AIB Group plc (A5G) Earnings Call Transcript & Summary

Ladies and gentlemen, good morning, and welcome to the presentation of our annual results for 2020 as well as an update on the implementation of the strategic plan that we announced back in December and which is now being driven forward at pace. 3 months into our Strategy 2023 transformation plan, we are making very solid progress as we seek to simplify, strengthen and streamline AIB. 2020 was a truly extraordinary year in all our lifetimes. Our customers and the communities in which we operate faced an unprecedented social health and economic crisis. But I'm pleased to report that the fundamentals of our business are robust, sustainable and strong. At the outset, I want to pay particular tribute to all our team members across the group for their exceptional performance and supporting our customers and each other at this very difficult time. We are pleased to report progress on both our cost initiatives outlined in December and on our growth initiatives which are designed to broaden the range of products and services that we present to our customers to win new customers and to strengthen our business. We were delighted to announce the acquisition of Goodbody earlier this week, a move which will materially improve our ability to fully serve our personal business and corporate customers. In February, as you know, we signed a memorandum of understanding with NatWest Group relating to the potential acquisition of Ulster Bank's EUR 4.1 billion corporate and commercial loan book, which, on successful completion, will see us welcoming 5,000 business customers to AIB Group. We are excellently positioned to deliver on these growth initiatives, thanks to the resilience of our capital position, with our CET1 ratio of 15.6% at year-end, which was achieved while taking a conservative, comprehensive and forward-looking ECL provision of over EUR 1.4 billion. Despite continuing uncertainty about the near-term economic outlook, which is largely dependent on the path of the virus, we believe our economy is poised for a strong recovery in 2021 as vaccine deployment accelerates, as Brexit uncertainty is eliminated, with continuing government supports, a resilient housing market and surging deposits to play an important role in protecting activity levels today while powering growth as a threat of the virus recedes. On the sustainability front, we showed it's possible to do well while doing good, with strong growth in green lending, now accounting for 16% of new lending, with our strongest performing part of the lending book, once again being our energy, climate action and infrastructure team. But don't just take our work first. Our progress is recognized independently and externally by both rating agencies and industry bodies. We are Ireland's leading financial services provider, and that position is being consolidated and augmented to the determined implementation of our strategy at pace. Turning now to the economy. GDP growth for 2020 was boosted very significantly by a strong external performance, which balanced weakness in domestic demand driven by the virus and its associated restrictions. Expectations now are for an acceleration of activity through '21 and '22, with the current lockdown serving to delay rather than derail the recovery. The imbalance between housing market demand and supply will remain a future for some years to come despite a better-than-expected completion outturn in 2020. We are expecting output in the housing market to be behind last year's level somewhat this year due to delayed commencements. But that imbalance, something AIB is well positioned to play its part in resolving, remains a key support for house prices. Looking at the business sector, PMIs are pointing to positive activity levels with sentiment markedly robust compared with the initial phase of lockdown, thanks to strong fiscal support, the resolution of Brexit uncertainty and hopes for a successful vaccination program. And finally, household balance sheets are in robust health with deposits surging and leverage levels continuing their significant reduction from the peak seen during the last crisis. The ingredients are now clearly in place for a strong rebound right the way across the economy over the quarters ahead. When COVID-19 first hit, our reflex was to support our customers, the team at AIB and the communities that we serve during this period of unprecedented uncertainty. We gave our retail customers over 66,000 payment breaks with over 88% of those customers now returning to full repayment of principal and interest, which is well in excess of our initial expectations. We kept more than 99% of our branches open, bring stability to the main streets of Ireland when so many other businesses were forced to close their doors. Over 88% of our -- over 80% of our employees move to working from home, while hundreds of our team members remained on the frontline serving our customers. While we were physically distant, we maintained a strong digital connection with the teams across Ireland, Britain and in New York. And recognizing that the restrictions have necessarily blurred the lines between work and home. We introduced a right to disconnect across the organization to encourage everyone at AIB to maintain an appropriate balance between their duties to our customers and their responsibilities to themselves and to their families. We also advanced our community support program through AIB Together fundraising, through targeted philanthropic donations and through the continuation of our partnership with the GAA, an organization which, like us, is truly embedded in Irish life. As the virus recedes, this impact will continue to be felt in terms of digitalization, how and where we work and the priority of the sustainability agenda, and those long-term changes are fully reflected in our plan. In terms of our current activity, we wanted to share some of our own data with you this morning. Both weekly card spend and mortgage applications are tracking very much in line with the pre-pandemic 2020 levels. At the same time, we've seen an ongoing shift to digital in terms of everyday banking with a 39% reduction in ATM withdrawals, a 71% increase in digital wallet payments while looking at our mortgage applications, 28% in terms of both volume and value are now completed through our end-to-end digital journey. The busiest day in our history for our mobile offering was the 1st of December, with 2.3 million interactions while online channel usage increased by 14% in the second half of last year compared with the second half of 2019. And today, some 80% of our customers use an AIB online channel on average once a week. This slide is designed to provide you with an at-a-glance snapshot of AIB today, highlighting our market-leading positions. We have a really strong franchise. It's an exceptional platform. And we are now well embarked on our strategy to be at the center of our customers' financial lives by presenting an ever-growing range of competitive products and services to our personal business and corporate customers. Our strategy is built on 5 key pillars: customer first, simple and efficient, risk and capital, talent and culture and sustainable communities. And I am pleased to report that across all pillars, we made steady, solid progress in 2020 despite the real challenge of 20 -- of COVID-19. And it is those pillars, the progress made and the implementation of our strategic plan that gives us the confidence today to reiterate our 2023 targets of a cost base below EUR 1.35 billion, a CET1 ratio above 14% and RoTE, our Great North Star, greater than 8%. I now want to take a few moments to update you on the implementation of the strategic plan that we presented just 3 months ago. On the digitalization front, we are amalgamating 5 branches in Cork, Dublin and Galway, as previously announced, and that will be completed in the first half of this year. At the same time, we are refocusing our network, reflecting evolving customer behaviors to concentrate more on sales and advice and less on everyday transaction banking, the bulk of which is now completed online. On our end-to-end credit initiative, full rollout is now well advanced in our asset finance area, and we are also making good progress in SME lending with retail in design and planning. In terms of the way we work, we exited 2 of our 8 Dublin head office buildings in the closing weeks of the year. And today, we're announcing that we will be leaving our Burlington Road premises in the first half of this year. So again, we're well on track here. On change delivery, our first recruitment group has been scoped with a 155 roles identified, and we have commenced our formal recruitment process with strong initial interest being shown in those positions. In terms of our business model, corporate adviser has been appointed to advise us on the exit options for our commercial SME business in Britain, as previously announced, and the teaser document was issued this week to potentially interested parties. And finally, on legacy issues, we signed 2 NPE portfolio sales in recent weeks, which on completion will reduce our NPE ratio to some 6% of gross loans. I also want to update you on the progress that we've made in our strategic moves to broaden and strengthen our product suite. We announced the acquisition of Goodbody earlier this week for an enterprise value of EUR 82 million, and this transaction significantly augments our product suite and would allow us to better serve our personal business and corporate customers, and it will be earnings and RoTE accretive in the first full year of ownership. We're also announcing today that we are in exclusive discussions with Great-West Lifeco to establish a 50-50 AIB branded joint venture. This will allow us to combine the expertise in product range of Great-West and our leading franchise, and it allow us to broaden and enhance our customer offering in savings, pensions and life products. The launch of the JV is obviously subject to successful conclusion of the current negotiations and regulatory approvals, and it's planned for the first half of next year. We are the leading bank in Ireland in promoting and advancing the sustainability agenda. It sits at the very core of our strategy, and we pledge to do even more over the years ahead. We continue to enhance our green product range with clear benefits for the environment for our customers and our lending book with green lending enjoying robust growth in 2020. We are committed to backing economic and social inclusion through many initiatives and tangible progress has been made here, with highlights including our EUR 300 million social housing fund, our ongoing support for entrepreneurs and the continued promotion of financial literacy across all our customer groups. We've recognized that good governance is vital to sustainability. And our ESG program across the group is led by our Board and our Sustainable Business Board Subcommittee. Internally, amongst other initiatives, we are focused on ongoing ESG training and lending exclusions. And externally, we have demonstrated our commitment through our adoption of the UN Global Compact. In 2020, we did EUR 1.5 billion of green lending. We've pledged to do more, and we will do more. It's an area offering potential for very significant, responsible and sustainable growth over the years ahead. So in concluding, for 2021, we are focused on the execution of our 2023 strategy -- strategic plan, delivering cost efficiencies and expanding our product range. We'll take a prudent and responsible approach to new lending, we'll further strengthen our balance sheet and we'll reduce NPEs towards our 3% target. The strength of our business and our expanding range of products and services positions us very well to support the rebooting of the economy while continuing to work with COVID-19 impacted customers. We are relentlessly focused on returning our group to profitability, to generating capital and to creation the potential for a return to dividend payments. We will continue to grow our green lending book, underpinned by the adoption this year of science-based targets and the further integration of ESG priorities right away across the group. So while the near-term outlook is clouded by the path of the virus, we are positive about the prospects for our group over the quarters and years ahead. Our targets are now set, our plans are being implemented and we are prepared at every level across AIB to deliver on these commitments in the interest of all our stakeholders. I'll now hand over to Donal, who will bring you through the financial details.

