Metro Bank Holdings PLC (MTRO) Earnings Call Transcript & Summary

Good morning, everyone. Before I flip through -- I know everybody has the deck and the tendency is just to want to start flipping through the slides. So if I could ask, just bear with me for a minute as we get through the process. I just want to do a bit of an introduction so that you know a bit more about me a bit more, and I want to start with thanking our investors and analysts in America. So it's early here but much earlier for them. We did really make a decision to prioritize colleagues and customers. So we moved it back to the morning, so our colleagues could be more engaged and be with our customers during the day than doing it at night. I fully accept for some of our U.S. investors that's -- I've had a few emails already this morning. I would say they were -- a couple of them are expletive-laden, if I was honest, but that's fine. I'm a big boy. I can take that. So I just want to thank them and just let them know that we really prioritize colleagues and customers. I guess, I'll start with a bit more about me. So I'm Dan. At the end of the day, the reality is, is that I'm an old -- and old is the keyword, community banker from the U.S. So I grew up in community banking and really made my career in banks that are dedicated to making the communities they operate in better and in banks that focus on SME lending, retail banking, unsecured personal lending, credit cards, all what I would call basic community banking. We had good private banks. We had everything you would expect to have. We had a good asset-based function. I was an asset-based lender for a long time, what you would call, asset finance and invoice finance. So I grew up as a community banker. I just want to also be really clear because everybody thinks every American knows every American. I met Vernon for the first time in June. So while I'm a community banker, I was raised as a community banker by different people than Vernon and Vernon's group. So that's it. Beyond being a community banker from the U.S., I've worked all over the globe. I've done stints in Eastern Europe. I was just in Bermuda for a handful of years. I worked here in the [ knots ] for RBS and then I help restructure Northern Rock, and then I went Latvia to structure the Bank of Latvia. Then I went to Bermuda, Carlyle, the private equity house, had just recapitalized the bank in Bermuda. So I went there to try to help fix it and get a bank that was loss-making back to generating good returns. When I left Bermuda, it was trading -- well, it traded as high as 3.6x book. When I left it was trading about 2.3x book. So it was a pretty good success story. I guess, a bit more about me. So why am I here? The reality is, I guess I fix things. So I was asked one time to say what I do and less in a sentence, and I think simply that's who I am. So I quite like the challenge of change. I quite like the challenge of transformation. I quite like the challenge of putting banks back on a firm footing and giving them a future. So that's who I am. So let's talk about the journey I've been on since I arrived. So I came on September 2. I arrived in the country. So I haven't had my 6-month anniversary yet. It's been quite a journey for 6 months. So let's talk about the past. So when I first arrived for probably the first 6 or 8 weeks, I was unsure whether there was a path forward as an independent company for Metro Bank. Getting the math to work was hard, and getting the math to work was hard for a couple of reasons. One is, if you're a restructuring guy, if you're a fixer, the reality really becomes is, you tend to focus on costs. It's the most believable part of a plan. It's the easiest thing to do. You tend to shrink the business to a point of breakeven and then you grow it from there. Metro doesn't really have a cost problem. We're going to come on to that in a little bit. So we can nibble around the edges. So it became sort of a conundrum. So how do we actually get the math to work? So then I started spending some time with colleagues in the stores, started digging through our customer penetration numbers, started understanding our business model and how it resonates and spending a lot of time digging into the service proposition that we've built. That unique service proposition really is a differentiator. And it gives us a real opportunity to grow the bank out of its current situation. So this is a J curve turnaround as most are, but it's really based off of revenue. So what you need to believe to believe in the Metro story is that we can deliver more revenue from our existing customer base and grow more customers. And we'll get into that, and I'll give you proof points, and we can talk about what it looks like. But there is a path forward that gets us to a really adequate return for shareholders over the medium term. And we'll walk you through that math. So that's the history. So that was the beginning. So let's fast forward to today. So I was lucky enough to be offered the CEO job, both on the interim basis, and then there was a process we went through to determine whether I'd be offered the job on a permanent basis. And they were -- I was lucky enough to be offered it. And I feel truly blessed because actually, there is a huge opportunity to take something great -- and Metro is genuinely great. #1 for in-store service, #1 for online and digital service. It is a great franchise that has kind of lost its way and has a business model issue. But at the core, it's a great franchise and it's full of great colleagues. So the people who work throughout the bank, be it in Amaze central, be it in the stores, Amaze Direct, in any one of our businesses, they're genuinely focused on doing the right thing for the customer. And again, as I said, I'm old, right? So that is, I think, maybe one of the things that's good, actually, because you only have one choice, right? So being old is much better than not being old. There's only one other outcome. So the reality is that I'm old. In that experience, I've worked in lots of places that have genuinely talked about being customer-focused, have genuinely talked about putting the customer at the heart of what we do. I've worked at big banks. At one time, I worked at the largest bank in the world. We didn't -- it just didn't filter through into the ethos of the underlying culture. We were target-driven. We cared about the number of units you were shifting. We were product pushers for all intents and purposes. And to be in a place where we actually -- we live and breathe the ethos of being customer-focused, is great. So that's today, and I'm thrilled by the opportunity to lead such a customer-focused organization. And then we talk about tomorrow. So let me paint a picture of where I think we are. So this business starts to become profitable over time. We start to generate really good returns. And we do that by meeting more customer needs. So as much as we're surprising and delighting customers today and creating more fans, the reality is that we do more and more of that. And that is just lovely for a CEO to be a part of because it allows our colleagues to grow, it allows them to continue to advance their careers. We create opportunities for our people, that they just wouldn't have without us righting the ship and getting it going forward. So the future is quite bright. And so I'm really quite excited to be a part of it. So that's me, that's who we are. Let's get into the deck. So what have I done? So when I arrived on September 2, nothing was off limits. There were no sacred cows. I looked at everything. As we go through the deck, you'll see that we looked at, everything from stores to C&I to everything. So what works? I spent a bit of time on this in my preamble, but we do generally have a differentiated customer proposition. Retail deposits grew 33% in 2019. Just pause on that for a second. 2019 wasn't the best year for Metro. We might have been in the paper just a little bit, we might have had a bit of a negative for us, and we still grew customer deposits by 33%. Now for the clever analysts in the room and everything else, we're going to have a conversation about cost of deposits, and we'll get into all that. But the reality is, customers chose us to increase their deposits with us by 33%. It's quite a statement. SME deposits are up year-on-year as well, only 3%. But honestly, SME deposit growth of 3% a year. It's pretty good off the back of the year we had. We grew accounts by almost 400,000 accounts in 2019. With all the headwinds, we grew accounts by almost 25%. And one of the things that gets lost and seems to become a story, and I don't quite understand how we got there, I mean our balance sheet is almost a fortress. So we have an LCR ratio that's almost 200%. We've got capital ratios that are in the 20s. I mean the reality is that it's a pretty robust balance sheet. So fine, those are the good bits. Those are the good bits you can leverage across. Then we get into what I would call external headwinds, which everybody knows, ring-fence has been a unique challenge. The rate environment has been lower than anybody would expect for longer than anybody would have expected. So it's difficult running a liability-led business and making money in an environment where interest rates are damn near 0%. But that doesn't matter. So the plan assumes that we have flat rates going forward. We're not telling you we get to adequate returns because we're expecting rates to rise. No. We need to do the hard yards to actually make sure that we can deliver the right returns. So some of the internal challenges, and honestly, all you got to do is read the analyst reports. And they're all really good. So the reality is that we spend a lot of capital on stores. So we'll come back to the store proposition. We're growing costs faster than revenue, not clever for any business. Whether you're a bank -- it doesn't matter what you do, if you're growing cost faster than revenue, you have a problem. There are some bits missing. So our shelves are broadly empty. We run a retailer. So if you walked into a Next and you walked into the store and half of the racks were empty, you would know that store was going to have hard time generating revenue because they had nothing to sell. Well, you walk into our stores, and we're not really very good at unsecured personal lending. We're not very good at credit cards. We're not very good at overdrafts. We're not very good at SME lending. We can't open up business accounts online as we sit here today. There is a lot missing. And it's not that our colleagues in stores don't want to have those conversations, it's not that our colleagues in store aren't up for meeting more customer needs, we have just created impediments for them doing it. And my job, fundamentally, is to be an impediment blocker. I need to rip up impediments. I need to make sure no more get created, and we need to allow and unleash our colleagues to look after their customers. And that's why we'll spend some more money on investment in people processes. Then you start to look at, okay, so if that was the set that I walked into, what do I do? And I would say, again, I'm old. So one of the things that happens with age is you lose the desire for fancy names and a bit of B.S. So as I laid it out, it's costs, revenues, infrastructure -- okay, balance sheet authorization, I'll give you, that's a little tricky. And not to mention, I needed to do the s instead of the z, which was a little confusing for an American/Brit. And then internal and external comps, I'm going to spend some time on because I don't think it's something that would cover ourself in glory. And what does that mean? That means, if we do all of that, we will become the U.K.'s best community bank. I think we probably already are. So I would think we stay the best community bank in the U.K. So let's go through a little bit more. So these are the core foundations. So what isn't changing? So in one of my first -- I think it's my October presentation to the Board, I did a paper that was, what was going to change, what wasn't going to change, and what we keep, what we lose, that kind, pretty simple. And we're going to be open 362 days a year. We're staying open 7 days a week. We're keeping extended banking hours. All of that is staying. We're going to keep the magic money machines. We're going to keep the free lollies. We're going to keep the free dog biscuits. We are a dog-friendly place. There will be dog bowls. That's part of who we are. We're completely staying at the heart of our communities. So I've been to every store. I've been to every Amaze Directs site, I've done all that in my first handful of weeks. It was great. All the stores are lovely. I had an interaction with somebody who was a local business manager at one of our stores. And he's like -- well, we're talking about today, and we're talking about how we communicate today and what we do and how I was going to prioritize colleagues over really investors and analysts. So I started with colleagues last night. I was on the phone with colleagues this morning at 6:30 in the morning. So even before we've gotten to today, at this moment, I have spent time with colleagues because, honestly, I think it's important to bring them on the journey. And he was -- and we were talking about how he would cascade the message to his customers. And we were -- I'd just left another store and the LBM was like, "well, we have a calling tree, we're ready to make calls, we're going to be out there front footed, all that." It's great. Lovely. And he's like, "Well, we don't want to do that. We don't want to do the calling tree thing because our customer base is different. We know them better. Actually, they'll stop in and all that." And it was a moment for me. So at RBS, I can tell you exactly what would happen because I was in the center, and I ran products and commercial in the P&L for the retail bank. We would have had to dictate that every business manager in the stores had to call their top 20 customers and then report back to the center about the percentage of customers they actually talked to and give us feedback. It would not have been optional. It would not have been local. It would have not been a -- it would have been absolutely dictated from the center. The reality is, for that local business manager who said that to me, I'm like, "fine." So don't -- it's your business. So the stores are theirs to run because they're closest to the community, and they know what it takes to be successful in the community. We've taught 45,000 children this year about money. We've run 1,500 Money Zone events. It might not be on TV, like some others, but the reality is, we're actually doing it. And it's a huge part of how we help the community grow and prosper over time. We're only as good as the communities we operate in. They grow, we grow. Colleagues. So this only works to our colleagues. I can talk to you until I'm blue in the face. We can have lots of conversations, it doesn't matter. It's the colleagues and the interactions with customers that will make a difference for the organization going forward. And we have colleagues who are -- who believe in Metro. And the bit I'm most proud of, and one of the reasons I was -- really wanted the job is because 80% of our store managers and 75% of our assistant store managers were promoted from within. We grow our own. We have a young kid who joined us as an apprentice. He's on the cusp of becoming a local director. That means he's been promoted about 7 times already, and he's been with us for a handful of years. He's exceptional. He didn't know what a job was when he joined as an apprentice. It was his first proper job. He didn't know about making time. He didn't know tying a tie. He didn't know about anything. And he is on the cusp of actually becoming quite important in the organization. And we're thrilled by that. It is those moments that actually give me heart and make me want to make the business successful. Okay. So all of that, in terms of customer opposition, you say, "Okay, that's great. Why are you wasting the money, you should be doing..." and I'm like, yes, fine. It's not a waste of money because actually people value it. So we're #1 for in-store service. We're #1 for online and mobile banking. And you say, "Okay, well, that's great. It's great you're in the stores, but are you getting any value out of it? Are you monetizing the stores?" Okay. Well, we grew accounts by 385,000 actually, you can see the personal current account and business current account growth in a very difficult year, we kept momentum in both of those. And as I said, we grew retail deposits by 33% in the year. And the CAGR for the last 5 years, including 2019, which we had a bit of deposits go backwards, thanks to our corporate -- some of our corporate depositors. The CGAR for deposits is 30% over the last 5 years. I don't know, there's not too many banks in the world doing that. Okay. So again, relatively simple, simple words, but what does it mean? So we need to focus. In costs, we need to focus on some back office efficiencies. We don't have the level of automation and straight-through processing you would expect for a 10-year-old bank. It's a little clunkier than I would have imagined. So we need to put some time and energy into getting that fixed. Our organization can get a bit unwieldy and then property, and we'll come on to property in a little bit, but everybody knows London relatively well. Everybody knows we have 20 Old Bailey. We rented 3 floors in 20 Old Bailey. And we're paying, I don't know, GBP 65 a square foot, plus or minus a little for 3 floors. And we've put operation centers there. We've put call centers there. We've put IT there. We've put a change there. It's unusual for any business and a bank to choose one of the 3 or 4 most expensive cities in the world and then choose property that is probably some of the most expensive property you could find in that city in the world, and put those types of functions in London. So over time, we need to figure out a way to rightsize that. I don't know what that means yet, and I apologize for the lack of specific detail, and I know I will get follow-up questions. I've been here less than 6 months. We're still doing the work to determine what that means, but we're working through how we could actually get the property portfolio to be more appropriate. Revenue. So I told you it's a J curve turnaround, relatively straightforward, and then it's not cost-driven. It's a revenue story. And I'm confident in the revenue story. Because to be honest, there's lots of customer needs we're not meeting today, and we'll just meet more of them. And there's some new capabilities we need to deliver partly through C&I and elsewhere. Then infrastructure. So we need to spend money to make cost and revenue happen. We need to fix some things. So at the end of the day, the business investment was broadly focused on creating new stores. The capital spend was on building up the store franchise, very much the front end of the business and maybe the investment in some of the back-end functions and support functions wasn't what it needed to be. So part of what you'll see in the infrastructure spend is things like some risk remediation stuff, some of the additional investment into the risk function, additional investment in the finance function, building up our control environment so that it's a more robust infrastructure as you go forward. Balance sheet optimization. We would expect to be part of the plan, nothing fancy in it. The bank has not been focused on risk-adjusted return on regulatory capital the way I would expect a bank to be focused on risk-adjusted return on regulatory capital. It should drive all the decisioning we do. We should be about optimizing shareholder value, and we do that by building a sustainable business that can survive. And again, while it's a J curve, so tangible book value in the J curve, we can argue what it looks like in the early years. But once we're through that J and out the other side, this place will become fanatical about growing tangible book value. Because it's really all that matters. So we will focus on it in a way that the place hasn't focused on in the past. Internal and external comms, I'll come back to it. But we weren't really great internally so we had store colleagues in the start of the year who were having customers walk in and having conversations with the customer, and they can only brief them based off of what they read in the newspaper themselves or online. We weren't necessarily valuing our colleagues in that process. We were so reactionary, and we've spent a lot of time and energy now to kind of front-load that colleague communication. And I think our external communications, if I'm honest, and we'll come back to it, but our guidance hasn't been very good. So you go back through and you look at what we've guided and how we helped you build models and think about the business going forward. We've not really been very good at it. So all of that will lead us to becoming the best U.K.'s community bank. And then to not want to bury the lead, this business can be an upper single-digit return on tangible equity business by 2024, by just doing that on the top. And the key to the whole thing isn't actually 1 through 5. It's the last 3 words on the top slide. So we just have to execute. [indiscernible] getting the place fixed. And that's really what all that's about. And I'll come back and we'll spend some more time on that and give you some proof points and walk through it. With that, I will turn it over to David to walk through the 2019 financials. Thank you.

