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

Good morning, everyone, and thank you for joining us today. I'm delighted to welcome you to our 2026 half year results and strategy update presentation. Today represents an important milestone as we approached the end of our current 5-year plan and announced an ambitious new strategy to take us through the end of 2030. We've got a lot to cover this morning. So let me start with a brief overview of the agenda and key messages. I'll begin with a look back on our progress to date. We have successfully executed our 2022-2026 strategic plan and are on track to deliver our 2026 financial targets. This plays strong foundations for the next phase. William will then cover our first half results that show sustained strength in financial performance. We are today announcing a significant step-up in our ordinary dividend with a 30% increase in the interim alongside a share buyback of GBP 1 billion. We will then shift focus to our new strategic plan, Accelerate 2030 and the financial outlook. I'm hugely excited by this next phase, where we will reimagine customer journeys, increase group connectivity and deliver a productivity step change, all enabled by pioneering technology. These actions will extend our track record of profitable growth and support long-term sustainable value creation for shareholders. Following the presentation, we'll have plenty of time for your questions. So let us begin with a look back on our progress, starting on Slide 4. We are the U.K. financial services leader with competitive advantages that reflect our scale, digital AI capabilities and cost and capital focus. These competitive advantages underpin sustainable value creation. Our customer lending and deposit balances today totaled nearly GBP 1 trillion in addition to circa GBP 250 billion of open book AUA. These support a diversified revenue base that's on course to reach circa GBP 20 billion in 2026. And we expect to deliver a return on tangible equity in excess of 16% this year and above this in the years to come. I'll discuss some of these areas in more detail, starting with our market leadership and revenue growth on Slide 5. Our strategy over the last 4.5 years has represented a clear shift in focus towards growth. To this end, we are on course to deliver around GBP 5 billion of net income growth by the end of 2026. Benefits from the structural hedge, BAU growth and our strategic initiatives have more than offset material headwinds in the period, including those from the runoff of our SBR mortgage book and highly competitive lending and deposit markets. Growth has been broad-based. Our focus on improving customer propositions and service has improved satisfaction scores and supported market share growth in key areas, up around 3 percentage points on average. This includes gains in PCAs, transport, unsecured lending, home insurance and SME deposits, amongst others, supporting strong balance sheet growth. We've also meaningfully diversified the business, increasing our OOI contribution by 4 percentage points despite strong NII growth and building our presence in high-value areas such as mass affluent. Complementing this, we've realized significant benefits from our investments and are on track to deliver circa GBP 2 billion of strategic initiatives revenues by the end of 2026, higher than originally targeted in 2022. Turning now to digital and AI leadership on Slide 6. We've been delivering against a clear strategy to enhance our capabilities, deliver new propositions to customers and position ourselves to benefit from new technologies. We have significantly modernized our infrastructure, actively unlocking our legacy data estate and technology. Investments in our people has been a key enabler of this with around 11,000 technology and data hires since 2021. These actions mean that our organization is better equipped to deliver significant change at pace. This has created a platform for increased innovation, driving clear benefits for both customers and the group. At the same time, we've established leadership positions across new technologies, launching industry-first use cases and realizing value from AI. Our actions here position us well for the future, increasing our confidence as a scale leader. Moving to cost and capital efficiency on Slide 7. Our growth has been enabled by a continued focus on delivering a more efficient organization. We've now realized more than GBP 2 million of gross cost savings since 2021, having surpassed our original targets. Savings have been broad-based, including meaningful contributions from technology modernization and the rationalization of our office footprint. These savings have more than offset an inflation headwinds in the period, creating capacity for the group to invest. At the same time, we've delivered GBP 28 billion of RWA optimization, offsetting regulatory headwinds to ensure that RWA growth more closely aligns with revenue-generating activities. These actions, combined with ongoing portfolio derisking and steps to clarify legacy remediation charges have helped increase the predictability of capital generation. This has supported growing shareholder distributions. The ordinary dividend has more than doubled versus 2021. And we've now announced circa GBP 17 billion of distributions in the period, equivalent to around 25% of our current market cap. Now turning to Slide 8. Delivery against our long-standing purpose of helping Britain prosper provides clear benefits to customers and communities across the U.K., supports the real economy and creates profitable growth opportunities for the group. Over many years, we've made a significant impact towards addressing key societal issues such as increasing access to housing and supporting the shift to a more sustainable future. Importantly, our actions have supported healthy franchise momentum, delivering profitable growth across both sides of the balance sheet. Looking ahead, we see further opportunities to help Britain prosper with bold ambitions for the next phase. Let me flip the section on Slide 9. Our successful strategic execution supports strong shareholder outcomes, diversified income growth, improving operating leverage and higher, more sustainable returns and capital generation. We're on track to meet the financial targets that we laid out over 4 years ago, having upgraded many of these along the way. By the end of 2026, we will have delivered a cost income ratio of less than 50%, a ROCE is greater than 16% and more than 200 basis points of capital generation. I'm very pleased with how well we have delivered for customers, colleagues and shareholders in this period. This creates a platform from which we can accelerate, further reinforcing our competitive advantages in the next phase I'll discuss this in more detail shortly, but for now, let me hand over to William to run through our first half results.

Thank you, Charlie, and good morning, everyone, and thank you again for joining. As usual, let me start with an overview of the financials on Slide 11. Lloyds Bank Group again demonstrates sustained strength in financial performance during the first 6 months of the year. As Charlie mentioned, we're on track to deliver our 2026 commitments. Statutory profit after tax was GBP 3.1 billion, with a return on tangible equity of 17.1%. Within this, we delivered net income of GBP 9.7 billion, up 9% from the previous year. Q2 net income was 4% higher than Q1. This was driven by continued strong momentum across both net interest income and other income. We remain committed to cost expense. H1 operating costs of GBP 4.9 billion were flat year-on-year. Notably, the Q2 cost-income ratio of 49% was in line with our guidance for less than 50% for the full year. Credit performance being while remained strong and stable. The H1 impairment charge of GBP 617 million equates to an asset quality ratio of 25 basis points. Our performance resulted in strong capital generation of 108 basis points in the first half and a pro forma CET1 ratio after distributions of 13.1%. Given our confidence in the group's strong capital position and earnings trajectory, we are announcing a significant step-up in our dividend, increasing the interim dividend by 30%. We also implement a GBP 1 billion interim share buyback. And together, this represents over GBP 1.9 billion of capital distributions as at the half. Let me now turn to Slide 12 to look at developments in our customer franchise. Our customer balances showed strong growth in the first 6 months across both the lending and the deposit franchises. Focusing on Q2, group lending balances of GBP 492 billion were up over GBP 5 billion or 1% versus Q1. We saw broad-based customer-led growth across all business lines. Within retail, mortgages were up GBP 0.2 billion in the quarter. This was net of a legacy mortgage book securitization of GBP 1.8 billion. Excluding this, mortgages grew by GBP 2 million and that reflects a positive trading performance and share of around 18% of net new lending. Mortgage applications remained strong, slightly below the level seen in Q1 given the context of a higher rate environment. Pleasingly, completion margins were slightly higher quarter-on-quarter, albeit again, rounding 70 basis points. Elsewhere in retail business, we saw continued and broad-based growth across each of our cards, loans and motor businesses as well as European retail. Commercial balances meanwhile, were up in the quarter by GBP 3.1 billion. This reflects strong growth in CIB, particularly in steadied products and infrastructure. BCB also continued to grow before the impact of GBP 0.3 billion government-backed lending repayments, after which balances are flat. In looking at the liability franchise, we saw a good performance in deposits, up GBP 5 billion or 1% in Q2 to now over GBP 0.5 trillion. Retail deposits were flat as we maintained price spend and the remainder of what was a competitive tax year-end and focus value on our relationship customers with broader product holdings and other selective propositions. We're also happy to see PCA stability in the quarter, maintaining our greater than 24% market share of balances. Commercial deposits meanwhile were up GBP 5.2 billion, driven by growth in targeted sectors across both CIB and BCB, continuing [indiscernible] in this area. And in insurance, pensions and investments, we saw significant open book AUA growth of around GBP 25 billion in the quarter to GBP 251 billion. Let me now turn to net interest income on Slide 13. Net interest income continues to grow robustly. H1 NII was up 9% year-on-year to GBP 7.3 billion. This included a 4% growth in Q2, helped a little by [indiscernible]. NII was underpinned by averaging fastening assets of GBP 476 million for the first half, up 4% or roughly GBP 18 billion year-on-year. Income growth continues to be supported by positive momentum in the net interest margin. In H1, the margin was 319 basis points and this included a second quarter margin of 322 basis points, up 5 basis points in the quarter. In this context, the growing structural hedge contribution continues to more than offset mortgage refinancing and other pressures. The nonbanking NII charge meanwhile in the first half was GBP 251 million, with Q2 down slightly in Q1. Structural hedge earnings were GBP 3.4 billion for the half with an average yield of 2.7%, feel well below market refinancing rates. Within this, the notion of GBP 246 billion and the weighted average life of around 3.75 years was stable in the quarter. We continue to expect hedge income to grow to greater than GBP 7 billion in 2026, and growth to GBP 8 billion in '27, further growth thereafter to the end of the decade. Coming back to this year, we continue to expect net interest income for 2026 to be greater than GBP 14.9 billion. Let me now turn to other income on Slide 14. We continue to build momentum in other income across our franchise. Other income was GBP 3.3 billion in the first half, up 11% on the prior year, with Q2 up 6% versus Q1. Pleasingly, this growth is driven by broad-based momentum across our businesses, bring to strategic initiatives as well as BAU activities. Within retail, we saw a 10% growth in H1 versus the prior year, supported by continued strength in our Motor leasing business and our Payments business. There was also a one-off benefit from the more securitization in Q2 that I mentioned earlier on. In commercial, year-on-year growth in fees and lending activity and transaction banking was more than offset by lower markets income in the context of market volatility. Importantly, however, commercial and CIB, in particular, was up in the second quarter after a slightly weaker Q1. And our markets and issuance activity recover. Insurance pensions and investments continue to deliver a positive performance in the first half, up 19% versus H1 '25. Growth in work rate income was particularly positive alongside a full half of strong performance from Lloyds' wealth. Equity investment OI meanwhile, was up more than 40% year-on-year in what was a very good half for LDC realizations alongside ongoing Lloyds Living growth. Looking forward, while Q3 won't grow quite as fast as Q2, given the benefit of the securitization that I mentioned earlier on, growth in other income will continue. Diversification of our income remains a strategic focus and indeed, our base case expectation. Operating depreciation was GBP 452 million in Q2, up GBP 63 million quarter-on-quarter. This was driven by fleet growth, but also by a GBP 41 million charge for used car price diversity. Going forward, we expect this charge to revert back to a normalized run rate, growing more in line with the fleet size. Turning to costs on Slide 15. Cost discipline continues to be imperative. H1 operating costs were GBP 4.9 million, flat year-on-year. This reflects continued efficiency savings, some timing impacts and slightly lower investment, including severance. At the same time, we've been able to effectively absorb the operating expenses of both the Lloyds' wealth and the Curve acquisitions. Along side, the remediation charge remains low at GBP 39 million in the half. And taken together, this has resulted in a cost-to-income ratio of 50.4% in H1 and again, notably a ratio of 49% in Q2. Overall, operating costs are in line with full year expectations, reinforcing our confidence in delivery of a cost income ratio of below 50% for 2026. Let me turn to credit performance on Slide 16. Credit performance was again strong and stable in the period. Retail and Commercial, both continue to see low and stable impairments. Neutral arrays and other early warning indicators remain benign. The first half impairment charge was GBP 617 million. That equates to an asset quality ratio of 25 basis points, which, of course, is in line with our guidance. The Q2 impairment charge was GBP 322 million, including a pre MES AQR of 28 basis points in the quarter. This was slightly higher than Q1 given model updates and the nonrepeat of Q1 releases. As always, we updated our economics in the second quarter. This resulted in a small Q2 release from modest improvements to our forecast. And looking forward, we continue to expect in 2026 AQR of around 25 basis points. Let me now address returns and TNAV on Slide 17. Our return on tangible equity of 17.1% for the first half represents a strong performance. Within H1, the restructuring charge of GBP 34 million includes costs for the integration of Curve and Lloyds Wealth. The volatility in other items credit of GBP 112 million was largely driven by insurance later gains. Tangible net asset value per share ended the half of GBP 0.57, in line with our full year 2025. This included a [ GBP 0.009 ] decrease in Q2 with strong profitability field, offset by shareholder distributions, including the full year ordinary dividend payment in May. And as usual at this time, TNAV is also temporarily suppressed by an accrual for the share buyback over the H1 close period with no corresponding share count reduction. This is worth GBP 0.1 per share, and it will mechanically reverse in Q3. Looking ahead, we continue to expect material TNAV per share growth in both the short and the medium term. We also continue to expect return on tangible equity to be more than 16% in 2026. Clearly, our H1 performance reinforces our confidence in this regard. Turning now to capital generation on Slide 18. Capital generation was strong in the first half of the year at 108 basis points, particularly in the second quarter. Within this, total RWAs ended H1 of GBP 242 billion, up GBP 6.3 billion from year-end. This increase reflects healthy lending growth, partly offset by continued optimization activities, notably in Q2. The pro forma CET1 after deduction of distribution is 13.1%. We continue to expect to pay down to a CET1 ratio of 13% by the end of the year. We also continue to guide 2026 capital generation of more than 200 basis points. I'll now move on to capital distributions on Slide 19. The group's strong capital generation supports sustained growth in shareholder distributions. Today, the Board announced an increased interim dividend of GBP 0.0158 per share, 30% growth on last year's interim. The significant step-up reflects the actions taken to de-risk the business, our strong capital position and our confidence in the future earnings trajectory of the group. Looking back, dividends per share have grown significantly over our strategic plan, as Charlie said, now more than double the equivalent interim dividend in 2021. And beyond 2026, we continue to target a progressive and sustainable dividend, expecting good growth in future years, albeit likely [indiscernible] to recent periods. Additionally, today, we announced our first interim share buyback of GBP 1 billion. This is in line with our stated intention of moving to excess capital reviews over and above the dividend every half year. We expect this growth and distributions to continue, both this year and into the new strategy, returning substantial excess capital to our shareholders year in and year out. I'll now wrap up the financials on Slide 20. To summarize, in H1, the group showed sustained strength in its financial performance and delivery on its strategic ambitions in the final year of our plan. In the first half, we saw continued net income growth, cost discipline and strong and stable credit performance, all contributing to strong capital generation. This allows us to deliver a significant step-up in interim dividend and to announce an interim share buyback for the first time together providing over GBP 1.9 billion of capital return for the first half of line. As we look ahead to the remainder of 2026, we are confident of meeting our financial guidance, as laid out in the slide. I'll now hand back to Charlie to talk about our exciting and ambitious new strategic plan. I'll return later, of course, to discuss the associated financial framework. And needless to say, this will include continued income growth, improved operating leverage, stronger sustainable returns and, of course, very capital generation for our shareholders.

