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

Good afternoon, everyone. And firstly, welcome to you all to this governance event for Lloyds Bank -- Lloyds Banking Group, I should say. It's my privilege to be Chairman of Lloyds. My name is Robin Budenberg and we just wanted to talk to you about the importance of governance for us and the clear connection that we see between strategy, performance and culture as linked through our governance framework. We are, of course, a bank, and therefore, regulation and risk is a very important part of our -- the way in which we operate. But it's also incredibly important that we spend time at the Board focused on the big strategic issues that we face. So we try and operate as a Board with 2 principles in mind. First of all, very clear accountability between the Board and the executive and secondly, equally clear accountability between the Board and committees. It is vital that we trust our committees to do the detailed work that is required in order to allow us as a Board to be comfortable with the conclusions that they reach. So I'm joined today by a number of my colleagues. You can see them on the list. First of all, Amanda, who is Chair of our Responsible Business Committee, Sarah, on the Audit Committee; Catherine on the Board Risk Committee; and Alan Dickinson on the Remuneration Committee. And I'm also delighted today that we have with us Nigel Hinshelwood who is Senior Independent Director of our ring-fenced bank. It's worth just saying in advance of the presentation, how we operate the ring-fenced bank. I am Chairman of the ring-fenced bank, all our Board sits on the Boards of the ring-fenced bank, and Nigel is Senior Independent Director. We have, through the year, an appropriate number of group Board meetings and separate ring-fenced bank Board meetings. I strongly feel that this integrated approach to the ring-fenced banks is important in the context of the fact that naturally, the ring-fenced bank provides the vast majority of our activities. So if I go on to my part of the section, the first slide is something that I hope you are all very familiar with. We are a purpose-driven organization. And we strongly believe that our strategy is a reflection of our purpose, and it is our strategy that generates the returns for all our stakeholders. In the past, our strategy was very much about simplification and efficiency. Under Charles Nunn's leadership, we are moving that to a more growth-focused strategy. And that brings important implications for governance particularly around things like culture and as Alan will speak later, Remuneration. We need to have very clear growth objectives that we hold our executive accountable for. So we are an inclusive and sustainable business, and our strategy produces outcomes for a broad range of stakeholders in addition to those of our shareholders. But I hope you can see from the list of outcomes that we have here, that all of these have very direct commercial benefits for our business. And therefore, it's easy to see how our purpose is entirely consistent with our commercial objectives and the interests of our shareholders. Amanda will go through this list to a bit more detail in her section. So turning now to the Board's focus areas. As you can imagine, the year after the advent of a new Chief Executive is always a very busy period for a year -- for a Board, and Charlie has indeed kept us extremely well occupied. As you can see, we've set now the group's purpose, its strategy. We've aligned the organizational structure to that new strategy. We've set important key performance indicators and indeed, we've also had time for a Board effectiveness review reflecting the outcome of that strategy. And as ever, there were useful inputs that we will reflect properly in our annual report and accounts. And that leaves us with a very clear long-term focus and it's important to reflect the differential between the long-term focus which we cannot be deflected from and important short-term focus areas, which we have to deal with as life goes on. And our long-term focus builds naturally. It begins with our customer experience. That relies upon our people and our culture. We cannot drive the right outcomes unless we have a properly effective technology and data infrastructure. And as you all know, we are going through substantial investment in that infrastructure at the moment. And that is a very important focus for the Board because we all know how difficult it is to get that absolutely right. We need to focus on our growth initiatives and then, of course, our key outcomes of building an inclusive society and transition to a low carbon economy alongside the benefits that the strategy will bring for our shareholders in financial terms. And finally, it's important to point out that risk and resilience, particularly around cyber and a number of other issues is always very close to our heart. At the same time, of course, we are facing short-term issues. And cost of living is naturally one of those that we're very heavily focused on as well in the near term on the transformation of our executive management team and indeed holding ourselves to account for the delivery of the initial phases of the key performance indicators I referred to earlier as well as retaining operational effectiveness. Another very important focus for the Board is culture. And of course, without the right culture, growth initiatives are difficult to implement. We need to move from a historic culture of command and control to one where our people feel empowered, where people feel a willingness to be held accountable and to make mistakes when they make mistakes because it's very difficult to move forward without occasionally making mistakes and then learning from them. And finally, the key element -- another key element of our cultural transformation is moving from a process-driven culture to one that is fundamentally focused on agility and speed of change. And this culture is something naturally that is headlined by the executive team, particularly by Charlie, but it's something that the Board plays a very strong role in oversight and continuous monitoring. In order to implement this new strategy, we have changed our organizational structure and also made some significant changes to our management team. It's great that out of an existing number of 15 members of our group executive committee, 8 are new, of those 5 are external recruits and 3 internal recruits that gives a good balance in that regard. And we also have 6 female members of this committee as well as 2 ethnic minority members. So we feel we have a good balance of diversity in relation to this, which should allow us to meet all the diversity targets that we set ourselves. Finally, when we look at the Board, I've discussed the way in which we structured the Board between the main group board and the ring-fenced Bank board, that means that we are a busy board because a very significant number of individual members of the Board have specific roles that they need to play. And I'm very grateful to everyone that being a part of the Lloyds Board brings significant commitments, which everyone lives up to in an extremely positive way. Again, we have 2 new recent NED appointments. We have 5 female members, 2 ethnic minority members. We have 5 Board committees and you can see how membership of those committees is spread across our different members. And as I said earlier, we have a clear delineation of committee responsibilities that allows us to delegate key discussions to those committees whilst also allowing the Board to listen to the outcome of those deliberations before making any final decisions. We fully aim to meet all our diversity targets. Very sadly, Alan Dickinson will be moving on as our Senior Independent Director towards the end of the year. And at that point, we will look very closely at the key leadership roles on the Board to make sure that we have a proper level of diversity in those. So that was really what I wanted to say. I very much look forward to your questions. And in the meantime, I will hand on to Amanda. Thank you.