Thank you, Dan. I've also got some water because I've got a bit of a cold, so you'll have to bear with me. Good morning, everybody. Turning first to our full year KPIs. Clearly, our financial performance reflects the challenging year for the bank. We've been impacted by heightened competition, increased regulation and some specific headwinds. The underlying loss before tax of GBP 11.7 million was primarily driven by margin pressure caused by mortgage competition, asset sales, higher deposit costs, higher interest charges from debt issuance. Our statutory profit, which I'll talk about in a bit more detail, was further impacted by a write-down on intangible assets and the derecognition of the deferred tax asset. Both of these items, neither of them have any impact on regulatory capital, as I'm sure you know. Our capital liquidity was further strengthened through the year. With our total capital for plus MREL, up to 22.1%, and our LCR, up to 197%. Despite the headwinds, as Dan said, the core franchise has continued to work. It has momentum. We've had strong growth in customer accounts, up to GBP 2 million, and we've delivered exceptional customer service, which is reflected in the CMA survey results. So in short, we have a strong balance sheet. We have a core franchise with underlying momentum. We clearly need now to focus on profitability going forward. Turning to our statutory loss after tax in more detail. It's principally driven by the write-down in intangible assets. This relates to the discontinuation of IT projects that do not form part of our strategy going forward. There's a number of items in there. We've done a thorough review. To give you one example of the IT projects would be that the commercial lending origination platform has been written-down. It doesn't mean we're not using it. But given the slower pace of growth, we can't justify keeping it on the balance sheet. Going forward, we will be capitalizing much less in the future than we have done in the past. Broadly, the business was 80%/20% CapEx/OpEx in terms of intangibles. We're going to flip that around going forward simply because we think it provides more transparency for our stakeholders and our -- readers of our accounts, and it also provides greater accountability within the business. The GBP 53 million derecognition of the DTA reflects the short-term profitability outlook, particularly given the level of investment we're going to put through the business over the next 24 months. Of course, we will retain the economic benefit of brought-forward tax losses going forward. In practical terms, it means that our effective tax rate in the future will be less than if we hadn't written it off. Quite an important point for your models. Also below the line are the remediation costs and there are a number of items in there, principally, though, it was the RWA remediation program and associated investigations. It's also been previously disclosed and self-identified work we're doing on sanctions procedures within the bank. Looking forward, it's difficult to guide on below-the-line items for obvious reasons. However, I would expect that remediation costs will continue into 2020, albeit a lower level of absolute cost than you see in 2019. Turning to capital. Our capital and MREL position has been materially strengthened through the year. We've obviously had the equity raise. We sold some treasury assets. We sold the mortgage portfolio, and we've completed our MREL issuance in Q4. We are well capitalized. Total capital is 18.3%, total capital per plus MREL is 21 -- 22.1%. We're very focused on the delivery of our plan without further equity. The plan assumes no further equity injections. We're also focused on minimizing the requirement for further MREL by increasing our focus on balance sheet optimization and RWA efficiency. Initiatives could include asset disposals, secured wholesale funding options or other initiatives. We're actively working on those today, but we'll only do the right thing at the right time for the bank. We do, though, recognize that MREL is the binding constraint on the bank in terms of growth. And we are guiding up to GBP 500 million of MREL issuance by 2022, when full MREL takes place. Turning to deposits. The reduction in larger commercial deposits has obviously being well documented, but we're really pleased with the growth we've seen in both personal and SME deposits, which, in total, are up 21% year-on-year. These core deposits now make up 70% of the base, up from 53% prior year. Our cost of deposits increased to 78 bps for the full year, reflecting the increase in retail fixed-term deposits in the second half. Our normal price position for retail fixed is best buy in the High Street. In the second half of last year, we've stepped up into the online space. We're now firmly back into our best buy position, which is best buy in the High Street. That's probably a 40 to 50 basis point decrease in retail fixed term in terms of where we are today. Going forward, we expect our cost of deposits to reduce. Firstly, from an increasing mix of current accounts; and secondly, from lower fixed-term pricing. And again, so just to reiterate the point on this slide, the core franchise has continued to deliver. Total accounts were up to 2 million, and we've now got nearly 1.1 million current accounts. Going forward, we're targeting further growth in low-cost current accounts as a percentage of total deposits. Current accounts going forward will be the key driver of growth for us. In terms of the balance sheet, it's highly liquid. Our funding and liquidity position has remained strong and well diversified. You can see the trajectory there on the bottom right in our loan-to-deposit ratio, as we stand here today, our LTD is 99%. We elevated our LCR, closing the year at 197% by improving the quality of our liquidity resources. We think it's prudent to hold excess liquidity right now, both for the external environment and also as a buffer for TFS repayment. Over time, the bank will revert to its typical LCR, which is between 130%, 150%. The strength of both capital and liquidity stands us in good stead as we start to execute our strategy going forward. Our underwriting and asset quality remains strong. Customer loans in total were up 3% to GBP 14.7 billion. Residential mortgage lending is now 58% of the total book where credit quality remains particularly strong. We've actively managed down our exposure to commercial real estate through redemptions and managed originations. We do see opportunities going forward to drive unsecured lending at levels that are more appropriate for a full-service retail bank, and Dan will pick it up in terms of the proof points and the opportunities in that space for us. In terms of Q4, increase in the cost of risk and NPLs. It's principally due to long seasoning and a couple of single-name exposures. Collateral coverage on the bottom left of the slide there is very strong with collateral covering loan balances by 195%. We have predominantly secured lending book, which results in minimal write-offs. And that reflects in our cost of risk, 8 bps for the full year. We've seen pressure on interest income, which has been mitigated by significant growth in fees. Our NIM contracted 30 basis points in the year primarily reflecting the sale of assets, which I have alluded to, higher deposit costs, which we've talked about, higher interest charges from debt expense, which you understand, and competitive trends in the marketplace. Q4 NIM, which you noticed, was 1.3%, the movement quarter-on-quarter was primarily due to MREL costs in Q4. And I would expect NIM in 2020 to be broadly in line with Q4 NIM at 1.3%. The pressure on NIM was partially mitigated by 43% growth in fees to GBP 90 million. We've seen strong growth in customer numbers, a lot of it's volume driven. We've addressed some fee leakage. You can see that there in the interchanged line, where we've made some tweaks and we've tapped into opportunities to drive more fees, and we've been developing new services. You'll notice that in Q4, fee growth slowed. That was solely reflecting a GBP 4.6 million reallocation of costs to fee and commission expense where these costs are directly attributable to both of the fees. So it's just a geography on the P&L. It does not impact the trend going forward, and it does not impact the broad target of fee expansion as a percentage of total revenue. Containing cost growth has been a key focus for us. Cost growth in H2 materially slowed, driven by restructuring our commercial lending teams, rightsizing our lending operations, centralizing procurement and frankly, increasing cost accountability across the business. The business, though, continues to progress. We have opened new stores. We have driven new volume. And we have invested in certain core capabilities, and we will continue to do that. On the slide, I've broken out run-the-bank OpEx and investment OpEx and we'll talk to you much more about this going forward. We're going to be really transparent in the investment OpEx we're putting into the bank. New investment spend is key to the delivery of the strategy and you'll see that we are forecasting between now and 2024, between GBP 250 million and GBP 300 million of changed OpEx in the plan. This will be front-end loaded. The first 2 years will probably account for just over 50% of that spend. And every year will be lower than the last. That's just the way you need to think about how that changed OpEx is going to come through the plan. So I think that's it from me. But [ at the Whistle Top ] store, not been a great year financially. But Dan is going to now talk about how we take this business forward and how we get to a high single-digit ROTE by 2024. Dan?