Thank you, William. So I'll now discuss the vision and priorities that define our new strategic plan, Accelerate 2030. I think by the end, you'll be as excited as I am about the group's future. Before getting into detail, I'd like to start on Slide 22 by reflecting on the external environment that we operate in, and outline why we are well positioned to continue to grow faster than the wider economy over the coming years. Our base case outlook for the U.K. economy is one of stability with resilient fundamentals. At the same time, we see clear opportunities for the U.K. to move to a higher growth trajectory than is forecast today. This reflects the improving capacity for spending and investment, combined with the government's ongoing focus on regulatory reform and growth. The latter is likely to drive structural shifts in key areas, including housing, infrastructure and wealth and pensions, creating a long-term nominal EDPs opportunities. As the U.K.'s only integrated financial services provider, we are uniquely positioned with established leadership positions and a proven track record of driving growth in these faster-growing high potential areas. And as you will hear today, our strategic choices reinforce these strengths. Let me now unpack Accelerate 2030, starting on Slide 23. Our strategy represents an acceleration of our transformation and ambition. But fundamentally, the business model we have today is the right one. Therefore, Accelerate 2030 will also reflect the strategy of evolution and build on our existing participation choices. This includes our U.K. focus, product breadth, connectivity, reach and low-risk diversified balance sheet. These provide us with confidence in our ability to deliver unique propositions to customers, diversified growth and long-term sustainable value creation for our shareholders. On Slide 24, I'll highlight the new components we are adding to this. Our purpose of helping Britain faster remains at the core of Accelerate 2030 supported by a clear promise to our customers to make finance simpler, smarter and more connected for every moment that matters. Building upon our existing strengths, we will reimagine experiences to the like our customers, better connect than ever before, making the group more than the sum of its parts and deliver a productivity step change to create value. All of this will be enabled by pioneering technology and a clear commitment to investing in the business. Our strategic priorities will be delivered through 3 pillars: grow the core, innovate to deepen and diversify and simplify to outperform and successfully executed our plan will reinforce a clear financial framework with our investments supporting continued income costs, improving operating leverage, stronger sustainable returns and growing capital generation. Let me explain in more detail on Slide 25. Our pillars represent distinct opportunities. Grow the core is focused on reinforcing our position as the U.K.'s financial services leader. We will meet more needs in areas of strength and accelerate in faster-growing areas where we have headroom, maintaining or gaining share across the core franchise. To achieve this, we will reimagine customer experience, embedding AI to make things simpler and more personalized than ever before. Innovate to deepen and diversify is focused on increasing group connectivity, whilst extending into higher-value fee-generating adjacencies and building new businesses. We will also increase the group's presence in third-party and AI channels to be where our customers are. Our delivery here will support a high single-digit OI taker. And finally, simplify to outperform is focused on how we'll create the capacity, pace and discipline to enable our acceleration. Investment in our people, data and AI are the cornerstones of this and are critical to enabling our growth ambitions and a productivity step change. This includes a further GBP 2 billion of gross cost saves. I'll shortly run for our strategic priorities by business area with deep dives on opportunities where we can differentiate. This includes things like our unique group-wide rewards offering and bancassurance. This will help you better understand both our ambition and how grounded our plans are in these areas as well as serving unique value for customers Accelerate 2030 will further improve our financial performance as shown on Slide 26. By building upon our competitive advantages and raising our ambition, Accelerate 2030 will create the foundation for long-term outperformance. Growing business momentum will support continued income growth with net income growing at mid-single-digit CAGR. As highlighted already, OOI will be a significant contributor to this. Strong income growth, combined with our continued efficiency focus will further improve operating leverage, [indiscernible] income ratio of less than 45% in 2030 with year-on-year reductions. This will support stronger sustainable returns and growing capital generation. We're targeting a ROTE of circa 20% and more than 225 basis points of capital generation in 2030, including continued investments in the business and growth in the balance sheet. We believe this represents an attractive shareholder proposition, focused on long-term sustainable value creation, both in this strategic cycle and beyond. Having introduced the strategy, I'll now cover our priorities in more detail. Firstly, I'll discuss our refreshed proper foundations on Slide 28. In line with Helping Britain Prosper, we remain focused on addressing critical societal issues. The strategic actions across our business units are aligned to these aims. Whilst our purpose remains unchanged, our 2030 ambitions are bold. For example, we're targeting more than GBP 45 billion of new finance to small business customers and more than GBP 100 million of sustainable and transition financing. These actions will reinforce our existing leadership positions, deliver significant impact for customers and communities and create attractive growth opportunities. Let me now move to our business priorities, starting with retail on Slide 29. Our retail business has significant scale and reach, including relationships with half of the U.K. adult population, colleagues present in around 1,000 communities and nearly 22 million mobile app users. We also have leading market shares in our key product areas. Our strategic priorities are focused on further deepening relationships to an even more connected personalized offering and AI-enabled experiences. In addition, having established a digitally led European mortgage business with strong returns, we will selectively scale this, supported by European deposit growth. To support these aims, we will progressively extend our new core banking engine, which will improve speed to market and personalization. AgenticAI-powered customer journeys will also drive further improvements in our ability to grow and serve customers significantly more cost effectively. We recently announced the decision to move our Halifax customers under the Lloyds brand operating alongside our other relationship brand, Bank of Scotland. This will make it simpler for our customers to access all of the group's products and servicing capabilities, as well as positioning us to stay connected in a more digital and AI world going forward. Our strategic priorities will deliver improvements in both income growth and operating leverage. We're targeting a mid-single-digit net income CAGR and CIR reduction over the plan. Over the next few slides, I'll deep dive on 3 priorities that will support around 80% of our retail net income today, starting with rewards on Slide 30. We have deep customer relationships today with around 70% recognizing us as their main bank. This supports leading positions in high-value areas, including a greater than 24% share of PCA balances, a significant underpin of the group's structural hedge. We see opportunities to reinforce our scale position further by building a truly unique group-wide rewards offering. This will increase advocacy and retain primary relationships, rewarding our most valuable customer groups -- customers in a group in the world of multibanking. We've taken the first step here by relaunching our rewards portal earlier this year. More than 8 million of our customers have already used this and are benefiting from discounts and cash back offers, participating in challenges and monthly price draws. But this is just the start, and we want to take this much further. In the future, we'll leverage AI to make better use of our extensive data and provide offers with even greater personalization [indiscernible] moments and based on spending behaviors. Rewards will also be increasingly based on loyalty and relationships across the whole of the group. This will include differentiated pricing, providing greater benefits to our most valuable customers. And to encourage regular engagements, customers will be able to track the value of the rewards every time. We see significant value upside here with rewards customers typically having greater monthly account contributions, larger payments values and higher depth of relationship. As we strengthen these primary relationships, we look to meet even more of these needs and reinforce our leading deposit franchise. Now moving to our homes offering on Slide 31. We are the market leader for Homes today were 19% mortgage market share. From this position of strength, we understand that there are currently many challenges for prospective and existing owners, including savings for deposits, affordability and complexity in the mortgaging journey. We want to change that and deliver a broader transformed high experience. There are 2 main parts to this. Firstly, we'll launch new propositions that broaden our reach. This includes better serving first-time buyers and buy-to-let customers and meeting more of the customers' home needs including protection insurance and retrofit solutions. We will also innovate to help unlock the GBP 9 trillion of residential property value in the U.K. today. At the same time, we're committed to transforming customer journeys. Direct remortgaging is live today to a reduced time to offer, but we have a lot more to do. The homes journey of the future will be AI and blockchain powers, increasing both personalization and speed. AgenticAI will make it easier than ever for customers to get advice and better value on their mortgages, and broader homeownership needs. This will position the group to have closer, longer lasting and deeper relationships with its mortgage customers, complementing our leading position within meters. I'll now cover our last retail slides on Slide 32. With the U.K.'s largest motor financing and leasing provider with significant scale, through our Black Horse, Lex and Tusker brands, we finance the lease more than 1 million vehicles. Transport is a core need of U.K. consumers, SMEs and large corporates. If it is important, customers are demanding simplicity, confidence and personalized support. We believe we are uniquely placed to reimagine vehicle ownership, working closely with our OEM and broader partners by delivering simple joined-up solutions within a single faster platform for broader transport needs. We will create a smoother, more empowering experience for customers. First phase of this is already live today within the Lloyd's app. As you can see on the screen, customers already have access to tools, including MOT, tax and insurance providers. We'll add more functionality over time before broadening the U.K. system to serve more needs supported by greater productivity with the wider group and industry partnerships. To bring this slide in future years, customers will be able to search verify listings from branded partners to select the next vehicle within the app. AI will offer tailored guidance, helping customers choose vehicles that suit their needs and budgets. We view this as a significant opportunity to acquire, serve and retain customers of scale driving OOI growth. Moving now to Commercial on Slide 33. Commercial captures both our BCB and CIB franchises with around 1 million relationships. In BCB, we are a leading provider of lending and deposits to small businesses. Whilst in CIB, we have strong positions in our core areas of participation. I'll elaborate on the different priorities across each of these businesses within the deep dives. But in short, we're focused on deepening penetration of our existing client base, broadening our reach to capture new clients and enhancing our capabilities to further improve both cost and capital efficiency. The 2 businesses have a broadly 50-50 net income contribution today of a circa GBP 6 billion total. Combined, we're targeting a mid-single-digit net income CAGR and a low-digit CIR reduction by 2030. On Slide 34, I'll cover our priorities for BCB. BCB is a highly profitable area builds on long-standing trusted relationships. However, we have more to do to digitize end-to-end to improve experience. Additionally, whilst we have strong market shares across lending and deposits, we have the opportunity to grow in higher-value areas such as trade, mid-market corporates and within specific sectors. Our strategy, therefore, focused on digital and AI-enabled differentiation and doubling the size of our relationship team to support clients and growth and further enhancing our products. We will offer seamless digital experiences, improving access to cash alongside simple, flexible payment solutions for small businesses. On product, we'll focus on delivering more comprehensive offerings across both trade and working capital. Enhancements here will be complementary to our heightened focus on mid-market corporates. Relationship managers will leverage AI tools to establish as the leading partner for this vital segment, supported