Thanks very much, Robin. Thanks a lot. So I'm going to talk briefly about the Responsible Business Committee. I think we've worked as a committee. We've worked hard this year to really focus the agenda on impact and to support the Board's agenda, which may sound obvious. But I think it's often this equivalent committee and other companies can [ be a series ] of unconnected topics, if you're not careful. So ensuring that it really does support the Board's agenda and drive the purpose of the organization, I think, it's quite essential. So I think you can see what we've been working through and what we've helped deliver this year. I think in terms of the long-term focus, embedding the purpose in the operations is essential, but also it is going to take a lot of tenacity. Again, I would say people hugely underestimate this task. And fundamentally, we have to get to the point where it's black pull through a stick of rock, it has to be consistent, rigorously applied and really sort of forensically looked at. But I think it's very fair to say that the leadership team under Charlie are very much getting after this, which is great. I think the other thing to point out on this chart under long-term focus is just transition. Again, I think it's always easy to go after net zero to the sort of detriment potentially of other things. I think you have to always be aware of unintended consequences. So really thinking about just transition because we don't -- so we don't want to accidentally level down when we're trying to green up. So really using our strength to think that through and what that means, I think, is going to be important to. And in terms of very specifically short term right now, as you would expect, we're thinking about the rising cost of living and the impact on our customers, our vulnerable customers and our people. And importantly and most recently in this past year, thinking about the implementation and embedding of consumer duty, which again, will be something that will be evolving over the coming year. I think in terms of very specifically right now, supporting customers and communities, obviously, it's an incredibly challenging context. And what we're seeing at this point is that customers are actually demonstrating a remarkable resilience. And they are, at this point, adapting to that higher cost of living. I'm sure it's not [ going to be ] easy but really thinking about that. Nevertheless, we have vulnerable customers that we need to think about and that's the targeted support to them proactively contacting those most impacted. I mean some of these numbers are quite huge, helping 100,000 out of persistent debt so far this year. And then obviously, that works through into the commercial aspects of what we're doing. And then similarly, in our communities, additional cost of living support to 800 new and existing charities through the charitable foundations. I think it's a unique thing in terms of foundation, actually, that they tend to give smaller amounts of money, locally. So that impact is so tangible, be it East Kilbride, [indiscernible], Jersey, Belfast, you name it, it's tangible on the ground. So a grant of GBP 15,000 will actually pay for half of support worker, and that's going to profoundly help that local community. But the other lovely step that goes alongside that is that 85,000 hours of skill-based volunteering -- colleague volunteering, has been helping those various charities. And we've got 900 colleagues alone who are volunteering within a foundation-funded charity [indiscernible] of trusteeship. So it's a really vivid part of our social story as Lloyds Banking Group. So focused on building an inclusive society on to the next chart, please, [ Nora ]. As you'll see from our activities, they are rooted in our strategy. It's about living our purpose, and it's fundamentally using our scale to the benefit of Britain. So if you look at the headlines on the -- well, on my left, as I'm facing this chart, absolutely, the key kind of areas are access to quality housing, financial inclusion, regional development and inclusive organization society. And if you just look at some of the things around housing, GBP 12 billion funding into the social housing sector over the past 4 years is not an insignificant amount of money. But importantly, that's also rooted in our whole strategy overall. And then if I just draw your attention to the partnership with U.K. Urban Future Commission, the support for leveling up is incredibly detailed, incredibly whole-hearted and we're not going to get there unless it's a significant collaboration with civic society and government and it's really working together in those areas to really support leveling up is going to be very, very powerful. And then finally, the inclusive organization. I think, as Robin earlier said, we're fortunately well achieving the targets that we set out. And I think it's something that makes us all proud that we were the first FTSE 100 to set targets, both for gender and ethnic diversity at senior levels. So again, I think it's just always been really thoughtful and where that balance of ambition and pragmatism lies and driving for that. So moving on to the continued progress towards our net zero ambitions. I think it's probably fair to say across the market at the moment, sustainability as a whole is largely targets, targets, targets. And at this point, not so much about results because they haven't been achieved. So I think it's fair to say the team are being incredibly methodical about the sectors and the approach, so that it is grounded in what we know and that we are being realistic, ambitious but ensuring it's embedded in the day-to-day, and that's the general basis upon which the various targets you see on this page have been set. And as you can see on the left-hand side, some chunky sets of targets now across net zero banking alliance across the supply chain. We're making some big commitments in terms of no new greenfield oil and gas development finances and we're the first major bank to do so. And the first group Climate Transition Plan will be published in February of next year. So I think on every aspect of that, just really thinking what do we know, how are we going to get there. And I think it's probably fair to say that the work and you'll hear this from both Sarah and then Catherine is the work of the committees together now, ensuring we're joined up and driving that is going to be incredibly important and it has been this past year. And then finally, onto cultural change in alignment with purpose, values and strategy. You heard very clearly from Robin, what we're trying to get after, and this is very obviously something that Charlie and the whole leadership team but it has been hugely supported by the Board. And I think the interesting thing for me is, one of the Holy Grails in this area is how you measure culture. I think it's an incredibly hard thing to do. And with the combination of listening, learning and really the closed loop of all of that is going to drive a mechanism by we can really measure that and drive it forward. And I feel -- I don't think it's -- I think it's very fair to say on behalf of my colleagues that we're all really pleased with how that's emerging and how that's going to happen because we know, therefore, it will drive the change that we're looking for and make the progress that we want to see. So I think that's everything I was going to say. It's a fabulous committee to chair, and there's certainly a lot of commitment and passion to do what you've seen today. So thank you very much. I'm going to hand over to Sarah Legg. Thank you.