Thank you, David. Thank you. Okay. So I know you've been sitting for a while already. So I'll see if we can just pick up the pace a bit and -- but get you through it. But I don't want to miss some of the bit. So we talked about this already. So it is the foundation that get us to the high single-digit ROTE by 2024. So let's start just unpicking it a little bit. Let's talk about costs. So don't take out your rulers and try to figure out the cost base by splitting it up. I know everybody has a tendency to want to do that, we intentionally kind of made it a little amorphous so you couldn't quite get there. But the point fundamentally of Metro is we have a high fixed cost base. So BNP Paribas published an analyst report, I think, in July, maybe July 15th of this year where it used a line that due to the store investment, we had -- Metro had a structurally high fixed cost component. The word structurally, I quite liked it actually. And they're right, right? So everybody's picked up on it. We've put a ton of money into the stores. That gives us a high fixed cost base, okay? So we've done everything we can to try to optimize the stores, and we'll continue to try to optimize the store, and we need to make sure we're putting a ton of energy into the bottom box, and make sure that we're doing everything we can to try to level off, if not shrink the controllable cost. The other bit in the middle, which is kind of unique and kind of unique to being a challenger bank, I think, more than anything else, is we have a fair amount of contractual but variable costs. So we do have a fair amount of razor-blade contracts, TSYS for credit cards. We do a bit of Barclays processing. There's a bit of that stuff that just as we grow volume kicks in. We've ripped apart every one of those contracts. We're going through them in great detail, but it's probably closer to fix than it is controllable, okay? So if the stores were the fixed-cost problem, could you -- I said there were no sacred cows. Could you close stores? So could you actually go through the process of backing off from the store estate? And go through the analysis and make sure that we understood the underlying store profitability? So for the first time, I'm told in a long time and maybe ever, we got to underlying store profitability, strip out corporate activity that gets dumped in there, what does the store do? A good bit of this graph basically says there's 4 stores that if you use an NPV going forward and actually look at the cost to close, so you net off the cost to close that actually are better off closed today than open. And you say, "Okay, well, then why aren't you closing those 4 stores?" I think there's a few reasons. So the reality is that every store is more profitable tomorrow than it is today. So they're all still growing. They're all maturing, different growth rates, different maturity profiles. Some of them are quite new. So you'll see 2 of the 4 below the parallel line that are light blue. That means they opened in 2018. I'm not sure it's completely fair to judge a store that opened in 2018, given the kind of 2019 Metro had. It's probably unfair to assume that the negativity around the brand didn't have some effect. So we're going to continue to do the work every quarter. We're going to continue to review stores on an ongoing basis, but the message to take away from today is, we're not closing any stores. So we have done the analysis, and we are comfortable with the store estate. It is the foundation of our exemplary service. It is the fact that it is a foundation of our bricks & clicks. I fundamentally believe, I know it's old-fashioned now, and to be clear, I started in the banking well before there was such a thing as clicks. So the reality becomes is that I know it sounds old-fashioned, but today, we're a really good bricks & clicks organization for retail customers. And we're investing heavily to become a really good bricks & clicks entity for SME customers. I think that's how you win. So I think at the end of the day, there is a reason why Amazon bought Whole Foods. I think there is a reason why having a physical estate, combined with a digital offering is hugely valuable. There is a reason JPMorgan shut down its digital-only bank in the U.S. Because Chase was already offering it and the bricks & clicks was more powerful. So I actually think it's a great model and will continue to be. There are some constraints on the current store model. So we might as well own up to them because I think some of you already know and have highlighted or guessed that. So they're expensive to close, and they're expensive to close because we have really, really long leases. And for some reason, the phrase "break clause" wasn't something that people knew when they were executing the leases. So they are long leases without break clauses in retail developments. So they are tough to get out of. That being said, I'd still keep them all, right? And so what are we doing? So we clearly need to figure out a way to generate more revenue from our fixed cost base. So the reality is, it's like we're, I don't know, a printing company or plastic injection molding company. And I just went and bought 3 or 4 plastic extrusion pieces of equipment, huge, spent a ton of money, more than I had, borrowed to do it, put all my capital into it, and they're sitting on my shop floor, and they're running 4 hours a day. If they're running 4 hours a day, you would know that business is losing money. Well, the reality is, as those pieces of equipment starts to run 8 hours a day, work gets a bit better. They start running 12 hours a day, it gets a bit better. When they're running 3 shifts, 8 hours each, running 24 hours a day, that business is printing money. And at the end of the day, it's kind of the Metro story. We have a high fixed cost that we need to figure out a way to generate more revenue out of. You'd say, "Oh, well, reduce the hours, it will save you some money," Honestly? It's the lighting bill. It's all that stuff. The incremental marginal cost of running a store, my staff costs, actually aren't all that big. So it's not the staff cost. That's actually not what gets you. It's the lease cost. It's the amortization of the investment spend, it's the fact that we have to light the thing and heat the thing and all of that, actually. So if it is your fixed cost, actually, you better be open as much as you can be open as long as you're meeting customer needs. And then we just need to do more with it, unsecured personal lending, overdrafts, all sort of basic banking products. We're going to slow new store openings. So I haven't really done the math and I should up at the bottom chart. But let me be clear, we're going to open, I think that is 20 -- what is that, 24 new stores. So we're opening 24 new stores, down from, I think, the above number is in the 70s. And we're basically opening over 50 fewer stores over the next handful of years. It's not because we don't like stores. We love stores. I love stores. The issue really becomes is, if we need to fix things, and I have to live within my capital constraints, I have to choose between spending capital on stores or spending capital to fix infrastructure. And we've made the conscious decision to spend the money to fix infrastructure over building new stores, get the plumbing right before you actually start building more bathrooms. So that is the fundamental message and what we're doing. In addition, we also need to figure out a way to come up with new store designs. It's not a shot at -- listen, the Metro brand was built off the fact that they're big box stores and they stick out and they have neon and all that kind of good stuff. It's memorable. But we need to get to the point where we have a papa bear store, a mama bear store and a baby bear store. We need to get the store size to be fit-for-purpose in the markets we are. So there's a bunch of that work that's ongoing. And I think that's the plan forward. It is to not walk away from stores that's still open. To be clear, that store opening profile is -- it's GBP 75 million to GBP 100 million of capital in the plan to open new stores. We're not walking away from it. We're just taking a breath to redo the store design and format and to allow us to free-up some capital to fix the place. And then you start talking about cost. And why do I think this isn't a cost story. Why do I think -- and again, we had a couple of conversations with our largest shareholders last night. We walked across a few of them, as you would expect, we would and there's one in particular who's, "just can't you get more cost out?" When you actually look at Metro's cost structure versus its asset size, and you compare it to the peer group that you see on the table, we're about spot on. It's actually not that the costs are out of line, it's that the costs are fixed. It's the fact that you can't rip out of the GBP 400 million cost base, plus or minus, you can't get GBP 100 million out of it. So your only way to fix it going forward is to actually grow revenue. Now that doesn't mean we're not doing anything. So we're spending a lot of time on automation and digitization. This does not mean, by the way, any of our stores are going to look like any of the other High Street stores, that's freaking ridiculous. You walk in and all you see is kit. You don't see people. That's just nonsense. So that's not what I mean by that. I actually mean in Aisling's world who runs ops for us, there -- we just don't have enough straight through processing. We have manual intervention in places where you could actually build a small program to do it. We just need to get better at it. Some of the capacity we're freeing up by opening full stores, there are some really great people who have dedicated their time and energy to becoming really slick at opening stores. We unleash them on fixing processes and making it easier for the colleagues to work, and we're going to make huge progress on changing the fundamental way we do business. And again, we are already really good in digital in certain spaces. We'll continue to invest in digital because we actually think actually allowing people to self-serve and do some of that stuff reduces our cost base. We've talked about London already, and that's what that means, spans and layers, you wouldn't expect me to say anything else. I'm not sure everybody goes on the journey with us for the next leg of the journey, and nobody should be surprised by that. However, there are no fundamental redundancy programs in the plan. There's no effort to lose a lot of people, but I think some of the leadership team over the cross of the piece, whether they're up for the next leg of the journey will be a conversation we have. And this migrated away from consultants and contractors, it drives me crazy. This place spends money like a drunken sailor with people who don't work here, right? So they turn up and they spend a little bit of time, and then they flip off to the next thing. It drives me crazy. That is tens of millions of pounds. It is on the -- it might be 9 figures, okay? So we're still trying to dig into it. It is a big number that we're spending on consultants and contractors. Just actually hiring permanent staff would save us a lot of money. Now we've had to do it because we needed their help and we had to get through it. They're all great. They work hard. They all tried to help them make the place better. But they are 40% to 80% more expensive than a full-time colleague. They have to go. So that's where it's going to be. Okay, so I think David's point, we're going to really focus on the run-the-bank costs versus build-the-bank cost. We're going to create the transparency for you a little bit today, but more as we get into the reporting cycle going forward because I do think our cost base has been quite opaque. They have been -- we have historically capitalized a lot of our costs. It ended up in intangible assets. It was really hard for you to get a good sense of what the actual run-the-bank costs were. We're going to try to give you a bit more clarity. I think that's only fair. Okay? So then you get into revenue. Why do I think revenue will work? I think revenue will work for a few reasons. I'm going to tell you a couple of stories. I know a little longer and I apologize, but you need to believe the story. And I think to believe the story you need to hear some bits. So I opened my account, September. I put a fair amount of money in it. When I opened my account, I was not offered an overdraft, fine. I was not offered a credit card, fine, again. I think our store colleagues aren't comfortable having those conversations, not because they're not capable, and not because they