by our deep regional presence. We will also increase connectivity with the rest of the group, building our presence with hybrid companies across the U.K. innovation economy and connecting our merchants with retail customers to facilitate 2-sided growth. I'll discuss this more in more detail later. Now turning to CIB on Slide 35. CIB is an important source of diversification for the group, contributing to OOI growth and acting as the key enabler of group connectivity. The business is built upon disciplined participation choices across our cash, debt and risk management offering. However, only 15% of our clients have needs met across all 3 areas today. As we've highlighted previously, there is significant revenue multiplier effect as relationships deepen, representing clear upside as we become a broader solutions provider. To support this, we're continuing to enhance our capabilities across the full spectrum, supported by investment in our technology infrastructure and data. We also see opportunities from selectively increasing our international presence. Around 70% of our clients operate internationally today with U.K. issuance activity increasingly in U.S. dollars and euros. We're underweight here and have headroom for growth. Building on an established base, we will broaden our European offering and further deploy our existing product capabilities and expertise in the U.S., supporting U.K. linked clients. This represents a continuation of our strategy in this area, and you should expect us to be disciplined in our participation and returns on this growth. I'll now discuss IP&I on Slide 36. IP&I is a profitable business and a key differentiator for the group. The business is a scale provider in U.K. insurance and retirement markets with leading positions across home insurance, annuities and workplace pensions. We've refocused the business in recent years and have delivered strong growth with open book AUA of GBP 250 billion doubling since 2021. In addition to reinforcing our leadership positions, our priorities are focused on further improving our propositions with digital and AI innovation and better connecting the group to transform our bancassurance and wealth offerings. These initiatives will support a high single-digit net income CAGR. At the same time, we're highly focused on driving productivity in this area to support a high teens CIR reduction. Combined, IP&I will further strengthen its returns supporting a larger and more predictable distributions than Scottish Widows to the group. Let me deep dive on the bancassurance opportunity on Slide 37. In 2021, we're focused on better connecting our scale, retail and insurance franchises and have made strong progress. Our retail customer penetration has increased in this period with growth in both protection and home insurance as examples. Given the scale of our customer base, we have a significant further opportunity. Indeed, over 20 million of our retail customers still do not have an insurance relationship with us, and 17 million have their home insurance needs met elsewhere. Our industry-recognized digital bank will be a key driver of growth with simpler, more integrated journeys and greater insight to increase engagement. AI-enabled claims management will also increase certainty and lead to faster resolution times, improving satisfaction. We will also broaden our core product capabilities including increasing customer access to protection through ready-made and micro products. Above all, we believe the scale of our data and insights can help to provide differentiated customer value, supporting market-leading pricing and rewarding loyalty and relationship depth as part of the group-wide rewards offering I discussed earlier. We're encouraged by the progress we've made to date and believe we're better positioned to address this opportunity than ever before supported by a more constructive regulatory backdrop. By leveraging the full capabilities of our business model, we'll be able to maximize the potential of a unique growth lever. Now turning to wealth on Slide 38. The group operates a full-service lot offering today with around GBP 110 billion of open book AUA. This includes a top 5 D2C platform, scale intermediary business and Lloyds Wealth. This is in addition to our top 3 workplace pensions business. These are strong businesses positioned in an attractive growing market, but we have the potential to better connect them to retain value across the group and offset outflows to third parties. Our vision is to offer a lifetime wealth management proposition that caters for a broad spectrum of customers across accumulation, decumulation and generational wealth transfer. By increasing interaction with our banking and Workplace customer base, we can turn savers to investors and [indiscernible] workplace outflows at the point of retirement. We'll also increase customer access to advice through agenticAI-enabled offering, invest AI. The initial version of this is currently live within the Scottish Widows app. And over time, will further its capabilities with targeted support and extend it to the retail banking app alongside coaching agents, significantly increasing the addressable customer base. In an increasingly fragmented market, we believe the ability to help customers build, manage and transfer their wealth with one provider is a unique differentiator that will allow us to grow in a high-value area. Now turning to our final area, equity investments on Slide 39. Equity investments primarily captures Lloyds Development Capital, an award-winning private equity firm and Lloyds Living, our residential landlord business. Here, we're primarily focused on consolidating and establishing leading positions across these high-quality nonbanking businesses, whilst increasing connectivity with the rest of the group. We're targeting a high single-digit net income CAGR and to maintain a low CIR with the current position of roughly half of the wider group. Let me elaborate on our plans on Slide 40. Equity investments is a growing contributor to the group, representing more than 10% of OOI in the first half of 2026 with a ROTE in excess of 20%. In LDC, we delivered strong momentum in the first half of the year with 9 new investments made, and we're focused on supporting higher growth businesses through the life cycle to maximize potential returns. We'll also further increase connectivity within our BCB franchise. Lloyds living, we're aiming to become the U.K.'s leading private institutional landlord, doubling the homes portfolio to more than 20,000 by the end of 2030. This will be supported by strong relationships with CIB, with 85% of new homes today in collaboration with housebuilder clients. We will also increase connectivity to the rest of the group, providing insurance solutions for renters and moving customers to shared ownership for our pathways proposition. The cost base will retain a disciplined focus on efficiency. Taken together, equity investments will continue to support the group's diversification efforts. On Slide 41, I'll bring all of these areas together with a focus on connected opportunities. As you can see, we have exciting plans across all of our businesses and expect to deliver broad-based revenue growth and efficiency improvements over the plan. Each of these plans is enhanced by our focus on further increasing group connectivity. We've talked about a number of these areas already such as bancassurance and wealth. But beyond these, we see many more outstanding opportunities as we look ahead. For example, we've grown Tusker from the fleet of 23,000 in 2023 to more than 100,000 today, benefiting from increased connectivity with our commercial client base and funding synergies. We will scale this business even further as part of Accelerate 2030. We will also add new growth levers in this period, unlocking the full potential of the Connected Group to further diversify our revenue streams. I'd like to highlight some of these opportunities in more detail, starting with Slide 42. By combining our scale, retail and commercial franchises and digital and AI leadership, we see the potential to offer valued customers on both sides in a way that only we can. Connected Commerce will enable our business customers to provide targeted campaigns and offers to our retail customer base. The merchants that has clear potential benefits, including increased sales and more effective marketing spend, whilst our retail customers will fill more rewarded with access to offers that only they can receive. I'm also delighted to announce that we are today opening the waitlist to Lloyds Smart Wallet, which builds on Curve's pioneering capabilities to provide an enhanced payment experience to customers. Retail customers will be able to store their payment and loyalty cards in one place, apply spending rules and rewind payments. Over time, customers will also be able to increase payment flexibility with the potential to offer point-of-sale financing options for merchants. We will also look to integrate the personal digital volt for customers, allowing secure document storage. We'll be able to hear more about the visions exciting proposition later today. Moving now to digital assets on Slide 43. We've been an early mover on digital assets, co-chairing the GB tokenised deposits project and delivering notable U.K. first transactions. We continue to support various industry initiatives that are critical to establishing the necessary foundations for future growth. At the same time, we're developing our own capabilities, so we can move from pilot to production at the earliest opportunity with initial proposition launches to take place for our commercial clients during the second half of this year. We're also establishing the capability to facilitate stable bond payments, recognizing adoption is likely to increase over the medium term. We believe that digital assets have the potential to deliver meaningful benefits to customers with these likely to be amplified by the interaction with agentic AI. The effective integration of these solutions into broader customer journeys will support our competitive advantage over time. And we're well placed to do this given the practice stance we've taken. I've spoken a lot about the opportunities across our grow and innovate poles far, but the strategic acceleration of this scale is only possible with ongoing investments in our organization and capabilities. With that in mind, let me now turn to an overview of simplify to outperform on Slide 44. This pillar is critical to enabling the innovation and pace that underpins our growth and efficiency ambitions. I've already described many of the important elements in the business updates and therefore, will not go into too much detail here. I would like to highlight a few key points. Talent, data and technology are the key unlocks for this. In the next phase, we'll further build out our in-house expertise for a constant commitment to colleague upskilling alongside targeted hiring, whilst we'll take our technology and data modernization efforts to the next level. At the same time, investments in AI and specifically agentic AI will deliver value across all divisions and functions. I'll expand on some of the main opportunities we see in more detail on the next slide. And finally, as you'll hear from William, capital efficiency remains of the utmost importance, creating the capacity for further growth. This is supported by our continued shift towards OOI and increased balance sheet velocity for origination and optimization initiatives. Moving now to a deep dive on AI specifically on Slide 45. As I outlined in November, I believe there to be 4 key characteristics of a scale AI leader, trust, breadth, data and capabilities. We're uniquely positioned across all 4 of these areas and have a differentiated starting point. Added to that, we've made significant size in recent years -- years to both adopt AI at scale and measure its impact. As you can see on the slide, we have many examples where AI is driving significant benefits today for both customers and colleagues. It is a bit in mind that I see significant revenue and cost opportunities over the coming period as we scale further. As covered in the deep dives, every part of the group has a clear AI-enabled strategy that will further enhance our ability to differentiate our services, grow and deliver improved productivity. Indeed, by 2030, we expect AI-powered tools will support every customer interaction and all of our colleagues. As these opportunities scale, so will too with the value that we realize. We're on cost to deliver more than GBP 100 million of value from generative agentic AI in 2026 with substantial benefits driving our revenue growth and efficiency in Accelerate 2030. Fundamentally, we expect to remain right at the forefront of this change and are extremely well equipped to realize value, given our scale leadership and staffing position. I'll now close the section on Slide 46. I appreciate I've covered lots of detail, but hopefully, this has given you a feel for the breadth of the opportunity across the group and has given you confidence that we are uniquely positioned to deliver it. We will, of course, provide more progress -- detailed progress in future updates, and you'll hear more on divisional plans in the interim years through investor seminars for the first of these likely next year. The group has strong growth momentum today, and our plans will further reinforce this, supporting nearly a decade of ongoing mid-single-digit revenue growth by 2030 and continued improvements in operating leverage. These actions will drive stronger sustainable returns as we target a RoTE of circa 20% in 2030. With that in mind, I'll now hand over to William to discuss the financial outlook in more detail.

