Lloyds Banking Group plc (LLOY) Earnings Call Transcript & Summary

Good afternoon, and welcome to our next session. We are -- we're delighted to host Vim Maru, Group Director of the Retail Bank of Lloyds Banking Group, and Israel Santos, Finance Director of the Retail Bank at Lloyds. Vim and Israel, thank you very much for making time and joining us at our conference today. We appreciate.

Thank you very much, Martin, and thanks for having us.

And let's start with the U.K. mortgage market and the outlook for the mortgage market, if I may. The mortgage market over the recent months has shown an incredible strength, both in terms of pricing having improved and volumes. And Lloyds' first quarter results are marked by strong growth in mortgage lending. And I was just wondering how should we think about the prospect here for the mortgage market, first of all, in terms of volumes going forward, could we think that this strength could continue far out in the year? And how does the medium-term prospect look like?

Yes. So Martin, I mean, it's clearly been a really vibrant period for the housing and mortgage market in the last year or so actually because some of the applications sort of business started more in the middle of last year, which we then saw came through in Q4 of last year well. And certainly, from a Lloyds Banking Group perspective, it's been a really kind of positive period in terms of momentum on mortgage lending as well. So we saw GBP 6 billion of open mortgage growth in Q4, another GBP 6 billion in Q1, so have GBP 12 billion in 2 quarters And I think it's really a testament to our ability and our agility in being able to take advantage of some opportunities that arose in the marketplace. So you know we've done for a number of years, very carefully that the volume value strategy that we've had. We've talked about it a lot, making sure that we're disciplined in our approach. But when we saw some of the opportunities that came during the course of last year as margins widened and we saw that the market was attractive, and we saw demand from our customers as well, we stepped into the market and changed the strategy and took advantage of that and made the best of it. And you talked about spreads at the back end of last year, 190 basis points; Q1 comps were -- completions were around 190 basis points, too. So it's been a good period for us during that period. And It's been great to be able to support the U.K. economy, U.K. housing and U.K. consumers as well through that period. And I think it's been characterized with some really interesting trends from what consumer behavior is going on. And I think we all know that there are kind of a couple of things that are really going on here. One, there's a bit of a -- sort of a rush business space. So there are people who are working from home or are working in hybrid ways, are able to create an extra room or have it gone, those sorts of things. So we've seen the home mover market really strong, and we've seen some of the growth numbers coming out of that during the course of the last year or so where more and more people are saying, "You know what, I want something different." And actually, as corporates say you can work from home 3 days a week, et cetera, that creates additional demand for people who are able to work in a different way as well. So that's been a really interesting phenomenon that we've been able to support moving people around the economy. Clearly, the stamp duty effect has also been there where people have been trying to make sure that they take advantage of the GBP 0.5 million stamp duty break that's out there. And of course, because it's a slab structure, it means even if you buy for GBP 700,000, you get some benefit out of it. So people have been motivated by that. And clearly, originally, the plan was that ends in March, then it went on to June and now, there's a taper down to GBP 250,000 in September and then down back to normal at the GBP 125,000 level that thereafter. So It's been a number of factors that have been driving some of the things that we've seen And say, whilst, first-time buyers, which has traditionally been one of our big areas and really kind of strong from a brand perspective and you know how strong the Halifax brand is in the mortgage market, in the housing market. Everyone knows there is synonymous with housing in the U.K. We've taken -- we made the most of the fact that brand is there. And what we've done really hard is to make sure we invest in service as well because one of the things that characterized differentiation in the last 9 months has been making sure that services is great. And that's testament to my colleagues who work so hard in the back office, making sure that things work well for our customers, but also for the broker market as well. now. Now, so I think that's all good. And when we looked at March, it was a big month in terms of -- and that was the biggest month for us since 2008. So it's -- completions were strong in March. Now when you look forward beyond Q1, I think there are a couple of things to say. One, I think when you look at margins, I think we'll see margins come down because what we've seen is swaps have risen. That's been helpful for us on the hedge side, which we'll, I'm sure, come to and we'll talk about. But it also meant that some of the -- given those prices haven't gone up We've seen a little bit of a squeeze, particularly at the 5-year end of the market. So there will be some reductions in pricing and as well as in swaps, which will squeeze some of the margins, but as we move forward -- but when we sit where we are sitting right now, we still like the returns. We like the business. We like the volume margin trade off. And so we continue to participate strongly in this market and are excited about being able to help consumers through it, too. So I think that's the first thing to say about margins, and I think also from a volume perspective, then if you think about what will happen, so we certainly see demand from a consumer perspective when we look at website traffic, right move traffic, all those sorts of things. There's been good momentum for the last few months as well. So I think there's a continuation of this to come into Q3. Once the GBP 250,000 disappears at the end of September, I don't know what will happen for sure. But what I do know is some of the trends that I've talked about, where people want to move homes, they want to buy homes. that motivation remains. And even if house prices are going up, which is obviously what we've seen with house prices going up, people are saving money at the moment. We've seen that in our deposits because they're not having to spend on commuting, things like that, and therefore, they have more disposable income to put into what they might pay on their mortgage every month as well. And so I think there's an underlying demand that will continue. And I think there's good momentum to come certainly for the next foreseeable quarters. from what I hear and see what consumers want to do in the U.K. as well. So I'll stop there, it's sort of a long way around of saying good progress, decent margins, there's still momentum. And the final thing just to say, I guess, is if you look at the average house price, in the U.K., it's GBP 260,000. Even after the increase we've seen. If you go outside of London, clearly, that number comes further down then. And we're strong outside of London as well as a business and Halifax is the -- as a brand is strong, Lloyds is strong outside of London, too. And therefore, I think even with the GBP 250,000 stamp duty, I think we've got good participation options and opportunities for us as a business as we move forward, too. I'll stop there, Martin, and sort of the long way around of saying kind of a really interesting market and improve momentum for our business, too.

