Close Brothers Group plc (CBG) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Close Brothers 2020 Annual Results Call. My name is Stuart, and I will be the operator for your call this morning. [Operator Instructions] I will now hand you over to Adrian Sainsbury. Please go ahead.

Good morning, and welcome to the presentation of Close Brothers' 2020 Annual Results. I'm delighted to be introducing this set of results on my first full day as Chief Executive. It's an honor to have been chosen to lead the group as I truly believe this is an extraordinary company that plays an important role in the lives of the people and businesses it serves. I'll start by giving you an overview of the group's position and strategy and how we'll emerge from this crisis in the strongest possible shape. Mike Morgan, our Group Finance Director, will be taking you through our financial performance. And I'll then come back to give you an update on each of our businesses and outlook. Current circumstances have dictated that this is a prerecorded presentation. But as usual, we'll be happy to take your questions afterwards, both via the telephone conference line and over the webcast, which you can submit either during or after the presentation. Our 2020 financial performance is a story of two halves. Strong results in the first half of the year were followed by a period where we felt the impact of COVID-19, an unprecedented turn of events which affected us all. And while we couldn't have predicted the emergence of COVID-19, the planning we've undertaken in previous years leaves us well placed to successfully navigate the crisis. And the disciplined application of our model has allowed us to deliver a resilient performance despite the impact of COVID-19. We remain very confident in the high-quality of our loan book, which is predominantly secured and prudently underwritten. Winterflood has delivered a very strong performance, and we've seen continued good momentum in Asset Management. We also have a strong capital funding and liquidity position and are well placed, both operationally and financially, to navigate this challenging environment. It's still early days, and the path to recovery remains uncertain, but we've seen encouraging green shoots of recovery since June, with some positive early signs from those customers in forbearance. Following our resilient financial and operational performance in the second half, the Board is recommending a full year dividend of 40p per share. This decision to resume our dividend reflects our confidence in the group's business model and strong financial position, notwithstanding the current uncertain environment. Having been at Close Brothers for 7 years, I was heavily involved in the definition of our group purpose: To help the people and business of Britain thrive over the long term, which resonates deeply with me. To achieve this, our long-term strategic approach places exceptional service at the heart of everything we do. Each of our diverse specialist businesses have deep industry knowledge, so we can understand the challenges and opportunities that our customers and clients face. We have an important role to play in supporting small businesses and individuals throughout the current crisis. And as a specialist lender, we are well placed to make a real difference to them. Our culture brings out the very best of our people, their skills and the strong reputation we've built over many years. I've been in banking for 30 years, and doing the right thing has been important to me throughout my career. To reflect this, I'm immediately adding our responsibility as a core component of our purpose. As well as helping the people and businesses of Britain thrive, we also have a responsibility to help address the social, economic and environmental challenges facing our businesses, employees and clients now and into the future. A key point of difference at Close Brothers is our long-term approach and the rigorous discipline behind our proven and resilient business model, which supports our long-term track record of growth, profitability and dividends over the years. Our success is supported by 3 pillars. Firstly, our consistent pricing and underwriting criteria are a strategic imperative for us. Our lending is predominantly secured with conservative loan-to-value ratios, small loan sizes and short maturities, which allows us to maintain both a strong net interest margin and high-quality credit portfolio throughout the cycle. Secondly, the prudent management of our financial resources, where a strong capital liquidity and funding position allows us to grow and invest, while comfortably meeting regulatory requirements. And thirdly, the diversity of our businesses with specialist expertise in each of the sectors we operate in. These are the fundamental strengths of our model, and my role is to ensure we continue to protect these pillars whilst taking the business forward. We entered the current crisis in a strong position, and the group's agility and operational resilience have allowed us to respond effectively and to remain open for business throughout the pandemic. Our immediate priority is to continue to successfully navigate the COVID-19 crisis and to support our people, customers and clients as the economy recovers. We have a long history of supporting individuals and SMEs across the U.K. through a range of market conditions and have introduced new ways of working to protect our colleagues and maximize our assistance for customers and clients during these times. In 2019, we spent considerable time developing playbooks and simulations in preparation for an economic downturn, which were implemented in response to COVID-19, allowing us to navigate this crisis and be ready to lean in to any green shoots of recovery. The economic downturn from COVID-19 has been felt across our businesses, but the fundamental strengths of Close Brothers remain unchanged. As a through the cycle provider of funding, wealth management and trading services to individuals and small businesses, our role remains as important as ever. The deep experience and expertise we have within the group across all economic conditions ensures we're well positioned to continue delivering on our purpose to help the people and businesses of Britain thrive over the long term. I'll now hand over to Mike, who will take you through the group's performance in more detail.