probably don't know I would like an overdraft or would like a credit card, it's because the process is sitting behind, delivering those products aren't very good. So they shy away from it because they know it's going to be painful for me and they don't want to upset the customer relationship, fine. So I get this job. I get the interim gig in December. And I'm standing up in front of the leadership team in the top 60 and I tell the story. So you're all bright and capable. Some of them actually work for the banks. So they were in the room when I said it. The reality is, I would have expected by the time I got back to my desk, to have about 8 credit card standing on my desk as everybody tries to kiss up to the new boss, right? I mean honestly, I was a young guy at one time. That's what I would have done. I would have printed it myself, whatever it would have look liked, I would have done whatever I needed to do to have credit cards ready for me. It took 9 days for me to get the credit card. Nine days. And the first time they walked into my office, and I mean no disrespect, I have kids in America, it's a lot of money to live my life. I apologize for it in advance, but they offered me a credit card limit that was ridiculously low, like ridiculously low. Like, I'm sorry, that's not going to really fit my lifestyle. And they go to me, they go, "Well, I'm sorry, we don't know your salary." And I swore, which I do a little bit, it's an American thing. I think, also the Brits. So I said, "Honestly, f*** off." It was in the press release. So my salary is actually in the press release. It was embarrassing that it was in the press release. And it's there. I'm like, you know my salary, it's there. Fine, they scurry away, come back. And it's not the person dealing with me, the person dealing with me was great, unbelievable, actually and doing everything they could. It's the processes behind the scenes that have become ridiculous. So they then go away, they scurry around, they come back, they come back with better limits, still at that point, I was just played. I said, "yes, I mean it's kind of still -- it's fine." But they say to me, "I'm sorry, you don't have a national insurance number," So again, I am British, I did have a national insurance one time. I've been gone for a decade. I don't know what happened. I got to get a new national insurance number. But because you don't have a national insurance number, we can't actually give you a credit card because we're not sure you're creditworthy. Swear to God, I'm CEO, not sure you're creditworthy. So you need to pay your credit card off at the end of every month. So fine. If that happens to me -- right? Can you imagine somebody sitting in the store in Slough. There's -- no CSR who's 21 years old is ever going to have a conversation with you about a credit card because they don't want to put their customer through that dilemma, that drama, all of that. It is a shocking story, okay? So that's the story. The bit that made me happy through all of that and really made me genuinely joyful is, God, that's an opportunity. So we'll come on to the proof points when we come into it, but 3% of our personal current account customers have a credit card with us. 3%, it's a joke. Unsecured personal lending. At the moment, it takes us 3 hours, plus or minus, and people argue, but I've been told by some store colleagues that it can take up to 3 hours to run unsecured personal loan. Three hours. Other institutions, you push a freaking button on your mobile and the money is in your account within 20 minutes. We don't have the mobile app. We have processes that are really difficult to actually extend the money. And not only it takes 3 hours, we say "no" over half the time. So again, if you're a 21, 22-year-old CSR sitting in the store, why would you ever talk to somebody about unsecured personal lending? Because what you're going to do is waste 3 hours of their time and most likely say no. We just -- we've gotten the model a bit wrong. So again, terrible story, get that. We'll come back to it. It's a huge opportunity. So the enablers for us are things like improved credit scoring. We need a credit decision engine. You would expect we would have one. We don't have one. We don't do risk-based pricing. We have single pricing for credit, which was an ethos here. And then I went out to the stores, I'm like, "Okay, I'll give you 2 options. You can say no 50% of the time or we can do risk-based pricing," So the reality is that everybody would agree to do risk-based pricing. So we need to invest in our store colleagues. I'm a huge believer that our store colleagues are the secret sauce. They are people-people. And that's Amaze Direct. So when I say store, I don't mean just store. I mean Amaze Direct. I mean our private bankers, our corporate bankers, it is our customer-facing staff that are truly the secret sauce. We need to do some more in digital. We don't open accounts for businesses online. We will soon enough. And when we do, we'll be able to offer the same bricks & click service that you would expect. So the bit of this slide that should make you confident that the J-curve is possible with revenue as a foundation is actually the things we need to do aren't overly unique. I don't need to build all sorts of fancy whizbanging products, I can just be a better community bank. So let's talk about C&I for a minute. I know it's going to garner a lot of attention. And I just want to be really clear about a couple of bits. So we approached C&I for the first time in November. So as we started to do the strategies you would expect, as I said, there were no sacred cows. We looked at everything. We looked at our C&I commitments. And we initially put in every model the Board saw, the financial profile that allowed us to meet all of our public commitments. So at the end of the day, had BCR not agreed to the renegotiation, we could have chosen to meet all of our public commitments. It would have created a slightly different profile than what you're seeing today. But the reality is, is we have the capacity and ability to do it. But we -- as we worked through the math, realized that there was a better solution for us to still get 6% business current account market share which, by the way, makes us a real player in the SME space. There was a better way for us to get there. And so we put together what I thought was a really good business case, went back to BCR, who were great. I cannot say enough good things about them. They were -- they completely understood that the key for us being successful was aligning this with our strategy. And to be clear, if BCR didn't exist, if C&I didn't exist, we'd be doing the majority of this anyway, almost all of it, actually, because we want to be a dominant SME bank. We think our service model appeals to SME customers. We think it's a place that we will be very successful and have been very successful over time. So we would be doing it anyway. So the revised business case, we mentioned the business plan. Paul and his team did a great job. The reality is, as we went, I turned up, we pitched a little bit, they took it away. We went back and forth, and we were lucky enough to hear last night that they've now approved the revised business case. It means we opened 15 less stores in the north. Honestly, we think that gets us into the combinations we want to be in from an SME perspective. We built most of the kit we wanted to build anyway. We obviously spend less money because we're opening fewer stores. So that means we spend less money, and they give us less money. So we give them some of the money back, our choice to give it back based off of the new business case. And we still get to a 6% business current account market share. So a really good outcome. So let's talk a little bit about investment spend. So you'll see, and David mentioned it, there's a GBP 250 million to GBP 300 million of OpEx spend on infrastructure, and then there's probably another GBP 50 million to GBP 100 million that we'll capitalize. So we're going to spend somewhere between GBP 300 million and GBP 400 million on infrastructure, that's in the plan, that still gets us to the ROTE you've seen. So we're not shying away from the spend necessary and we're doing, we need to do it. So let's just talk about investment spend to bring physical and digital together. What does that mean? So start in one channel, finish in another. So why do I think that Amazon bought Whole Foods? For that reason. So the reality is that when business account opening online launches, you will be able to open your business account online quickly and we think competitively quickly. I don't want to quote stats, but competitively quickly. And if you need a card right away, you can stop into any store and we'll print your card. So the ability to actually be able to combine the clicks with the bricks is hugely, hugely important. This sort of new and improved digital journey is across. Again, some of those people were freeing up, who've been focused on store opening, can really help us with process redesign. And again, as we redesign the digital journeys, we'll replicate that in the stores. And actually, it's kind of funny. So again, one of the things that's true and somebody said it and I was probably a bit direct, maybe a bit aggressive, which I can be occasionally. So they said, "Well, we'll just take the digital journeys, and we'll put them in stores." And I'm like, "No. No. You won't," because actually, a face-to-face interaction is very different than a non-face-to-face interaction. So you need to build in points where you can personally connect with the person. You need to build in an empathetic sales model, so they can start to understand the customer needs. It's a lot different than sitting at home, relaxing and doing it on your iPad than it is actually sitting with somebody and interacting. So the journeys have to be different, but we can use the foundations and the infrastructure to actually make those journeys better. And you say new customer authentication. So one of the things that we did and we deserve credit for, well before Apple did the face thing where you can unlock your phone, if any of you have a Metro account, you know we asked you if you could take your picture, right? So you can walk into a Metro store, and you can actually get access to your account without your debit card. We -- you walk in, and we know you are you because we have your picture. So we've been doing face ID longer than most. So our in-store authentication thing is pretty slick. It's actually not shared across channels. We have different authentication methods, depending upon if you're on digital or if you're on online or if you're in the store, it's a bit of a dog's breakfast. That makes it really hard for us to allow you to do certain things. So it makes it really hard for us to allow you to like change your password online. So 13% of our calls into Amaze Direct are password reset because you either need to walk into a store or call us to reset your password, okay? Now that's a bit of a shocking statistic, but the reality is it's a huge opportunity. But to do that, we need to rebuild the authentication layer, okay? So I think that's a big chunk of the investment spend. The next slide. Again, for those in the room who -- and on phone and online who are looking at it, the reality is, I know this is a lack of specificity that's going to drive you a bit crazy. I don't really want you to be able to hold me accountable for anything on the slide yet. That's really for the Board to do. And we have a bit more work to do, and we'll share bits of it as we go forward. But what I want to tell you is that we've actually developed the underlying plan. So I told you, this is about execution. This isn't about whizbanging new product. This is about executing day in and day out. So what have I been doing since I've been here? The strategy was broadly in line by October. It's not really rocket science about what we need to do. We have basically spent the last 3 months with people locked in the basement of our Piccadilly store, literally badge in, badge out, would feed them occasionally. We had about 25 to 30 colleagues down there, and we supplemented with a bit of Deloitte resource for subject matter experts. Because you talk about new call center technology, everything else, our guys are really good in that space, but they haven't seen the broader universe. So you bring in some subject matter experts, and that's what we used Deloitte for. And we have underlying project plans for everything we need to do. So when I talk to you about growing revenue and launching a better unsecured lending product, I'm not just using the words. We