123.1

Intangible assets (at the beginning of the period) (E1)

124.0

107.2

124.0

107.2

C1-D1-E1 (F1)

1,335.2

1,108.4

1,335.2

1,108.4

Total equity at the end of the period (C2)

1,842.5

1,582.3

1,842.5

1,582.3

Capital securities (at the end of the period) (D2)

123.1

Intangible assets (at the end of the period) (E2)

145.8

124.0

145.8

124.0

C2-D2-E2 (F2)

1,573.6

1,335.2

1,573.6

1,335.2

Average tangible equity ((F1+F2)/2)

1,454.4

1,221.8

1,454.4

1,221.8

Return on tangible equity (%)

16.3

16.7

12.4

16.8

290

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Annual Report and Accounts 2025

FINANCIAL STATEMENTS

CLIMATE REPORT

CORPORATE GOVERNANCE REPORT

RISK REPORT

STRATEGIC REPORT

The following disclosures are provided solely to comply with the requirements of the Capital

Requirements (Country-by-Country Reporting) Regulations 2013. These disclosures may not be

relied on for any other purpose.

The country-by-country reporting requirements originate from Article 89 of the Capital

Requirements Directive (CRD IV). The purpose is to provide increased transparency regarding

the source of the Group’s income and the locations of its operations.

In both reported years, Shawbrook Group plc and its subsidiaries (the ‘Group’) are all UK

registered entities.

The activities of the Group are detailed in Note 1 of the Financial Statements and in the

Strategic Report. Details of subsidiary companies included in the Group are provided in

Note 45 of the Financial Statements.

Required disclosures for the year ended 31 December are summarised below:

2025

2024

Net operating income (£m)

682.1

609.8

Profit before tax (£m)

272.2

295.1

Tax charge (£m)

76.7

75.2

Tax paid (£m)

62.9

85.5

Average number of employees on a full-time equivalent basis

1,483

1,519

The Group received no public subsidies during either of the reported years.

Country-by-country reporting

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STRATEGIC REPORT

Shawbrook Group plc

Registered office: Lutea House, Warley Hill Business Park, The Drive, Great Warley, Brentwood, Essex, CM13 3BE.

Registered in England and Wales – Company Number 07240248.

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