Thank you, Adrian, and good morning, everyone. As Adrian said, we delivered a resilient performance in 2020, reflecting the disciplined application of our business model in a challenging environment. However, the impact of COVID-19 can be seen across all aspects of our business, with group AOP down 47% to GBP 144 million. Profit in banking was impacted by lower activity levels, forbearance and higher impairment charges, but this has been partially offset by higher profits in Winterflood. Overall, we delivered an adjusted earnings per share of 74.5p and a solid return on opening equity of 8%. We maintained a strong capital, liquidity and funding position, with significant headroom above regulatory requirements as our CET1 capital ratio increased to 14.1%. Our leverage ratio remained very strong at 11.2%. And as Adrian mentioned, following a resilient financial and operational performance in the second half, the Board is now proposing a 40p dividend in respect of the full financial year. Looking first at the income statement. Income was up 6% to GBP 866 million with growth in Asset Management and Winterflood, partially offset by the Banking division. Expenses increased 8% to GBP 538 million, reflecting higher variable costs in Winterflood and continued investment across the businesses. Impairment charges rose to GBP 184 million, reflecting the forward-looking recognition of impairment charges under IFRS 9 to incorporate the impact of COVID-19. And we delivered GBP 110 million of profit attributable to shareholders, a 46% decrease on the prior year. Moving on to the divisional performance. Overall, adjusted operating profit reduced 47% to GBP 144 million, with the lower profit in Banking and Asset Management, partly offset by a very strong performance from Winterflood. In the Banking division, profit reduced 61% to GBP 99 million, as retail, commercial and property were all impacted by higher impairments and lower activity levels, which affected both loan book growth and net interest margin. We have seen good momentum in Asset Management in challenging market conditions, although profit decreased by 6% to GBP 20 million, reflecting investments in new hires and technology. Profit in Winterflood increased by 140%, with a very strong trading performance, reflecting increased volumes and the expertise of our traders. And now on to our balance sheet. Our balance sheet remains strong and transparent with a diverse funding base. We entered this period with strong levels of funding and liquidity, which we have increased further since COVID-19. We have maintained a prudent level of funding well in excess of the loan book, with total funding increased to GBP 10.2 billion. We continue to borrow long and lend short with the average maturity of funding at 18 months, ahead of the loan book at 15 months. We increased our levels of liquidity, which remain well ahead of regulatory requirements. We had GBP 1.7 billion of treasury assets at the 31st of July 2020, with the majority held with the Bank of England. Our funding base is well diversified and includes access to retail and nonretail deposits as well as secured and unsecured wholesale funding. We continued to optimize and diversify our funding base. And our customer deposit platform helped us increase our retail deposits by 22% in the year. Our credit ratings remained strong with the banking subsidiary rated Aa3 by Moody's. Turning to our capital position. Prudent management of our capital has always been core to our model and has been particularly important in light of COVID-19 to ensure we can continue to support our customers, clients and colleagues. Our CET1 capital ratio increased 110 basis points to 14.1%, with over 600 basis points of headroom against minimum regulatory requirements with our CET1 capital increasing 7% to GBP 1.3 billion. This is driven by retained profit with the impact of higher impairment charges largely offset by the capital add-back under transitional IFRS 9 arrangements. Risk-weighted assets remained broadly flat at GBP 8.9 billion. And our leverage ratio remained strong at 11.2%. We have made good progress towards our IRB application, with the initial IRB model suite now complete and are currently on track to submit our formal application to the PRA by the end of 2020, which will further strengthen and optimize our capital position. Overall, we have a strong capital base, with significant headroom to minimum regulatory requirements. This gives us confidence that we have the flexibility to support our customers and clients through the current crisis and grow the loan book. Moving on to the Banking division. We saw a 3% reduction in income to GBP 586 million, driven by lower customer activity and forbearance measures. The impact of these lower activity levels is reflected both in the broadly stable loan book and the net interest margin, which declined on the prior year to 7.5%, while we maintained our focus on prudent underwriting and pricing discipline. Expenses grew just 1% to GBP 303 million as the continued investment in the business was largely offset by lower variable compensation. Impairment charges increased across commercial, retail and property, resulting in a full year bad debt ratio of 2.3%. As a result, adjusted operating profit reduced by 61% to GBP 99 million. Our approach to provisioning reflects the application of our IFRS 9 models, overlaid with our expert judgment. In the last financial year, provisions increased from GBP 104 million to GBP 239 million, predominantly reflecting the impact of COVID-19 and related forbearance. The increase reflects the movement of loans between stages as well as more severe macroeconomic scenarios and a review of provision coverage at the individual loan and portfolio level. This resulted in an overall increase in coverage to 3%. We believe this represents a prudent and appropriate level of provision and remain confident in our loan book, which is predominantly secured, prudently underwritten and diverse. We are now seeing customers emerge from their concession period. While it is still too soon to draw any firm conclusions, the early signs are encouraging with the majority of forborne customers in commercial and retail recommencing payments either on their original terms or under a bespoke payment plan. Now on to the loan book, which remained broadly stable at GBP 7.6 billion, a resilient performance overall, reflecting the diversity and specialism of our lending portfolio. And although new business volumes fell materially when the U.K. entered lockdown, we have since seen an increase in customer activity with a fairly sharp pickup in some of our businesses. The commercial loan book increased 2% overall. We saw growth in our Asset Finance business, which experienced record new business volumes in June and July supported by good demand for loans under CBILS. This was partly offset by lower utilization in our Invoice Finance business. The retail loan book increased 1%. The Premium Finance loan book grew 5% as we continue to see solid demand for insurance finance with limited impact from COVID-19. In Motor Finance, the U.K. loan book grew, benefiting from a sharp recovery in new business towards the end of the year. However, this was offset by a modest reduction in the Republic of Ireland and the Motor book declined marginally overall. And the Property loan book declined by 6%. This reflects subdued construction activity during the lockdown period as well as higher repayments by our customers. Turning now to our net interest margin. Our business model is built on pricing and underwriting discipline, which has supported a consistently strong NIM compared to our sector. Despite this discipline, in the last year, the net interest margin reduced 40 basis points to 7.5%. This reflects a period of lower fee income, with the impact of forbearance measures where we have waived certain fees as well as lower transaction and utilization levels during the lockdown period. The chart on this slide shows the trajectory of NIM during the year, adjusted to exclude certain items, including modification losses and adjusted for day count. As you can see, it remained broadly stable through the first half of the year and prior to the COVID-19 outbreak. We then experienced a sharp drop in April and May, reaching a low of just over 7%. There has since been a partial recovery as the easing of lockdown restrictions in June and July have increased activity levels and associated fee income. Moving on to costs. There was a slight increase of 1% in banking costs driven by continued investment and offset by lower variable compensation. Investment costs increased by GBP 11 million to GBP 57 million in the year, which represents 19% of our total cost base of GBP 303 million. Our commitment to maintaining this investment is a key differentiator of our model in the long term and ensures we are able to lean in when the opportunity arises. We believe that this is the right time to continue investing to increase our capacity and capabilities. Other operating costs decreased 3% to GBP 246 million, as we maintain strict control of costs to create investment capacity and reduced variable compensation by GBP 11 million. Going forward, we will continue to exercise strict discipline on our operating costs, but expect investment to continue to increase as our key strategic investment programs progress. The next slide looks at how we are investing for the future. Investing through the cycle is a core part of our business model, and we have a number of key strategic projects underway. Some of these are focused on protecting our business, strengthening systems and operational resilience and adapting to regulatory change. Others help us improve the business. For example, by strengthening our customer proposition or driving operational efficiency. We also look for opportunities to extend our business through growth opportunities in existing and adjacent markets. Our key multiyear investment programs in Motor Finance and Asset Finance and our IRB application all remain on track despite the operational impact of COVID. The investment we have made in recent years has given us some real benefits in responding to the recent challenges of COVID-19. For example, in Motor Finance, we were able to accelerate the rollout of our remote lending capabilities, which allowed our dealers to continue writing new business during the lockdown. And in Asset Finance, our recent rollout of Salesforce enabled us to quickly set up a portal for CBILS applications. Now we turn to our customer deposit platform, which is another example of an investment program that has proven particularly beneficial in the current environment. We have delivered a resilient and scalable deposit platform that allows us to offer a wider range of products and provides access to new customer segments. We've also delivered an enhanced customer experience with faster onboarding and the introduction of online savings accounts and digital communication. Our broader savings proposition has enabled us to optimize our cost of funding, and the platform has delivered scalability and operating efficiencies. Since launch, we have attracted around 4,000 online customers to our online portal and have seen 37% growth in retail deposits. Our online portal also allowed us continued access to additional depositors throughout the lockdown period, which has been essential in enabling us to continue raising deposits remotely. Moving on to Asset Management, where we saw good momentum despite the challenging market conditions. We achieved strong net inflows of 9%, reflecting the strength of our client proposition and the hiring of additional portfolio managers. Managed assets increased 8% to GBP 12.6 billion, and total client assets increased 3% to GBP 13.7 billion as we saw good demand for our integrated advice and investment management services. The division saw a 6% increase in operating income driven by continued growth in managed assets. However, the reduction in income on advice and other service reflects the impact of COVID-19 on new advice business. The revenue margin remained broadly stable at 94 basis points. Expenses increased 9% to GBP 108 million as we continue to invest in people and new hires as well as technology to support the long-term growth of the business. And the expense income ratio increased to 84%. Accordingly, adjusted operating profit reduced 6% to GBP 20 million. And on to Winterflood, which delivered a very strong performance with a 140% increase in operating profit to GBP 48 million. The first half of the year saw continued Brexit and general election outcome uncertainty, contributing to a slowdown in capital markets. However, the second part of the year saw significant volatility driving heightened trading activity across global equity markets. Overall, income increased 63% to GBP 152 million, reflecting a very strong trading performance and a significant increase in volumes since the COVID-19 outbreak. Expenses increased 41% to GBP 104 million, reflecting higher variable compensation and settlement costs following increased trading activity. The expertise and experience of our traders meant they were able to successfully navigate the challenging market conditions with only 7 lost days. All of this contributed to a very strong performance, delivering the highest level of profit in the last 10 years. So, as you can see, despite the very significant impact of COVID-19, we have achieved a resilient performance overall, and we are in a strong financial position, which leaves us well placed to continue navigating this crisis. I will now hand over to Adrian. Thank you.