have detailed project plans sitting behind it. We have detailed project plans about what we need to do, asset, finance and invoice finance to make it better. We now know what risk engine we want and how we want to build it. We actually -- the GBP 300 million to GBP 400 million of investment spend is actually allocated across all of those projects. So we're still arguing about sequencing, we're still arguing about who gets money when and what order it occurs in, then we're making those decisions. But we are -- actually have the underlying plans to execute. And you'll see over on the right. We've made a lot of changes, right? So one of the things that I don't think was as clear as it needs to be is there's real accountability. So every one of those work streams will have one of my direct reports, so an ELT responsible for it. And they will be personally accountable for delivering it. There will be a higher level of personal accountability than maybe the organization had in the past. We now have a transformation delivery group. So we had a fair amount of train wrecks occurring in Cheryl's world. Cheryl runs -- is our new CIO. And we're really glad to have her. But -- so they get to testing, right? So everything needs to be tested before we take it live. And then get to the testing thing, and there will be so many competing priorities that things would just stop at testing because we didn't sequence it right going in. So again, that -- the reason we set out the transformation delivery group is to try to sort out some of the mechanism. So we're already on track and already mobilized to start to deliver against the plan. So this, I'm not going to spend a lot of time on. You would expect nothing less of us, right? I don't understand whether the culture in the organization got you, but I grew up managing balance sheets, right? So when I was at Citizens Financial in the '90s and the turn of the century before I moved over to RBS, the reality is, I made my career at being really good at managing balance sheets. I can squeeze the pips as well as anybody to make sure that we get as good a risk-adjusted return out of a set of assets as anybody. So we will be much more disciplined about making sure we do what we need to do to increase shareholder return. Okay? So this is the internal external comm part. I hope people have seen the people-people banking ads. Have you seen anything walking around? I mean they are really amazing. Honestly, Jass has done a great job and deserves a ton of credit for it. It's funny. All of them I've met, but Jass, I was in Staines. He works in Staines. And the bit he didn't understand -- so they also signed up, we had people apply. So I think we had like 80 or 90 colleagues, send in videos of themselves and we chose, and there was a selection process, they didn't choose me. I was a little hurt. So as they say, I have a face for radio. So Jass, he didn't understand that he'd become a celebrity in Staines. So he's a little shocked by what's happened. So actually, his face is literally all over Staines. And now his friends, his family, everybody's taking the pics. So it's been a bit of a thing. So we've really worked on our internal comms. And I told you in terms of KPIs and external stuff, we haven't been good enough. You go back and look at all the promises we made to the market. And I've had somebody to do the work for me. So every promise we made before we went public and every promise we made since we've gone public. And I looked at the percentage we've actually met, it is pretty poor. So that's got to stop. So what we say we do and what we do, we say. So it just needs to stop. So that leads us pretty nicely into the guidance. So we think this guidance, and I'm not going to spend a lot of time going through each box, but we've actually had one of our bankers, unrelated to helping us build this together, another banker, reverse engineered based off of this guidance and came up with a number pretty close to 8.5% ROTE. So we're pretty confident that that guidance will allow you to model going forward. Maybe, maybe not. I'll come on to why I think it's not overly aspirational, and I'm happy to take questions on it as we go forward. But David did mention the MREL, we do have the investment spend in there. You look at the cost-to-income ratio, 70%, 75%. I've worked in places that if my cost-to-income ratio was 70%, 75%, I would have been fired. So it's not overly aspirational. Cost of risk of 15 to 30 basis points, we can argue about it through the cycle until we're blue in the face. But the reality is, is that that's twice what we're currently running at. So pretty conservative. You look at the growth in deposits, again, pretty conservative compared to historic run rates. So let's talk about why I believe that's believable because all that really matters to you now is, okay, you've heard me talk, I got this wired accent, it's kind of a blend. I use words that are a mix between America and Britain. It's all a bit confusing, why the hell should you believe me? Because if you don't believe me, you don't believe that. And if you don't believe that, then you don't believe the J curve. And if you don't believe the J curve, you don't believe the story. So let's get into why you should believe that. The first thing in our revenue story is you got to believe that we have a proposition that our customers love. So it's a slide you've kind of seen before, but repurposed. So we clearly have customers who love us and you say, "Yes. Yes. Sure." Anybody could pick out 3 or 4 nice comments. No matter who you are you get those. "Fine. Great. I hear you." But our service scores, #1 in store, #1 mobile on banking. Yes, so fine. We're already getting scores that are great. Not only that, we're winning awards. We have a 90% NPS score for new accounts. So fine, they say nice things about us, not only to our face or online, they say nice things about us when asked independently. And oh, by the way, we're winning awards and everything else. And more importantly than that, the way we do all of those 3 things, is by having award-winning colleagues who are just amazing. And the reality is, we have a great engagement score. 92% think it's a great place to work. And 91% say it's an inclusive environment. And you're like, "Oh, why did you put the 91% inclusive? That's just you being modern." No, it's actually not. Our colleagues need to look like our customers. So our colleagues, to be a community bank and to be local, means that our colleagues look like our customers. Our colleagues behave like our customers, our colleagues are our customers. So actually being an inclusive employer, feeling like you're welcoming and opening to everybody, which for the record, we are, is important. And then you say, "Okay, well, if you have all that, how do you monetize it?" Well, you monetize it by being a deposit-generating machine. Now I know and I know full well that there are some clever people who've done the work who say, " Yes. Yes." But actually, your cost of deposits isn't that number because you have your investment in stores, then if you adjust for your investment in stores, your cost to deposits would look a lot more like Voldemort. So you should take the blue dot for Metro and drive up the cost of deposit, because you're not accounting for your stores. I'm not going to argue. The one thing that is true, my marginal cost of acquiring the next pound of deposits is a whole hell of a lot lower. And all I get paid to do is drive down the marginal cost of acquiring the next pound of deposits. Because if we can keep growing like that and drive down our marginal cost of acquiring deposits, we will win, and we will make a lot of money. Because on the asset side, honestly, I can run a successful leverage bond fund. I've done it in prior organizations. So even if the asset generation capacity doesn't work, I can go buy a bunch of covered bonds at 10% risk-weighting, earning me 120, 125, and I can actually -- if I get my marginal cost of acquiring deposits down, I can actually make a ROTE that's above the 8.5% with my eyes closed. So the reality is, what I need to be is a liability-generating machine, and I am, I just need to bring my marginal cost down. The beauty of it is, I got my plastic extrusion equipment that I already paid for that's sitting on the floor. As I start to sweat at it a bit harder, magically, my marginal cost of deposits comes down. It's the story. It's a liability-led story, and that's where we end up. So why should you believe it? So the deposit growth is less than 10% CAGR over the 5 years. Including 2019, our CAGR was 30%. So I need to grow deposits 1/3 of what I've done for the last 5 years. I will have more stores, too, by the way, and I still need to grow 1/3 less. Our loan-to-deposit ratio dropped below 100. So I don't even need to sweat the balance sheet to any great extent to kind of get the returns. NIM expands. Why does NIM expand? NIM expands pretty simply. Our cost of deposits drop because, again, everybody knows we bought in deposits to kind of get through last year, fine. We reprice those as we go forward. We grow BCAs and PCAs, so business current accounts and personal credit accounts, which means we end up with more noninterest-bearing liabilities, pretty straightforward. So my cost of deposits drop, I pick up a bit of growth in lending yield. I pick up lending yield because I'm doing more unsecured personal lending, a bit more credit card, nothing overly sophisticated. And again, we've already talked through how bad we are. On average, we do 2 unsecured personal loans per month per store. So that means they're doing 1 loan every 2 weeks in store. So not aspirational to get a bit better than that. We continue to grow fee income. Fee income for us is driven off activity base. So if you grow PCAs and BCAs that activity generates fee income, no great surprise. We do have investment spend in the plan. So we're not hiding from the fact that it costs money to do stuff, which maybe historically we've done. We're actually telling you, and we're OpExing it instead of CapExing it. So the plan has OpEx spend front-loaded to make sure it's believable. And the cost-to-income ratio, again, as I've said, 70%, 75% is not overly aspirational. And that gets us to a ROTE greater than 8.5% by 2024. And one more thing. There's a few upsides in this plan. One of the big ones is I didn't put AIRB in the plan. Because I think it was inappropriate for us to put a plan together that we couldn't deliver. And I can't promise you I can deliver AIRB. I'm doing all the work. And for those who've done the research, I was at RBS, and I worked in group risk when we did all the work to get RBS group approved for AIRB at a group level. So I kind of know it. The reality is, as I think the work, we're doing good work but I don't know. It's up to the regulators. Whether the regulators, they give it to us or not. So this plan assumes that it doesn't have it in it. For the record, if we get AIRB, which we're working towards, it's worth 200 to 300 basis points on the ROTE. So your ROTE goes from 8.5% to 10.5% to 11.5%. It's a lot. The other thing that's not here is that deposit growth number. So let's assume I grow deposits at 30% a year instead of that -- instead of 10%. That ends up -- I end up with another GBP 10 billion or GBP 15 billion of deposit. And before somebody says, "Oh, you run out of capital." Can we be really clear that capital isn't driven by liabilities? Capital usage is driven by assets. So I can take those liabilities and I can invest it in low risk-weighted assets, 10% covered bonds, and I can generate a return that is accretive to ROTE, accretive to NII, but is destroying NIM a little bit because you're actually earning less. But what I care about is ROTE, right? At the end of the day, I care about growing tangible book value and ROTE. So if we grow deposits quicker, that's actually worth another 200 to 300 basis points on the ROTE by 2024. So I've got AIRB, I've got that. And everybody knows in every bank in the world, "I'm a liability-led franchise, please, God, let rates go up." Because if rates go up, we make a lot more money. Not in the plan, but there are a couple of drivers in here that are beyond the plan that give you further upside. And with that, I feel like I've talked to you to death. So what we're going to do now is we're going to just open it up to take questions. So thank you for the time. I think we're going to do questions in the room first, and then we're going to go on to the folks on the phone and on the Internet. So thank you very much. So questions? Don't look at me, man. I'm not -- look at them, if you get my attention, it does you no good.