Thank you very much, Colin, and good morning, everyone. I'm going to briefly run through the financial performance targets for 2020. Operating profit of EUR 700 million, a loss after tax of EUR 700 million. A EUR 1.46 billion ECL charge, which is a cost of risk of 240 basis points, which is in line with consensus and consistent with our conservative, comprehensive and forward-looking approach. Total income was EUR 2.4 billion, which decreased 12% year-on-year. Within that, interest income was down 10%, and other income was down 19%. Cost of EUR 1.527 billion were well-managed and in line with expectations. And notwithstanding the difficult operational year from COVID where we maintained full operational resilience, we reduced our headcount by 3% to finish the year at 9,193 employees. Performing loans were EUR 55.2 billion, which decreased 6% as redemptions exceeded new lending, and we had a higher flow to NPEs. New lending was EUR 9.2 billion, which was down EUR 3.1 billion, which is 25%, which is slightly better than where we would have imagined it in Q1. The recovery in H2 was up 9% versus H1 and gives us cause for optimism and a reasonable trajectory. We have a very strong funding position, which has been compounding the excess liquidity balances. Customer deposits at EUR 82 billion, increased by 14% in the year, contributing to higher cash held at the Central Bank to EUR 19 billion. With respect to MREL, we reached and exceeded our targets throughout 2020 through the issuance of 2 hybrid securities, an additional Tier 1 instruments of EUR 625 million and Ireland's first Green Tier 2 bond of EUR 1 billion. Our fully loaded CET1 at the end of the year was very strong at 15.6%, notwithstanding a large ECL charge, comfortably ahead of all regulatory means. I'm not going to dwell on the income statement items for too long. Really just to call out 2 particular items. Year-on-year, bank levies, regulatory fees, a slight increase of EUR 11 million. This is due to the buildup of liabilities and, obviously, the guarantee scheme, which is associated with that. And our associated undertaking research is really our investment in AIB merchant services contributed EUR 15 million, slightly down on the year, reflecting lower economic activity. A lot of moving parts here on interest income. It's down 10% on the year from full year 2019. Consistent with the way I've shown this before, I want to talk about this in interest income terms because the NIM distortions from excess liquidity are continuing to create visual difficulties, should I say. So if I just walk through the different moving parts for 2020, we had a benefit from liabilities of EUR 81 million, which is primarily due to lower deposit pricing, generally speaking, and some parts of negative deposit pricing as well as some lower wholesale funding costs. On customer loans, we had a reduction of EUR 152 million, and this is really from volumes and interest rate effects. And I would say, of that, 50% was due to lower volumes on the balance sheet and the other 50% was due to lower interest rates running through the asset side of the balance sheet. On investment securities, down EUR 83 million on the year. Obviously, any investments from prior years of higher yields, unfortunately, maturing and being replaced with assets at lower levels. And as liquidity grows, we're obviously buying some more government bonds as well which reduces that number overall. And I'm trying to isolate here the cost of excess liquidity here of 8 basis points. So that's EUR 50 million for the year. Half of that is related to cash which is placed with the Bank of England in the U.K. So as the rate cut in the U.K. took effect in early March of 2020, obviously, the return on that is lower. So that had an effect of around EUR 25 million. Then the remainder of this, so EUR 25 million is really the cost of excess cash placed with the Central Bank of Ireland, which attracts a negative rate of 50 basis points. I've tried to isolate here the grossing effect of excess liquidity, which I define as 18 basis points. So I just want to explain quite clearly what I mean by this, okay? If you can imagine a situation where I have EUR 9 billion of customer accounts or liabilities at 0, I have a TLTRO quantum of EUR 4 billion and there's a tiered reserve amount of around EUR 5 billion, okay? So there's EUR 9 billion of liabilities paying 0 and I have EUR 9 billion of assets which are paying 0 as well. So no interest costs, no interest expense, yet it's grossing up the balance sheet on both sides by EUR 9 billion. And that's really what I'm trying to isolate here and show the 18 basis points. So the real area for NII focus is the items on the left-hand side of the page as these are the ones which have created the reduction in interest income. So with respect to excess liquidity, we do have actions in place. We have a tailored negative deposit strategy. Obviously, negative rates implemented in 2014. But as I would have talked before since 2019, we would have been charging MBFI's negative rates. In 2020, we would have begun to charge our corporate and business customers. At the end of 2020, we had around EUR 4 billion on deposits at negative rates, and this was effectively in line with a threshold of EUR 3 billion for our business and commercial customers. As we go into 2021, that threshold will be lowered to EUR 1 billion, and we do expect that more and more balances will be captured within this construct. And just to give you an idea of quantum, within that cohort of business and corporate customers greater than EUR 1 billion, there's a total quantum currently of around EUR 20 billion, which we believe, over this year, will attract a negative rate. Obviously, that number can go up and it can go down depending on the liquidity position of firms, et cetera, et cetera, but I really just wanted to try and quantify what that is. So over and above where we were in 2020, there's effectively an excess EUR 16 billion in scope for our negative price -- deposit pricing strategy. What I talked about TLTRO previously drawn down in September 2020 EUR 4 billion. We were certainly fairly committed at the time as we look to 2021, et cetera. We didn't accrue the benefit for that in 2020. And it's still a little bit too close to call. We will know at the end of March, and I'll be able to update you at that stage what the benefit for that is going to be. But as I look to 2021, some headwinds still remain. And if I was supported in terms of the pillars here, which I've talked previously, in terms of cost of liabilities, where we'd expect to make continued gains in this area of 10 to 11 basis points. On customer loans, although the bulk of the interest rate impact has been felt or being taken through the balance sheet, we do see a reduction there of 10 to 11 basis points. And the rationale for that is more around volume. We have deleveraged throughout 2020 around EUR 1 billion of leveraged assets. I'll come on to the reason why in the capital slide. We've obviously just executed a portfolio sale, which will have an interest income impact of around EUR 12 million. And lastly, as I would have talked about in December, as we delever the SME portfolio in the U.K., there's approximately GBP 1 billion of assets that will come off the balance sheet. With investment securities, we don't think that there will be too much of a drag in 2021. So that's -- we expect that to be more like 2 or 3 basis points. And with respect to excess liquidity, this is obviously going to be dependent in many respects on the -- on when business activity resumes, what the quantums are. But we feel that the bulk of that excess liquidity cost has already been borne. And with a number of actions that we have in place, I don't think in '21 that, that's going to be any more than 1 basis point. So for 2021, what we said is various factors to impact interest income and we expect a moderate decline in full