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

Good afternoon, everybody. Lloyds Banking Group is delighted to be running another one of these Retail Briefings. We have the largest retail investor base in the U.K., and we believe these updates are an important way of keeping in touch with our shareholders. So thank you for joining this afternoon. As Mark indicated, I'm Douglas Ratliff, and I'm the Group Investor Relations Director for Lloyd's. I will begin today with an overview of our performance in 2022. Adam Williams from Group Strategy will then present the good start we have made 1 year into our strategic transformation. And I'll then provide the usual detail on our numbers, as well as outlining what you can expect over the next 12 months, and we will have time at the end for questions. So let me begin on Slide 3. I I'll start here. You can see it clearly laid out on the slide, but I'll start with the 5 key messages from the results. First, our purpose of helping Britain prosper is core to everything we do. With this in mind, we have taken significant action to provide support to our customers and colleagues through a period of increased uncertainty. Second, we delivered a robust financial performance in 2022 with increased capital returns supported by strong income growth. Thirdly, although the macroeconomic environment has changed significantly, we remain confident that our strategy is the right one, delivering positive outcomes for all our stakeholders. Fourth, we have made a good start to our strategic transformation with 2022 largely focused on mobilizing the businesses and laying the foundations for our future success. Our investment is fundamental to the prospects of the group, and we are already seeing early evidence of delivery, as Adam will indicate. And finally, our confidence in our strategy is reflected in an enhanced financial outlook, particularly as we build through the plan. This includes upgrading our medium-term return on tangible equity and capital generation guidance. So with that, I will now turn to Slide 4 to briefly outline how we have delivered for our stakeholders in 2022. Customers and clients are at the heart of our business. In a year where the environment has proven more challenging due to increases in the cost of living, we are extremely proud of the support we have provided. We have leveraged our digital strengths to provide our customers with the ability to take greater control of their finances. We have also invested in deep capabilities to help customers build financial resilience and support them with tailored products and plans if they are unable to make ends meet. This includes training more than 4,600 colleagues to provide financial assistance where it is needed. Despite the more challenging economic environment, we have not seen a meaningful increase in the total number of customers needing this enhanced support. This highlights the resilience of our customer base as we enter 2023. Our colleagues are critical to providing this support, and we have also made significant efforts to help our people through changes to pay and working practices. Core to our purpose is our focus on building an inclusive society. To that end, we have provided over GBP 2 billion of funding to the social housing sector and lent over GBP 14 billion to first-time buyers in 2022, helping more than 60,000 customers get on the housing ladder. Alongside this, we've delivered race education training to all our colleagues, providing focused support for black entrepreneurs, financed high-speed Internet in less privileged communities and supported agricultural clients in their efforts to build financial resilience. We have also made progress in supporting the transition to net zero. This includes our commitment to responsible investment within Scottish Widows, launching a carbon calculator for SMEs and our innovative new partnership with Octopus Energy, which will enable customers to make their homes more energy efficient. We have also provided over GBP 13 billion of green and sustainable lending in 2022 and developed our first group climate transition plan. The latter includes important industry firsts, such as our commitment to not directly finance any new oil or gas fields. So there is a lot going on. And as ever, we are targeting our efforts in areas we can make the biggest difference whilst creating opportunities for profitable growth. We have published our environmental and social sustainability reports last month, and you will find a lot more information in there. Turning now to a brief overview of our financial and business performance on Slide 5. As you can see, the group delivered a robust financial performance during 2022. Net income was up 14% compared to the prior year, whilst operating costs increased by 6%, in line with expectations. Stable BAU costs highlight our ongoing cost discipline, which is particularly important in an inflationary environment. We delivered a return on tangible equity of 13.5% and generated 245 basis points of capital. This enabled an increased total ordinary dividend of 2.4p per share, which was up 20%, alongside a share buyback of up to GBP 2 billion. As you will hear in the remarks that Adam is going to reference on our strategic progress, we are delivering continued business momentum and seeing real franchise growth. This is alongside improving levels of employee engagement and progress on our diversity goals. I will now hand over to Adam to present our strategy.

