Lloyds Banking Group plc ($LLOY)

I think we can get started. Similar to prior sessions, this will be 35 minutes. We'll try and leave 5 minutes at the end for audience questions and answers. So have a think if there's anything you'd really like to ask. With that, though, may I take the opportunity to say it's a great pleasure to have you here with us, William Chalmers, Chief Financial Officer of Lloyds Banking Group, a role you've held now since 2019, prior to which William held various roles in financial services, including Co-Head of the Global Financial Institutions Group at Morgan Stanley. So thank you very much for being here.

Well, thank you for inviting me, Ben, to this magnificent setting here in Zurich.

Very good. Well, let's start with what's top of mind for the U.K., thinking about macro. How do you see that situation currently evolving? How much change are you observing in client behavior, sentiment, as clients are looking ahead? Is any of that really moving at the moment?

Sure. Sure. Yes. U.K. macro is obviously much talked about, Ben. But I think at a relatively high level, despite the news flow, it's a picture of stability really. And what I mean by that is that, as you know, at Q1, we took a couple of revisions for our macro outlook. Off the back of the Middle East crisis, we thought that inflation would stick around for longer, be a bit higher than we had originally anticipated. And off the back of that, we took rate cuts out of our forecast. And so now we expect none during the course of '26. That tempers GDP growth a little bit. We took it down to about 0.5% positive during the year. And then unemployment, we took up to a peak of about 5.6%, and that all tempers again, HPI growth during the year, about 70 basis points or thereabouts. Those changes are adverse versus where we started out the year, but to be clear, they are also positive, and it is also stable. And so that's the backdrop, I think, that really counts. As we sit here today, with respect to Q2, our view is really very similar. It's a very similar outlook in Q2 today to what it was that we saw at the end of Q1. I think you asked about client behaviors in that context, Ben. Overall, I'd say client behaviors are pretty constructive. You saw our lending book grew at about GBP 5.1 billion over the course of Q1. In fact, if you strip out central hedges, it was about GBP 6.3 billion over the course of Q1. And that was spread over retail, about GBP 3.5 billion, and commercial, about GBP 2.8 billion. So growth in all areas of the lending book despite, as I said, a slightly subdued but still positive macro backdrop. I think when we look at the performance so far during Q2, that retail and commercial growth, we expect to continue over the course of the quarter. It is, for sure, likely to be a little bit slower off the back of rate changes, off the back of uncertainties. But overall, it's consistent with our forecasts. And as I said, positive growth. I think when we look at the kind of the other side of the equation, are we seeing any asset quality impact from what we have seen so far? The answer is very clearly no. We've seen nothing. We have, in addition to that, very stable early warning indicators, again, across retail and commercial, which is good to see. We're vigilant for sure, Ben. But as I said at the beginning, overall, it's a picture of muted growth, clearly, but it's also a picture of relative stability.

Okay. Good to hear. If we flip next to NII, one of the biggest contributors to revenue. Let's drill in particular, into the margin component of that. So you have the hedge, which is still a positive, the path of bank base rates, which at the moment still looking like it will be a negative year-on-year in 2026. And then you have mortgages continuing to reprice a bit more tightly sequentially. How are you seeing all of that fitting together and effectively how it pans into a multiyear outlook?