Thank you, Charlie. Now that you've heard about our strategic priorities and business outcomes, let me talk through the financial framework that is behind this plan. As you might expect, I'll start with our economic outlook. We built a strategy based on prudent assumptions. We assume a stable U.K. economic environment with real GDP growth averaging 1.4%. We expect easy inflation to settle at around the 2% target level in the second half of '27. Taken together, this means nominal GDP growth of around 3.5% per annum in the period to 2030. Turning to interest rates. We continue to assume a terminal base rate of 3.5%. Our expectations for the reinvestment on our hedge are predicated upon this assumption, an average around 3.7% over the period. Now clearly, this is below current market implied rates, which are around 50 basis points higher. Against this backdrop, we expect unemployment to increase slightly before peaking in the first quarter of '27, around 5.5%. For house prices, we assumed growth of around 1% in '26 and '27 before rising towards 3% later on in the period. While we will inevitably be impacted if actually economic outcomes differ materially to our expectations, we have nonetheless built the strategy to be resilient to a range of scenarios. Let me now explain our financial framework on Slide 49. Accelerate 2030 is built upon a robust financial framework that will generate long-term sustainable value for our shareholders. The framework rest upon the 3 foundations of investment discipline, efficiency focus and risk management. Together, they are underpinning continued income growth, improving operating leverage and stronger returns and capital generation. These financial outcomes drive a positive feedback loop. They create capacity for further investment to reinforce business performance alongside and importantly, delivering growing and sustainable shareholder distributions. Let me now talk about each of the foundations in turn, starting with investment discipline on Slide 50. In the current and rapidly evolving and competitive context, it is essential that we continue to invest significantly in the business. Disciplined investment transforms the infrastructure of the bank and it reinforces our market leadership positions. Ultimately, it supports the financial performance that we will deliver over the plan. So in 2021, we have invested successfully to drive improvements in the business and generated significant shareholder value. In Accelerate 2030, we will focus our investment on the priorities that Charlie set out earlier, reimagining our customer propositions and our market-leading businesses, building cross-group connectivity, driving an AI and digital enabled productivity step change all the time investing in talent. As you know, we are intensely focused on investing with discipline. While we will invest at scale commensurate with the opportunity that we see, our investment will be governed by demanding return pedals. We will constantly track performs and if required, we will reprioritize to ensure delivery. The opportunity that we've seen [indiscernible] step-up in investments. Indeed, our total cash investment will increase by around 10% to 15% in '27 versus '26 before stabilizing in the years thereafter. Cash investment will, in total, be in excess of GBP 13 billion over the strategic period. Alongside, OpEx will increase in '27, growing at levels closer to the '22 to '25 period versus our 1% in '26. However, we will invest efficiently. Over time, our investment will be increasingly financed by the capacity created by gross cost savings in our strategy, allowing us to control overall OpEx growth during the plan period. Let me talk a little bit more about that now. Lloyds efficiency remains a keystone and we have a strong track record of delivery. Over the current plan, we've achieved more than GBP 2 million in gross cost savings. This has been through a variety of levers, including modernizing technology, digitizing processes, reducing our property footprint and tightly controlling BAU costs. Going forward, we will continue to build on these sources of efficiency. For example, there is more that we can do to modernize our infrastructure to automate, to scale our offshore hub, Lloyds Technology Center, to optimize our property footprint and sales force. And on top of this, AI presents a huge opportunity to drive a step change in productivity. Charlie talked to you earlier about some of our ambitions here as well as some of the early successes that we've had in driving efficiency. We believe there is much further to go. As an example, we aim to drive a significant improvement in the number of active customers served per customer-facing colleague. Alongside AI tools will transform engineering productivity and automate manual processes such as fraud and complaints. This combination of new and existing levers will drive around GBP 2 billion of gross cost savings from 2027 to 2030. As Charlie said, our focus on efficiency also encompasses capital utilization. Since 2021, we've improved our net income per average RWA by around 50 basis points. This is despite significant regulatory RWA inflation over the period. Going forward, we'll continue to optimize balance sheet capital utilization alongside growing income in capital-efficient areas such as IC&I and equity investments. This will drive further improvement in net income per RWA, supporting growing returns and capital generation. I'll speak further on growth in just a second. Let me talk now about the 1/3 of our financial foundations, risk management. Effective risk management is core to Accelerate 2030. Lloyds has a strong track record in credit performance. Over the course of the current strategy, balance sheet risk has been tightly managed. As the quality ratios have been consistently at or below 30 basis points and arrears have been low and stable. Alongside, we've been disciplined in our participation choices and taken steps to manage conduct risk very carefully. Our performance is built on a prudent risk appetite and a strong focus on governance to deliver sustainable growth. Let me highlight a couple of key components of our risk management. Firstly, we have a low-risk diversified balance sheet. For example, an average loan-to-value in mortgages of 46% and SME lending portfolio is around 90% secured. Secondly, we have and will continue to make appropriate and low-risk participation choices across our businesses. This means a strong focus on strong risk-adjusted returns within a consistent risk framework across the bank. In sum, Accelerate 2030 is aligned with our current risk appetite. Finally, we have a comprehensive data and robust underwriting, increasing the AI power. We aim to continually improve the speed and quality of our credit decisions. Consistent with these points going forward, we are guiding to an AQR of 25 to 30 basis points throughout the new plan. Let me now move from foundations to output. Building on our current tailwinds and with these foundations, we expect to see continued income growth during Accelerate 2030. Strong franchise growth, strategic initiatives and, of course, the structural hedge has driven income growth of around 30% over the current plan. Importantly, this has been diversified with more than 30% NII growth and 40% OOI growth versus '21. We expect this pattern to continue. Going forward, the structural hedge tailwind persists growing by more than GBP 2 billion in 2026 to 2030. Headwinds will also remain, including expected competitive pressures. I'll talk more about this in relation to NII in a later slide. Accelerate 2030 and the consequent franchise growth will then provide income momentum beyond this. By growing the core, we will drive strong performance across our existing businesses through balance sheet growth and continued OOI momentum in areas including CIB and Workplace, for example. Our focus on innovation will drive further growth from building out existing propositions, for example, in the transport ecosystem, bancassurance, impeditive finance. And finally, we expect to deliver new revenue streams in several areas such as digital wallet, digital assets, connect to commerce, just that Charlie discussed. Taken together, this means we are targeting a mid-single-digit net income CAGR in our plan, albeit it is important to highlight that we expect net income growth to be higher than this in 2027. Let me explain income growth a little further, starting with net interest income on Slide 54. Net interest income will be supported by continued balance sheet expansion. Lloyds has a strong and diversified balance sheet with GBP 492 billion of customer lending, funded by more than GBP 0.5 trillion of customer deposits. Over the plan, we expect lending to grow at nominal GDP plus. This will be supported by strength in faster-growing areas of the economy, such as infrastructure and innovation, and targeted market share gains from our strategy. Of course, we will always be disciplined with respect to volume and value. In deposits, we expect to deliver growth but in a measured way in what will no doubt be a competitive market. We focus on deepening relationships and the attraction and retention of valuable customers. And moving to RWAs. As you know, [indiscernible] will drive a reduction of around GBP 6 billion to GBP 8 billion on the first of January '27. Beyond that, lending growth will increase RWAs roughly proportionately. And alongside, business growth will increase RWAs and operational risk and in equity investments, thereby modestly increasing RWA density. As always, we will seek to mitigate some of this growth through value-added optimization. I'll now move to the other sports for now on Slide 55. Alongside customer balance sheet growth, the structural hedge tailwind will support NII growth during Accelerate 2030. The hedge will remain a significant tailwind until at least the end of the decade. Based on our plan assumptions, we expect hedge income to grow to more than GBP 9 billion in 2030. This will continue to be supported by our strong deposit franchise, albeit we assume only modest notional growth in the hedge during the period. We also assume a reinvestment rate averaging 3.7%, consistent with a terminal base rate of 3.5%. Clearly, that is well below market rates and applying those to our hedge will drive a meaningful uplift in income. The structural hedge tailwind, combined with the lending and deposit growth will inevitably be partly offset by competitive margin pressure. As we've seen over recent periods, higher hedge income for the sector may be partially offset by tighter asset and liability margins. Realistically, this is likely to continue, and we have built it in. There will also be modest growth in the charge associated with nonbanking NII, for funding cost for our OOI generating businesses. So let me move on to OOI on Slide 56. Impressive other income momentum, as seen over the course of our current strategy, we'll continue and Accelerate 2030. Group OOI has grown at 8% CAGR since 2021, driven by broad-based growth across each of our businesses. As we look forward, this momentum will continue. It will provide capital efficient growth, and it will provide diversification. To underline the point, we are targeting high single-digit OOI CAGR through to 2030. This performance will once again be supported by delivery across the divisions. You heard Charlie speak about retail initiatives, including the new Trend 4 ecosystem, the digital wallet from our Curve acquisition, supporting growth in payments and associated spend. Likewise, as we invest in platforms and product capabilities in food and digital assets and in coverage, we see meaningful OOI growth in CIB within the existing cash debt risk perimeter. In insurance, growth in Bancassurance, Workplace and Wealth is augmented by the mechanical unwind of GBP 5 million of deferred profit. And currently, in equity investments, LDC and Lloyds Living will become increasingly important and differentiated drivers of our OOI momentum. Of course, beyond each of the divisions, individual contributions, growth will increasingly be unlocked through our ability to connect the group's unique portfolio of businesses, just as Charlie described. CIB, for example, driving growth across our group by meeting our corporate clients, transport and workplace needs. Offering value to our retail bank customer base is a huge source of opportunity for IP&I. Income growth alongside the foundation of efficiency will deliver improved operating leverage. So let me talk more to that on Slide 57. As said, Accelerate 2030, will consistently deliver year-on-year improvements in our operating leverage. We made good progress on this in our current strategy. We are targeting a less than 50% plus income ratio this year, and we expect to deliver. However, this year is a staging post in our journey. We're targeting a reduction in cost income ratio every year of our new strategy to less than 45% by 2030. Our ambition will be underpinned by the significant income growth talked to a moment ago and the productivity step change, including the circa GBP 2 million of gross cost saves in this plan. AI will, of course, be a major contributor to our transformation in this respect. The substantial AI value we're delivering is driving both revenue growth and cost efficiency. Charlie has given you a flavor of this and our capabilities will only grow. Outside of OpEx, our plan archived remediation goes around GBP 200 million at the lower end of the range that we've historically guided you towards. Enhanced operating leverage will drive greater returns. So let me talk to that on Slide 58. Accelerate 2030, we'll deliver stronger sustainable returns. This year, we will generate a greater than 16% return on tangible equity, that will rise to around 20% by the end of the plan period. Importantly, this encompasses both material earnings growth and a significant increase in tangible equity. That, in turn, is driven by the strong balance sheet momentum that we expect to deliver. To reiterate, this means we expect to generate a sustainably higher RoTE on a fast-growing equity base. We expect the trends to progress through the life of the plan. 2028, we are targeting an RoTE of more than 18% before rising, as I said, to around 30% in 2030. Importantly, our returns will continue to be balanced with the investment necessary to position and to grow the business sustainably. Higher returns will, of course, drive growing capital generation. Let me talk to that on Slide 59. Our strong financial performance over Accelerate 2030 will drive growing capital generation. As with RoTE, there will progress through the plan. We're targeting capital generation that rises from greater than 200 basis points this year in 2026 to around 225 basis points in '28 before then rising to beyond this level by 2030. This is on a growing RWA base and the customer lending growth that we discussed earlier. Our strong capital generation will create further capacity for business investment, including M&A, if value-added. But most importantly, it will drive strong and growing shareholder distributions. Shareholder distributions will come firstly through our continued commitment to a progressive and sustainable dividend. As mentioned earlier, this year, we are significantly staffing up our ordinary dividend, up by 30%. This reflects the actions taken to derisk the business over the course of the current plan, our strong capital base today and our confidence in our future earnings trajectory. Going forward, we explained we expect dividend growth to be healthy, but likely to revert to a sustainable growth rate more akin to recent years. And beyond the dividend, we will, of course, continue to review excess capital distributions every half year. Currently, buybacks remain the preferred form of excess capital distribution as we see a lot of value in the stock. With that, I'll pose this section with a summary of our full financial guidance on Slide 60. As said, in Accelerate 2030 our financial foundations will drive continued income growth, improving operating leverage and growing returns and capital generation. We are targeting a mid-single-digit net income CAGR over the plan, supported by a high single-digit OOI CAGR. Alongside gross cost saves, this will drive a reduction in our cost income ratio every year, all in collection 45% in 2030. Our credit performance will remain robust, plan for an asset quality ratio of between 25 to 30 basis points through the plan period. We expect this strong financial performance to drive an RoTE of around 20% in 2030, including more than 18% in 2028. This will equate to capital generation of more than 225 basis points by the end of the period. Given a stable CET1 target of 13%, this creates capacity for material and sustainably growing capital distributions. Putting it all together, we believe Accelerate 2030 delivers ambitious and sustainable financial performance. All along, this will result in attractive and growing returns to our shareholders. Thank you for listening. I hope that's been helpful. I'll now hand back to Charlie to close.