Thank you, Amanda. I'm really pleased to be able to give you an overview of the work of the Group Audit Committee. As some detail of the matters that we focused on in the year. So I thought it would be helpful to give you a sense of the topics we're spending more time on from a forward-looking perspective. We're conscious of how the work needs to connect with the work of the other committees and the Board itself, as Amanda has said, and Robin has said, particularly in the important area of climate reporting. I'm just going to start with a quick reminder of how we operate. We have an Audit Committee at the Lloyds Banking Group plc level as well as the principal subsidiary levels with independent non-executive on those subsidiary committees. So notably, those would be the Insurance subsidiaries with Scottish Widows and at the Lloyds Bank Capital Markets level, LBCM. The Lloyds Bank and Bank of Scotland Legal Entity Audit Committees, effectively play together the ring-fenced bank, run on aligned basis, to the group. So that ensures that we get appropriate legal entity discipline, but time to time having a single legal entity audit committee sessions as well as effective consideration of the group as a whole. So on this slide, you'll be familiar with the purpose of Audit Committees, just to remind that we monitor and review the group's financial and narrative report arrangement, the effectiveness of the internal controls, including those over financial reporting and the risk management framework, whistleblowing arrangements and each of the internal and external audit processes. So in this respect, the committee agenda is taken up with a number of standard items including, of course, a scrutiny of the quarterly external publications. So the committees continue to focus on the issues relevant to the group's financial reporting, including consideration of the key accounting judgments and estimates ensuring integrity of the financial accounts and associated disclosures. The committee has also spent a significant portion of its time considering other related areas, including maintaining the group's internal control framework to ensure it remains fit for purpose. Our commitment to the continuous improvement of the reporting control environment is key in supporting the strategic development of the group, in line with our strategic development. This also [indiscernible] valuation for us remain the company's financial control function, the risk function, internal audit and external audit. So the committee is receiving multiple independent and objective report in support of its assurance work. And on this side, I'd like to draw out some of the specific areas where we focused on in 2022 and where we'll probably spend more time in 2023 and likely beyond. And those areas that I'd pull you -- pull out would be impairments under IFRS 9 as we emerge from the pandemic situation in '21, '22 into an environment of higher inflation, higher interest rates and IFRS 17, the implementation of this accounting standard in 2023, which impacts insurance contracts. Climate impact and reporting and the continuous improvement of the reporting and control environment. I think on this last point, it's worth mentioning that we're overseeing improvements in the Sarbanes Oxley reporting processes, regulatory reporting and the finance transformation program, which pulls this together. We move on to Slide 18. I thought I'd highlight the oversight work that the committee conducts in respect of Expected Credit Losses or ECL. So given, firstly, it's important to the financial statements, secondly, the forward-looking nature of the standard; and thirdly, the impact of volatility in the economic environment. This is an area that has received increased investment over the last 2 years. This has resulted in improved agility in the financial processes that allow the capture of more recent economic news. The committee scrutinizes the multiple economic scenario. So effectively, the economic estimates that underpin Expected Credit Losses, and it examines the movement period-on-period and supporting evidence relating to external benchmark information. The accounting standard requires that judgment is applied and the economic environment in 2021 and '22, reflecting emergence from pandemic conditions moved us into one of higher inflation and higher interest rates. So the committee has examined the management judgments that have applied consequently, ensuring that they're all well-defined, discrete by individual rationale and portfolio and are supported by documented release criteria. The committee also considers the consistency of methodology from period to period. External benchmarking were available and the quality of both quantitative and qualitative disclosures. This will continue to be a focus of our attention in 2023. If I move to the next slide, just some brief words on 2 other areas that have taken more of our committees attention in 2022, and we'll continue to do so in '23. Firstly, as mentioned previously, our climate-related disclosures, we've spent more time both within the committee and outside of the committees. In fact, we recently brought the Audit and Risk Committee members together across the group subsidiaries for our inaugural Audit and Risk forum to discuss common topics and climate risk and reporting was a key topic, as you would imagine, on that agenda. From an audit committee perspective, we've been examining the impact on the audited financial statements and where climate could be a consideration as we look at assets and liabilities. We apply a lens of fair balanced and understandable as we review the linkages between the strategic report, the financial statements and the stand-alone climate report. We request and obtain regular reports from the team with respect to the developing systems of reporting and controls as well as assurance. And it's really important to mention that internal audit has continued to build out their capabilities here providing that third-line assurance. And with the evolving regulatory -- regulatory and reporting standards, we review and discuss updates on the necessary preparations in response to maturing external landscape and demands. I'll just briefly then turn to IFRS 17, a long-awaited accounting standard impacting insurance contracts. We receive regular updates on the progress of the implementation project. It's a complex project. The standard impacts, the previously recognized value in-force asset and leads to a change in the balance sheet on the transition to adopting the standard and to a timing change in the recognition of profits on those contracts. So in this respect, the committees had deep dives and have looked at some considerable detail into the implications of the standard, the choices that have been made and how this will impact for the results going forward. We have heard directly from the component external auditors, i.e., the insurance external audit team, we continue to receive updates from the Chair of the Insurance Legal Entity Audit Committee. And all this means that the governance is well connected. So I hope that, that gives you a good sense of what has taken of our time in 2022 and will continue to take up our time in the future. And with that, I'd really like to pass over to my colleague, Catherine Woods, Chair of the Board Risk Committee. Thank you.