Thank you, Vim. Just to follow up on -- in terms of house prices. I mean house prices have evolved strongly in the U.K., not only in the U.K., it's the kind of a characteristic of this pandemic. And I was just wondering, how do you think about house prices here, obviously, as a kind of an input, if you like, in the mortgage growth going forward with Brexit done and the prospect of a sharp economic recovery, do you think house price probability, particularly in certain buckets of the markets might be having to?

Yes. I mean it's a really interesting question, Martin, and I'm not going to predict house prices because I know I'll be wrong. But what I can talk about, I guess, is maybe some of the supply and demand factors that are out there. So I think I've talked a little bit about the demand factors already, which is this desire for people to move homes, to buy homes, potentially with sort of bigger homes as well. So there's quite a lot of demand, and we're seeing it right now, I guess, where lots of homes are going very quickly. Even though people are getting 6 offers on homes within days of putting it on the market, et cetera. And so there's good momentum from that perspective and the demand factors. And then I've also said there's some of those opportunities that come because you touched on affordability. I think actually, affordability has opened up a bit because people's disposable incomes have grown as they reduce some of the spend that they may have had on commutes and so on as well. So I think there are some positive factors from a demand side perspective. And then from a supply side perspective, clearly, there are number of homes available for sale. We're not seeing that expand massively. And therefore, while supply remains kind of where it is right now, and demand remains strong. I can see there's probably decent momentum in housing and in-house prices as we look forward. And I guess that may be the case for a little while yet. I don't know what the long long-term view is. But that's what I see in the supply and demand factors in the housing market at the moment and what we are seeing from what we listen to customers from a marketplace perspective and also talking to house builders as well as some of the brokers that we work with, too.

And then maybe moving to pricing. You alluded that you would expect pricing to soften a little bit. I mean, pricing has been through a tremendous change over the last 2 years being as low as probably around 80, 90, 100 basis points going up close to 200, and now being probably down 50 or something. How do you think about pricing going forward? How low could this potentially get again? And maybe more broader, how do you see competition for mortgages evolving in the U.K. over the there -- over the medium term?