Thanks, Douglas, and good afternoon, everybody. It's great to join you today. We launched our strategy in February of last year and recently provided an update on the good start we have made 1 year into this transformation, as well as outlining what we expect to deliver over the next 12 months. I'll provide a brief overview of this today. I will begin, we will recap our strategy on Slide 7. As you have heard in prior updates from both Carla and Douglas, our purpose-driven strategy has 3 distinct pillars. First, driving revenue growth and diversification across 4 key areas that cover our consumer and commercial franchises; second, strengthening the group's cost and capital efficiency, building on our strong foundations. And third, building a powerful enabling platform that combines people, technology and data to support our ambitions. The combination of these priorities will enable the group to deliver on our purpose, attract and retain the best talent and grow profitably with our customers. In turn, this will enable us to deliver higher, more sustainable returns and capital generation across both the short and long term. On Slide 8, I will look at how the changing environment reinforces our strategy. Following the launch of our strategy in February 2022, the operating environment has changed significantly and continues to do so. As a result, customers are facing a more challenging outlook than we had anticipated. This has also presented challenges for us, as we are focused on supporting our customers and ensuring they remain financially resilient. We have also continued to see shifts in our customers' behavior, such as becoming more digital. Given the group's financial strength, it is more important now than ever to deliver our purpose-driven strategy. It will enable us to further differentiate how we serve our customers as they start to recover from these economic challenges, whilst we can also strengthen and diversify the group's earnings. In some cases, we have stretched our ambition even further, such as adding an additional GBP 0.2 billion of cost savings targets for 2024. Our ongoing commitment to our strategy is reflected in the scale of our investment. As a reminder, we have committed to GBP 3 billion of incremental strategic investment over the first 3 years of the plan or GBP 4 billion over 5. On Slide 9, I will look at how we view our strategic transformation. Our strategy reflects an ambitious 5-year transformation of the group with clear deliverables and increasing financial benefits as we move through the plan. 2022 was our foundational year, and we have taken significant action, investing for growth and accelerating our efficiency initiatives. We also reorganized the group to accelerate the pace of transformation and have seen good early evidence of delivery across our initiatives. This increases our confidence that we are well placed to deliver going forward. On the next few slides, I will highlight some examples of our progress, starting with our consumer businesses on Slide 10. We have made good progress on building deeper customer relationships, as well as innovating and broadening our product offerings, whilst improving the ease in which our customers can access them. We have invested in driving improved levels of personalization and digitization, resulting in a 15% increase in daily logons and we have now reached 20 million digitally active customers. This is 2 years ahead of schedule. This enables the group to reduce costs and drive deeper customer engagement. In 2023, we continue to personalize and digitize our consumer offering, supporting our ambition to meet more of our existing customers' needs. For example, in February, we announced the acquisition of Tusker, a vehicle management and leasing company focused on electric and low emission vehicles. This will further develop our motor business in a way that is clearly aligned with our purpose and sustainability ambitions and supports our growth ambitions in SME. Additionally, in 2022, our mass affluent business, supported by targeted campaigns increased banking balances by over 5%. We have also launched new tailored banking products, including credit cards and packaged bank accounts. Our direct-to-consumer investment capability has been enhanced, aided by the completion of the Embark acquisition. This was previously a gap in our product capabilities, and we expect both direct-to-consumer and ready-made investment options to launch in 2023. Our mass affluent offering will be launched in earnest this year with customers experiencing a differentiated digital-first model. We also expect an expansion of our banking offering, providing value-added products, services and benefits for our customers. Looking now at our progress in commercial on Slide 11. Our ambition in SME is to build a diversified digital first business. This is a multiyear journey, and in 2022, we laid the strong foundations and showed