Yes, yes. The overall picture in respect of net interest income, the bottom line is pretty constructive, pretty positive, Ben. Within that, you asked about net interest margin in particular. Overall, net interest income, we expect to be greater than GBP 14.9 billion during the course of 2026. In that context, we took a modest upgrade at the Q1 stage, and that was just to recognize the changes that we've seen in rates. But alongside of that to say, well, those same rates are going to have a little bit of a dampening impact, if you like, upon volumes. So it's a net of those 2. You saw in that context where we had a good Q1. Net interest income, GBP 3.6 billion or thereabouts. That's up 8% year-on-year. It's up 1% quarter-on-quarter. In fact, if you strip away day count, it's actually up 3% quarter-on-quarter. So a pretty robust performance. And to your point, Ben, that was a function of net interest margin in significant part. Net interest margin at 3.17%, 317 basis points. That's up 7 basis points over the quarter. So it's a pretty significant and meaningful move within the net interest margin. But it's also a function of lending volumes, which I mentioned just a second ago. What's going on within net interest margin? I mean, first of all, it's worth saying we expect that net interest margin pattern, i.e., quarterly sequential increases, to continue through the course of '26. And what is driving that? It's a combination of a strong structural hedge tailwind against a slightly weakening mortgage refinancing headwind, and I'll come back to each of those. Structural hedge, first of all. Structural hedge is going to contribute in excess of GBP 7 billion this year. That's up over GBP 1.5 billion versus what it was last year. When we look forward into 2027, it will be up and over GBP 8 billion over the course of '27. Now what's going on there? It's effectively the refinancing. There's a modest notional, i.e., quantum increase, but it's basically about the refinancing story. And you've got a yield of about 2.7% in the course of Q1. And you've got that refinancing into markets, which are now, as you know, 4.2%, 4.3%, depends on the day of the week, but a significant uptick in terms of what it is refinancing into. The mortgage completion margins are around 70 basis points. So dealing with the mortgage refinancing headwind, that 70 basis points stacks up against a book that is rolling off at around the 100 basis point mark. So it's about a 30 basis point headwind in that context. We'll be done with that by the end of -- around the first quarter of 2027. But that is contributing to an overall headwind, but the net of that is, as I said, very positive constructive margin development. It's noticeable actually in the last couple of weeks or last couple of months or so, we've had slightly stronger margin developments within the mortgage product, slightly stronger completion margins than we had previously expected. While that's good, Ben, it's probably a little early to call a trend. So let's see how that develops. But overall, I think it's a reasonably positive development. Now having said that, we've got other factors at play. So we've got stronger-than-expected PCA volumes, which, of course, is good. At the same time, we've got some competition in other markets. So competition in asset markets, competition in liability markets. I think the net of those kind of other things that are going on in the margin is pretty much awash. One thing more or less discounts the other. Overall, though, I think it's a positive rate environment for the progress within the net interest margin and very much consistent with the guidance we've given, Ben.

Okay. Very clear. Well, let's dig into the lending component, which you alluded to. Pretty strong start to the year across business lines. How are you looking at lending volumes going through the rest of the year? Any difference by asset class as well?

Yes, yes. Overall, as I said, it's a pretty constructive picture, Ben. So if we pull that apart a bit, a strong start to the year. Lending volumes up about GBP 5.1 billion. Stripping out central hedges, GBP 6.3 billion. That's about 1.2%. So it's a good start to the year. What's also notable that it is across all sectors. So you see GBP 3.5 billion of growth within the retail sector. And within that, growth across pretty much all the asset classes, GBP 1.6 billion of that was in mortgages in what was a strong repayments quarter, but also growth in the other unsecured asset classes, transport and so forth. So pretty well spread. CB likewise, GBP 2.8 billion within Commercial Banking. And again, that is pretty well spread between what we call the BCB business and commercial banking business, which is our SME franchise, as well as CIB. Within that, we're seeing continued progress within CIB in terms of the infrastructure lending, which has been the pattern actually second half of last year and going into the first half of this. The growth within retail, as we go into quarter 2, it will be a touch slower, and it will be a touch slower partly because we saw March front-end loading off the back of expectations that rates would rise. I think that was a sector phenomenon. So you saw a strong March and therefore, a slightly more attenuated April. That's just going to be a business flow pattern, not unlike actually what we saw last year. And then we will have an idiosyncrasy in terms of our mortgage lending, which is to say that we did a legacy mortgage securitization just recently, actually, a very successful deal, NPV positive, and all the other things that we look for. But obviously, that has an effect upon the balances that you will see at the end of quarter 2, that securitization. So that's an idiosyncratic factor. Business and Commercial Banking, I would say decent growth, particularly in terms of the sanction growth that we've got out there. At the same time, you're seeing, I think, some clients at the edges as a function of the uncertainties. Perhaps a little bit slower to utilize some of those sanctions. So I think that's just a characteristic of the environment that we're in. Looking forward, I think we'd expect to see continued growth across the businesses with those comments kind of borne in mind, Ben. As I said, it's a stable macro, and I think that is then supplemented by the decent share that we have across our product ranges. That decent share is enhanced by the strategic initiatives. As you know, we've launched those really across the business. They're starting to show some benefits in the context of cards, for example, the launch of Ultra, the launch of Advantage. In the context of personal loans, your credit score leads to a good flow of personal lending business. So overall, the impact of rates will have a slightly muting effect upon growth, but some of that should be offset, if you like, by our strong shares in turn supplemented by the benefits of strategic investments coming off the strategy. So I think, Ben, if you wrap all of that up, what does it mean? It means last year, we had GBP 22 billion growth in lending. That's great. I don't think this will necessarily be a GBP 22 billion year, but we would expect to see decent progress through the course of '26.