year 2021. Other income, obviously, very heavily impacted by economic activity in the Irish economy, in particular, are customer behaviors, et cetera. But year-on-year, fees and commissions down around 16% and other income down around 19%. And orderly impacts that you see on the fees and commissions line are really all related to both business and retail consumer behavior. But what we have seen throughout 2020, if we're to compare volumes activity from Lockdown 1 to Lockdown 2 and indeed, in the current lockdown which we're in, most societies, Ireland is no different, people are learning to live with COVID, so activity is higher, albeit lockdowns exist, and we're still not entirely sure in Ireland when different businesses are going to reopen. But overall, we think that the outturns and the volumes are picking up. Other business income includes a couple of items. NAMA subordinated bonds at EUR 23 million. That's the last dividend that we will receive. We've obviously had an RWA benefit from that bond maturing, but that is not going to repeat. And then we had other items, as we typically do on any given year, of EUR 101 million, some equities and also a gain when we delevered some of our leveraged loans, taking advantage of strong leverage markets at the back end of 2020. So for other income, looking into 2021, I think activity levels, we think, will be better, and we do see other income improving by 5% or 6% on the core fees and commissions line. So overall, for other income, I would say, broadly flat year-on-year, is how we see total other income. Costs, very much in line with our expectations at EUR 1,527 million, up 2% as guided. A number of factors impacting costs. Increased depreciation of EUR 50 million, which I would have flagged to you in December. COVID-19-related expenditure, there was various one-off costs included in there, branch costs, sanitation, et cetera, et cetera, security, enabling all of our staff to be able to work from home. Against that, we obviously have reduced expenditure from travel, business expenses, et cetera. And then we have lower FTEs year-on-year of, on average, 499, which is around a reduction of 5%. We have a further 1,500 reductions to realize over the coming years to reach our targeted 2023 number of less than 7,700 employees. So for 2021, in terms of costs, we would expect to see further increase in depreciation of approximately EUR 20 million. But within the G&A line, we think that there will be a reduction of around EUR 40 million and staff costs will generally be flat year-on-year. Overall, you can see on the left-hand side, as we would have explained throughout last year, our FSG nonperforming workout unit would have been staffed at full levels firstly to ensure wholesome engagement with customers around payment breaks. But obviously also, they've been working on different strategies on legacy NPEs. And as Colin mentioned, we would have executed 2 portfolio sales in quarter 1 of this year. Exceptional items are EUR 215 million. I'll break this out a little bit. EUR 117 million is restitution costs, which is primarily operational in nature, which is really dealing with the old tracker mortgage dorm items. EUR 36 million relates to U.K. restructuring costs. So when I talked to you in December about the restructuring of the U.K. business, exceptional costs that I would have flagged would have been for 2021. With respect to people and property, we have taken an amount of those charges in 2020. We've reviewed all of our live asset register, and we have made an impairment of intangibles of EUR 30 million. This is not on any particular project or any particular system. This is small amounts across the entire register, where we had done a full route and branch review as we do every year. There was one-off COVID-related cost of EUR 22 million, and that's very isolated just to the implementation of payment breaks, and there was a small amount of EUR 9 million for voluntary severance. And as I look to 2021 looking at exceptional items in totality, obviously, taking some of the benefits of the U.K. restructuring costs, acknowledging the ongoing enforcement work with the CBI on Tracker Mortgage Review, I would say exceptional costs for 2021 will be around EUR 250 million. ECL and asset quality, full year charge of EUR 1.46 billion, conservative, forward-looking and comprehensive. The 3 main drivers, as we've talked about earlier, macroeconomic scenarios, EUR 400 million, downward staging movements impact of EUR 700 million and post model adjustments of around EUR 400 million. That's a cost of risk for 2020 of 240 basis points, and we feel we have maintained our strategy to be forward-looking and take as much of the potential credit deterioration into account in 2020. And so I'm happy to reiterate our normalized cost of risk guidance for 2021 at 40 basis points. As we went through the year, there's no doubt the range of outcomes began to narrow a little bit. Our own thinking as a management and a Board and AIB is that the impact of the COVID-19 pandemic will be very different for AIB than the impact of the last global financial crisis. We, obviously, have come into this in far stronger liquidity and a capital position. But I would just call out 2 things which are materially different. Number one is through the payment break construct like direct engagement and very interactive engagement is a part of that process. So all customers on payment breaks, coming off payment breaks, irrespective of their financial position, the engagement levels are really, really high. And that gives us a lot of comfort that we'll be able to find very solid solutions for all impacted businesses and customers in the future. But there has been unprecedent levels of government support at individual level for wages and even at business level, and that cannot be underestimated. As a percentage of G&A, that is up around 20%. And I think the expectation of total cost from the government between '20 and '21 is estimated to be something like EUR 35 billion. So all of that government support is naturally impacting individuals' customers and our conversations with them. Macros, I'm not going to dwell on. No doubt, second half of the year, Ireland Inc. performed far better in terms of GDP, HPI. And obviously, a big thing to take off the table was the negotiated Brexit agreement. So you'll see between the first half and the second half, material adjustment and macroeconomic impacts. I've just shown you here quickly the weightings, where we have applied our ECLs, 50% base case, maybe 5% overall to the downside, just reflecting the uncertainty that still exists given the fact that a fairly severe lockdown was announced towards the end of the year. On staging, overall, just a couple of key points to make here. On the year, our cover would have increased from EUR 1.2 billion to EUR 2.5 billion of stock on the entire balance sheet. What we saw throughout the year really was a movement into stage 2 for the sectors and the industries that we would have been calling out from Q1. No difference in Ireland to anywhere else, really in our corporate and SME world, hotels, accommodation, nonfood retail. And when in the commercial real estate world, I would say, in particular, retail parks is an area where we have seen weakness. I think some of the key points to show here, stage 2 cover rate 9% which is a large increase year-on-year. Within that, those higher risk sectors that I would have called out, accommodation and some of the construction areas would have stage 2 cover rates of around 15%. And this is really just to reflect the uncertainty that still exists in these sectors. We don't know when the businesses will be reopening. We don't know what the cash flow position is ultimately going to be like. And we do think it's not -- it's unlikely to be until the second half of the year that we really begin to see what the impact is as the COVID supports are