positive growth across the business. Where appropriate, we are also broadening our product capabilities through strategic fintech partnerships. In 2023, we are taking further steps to improve our digital offering with new onboarding propositions, enhanced functionality and new insights for clients. Our corporate institutional offering has made good progress within the targeted parameters that were outlined in February last year. We are investing in product capabilities that support our clear cash, debt and risk management offering. This includes upgrading our rates digital product offering and delivering the first phase of our new FX platform. And finally, we have strengthened our originate-to-distribute capabilities, which further improves the group's capital efficiency. In 2023, we expect to extend the scale of our originate distribute offering alongside maintaining our clear sector focus and further improving product capabilities. I will now look at our clear commitment to the enablers on Slide 12. Maintaining discipline with regards to cost and capital efficiency is critical to our strategy. In 2022, we increased customer engagement and service options for our digital channels, enabling us to optimize our cost to serve by, for example, increasing the automation of operational processes. With regards to capital efficiency, we continue to demonstrate RWA discipline whilst pursuing growth in capital-light fee-generating businesses. In 2023, we will also conclude the triennial pension review, which is expected to demonstrate the significant advances we have made with an improved funding position. Our people efforts in 2022 included refreshing the leadership team, establishing a new operating model to deliver the strategy and driving greater efficiency. For example, by reducing our office footprint by 12% as we adopt new ways of working. We have continued to invest in future data capabilities, as well as decommissioning 5% of legacy applications and reducing our data footprint by 10%. This brings new capabilities to supplement our strategy, as well as greater efficiency. I will now finish with a brief overview of how our strategic progress supports financial performance. When we launched our strategy, we highlighted an expectation that the growth initiatives will provide GBP 0.7 billion of additional revenues per annum by 2024 and GBP 1.5 billion by 2026. This is split 50-50 between interest and other income. As you have seen from the previous slides, we have made good initial progress. And as we deepen our customer relationships further over the coming years, we expect to build momentum that will support higher, more sustainable revenues that extend beyond the current rate cycle. In addition, we have achieved GBP 0.3 billion of gross cost savings in the year, which supported a stable BAU cost base. As mentioned, we have identified further cost savings in 2024 that will partially mitigate the impact from inflation and create investment capacity. As these benefits build, we expect an inflection point to be reached where the benefits from our strategic initiatives will positively contribute to the bottom line in 2025 and beyond. Thank you. I will now hand back to Douglas to discuss financial performance and guidance.

Thank you, Adam. As Adam said, the group delivered a robust financial performance in 2022 based on continued strength in the customer franchise. Net income of GBP 18 billion is up 14% versus 2021, supported by a higher net interest margin of 294 basis points, 4% growth in other income and a low operating lease depreciation charge. We remain committed to efficiency. Operating costs of GBP 8.8 billion were in line with our guidance. This includes stable BAU costs alongside higher planned strategic investment and the cost of new businesses. Asset quality, meanwhile, is strong. The observed impairment story has not materially changed in the quarter. The full year impairment charge of GBP 1.5 billion includes the impact of the revised economic outlook emerging during the year. Together, this strong performance delivered statutory profit after tax of GBP 5.6 billion and a return on tangible equity of 13.5%. Tangible net assets per share at 51.9p, down 5.6p in the year, although up 2.9p in the fourth quarter. Robust earnings alongside a modest reduction in risk-weighted assets and significant insurance dividends have driven strong capital build of 245 basis points in 2022. Let me now turn to Slide 16 to look at the ongoing development of our customer franchise in the year. Our mortgage portfolio continued to grow in 2022. Balances are up GBP 3.7 billion in the year, including GBP 1.2 billion open book growth in the fourth quarter. Credit cards were up GBP 0.5 billion in the year, although flat in the fourth quarter. Motor Finance is up GBP 0.3 billion in 2022, including GBP 0.1 billion in the fourth quarter. The order book is strong, albeit the business remains impacted by