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Lloyds Banking Group vs HSBC

Side-by-side credit pricing comparison from Pillar 3 disclosures.

Last updated: March 2026 · Data source: public Pillar 3 disclosures
Verdict:

On a representative BBB+ EUR 25M 5-year term loan, HSBC is the cheaper lender by 15bp in minimum spread. For a EUR 25M facility, that's EUR 38,034 per year.

Bank profiles compared

Metric Lloyds Banking Group
United Kingdom		 HSBC
United Kingdom
IRB approachA-IRBMixed
Cost-to-income53.3%53.3%
Effective tax rate28.6%22.7%
Avg corporate PD1.52%3.07%
Avg LGD unsecured41.7%39.9%
Avg LGD secured20.0%20.0%
Funding spread (bp)12bp15bp
Corporate EADEUR 57bnEUR 540bn

Sample RAROC: BBB+ EUR 25M 5Y term loan

Both banks priced on the exact same deal — 150bp spread, 20bp commitment fee, 60-month maturity. Higher RAROC means the bank earns more from this deal. Lower min-spread means the borrower gets a better rate.

Component Lloyds Banking Group HSBC
Annual revenueEUR 385,000EUR 385,000
Operating costEUR 154,000EUR 154,000
Expected lossEUR 28,750EUR 28,750
Capital required (FPE)EUR 2,451,320EUR 2,451,320
RAROC (after tax)7.21%7.53%
Min spread for 12% RAROC260bp244bp
This is just one sample deal.

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FAQ: Lloyds Banking Group vs HSBC

Which bank is cheaper on corporate credit: Lloyds Banking Group or HSBC?
On a BBB+ EUR 25M 5-year term loan, HSBC requires a minimum spread of 244bp to reach a 12% RAROC hurdle, versus 260bp at the other bank — a difference of 15bp on the same deal.
How do Lloyds Banking Group and HSBC compare on corporate PD?
Lloyds Banking Group reports an EAD-weighted corporate PD of 1.52%, while HSBC reports 3.07%. The gap reflects differences in obligor mix and geography rather than underwriting quality.
How do the two banks differ on IRB approach?
Lloyds Banking Group uses A-IRB and HSBC uses Mixed. The IRB approach determines whether internal LGD models or supervisory LGDs apply, which materially affects capital required on every corporate facility.
What deal is used in this comparison?
A single standardised facility: BBB+ rated, EUR 25M drawn on a EUR 30M commitment, 5-year tenor, 150bp spread, 20bp commitment fee. Both banks are priced on this exact deal using their own disclosed Pillar 3 parameters.