Thanks, Mike. Close Brothers has a tremendous track record, and as Chief Executive, my role is to take the group forward and build the next chapter of our success story. The group's resilient performance for the year demonstrates the experience and specialist expertise of our people across lending, wealth management and trading during an unprecedented period. The impact of COVID-19 on the Banking division from lockdown, forbearance and impairment provisioning was partly offset by a very strong performance in Winterflood, while Asset Management maintained good momentum in challenging markets. In Asset Management, our attractive vertically integrated model continues to see good demand, while in Winterflood, our resilient trading expertise combined with strong market activity upside potential. Our diverse business model and specialist expertise support our resilience and performance in challenging markets. This means that the group is well placed to respond to opportunities as we emerge from the current crisis. The distinctive lending model at Close Brothers focuses on maintaining our disciplined lending criteria over the long term, which consistently delivers strong returns and support for our customers and clients and has demonstrated over a number of cycles, we don't change from our proven approach. You can see here that we are well placed to lean in and generate strong growth in the periods following previous crisis, such as the dot-com bubble and the global financial crisis, while in more recent years, a benign environment has led to moderation of our growth. COVID-19 has now broken that pattern. And at this stage, our model is performing as we'd expect. Our strong net interest margin creates capacity for us to make quality investments through the cycle, which in turn have helped sustain our net interest margin and support our growth. A number of investments have proven crucial for our response to COVID-19, and we'll continue to invest to protect, improve and extend our model as has proven successful for us over many years. And while we can't know how the next phase of the cycle will play out, we do know that we're in a strong position to make the most of any opportunity it presents. In our Banking division, we've a great deal of confidence in the credit quality of our loan book. We apply consistent and prudent lending and underwriting criteria across our specialist businesses to mitigate credit risk. Over 90% of our lending is secured or with some form of structural protection with short tenors and low average loan sizes. It's also diversified across sectors, asset classes and geographies within the U.K. This, in turn, reflects the discipline we apply in our underwriting at all stages in the cycle and the many years of underwriting experience of our people. You can see from this chart, the broad spread of industries and sectors that our loan book is composed of, which highlights the diversity of our lending with no major sector concentrations. And we've minimal exposure to sectors that have been most significantly impacted during the crisis, such as retail, hospitality, leisure, air transport or oil and gas. Looking now at the various segments of the bank, our commercial businesses saw some of the most significant impact from COVID-19. Our Asset Finance business experienced its lowest levels of new business in April and May, but this was offset by record volumes in June and July as lockdown restrictions eased. This was supported by strong demand for loans under the U.K. government's Coronavirus Business Interruption Loan Scheme, where we were credited to lend up to GBP 750 million. In Invoice Finance, we experienced a marked reduction in utilization levels of Invoice Finance facilities, and the U.K. lockdown had a significant impact on new business levels. Impairment provisions increased significantly, reflecting the increase in forbearance across the portfolio. By the year-end, we had granted forbearance on around 26% of the commercial loan book by value, largely in the form of payment deferrals in Asset Finance. While it is still early days, our experience of customers emerging from concessions has so far been encouraging, with over 70% of the elements of the loan book originally on a payment holiday now having resumed payments. In Motor, new business was impacted by the temporary closure of motor dealerships during the U.K. lockdown, with most dealerships shut but some business still written remotely or in support of key workers. Volumes recovered sharply in June and July as dealerships reopened. In fact, July saw the highest monthly new business on record, up 35% on the prior year, with recent investment in Motor Finance allowing our sales team to maximize the opportunity. For Premium Finance, the impact of COVID-19 was more limited and we've continued to see solid demand as well as resilient credit performance. New business and premium reflected strong demand for Insurance Finance, leading to an increase in the loan book for the year overall. Across our retail businesses, we've granted forbearance on almost 9% of our loan book by value at the year-end. This is principally in the form of payment deferrals of varying duration, with fees and charges waived and no impact on our customers' credit records. It's still early days, and the picture continues to evolve, but the early signs are encouraging, with over 3/4 of the forborne loan book currently up to date, settled or having recommenced payments. Our Property business was particularly impacted during the lockdown period, where the temporary closure of building sites meant that only around 40% of sites remain active. Since lockdown restrictions began to ease, the U.K.'s construction market appears to be returning to a sense of a normality with the reopening of development sites. New build sales activity appears to have rebounded, aided by the temporary reduction in stamp duty and reflected in recently reported increases in house prices. Our new business has since started to recover, but remains below pre-COVID levels. We're confident in the credit quality of our property lending, with a high-quality development finance loan book and originated a prudent loan-to-value ratios at a maximum of 60%. We work with experienced developers and focus on residential developments of family housing where there's strong structural demand. The forbearance we've granted in property amounts to approximately 18% of the loan book by value. And is principally in the form of fee free extensions for development loans, where we remain confident in the quality of the borrower and the underlying security. The development book has had no significant credit issues to date, and our new business pipeline and undrawn commitments remain strong. The Asset Management division has maintained excellent client service during challenging market conditions, reflected in the continued good demand for our integrated advice and investment management services. We have an attractive, vertically integrated and multichannel distribution model, which underpins our success. This leaves us well positioned to benefit from the proven ongoing demand for our services and the structural long-term growth opportunity in the wealth management industry. The division has achieved good net inflow rates over several years, and has again delivered strong net inflows at 9% despite a slowdown in inflows in the second half due to the impact of COVID-19 on client interactions. We've seen net inflows from our advisers, third-party IFAs and our own portfolio managers with strong contributions from our investment in new hires over recent years. Ongoing investment in systems and technology continues to enhance our operating efficiency, and increase the scalability of our back and middle office functions. We also continue to hire additional advisers and fund managers while remaining open to selective incremental acquisitions to add long-term growth. Sustainable investment management strategies remain a key focus area across the investment management industry. And our socially responsible proposition continues to be well received with further sustainable fund launches planned in the coming year, and ESG criteria now embedded within our in-house research capabilities. And finally, Winterflood, which delivered a very strong trading performance for the year. Despite the unprecedented environment, Winterflood's operational responsiveness allowed it to maintain uninterrupted trading throughout the crisis, while the experience and expertise of our traders enabled them to deliver a very strong performance in extremely challenging market conditions. The extraordinary market conditions in the second half saw Winterflood record its highest ever volumes in March, its highest annual income since 2000 and its highest profit since 2010. And it navigated these extraordinary markets with great expertise, recording only 7 lost days in the year. Winterflood remains a long-established leader in market-making and is well positioned to maximize daily trading opportunities, and provide continuous liquidity in all market conditions. The business continues to make good progress in expanding its relationships with institutional clients and continues to grow its presence in the U.S. market. And Winterflood Business Services, which provides outsourced dealing and custody services for asset managers in the U.K., has continued to grow its client base with assets under administration now exceeding GBP 4 billion driven by continued net inflows despite the impact of negative market movements in the second half. Overall, the group has adapted well to this unprecedented environment, drawing upon our financial and operational resilience and the deep experience of our people. Following the easing of lockdown restrictions since June, we've seen encouraging signs of increasing economic activity in the U.K. However, the near-term path to recovery still remains highly uncertain. In the Banking division, we remain focused on maintaining our prudent and disciplined approach while continuing to support our customers through this challenging environment. Asset Management continues to have long-term growth potential, and we remain committed to growing our client base organically and through selective hiring and infill acquisitions. Winterflood has shown continued good momentum through August and September, but remain sensitive to changes in the market environment. We have a strong balance sheet, high-quality loan book and proven resilient business model. And I'm confident we'll emerge from this crisis in a strong position to support our customers and clients through their recovery. And I'm really looking forward to taking this great business forward in the years ahead. Thank you, and we'll now be happy to take any questions you may have.