Okay. Very clear. So we've touched on lending. Let's move to the other side of the balance sheet, think about deposits. Q2 often has some ISA seasonal impacts. How are you seeing that playing out? And as well, we've had a lot of rate volatility year-to-date. Has that had any impact on how customers are thinking about managing deposits in a higher for longer rate backdrop and any impact on mix there?

Yes. Yes. Thanks, Ben. The business is performing well and very consistent with our plans. That's the bottom line. I think when you look at Q1, as you know, we saw a slight reduction in Q1 deposits, about GBP 0.6 billion. That was in the context of retail down about GBP 3.1 billion and commercial up about GBP 2.3 billion. So that was the pattern in Q1. Within retail, the balances that really mattered showed growth and indeed stabilization, which is great to see. So PCAs, for example, up GBP 0.6 billion, instant access up during the course of the quarter. And the areas that were a bit softer were the balances within fixed term and within what we call restricted variable, which is limited access. And that was in the context of what was a very competitive ISA season, often straying into kind of negative margin territory, and we chose to step back from some of that activity. Now strategically, what we really wanted to focus on during Q1 and indeed going into Q2 was and is strong retention, combined with ensuring that we deliver value to our relationship and most valuable customers. That is what it is all about. And that includes people like Lloyds Premier, Lloyds Club, these types of balances. And indeed, I think we basically achieved those goals. So if I think about our '25 ISA season, we landed with a roughly 90% retention of those balances, which is what we set out to do. At the same time, as my comments earlier on alluded to, we grew our relationship balances. And what we stepped back from was the more rate-sensitive mobile money that you saw during some parts of the ISA season, as I said, often straying into negative margin territory. The recent conditions last few weeks or so have allowed us to step up a little bit in the context of the deposits market. And so what does that mean? I think probably what it means is that we'll see more or less a plateauing during the course of quarter 2. That's my expectation. You asked about customer behaviors, Ben, and what is going on there more generally. I think outside of the ISA season, there's been not much change. We've seen a bit of a rally in rates, as we all know, and I know it's much talked about, but it's pretty limited compared to what we saw in 2023. I mean, as you can tell from our PCA numbers, our instant access numbers, we are not seeing customer migration. It's more a question of where the ISA balances in any given ISA season may land depending upon who wants to be out there taking the ISA volume and who is prepared to, if you like, suck up some of that margin negativity from time to time. So I think that's what's going on. It is, at the same time, to be clear, it's a competitive deposit market. I wouldn't want to suggest otherwise. And that's a function of all of us seeing the benefits of structural hedges and the thickening of liability margins that go on with that. It's a function of the Central Bank withdrawing TFSME, the support program, towards the end of this year. It's a function of new entrants in the U.K. market. So it's a competitive deposit market for sure. When we look at our overall strategy, it is really about delivering value for our customers in a way that makes sense for us.

Okay. Brilliant. I think we've covered net interest income and the components pretty well. Let's move to thinking about other income, one of the key components of your recent growth strategy, up 11% year-on-year in Q1. You've had the benefit of consolidating Lloyds Wealth, but also some recent strength in transport and equity investments. What are the key focus areas for you in sustaining that business momentum and then continuing to diversify the top line looking ahead?