Thank you, Sarah, and good afternoon, everyone. I'd like to take this opportunity to share with you how the Board Risk Committee delivers on its purpose and also spend some time with you on 3 important topics that we've spent time on at the BRC this year. If I, first of all, start with the purpose of the BRC, this is to assist the Board in fulfilling its risk governance and oversight responsibilities. But that's quite a broad remit, and we do it in a variety of ways. We have regular cyclical reports coming into us. But in addition to that, we also have a series of deep dives which are dynamic and pre-planned but also reprioritized as necessary. We take a strategic forward-looking approach at the BRC with respect to risk management. And the key principles and 3 themes that drive our long-term focus are laid out there for you in the middle of the slide. This ramifications clearly for both our short-term focus, but also our deliverables and I've laid out some of deliverables that we've had in 2022 on the left-hand side of the slide. Risk strategy and risk appetite are very important for us from a long-term focus. I really see this as establishing the guardrails within which the group can safely deliver on both its purpose and its strategy. On governance and oversight, really, this is to ensure that we have an effective control environment that's fit for purpose. And it really has to be supported by a risk culture that's fully embedded, as this is how we operate day-to-day in everything that we do. We work closely with Alan on the Remuneration Committee to ensure that the risk culture is properly reflected in Remuneration and that our colleagues are properly motivated and conscious of risk management. Principal risk, as you would imagine, we have both financial and nonfinancial and nonfinancial covers quite a variety. We have people in there, we have cyber. But in addition now, we have climate in there as a principal nonfinancial risk. On the emerging side, we look at this both on an immediate horizon basis, but also on a long-term basis. And we do this both on a thematic and a strategic basis. And to that end, we spend a lot of time both in emerging risk near term in 2022, as I laid there in terms of cost living on the macro environment, which I'll come on to shortly. Finally, then, we also approved a number of stress and scenario testing. Now this is important in order to ensure that the group has comfort that we have sufficient -- that we have sufficient capital and liquidity in stress situations. But not only do we look at capital and liquidity, we also look at cyber doing both idiosyncratic and systemic testing there. And this year, we also added in climate through the CBES, Bank of England exercise. So I'd like to take you through in our 3 topics that I thought you would be interested in terms of how we've spent a lot of our time at the BRC this year. The first one is the credit impact on the cost of living. Now inflation and its potential impact has been a concern for the BRC throughout 2022. And given these inflation concerns and also the macro environment, the potential cost of living pressures in addition, we have put in place heightened monitoring for the whole loan portfolio. This has consisted of early warning indicators and dashboards, which we have developed and enhanced for all segments of the loan portfolio at quite a granular level. And in addition, we've also undertaken a number of vulnerable sector reviews. The discussion then at BRC has centered on the implications for our board risk appetite metrics but also ensuring that the actions and the initiatives that have been deployed are appropriate and proportionate. And this then also feeds into the discussions that we have at the Audit Committee on provisions. Now while we've seen some early signs of cost living pressures, there's no evidence to date of any significant deterioration in the portfolio at this stage. And if I draw your attention to the chart on the bottom left-hand corner of the screen, you'll see that this is new to arrears across the retail portfolio. And the levels remain low under our pre-pandemic levels and also actually at our below historical levels. I've also given you some information on the credit quality of our portfolio and in particular, on the mortgage side on CRE portfolio at the top of the chart. I thought this was interesting because it highlights the impact of tightening our risk appetite since 2019. And as you can see now on the mortgage portfolio, only 4% of our book has an LTV above 80%, and only 11% of our pre-portfolio in the Commercial Banking book is above 60%. An additional focus of the BRC in 2022 has also been on our capacity and ability to support our customers who may get into financial difficulty. Now this could be obviously through cost living pressures but also as the government-backed lending schemes roll off. So our focus there has been on conduct risk, capacity planning, ensuring that skilled resources are in place and also contingency planning and also within an appropriate environment that's effective and fit for purpose. We also want to ensure that there are adequate resources and attention paid to both early and pre-arrears because this reflects our preventative approach to our customers getting into difficulty. And you've heard a little bit more from Amanda on that in terms of the RBC. If we turn now to Climate Risk Management, this has been an issue that has been reviewed a number of times at the BRC, and we expect to continue to do so in '23. Climate change strategy itself is set at the board and considered at RBC. The BRC's focus is on climate risk management. So for example, if I look at the electric vehicles and PHEV portfolio, the leasing and financial targets for that were set at the RBC but the BRC recommended the appropriate risk appetite for the residual value of these vehicles. Our focus in 2022 has been in defining a consistent risk framework with clear responsibilities. And we believe that this has resulted in a fundamental shift from risk ownership, our second-line ownership of climate risk to business ownership during the year. This has enabled us to embed climate risk management across the group and also enhance our capabilities. We assess that we've made solid progress in 2022. And in particular, I'd refer to our response to the CBES' exercise. The fact that we've met regulatory expectations on financial risks from climate risks and also that we've embedded climate risk in all of our new credit applications and renewals in commercial banking with a dedicated sub team available to support them. It's clear also where we want to enhance our approach to climate risk in '23. We want to further embed the climate risk factors and credit decisioning and MI. We want to strengthen our scenario analysis capability, and we want to develop further board risk appetite metrics. There's also a number of data gaps, which we know we have to closed on. And perhaps I could just refer here to a consultancy pilot that we have with the Soil Association Exchange which will help us at an individual farm level give us a better understanding of the makeup of our own farm [indiscernible] emissions that also help farmers make the just transition. If we move on then finally to the strategic transformation. So there is a significant strategic transformation underway in the group in order to deliver on our strategic objectives and initiatives, which Robin referred to earlier. Now the oversight of this strategic transformation has evolved during 2022. We have new change-related risks, which have emerged both as we've moved really from mobilization of strategic initiatives to delivery, but also as the existing change-related risks evolved as well in this scenario. And operational resilience from this strategic transformation has been up almost on our minds. Robin referred earlier to a committee called ICAP, IT and cyber advisory forum chaired by Nigel. This is a very important committee that supports the BRC's direct oversight of technology and resilience related matters. It does this through a series of prioritized deep dives which focus on the implications of the transformation for both our important business services and critical business processes. And alongside the work done by IT ICAP, BRC receives regular updates from the executive committees on the progress of strategic transformation and the impact this has upon the group's profile -- risk profile. We also look at external assessments that have been undertaken and the results and discuss those. We've introduced a new agile approach to change management in 2022, and we refer to this as the platform team approach. This ensures that business and technology owners are aligned on change delivery. And we've also introduced end-to-end accountability for business unit heads. The BRC oversaw and we're very supportive of these changes as we believe that they will reinforce the risk culture within the group. And as a consequence, we've also overseen the upscaling of the second line of defense, to help ensure that the strategic transformation is delivered in a safe way within risk appetite guardrails. The second line of defense also delivers regular risk opinions on a number of executive papers to both IT ICAP and the BRC. Internal audit has also been upscaled and has delivered a number of important thematic reviews in this subject to the Audit Committee, and that will continue into 2023. As a consequence, our risk management framework has evolved throughout 2022. And really, what we're trying to do here is reflect the requirement for really enhanced, integrated and better coordinated oversight as we implement these changes. We also expect that the framework will evolve further in '23. So that brings me to the end of the Board Risk Committee presentation. So I'd now like to hand over to Alan who is our Deputy Chair and Chair of our Remuneration Committee.