[Operator Instructions] First question today from the telephone lines is from Gary Greenwood from Shore Capital.

I've got 4 questions, if I can be a little greedy. So the first is just on the loan book provisioning. I was just wondering if you were to move 100% to your severe downside scenario, how much additional provision that would ask -- that would add, sorry? And the second one was on the dividend, whether we should think of the 40p as a sort of new base level as a full year dividend or whether that's just sort of a final dividend, and therefore, you'd expect dividends going forward to be looking more like they were previously. And the third one on Winterflood was whether you think any of the better trading performance in the second half of the year is structural rather than just being a cyclical factor related to the increased volatility. And then final question is just on sort of strategic outlook. And I guess if it ain't broke, don't fix it, but I'm guessing, Adrian, you're probably going to want to bring your own sort of style and approach and views to the group. So I was just wondering if you could give some insights as to what those might be.

Thanks, Gary. On the 4 questions, I'll take the latter three, and then I'll hand over to Mike to talk about the loan book provisioning. Firstly, on the dividend, the 40p, we don't see as a new base, absolutely not. We see it as the right level for the business performance this year that, as we described, is highly resilient. We canceled the interim, we were focused at that stage in the remarkably uncertain environment on our people and our customers. The delivery we've seen, the green shoots we've seen in recent months that have continued into August and September as well that we can talk about, aligned with our 14.1% CET1, have led us to conclude that is the right level for us at the moment. That is broadly the dividend cover on that 40p in the mid-range of what we've had historically, around the 1.5 to the 2.3 level, it's broadly in the level for that. And importantly, it is not a rebase either. It's the right dividend for this point in where the business is. And we'll look at it again with the Board when we come to the interim next year and the full year next year. It's clearly an uncertain environment, but we're very confident that this is a good level of dividend as we stand. I see Close Brothers' investment thesis as very important and relevant here. We look for the 3 ticks on very solid capital, liquidity and funding, 3 very clear ticks. We've got the disciplined model we've talked about throughout the presentation. And that's enabled us to provide the sustainable dividend that we've had in the past, pretty much since the company became public in the '80s and only broken by the COVID cycle. So I'm very keen that we have a step in future when the time is right, and we move back to that dividend story that we've had before. Looking at Winterflood, the second half was significantly better than the first half, not surprisingly. Winterflood's profits are helped by a very good market, its volatile trading and good volume. And as the slide showed, the bargains that we saw in half 2 were dramatically higher than the prior year and half 1. And I don't necessarily see it as a structural change. But importantly, we are seeing good volumes continue in August and into September so far. Phil, would you like to add anything to that? I'm joined by Phil Yarrow, the CEO of Winterflood. Would you like to add anything to that, Phil?

Yes. I agree with you, Adrian. I see it as cyclical. We've lived through many market cycles over the last couple of decades. And clearly, this second half performance demonstrates the ability of Winterflood to lean into much greater investor appetite when it presents itself at the upper end of a market cycle.