Yes. So I mean, it's a -- it's again, obviously difficult to predict what will happen many quarters ahead in someone, but I can tell you what -- I guess what I seen and feel every week that we look at this from our business perspective. But one is, I think where we ended up in Q4 to Q1 this year, was clearly attractive better than what we've seen in the past. As you say, I don't think -- I think we've always said it, that that's not the kind of long-run sustainable face of the market as we move forward. And of course, what we've seen is in Q2 and a little bit in Q1 as swaps sort of rose and we see more competition in the market that prices and margins will come down. Clearly, there's lots of competition in the mortgage market. That's actually been ever of us for many, many years, ever since I've been in this market for a dozen years now, there's always been lots of competition in the mortgage market. And one of the things that I've tried to make sure that we continue to do is to make sure that, that service differential, which is really important from our pricing perspective for us as well remains in place and intact because I think people really care about service in mortgages. They don't -- you can go for the cheapest price, but you could end up with a poor experience and a service. And something like buying the home, you do not want that. You want reliability, you want confidence in doing that. And that's why Halifax, Lloyds, Bank of Scotland offer our customers and our brokers as well. And so that really important for us as we move forward. And so yes, margins have come down. And I think competition will remain. The great thing for us, as we touched on this right at the outset, is because we run both strategies, which is the one that we run for the last year or so and the one prior to that, where we were trading off volume value. Actually, the agility we have is second to none in the market. We have that capability to fit in and out as we want to depending on what we like or don't like in the market. So actually, from a returns perspective, from a sort of a shareholder value creation perspective, I have lots of options depending on how the market evolves in the future. But that's kind of certainly where we stand today, we still like what we're seeing in terms of margins, returns and the volume value trade-off.

Thank you. Let's move to Retail unsecured. And over the years, Lloyds has become the largest credit card lender in the U.K. and obviously, balances have been materially impacted by the pandemic. And later data seems to show that we are reaching a plateau and it seems like prospects are here for recovery. How do you think about the prospects for recovery, how quickly could balances grow again if the economy moves into full recovery mode from here, how quickly could this loss balances in a way we replenished.

Yes. And I've sort of a bit started to stop predicting this because every time I try and predict it, there's another lockdown or something. So it's been a period of great uncertainty in terms of how this will evolve. Firstly, I guess, on unsecured, let's take credit cards, post of the MBNA acquisition and the successful integration of the MBNA business into Lloyds. I think we clearly have a very strong market position there, 25% market share and feel good about the business that we have and good about what we see actually through the pandemic in terms of the quality of the business that we have in that, too. Clearly, Q1 to Q1, we saw credit card balances down 19%. We saw overdraft balances down over 20%. So clearly, there's been a big deleveraging happening from a consumer perspective. We've seen people using the excess deposits that have come through to make lower payments into their unsecured balances as well, which is good for consumers and of course, the right thing to do for them as well. The important thing, I think, is that every time I predicted it, it's been that period of uncertainty about what will happen from a lockdown perspective. And I sit here today, not knowing what will happen in terms of government announcements on the 14th of June to about 21st of June. So it's difficult to predict. What we are seeing, as you said in your question, it's clearly, we've seen it in the Bank of England during April, which [indiscernible] the stabilization now of the board. So in Q1, we were still shrinking from an unsecured then the market starts to flatten out. So I think what that does, it tells us maybe there's a sort of a flattening out at pace here now. And what we're waiting for is more confidence for consumers to start spending, particularly on their credit cards, with bigger ticket items, holidays, leisure, those sorts of things, which will then start to see because we're still seeing versus 2019, credit card spend is down relative to that position. And therefore, at some point, we'll start to see that turn and I think that we can. So for me, I guess, the nutshell answer is I do think we'll start to see it kind of lift up again. The only question is when, not if. And I think that will be very much linked to confidence, travel, international travel, in particular, which we will -- I hope we start to see during the course of the second half of the year. But I think Q3 will still be difficult because It's kind of hard to know whether you can book a holiday or not. I sit here trying to work out where I can travel to, it's pretty difficult at the moment. And obviously, with the Portugal thing turning around as well, it made it more uncertain to consumers. But I think there will come a moment when there's more release to this. The vaccine is going well that we'll start to see this turn. And then I think momentum will start to build off the back of that as well.