Ben Toms from RBC. So your deposit growth guidance is quite clear. And you don't include AIRB in the plan, which is also quite clear. You also mentioned asset sales and the potential of securitizations. Your CET1 target of greater than 12%, does that include asset sales and securitizations? Or can you get there without those 2 levers? Or to put it another way, what do you assume in terms of RWA growth throughout the plan? Because I don't think there's any guidance in there about loan growth or RWA growth? And then secondly, on the point about interest rates, if you do get a 25 bps increase in interest rates, what's your sensitivity to that, please?

Okay. So let me start, and then I'll have David come in a little bit. So again, we're going to make decisions about how we handle the capital stack in the way that generates the best return for shareholders. So if selling GBP 500 million of loans makes more sense than not, then we'll do it. But we're going to do it with that lens. So again, we assume that we're going to run the balance sheet as is. So all of that activity would be accretive to what you've seen. And we're committed to holding the 12%. In terms of the RWA growth, I think it's actually been discussed on a few occasions by more than a few of the analysts. The reality is, that it's not a surprise that RWA growth over the course of the 5 years is up less than 20%, over the 5 years because we just need to be careful about how we grow RWAs because, again, we're trying to manage within our capital stack and go forward. So as you sit here today, you're going to -- you're looking at an RWA growth that is just under 20%, probably plus or minus from '19 through '24. So pretty muted. And then in terms of -- what was the second question?