Thank you very much indeed, Catherine. I suspect it won't be difficult for those listening into think what are the key issues on the Remuneration Committee agenda this year. Just looking at the inflation numbers this morning, whilst they're down, we're still in double digits. And frankly, cost of living affects our customers but also affects our colleagues and that has been very much up almost in our mind over the last 12 months. There's a few things to talk about, and I will come on to them. But if I think about the first priority, our colleagues, 12 months ago, if I talk to you then, there is a considerable disquiet amongst our colleagues because in 2020, we did not pay a bonus. We felt that we should align with our shareholders hadn't received dividends and didn't pay our colleagues the bonus. And that caused a considerable amount to disquiet and some heightened attrition. That was 12 months ago. I would say that we're in a much stronger position today, partly because as a result of the performance in 2021, we were able to pay a bonus earlier this year, which met quite of the expectations. So that has helped. And I will talk, if I may, about what we've delivered in the year for colleagues in a little bit more detail later, in terms of the cost of living payments that we made and an agreement we've already reached for a pay around for 2023. I'll also spend time talking about Directors' Remuneration Policy. We are due to go to a vote at the '23 AGM for Lloyds Banking Group. And we've done awful lot of property work in looking at the market and coming up with our thoughts as to which way we should go. Climate change has been uppermost in our minds and how we embed this in the group's policy and how we reinforce that with our remuneration strategy has also been a key focus in the current year. Longer term, the new strategy that we announced in 2022 in February this year, has been a key issue for us, how we should look to amend remuneration strategy, if appropriate, to align with the new corporate strategy that we have. We've looked at how we can make sure that our colleagues are part of this more growth-oriented journey. And we've also, as I said, looked at how we embed ESG into the remuneration measures. We have made progress in 2022 on gender and ethnicity pay gaps, but there is a long way to go. There is more to do, and we've set ambitious targets going forward. But I'll come back to the short-term focus. And I think there are probably 3 issues there working for back to front. The remuneration outcomes in '22 remain to be firmed up and agreed, but they have been a focus for us over the last few months. And I think also cost of living impacts on the lowest paid employees and how we should approach director's remuneration going forward. So moving on to the first issue of workforce engagement. We've been very concerned that the lower paid colleagues in Lloyds Banking Group, where we have a very large group of people. The lower paid colleagues have been and are being disproportionately affected by inflation. I think that's very well known, and it's been a concern to us. We need a motivated workforce. So in August, we led in the industry by making a one-off payment of GBP 1,000 to all colleagues, which was very well received, I think much needed, but very well received. But we then moved on to thinking about 2023 and the pay award and what we could and should do. And we have agreed with the unions and then employees and union members have supported that and voted for this. We've agreed a deal which will afford the lower paid between 8% and 13% increase. In terms of the overall pay bill, that will be only 6.3% and as you can imagine, when we come to the higher paid colleagues and the executives, those awards will be materially less. I think we've also provided a good deal of financial and nonfinancial support to colleagues, helping managing personal finances and I think we'd be very mindful of the impact on people's mental health as well throughout what has been a very difficult year. We have heightened our attention to colleague sentiment through annual colleague survey and monthly pulse service. We've completed recently the 2022 annual survey. The employee engagement is up, which is absolutely to be welcomed. And in particular, 87% of very high number, have connected with the renewed purpose of helping Britain prosper. People really believe that is the right way for this organization to go to be a very purpose-driven organization. I mentioned before that we have made further progress, which we will announce in February of our ethnicity and gender pay gaps and more to do, and we remain ambitious in our targets for the future. Moving on then to the other key topic of directors' remuneration going forward. This is an issue because we need to talk to the shareholders of the 2023 AGM. Having last been to the 2020 AGM with proposals at that time. And many of you will know that in 2020, we looked to move to a restricted share plan. The review that we've undertaken now just makes one particular point. Given our strategy has changed to being efficient, but also growth-oriented it's important that we align that strategy with the remuneration outcomes. And we therefore see returning to a long-term incentive plan. Not an easy decision, but one which we think is the right one. And in the conversations I've had with investors, which have been very welcome and very helpful that has been reinforced. We wouldn't propose to change the target remuneration, the maximum award will be 300% of salary. And that would align with the LTIP previously. In fact, there was an option to be at 400% before that would not be the case going forward. It would be 300%. We would have increased pay for performance. And quite simply, the LTIP targets were met and was vested in full. There would be a 30% increase in payout versus the current policy. But the performance wasn't met there will be up to a 30% reduction in payout versus current policy, which does achieve the alignment that don't think we need. We're in course of preparing the metrics and the targets and I will be consulting with investors in January in that regard. And given the uncertain economic climate, we have also given a lot of tons to whether this is the right time to make this move. At the moment, we feel it is, and we feel that there's always going to be challenges whatever with time we pick. But we are very mindful that the world is very fast changing, and we are in an economic crisis and do need to be very careful that this is the right thing to do at the right time. Two additional changes are likely to be proposed, one in terms of our over deferral of parts of the reward package. We have a policy, which is to align with regulatory minimum requirements. But we go beyond that at the moment. And that is perhaps a legacy of the past, but it has meant that it's been expensive for us to hire the new recruits we've wanted to build up the management team. Now I think that can be addressed fairly reasonably. And we propose to move to the policy to enforcing that and taking that into practice. There was also a minor change proposed in terms of the quantum for the CFO in terms of the bonus award rather than anything else. And I have spoken to investors about that and continue to do so. As I said, the feedback from the initial consultation has been extremely positive. I'm grateful for that. And I'm very grateful for all the guidance that you have given. Robin, I propose to hand back to you at that point, if I may.

Thank you, Alan. And that completes the formal presentations, and we now look forward to taking your questions. You can either submit questions by the usual hands-up method or through the chat function, and I'm going to ask Douglas to dish out the questions. This is the point where Douglas has his fund for the year. And we may also allocate questions to Nigel, who, as I said earlier, has the important role in relation to the ring-fenced bank. And as Catherine said, in relation to the IT advisory forum. So I'm going to hand now back to you to do your worst as they say.

Excellent. Thank you very much, indeed, Robin. As Robin just indicated there, if you wish to ask a question, if you could simply indicate through raising the hand button, which is actually within the reactions content section at the top of the screen. I will then call your name out and the studio will open your audio lines so that you can ask the respective question. When asking specific questions, it would be great if you could actually reference your name, your institution. Clearly, the question and ideally who the question would actually should be directed at. I also have a number of other pre-submitted questions, which I can reference as well. We do actually have the first question that's come in, which is actually from Hendrik. So Hendrik, would you mind asking the question?

Yes. Thank you very much. And ladies and gentlemen, thank you very much for taking the time. This is Henry Schmitz speaking from DWS, German asset manager based in Frankfurt. Indeed, very good to have this conversation near the year-end. I would have 2 major aspects that I'd like to address here. First, with regard to the disclosures that you've already made in terms of your net 0 commitment and the progress and, let's say, pathway to achieve that. In this particular aspect. I was wondering, to what degree or how far are you extending you on a 0 commitment? And when could we expect that you will also be, let's say, willing or able to commit or to conduct a validation of your targets by the science-based targets initiative, which for us is, let's say, currently the best external evaluation that we can rely on. And the second aspect would be with regard to the remuneration and Alan I'm looking forward to our discussion in the new year on that already. And I do recall that we had initial exchange about the balanced scorecard methods, and I, yes, can see that you have reduced the complexity, which I think is in favor of all that are affected by that. Just with regard to the employee engagement index and first of all, it's good that this is included in that measure. Would be good to understand what kind of threshold you have introduced so that we can understand, let's say, what the requirement is so that this incentive really kicks in. And obviously, it would be good to understand also what kind of succession planning in terms of your role as Senior Independent Director is currently ongoing.