How is the competitive landscape evolving in retail unsecured? It seems like some of the larger peers are warming up to the idea to leaning more into the recovery and regain some of the shares lost over time. And there's also talk of some fintech companies trying to expand more into the credit card space as an example. How do you see this evolving over time?

Yes. So I think -- I guess a couple of things. I think, again, in unsecured, there's never been any shortage of competition for many years. So it's not a new phenomenon that people want to grow into it. And it flips. Sometimes somebody is going at it than another person is going at it, and you see not of competition in the market. So what we continue to do is to focus, one, on making sure we support our franchise customers and do that as well as we possibly can, whether that be in credit cards, personal loans and over drafts really important there. And we've tried to build amazing customer journeys for those customers. So it becomes easy and convenient for them to do business with us and we continue to see real progress there. And we never rest, we continue to try and improve those journeys and process, the stuff we've done at the beginning of this year, even whilst the pandemic going on, continuing to be ready for the moment where there's more lift off in this, there's more work we're doing in personal loans, which will be ready early next year, which will make it a really strong proposition, too. And on the other side, we're also trying to make sure with the expertise and skills we have in the MBNA business to make sure we're really good in the non-franchise business, too. And one of the key things there is data risk capabilities and we -- and the customer journey as well, working closely with aggregation. And again, we've excelled in the way that we built those journeys out. And so for us, taking the customer experience, convenient, easy has been the way to make sure that whether you're a fintech, whether you're a competitor, we continue to be one of the first people that consumers turn to. And so actually, when we look at our flow business, we continue to like what we see based on our capabilities in digital and the journeys that we've built out there as well. And then the final thing I'd say is a couple of things, I guess. One, in that space is the fintech space. One, I guess some people will want to be chasing volume in this space. It's clearly possible to, but we're not about to go down the risk of to try and chase volume. We'll continue to be disciplined. We know that one of the things we pride ourselves on is the low-risk bank and therefore, we will make sure that we are thoughtful about the risk appetite that we have. And as the demand comes back, we'll feel more confident. We'll see what the economy looks like when furlough ends. And we'll make sure that we step in, in the right way as well. And then finally, I think there are lots of things happening in the world of things like buy now, pay later and so on. And we continue to watch and observe while that's done. Clearly, in the U.K., the impacts have been pretty small so far, but we're observing and thinking about it quite closely in terms of what the customer demand and need is, and where and how we might want to offer propositions for our customers too.

Thank you, Vim. If we then move to other income, prospects. which growth prospects they are you most excited about? And maybe if you could talk about your wealth and advisory proposition. How significant could this proposition become in terms of P&L contribution going forward?