Yes, it's an important question, Ben. I might just step back actually and just put it in strategic context, because I think that's where it comes from, and that's the most important point. When Charlie and I came in after a decade of basically low to 0 interest rates, one of the determinations that we made was that we needed to diversify the group. And we used to diversify the group for 2 reasons. One is to, if you like, move away from dependency upon volatile and sometimes very low interest rates. And two is to make sure that we realize the value of a very significant U.K. franchise, both of those 2 things. What that's led to is that OOI has now been up over 30% over the last 3 years, which is great progress. And we expect to see continued further strong growth during the course of 2026. You saw during Q1 that, that was the first step. We saw strength in Q1, consistent with what I've just said. It was up, as you know, 11% year-on-year, up about 1% quarter-on-quarter. Where was that coming from? A combination of at least 3 out of the 4 main engines that we have. And so specifically, what I mean by that, growth within transport, growth a little bit within mortgages within retail. Growth within GI, growth within pensions, growth within Lloyds Wealth, within the Insurance, Pensions & Investments business. And then finally, growth within LDC and Lloyds Living within our Lloyds Banking Group Investments business, which is basically the equity business. So over the course -- or rather within OOI, some pretty good performance from those areas. It's a combination of both BAU activity as well as the benefits of some of the strategic investments that I mentioned earlier on. OOI has been a key beneficiary of those. So things like investing in our own channel in GI, for example, things like investing in Lloyds Wealth, for example, things like investing in transport within retail, for example, all of those are areas of strategic investment, which then come through in terms of the OOI performance. Where we were slower was CB, Commercial Banking, and CIB in particular. And I think that was off the back of a couple of things really, both related. One is volatile sterling markets. We are quite exposed to sterling markets naturally. And the second was partly, because of that, limited new issuance in those same markets. And overall, that led to a pretty muted CIB performance within Commercial Banking, and we obviously need to address that. Looking forward, putting all of that in around, we expect continued strong growth within OOI over the course of 2026, consistent with the guidance, the nonnumerical guidance in OOI that we have given. And again, Q1 is a testimony to that. What does that mean? That means basically similar to 2025 plus Lloyds Wealth. So overall, I think it's good performance. Looking forward, we do expect to continue to invest in OOI propositions, to continue to invest in areas of what we term GDP plus growth opportunities for the business, and it will be a key plank for the next strategy.

Okay. Brilliant. Well, let's follow up on 2 of the points there. So the commercial angle and the capacity of the business to grow above GDP, as you say. So some of the areas within commercial that I know you've spoken about have been infrastructure and project finance, some of the capabilities you've been building up more broadly in commercial. Can we touch a bit on those and then also how some of the announced changes to the ring-fencing regime and the new growth allowance that's been proposed might fit in?