the ongoing global supply chain issues affecting the industry. Commercial banking balances are up GBP 1.2 billion. This continues to be led by attractive growth opportunities within Corporate and Institutional and FX movements, partly offset by repayments of government support scheme loans, predominantly in our small and medium business franchise. On the other side of the balance sheet, retail deposits were up GBP 2.4 billion in the year. This includes current accounts up GBP 2.5 billion in 2022, although down GBP 1.7 billion in Q4, given some customers switching balances and seasonality. Commercial deposits are down GBP 3.7 billion in the year, including GBP 6.4 billion in the fourth quarter. We saw some short-term placements from Q3 in CIB, that's the commercial business reversed in the final quarter, as we had expected, alongside the impact of management pricing actions and seasonal effects. During the year, we have also seen assets under management growth within insurance of over GBP 8 billion of net new money. I'll now turn to Slide 17 and the strong net interest income performance in a little more detail. NII of GBP 13.2 billion was up 18% on the prior year. Average interest earning assets of GBP 452 billion are up GBP 7 billion or 2%, largely due to the GBP 6 billion growth in average mortgage balances. The full year margin of 294 basis points is up 40 basis points on 2021. This benefited significantly from the base rate changes through the year and structural hedge reinvestment outweighing mortgage pricing pressures. The Q4 margin of 322 basis points is up 24 basis points in the quarter. This margin is largely driven by base rate movements. But bear in mind the deposit pricing has lagged base rate changes, and therefore, some of this will unwind towards the end of the first half of this year. The mortgage rollover pressure increased to 8 basis points in Q4, and this will continue across 2023. Looking forward, we now expect average interest-earning assets to be broadly stable in 2023. We should see low single-digit growth in the core businesses being largely offset by reductions in the closed mortgage book and government support scheme loans in commercial. I should also note that Q1 will see a modest reduction in customer lending given our exit from our legacy mortgage portfolio in January. Putting all this together, we now expect the net interest margin to be greater than 305 basis points in 2023. This is below the fourth quarter exit rate, given the impact of the mortgage book refinancing, deposit repricing actions and higher funding costs. These will more than offset the expected higher hedge earnings. Moving on, the group has maintained its focused on efficiency during 2022. Let me talk a little bit more about that on Page 18. Operating costs of GBP 8.8 billion are in line with guidance. This is up 6% on the prior year, driven by planned investment and the costs associated with new businesses. Alongside BAU costs were stable in the context of material inflationary pressures. Remediation costs of GBP 255 million are significantly lower than prior year and reflect a number of pre-existing programs. The charge of GBP 166 million in Q4 includes GBP 50 million for HBOS Reading. Our cost-to-income ratio for 2022, including remediation, was 50.4%. Looking forward, we now expect 2023 operating costs to be around GBP 9.1 billion. We are not immune from inflation, but we would maintain our rigorous approach to efficiency. Consequently, we will absorb a significant part of the incremental inflationary pressures in 2023 through increasing the target savings that we announced last year. Looking now at impairment. Asset quality remains strong. We're seeing stable observed asset performance across the portfolios. The impairment charge for the year of GBP 1.5 billion, as you can see on the slide, is equivalent to an asset quality ratio of 32 basis points, in line with guidance. This includes a GBP 595 million net MES charge for the updated macroeconomic scenarios alongside a GBP 915 million underlying charge. The charge in the fourth quarter of GBP 465 million includes GBP 82 million for updated MES, driven by HPI so that's house price index reductions and a slightly weaker GDP outlook at Q4. Pre MES, the quarterly charge of GBP 383 million includes a long-standing single-name commercial charge. Excluding this, would leave a quarterly asset quality ratio of 26 basis points. This includes the roll forward of the Stage 1 provision into a more adverse economic environment, which of course does not represent actual defaults. As a result of the provision build in the year, largely in the third quarter, our stock of expected credit losses has increased to GBP 5.3 billion. It is worth noting in this context that our Stage 3 balances have remained flat during H2 and 93% of our stage balances are up to date. Based on the group's Q4 macroeconomic scenarios, we now expect the net asset quality