Yes. I think I'd say 2 things on other income, I guess. One is that I think there's an opportunity for recovery on the back of the COVID issues unwinding. And I think we've talked to the market about GBP 300 million to GBP 400 million that's impacted by the fact that we've got the impacts from the COVID perspective. So as spending increases, we'll see more interchange fees and income as people start to travel, will see more FX income, et cetera, et cetera. So I think there's a bit which is to do with the recovery from going back to normal. And then the second is the strategic factors that you touched on, which, in effect, we talked about as preferred financial partner which for me, is -- strategically is all about bringing the whole of the bank to our consumers. We have relationships with 1 in 2 adults in the U.K. What we can have opportunity in this share of wallet. And actually, either there were 2 different things going on here. One is how do we switch needs where people that are being served somewhere else and we bring that business to us. And then the other is where there are unmet needs and how we might be able to serve customers. So that might be in the world of like insurance, protection, et cetera, that we might be able to serve needs that people have actually post the pandemic realized they're quite important to them as in society as well. So for me, there are sort of 2 or 3 things in the insurance and investment space that there are opportunities. And we continue to see real opportunity, one, to talk to our customers both from an advice perspective, with our partnership with Schroders Personal Wealth. So I think there's opportunity and momentum in that business that we're starting to see where people have more deposits, what do they do with it, how can we help them when they've got GBP 100,000 plus to be able to advise them on what to do with their money, lots of people talking to Schroders Personal Wealth that we're seeing in Q1 and onwards in terms of momentum there. The second is the digital side of things where people have money and they want to invest. This isn't about investing in kind of single stocks or certainly esoteric type of opportunities that are out there at the moment, but more making sure that we give them opportunities to invite -- invest in funds, et cetera, et cetera. And we've seen good momentum in our stock braking and investments business there. There's more opportunity to come in the future. I think as we develop our proposition, too. And then finally, in home insurance and protection, again, we've seen good momentum, particularly through our franchise in the last year or so on home insurance. Quite a big change coming in that market as the pricing changes from the FCA take hold. We -- I think good brands like ours will do well in the future in that market. And we're investing quite a lot of money in improving the processes for our customers so that we ask fewer questions. We use the data we know about customers to be able to make that switch to somewhere else to us as slick and easy as possible as well. So I think there are a number of opportunities there. And in the coming quarters, you'll start to see us talk more and more about that as we realize those opportunities with the work we're doing and the investment we're making in those spaces.

You mentioned deposits. And deposits are interesting as all banks saw significant inflows truly dynamic in terms of deposits. And it seems like this trend is continuing, particularly in the Retail side. How sustainable do you think are these deposit inflows obviously for you on X capacity going forward? And could there be a scenario if everyone is awash with liquidity that this could lead to higher competition on the lending side, just given if volumes don't match that kind of increase?

Yes. I think -- I mean the deposit story has been fascinating in this last year or so. The momentum has been incredible because prior this last year, the pandemic, we were seeing good momentum already in our current accounts business in retail. We were gaining market share, and we have good momentum with propositions like Club Lloyds, the reward current account in Halifax as well. So there was good momentum in our current account business already prior to the pandemic. And now it's continued -- where we're continuing to gain market share in the last year. And actually, even on a total deposit basis, we're now regaining market share in the last year as well. So whether I look at deposits or lending, I'm seeing market share growth across most of my lines of business, which is really good and positive. And then if you look at the sorts of numbers that we're talking about, I think in the last year, we've seen GBP 20 billion of current account deposit growth for us in Retail, GBP 10 billion in Q1 this year, incredible I've never have thought a couple of years back that we'd be talking about GBP 100 billion of current scan deposits in the retail business. So gone past the GBP 100 billion number as well. So that's clearly, yes, positive for the hedge. But at the same time, we've been pretty conservative about how much we put into the hedge capacity. So the $225 million number that you see, which is the capacity, obviously, we're not fully utilizing that capacity when we were talking about it in Q1. There's still more potentially if that money doesn't get spent. But what we've also done is said, actually, you know what, we think some of that money will get spent. And obviously, everyone is trying to opine on whether that will -- how much will get spent during the course of the coming months and years ahead. And obviously, the Bank of England has been out there saying maybe 10% of it will or won't. What I can tell you is that what we've done -- we've been looking at is sort of the detailed analysis of which customers are getting those deposits, what do they look like. What do we think when we research with them, their intentions are, et cetera. And actually, what we see is that a lot of -- there's a real disparity between who's gained and who hasn't. So there's a bunch of people in society who had a difficult pandemic. They found essential spending, continuing to be at the levels that they were before. And because they didn't have a lot of discretionary spend, it's been tough. whereas there are other people who had a lot of discretionary spending, that discretionary spending has come down and they've seen their deposits go up. And typically, some of these people are a bit older. So -- and that's what we see. And older people tend to be a little bit more cautious about what they'll do with their spending. So obviously, I think we'll see some of it come back, and it's really important from an economy perspective for some of our spending to start come back. And when we talk to them in research with them, these consumers saying, you know what, I do want to spend because I want to have a nice holiday. I want to help my children and grandchildren buy a home. I want to do things like that and enjoy my life, too. But they're not going to have a big splurge in trying to spend all of the excess deposits as well. So I think there will be some spending. We've been pretty thoughtful and conservative about how much we think will happen there. And I think depending on what happens, actually, I think we can manage from an economic perspective for us, it always be spending -- if less spend happens, we have more for the hedge If more spend happens, that would be good for the economy, which will create more momentum in our business as well. So I think all ends are good, but we think some of the spending is definitely going to come back or these deposits will come back. The question is just the extent, but it gives you a sense of the sorts of consumers who have saved this money as well.