Thank you. Should we have a look at the strategic outlook? Obviously, I've been at the company for 7 years. I think this is a great company, as I said in the RNS statement and also in the presentation there. We've got a good model here. It's a strong model, and it's led to that investment thesis that I mentioned. I'm keen that we progress that model into the future. There's a very good slide on the loan book and how we've added businesses to that in the past. We'll look to generate future opportunities that fit with that model as well. An important thing for me is maintaining the premium valuation that we have achieved for a number of years. And the strategies that we bring will fit with the model, and we'll look to sustain that valuation into the future. Mike, would you like to answer the loan book provisioning question?

Yes. Thanks for the question, Gary. You'll have seen that we have taken a charge in the year of GBP 183 million, and you'll see that our base scenarios are 40% baseline, 60% downside. So to answer your question specifically, if we move to a downside scenario, where we would have a protracted slump, you would take a further GBP 23 million of provisioning. Equally, if you move to 100% of the upside, you would reduce the provision by around about GBP 18 million.

Gary, is there anything you'd like to come back on there? Or should we move on to the next question?

No, that was it. Just on the downside scenario, is that the most severe scenario? Is that just your...

Yes, that is Gary.

Next question is from the line of Nicholas Herman from Citigroup.

Can you hear me all right?

Not very clearly, actually, Nicholas. The line isn't perfect. Maybe a little bit slow would help us. That would be great.

Is that better? Can you hear me?

Yes. Yes. That is better. Thank you. Yes.

Okay. Cool. Three questions, please. Two on Banking and one on Asset Management. On Banking, it looks like your fourth quarter Banking net interest margin was 7.4%, 7.5%. Thank you for that chart. That was helpful. But for the net interest income, in particular, rather than including the noninterest income, I mean, just curious what your exit margin is there, please, and then just the outlook for the pure net interest income. And then how quick -- I mean, is there still repricing that needs to go through in terms for that, that will determine the NII outlook there? And second question on Banking. Just, I guess, what are you seeing on the ground that has encouraged you to increase your provisions yet again in July? Just curious if there are any sectoral indicators that you're looking at in particular. And then obviously, the accounts that you were talking about, you were referencing a more constructive green shoots -- potential green shoots recovery. I'm just -- and I'm also cognizant because you're provisioning is quite a bit higher than some of your closest peers. Third question on Asset Management. Despite an 8% increase in managed assets and even bigger increase in average managed assets over the year, we've still seen another year of negative jaws. So just curious, I guess, there's 2 parts here. First of all, any comments you can make around pricing because the margins in investment management and advisory seem to be coming down? And then as part of that, when -- how long before we think we can start to see some positive jaws? Obviously, you're -- you do continue to invest in that business.

Thanks, Nicholas. If I start with the NIM question first. And I think this is Slide 17 in the deck, probably. And if that helps, people, it is Slide 17. As you rightly say, if you look back at that slide throughout the year, the NIM was pretty flattish below COVID, it was around 7.6%. And then there was quite a significant drop-off, largely due to forbearance, not charging fees to customers and reduced activity levels in a number of the businesses that we alluded to. And importantly, we've seen the NIM bounce back into the range that you said in the 7.4% sort of level towards the end of the year. And that's because we've seen activity levels pick up again, and we've been able to see more fee activity as well. The first point I'd make around that is our NIM is particularly strong compared to the market, and that's from the expertise of our businesses and the different positions that we have in each market. We don't actually disclose the margins within the NIM by business, but it would be fair to say that there is competitive pressure still in the market. We are seeing some specialist sectors where people are pulling out, which will be helpful to us. We also talked in the presentation about the Coronavirus Business Interruption Loan Scheme, the government scheme. That is at a modestly lower margin as well. We pass on the benefit of the government guarantee, that 80% covers that lending. So that has a small impact as well. So the trend you will have seen, if you look back further, there has been small erosion over the years. But where we are around the 7.6% at the start of the year and some recovery, I think, is the position as we stand today as well. So I think that is sensible to go on that basis. If I talk about the provisioning we've seen, in half 1 of the year, it averaged GBP 6 million a month, the bad debt charge. In quarter 3, it was GBP 87 million. And in the last quarter, we were charging at GBP 20 million a month. So that's the charge. I'm not quite sure on the point you're making in the final month of July, but we charge broadly GBP 20 million a month on average in the last quarter. The comments we've made on the encouraging signs emerging from forbearance in Asset, Premium and Motor in particular, lead us to conclude that the provision level we've had, the 2.3% for the year, is a prudent level and a right level for the business. I'm expecting -- we're expecting the provisioning level below that GBP 20 million going throughout the half one. And lastly, on Asset Management, on the cost of income, it would be fair to say that we've been investing significantly in recent years and successfully, that's both in our systems, and we're coming towards the end of that investment profile, that will be towards the end of 2021. And we've been investing in some high net worth portfolio managers, acquisitions that are bringing in funds for us very successfully. And those are sort of mini J curves, each of them when they come in. So as you bring the new portfolio manager in, there's a cost, there's a success that comes over a period. So we will be working on the operating margin as we go through. And I see the position as we have it at the moment as probably the -- a sensible level of operating margin to look at. Is there anything you'd like to come back on there, Nicholas?

Yes. Just coming back on the net interest margin, and I guess, pure NII margin. Obviously, I guess there's a bit of a lag as well of repricing liabilities versus assets. You've got quite a long duration funding. Is that going to mean that it's going to be quite a slow grind upwards as you reprice those liabilities? Yes, so it's going to be quite -- it's going to be pretty, pretty slow grind for you to kind of offset the lower prices after lower base rates.

On the repricing of liabilities, that's part of when Mike was talking about the deposit investment we've made. We have a changing profile within that as well. Our book is -- the term of the book has not changed dramatically on the loan book at all actually. We obviously have some forbearance we've talked about, but it hasn't dramatically moved the term out. Mike, would you add to that in any way?

Yes. So I mean, in terms of the pricing that the deposit program is giving us, we've been able to raise deposits and introduce new range of products there, which allow us to get a benefit to come through. So that will help as that comes through. We have seen a small uptick in the wholesale funding pricing, but not significant. That's had an impact as well. And those would be the only other 2 points I'd make on the sort of the funding cost side.

Next question is from the line of Benjamin Toms from RBC.

There's two, please. The first is that there's a headline on Reuters which has come out whilst this presentation has been ongoing from Sam Woods saying that the Bank of England next month will propose simpler rules for small banks in the U.K. I appreciate that you haven't seen this, but have you had any discussions with the regulator on this topic? Do you expect that the main thrust will be the relaxation in the MREL threshold? And secondly, in your CET1 ratio of 14.1%, is there any benefit in there from the changes in the rules on software intangibles? Or is that still to come?