[indiscernible] we're almost there. So thank you, William. And to briefly recap, we've made excellent progress in the 2022 to '26 strategic pace, reinforcing our competitive advantages, and position as the U.K.'s financial services leader. Our progress has created a platform from which we can take the group to the next level, and we're committed to investing in the business to do so. Accelerate 2030 represents a new ambitious plan, where we will reimagine customer experiences, increased connectivity and deliver a productivity step change, all enabled by pioneering technology, and our strategic actions will further enhance our financial performance, supporting long-term sustainable value creation. Thank you for listening this morning. We'll now take a quick break to allow people to stretch our legs or use the toilet before the Q&A session commences. See you back here in 5 minutes. Thank you. [Break]

Welcome back, everybody. It's now your favorite part. We now have plenty of time allocated for today's Q&A session. We will start by taking questions from the room, but as ever, we'll cover those submitted online throughout the session. For those joining via the webcast, please follow the form to register a written question. If you could please provide your name and institution before asking your question, that would be appreciated. Okay. So let's begin. Why don't we start in the [indiscernible].

It's Guy Stebbings from BNP Paribas. The first question was on investment and whether you could call out any sort of lumpiness in the profile, I think there's a comment around '27 having slightly higher investment and depreciation. And if I screen carefully on Slide 57, is that the cost income improvement looks a little bit less in that year, another year yet to call out the biggest income growth. So is it right to think then cost and growth is going to be highest in that year of the plan, if you like? And then the second question is on noninterest income. Very pleasing guidance for managing income through the plan. Could you call out any divisions or areas you expect that to be most pronounced? And then specifically, it was interesting to see this 1 million of new customers that invest. Can you call out specifically what the sort of definition is there? Are these customers that don't invest a talk with you now and what would classify as an investment?

Yes. Should I kick off, Charlie, and then hand over to you to elaborate. Thanks very much indeed for the question, Guy. In terms of the chart, I'm afraid our traffics are probably not quite good enough to refine the second decimal place I'll say. So I wouldn't read too much into the fuzziness of that -- is that progression. Safe to say that the cost income ratio, we do expect year-on-year improvements in terms of offering leverage in the business, which, of course, translates to lower cost income ratio year-on-year. What do we think about the cost growth behind that between '22 to '26. As you know, we had cost growth of roughly 4% during that period. I would expect us to be a shade lower than that over the course of this new plan and probably around the 3% mark is what that translates as around that level. I did mention in my script earlier on that we will step up investment a little bit in the -- as we go into this new plan, and that is partly what is behind that step-up in costs between '26-'27. And indeed, we do expect that. But it's in line with the comments that I just gave, guys. So nothing very much beyond that. I would expect, just as we have done at the end of this plan, where we kind of taper off towards the end, you might see a little bit of that last time get around to 2030. But that seems like a long way off right now, but it's something like that built in. The the OOI performance, as you say, it's been encouraging over the course of the last 4 years, so 8% CAGR between '22 to '26, which has been a strong performance. As I mentioned in my script earlier on, we've had 11% improvement in OOI over the course of first half of '26 versus this time a year ago. And that's been boosted by performance really across all of the different business areas. Charlie will comment, I'm sure in just a second upon, which are the particular business areas we're looking out for. But on a look-forward basis, we expect growth from multiple engines. So growth in retail, for example, through transportation, through some of the digital capabilities that Charlie mentioned earlier on, likewise PCA value-add. CB from breadth of coverage, if you like, within the cash debt risk portfolio that we have improving product capabilities, IP&I workplace and Bancassurance, NEIL, the investments business, boys living and tables. It's very similar this time around, augmented by some of the innovation that Charlie will I'm sure talk to in just a second. I think one important point to me, why do we have this confidence in the OOI growth as we see going forward is because, a, we have to track record #1; and b, because a lot of these businesses are pretty predictable. As I say, the transportation business is a bit like a balance sheet business in some respects. It reliably produces year in, year out. Likewise, I mentioned in my script, the unwind of the GBP 5 billion TSM within the insurance business, very mechanical, very predictable. Workplace is a balance sheet business. Lloyd's living more or less the same. These are not highly volatile sources of other income. And therefore, we expect the predictability to be there, and we do have confidence in our investments to produce the growth on top of that. Charlie, I don't know whether...