Yes. Yes, absolutely. Maybe just to step back, those that are familiar with our business will know this, but those that aren't, maybe less so. Commercial is basically 2 businesses. That is to say it's BCB, which is Business and Commercial Banking, which is our SME franchise. And it is CIB, forgive all the acronyms, which is our corporate and institutional franchise. They are both areas of significant investment and opportunity for the bank, and they are both areas that we've been investing in heavily during the course of the strategic cycle. BCB, first of all, the strategy there is about digitizing the platform, but also retaining our relationship manager franchise up and down the country and across all the sectors. We've seen some decent progress in that respect. So mobile onboarding, to take one example, is now 15x faster than what it was. Digital FX, significant progress. 45% of our key services within BCB are now entirely digitized with all of the customer benefits and efficiency gains that come off the back of that. So that's BCB. CIB, Corporate and Institutional business, that is following a cash debt risk strategy. It is a very deliberately set strategy around those parameters, that perimeter, if you like, cash debt risk. It's important to us that we stay focused. What does that mean? It means that we've been strategically investing in areas that are consistent with that. DCM, for example, FX, for example, cash management, for example, all areas that have received attention. And again, we've seen some decent progress in that. So OOI is up 35% versus what it was in 2021. Likewise, FX share of wallet up also about 35%. We've been making, for those that watch us carefully, some significant progress in the realm of digital assets in that same space, all of which is good to see. But at the same time, within the CIB business, I think it is too narrow. I made some comments earlier on about it being somewhat subject to the fortunes of sterling FICC markets. That's a function of the cash debt risk CIB focus that we have right now. And I think over time, there's an opportunity just to build that out, not to change the focus, not to change the perimeter cash debt risk, but just to build a little bit around the edges for the capabilities there to make sure that the resilience and the growth opportunity is fully realized. You asked about growth, Ben, and what does GDP plus mean in this area. What it really means is things like infrastructure. It means things like transition. It means things like enhancing our institutional capabilities in respect of currencies, markets and likewise. All of these things come very naturally. I mean, if you look at the bank and its overall purpose at a high level, but overall setup and franchise, all of these things kind of naturally follow from there. There are areas where we should be able to win and indeed have been making investments in and intend to continue to do so. Ring-fencing. Ring-fencing is interesting. As you know, we've taken a view, which I think is the correct one, that the banking sector and the U.K. sector and the U.K. banks have moved on a lot since the inception of ring-fencing. And therefore, we welcome the treasury and kind of PRA sponsored, I suppose, review of ring-fencing as it stands. And there have been some changes proposed recently, all of which we would welcome. They are steps, to be clear. They're not necessarily the end of the project as such, but nonetheless, they're welcome steps. One example of that is the growth allowance. The growth allowance is essentially saying, look, you can have a certain number of your risk-weighted assets that previously would have had to have been outside of the ring-fence, now put within your ring-fence. That is effectively a concession. It's talked about as around 10% of your eligible ring-fencing risk-weighted assets can now be enhanced by previously non-risk-weighted eligible assets. From our perspective, that's welcome. Why is it welcome? Because it should allow us to reduce client frictions in terms of moving between ring-fenced and non-ring-fenced entities, and off the back of that, enhance our ability to better serve and grow the client proposition. More materially or more quantitatively, it should also lower our funding costs. That is to say we can put assets into the area of the lowest cost funding from the bank's perspective. And of course, that will be beneficial. And ultimately, the intention from the government's perspective is for it to be beneficial to the growth of U.K. financial services and service propositions to clients. From our perspective, we should be able to neatly fit into that. Having said all of that, it will reduce client friction. It will reduce our funding costs. That's great. I'd like to see the final form of the growth allowance and the ring-fencing reforms before, if you like, becoming too, if you like, convinced of the merits of it and the strength of it, but it is a positive development and one that we seek to benefit from.

Understood. Let's flip to costs. You're targeting below GBP 9.9 billion in 2026. That's pretty limited cost growth year-on-year. What are the biggest sources of inflation that you're absorbing within that? And then how are you balancing that against investment?