Sensitivity to rate rise, please?

Sensitivity. At the moment, we run -- sorry, I'll take that. We run a balanced -- we're on balance. So in the first year, it wouldn't actually mean all that much to us because we try to actually take interest rate risk out of the balance sheet, which is a conversation John and I will have a bit more over time because I come from a place where it wasn't always the case. But we run it pretty neutral. I think by the time you get a year out, it's really very accretive. And then you go forward and it becomes really profitable for us. I'm not going to give you a number, but you can run the math. But broadly, we're balanced as we sit here today.

So year 1 flat, but then it compounds year 2, 3, beyond.

Ian Gordon. Just a couple of points for clarification, please. On the investment plan spend chart on Slide 23, I noticed you haven't got anything in for 2020 spend on secured lending. Is that simply because you think you can up your penetration levels on cards and unsecured loans from near 0 just by changing behavior rather than spending money? And then secondly, when I look at your store opening plan, which I've lost, is it a fair interpretation that the limited numbers of business as usual store openings you've got in '19 and '20 are essentially a rollout of the ones where you're already committed?

Correct.

Yes. It's a -- so listen, it's a great question, and it's actually -- on Slide 18 is the store. So let's start with slides. Sorry, I'm old, glasses. So let's start with Slide 23. You're spot on, on the unsecured lending. So as we started to look at what we prioritized in the early year, we realize there's a lot more we can do with a bit of training, a bit of revising our existing processes, a little bit of change in risk appetite ourselves. So we decided that this is sort of transformation spend. We could do a lot without spending money actually. So that's what we're going to do in the first year to free-up capacity and invest in some other things. So spot on. And then I think in terms of stores, you're absolutely right. So the stores in the early years are the ones other than the C&I stores, they're the stores I'm legally obligated to do. That actually, it would be more expensive to back out of the legal agreements than it would to build the store. And faced with that is a decision, might as well build a store. So I think that's where we ended up, but both spot on, really good. Sorry. No. No. No. Don't. Let -- the ladies will drive.

It's John Cronin from Goodbody. Firstly, thanks for the refreshed strategy. It's good to see the vision that the founders set out a few years ago continue, married with some risk-adjusted returns, focus and efficiencies. Just on the strategy, particularly, the first question I have is around the percentage or the proportion of current accounts you expect -- the mix of deposits and the evolution of that in terms of how higher percentage of the deposit base do you anticipate will be represented by current accounts over the course of the 5-year plan? And secondly, just what kind of assumptions -- if you can give us any color on what you're assuming in terms of asset yield inflation, as you tilt further towards unsecured? And I suppose part b of that question is whether there are any inorganic opportunities that you see that could be -- could provide incremental asset yield uplift opportunities? Another question I have is just how you think about the competitive landscape? JPMorgan reported to be entering the consumer market here. Lots of new challengers. How that will play out in the context of your deposit-gathering strategy? And then finally, just, look, you've obviously come in fresh to the business, Dan. Keen to understand any insights you might have -- having taken a fresh look, perhaps at asset quality as well.

So let's talk about NIBL growth, right? Noninterest-bearing liabilities. So we've proven our ability to grow them, and you can look in there pretty significantly, and they do continue to grow. So the mix as it sits here today, I think what you would see is fixed term is about 1/3 of our deposit book, as we sit here today, plus or minus a little. And then we have this interest-bearing account, which is just a little shy, under 1/2. And then the remainder is noninterest-bearing liabilities. I think as you start to roll forward and we end up growing deposits at a compound annual growth rate, a little less than 10%. Everybody can do that math. The reality is you end up with deposits at GBP 22 billion, GBP 23 billion. That's not a hard math to do. And of that GBP 22 billion or GBP 23 billion, 1/3 is still on interest-bearing demand accounts. You're over -- well over 1/3 now in NIBLs, well over 1/3. And then the remainder is in fixed terms. So fixed term basically broadly stays flat over the 5 years, and you really get growth in NIBL and you get growth in interest-bearing demand. So we have proven the ability to open personal current accounts and business current accounts, and that's what we need to continue to do it. It's a big part of the driver.

Because John, current account is growing at 20% a year. As we bring down the overall deposit growth, the mix is naturally going to skew towards noninterest-bearing.