ratio for 2023 to be around 30 basis points. Moving on, I'll now turn to Slide 20 to look at our retail and commercial portfolio in a bit more detail. We are seeing significant resilience within our retail portfolio. Our retail portfolio benefits from our low-risk approach and conservative underwriting standards. Early warning indicators remain benign. While arrears trends in some areas have increased very slightly, they are doing so from a very low base and they remain modest. Almost 70% of our lending book is mortgages. Within this book, customer household incomes averaged 75,000 and the average loan to value is 41.6%. Only 1.4% of balances have a loan-to-value above 94% -- above 90%. And customers have a lot of equity in their homes, protecting both the customers and the group. We are also seeing significant resilience in our commercial portfolio. We see stable SME overdraft and corporate revolving credit facility utilization in the year as outlined on the chart on the bottom left side. Average debtor days in our invoice financing business remained below historic levels. The commercial portfolio has evolved in line with the group's conservative risk appetite. Around 90% of SME lending is secured, while around 75% of commercial exposure is to investment-grade clients. Moving on, I'll now turn to Slide 21 to look briefly at the below-the-line items. Following the reporting changes of a year ago, restructuring now reflects only M&A and integration costs. The volatility line includes GBP 148 million of negative insurance volatility, largely driven by the higher interest rates. Taken together, the statutory profit after tax of GBP 5.6 billion and the return on tangible equity of 13.5% represents, as I said, a robust performance. Looking forward and based on the guidance given, we expect the returns to be around 13% in 2023. Looking briefly at tangible book value. As you can see, the TNAV per share of 51.9p is down 5.6p in the year, although up 2.9p in Q4. In line with what we said at the third quarter, if you've seen our various sets of results, the IFRS 17 accounting change, which occurred as at January 1 of this year, is expected to result in a mid-single-digit pence share reduction in the TNAV. Looking forward, the direction of tangible book value should be positive and have momentum. Now turning to Slide 22 and looking at risk-weighted assets and capital developments. Capital generation in 2022 at 245 basis points was very strong. Underpinning this, RWAs of GBP 211 billion were down GBP 1 billion in the year, excluding the regulatory changes on the 1st of January 2022. Lending growth has been more than offset by model reductions, reflecting underlying credit performance and ongoing portfolio optimization. Healthy banking profitability led to capital generation, supplemented by GBP 400 million in dividends from the insurance business. We also benefited from impairment transitional relief and a lower-than-usual effective tax rate. Importantly, our strong capital generation enabled the group to make significant pension contributions, including an additional GBP 400 million at the end of Q4. Added together, the total of GBP 2.2 billion of pension contributions this year puts us in a very good position for the latest actuarial valuation process. The group's capital position enables the Board to announce a final ordinary dividend of 1.6p per share, making a total of 2.4p, up 20% on 2021, as I said earlier. Alongside this, we have a buyback program of GBP 2 billion, which means the group will distribute a total of up to GBP 3.6 billion, equivalent to greater than 10% of our market cap. The closing CET1 ratio of 14.1% is very strong and ahead of our ongoing target of around 13.5%. Looking forward, we expect capital generation of around 175 basis points in both 2023 and 2024. This is below the outcome in 2022, reflecting the exceptional benefits in the year that I just mentioned. Nonetheless, it still represents a very healthy level of capital generation going forward. The Board is committed to shareholder returns. We will maintain our progressive and sustainable ordinary dividend policy whilst considering excess capital distributions at each year-end as we usually do. Let me now bring this together on Slide 23, where I'll summarize our guidance. The group faces the future with confidence. For 2023, we now expect the margin to be greater than 305 basis points, operating costs to be around GBP 9.1 billion. The asset quality ratio to be circa 30 basis points and the return on tangible equity to be circa 13%. As mentioned, we also now expect capital generation of around 175 basis points in each of 2023 and 2024. As I mentioned, we are also today enhancing our medium-term targets. Based on both profit developments and expectations of a rising TNAV, as mentioned, we expect the return on tangible equity to be circa 13% in 2024 and greater than 15% by 2026. We have also enhanced our 2026 