Yes. Yes. Good question. I have to start off at this point, of course, which is that cost management is an absolute imperative for Lloyds Banking Group. For those who know us well, it's been a hallmark of the group for some time, and it continues to be so. When we look at our 2025 operating cost commitment, it is less than GBP 9.9 billion. That is about a 1% increase year-on-year, and that includes a couple of acquisitions, i.e., Lloyds Wealth and Curve. So actually, the underlying is even tighter cost management than that 1% would imply. Where is that coming from? It's coming from the benefits of strategic investments. It's coming from tight BAU cost management, and it's a little bit coming from the plateauing of investment flows as this strategic cycle comes to its finishing line, I suppose. Those investments, those strategic investments that I mentioned so far at least have delivered about GBP 1.9 billion of gross cost saves. By the time we get to the end of 2026, they should have delivered in excess of GBP 2 billion of gross cost savings. So that's a material help. The focus, though, in addition to an absolute cost number, as you know, Ben, is a complete focus on, a complete commitment to a cost-income ratio that is below 50%. That has been a key point of our guidance for some time and it continues to be so. That sub-50% cost-income ratio is coming from a combination of income growth, we talked a bit about that, but also obviously cost containment. And in that respect, at least, Q1, as I hope you saw, was basically on track. So GBP 2.47 billion of costs in Q1, 3% down year-on-year. There's some timing in that, but nonetheless, overall, pretty tight cost performance consistent with guidance. What are the sources of inflation? What are the sources of saves, Ben, to your point? Each of these 2 folds into a kind of BAU point and, I guess, a strategic point. And so inflation, first of all, where are we getting the inflation from on a BAU basis. We're getting it from things like pay settlements, clearly. We're getting it from places like suppliers. We're also getting it from benign sources. So volume growth. I mentioned the lending growth earlier on. That naturally incurs OpEx. And that's an example of a kind of benign BAU cost pressure. The cost pressure is also coming from strategic choices. And what do I mean by that? I mean, investments in things like IT, investments in things like Lloyds Technology Center out in India, investments in Lloyds Wealth, investments in Curve, which we have just completed, digital wallet capability. These are very deliberate strategic choices. They lead to cost pressure, but it's good cost pressure, because it's what we want to do. It's how we want to develop the business. The saves, Ben, again, similarly break down into BAU and into strategic choices. And I think they're kind of interesting. So BAU, third-party saves, the regular management that we apply to our third-party suppliers. That's principally a contractual type initiative. Alongside of that, organizational design, we constantly think about how to set the organization up in an efficient way. Divisional initiatives, these types of things, they're very BAU. Every year, we think about them. And then strategically, there's 2 or 3 areas. And again, I think they're kind of interesting. Technology, first of all. So migration to cloud, data center migration, likewise, decommissioning of the business. These things ultimately all give us structural benefits. Digitization and automation, including obviously the much heralded AI as part of that, second strand. Third strand, property. As you know, HQ and branches are things that we've been looking closely at over the course of the last several years and continue to do so. And then finally, change saves, making that change process that we have, which consumes an awful lot of our investment capital that much more efficient. We've been relatively successful. Now looking forward, Ben, as we go into the remainder of '26 and indeed beyond that, our focus really is going to be upon operating leverage and upon continuing to improve cost-income ratios. That's going to be the focus, probably slightly more than trying to repeat the 1% trick of 2026. It's going to be about continual improvement in cost-income ratios and indeed operating leverage. Overall, the strategy is, the intention is to say let's be really tight on BAU cost management, operational cost management, so that we can then afford the investments that we want to make as a business. And we'll talk a lot about that during the course of July.

Okay. Brilliant. Well, I'll ask one more question before we open up to audience Q&A. So let's think about Motor. You have a GBP 1.95 billion provision that's scenario-weighted. You left that unchanged after the FCA's finalization of its redress scheme earlier in the year. Since then, though, there have been a few legal challenges to the FCA scheme. How are you thinking about that playing out?

I didn't think I'd get away through the session without a Motor question coming up at least. So thank you, Ben. The provision, as you know, is unchanged at GBP 1.95 billion. That very much remains our best estimate of operational costs, of legal costs, of redress costs. And it is, as I think everybody in this room knows, a scenario-based provision. Now the first step in all of that scenario-based provision is obviously what the FCA put forward. And what the FCA put forward just recently had a bunch of puts and takes versus what it put forward in October. And so what I mean by that, de minimis constraints, for example, remediation caps, for example, those are positives versus where we were in October. And at the same time, we had APR floors, which are negatives versus where we were in October. And you put all of those through and it's more or less awash, i.e., the puts and takes iron each other out. There are some other uncertainties beyond that. So take-up rates, let's see what happens. We've got a relatively toppy take-up rate, i.e., we expect quite a lot of take-up that may or may not actually come through. I think we probably provisioned to the upper end of that. At the same time, operational costs. We're trying to, not surprisingly, exert downward pressure on our operational costs within the context of the exercise. But those uncertainties are out there. We don't quite know how they're going to play out. And then Ben, as your question highlighted, we've got some risks outside of the scheme in the context of challenges to the scheme, in the context of potential litigation. And the first point is to say, because our provision is scenario-based, not surprisingly, we constructed scenarios around precisely that, i.e., challenge and litigation that could come at the back end of that. So those are in our GBP 1.95 billion provision, although to be clear, they are relatively low probability-weighted in the context of our GBP 1.95 billion provision, but they're there. I think in this context, it's interesting to note that the challenge to the scheme has come from both sides. And the reason why that's interesting to note is because the FCA has pretty wide discretion in the context of the scheme that they are allowed to introduce and impose, if you like, upon the industry. And so the fact that challenge has come from both sides is just kind of interesting in trying to figure out where this might go. Let's see. The second point in relation to litigation is, as you know, it's our view, at least, that the scheme is not perfectly aligned to some of the Supreme Court decisions. And indeed, as an example of that, the definition of unfairness that the scheme adopted we think went outside of the Supreme Court determinations. And that is interesting in the context of litigation, because it suggests that litigation is not all about risk. That is to say litigation may actually also go the other way. And so stepping back from all of that, what does it mean? I think what it means is that overall, of course, there's a little bit of uncertainty. But GBP 1.95 billion very much remains our best estimate. Litigation, it's possible. It might drag things out a little bit, but it does not change our view of what the right provision is, and that remains GBP 1.95 billion.