Amanda, do you want to take the first question then perhaps on the Net Zero.

Yes. Great. And also Becky Heaton, who's our Head of Sustainability is also in the back somewhere if we get an incredibly complicated question that is a real expertise requiring one. First part of your first question in terms of how further we should go on net 0 I mean I think working backwards. Thanks, Becky, Hello. Well, from the climate transition plan planned for February. I think if you think about the combination of the depth of the data inherent in that, TCFD is also on the stocks for the future. We've got the climate, the CDP disclosures that we do every year, the net banking alliance ones that were published for the first time in October and obviously, the Bank of England work. So if you put all of that together, that's a pretty thorough runaround of this subject. And we've made, as you know, some pretty challenging targets to reduce by 50% the carbon that we financed by 2030. And I think that's not insignificant, frankly. So kind of we could spend the whole half an hour on this. And clearly, I shouldn't sush. Becky, what would you like to add?

Just to say on SBTI, we're in active conversation with them. And absolutely, you're right that the sort of preeminent organization on this. Most of the NZBA targets we've set would meet the SBTI criteria. The housing is one sector which is still evolving both for us and for SBTI, so SBTI at the moment looking what some different scenarios what might look like. And so that's really why we're holding off at the moment just last week, we carry on those discussions.

Thank you. Should I hand over to Alan? Douglas?

I would just say, if you may, I will leave the decisions and timing on my replacement to Robin to talk about. I think it'd be wrong for me. Robin may have implied I was going at Christmas this year where it's not quite right. I think it's probably towards the end of next year. So I'm afraid you've got me a little bit longer, Henrik. But the -- in terms of the balanced scorecard, I'm a great believer as you are in centricity. And I think it's fair to say that the LTIP that we are proposing will be heavily around financial measures--around the normal relatively relative TSR capital generated and return on tangible equity. Together with as close to financials we can get in terms of the strategic objectives, as we have said, plus the ESG targets that we regard as very important in the long term. That's our current thinking to be finalized, but that's the direction of travel. When it comes to the employee engagement, that's very much more likely to be in the 12 month bonus scorecard. And that is certainly not finalized as yet. We normally look for a variation around the U.K. norm and obviously, a threshold which would be below the U.K. norm, and maximum will be quite a bit above the U.K. norm. I'm happy to engage more separately offline, if you wish, at some point. But probably now is not the time to be specific on the numbers as we're coming up to negotiating about those. Robin, do you want to tell everybody about my succession?

And just to be clear, the reason I said that and it is, you're right, later next year, I kind of always assume we're in January, it looks so cold and dreary outside. It is sadly for us, your full term as a nonexec comes up in September of this year, next year, which means that you, unfortunately, no longer are able to play the role of Senior Independent Director. And it was in that context that I was talking about the ability to think about the leadership roles on the board. More generally, obviously, Alan does deserve a break at some stage, we'll hold on to them for as long as we possibly can, but we have plenty of people, particularly in relation to remuneration who are well qualified to take over the Remuneration Committee and we will be thinking about that as we get closer to any final decisions on letting Alam hand on any or all of his responsibilities.

Thank you, Robin. And I think that addressed all of your questions, Henrik. Excellent. Thank you. So we have another question from Janet Janette, Andrews.

Hello, everybody. So please, I was able to join you here today. My colleague, Caroline, who normally joins this meeting does end her apologies. So I was also going to ask about SBTI, so I was really pleased that, that question has been asked. It's so important to us as investors, and we'd encourage you to put as much effort and emphasis in your discussions with SBTI that could be moved along. As quickly as possible. I also wanted to ask about culture, which really centered on, I think, most of your presentation today talking about where you want the culture of Lloyd's to be. And I wondered how you think about the line between the individual decision-making, that agility that's needed and how that interplays with the recommendations and prompting coming from your regulators? And whether you see any conflict there and how you may be overcoming some of those barriers? As we know, culture is almost the hardest thing to change in any organization, particularly when you're heavily regulated as yourselves.

Should I take that?

Do you want to start off there?

Yes, I think so. Yes. So it's a really good question, a very insightful question. And what I would say is that there should not be any issues between us and our regulator because we are both trying to achieve exactly the same outcome and culture is an issue that we are in constant dialogue with both of our regulators about and which they are extremely focused on. And I think for us, this is about leadership in many ways, and we are implementing a very clear program where we are effectively running our culture down through our top 300 leaders in order to make sure that they really understand what we are seeking to achieve. We also have really quite a sophisticated form of measurement through our monthly and less or more annual-based surveys, which goes down into quite a lot of detail in individual areas so that we can pinpoint the areas where we feel the message is not getting through and make sure that we do things about that. So there is no black and white answer to your question because, as you say, culture is something that is a constant journey. But it is something a journey that we are very firmly together with our regulators in relation to, and they understand our challenges and always say to us that if we demonstrate that we're heading in the right direction, they will work with us.

Excellent. Hopefully, that addressed the question, Janet. The next question we have online is coming from Andreas. Andreas, do you want to ask your question? I think Andreas is still on mute. I don't know whether that's through Andreas or whether that's through the.

Sorry, you hear me now. We can now, yes. Okay. Sorry for that. So Andreas Tomei investment from the ESG department. I would be interested in the -- will you have ESG targets in the LTIP plan, but I would be interested in when you want to implement to the KPIs is the sector environmental targets because it's key to the strategy to manage to net 0. And so far as I know they are not already included.

I think Alan that probably makes sense to come to.

You're absolutely right. It's part of the thinking we are doing at the moment for the future of the proposed LTIP that we need to embed appropriate targets in there. You're rate right that we've just set out some very clear sector-specific goals and I think we need to marry those up. So I think within the short space of time, we will be able to clarify that, and I'm happy to engage with investors, as I say, in January in the detail of that.

We have another question from Miles Hamilton.

Can you hear me?

We can, yes.

And nice to meet you all. A follow-up question for me on culture. So you mentioned the shift or the need to shift from a command and control culture to empowerment. That word empowerment, I thought was very interesting. And trying to create a culture of ownership within the banking industry must be quite a challenge. So if you could speak a bit more about how you're approaching that shift. I'd be really interested.