capital generation guidance to greater than 200 basis points. Our revised guidance reflects the changing shape of the environment, the development of our plan and our financials. We expect to deliver higher levels of capital generation alongside ensuring lower other claims on our capital, including pensions. While staying focused on our purpose and our customer objectives, our updated guidance is positive news for shareholders. I will now wrap up. As you have heard, the group delivered a strong performance in 2022. Our purpose-driven business and financial strength enabled the group to provide significant support for customers and colleagues. Alongside the group's robust financial performance, underpins our increased capital returns. Our strategy is reaffirmed as the best way to serve our purpose and support our stakeholders as well as put the group on a higher, more diversified growth trajectory. We've made a good start. Finally, we have enhanced our guidance over the short and medium term, as we progress towards delivering higher and more sustainable returns for shareholders. Clearly, there has been a lot of volatility in the markets since we issued our results. But Lloyd's continues to have a strong balance sheet and is positioned well. Our first quarter results will be issued at the beginning of May, so I'm sure you also have questions. So without further ado, let's go to Q&A. Thank you.

As per normal, if you could actually outline any questions in the actual Q&A box, and we will address those on a regular basis. So there's a couple of questions that have come in initially. So the first one was all of the high loan-to-value mortgages covered by the indemnity insurance. I think the first thing I should flag when you actually start looking at the loan to values on our mortgages is that they are in a very different place to where they were 10 years ago. In fact, actually, within our slide deck, we always produced a slide that actually outlines the loan to values on the book itself. And actually, you can see that actually at the end of 2022, the average loan-to-value on our mortgage book was 41.6%. The new business LTV so the loan-to-value was 61.7%. So you can see, on average, even for new business being written, that there's still 40% equity approximately, which is clearly beneficial from both a customer perspective and a bank perspective. If you actually look at the range of the mortgages, you'll see that as at the end of 2022, 93.9% of the book actually had less than 80% loan to value. And actually so on that basis, only 0.1% of the book was over 100% LTV. And when you look at that 0.1%, that was GBP 0.3 billion, and that's GBP 0.3 billion of a GBP 312 billion mortgage portfolio. So you can see that the loan to values are in a very different place. In fact, if you go back to 2010 and you look at the loan to values at that place at that time, at that time, you had effectively 43% of the book, which had mortgages of more than 80% loan-to-value. That now number is about 6%. So you can see the significant improvement in the quality of the book. The initial question was relating to indemnity insurance. And actually, given the nature of the book, those high LTV mortgages are less of a concern to the organization and they don't all have indemnity insurance on them. But that's not a requirement, given the very prudent, conservative and sensible underwriting criteria that we've applied in recent years. In fact, for any of you that have followed us for a number of years, you'll know that actually the whole approach that Lloyd's has to lending is to be more prudent and to be more conservative. Okay. I think I addressed that question. Another question that came in, most of the cost savings from bank closures. So clearly that's a very topical subject. If you talk about the branches themselves, we currently now have a branch network of about 1,300 branches. If you look at that, that's probably reduced by about 200 branches roughly over the last 12 months. We are very much still a believer in the branch network, but have said that, that branch network is very much going to be driven by customer needs. As and when customers use those branches, obviously, we'll continue to keep branches up, but their role will change. And we have actually seen the footfall and use of branches reduce over the last few years. So if you look at where those cost savings have come from, clearly, there have been some from branch closures. But actually, it's more about end-to-end cost improvements across the business. This is about how we manage the cost base at every level of the organization, not just from a day-to-day process perspective, but also the way that we look at operations with large suppliers and indeed the way that we manage the cost base throughout. The third question that we've got there that's come in so far is talking about any news on the house building program, how many were built in 2022. I