I'll leave Mike for the CET1 question. I haven't read the Reuters announcement on the simpler rules. We interface closely with U.K. finance, where we do have a good dialogue on proposed changes and proposals from the PRA. On MREL, specifically, our deposit base is well below the current threshold anyway. So I can't see that, that would necessarily be a beneficial impact on Close Brothers. Obviously, I'd welcome any simplification that the PRA may have, and we'll read the announcement when it's published. Mike?

Yes. I mean the straight answer on software is no, that isn't in there yet. That will still take some time to come through if, in fact, the U.K. authorities agree to apply that. We do have, obviously, IFRS 9 transitional relief in there, though.

Benjamin, is there anything you'd like to come back on there?

Is there any way of quantifying what you could expect the software intangibles benefit could be? Or is it still too early in terms of the rules?

Well it's still too early in terms of the rules. It depends on over what period they defer that. I've seen 2 examples so far, one on 2 years and one on 3 years. But as I say, it's not certain yet whether that's actually going to be implemented in the U.K.

Next question is from the line of Freddie Sleiffer from KBW.

Just a point of clarification, please, on the liability side of the NIM. Just wondering how much did your deposit costs go down during the year? Just want to have the sense of the magnitude. And should we expect more of a decline in 2021? That was my first question. And then just secondly, since you're the first this year to announce a dividend, just wondering what sort of discussions you've had with the regulator on this?

Okay. I'll take the second one, and then I'll hand over to Mike on the liabilities point. We -- as you'd expect, we have a good relationship with the PRA, and we've consulted with them in the normal regard in terms of the proposal of the 40p. The decision is the decision of our Board, and I ran through some of the reasons on why it's the right dividend for us, the right level for the year and how we'll look at that in the future. Mike, would you like to talk about the liabilities point?

Yes. I mean, if we look at what happened in the year during the first half of the year, the monthly cost of funding initially rose by a relatively small amount from 1.67% to 1.74%, then in the second half, we saw a fall of 14 basis points from 1.74% to 1.6%. So it did come through and helped us there. I suppose the point is, is that what we saw was that the rate of retail deposits didn't fall as much as the base rate. So although it did come down, it didn't move in the same way that we saw base rate move. So a relatively small effect, which overall has left cost of funds broadly flat on the year.

Next question is from the line of Robert Sage, Peel Hunt.

I was intrigued by your comment that there's positive news in terms of customers emerging from forbearance, the majority, I think, of which you said have restarted repayments. And I was wondering if you could give at least a qualitative feel in terms of how many of those who have restarted repayments are on their original terms? And how many of those might be on a sort of bespoke amended repayment schedules? And I guess, related to that, I would be interested to know whether you think that these sort of loan modification losses could have a significant impact on the net interest margin in 2021? And finally, just on CBILS, I think you said that you're authorized to lend up to GBP 750 million. And I was wondering how much of that you might have lent to date?

Okay. I'll start by answering the CBILS question. Mike, can you -- I'll hand then to you for the positive news by customer, if that's okay. So correct, we have a GBP 750 million approval with the British Business Bank for CBILS. And as I mentioned, we have credit approved around GBP 350 million at the moment. And that's 1,420 customers. I don't see that having a material impact on the NIM. It will be modest, as I said before. Depending on what the Chancellor may announce because there is some speculation the scheme may be extended, that lending would increase from the GBP 350 million position that I mentioned before. And we would actively use that scheme because it has helped our customers dramatically in recent times. Mike, would you like to handle the positive news that we got on the number?

Yes. I mean in terms of the forbearance numbers, you'll have seen in the announcement, we disclosed the levels of people that are either repaying or back on a payment program. So that's 75% in retail and 70% in commercial. In the commercial business, we will have worked with those individuals to make sure that the payment profile fits with the company's ability to be able to continue to repay that. So those will be personalized. They may well have dropped back on to the original rate, but those will be personalized. From the retail perspective, the vast majority will be back on to the original terms, albeit over a longer period of time in most cases.

Robert, can you just give me your second question again because I didn't quite pick that up?

There was a point on the loan modification losses as well which we -- which, if I'm hearing you correctly, you're talking about those that we took through the net interest margin. Those will actually unwind as we move into next year. Obviously, if there is further forbearance and the cash flow comes in over an extended period of time, we will need to make adjustments for that. The levels going into forbearance now have dropped quite markedly. So in terms of those modifications that are there, those will unwind as we move through the life of that loan.

[Operator Instructions] The next question is from the line of Jason Napier from UBS.

Three questions, please. The first one on government guarantee scheme related lending, and the volume data is really helpful. I'm just trying to get a sense as to the degree of pull forward that we're basically seeing in credit demand. Some of the borrowing that is evident in very strong SME credit growth is obviously firms trying to trade their way through tough circumstances. But with your loans coming in a couple of percent higher than we had expected, I'm just wondering whether this is a pull forward in leverage that you might have extended next year or we might expect more subdued growth or whether, overall, you still have a picture of sort of pent-up demand, if you like, for investments and loan growth. Secondly, on the outlook for costs. One of the things that I've gotten wrong in the past, one of many things, is to underestimate the bounce back in expense growth that you get after periods of crisis and austerity. So you flagged GBP 11 million in lower variable comp and an intention to continue to invest in the business. I'm just wondering what do you think the expense inflation for the year ahead in a normal operating environment may look like given having cut back variable costs in 2020 and the further investments in the platform. And then lastly, you've obviously posted a really resilient NIM in the year just gone, given that it is highly topical and undermines your investments. I wonder if you could give us a sense as to what you think the gearing of the P&L was to, for example, the 20 basis points cut in rate is taking the policy rates in the U.K. to minus 10 basis points, just to make a difference.

Your third question, I've got the gist of the last two. Can you just go again from when you said it's been a resilient year? Can you just clarify the last -- the third question, please?

Yes, absolutely. So the headlines late last week that the Bank of England was looking at the mechanics of applying negative rates in the U.K. Could you give us a sense as to what the gearing of the P&L would be to a move to negative rates. And if you've got a number that's 8 to 20 or 50 basis point cuts, that would be helpful.