Thank you, Vim. In terms of competition from fintechs, how concerned are you about the impact they could have on the outlook of the retail banking business in the U.K. Is that a risk that piece by piece, some of the revenue streams can get diluted away over time?

Yes. I mean it's a really, really good question, Martin. I think when we think about fintech and competition. So the first thing I'd say is I welcome competition. It's always been a prevalent feature, certainly in my 20 years in financial services, and it's always been good because it keeps you on your toes, and it makes you want to strive for more and do better for your consumers and serve them well. So it's great that customers have choice And I've worked hard in the last 10 years in this business have much competition there is for those consumers to do the business with us rather than take their business elsewhere. And I think if you look at our track record, I think we've done a pretty good job of doing that in the last number of years. And so I welcome that competition, I welcome that market. The second thing to say is that actually, we've really stepped up our game in this space. So I'm really proud of our ability -- a lot of people said, incumbent banks aren't going to be agile. They're not going to adapt, et cetera. Well, look at our digital business. We've embraced digital, we've transitioned to a world of digital, 85% of my sales were through the digital channels, but the products that we serve people with. And more than 50% were mobile that originated. So I'm really proud of the way that we transitioned. We've also transitioned in that way without impacting margins. We die in a very thoughtful and careful way and embrace digital, served customers in the way that they want to be served. And proud to be the #1 digital bank in the U.K., proud to have fantastic benchmarks in the way that we do sales in every product line of our business through the digital channel as well. So there's a lot to be proud about how we embrace this. And if you look at the servicing side as well, we've obviously got enormous numbers of log-ins. We're seeing customers kind of log in nearly 30 times every month, that creates eyeballs, opportunities for us to talk to them about things that they need, but also help them with some of their money management-type skills, too. But what we've also done quite thoughtfully is to build partnerships with fintech were needed. And so we did something with one of the fintechs on our continuous payment authorities to help people look at their subscriptions That sort of capabilities has also become right where we feel you know what we can accelerate the delivery for our customers using partnerships as well. So we're quite excited by this space where there are opportunities for partnership. But it's also keeping us on our toes, and it's helping us deliver great consumer propositions and our customers are liking it because the ultimate point is the outcomes, and we've had record levels of net promoter scores in our digital channel in the last quarters, and it continues to get better. So that tells you that we're really stepping up our game in the face of any competition that's out there.

Thank you, Vim. Let's move to costs. And I mean, one interesting outcome of the pandemic was the move to digital. I mean few and fewer people physically coming to the branch and making use of branches. Has this changed the way your view your branch network? I mean Lloyds Banking Group still is one of the large or the largest branch network in the U.K. Has the experience from the pandemic changed the view on how many branches you need going forward? Could there be a case of cost savings going forward.