think when you talk about the house building program, clearly, from a Lloyd's perspective, our focus has very much been lending across the piece. And as I said earlier, we got over a GBP 300 billion mortgage portfolio. We did recently, must have been probably about 18 months ago, 2 years ago now, which I think is where the question comes from, enter into a new business, which was more about effectively buying properties to effectively rent out. So from that perspective, the number of properties that we've actually bought that relates to that has actually been relatively small in 2022 as a whole. It's a business that we're looking to develop over time. But actually, if you look in the second half of the year, we were much more conservative about the areas that we went into. It's still an area of focus. We will develop it in a cautious and more appropriate fashion. When we look at the properties that we're looking to acquire, those business -- those properties tend to be effectively new properties. Initially, the thought was how can we look at it across the face, but it's very much new properties. For those of you that weren't aware this is a business that's referred to us as Citra, but it's still a relatively small percentage of the overall asset base and indeed our business mix. The next question was relating to ordinary dividends and buybacks. And looking at plans for share dilution or any other risks on the balance sheet. So first of all, if I look at share dilution itself. So if you look at -- well, let's look at the actual ordinary dividend and the buyback and the approach that the Board takes. As I announced in the actual presentation itself, effectively, we announced an increased ordinary dividend this year of 2.4p in total. That 2.4p was effectively an increase of 20% on the previous year. We also announced a GBP 2 billion share buyback program or up to GBP 2 billion. So in total, the capital returned was about GBP 3.6 billion. In essence, if you look at it, we always talk about having -- our policy is to have a progressive and sustainable ordinary dividend, hence, why we increased it by 20% this year. And then we make a decision about excess capital at the end of each year, hence, why we announced with the full year results, the buyback. The buyback itself is very much a case of, I say, something that's considered at the end of each year. It's particularly favorable when you actually have shares trading beneath the tangible net asset value. If you look at others, that's from a buyback perspective. If you look at other things that might offset that, clearly, you do tend to get an amount of share issuance each year, which tends to be the case for share reward and share reward programs. That tends to be about -- effectively about GBP 700 million, GBP 800 million of shares each year. So you can get that, which offsets it. We're very much minded to reward our executives and reward our senior staff through shares. By actually holding shares, those individuals are much more aligned to the performance of the company rather than receiving them in cash. I should obviously highlight there, of course, that as all of you on the call are probably aware, Lloyd's is very much a retail and commercial bank rather than an investment bank. So the sort of bonuses we are talking about are at a much different level. There was also a question from the same individual, which was talking about hidden derivative risk on the balance sheet. And I would say that's very much not the case. Look, there's been a lot written over the past 2 or 3 weeks, particularly with regard to the failure of Silicon Valley Bank in the States and indeed the takeover of Credit Suisse by UBS. And clearly, that is highlighted, it's garnered a lot of headlines in the press. I think there's a number of key points when looking at those different elements. Firstly, from a Silicon Valley Bank perspective, we have no limits or exposure to Silicon Valley Bank, and there was no read across to Lloyd's in any way at all. We have a very well diversified and solid retail funding base across more than 25 million customers with a well-termed wholesale funding base. Any interest rate risk that we tend to have on our book, particularly relating to our available-for-sale portfolio is fully matched, thus eliminating any interest rate risk. Clearly, I think it was helpful in the fact that from the U.K. operations from SVB were acquired by HSBC, and that very much removed the issue within the U.K. economy itself. From a Credit Suisse perspective, again, look, any potential issues with regard to exposures have clearly been subsumed by the fact that Credit Suisse was taken over by UBS last weekend or the weekend before last, in fact, so -- and what I would say is, look, when you look at Lloyds Banking Group as an entity, the capital and liquidity position and indeed funding position remains very strong in excess of targets, as you can see