I mean you've done a great job describing the engines of growth. I suppose the same level of diversification with the same predictability with some additional areas we're going to grow, and be able to go further. And that's really why we have that confidence over this period. You asked specifically about the 1 million new investors. And hopefully, the disclosure we gave you in wealth to give you a bit more detail now around the different wealth businesses we have. But the D2C business are ready-made pensions and increasingly, I'll come back to that [indiscernible] business. Obviously, our advisory business that we've just brought in from Scottish Widows, Lloyds Wealth. And we can point that sort of capabilities at both the 28 million retail customers we have and also the about 5 million workplace pensions customers we have, where we see pension consolidation, attrition to third parties and the opportunity to consolidate more. So that broad pattern, we think, gives us additional growth looking forward versus what we had in the past. The one may need to invest. Look, this has always been a challenge in the U.K. unless you have broadly GBP 100,000, can be GBP 75,000, GBP 100,000, you don't get advice in the U.K. because of the current regulation, the regulated industries to see concept targeted support, which gives you an ability to support customers in new ways. And we are -- in fact, I think we're the only I can see my business there, we're the only fintech or bank that has put our invest AI in their sandbox is actually intending to use [indiscernible] in Q3 this year. So we're going to be able to start talking to customers about their investment needs. Most of those customers will be relatively smaller ticket customers that will build off over time. But we think it's a really important part of helping the U.K. to invest safely and to get more diversification. As you know, there's a lot of other providers out there today. So I don't think this is about people taking the deposits out of us. It's about creating new opportunities for people to invest and for us to do that in a way that's really relevant to our broader customer base, and kind of a unique opportunity for us, and that's where the 1 million number comes from. What could that mean? You've seen we've broken down the GBP 350 billion of AUA. We've grown in the IP&I business into the wealth parts and then the other parts of that growth. That means we should be having strong, sustainable growth in our wealth AUA and our wealth OOI over the same period.

Ben Toms from RBC. The first one is on your RoTE guidance in 2018, greater than 18%. It was a bit light versus consent. I appreciate there's a greater than simple impact it may be. And you could just unpack where some of the areas you think that you're being conservative in your assumptions versus where analysts might be thinking otherwise? And specifically, I guess, around the structural hedge, your guidance of greater than GBP 9 billion in 2030, what would that look like if you did mark to market the number -- my number is around GBP 10.5 billion just interested about unpacking that. And then secondly, you don't have an absolute cost target, and if we take the assumption that you are being conservative in your assumptions and you start coming in ahead on income, how fixated are you on the cost-to-income ratio target? Will you start spending that additional revenue in terms of higher costs? Or will you allow it to drop to the bottom line?

So I'll kick off here and then hand over to Charlie for the cost issue in particular. First of all, Ben, as you say, it is greater than 18% for 2028. So I guess that greater than safer reason. You asked then specifically about which areas might we be being conservative in. It's worth just maybe pausing in terms of how we've approached this overall income question and then alongside of that, the cost to give you some insight into the answer to your question. We said mid-single digits net income growth. Within that, we see, as I said, high single digits other operating income growth. And then we haven't specified, but certainly, there is room for what we describe as a very healthy NII growth. How we approached it in the context of NII, we see some strong tailwinds, in particular the structural hedge alongside of that, the volumes in terms of the pickup in business that we expect to see on the asset and the liability side. And then some headwinds, some will attenuate the mortgage refinancing point, for example. Some may grow, i.e., good sources of -- or good headwinds, let's say, things, for example, are nonbank net interest income in turn financed other operating income. And then on top of that base, we then applied, if you like, layers of interpretational prudence, which may be partly answered your question, the refinancing rate on the hedge is one of them. We've got a refinancing rate, 3.7%. The market at the moment is at least some 50 basis points ahead of that. I'll come back to that and answering your second point, just a second. Alongside of that, we've seen pretty modest notional growth in hedge. Again, perhaps I'll revisit that in just a second. And then I would say a series of what I described as nonheroic assumptions in terms of our margins, both on the asset side and the liability side. That, in turn, is related to the competitive pressure box that you will have seen in our graphics earlier on. There are 1 or 2 other items in there, including things like the SCR runoff in the mortgage book, for example, including for example, things like optimization headwinds for when we do NPV-positive transactions, those types of things. But again, these are sources of, I suppose, prudent or interpretation of applied where you might look for a degree of conservatism. I think then moving on to the cost side. We have been, I would say, demanding in terms of our cost and ambitions. But let's see whether we are able to do better than. I think a lot will depend upon not so much of traditional levers where we believe that we have a very clear line of sight to continued performance in terms of technology modernization and simplification, in terms of things like organizational design setups in terms of things like the property footprint and so forth. It's pretty clear what we're going to be doing there, but more in terms of technology upside that might be offered over time. And let's see what that translates as. Those are a couple of areas. We have assumed a pretty stable macro environment, I would say, beyond that. And then on top of that, while you -- you talked about greater than 18% being, if you like, on the lower end of consensus maybe, it is important to say that it's underpinned by meaningful balance sheet growth, which in turn leads to meaningful equity growth. And therefore, it is a higher R&D on a higher equity base. And those 2 points were bearing in mind at the same time. Then on your structural hedge point, we won't put a number on it precisely, but we said get GBP 9 billion based upon our expectations. You could tell from my earlier comments, just second are that our expectation for the refinancing rate 3.7% has a degree of, if you like, conservatism built in versus market. On top of that, we expect pretty modest national growth to dig in a bit behind that and give you some idea. PCA is pretty much flat over the period, not quite, but pretty much flattish, I would say. Instant access, another important driver of balances that then in turn important structural hedge, again, pretty modest growth expectations. So that gives you some insight into the assumptions for the hedge. If you simply layer on the market refinancing on top of the notion, again, I shan't give you a number, but we're at 246 notional right now. You grow that credit relatively conservatively and put on the market assumptions, and you'll get to a number that I suspect is wildly different to what you just said.

That was a pretty full answer. Maybe just to come back to the cost and kind of cost ambition question you asked. Look, the reason we less cost income ratio is less than 45% as we think we could have executed in the period. But based on what we can see and predict today, that's a good outcome. We've just delivered GBP 2 billion of gross cost saves over 5 years -- 4 or 5 years, and we're committing to GBP 2 billion, as William said, both with some of the existing levers, but some of the new levers like agentic AI looking forward for the next 4 years, so over a shorter period of time. And as you know, with agentic AI as both a lever that will support revenue growth and differentiation, kind of 50% of our investments around that, and 50% around productivity and efficiency and improving how we can manage risk the decisions internally. If we can out deliver, we think we are right at the forefront of this, certainly in the U.K. If we can outlive we will add [indiscernible], and then we'll get it back to the framework that William always lays out around if we have additional capital. We'll look at the alternatives. And we know that you know now that distributing to our shareholders is an important way that we think we add value. And we certainly believe the stock has value. So we'll make sure we do that. And that's why we laid out the same in the way we did.

Benjamin Caven-Roberts from Goldman Sachs. Two questions, please. First, on the return on investment landscape as you look between organic and inorganic opportunities. Has that balance changed at all in terms of whether you're seeing the ROI of organic changing in terms of relative attractiveness versus inorganic? And then secondly, just to drill on AI. Could you talk about some of the assumptions you have within the plan there in terms of opportunities it creates, but then also risks on deposit attrition, cyber risks, cost inflation?

So just on organic and inorganic versus the ROI. Look, the first thing is, as you know, we've done a few acquisitions in the last cycle. I gave some examples in the presentation just now around Tesco where we've now almost quadrupled the fleet in a few years. And what we've always said is, our plan will be primarily an organic plan because that's what you can base your plan on. But we'll look for inorganic opportunities where they bring strategic value where they would accelerate our plans and where there is a very good return for our shareholders. And that's the discipline that we've had in the past. And I think you should expect that's the discipline we'll have going forward. What we're really [indiscernible] about is that we're now proving we can bring in new capabilities and scale them. It's too early to say what we do with Curve, but you've seen our ambition is quite exciting in terms of how we can scale that business. And you should expect us to continue to look at things in that context. So I think the ROI and expectations has changed. I don't think so, but you may have a point of view on that. I mean we have a clear view around the returns you can get from investing in our own business and obviously from doing buybacks and value for our shareholders, and that's a high bar, but that's always been the case, I think, William.

I think, I mean, to your point then, what has changed is clearly the share price that we operate on has changed. And so the relative maybe have changed a little. But I think when we look at the prospect of M&A, we passed it through a number of filters, just as Charlie said, strategic adherence to see at baseline without that, you don't go anywhere. But then beyond that, you have not just value but also speed and risk in terms of the boxes, if you like, the M&A has to tick before you're going to proceed. And therefore, although the ROI, I suppose, of the target that you're looking at as long as it's cash funded hasn't term much changed. Our stock price that we compare it against buybacks and life clearly has. But then M&A still has to be better than the organic alternative in terms of delivering a solution faster. And perhaps most importantly, in some respects, it has to do so at a level of risk that is acceptable to the group. And as you know, M&A doesn't always perform that task certainly well, even though I speak with the history that I have.

And then in your AI point, let me have a go at this and see if this helps. I mean, the first thing is, as we've said, we see AI and agentic AI, particularly, and I think the language will evolve. So we've used this language of pioneering technology underpinning our plans and it may go to other areas as we look forward. As a really important differentiator for both our services and then obviously, the depth of our relationships and growth of the business, as well as around productivity and efficiency. And we do think it's an important leader. You've seen we've taken a very narrow definition over 2025 and 2026 to talk about the in-year value we've delivered. So the fact that we have delivered a year value with a narrow definition, which is generative AI and agentic AI, not broader AI models and digital innovation, which obviously some other people have decided to use those broader definitions. We think should give you some confidence that we're seeing returns today from those businesses. Now while we're excited on the revenue side, we just talked about the [indiscernible] example. We teed up our customer promise as simpler, smarter, more connected. Those are really simple words. But if you think about what they could mean that every single business, whether it's a retail customer, small business, wealth insurance customer, a corporate and institutional customer. If you think about really making things simpler and smarter and more connected, there is just a massive opportunity for us to innovate. And when you come back to the strength of what you need to be able to innovate, you need to have the relationship. You need to have some digital capabilities and products and services. You need the data that underpins those interactions and use the capabilities to innovate safely with them. So we've built in a view, as you've heard today, I've talked about some of the innovations by business. We've got a view around how that will support our growth. But the 2 things we can't control in that context is customer adoption and regulatory approvals. So we think this is a sensible plan. We think it is ambitious and we'll be right at the forefront in our businesses, in our sectors, in our country around driving forward that innovation on the revenue side. The same is true on the cost and efficiency side. And in fact risk management side, if I do that more broadly, it seems like broad, obviously, credit risk models and then how do we think about operational risk, and I'll come to cyber in a second. And we have a really good track record already of not just deploying those services, but actually seeing value from them today. So better productivity, better efficiency. I think they're going to be particularly helpful when you think about lower cost of growth so we can scale businesses more cost effectively, and we're trying to do that across every business in the group, onboarding customers, getting them up to speed and then deepening the relationships with them. But again, we're just at the early start early days really of using agentic AI at scale. So we've laid that out within the context of our net interest income growth of mid-single digits. We've included AI is driving that, and we've included in the GBP 2 billion gross cost saves. If we move faster further for our customers and for the organization, we will be, and we'll deliver on that.