Yes. So just on the cost side, I guess the first thing to say is that we're pretty proud of the progress we've made in the last decade on efficiency, on costs, where we continue to see absolute cost levels coming down, which has obviously improved our cost-income ratio as well to a kind of a market-leading type position as well. So feel proud of the work that we've done over the course of the last number of years. in a good place there. The second thing to say is that when we talk about branches and we look at consumer behavior as well. We never thought of, and I think I've presented this in the past in sort of our annual results as well that we don't think of branches as a cost lever. What we need to do because it's a small proportion of our total costs. What we need to do is to work out how do we make sure we're able to serve customers in a multichannel way because many of our customers love digital for sure, and we see more digital during the course of the pandemic. We've seen the number of people visiting our branches reduced during the pandemic as well. What I think we've realized also is that during this period, this last year or so is the human touch is really important. And our customers have really valued that. And they really called it out, and I see it in survey after survey how much they've appreciated the fact that we were there either on the phone or in the branches to help them. And lots of customers had moments to treat issues that they need to deal with, sadly, bereavement, things like that, that they needed help and support with. And therefore, us being there has been really important. So one of the things we've got to do is to look forward and say, how much of what we see happen in the pandemic is permanent? And how much is temporary? That's issue one. The second is how much in this what we used to do from a human touch perspective could become virtual, like we are today versus having to be in a physical environment. And then finally, I think a lot of people talk about what you might say is points of presence, which is a number of branches and so on. I don't think a number of branches in itself is the most important thing because actually, a lot of the branches that we talk about, where you might say you've got more branches than others, et cetera, is actually -- they're pretty small branches, many of those are. They're not the biggest driver of costs, et cetera. So I can have a smaller rush network But it's not going to be the biggest cost leader. What I need to do is to make sure I protect the franchise, grow the franchise and give it the perfect balance between the digital and human touch that we have in this moving forward. And so when I think about costs, the bigger opportunities that we're seeing are, yes, of course, make sure that our branch network is right. But it's more about how does the digital -- digitalization type opportunities create for us in the end-to-end experience for customers, what's left in the back office that we could still tackle, how can we help customers to self-serve rather than have to end up having to go into channels, which you might call is failure demand because actually customer wanted to do it self-service, but we didn't have the capability to do it in the right way. So that's what is the big opportunity for us and actually all through GSR3, and we will continue to in Strategic Review in '21, there is -- you have to grind those out individual opportunity by opportunity. And it isn't one big opportunity. It's 100 big opportunities. One small opportunity that make the big opportunity for us as we move forward. But our focus remains to continue to want to be as efficient as we can be.

How far down the road is Lloyds in terms of the digital transformation you just mentioned? And could this transformation be kind of like an economies of scale like you need to be big in order to be able to afford the cost of such a transformation. Could this lead to consolidation in terms of some of the smaller banks who maybe not be able to have a similar budget for such a transformation.

I don't know about consolidation, Martin. It's kind of who knows what will happen in the future. I won't probably get drawn into consolidation. But what I can tell you is that, as I said, in the last 6 years, we've made huge progress in our digital and digitalization efforts. And our touch already on some of the progress in terms of having the largest digital bank opportunities that we're seeing from a cost-out perspective, efficiency for customer efficiency for us in the back office as well. And we've also been grinding out opportunities using robotics, AI-type capabilities as well. And there are still more to go at from a digitalization perspective. We made lots and lots of progress. And when I look at the business, it's really transformed from where it was 6 years ago or so. And so I feel kind of excited about what we've managed to do, but also the fact that there are continual opportunities as well. One of the things we called out in our Strategic Review '21 presentation that William did earlier this year was that actually we started to experiment with some more new technologies as well. So I think there's still opportunity in things like cloud for us. We're sort of doing more in public cloud starting to look at opportunities there. There are some new platforms that give us additional digital and digitalization opportunities as well. So as that kind of what we might call R&D-type work comes to fruition, I think that will create the next wave of opportunity for us in future years, too. So I think it's definitely good progress, not done yet, more opportunity to come in the future, and that's really exciting because it creates better consumer propositions and better efficiency for our business as well. And then the final thing is, you touched on things like economies and scale. Of course, yes, there are some relevant scale points there, but we also see some really agile, the smaller layers out there. So we should never be dismissing that. And what we need to be doing is constantly being hungry, not complacent at eating out opportunities that we see and not dismissing small being no fracs. I think there are lots of things that we can keep learning and certainly, the curiosity on learning about those things is something continue to talk to my teams about in making sure we're not complacent.