Okay. Very clear. Well, we've got 2 minutes left in case there's anyone in the audience who has a question. If anyone is brave enough? Perhaps not. Well, I'll very happily keep going. So let's close with asset quality. Q1, your impairment charge, 25 basis points, bang in line with the full year guidance. That did, though, as you mentioned, include a scenario change for a more challenging economic outlook. So how are you thinking about the trajectory from here? What gives you confidence in maintaining that 25 basis point trajectory?

Yes. Yes. Yes, good question. AQR guidance remains 25 basis points, I should say, circa 25 basis points, I think the precise way we put it. The Q1 impairment charge, as you say, was bang on that. That is to say, 25 basis points, GBP 295 million. And therefore, very confirmatory of our full year guidance. Now within that, 25 basis points, we had 2 components. One is the observed charge, which is actually what's going on in the book, if you like, and that was 16 basis points. That was low, partly because of calibrations within models, which happens every quarter. Sometimes it goes for us, sometimes it goes against us. This time it went for us. Alongside of that, a very low charge, in fact, a release within Commercial Banking. We really saw no material defaults. And so if you strip all of that away, the underlying observed impairment charge is probably somewhere between 20 to 25 basis point mark. It's in that zone. Now in addition to that, we had an MES charge, multiple economic scenario charge, which takes account of our forward forecasting. And that, in turn, was 9 basis points, just over GBP 100 million, which was a combination of the unemployment and HPI changes that I mentioned earlier on, offset against us taking out a PMA charge for the U.S. tariffs from last year, which have now worked their way through the models and indeed performance and so forth with no noticeable effect. So we took that out. So Q1, very much according to plan. Q2 so far, we haven't finished our forecast for Q2. But everything that we can see is more or less in line with the stance that we took at Q1. Of course, there are uncertainties, but at the moment, that's where it stands. And so no material change. And then when you say what's going on within the book, you would say basically the same. So retail, very robust across asset classes, not just in terms of performance, but also in terms of early warning indicators. So things like new to arrears, things like cards repayments, things like overdraft utilization, stable. Commercial Banking, we are pretty vigilant in Commercial Banking. When you look at sectors like housebuilders, clearly under a bit of pressure right now, we're keeping an eye on the situation. But again, no material defaults that we are seeing within Commercial Banking. And again, early warning indicators, revolving credit facilities, for example, liquidity levels, for example, again, stable. So our expectation is that the observed performance in the course of quarter 2 and indeed for the remainder of this year is showing promising signs in line with our guidance. By definition, well, actually, I guess I just mentioned it, the MES outlook, not awfully different to Q1. And then behind that, Ben, what is all of that based upon? It's a prime portfolio in terms of the mortgage business, in terms of the retail business, in terms of the commercial business. It is stress tested at rates that are well in excess of where we are with the market right now. And then if things do go wrong, there is plenty of collateral. We've got a 45.5%, 45.4% LTV within the mortgage portfolio. We've got something like 90% of our SME business secured. We've got something like 80% -- greater than 80%, I think it is, of our CIB exposures investment grade. So there's plenty of recourse should things go wrong, Ben, but we don't anticipate it. And absent a material change within the macro, we are very confident in our AQR guidance.

Okay. Perfect. Well, I think, unfortunately, we are out of time, but thank you very much, William for joining us. That's brilliant.

Thanks very much indeed.