withdrawn by the government. But it is comforting certainly that the Minister for Finance has reiterated on a number of occasions that supports will remain in place for a long period of time for all of those industries that have been shutdown. PMAs, I'm not going to dwell too long on this. EUR 200 million goes to legacy mortgages. I would say that's not really a COVID-related effect. This is legacy mortgages from the last GFC. To be perfectly frank, we need to ensure -- I wanted to ensure that they are absolutely adequately provided for so that we can really focus our time and our effort on all of the individuals and businesses who may be impacted by COVID. So on the right-hand side, the EUR 200 million. This is really a representation of an expectation and an understanding that as people roll off payment breaks and the payment break experience was very strong, there is inevitably going to be some businesses and customers who are impacted and really what we've done is taken a forward-looking estimate for what we think could be impacts coming down the track. Balance sheet, overall, really, the main item here is on customer accounts. Loan-to-deposit ratio reduced EUR 10 billion of liabilities increase. And obviously, on the asset side, this goes back to the Central Bank. Net loans, point-to-point, I'm trying to just break out the difference here, down 6%. In terms of performing exposures, new lending, EUR 9.2 billion, as I would have described, redemptions in that core portfolio, down EUR 9.9 billion, slight reduction. Redemptions, I would say, all very much on plan, whereas new lending was impacted by the reduced activity, particularly in Q2. Other items here on the balance sheet would be redemptions of NPEs and ECL charge. And you can see here, again, I've called out the leverage loan disposal of EUR 500 million, to leave us at EUR 57 billion at the end of the year. New lending, EUR 9.2 billion, but more importantly, up 9% in the second half of the year. Really to give a comparator, I've shown half 1, half 2. Half 2 growth very strong across some of the markets, particularly in the retail world, mortgages personal. And then in the wholesale world, property, corporate and SME, really strong growth in our energy climate change front, reduced appetite in our leverage book and property exposure is increasing. For 2021, we don't know if we'll see that overall trajectory. But certainly, the kind of lending quantums that we saw in half 2 on an annualized basis would give us comfort to say new lending will be above EUR 10 billion for 2021, but the outlook is still uncertain in some sectors. NPE normalization, as always, remains a priority for the organization. Our NPE ratio would have risen from 5.4% to 7.3% in 2020, slightly less, frankly, than what we imagined at the onset of the pandemic. But early this year, as you know, we would have executed 2 portfolio sales which has had the effect of reducing our quantum of NPEs from EUR 4.3 billion down to EUR 3.6 billion, which is circa 6%. And we remain committed to getting under our circa 3% by 2023. It's going to be very important for us to focus on managing and ensuring we reduce the legacy NPEs so that we can spend our time and energy on the COVID-impacted NPEs, which we think will appear in H2 2021. Funding and capital, again, here, only really to show here of the increase in liabilities, half is retail, half is business and corporate. MREL targets met and exceeded. Very strong capital position, a lot of capacity for growth, organic and inorganic, in 2021. Fully loaded capital 15.6%, very strong outturn. Definitely, a few moving parts here before the end of the year, which is worth a little bit of time to talk through. So we've been operating with pro forma CET1 reporting for a period of time. I'm pleased to say that the bulk of that has now gone. The TRIM impact in totality is around 130 basis points; mortgages 50 basis points, which is not new news; corporate, post our corporate TRIM, had an impact of around 20 basis points; and then when we concluded our corporate TRIM review, we would have agreed and accepted with the regulator that for our leverage portfolio a floor of 125% would be applied. So I would have mentioned earlier that we would have delevered some leverage assets. At the start of 2019, that book was around EUR 4.7 billion. At the end of the year, it was around EUR 3.5 billion, EUR 3.6 billion. And some of that activity or a lot of that activity was driven by the fact that we had new risk weightings on that book which forced us to do some portfolio management to optimize returns, given the increase in risk weightings. Other regulatory items of 10 basis points. Software impact 60 basis points, a little bit better than expected. SME 501 impact 30 basis points. Calendar provisioning was 60 basis points impact, which is slightly better than I would have talked about last year. Obviously, the higher provisions would have helped reduce that number. And then other IRB models, 20 basis points. That's really our SME model, which we have submitted to the regulator for approval. We've actually made the adjustment for the risk weighting in advance of how that plays out. So overall, end-to-end, you can see the impact, notwithstanding the fact that we have taken a large ECL charge. Our fully loaded capital is very strong at 15.6% at the end of the year, which leaves us in a very strong position for the year ahead. Medium-term target 14%. One of the items we would have measured on in December. Strong buffer to MDAs 5.9% or 9.2% on a transitional basis. For 2021, as we sit here today, I still see some tailwinds on the capital side. On the SME 501, I think that there will be around 40 basis points of benefits that we can still implement this year. And then on calendar provisioning, I think there'll be a benefit of around 10 basis points for 2021, which we've actually already realized through the execution and sale of the Oak and Iris portfolios. On inorganic opportunities, obviously, Colin would have talked to this for a period of time, good bodies and the AIB Life JV. What I'd say on this is a couple of things. Any item we look at from an inorganic basis has to be accretive to RoTE, and obviously, in excess of our RoTE target of greater than 8%. If we're to look at some of the businesses, which we've disclosed recently, the impact of good bodies from a capital perspective will be around 15 basis points. The final form of the AIB Life JV is not yet concluded, whether it will be a JV and associate, et cetera, et cetera. But I would say that the capital impact should be no greater than the 15 basis points in good bodies. And then on the Ulster Bank MoU, which we have signed, and we're working through, it's a bit too soon to talk about revenue impacts, et cetera, et cetera, because there's a lot of work that we still need to go through with Ulster. But what I would say is, as you look at the quantum of 5,000 customers, EUR 4 billion of loans, I think an appropriate risk weighting to base your calculations of is probably more similar to AIB's risk weightings, which, for the mix of corporate commercial would be around a 90% risk weighting density. Distribution policy, we're monitoring regulatory developments. Our existing policy is 40% to 60% ordinary dividend payout ratio. We haven't accrued a dividend for 2020, given we've posted a loss. But we will assess the balance between dividends and buybacks at the appropriate time, which we expect to be in 2022 looking at '21's returns. So despite near term uncertainty, we remain positive. And our return to profitability in 2021 will generate growing and sustainable earnings and resume dividend distributions. Again, a rerun of our medium-term targets. The main one for us for me is the cost discipline, less than EUR 1.35 billion. That's the enabler for the RoTE greater than 8%. Our strategy to 2023 is set, and we are implementing at pace. Thank you very much.