by the recent results. And the whole funding base, when you look at between both deposit funding, both retail and commercial with more than 25 million customers and the wholesale funding base, that's about GBP 100 billion is actually in a very strong place. So coming back to the question, were there any hidden derivative risks on the balance sheet? No. The next question that came on board was with regard to the dividends as well and talking about returning dividend levels to where they were prepandemic. Again, what I've talked about is that the group has a progressive and sustainable ordinary dividend policy. As I said, we have increased dividends by 20% this year. The Board will certainly look towards increasing the dividends on that basis, being progressive and sustainable again next year. And indeed, we returned -- an additional GBP 2 billion through buybacks. So obviously, this is something that the Board is well aware of, and is looking to increase ordinary dividends in line with our policy and very much in line with the performance of the business, which as you can see, has been strong last year. And given the guidance that we've issued, we expect the performance to remain resilient going forward. There weren't any other questions that are actually specifically been highlighted in the Q&A. But if anyone does have any more questions, please highlight them there, and we can -- I can look towards addressing them. The other thing that I should possibly flag, which I know has been in interest, I'm sure this is interest from your perspective as well, is that whenever we look at guidance, whenever we look at performance going forward, our expectations are very much driven by the economic expectations that we're assuming. And you may have read a number of press reports, you may have looked at our results and start to see, okay, what are the underlying economic assumptions behind those? Again, it's one of those things that we actually outlined in our -- in the results itself. If anyone has any interest, it's one of the slides that appendix slides that is at the back. But essentially, the way that we look at it from a -- we look at economic scenarios from a base case perspective, we look at it from an upside, a downside, and indeed a severe downside. And that's how we look towards calculating the impairments that we look at in, in any one point in time. It's the way that IFRS 9, which is the effectively the accounting treatment that's used for calculating impairment works, is in essence, it's based on expected losses going forward. So in that expected loss every period of time, we look at our expected economic expectations and gauge what the likely impairment is going to be given those assumptions. Just for reference, I think it's quite an interesting stat is the fact that when we actually talked about and issued the results themselves, we were talking about rates peaking at 4% and starting to fall in early 2024, settling at 3%. Now the interesting element, as you can see already is the fact that actually people talk to us about having slightly prudent economic expectations. And actually, as you can see, the base rate has already increased above our expectations earlier this month when it increased to 4.25%. But if you look at our guidance, it's based on 4% base rate this year. It's based on unemployment peaking at 5.3% in 2025. It's looking at house price index being down 7% in 2023 and a reduction of 12% from its peak to its trough. And we're talking about inflation having peaked at 10% in the fourth quarter. And our base case is inflation of 8.3% in 2023. So it's very much a case of depending on what your economic expectations are. You may have different views as to where that's going to go. Clearly, from an economic perspective, it is a dynamic market as we speak at the moment. Things are changing day-to-day, but it's certainly worth taking into consideration the assumptions that we're making. We believe that we're well positioned given those assumptions and given the strength of the customer base and the strength of the balance sheet. But clearly, there is uncertainty out there, and we'll have to see how the economy progresses. As a U.K. bank, over 97% of our assets are based in the U.K. So clearly, we are often seen as a bellwether for the U.K. economy. I thought that might be a little bit of extra color. We haven't had any more questions come in, in the meantime, whilst I've been providing that detail. So Mark, unless you have anything else, I would propose that we close the call there. Thank you very much, everyone, for dialing in. As I said, it's always a pleasure to be able to actually brief retail shareholders as well as our institutional shareholders. Thank you for dialing in. And if you do have any further questions, please feel free to e-mail them in to ourselves in the Investor Relations team at Lloyd's. So thank you very much, and enjoy the rest of your evening.