Yes. A really good question. And it's not straightforward, but it is about shortening lines of command so that there is less distance between senior management and what happens on the ground. And that is about also reducing process banks tend to lay out process on process, and we need to address that issue so that people do not hide their accountability behind the process which is something that happens. And again, in order to make that happen, we have to go through the strategic transformation that Catherine talked about in relation to the oversight of that strategic transformation. So it's a number of different things that come together. But most importantly, Miles, it's about tone from the top. And I think it's when you bring a new Chief Executive in that is an opportunity to change the feel of an organization. And I think we, as a Board, feel that the organization is changing almost every day, but we can't allow that to be the only thing that affects this change. We have to do it through formal programs and to effectively removing some of the process that we have in place without releasing any of the controls that are essential for us as a regulated entity. Does that make sense?

Yes, I think so. So reducing unnecessary racy in driving decision-making down the organization.

Yes. And it's the old things like storytelling. We need to celebrate people doing the right thing in the right way. We need to celebrate, if I'm honest, Miles, people making mistakes if they make those mistakes for the right reasons, we must allow people to feel that if they do things for the right reasons, we will support them.

Miles, if I may, I'll just reinforce that. I mean I think leadership is critical. And one of the key reasons that we were delighted to bring Charlie Nonin because we see him giving that leadership to people. If you go back to the financial crisis, I think thanks for a period of time thereafter, we're very nervous about making mistakes and the regular regime and the individual persons resume sort of added to that concern. I think it's very, very important that we move away from that towards people taking accountability and making things happen. And all is down to Charlie and the leadership team has brought in. And as Robin says, the tone from the talk, people will follow if they see a good and strong leader, and that I firmly believe is what we have in Jelly.

There are a couple of other questions that have actually come in through the chat function. The first one was from Frederic actually. He was asking about the spit of executives and nonexecutives on the board. And he's also just seeing about how the management works effectively between the CEO and the Chair. So that might be something Robin that perhaps you could address initially?

Of course, I think the relationship between the Chief Executor in the chair is possibly the most important element of governance that exists. And that is all about a sense of openness about a -- there I said, a lack of ego on both sides, a willingness to share, to listen, to understand and to take advice. And again, to Alan's point, in Charlie, we have a Chief Executive who -- yes, he's a strong chief executive, but he does not have a big ego. And he listens to the Board as old, to me in particular. We have weekly discussions about the issues that are on his mind, and we supplement those in more frequent discussions about particular issues if that's required. We have a set agenda for those discussions. So we both know what we're talking about. But equally, we feel free to add to that and to speak to each other on a regular basis outside of those meetings, over weekends, whenever works and whenever is necessary. So to me, it's all about an open relationship. In terms of the number of executives on the board, we have quite a big board, as you can see from the list because we have a lot of roles that we need to fill. And we feel that having 2 executives is the right approach, I would emphasize that the Chief Risk Officer is present at virtually all issues that are discussed at the Board. And we think that's an important part of maintaining that proper balance between strategic discussions, control and risk discussions.

Another question that came through on the Message Board was from Zach. What are your views on shareholding requirements by Board members? Some firms require board members to purchase shares in the market with some proportion of their fees to improve alignment. Thank you.

Probably I think we don't have formal requirements because I don't think it would be appropriate to insist on requirements for a group of individuals who have very different financial and other characteristics. So I don't think it will be a good idea to have formal requirements. Equally, if people ask me the question, I obviously encourage people to do whatever they feel comfortable with to demonstrate that they have confidence in the business of which they are directors, but that is very much a matter for individual directors. There is no formal policy and I don't feel that any form of policy is appropriate. And on the whole, we obviously have to be very careful to make sure that we buy shares at the right time from a market-sensitive information point of view, and individuals by their shares in the market through very strict approval processes, which includes direct approval by me.

Thank you, Robin.

Those approval processes are intended to make sure that we adhere to regulations rather than be approving what and when people buy. Thank you, Robin.

Before I move on to another question that came to, there was a pre-submitted question, there were a couple actually. But the first one was, are you going to undertake a climate vote this year? I think there's probably one that comes to you first, isn't it Robin?

Yes. Good. Look, as I hope you've gathered from the presentations, climate issues are absolutely integral to our strategy, and we think about them throughout almost every process. And I think it's been mentioned in almost each of our -- it has been mentioned in every one of the presentations. So it's woven throughout everything that we do. We don't see it as a distinct factor -- we disclosed a lot of information in relation to our actions. We discussed that with shareholders and indeed with NGOs. I think given that, I think it's still something that we would consider, but we don't feel it's necessarily appropriate this year, but we will monitor how things get.

Thank you, Robin. Okay. Let's now take the next question from Debbie Lasan.

This question is for Sarah, and it's on the audited financial statements related to climate. The question is, could you just elaborate a little bit more on what it's going to take and what you're looking for in the linkages to be able to report on this? And is it going to be your auditor, Deloitte, who will be conducting the audit. And also, is there anybody -- any competitors or anybody that you're looking at currently that you're sort of modeling your -- the auditing of these statements after?

Yes. Thanks very much for the question. And of course, when we look at the financial statements, we've got to look through all the asset types and think about how climate could impact the statements or valuation of those assets and liabilities. And if not now, what would need to be considerations in the future for us to think about that. If I cast on buyback a few years, it probably would have mentioned upfront in the risk types but not actually directly in the financial statements. So if you look through our financial statements currently, it identifies under sort of some of the key judgments where we have made consideration, for instance, in the fair value of assets and whether that has -- we think there's any impact or not. And we'll continue to do that. I think like most companies, it's a maturing activity and I also refer to the sort of need to make sure that in the round that the annual report and accounts is fair, balanced and understandable. And that means that if we are talking about things in the front half in the strategic report, in terms of what's important to us in terms of the sectors that we are particularly considering and looking at and where we're thinking of taking actions in terms of meeting our net 0 targets we have to then put our mind into thinking about, does that have any impact on our portfolios might change? And any techniques that we might need to employ in terms of valuations there? So I'd say I would say that, that is an emerging state at the moment and will mature over time. And we believe that we are doing the right things in terms of connecting through the business, risks and finance who have primary responsibility for the financial statements along with inputs from second, third line through internal audit to be able to challenge through the internal governance from works of the organization to develop maturity in this area. Our financial statements are audited by Deloitte. And obviously, Deloitte will review the entire document to make sure that in terms of that fair bandanna consistency across the document that we have addressed that overall. But we believe that we're making good progress in that respect in tuning these pieces together.