Thank you very much, indeed, Donal. We're now going to telephone lines and take questions from our audience this morning. And first up is Diarmaid Sheridan.

Can you hear me okay?

We can hear you loud and clear.

Great. Maybe firstly, if we could touch on capital allocation. I guess, as we look forward, our -- the majority of the regulatory impacts now behind us at this point. And as such, should we think about capital allocation in terms of inorganic growth and capital distributions? So that's the first question. Secondly, just on the strategic initiatives, and I appreciate the comments Donal just gave us there. Perhaps you could give us a sense of how meaningful the 3 inorganic initiatives may have in terms of your 8% return target? And when we should begin to see those kind of accrete into that dynamic, if you like? And maybe just finally, a clarification for Donal. Just in terms of the cost of risk and your comments on normalizing at 40 basis points, so is that simply for 2021 and going lower beyond 2021? Or should we think about it as 40 basis points in the medium term?

I'll just take the strategic initiatives first and I'll hand over to you on the other 2 questions. We're obviously still in negotiation with Ulster with NatWest Group. We have concluded our MoU. There's a huge amount of efforts across the organization in bringing that to a conclusion over the course of the next number of months. And I'm optimistic that we can get those assets on the balance sheet and work with those customers to the group by hopefully the end of this year. Companies will now go through regulatory approval process. That could take 3 to 4 months, but we hope to have it as part of the AIB Group, fully consolidated within the group in the second half of the year -- from the second half of the year onwards. And in relation to the joint venture with Great-West Life company, that's expected -- the negotiations are expected to take another 2 to 3 months. We'll go through regulatory approvals then, and we are planning to actually launch products into the marketplace in 2022. So no impact in 2021, but we do expect to see it in 2022. And in every single one of the cases, the key filter for us, the key determinants of our drive to pursue these initiatives was that they were going to be RoTE accretive and help us deliver on our medium-term target of delivering an RoTE in excess of 8% by calendar 2023. Donal?

Yes. Thanks very much. On the capital allocation, capital walk, 15.6% starting point, looking at some tailwinds there gets you up to 16.1%, and I think that's the starting point for the analysis. If I look at the time line for model development, redevelopment, et cetera, with the regulator, we have a number of rebuilds in place and all scalers are already incorporated in our risk weightings to account for that on our main products. So really, it's the SME model for approval where we'll wait and see what the outcome is. I don't believe or there's certainly nothing on the horizon of a negative nature that I can currently foresee. But I'm going to have to wait and see and would not want to prejudge any outcome there. Look, I think cost of risk, I would, for modeling purposes, use normalized cost of risk, 40 basis points out the years. Obviously, it's going to change, like '21 is the year. When we sat down, looking at the impact of COVID and payment breaks, we thought they'd be finished and, let's say, quantified by the end of 2020. That just hasn't been the case. So we're pushing forward now. I think Q2, Q3 is a really important time. We've got a large quantum of assets in the higher risk segments in stage 2. What you're going to see happening there is an amount will obviously move into stage 3 inevitably and unfortunately. But obviously, a larger quantum will normalize and go back to stage 1. So I think as we get through the year, that's going to be the important piece of work that we need -- that we're going to need to figure out. But I think for now, it's -- it will be safer to use 40 basis points cost of risk out to 3 years. But I think we'll have more information on that as the year progresses.

Next, we're going to turn to Raul Sinha from JPMorgan.

A few questions from my side. Maybe the first one on strategic progress. You've made very strong focus already on these growth initiatives. The question I have is, do you think that after these 3 -- sort of 3 deals, you have more or less addressed the gaps in the product suite that you foresee or do you think there's more to do after that? That's the first question. The second one is on dividends. Will you accrue an interim dividend? And should we think that any distributions have to wait until full year results 2021, which is early 2022? Or is there a possibility that you might consider an interim earlier if the restrictions are lifted? And then a third very quick one. I was just wondering, it sounds to me like on the NII front, there are clearly lots of moving parts, but one of the main moving parts is what happens to the loan book. And you talked about the EUR 10 billion sort of number for 2021. How has the lockdown impacted your loan book early in '21? What gives you confidence that you won't have sort of downtick again like we saw in the first half of last year?

Thanks so much indeed, Raul. I'll take the question in relation to the strategic progress. This began 2 years ago, I was appointed CEO. And at that point, we identified a number of product gaps in our suite. One of the extraordinary things about this bank is the strength of its customer franchise. And we were very much focused on ensuring that we were able to deliver a complete product suite to our customers as we deliver on our strategic ambition of being at the heart of our customers' financial lives. These transactions allow us to complete the suite. And we are absolutely delighted that we've been able to announce them so early in the implementation of our 3-year plan. So we're done in terms of the very large-scale M&A activity. It's all announced. There may well be 1 or 2 small items we look at on an opportunistic basis over the course of the next number of years. But nothing of the quantum that we have announced, either over the course of the past number of weeks or announced this morning. The product suite when we complete those transactions will be complete.