Good. I'll answer all three questions. And Mike, if you could provide some more detail on costs as well. On the government schemes, I think it's difficult to say how much of the uptick in volume we've seen in asset in June and July that we talked about that's continued into August and September, how much of that is pent-up demand that was unsatisfied in the months just after COVID, and how much is a trend. It would be fair to say that there is uncertainty. We've got the government's announcement this afternoon, and we have Brexit as well. So I think it's difficult to give visibility of where that trend is going necessarily. Another important point I would say on the government schemes. We've done very strong lending on the CBILS scheme and less on the Bounce Back scheme. The Bounce Back scheme is the one for facilities under GBP 50,000 without personal guarantee at a yield of 2.5%. The CBILS scheme is more akin to our standard lending in terms of security and pricing, whilst I mentioned we pass on the benefit of the government guarantee. So I would say we're in the more advantaged part of the government scheme, and that's more suitable for our customers and the market as well. If we look at the outlook on costs, you correctly pointed out that we have had an GBP 11 million variable comp benefit in the bank. And Mike highlighted that we have a very disciplined focus on BAU cost remaining flattish. There will be some pressure on the variable comp because we'll obviously look to deliver a stronger year in the coming year than we did in 2019. So there will be some pressure on the variable comp, whereas I'd expect other parts of the BAU cost to be flattish. And Mike also highlighted the investment story we've got. The investment cost did go up around 24% or GBP 11 million last year, and we will be continuing that investment. I don't apologize for that. It is an important part of our model that generates the 7.4%, 7.5% NIM that we achieved and the service proposition that we have. Mike, would you like to provide some more detail on that?

I think you've hit the nail on the head there. We have a high degree of rigor around the BAU costs. And actually, if you put all the BAU costs together, the other operating expenses, those reduced 3% last year. But we will continue to invest. I mean we've given examples in the slides here. And certainly through the COVID-19 process, those investments have really proved hugely beneficial. In the Motor business, for instance, we were able to deal with dealers all the way through lockdown that the investment gave us that capability. On the Asset Finance side, we were able to get CBILS up very quickly. And of course, on the deposit platform as well we were able to continue to raise deposits remotely. So that investment is very important. The other aspect as well is IRB. That's a big area of investment for us. We're on track to submit that application before the end of this calendar year. So we will continue to invest, but we will make sure that we're on top of the business-as-usual costs. So I think that's the message that I would tell you from here.

And lastly, Jason, on the potential for the Bank of England to use negative rates as a policy to an increased conversation in the media on that. For us, it's a modest positive potentially if they were negative rates. We don't have current accounts. So we don't have the potential negative impact of the loss of the net interest-bearing current account benefit that the main banks have. We have a small benefit. It would also determine, I guess, on what happens with funding in the market that would go along with the negative rates as well. Is there anything you'd like to come back on, on those 3 answers, Jason?

No, that's perfect.

[Operator Instructions] Next question is from the line of John Cronin from Goodbody.

First one is on the -- if I can come back to provisioning in relation to the loans that are still on payment holidays. So under a quarter, if I take the retail book by way of case in point and are still on payment breaks, would you have any particular concerns around the fact that the payments forgone can accumulate quite quickly there and become quite material relative to the overall size of the loan with consequences for LGDs, given the relatively short duration? So anything, I guess, impacted by way of LGDs? And as a second follow-on question in relation to that, but much more broadly, can you just give us a sense in terms of how fluid the PDs and LGD inputs are from a modeling perspective? I've spoken to a number of bank CFOs on this point in recent months and...

John, can we just stop you a second? We've just lost you when you started talking on the second question on PDs and LGDs. Could you just start again from when you asked the question on PD and LGD, please?

Sure. Can you hear me now?

Much better.

Okay, great. It's a broad question in relation to PDs and LGDs, a topic I've picked up with a number of bank CFOs in recent months. And certainly, what comes across very strongly is that the assumptions are heavily driven by past experience, which clearly can be different in any crisis. I just want to get a sense of how fluid your own assumptions are and how often they are revisited in response to new information that's tailored to reflect your expectations around particular implications of the COVID crisis for your book. And then look, on IRB, and look, I've picked up your commentary around the expected -- the intended submission in current calendar year. Any -- not sure what you can say on timing, but very conscious that a number of other banks are in a broadly similar spot in terms of the applications as well as the fact that PRA will soon be facing a lot of hybrid bank model approvals. And just thinking about that, how do you think about that in the context of -- do you think that the wave of what's facing the PRA together with dealing with the crisis could push out the typical expected time frame towards approval of 18 months? Could we be looking at a longer period as a result? And then finally, Adrian, if I could ask you maybe, to press you further in relation to your strategy for the business. Look, I take your comments from earlier in response to a previous question on point, but -- clearly, the noninterest income businesses are performing very strongly. And could we see a greater push towards a reliance on those businesses in time? Would there be a deliberate potential strategy to orient the business in that vein? And I do appreciate clearly that the challenge of facing the mainstream banks are much greater than for your own banking business...

John, we're just losing you again. Sorry. I've got the strategy of the business. I couldn't quite get the other point you were saying. I think you were saying take some businesses past another, but I really lost it from there. If you could just start again from there, that would be helpful.

Okay. Yes, I think the question is really, do you see yourself potentially migrating the business to greater reliance on noninterest income activities despite the fact that your Banking business is not under the same pressure as the mainstream banks?

I'm afraid I just can't hear that last part, John. Really, we didn't get the last question, John, at all. I'm sorry. I've got the strategy of the business. I'm not sure what you're asking. We just can't hear it. So can you try one last time?

Okay. I'll try one last time. Can you hear me now?

We can hear. Yes.

Yes. Sorry, my coverage is patchy. I'm just curious as to whether you may orient the business towards greater reliance on noninterest income-generating activities over time. Would that be a deliberate strategy?

Generating, is that what you're asking?

Yes, to less reliance on interest income activity.

