Lloyds CEO bangs drum for risk-taking to drive UK growth

Allowing financial services firms in the UK to take more risk is vital to the UK’s long-term prospects, according to the CEO of Lloyds Banking Group.

Speaking at the FT’s Global Banking Summit today, Charlie Nunn said that a “healthy economy needs a healthy financial system”.

He argued that financial firms such as Lloyds need to be allowed to take risks to deliver better outcomes for consumers, including home-buyers and pensioners.

“That’s what enables the economy to invest in the future.”

Nunn highlighted the UK’s stringent levels of regulation, both prudential and conduct, compared to other countries. He also noted that there were more ingrained cultural factors which had been in place or decades.

All of these challenges mean that the cost of equity in the UK (the return that must be offered to investors to secure capital) – 14 to 16% – is much higher than other economies such as the US (at 8 to 10%).

However, he praised the fundamentals of the UK economy, saying it was “very resilient” and that there is “all to play for”.

Nunn praised the recent Mansion House speech by Chancellor of the Exchequer Rachel Reeves for offering some building blocks for a more competitive and dynamic economy. He lauded the fact that regulators are being pushed to consider competitiveness within their mandate, potentially offering a better balance between consumer protection and economic growth.

The latest generation of Lloyds adverts have eschewed the traditional brand icon of the galloping horse, focusing on tech-enabled services and features available in its app.

Nunn highlighted this drive into technology in his talk, saying that tech was a “competitive advantage” for the Lloyds group.

He highlighted how the company had leaned into AI and technology to enhance experiences for customers while weathering disruption from neobanks such as Monzo and Starling.

“We need to see what they’re doing that’s innovative and make sure we’re matching this,” Nunn said.

The key difference, he argued, is scale – Lloyds has 20 million customers logging onto its services several times a month.

Nunn noted how when Lloyds launches a new service it can reach 10 million customers in a month, which recently happened with a new credit worthiness tool that Lloyds introduced. Nunn compared this to fintechs, some of which, he said, have taken 10 years to get to that number of customers, while having less sustainable commercial models.

Alongside scale, he noted the wide range of services offered within one app.

Fintechs “have raised the bar,” Nunn noted, but he is “not worried by them.”