Raul, question here on dividend around interim considerations. I got to be honest, I'm not thinking about an interim dividend for 2021. What I am focused on for 2021 is sizing all of the impacts of these inorganic items from a capital perspective, income cost perspective. And if I was able to sit here at the half year results and give you a comprehensive overview of all of the moving parts and the impacts of these items, that would have been definitely a good days work for me. So I'm really, really focused on that. And organizationally, we're going to be really focused on that. So I think for the base case, we're focused on return to profitability in '21 for a dividend to be paid out in 2022. And anything in the interim is going to be focused around the strategy and the integration of the inorganic items. NII, good question. It's around liabilities, it's around deposits and it's around speed of execution of pricing strategies. On the new growth, look, there is uncertainty due to the lockdown, okay? What we have seen, though, even if you look at Q3, Q4 loan volumes demand, businesses and individuals are becoming more accustomed of living with COVID and operating with COVID. So we are seeing stronger mortgage market balances than what we would have imagined. It's more likely that supply will be a bigger issue in 2021 than demand. Building sites were closed for a period of time. But we do think that, that market will be certainly greater than what it was in 2020. And then in the other areas, whether it be SME, corporate, property, I think there is a lot of business to be done there. I think that initially we felt the participation of the Irish banks and the guaranteed schemes was -- could have looked something like the participation of the U.K. banks in C bills and B bills and those kind of programs. We just didn't see that in Ireland at all. Of maybe EUR 3.5 billion of available funds or guaranteed funds, only 1/3 was drawn down across the system. But what was different is that, there was also various forms of grants available, maybe up to EUR 800 million, EUR 900 million, and these were all drawn down, okay? So what's happened is that impacted business are looking to have their wages paid and they're receiving grants whilst they're locked down. As the calendar becomes clear with respect to which businesses could reopen, obviously, those supports are going to be withdrawn. And at the same time, we do expect that all of our customers will continue to engage with us and then term out debt to reopen and to grow their business in the coming years. So we do think that there's going to be an amount of credit demand in that area. But again, it's just uncertain. I'd love to be able to give you a lot more clarity, but sitting down with a hotel operator asking them for a cash flow analysis, it's just a short conversation at the moment.

Sure. That's very helpful.

Thanks much indeed. Raul, given that we haven't closed the transaction, it's probably a little bit premature to describe. Our next speaker is a colleague, Eamonn Hughes.

I have 3, if you don't mind, just capital kind of costs and maybe revenue stroke market share and mortgages. Just firstly, on the capital side. Just in relation to the slide and maybe Donal, directionally on Page 33, you're talking about the existing policy of 40% to 60% in ordinary dividends and then obviously considering buybacks. Would it be the case that you consider a dividend within that range and a buyback on top of that or would it all be kind of a total distribution? And I was asked the question just given the very attractive capital ratio overall and above your targets. The second question maybe on the cost, two parts if you don't mind. The first one is just could it be clear, just in relation to Donal, if you said personnel costs were expected to be flat this year. But also just with the acquisitions, and [indiscernible] standing back coming on board, it sounds like you're still very comfortable on the medium-term targets. So presumably, maybe doing a little bit better on the underlying basis. Maybe just to clarify that. And then finally, I know you've given kind of the broad loan guidance for the year. Just in relation to your market share, it kind of weakened on the mortgage side as the year progressed. So I was just trying to get a sense how you may be opened this year, maybe to get back to kind of where you were and maybe just some sense and that would be great as well.

Thank you, Eamonn. I'll address the mortgage issue first and then I'll hand over to Donal in relation to the capital ratios and the costs. We had a very strong fourth quarter of '20. And given the array of uncertainties that were out there in the second quarter, right, we're looking at an extraordinary array of uncertainties, very, very difficult outlook. We took a deliberate stance to be very conservative in relation to our mortgage policies. But as that uncertainty dissipated, we were very much open for business now, right the way across all our channels, branch, phone, Internet and mobile. And we're seeing very encouraging applications coming through the pipeline currently. And there's obviously a lag between applications and drawdowns. But we're encouraged by what we're seeing coming through at the moment. And of course, we have an ongoing emphasis on our green product. We want to see more and more of our mortgage lending being characterized as green, and we expect that to be the case in 2021.

Eamonn, firstly, on the costs, I really should have reiterated that our medium-term targets and the guidance that I gave was pre any inorganic items. It's a little bit too difficult to precisely size them at the moment. So I've left -- any of the guidance I gave you around cost, income, capital, et cetera, was really pre any inorganic. And like I said, I will, at the half year, give a much more wholesome overview of the entirety of the impact of those items financially. In terms of ordinary and buyback, I think, look, the focus of 2021 is we get back to profitability. That is the name of the game. And just remember, whenever we look to make a dividend payment, the document we'd be discussing with the regulator is an ICAAP, okay? So we have to have an ICAAP with the implementation of inorganic items, et cetera, et cetera, and that's really going to be what the focus is going to be for this year. So When I said -- the reason I refer to buybacks is if we get into '22 and let's say, equity valuations are where they are currently, I'd be mad not to look at a buyback as opposed to a cash dividend.

Okay. Thanks so much indeed, Donal. We're now going to -- next on the line of Chris Cant from Autonomous.

Question. A couple of points really around the transactions and how that fits into your guidance. Can I just confirm your flat other income guidance or broadly flat other income guidance for 2021 was pretty Goodbody. But I think from your answer to the last question it was. But just given you expect inclusion there from the second half, it will be a helpful clarification. And then in terms of Goodbody, I mean the public disclosure there on the financial is fairly limited, at least based on what I've been able to find. Given that sort of a more advanced stage, I appreciate you don't necessarily want to talk about synergies or anything like that at this point. But what is the sort of annualized revenues and costs you're thinking about including there in terms of how that business has been performing over the last couple of years? Just a sense would be helpful. And then on Ulster, that feels like the most significant transaction. When I crunch the numbers on that, it looks very accretive even with the sort of 90% risk weight that you mentioned during your remarks. Are you expecting to pay a big premium to part of that book to reduce that accretion? Am I missing something there perhaps or you are announcing that MoU mentioned that staff directly involved in that lending book would transfer across. I assume that means that the cost income ratio on that acquired business is fairly low. But again, perhaps I'm missing something. As I say, when I crunch the numbers, and I think when others have crunched the numbers, it looks very accretive. I guess the market is pretty skeptical, but it looks a bit too good to be true. So any color on anything we might be missing in our analyses would be helpful.