Okay. Okay. Fine. Good. Let me start off with the provisioning in retail and the payment holiday question. It's notable that we've got 2 books obviously there. We've got our Premium Finance book and our Motor Finance book. On Premium, it's a very short-term book because it's typically the 10 insurance payments. And importantly, it's a mandatory product effectively. It's the consumer typically paying the finance on their household or motor policy over 10 installments. So it's seen as a priority payment. And the amount of customers that we're seeing that are struggling there is almost de minimis-ly low. So that's very positive. In Motor, it's important to look at what the business we are funding there is. It's used cars, typically at a starting value of around GBP 8,000. And we're doing very little PCP relative to the market, which I contend is higher risk. That's around 11% of our book with 89% beyond HP. So we have strong security as well. The forbearance period is typically longer that we granted in Motor. And with the FCA guidelines, there can be a second period as well for the Motor consumer. So we're working closely with our customers in Motor. But overall, the statement we've made where 75% of the book in Retail by value has moved into the better categories, holds for the whole of that portfolio. If I look at the PDs and LGDs, we have the past experience, as you rightly say, and we've applied expert overlay to judge the prudent level of provision that we have. To do that, we use the expert judgment in three ways. That's looking at the staging between Stage 1, 2 and 3 in each of the portfolios. We look at the economic scenarios that Mike described, and also, we then look lastly at individual provisions and portfolios to judge the number. So that's where we've got our confidence for that we have the right level of provision. And again, the emergence we're seeing from forbearance gives us confidence that those numbers are correct. On the PRA timing, we're in dialogue with the PRA. We've had a very positive and ongoing dialogue about the application. And our full intention is to submit it before the end of the calendar year. Mike, would you like to build on that?

Yes. We -- yes. I mean, they know it's coming then. So we have landing place with them. So really, then it's up to them as to what they have to deal with, but they have been engaged with us since the outset here, are comfortable with where we are and are happy to take the application before the end of the year.

And on the last one, the strategy of the business, I did make a point that we've had a very successful history of launching new initiatives along the way, whether it's our beer keg business, whether it's our energies, renewable business, our move into Ireland, we've had good success at that. Largely, those businesses have been income based on interest and fees. The beer keg business would have a higher predominance of fee income. I would say, I'd be very happy with more fee income business. That would be fine. But we will look at that in the round when we think of the best things to add to our model for the future. Do you have any other questions to come back on those, John? Are you happy with those answers?

No, that's very clear.

Next question is from the line of Raul Sinha from JPMorgan.

A couple of areas, please, for me. The first one is just on the loan book growth and inflection point. Obviously, the growth in the book was much stronger than at the 11-month phase that you had indicated. And historically, Close Brothers has grown this loan book quite materially in recessionary period. So I guess my question is, do you think that we are likely at that point of inflection again where we're likely to see very strong loan growth relative to the rest of the sector driven by your own sort of appetite to increase market share. And I guess linked to that, the Motor Finance book has had a very strong increase, I think, in July in terms of loan book growth. So I'm wondering if you can comment on whether that was driven by the market or whether that was driven by your investments and your appetite for growth. That's the first question. The second one is on the deposit platform and the investments you've made. I was wondering where you think the sort of medium-term contribution from that deposit platform might be to your funding base? And if you could comment on the cost of the deposits, apologies if I missed that, the GBP 600 million. How does that compare to your sort of blended funding cost overall?

Okay. I'll take the loan book growth and, Mike, I'll hand the deposits over. So there's a very interesting slide, Slide 25 in the pack, which looks at the history of our loan book growth and highlights the 2 crises previously, the dot-com bubble and the financial crisis. And you'll notice that we've drawn a similar circle for COVID-19. We do see this as an inflection point in the market. There are some changes to those previous crises. We've got government support scheme. The other banks are better capitalized this time. But we see that this will be an opportunity that fits well with our resilience. We've had our playbooks that we've talked about before, where we prepared for this event when it's happened. So I see that there will be an inflection in the market. I do not see, in all likelihood, that we'll see the growth of the previous times that we've come out of crisis. That's for a few reasons. One, our loan book is broadly double for where we went into the GFC. We're at GBP 7.6 billion now, it was broadly half of that last time. So it's a bigger wheel to turn and generate new business into. So that's one impact. The government schemes also, depending on whether they renewed, will have an impact as well. But we are seeing, even before the crisis, there were some competitors standing back in some of our specialist markets. You talked about Motor. And indeed, in Motor, there were some players who had slightly pulled back there. And we've seen some players who are lending on more restricted terms. You mentioned, Raul, market share. That isn't a drive for us. We are through the cycle lender, and we keep our terms the same. So we will continue lending on our terms, and the growth that will come on to the next phase on that chart will depend on how that plays out in the market at our credit quality and our price point. Mike, would you like to talk about the deposits?

Yes. I mean the deposit platform allowed us to launch a new range of products. For example, the notice accounts, we've launched for retail business, pension and SME. And this is interesting for us because from a retail sort of deposit perspective, we've always issued fixed term deposits, which are more expensive than notice accounts. And of course, as we get the behavioralized experience, we will be able to get the same tenor of funding, but at a lower cost. Notice accounts are markedly cheaper than fixed-term deposits. So that's been very beneficial for us as well. We've also built out our capabilities with specialist lending as opposed to specialist products with some of the larger organizations such as Hargreaves Lansdown. We've built up a capability there as well. So that has allowed the cost of retail deposits or the funding from deposits to be reduced as we move into these other areas. One final point I would say is we'll be looking to launch a cash ISA going forward. And again, that will allow us to reduce the cost of funding on the deposit. So those rates are lower than the fixed term rates that we have used in the past.

Raul, would you like any builds on those 2 answers?

Yes. If I could just follow-up on the deposit question on the platform. What proportion of your medium-term funding base do you think this deposit platform -- originated deposits will be? Perhaps, I don't know if you have a sense of maybe a 3-year view. And then if you could -- I don't know if -- given the number on, what is the blended cost of funding coming through the deposits originated in the platform versus your overall cost of funding?

The question, Raul, just so I could check, the slide in front, the question is how much is the deposit platform likely to generate of the deposit base in the medium term? And also, what is -- what effectively is the funding benefit from the deposits that we're launching now? Is that correct?

Exactly, yes.

Yes. I mean, in terms of the second point, we wouldn't disclose the costs. In terms of the ratios of how much we will raise through different platforms, at the moment, we've got funding of around about GBP 10 billion, of which GBP 5 billion, GBP 5.5 billion to GBP 6 billion is coming through from the deposit platform. One of the areas that we look there is to make sure we get the balance right between the commercial, institutional-type deposits and retail deposits. And so we generally would want to sort of get a pretty reasonable balance between those and not relying overly on one or another. So we don't have any specific targets that we aim for, but we are conscious of balancing the cost of each of those deposit flows and the relative tenor of those as well. So it's a judgmental decision. But overall, we're comfortable with the funding level -- from a deposit perspective at the level it is out of the total funding balance.

[Operator Instructions]

We've got time for one more, if anyone has a final question. No? Can I just say thanks very much for your time this morning and for bearing with us on the remote side. Thanks for the questions. If you have any follow-up, please do phone the IR team, and I very much look forward to the next session being face-to-face. Thank you very much.

This presentation has now ended.