Thank you. Thank you, Wim. Let's move to asset quality. My final question. And it seems like things are evolving better than expected. So house prices up, unemployment forecast being revised down compared to prior expectations. What would need to happen within, obviously, for you to consider write back some of the general provisions booked earlier. And related to that, is there a risk that further out as government support scheme, furlough scheme and so forth, roll off that we could see some of the risk materializing later on.

Yes. I think -- I mean, the first thing to say is that the experience we had in Q1, which we talked about has been reasonably benign. We're seeing that in the retail business. We're seeing that in the commercial business as well. The other bit, I guess, good news is that like 90 whatever percent the payment holiday have come off where there were challenges or issues for customers, a lot of it, particularly in unsecured has worked its way through the staging and is charged off as appropriate and necessary as well. So that's, again, so when you look at the underlying position, there's really good asset quality that we're seeing in our business, and it's pretty benign from that perspective. But that doesn't mean we should be complacent. We know that furlough is still to come off. We know that some of the government lending schemes on the business side are maturing now and people are starting to have to pay. So there will be challenges in the months ahead. And I think everyone expects that unemployment will rise, at some way nobody has the crystal ball as is to say how high will it rise, what we have seen, however, is that the prediction we made in Q4 or Q3 last year in Q1 got a bit better. And the question will be, what's the predication in Q2 and so on. And that will determine, I guess, as to what we do with the retained or unwind of some of the provisions that we booked. And clearly, there's a considerable buffer that we have in there to make sure we're prudent and that's future results will give us an opportunity to talk about. By the time we get to Q2 results it will be a good opportunity to see, one, what the government is doing on unwind. And two, it will be the first month where furloughs engines always started to see the taper down of furlough. So we'll have a sense of what that's meant in terms of what businesses are doing. The only thing to add, I guess, is that what we are seeing is, I guess, lots of vacancies for jobs and so on. So I think the key question will be labor mobility, how will people move from job here, which may not exist in the future to new jobs that exist in the market as well. And that's going to be -- that leads back all the way to the housing market and actually people being able to move home so that they can go where the jobs are, too. So I think there's some lots of inter linkages in that space, too. But so far, so good.

Thank you, Vim. We're approaching the end of the session today. Anything we missed, anything we should have touched on?

I mean, Martin, I think the key thing for me to call out, I guess, is to sort of take us back to Strategic Review '21 and what we talked about from a strategic perspective as a business. We're really excited about the future. I get excited about the multi-brand strategy that we have, which I think is quite unique in the U.K., having scale brands like that. That creates the most reach for me in the U.K. market. We're really experienced at managing multi-brands, and that really is a key differentiator for us. The franchise is fantastic, I talked about. One in 2 adults having relationships with us. The opportunity from a share of wallet perspective with our preferred financial partner strategy is really important, too. And then I think using things like new technology and data, I see real opportunities for us, both on the efficiency front but also in terms of taking advantage of that share of what opportunity as we move forward, too. So I think there is a really clear and crisp strategy that we have in place. We have a great foundation to build off. And I feel excited about the future for the business, too. And these uncertainties, actually, over the last year, have proven what a strong franchise we have, what a great business we have and what great people we have, too. So I'll stop there, Martin.

I think this is a great note to conclude our discussions today. Vim and Israel, thank you very much for making time and joining our conference this year.

Thank you for having us.