Andrew Coombs from Citi. Firstly, just returning to costs. You talked about the investment spend being front-loaded to 2027. If you just advise us on the path of the GBP 2 billion cost saves. Is that linear recognition? And also the source of those cost saves based on what you said on the net income and the cost income CAGRs, it looks like more of it's coming from retail versus commercial, but perhaps you could just elaborate there. And then the second question, I'm just interesting our thoughts, Charlie on multi-brand strategy, given what you've announced with Halifax, it seems quite a step change or anything you could say there as well.

Thanks very much indeed, Andrew, for the question. The I think -- well, maybe 2 comments to make. One is there is, as I say, a bit of a step-up in terms of 2027 costs as we reignite the investment plan for the business in Accelerate 2030. And you've got that right, but I wouldn't want to overstate the point. That is to say, we expect to step up investments and then as my script mentioned, we expect more or less a bit of plateauing thereafter. And maybe a little bit of phasing out towards right at the back end of the strategy just like we've done on this one. So that's the kind of pattern, if you like. And overall, that produces together with the OpEx spend that we expect a little bit of a tick up in '27 versus '26, i.e., 1% growth in '26. You should expect that to be a bit higher in the context of '27. I mentioned the sort of circa 3% market seems about right in that respect. And then that type of level, more or less carrying on, again, maybe it was a little bit lower later on the plan. That gives you perhaps an overly precise shape, but it gives you a sense as to what we're planning going forward. You asked about the spread of the GBP 2 billion of gross cost saves. What we found in this plan is that much of our investment has indeed much of it has been to be clear, targeted towards customer-facing propositions and ultimately for the group revenue-generating initiatives. But much of it has also been devoted to improve our infrastructure, which ultimately results in cost saves. And what we found is that those investments then take time to mature and they hit our cost base progressively more in a good way as we get towards the second half of the plan. There will be a little bit of that in this case, and that in turn, informs some of my OpEx points just a second ago. So there is a bit of that, Andrew. And then finally, in terms of the spread. I think the -- I wouldn't want to comment too much in terms of the spread actually. I think it will be more or less kind of across the business and in no small part because actually, a lot of the operational efficiency that we expect to achieve is delivered an infrastructure way, number one. And number two, a lot of the efficiencies that we expect to achieve are actually transferable right the way across the group. That's not true in every case so the groups have different customer-facing propositions and therefore, 2 very different infrastructures, but there are certain similarities in transferability within the overall investments that we make that directs to cost saves. So I'm not sure there's a particular pattern within the divisions. There may be a little bit, but I wouldn't want to overstate it.

Great. Yes. So on the multi-brand decisions we've made is specifically around Halifax, obviously, a hugely important decision. Just when we take the brand architecture we now have going forward, and then I'll tell you why that decision was made. We think about it at 2 levels. We have full relationship brands where we aspire to really bring the whole of the group together for our customers, and so in our go-forward model, we'll have Bank of Scotland supporting our customers in Scotland, and we'll have Lloyds supporting customers in England, Wales, Northern Ireland and then in the businesses which we do overseas in the commercial area. And then we still have a series of specialist brands really focused on important needs, whether that's Scottish Widows, which we've talked a lot about today, MBNA, which enables us to really serve customers in specific areas with specific propositions and pricing [indiscernible] talked about, we've got Birmingham Midshire for a specific mortgage proposition around and other products. So we still think that's an important part of our architecture to serve the full breadth of our customers and to bring specialist propositions and pricing and all the rest of it to our market. The Choice Health in Halifax was really grounded looking forward in 2 things. The first thing, as you've seen, our strategy has been increasingly to bring the full breadth and capabilities of the group to our customers. And having one relationship brand for customers in England, we think, really gives us that opportunity that discussion around rewards, I could waste a West Mester and how sidebar around really innovating around towards and how that can create incentives to customers. Being able to do that on a single brand for our customers and give them the ability to really understand all of the different products and capabilities we have, we think it's going to be an important part around how we serve those customers going forward. And then secondly, the world continues to get more complex, like we have already a business in the U.K., most of our customers have both a relationship bank and then they go through third-party channels, whether it's a mortgage broker or an IFA or a dealer for auto finance or a broker or an SME lending. So there's already a world where we're operating effectively through our relationship brands and then through third-party channels. Embedded finance has started to emerge. And we do expect agentic AI to create almost a new way of interacting between financial institutions and their customers. And to be top of mind that really be relevant to our customers as they're trying to reach us through these different channels. We think having one brand that's really well recognized and really understood for all those customers is going to really position us well in that future. So those are the kind of 2 reasons. As you know, we're deeply committed to our Halifax customers, we're been committed to the region. We have done everything we can to make this transition as simple as possible for them. And we're actually quite excited about the next few months because to date, we've announced the decision, we're going to start helping them understand what's good for them as they start to come into the broader Lloyds Banking Group and of the magnet for why they should be excited and that will start landing in the next couple of months.

It's Amit from Mediobanca. So I just like to ask on the capital and capital generation. I mean when I'm looking at it, even taking, I guess, your assumptions for revenue growth and the cost of income, which may or may not be at the low end of where people are expecting. I'm still getting a lot more than the 225 bps capture. I mean it looks like there's quite a lot of RWA growth then baked in. So just wondering and above and beyond the kind of nominal GDP plus point. So just trying to understand what you're thinking there in terms of the capital consumption. Also, are you going to be looking to use [indiscernible] optimization strategies or the like? Or is there kind of conservatism there. But just trying to circle that back because net profit even on basic assumptions is materially higher than where it is today, [indiscernible] saying it's about 10% higher. So just trying to circle that?

Yes, thanks for the question, Amit. The start point might be to say the group is highly capital generative. And as you know, this year, we expect to generate greater than 200 basis points capital generation, which in turn is a significant sum and will allow us to both increase the interim dividend by 30%, but then also create significant space for meaningful buybacks, too. So it's a very capital generative group, which in turn gives us a good start point. Your question, Amit, is how do we progress from here? Again, at a high level, it's worth saying that there is significant capital generation coming off of a growing business from a profitability point of view and a growing business also from an RWA point of view. So I'm sure that you've seen it, but in a sense, to size both of those 2 parties. You've got increasing profitability. You've also got circa 225 in 2028 and greater than 225 by 2030 off the back of a growing RWA base. So those sums are significant as a result. The third point is, we are quite deliberately saying greater than 225 per time get to 2030. So you have a sum which we haven't precisely defined, but we have full confidence, obviously, in the guidance, and it is very deliberately great 225 [indiscernible]. I won't comment sort of specifically too much on the kind of spread get models or whatever. But today, I mean, roughly speaking, the relationships today, we have greater than 16% RoTE, producing greater than 200 basis points capital generation. Every 1% increase in RoTE is somewhere between 10 to 15 basis points increase in capital generation. So a circa 18% RoTE is probably around 230. And then let's say, 20%, therefore, is 260. Now why are you saying, therefore, are we guiding to greater than 225. I think there's a couple of points going on there. One is, as you say, a bit of balance sheet growth. The back of business as usual, passed off the back of the strategic initiatives that Charlie has been highlighting, we do want to grow this proposition. We do want to grow this business. The more relevant we are to more customers, the more relevant we are to our existing customers, the better. And now it does entail our balance sheet growth. So there's probably a bit of the answer there. And then secondly, I mentioned in my comments earlier on a modest increase in RWA density. It's not more than a couple of percentage points or so or so. It's not more than a couple of percentage points. It is driven by basically 2 things. One is operational risk off the back of the business, growing income. And as you know, operational risk RWAs are basically geared to income. And then secondly is a site modification in the RWAs attached to equity business, which is a function of regulatory change rather than anything else. Again, it's not more than a couple of percentage points, but that, as said, modestly increases the RWA density. I think then on top of that, this is an ROE point, not a cap end point. But the ROE has the kind of layers of interpretation that I mentioned earlier on, particularly in respect to the income side of the story. And then beyond that, we obviously have our usual prudence. You add all that together, and we're saying greater than 225 basis points for a certain ROE.

It's James Invine here from Rothschild & Co Redburn. I've got 2, please. The first is on branches. I don't think I've heard you mention branches this morning. So I was just wondering where you think what -- where you think the size of your branch network will settle, now that we're getting rid of the Halifax brand, is that an opportunity to close quite a few branches, the first one. And then the second 1 is, I think about international expansion. So you're clearly building some very strong digital capabilities. Do you think they would travel abroad. Can you do something with these in other countries? Or does it rely on your kind of deep relationship with customers that you already have here in the U.K.?