And hopefully, that addressed your questions, Debbie. Good. We actually have another question in from Hendrik. So Hendrik?

Yes. Thank you very much. And indeed, discussions like these always allow for further questions. So just allow me, too. So with regard to the climate vote, has the Board already discussed the scenario in which another investor might put up a climate vote for your AGM next year. And then what would be, let's say, your response to that? Because from an investor's perspective, you see us regularly in the position if a company is not providing such a bit themselves. Others might find the means to do that. And it comes to us as shareholders to act responsibly and make an informed judgment on that. Taking into account all you've said before about the importance of that topic and the, let's say, structural approaches and achievements so far, including the targets and ambitions going forward, what would be a scenario that you could describe here to which we could prepare as shareholders. That will be the first question. And the second question relates actually again back to the remuneration of the duty of the Board. Are there any grounds for claims against the former CEO resulting out of the FCA fine in terms of low or reclaiming paid out remuneration, et cetera. So to very different questions, but hopefully not difficult ones.

We mean, I think both of those come to you as well. Okay. So in relation to the first point, no, we haven't discussed it as a Board. And I think it's something we would think about if and when that happened and we would judge that against the issues that I talked about earlier. And obviously, it's something we would take note of what our investors felt about that. As I said, we feel at this point in time that we address all the issues that a climate vote is designed to address. But there's no point in saying never say never. In -- I'm not quite sure on the second point, what you're guessing at I don't think there's been any public suggestion that there would be any form of personal enforcement in it wouldn't be appropriate for me to talk about individuals further than that.

Okay. I mean just looking at the that the FCC has imposed -- FCA has imposed on Lloyd's with regard to the insurance contracts dating back to 2009, understanding that Mr. Carter was not part of the management at that point of time. But so I gather from your response that we have not identified any grounds for laying out claims against him for either not acting prudently and soon enough to basically stop the practices that have caused the[indiscernible] by the FCA or his personal involvement there. Am I correct?

I think that would be correct. Yes. But again, any personal issues relating to Antonio should be directed to him. It wouldn't be appropriate for us to comment on that. But we made no disclosures around that fine when we concluded it in our annual report this time last year, and the impact was fully reflected in terms of the levels of bonus that were paid to all the executives and indeed to the whole organization. Alan, is there anything you'd add to that?

Yes, I would just say a full review was undertaken, as you'd expect for a penalty of that order and appropriate investigation was undertaken of individuals contribution or not in that regard. Being quite blunt about former Chief Executive didn't fall into that category at all. And any appropriate adjustments have been made and announced in previous statements. So I think that's a legacy issue. I wonder whether you're talking about another issue, but if you're talking about the insurance contracts, then those adjustments that have been made were deemed appropriate in 2021.

Okay. We have another question on line from Andrew Risk.

Andy is from Abid. Yes. Thank you very much for the presentation today and the comments. Maybe 2 questions from me, please, if possible. One, with regards to the discussion around the sort of evolution of the risk management framework and the enhancements there. I wondered if possible, are you able to give a sort of tangible example of something that be done differently to help us kind of understand what actually is changing from a -- presumably, it was a strong system to something that's stronger? Is that something you could sort of help us understand what would be done differently. And then a second question is on the -- your sustainable finance targets there. There's quite a race in the market now one of your peers has put out sort of dramatically expanded its sustainable finance target today. I wondered if from the Board's perspective, in has set out quite interesting or made my interesting remarks about the sort of the share of the corporate lending book that could be allocated in finance next year. And it's impressive and ambitious. I just wondered from a core perspective you have any concerns around the sort of the risk or returns related to those sort of new emerging areas?

Is it worth covering the risk element first?

Yes. We do the RMS first. So yes, happy to give you a tangible element to that. So you have seen on one of our deliverables, actually, there was a risk performance review outline there. So this was a change in how we actually assess people's performance with respect to their risk management. So we really did quite a significant overhaul on that. We did it in conjunction with the remuneration committee as well. And I suppose it's fair to say that this is not something that's done by the business rather than to the business. We've simplified it. There's a lot of cultural elements to this as well that we referred to earlier. So in terms of the performance appraisement it's not built into that -- we've also tried to reduce the cultural drag and bureaucracy involved. And with respect to the strategic transformation and technology, we can now use technology better to improve the reporting and also the traceability of capabilities. So I think that it's sort of plays actually into a number of areas in terms of cultural transformation, strategic transformation and proper remuneration. So that's all -- for example, that's one evolution in the RMF so your second -- your second question then with respect to sustainable finance and the risk associated with that. So what I would say is we look at this on a sectorial basis in terms of our risk appetite. We have a prudent through-the-cycle approach to our risk-- credit risk appetite. And I would say we then apply the same principles therein to sustainable finance. So they really have to satisfy the principles that we normally apply. Each sector is different. As I mentioned, in terms of, for example, on the automotive side, we recognize that residual value is a big issue there. We haven't seen electric batteries used after 7 years, can be recycled, can it be reused? So we had to really assess the individual element there. So what I would say is it's sector by sector and applying the same principles that we would use generally speaking with respect to credit risk appetite.

Amanda, Robin, is there anything that you would want to add to the sustainable finance side?

No. I mean just to say, I mean, to Catherine's point, the veracity with which we're going to approach the targets we've set we have to apply. So it's the same point of catering, but from the point of view of our own targets.

Excellent. Okay. Look, there are no more questions now. And actually, we're coming to the close from a time perspective. Thank you very much indeed, everyone, for participating. Thank you for the questions. If I now hand back to Robin for a couple of closing remarks before we finish.

Great. Thank you, Douglas, and thank you, everyone, for joining. Thanks to my colleagues. I'm sorry, Nigel, that you didn't get to be grilled like the rest of us. But I hope that you feel that we are taking this very seriously. We see our roles and obligations in relation to governance is absolutely fundamental to making a purpose-driven strategy work and making sure that our strategy fits with our governance is one of the biggest challenges of that. And I hope that you feel that through these presentations, that has been a constant reference back to our purpose and to our strategy and to our people. And for us, that golden thread is a really important one for us to maintain the right level of cohesion in pursuant of what we're trying to achieve. So I'd really like to thank you for the very perceptive questions. and I very much look forward to repeating this exercise at some stage in the future. So thank you very much.