I'll deal with the Ulster question before handing back over to Donal. We've signed the MoU. We're in a very good position here. The negotiations are continuing. We're in very detailed due diligence as we speak. And we hope to conclude matters over the course of the next number of months. But as I said earlier, all of the transactions that we're doing, all of the activity we're engaged in, in terms of inorganic growth, has a simple filter applied to it. Is it going to be accretive to our medium-term RoTE target of greater than 8%. So you saw that we're talking about taking EUR 4.1 billion of corporate and commercial lending, which currently sits within Ulster Bank. And we're also bringing with those assets, something in the order of about 300 people from Ulster who are mainly relationship managers, and we look forward to working them -- welcoming them to the team and here at AIB. But the key thing is, I'm not going to get into detailed negotiations over a virtual line this morning. But decent negotiations are taking place between our team and the team in Ulster and the team in NatWest. But rest assured, this deal will undoubtedly position this bank as Ireland's leading corporate and business bank. It puts it beyond doubt, puts it beyond debate. And it will be accretive to our RoTE targets of greater than 8% in 2023. Donal?

Yes. I'd say on the the specific question on my guidance around other income, what I mentioned there, flat year-on-year. Again, that is excluding any impact from Goodbody's. Obviously, some of the details of the transactions were externalized. It's a bit too early for us to talk to that in detail, okay? One of the reasons for making this acquisition, very simple, bring our customers to their products. And it's going to take a little bit of time for us to be able to tease that out and give you the kind of color and information that you're looking for. But needless to say, we feel, with our customer base, with deal flow that generates that we feel we're missing at the moment, we think that there can be a reasonably material uplift to the Goody's proposition. And we're working at pace with the management team of Goodbody's to try and solve and to bottom out what these items could be.

Thank you, Chris. We're now going to Daragh Quinn from KBW.

Thanks for all the guidance and details you've given. It seems almost short list to ask, for a bit more. But I just want to go back to the dividend. We've seen a number of other European banks look to recover or repay if you want to cancel 2019 dividends once the current restrictions are lifted at the end of September. I mean given your capital ratio, I mean I appreciate, it's in the context of a number of acquisitions, but was that an option or something that you considered or debated? And then a second question on the restructuring charges and the outlook for costs. You've indicated a EUR 250 million restructuring charge or other provision charges in 2021. Should that be framed against the EUR 400 million number that you gave for '21 and '22? And then on the wage guidance for 2021, which, I think, you indicated as to be roughly flat, if you could just put that in context relative to the number of employees and how we should think about the wage evolution given the declining FTEs? And I guess, what is that saying about underlying wage growth? And again, I think you have confirmed it but all of that guidance around costs excludes the acquisitions.

Yes. In relation to wages, I'll just take that question for us before I pass the baton over to you. In relation to wages, we're currently engaged with the FSU in relation to negotiations for 2021. And I'm very, very comfortable with what Donal just said in relation to overall guidance. We have made significant progress in reducing our headcount over the 2020 year and we have a very clear target out there. We have indicated that we are going to embark on a voluntary severance program. We're currently in consultation on that, and it is something that I expect we will bring over the course of the next number of months. But we are going to see steady linear progress over the course of the next 2 years in getting us from the 9,100 level that it was at the end of 2020 down to less than 7,700 on an unchanged business basis at the end of 2023. Donal?

Yes. Thanks very much, Daragh. I think where I may have confused you, and this is my fault, by saying that staff costs will be flat year-on-year. That is indeed how we see us. It's not due to wage inflation or anything like that. It's actually linked to some of the G&A reduction as well. If you may remember in December we said that we were going to begin to in-source some roles in the technology world. So rather than paying all these experts to do stuff for us, we bring in-house a certain quantum of these. So what you're going to see is a reduction in G&A from that kind of expense because we're going to be doing it ourselves with our own people. So people flat, G&A down is going to be the way that, that is going to operate. So it's certainly not a commentary around wage inflation. I think that you'll continue to see the overall trajectory of the headcount, decline in line with the way Colin described. But the interplay and interactions between G&A and staff will change a little bit. That was on wages. On exceptionals, yes, I said EUR 400 million between '21 and '22. In effect, what I've done is taken amount of that in 2020. So EUR 200 million has effectively reduced by that EUR 35 million. And really, what I'm doing is filling in the gap for what I think the exceptional costs will be for 2021, incorporating hopefully, the last year of costs associated with the Tracker Mortgage Review, et cetera, et cetera, which is still ongoing. And obviously, the time line is set by the Central Bank of Ireland and not us. And then dividend, look, I think if we were not embarking on a number of inorganic items, and we were working off a clean balance sheet, clean capital environment, it would have been something that we would have considered. But just given the variety of different items that we are looking at now, EUR 4 billion of banking assets, a new LifeCo JV, it just didn't seem feasible or credible to be on top of that looking to talk about surplus capital, et cetera, what to do with it? So we're really focused on '21 on returning to profitability, integrating all of these items that we've talked about. I've been able to describe to you really clearly capital return impacts. If we do that well, we'll be generating a lots of capital, and I think the conversation around dividends going forward become a lot more straightforward.

Okay. And now we'll turn to Aman from Barclays.

Can I come back to net interest income, please? And I know 2021 and further out is going to be impacted by various acquisitions. But just the kind of underlying NII of your business as you're kind of guiding to as it is. First of all, what -- can I ask you for a bit more clarity on moderate in terms of your NII guide? Are you able to ascribe a percentage, rough range for 2021 versus 2020? I guess the reason I'm asking is, I think your kind of exit run rate and in terms of where NII is annualizing at the moment, I appreciate excess liquidity is weighing. To me, it does imply something quite meaningfully below where the Street is next year. So as part of that, you could help us understand what your exit average interest earning assets were in Q4, that would be really helpful. And Can I ask about TLTRO? So thanks very much for the commentary about the EUR 4 billion drawdown. I mean, have you -- do you think you'll meet your balance sheet criteria in order to recognize the income in there? And if so, should we be looking to kind of add 100 basis points to the contribution from that book? And is that to any extent embedded in any of your guidance? Or is the outlook for the balance sheet a little bit too uncertain? And then I guess on negative interest rates, thank you very much for that disclosure regarding the incremental EUR 16 billion of deposits. Just roughly speaking, what kind of rate are you charging those customers? And again, is that kind of captured into your NII guide? And just the final one, sorry, on your investment securities comment. So presumably, that excludes the impact of your structural hedge, so I've not -- forgive me first, I've not seen it, but I can't see any disclosure on the structural hedge in the slides or report. So could you help us kind of understand the balance and the yield on that book? And it sounds like you're not really expecting that to be a drag going forward. So I mean, could you confirm and quantify that, please?

Thanks, Aman. I'll take the negative interest rate question and then will hand over to Donal. Like every bank across the Eurozone, we've been grappling with the impact of negative interest rates since 2014. At the moment, we've got a pass-through of that minus 50 basis points to customers with a credit balance in excess of EUR 3 million. So EUR 3 million is the current threshold on that, and we'll be reducing that threshold through the next 2 quarters so that by the end of the third quarter all balances, personal and business and corporate, above EUR 1 billion will be liable to negative interest rates.