I've got it. And then you can come in. First of all, thanks for the question, James. Yes, on branches, we've been continuing to evolve how we think about this because we've been following our customers basically. Today, post the closures that we have announced on branches, we have present physically our people are present in about 1,000 communities with about 550 branches, the banking hubs and the banking also growing and our colleagues are there and then we have community bankers. On top of that, as you know, we then have 30,000 pay points and other 3 ATMs, 11,000 post offices, and then really important meaning, and as we look going forward, we have increasingly -- increasing debt and capability in our [indiscernible] service whether it's access to teams or chat [indiscernible] really specialist support to customers that [indiscernible] to provide in branches. And that's going to be the journey we've been on over the last few years. When we look at our access and reach to customers, no one else can get close. We know it's differentiating for our customers as what you've seen in the last few years is on branches, specifically, we'll continue to look closely at how customer usage is evolving and whether we've been successful at helping them in alternative channels. And on top of that, we've got 22 million customers logging on 7 billion times a year. So we don't guide to a number of branches. We follow our customers. And we definitely think though, as you build out these capabilities, first and most importantly, there's going to be an opportunity for us to be even easier to access more relevant to our customers to drive the revenue, the stickiness of relationships. That growth of PCA market share by about 2% to 3% that we've achieved in the last few years is obviously really important for us as we look forward. And the same is true on the SME side. So that's how I think about branch. I won't guide to branches, but we do see opportunity. Is it linked to Halifax, no is the answer. And the reason for that is about 1.5 years, 2 years ago, we announced something called co-servicing which meant any of our customers in any brand can walk into any branch. And so we've already been on kind of work out where we have in a single town, 2 branch locations that are supporting our customers. We've already been going through a combination to provide the best quality of service to customers in that context. So yes, that can continue, but that's not specifically linked to the Halifax brand. On international expansion, we've talked about 2 very specific areas. We didn't have a deep dive on it. The first is obviously around our corporate and institutional business, which you understand well is already a very international client base, but the depth and relationships and our brand presence in North America and the U.S. and what we can do for both U.K. sensitive clients going internationally, international clients coming into the U.K. and then given our origination capabilities as we look at syndicating risk and then passing risk into the U.S. market, we just see a significant opportunity for growth. That's less around digital. That's more around deep product experience and expertise and our ability to build those relationships and be more solutions-oriented over time. And we have a similar mindset into Europe, although Europe is more around coverage and less around on-the-ground product capability. On the European retail business, that is a digital proposition today. It's largely around mortgages, some loans and then a savings proposition. There is benefit and opportunity to link that back to our capabilities in the U.K. It's a really simple proposition, it's growing well. Most importantly is high return. And we said we see some continued growth opportunity in that context. So we do see synergies with our capability, product capabilities and some of our digital capabilities. It's clearly an option for us as we look forward. Neither of those businesses are doing anything materially different for the last few years. It's more of a continuation and it becomes relevant and important as those businesses scale over the next 4 years. William, if you have anything else on the international?

No, I think that's exactly. It is very much 2 buckets of business just as you described, Charlie. And we have ambition in both, but it is within the context of the existing U.K. primacy of the overall franchise.

This is Chris Cant from Autonomous. Two please. You have had in your slide deck for a long time this gross deposit margin, I think it's at the very back of today's deck. We're at 1.6% for the first half of '26, give or take. As we look forward thinking about what you said on the hedge, we're expecting a roughly 70 basis point improvement in the yield on the hedge over the plan period. You've mentioned deposit competition as something you're factoring in with regards to AI conservatism. And where do you see that deposit margin get into? I think you've had a variation on that question at each of the last couple of strategic plan discussions. But I think in the past, we've heard you talk about 2%. So as we're looking out to 2030, is that a sort of a reasonable expectation as we think about the puts and takes there? And I guess on a related point, I'm coming to what you said about tangible equity growth, William. You're guiding to a hedge yield of 3.6%, your base rate assumption is 3.5%. Should we be assuming the cash flow hedge reserve is essentially pulling to par within that tangible book build over the plan period? Or is there a structural element that will be remaining by the time we get to that point? Because it's obviously quite a big factor between CET1 and TNAV?

Yes. Thanks for those questions, Chris. I think on the -- on the first of the 2, I probably won't answer it too precisely because, as you know, the way which we look at it is we are trying to give a picture as to net income over the course of the plan. And then within that, we've given a picture as to ROI within the course of the plan. And obviously, that you can start from that some sense at least within a range of mid-single digits of the income what that might mean for net interest income over the course of the plan. And then as said, there are the -- what I described earlier on is the kind of layers of interpretational prudence here as you will on top of that. When we look -- having said that, when we look at the overall liability margins, first of all, in respect to the structural hedge, as you rightly said, Chris, we've got a Q2 yield on the structural hedge of 2.8%. I think over the course of the remainder of that, this year, it goes up to around 2.9% mark, something like that. And then it gradually matures or rather, if you like, build into the 3.7% refinancing rate that we just mentioned. It's fractionally shy of that the time we get to 2030, but not by much. And therefore, that's the pattern to the structural hedge. The pattern for the liability margins beyond the structural hedge, if you like, is composed of 2 elements. One is the margins in respect to the fixed term products, which are, of course, not hedge eligible. And for those and other similar products, CG limitary control restricted access, we are assuming a pretty flat, in some cases, modestly down overall margin picture. So we're not expecting to make money out of the fixed term market in short. And then we are seeing some part of the hedge come through into margins for SaaS -- is hedge eligible within the deposit range. PCAs and [indiscernible] has obviously been good examples of that. But equally, we are, as said earlier on, seeing some of that go off to, I suppose, maintenance of our competitive position, building a franchise that Charlie has been talking about. And that's what's taken account of by the gray box label competitive and other pressures. Now that's the overall margin picture, which doesn't give you a precise answer to your question, Chris, but hopefully gives you an ability to kind of build into it. Secondly, on the cash flow hedge reserve. The cash flow hedge effectively works its way through over the course of this plan. As you know, it is coming down -- the moment cash flow hedge reserve is worse about [indiscernible], something like that off the back of our -- whatever it is now 58 billion shares. That, in turn, comes out over the course of time as a function of maturity of certain of the derivatives within the hedge and as a function of rates coming down, albeit they remain at 3.5% of the duration of plan period. But of course, as we refinance the hedges that we refinance to are effectively mark-to-market. So as a result, not -- I wouldn't say that necessarily should expect the cash flow hedge reserve about GBP 2.5 billion to pay out to 0, but you should certainly expect it to come down meaningfully as a result of that maturity and that refinancing point that I just made.

I might just add one thing on the first discussion about right, William, which is kind of a more macro point around NII because I know there's a lot of discussion. But there's 2 things we can't control in that. There's the shape of the yield curve over the next 4 years. But the great news is you can all model that and make your own assumptions around it. And then the second thing is the competitive context in which we operate and how we see other players competing during that period. And I hope what you'd expect from us is we are committed to delivering what we say and we navigate those 2 things very effectively as we have done in the last 4 or 5 years. One part of that is whether we feel we need to chase the market at any 1 quarter or any 1 half. And actually, just in terms of what we saw in the last quarter, you saw us not chasing the market because we thought it wasn't the right thing either for our customers or for our shareholders. So you can see from the combination of guidance we've given and how we're laying out the market. We're going to be really ambitious around growing relationships. It's a relationship, positioning the bank to be more resilient through this. And we've been, I think, appropriately prudent around the 2 things we can't control. I know that doesn't give you kind of the detailed assumptions [indiscernible] understand at least our mindset as a leadership team around that.

It's Pui Mong from Bank of America. Charlie, you always just answered what about, which is competitive dynamics. So deposit obviously, is one part of it. I guess maybe can you comment on the sensitivities around that gray bar on the NII chart, by which I mean, as you say, the mark-to-market yield curve is probably at least 50 basis points higher and the terminal rate assumption is also probably higher. How does that affect the competitive dynamics in itself? Because obviously, this is very different to 4, 5 years ago when we went from 0% to 5%, but equally. We're also in a situation whereby many of your peers are making very high returns and everybody wants a bit more market share. So how does -- and obviously, the competitive dynamics in terms of if rates are higher, maybe people are more likely to switch products as well. So that is one part of it. And the other part is I suspect that's also not the only product that would give you competitive pressure. So where else would that competitive pressure come from in terms of products? So number one. And number two, operating lease depreciation. So if I remember your OOI chart, actually, the biggest chunk is probably transport. So I suspect motor finance is a big part of that growth story. And how should we think about the operating lease depreciation part of it, because I suppose if we go back the last few years, if you net those 2 off, the growth rate is probably somewhat lower at the headline level. Now obviously, there's some lumpiness with used car prices and all that, but just how are you thinking about those together. If you put obvious depreciation in the OOI would you still expect a high single-digit CAGR?

I'll leave the second 1 for you [indiscernible]. Look, on the first one, a first of all, thanks for the question. I completely agree. This is a really important question. I think the first thing is just to look back over the last 4 or 5 years. Now you've been on the journey with us, so you've seen this. Look, we've seen to volatility and unexpected changes in rates, competitive context that we operate in an incredibly -- I've said to you before, I think this is one of the most, if not certainly on retail, most competitive markets in the world, actually that we operate within. And we've had surprises geopolitically and politically and from a rates perspective during that period and from a competitive perspective and what we've delivered is what we said. We've managed -- manage the balance sheet, grow our relevance, increase our market share where it matters and deliver within our guidance or exceed our guidance at every stage. And without going through every step because it's been a lot a long time. We -- we've got less hair as a result of it. I really hope that give you some confidence as to how we as an institution think about this. And you've seen in some stages, we pull back on market share because it's the leader in the retail space and the SME space, and another place -- other points in time within leading into specific products, propositions, areas where we can deliver for shareholders more broadly and our customers. So just it's a bit of a look back. I know it's somewhat you asked, but I do think that's the most important point, which is we, as a leadership team, are highly aware of the competitive context. And we have a business where we are either #1 or top 3 in virtually every business we operate within. There's a couple with that's not true. So we spend a lot of time on this. When you look forward, it's interesting, right? I think it's more competitive than we've seen in the last few years. I'm not sure it is. I think the difference, as you say, is actually the returns in the industry are strong, and that's really good. And when our competitive response to that is about really working out how can we differentiate what we do for customers. And then where can we grow in a way that is differentiated bluntly. And of course, balance sheet is very important, and you heard all of the innovation we're going to be delivering will make customers want to do bring a balance sheet to us [indiscernible], but then all the OOI growth and the related businesses and then churning up across our group. And for us, it's just -- it's -- I'm very lucky being in the physician. The fact that our commercial, retail, wealth and insurance businesses are genuinely connected. Our clients come to us and they want us to join up. It puts us in a really unique position in the U.K. So I think that's the only thing I'd say. The reason the strategy is lined up about further differentiation, being relevant from a relationship perspective where we can and then joining up. That's one of the mitigants for this competitive context. But we'll always give you a price view around what we can't control. And I can't consult the yield care, and I can't control competition. Hopefully, what you've got is some confidence around how we've been navigating the last few years and how we're thinking about the next few years in that context. I know I didn't give you a specific answer. You said which other areas. Look, it's competitive virtually every area. And it has been for a long time. So consumer finance is a very competitive area, but we're #1 in loans and cards. So we feel good about our space there. Mortgages, we've been through a few years. You remember at the start of the last strategic cycle, we highlighted that we should expect as an industry as the other big banks in the U.K. building societies commit to asset growth, that there's going to be tightness around mortgage margins. We have more than offset that with the strategic growth we have seen. Again, I can see our insurance pensions and investments to think about home insurance, getting about annuity, these are competitive businesses. It's about creating differentiation and then a reason to grow beyond your competitors. And I think that's what we are very focused on. I'll give you a more difficult question around [indiscernible].