Okay. Moderate one can get into words sitting here, I would say moderate is less than 5%. Certainly my terminology. TLTRO, I would love to say that this is absolutely nailed on, but it is still pretty close to call. It certainly isn't going to cost me anything. I think that the TLTRO terms for the next drawdown are very, very favorable. And I will be able to update you in March. But it's just quite close to call. Redemptions impact this as much as new business. So it's very hard to be completely definitive, and I don't want to give you a wrong answer. But I mean I have conceptually got my head around taking on TLTRO liabilities, notwithstanding the fact I have quite a strong liability base because of the potential gains once you meet your asset targets. And the guidance I've given you, I haven't included any further impacts or anything beyond the TLTRO 3. Obviously, I will be looking to drawdown under the new terms of the new TLTRO as well. But I just want to figure out where we are at the end of March 1. AFS, I gave you the clear guidance there because the number was material. In terms of SHP, obviously, in a lower rate environment, that's going to perform. In 2019, SHP contribution to NII was around 6%. Of 2020, SHP contribution to NII was around 8% or 9%. So I didn't incorporate it. It's within that customer loans number. Again, in 2019, I would have referenced an EUR 8 billion structural hedge with an average life of 5 years. Obviously, throughout 2020, we would have increased that based off the fact that the lower for longer environment is fairly nailed on. So it's more like EUR 10 billion or EUR 11 billion now. And as I look to the outer years and why I don't draw attention to it as we see it being pretty consistent at around 8% or 9% of NII in the coming years. So it's not going to create any material changes up or down.

Okay. And next, we've got Guy Stebbings from Exane.

Thanks for all detail this morning. I just want to come back to deposits firstly. Obviously, very strong inflows and thanks for the detail on how it impacts NIM. I guess your your guidance to net interest income on the basis of no acquisitions, but presumably, when you look at those excess deposits, you have an eye to things like the acquisition and therefore, the current hit to NII, NIM from excess deposits, perhaps your happy to view a little bit as transitory in nature? Or would you still seek to manage it down quite meaningfully, if you could, going forward? And then on the U.K., sort of similarly, obviously, a healthy -- quite a low loan-to-deposit ratio, you're pointing to GBP 1 billion of asset sales in the U.K. I'm just wondering what the strategy will be with the deposits in the U.K. if you're successful there? And then just a very quick final question. On unsecured, quite pleasing to see that it grew in the second half unlike what we're seeing in some jurisdictions. I appreciate it's relatively small portion of the book. But just wondering how you're thinking about that going forward. I think you said that credit card activity was already back to pre-crisis levels. So should we expect to see growth in that portfolio even before or lockdown restrictions ease?

Okay. At a general level in relation to deposits, the surge that we've seen is driven by an element of precautionary savings, but there's also an element of inability to spend because of the nature of the lockdown restrictions. And we do expect that as those restrictions ease, you will see a significant uptick in consumption and investment, which will go some way towards addressing the surplus liquidity that we're currently dealing with. Donal?

Yes. With respect to the U.K., we're -- as Colin mentioned, we have advisers appointed for the business. And it's -- if I look at the assets and liabilities, it's GBP 1 billion worth of assets. Liabilities associated with that is around EUR 4 billion. We're dealing with different counterparts at the moment to see what kind of mix and what kind of transaction makes the most sense for customers, counterparties, ourselves. But we would expect if the assets are and the customers are leaving that the liabilities will transfer with them. So that's an effect that we think we'll see throughout 2021. On the personal loans and credit cards, yes, again, we certainly saw a strong trajectory H1 to H2. We saw a once-in-a-lifetime effect, unfortunately, in January where our credit card debt was paid down, which is pretty unusual in Ireland, which normally are maxed out in the first 30 days of January, February. But look, it's linked to the ability to spend. And when the opening, reopening timetable is clearer, we do think that, that is going to continue to normalize a lot. We would have presented in the personal banking space a new green personal loan product, very heavily target as buying electric vehicles, retrofitting homes. That comes at a discount to our normalized rate, and that's a product that we think is going to be very attractive in the marketplace. And all of our different distribution channels are rolling that out at the moment. And we think that, that is going to be a really key point of differentiation for us in the whole sustainability type environment. So that is what gives me calls for optimism.

Okay. And now for our final question this morning. We're turning to Marta Romero from Bank of America.

If I -- I would like to go back to old story, if I may. NetWest management has been very explicit about the contribution of the commercial business, which was slightly over EUR 200 million in 2020. Is this a figure you feel comfortable with? And regarding costs, they've mentioned that you will be onboarding roughly 300 employees. Trying to tally that with the guidance you've given for 2023 in terms of total number of employees, what's your expectation on that and cost, of course? And then the second question is -- would be on capital. And if you could give us an update on progress on your internal models. You mentioned at the Investor Day that you were investing. Are you hopeful you can bring great risk density down in your mortgage book? And do you think that at what happened with Ulster, the central bank may be more receptive to the idea that the current treatment of Irish mortgage books maybe too punitive compared to the Eurozone?

I'll take the last comment, and then I'll hand over to Donal. I think that the -- we're all well aware of the the burden of capital which Irish banks carry in terms of requirements, and that's very obvious consequence of the credit experience during the last financial crisis, during the global financial crisis. And my personal view is that I don't expect to see any significant change in that over the near term. We're going to have to see what is the credit experience this time around. I believe it will be substantially better. But we need to see those data points, and we see them running through our models over the next number of quarters and indeed years before I would expect to see any relief -- significant relief on that front. Donal?

Yes. Look, I think the impact of COVID-19, when we see that moving through stages, particularly stage 3 into resolutions, I think that's a relevant data point because all our models really know at the moment is what happened in the last GFC, which was pretty catastrophic. So -- but like Colin says, despite the fact that the last number of years have been relatively benign, the history is what really tends to hurt us. And the way the models are built is they're pretty long dated. So I think it would be naive to think our risk weighting density is going to fall any day soon as this hasn't been my experience to date. So I don't think it will get much higher. I don't think this could get much higher. But we don't certainly bake any benefits of that into our overall thinking about capital. Until that happens, we don't bank it. In terms of Ulster, I clearly need to be quite careful here, it's an MoU. It's very early days. Other than to say that number seems quite high that you have mentioned, I'll leave it to you to look through all of the various disclosures. We're specifically looking at assets, people associated with those specific assets. Sometimes it can get a little bit confusing with ancillary items, which may or may not be incorporated such as asset finance and things like that. But I just certainly don't want you getting ahead of yourself a little with a number like that.

Okay. You have us results 2020 and our updates on the strategic plan. Thank you for attending this morning. We look forward to updating you on our first half performance as we move into August. Thank you very much, indeed. Good morning.