And to be clear, we think that's conservative from a fixed-term deposit. So in the first 2 months of the year, so we put a plan in place to try to look at retention of the fixed-term money we did last year. At lower rates, obviously. But for the first 2 months, our retention rate is almost 100% at meaningfully lower rates. So if we can keep fixed-term money at the right price, John, we'll keep the fixed-term money. But this assumes we actually have it sort of flat to stabilize. In terms of -- in terms of acquisitions, you -- sort of inorganic growth, I don't think I yet have the credibility to be able to stand in front of my Board and/or you and convince you that that's the right thing for this organization to do. I hope to build that credibility pretty quickly by showing you we can deliver and do all those kinds of good things. And there is no doubt as we build that credibility, there may be some opportunities to allocate capital into inorganic opportunities, and we'll consider it. Again, it's all about driving a risk-adjusted return and driving ROTE. So if there's a way to do it and actually shrink time and pull it forward, then the reality is, we'll do that. But at the moment, we need to focus on ourselves, right? So we need to get better at what we do. So I think that's right. JPMorgan, I mean on they come. Marcus, I don't -- I think if I was a digital-only player in this market and I was going to have my second Marcus open up with a bit better brand than some of the digital-only players we have now, I would be genuinely worried. Because nobody should underestimate, I don't know, if people spend time in America, look at American banks, Chase is a really good bank. So Jamie Dimon is a good retail banker. So the reality is that their online offering will be good. But it will only be online. So at the end of the day, our differentiator is the bricks & clicks, it's the bricks part of it. I'm not overly nervous about it. I think they'll end up having to pay up for deposits like Marcus does. I think their cost of deposits will be a bit high. But again, for them, they can use those deposits in different ways. You've seen that Marcus is talking about slowing growth because they're worried about ring-fencing and all that because Marcus' nightmare is that those deposits can't be used to fund their wholesale banking activity. So if JPMorgan -- they can generate the liquidity to fund their wholesale banking activities in Europe, which we all know are extensive, then great, it's hugely accretive to them. They're not really my competitor, if that makes sense. But if I was a digital-only bank, I'd be nervous. I think I've never known -- and I've been a competitor in the U.S. for a long time. I've never known Jamie not to do anything well, and I've never seen him not really compete to win. So if I was a digital-only player, I would think he's coming for me. But I'm not. And then last in terms of the fresh look, I would say, the bit that surprised me the most is that I couldn't get a cost. So I think the -- and I should have read all the analysis before I turned up, apologies. Because the reality is you guys were really clear on the fact that you were putting all this capital in the stores, it was creating this fixed cost nut, you couldn't really lever up. And I just -- I didn't catch it. So I thought the turnaround plan would be relatively straightforward. It will be a cost-led turnaround plan. And actually, I was a bit nervous. So it was the moment where I realized that we had so many opportunities on the revenue side that gave me confidence we could actually execute the J curve, but it was the cost bit. I would say that was a bit. The second surprise that was a little bit surprising was, I wasn't aware of all the dynamic between some of the senior executives and some of the Board, and it was a unique cultural moment that I walked into.

It's Chris Cant from Autonomous. If I could just ask about cost development, please? So if I look at Slide 14 in your deck, when you talk about the split of investment OpEx and run the bank OpEx. Obviously, you've reallocated this GBP 4.6 million of cost into other income in 4Q, but you haven't restated full year '19 on that basis. If I annualize your GBP 358 million, adjusting for that GBP 4.6 million. I think your sort of starting point going into 2020 for that is more like GBP 344 million, implicitly, and you're talking about mid- to high single-digit cost growth on that GBP 358 million. So I think that's more like 11% underlying cost growth year-over-year, adjusted for this fee reclassification.

In the GBP 400 million there, Chris, is the reallocation of the GBP 4.6 million. And the way to think about it going forward, you should be thinking about mid-single digit in 2020 of that GBP 400 million. And then you've got the change the bank OpEx [ of that 400 ].

So you say that the GBP 400 million is not investment OpEx?

Yes. I think broadly, the run-the-bank OpEx will be flat next year. We've then got the amortization coming through of the previous capitalized. You've got C&I, which is -- we are operationalizing C&I, which will be a new cost coming through. So I think the way to think about it, just being really clear that GBP 400 million, you should think about that being mid-single-digit growth in 2020, Thereafter being broadly inflation.

So can I just try to be -- sorry, Chris. Can I just try to just follow that up a little bit? So the bit that will grow, the GBP 358 million that you see, yes, which is the run-the-bank cost. If you focus on the GBP 358 million in terms of run-the-bank costs, that actually over the life of the plan, will trend down slightly because the run-the-bank cost will sort of be in that space. The part where costs will increase, the GBP 400 million will increase somewhat meaningfully is this OpEx thing. So when you get to total cost for '20 and even '21, that total cost number, you're right, grows much more dramatically in the early years because of the OpEx spend.

And in terms of where you then get to on cost-to-income ratio, I think I probably need to take it offline. Because I'm a bit confused as to which bits are growing relative to what you put in your deck. It looks like your cost-to-income ratio is going to be well north of 100% next year, given that you're talking about limited balance sheet growth and flat NIM. Is that...

I can't disagree with that.

I think that's a reasonable statement, Chris.

So when you put that to 2024, do you expect that to actually dip below GBP 100 million or is [indiscernible]

So I -- so listen, I think if you go away and run the model and you take the guidance that the OpEx that we have in the plan, that GBP 250 million to GBP 300 million, 50% of it is in the first couple of years, maybe a little bit more. And every year, it's a little bit less and you start building it through, I think you'll come up with a number yourself, and we're happy to circle back offline and spend some time, if you'd like.

The 70%, 75% cost income ratio by the end of the plan includes the change the bank OpEx.

Understood. If I could ask one follow-up. Well, not a follow-up, a separate question. And if I look at your balance sheet, as you've taken some decisions to write-down deferred tax assets, write-down intangible assets. But your PP&E balance is large, reflecting this store investment that you've done. I mean it's quite outsized relative to peer banks versus your TNAV, it's 60% of TNAV. So have you taken any view on whether you need to impair that at all, in terms of your store asset base.

No. So it's great question. So we've gone through store-by-store and looked at the analysis. We've reviewed that. And actually, the -- while it is a large percentage of it and it does create the fixed cost [ knot, ] the reality is, is all the stores are broadly of a value because they're all really in good locations and all of that, and they continue to operate well. So we did go through that impairment analysis and came to the conclusion that we couldn't and shouldn't impair any of those assets. But it is a unique part of the balance sheet. Because we're a new bank. So we're a new bank that put it all in. I mean most of the older banks like a TSB even or a Lloyd's and RBS where I worked, I mean I think, up until recently, the most recent store we'd opened was like 40 years ago or something. So I mean the reality is they're all fully amortized down and depreciated down. It's a different model. So we just need to digest that. So -- but we did go through the impairment analysis, and there's nothing to impair. Anything else in the room?

You talked a little bit about decentralizing branches and giving them a bit more autonomy. How far does that go? Do you -- are you decentralizing any cost decisions to branches? And this pricing where you talk about risk pricing, does any of that get handed to branches and you start looking a bit more like a Handelsbanken?

Yes. So it's a really good question and yet to be determined because we're still working it through. And I'll be really clear. I think -- it's not that we're changing, they already feel pretty powered. So I think if you talk to the store manager in Bristol, they run Bristol slightly different than they do in Birmingham and all that, as they should, and to make sure they're engaged in the local community. But as we start to introduce risk-based pricing, inevitably, there'll be discretion that's rolled out in stores because I kind of quite think that's right. They know the customer better than I do, so they should have some flexibility to do what they need to do. So it's a conversation, Ian, who runs distribution for us, and I will be having as we start to roll out some of that. But my inclination is to empower them more. They're all bright, capable people who know the market well and are good bankers. There's no reason why they shouldn't be treated as such. Anybody else before we go to the phones. Over to you, Joe, who's going to run phone stuff.

[Operator Instructions] And our first question comes from the line of Michael Perito of KBW.

The -- a couple of clarification questions. Appreciate all the info you guys have provided already. But I'm just kind of looking to the model here. And so am I understanding it correctly that the fee run rate going forward should grow but off of kind of the 4Q starting point given the kind of the accounting geography that occurred to say -- is that the correct way to think about it?

I think of it, either pre or post, but the general point we're making, Mike, is that we would expect fee progression. The Q4 trend, where it steps down because of the geography on the P&L, is not reflective of the trend. Adjust for that with the GBP 4.6 million, the trend will continue, and we are guiding that we will continue to grow fees, but also grow fees as a percentage of total revenue.

Got it. Okay. So and then...

Go ahead, Mike. Sorry.

As you think about net interest income, does -- I realize that the plan is more longer-term in nature, but do you think it's fair to assume that the fourth quarter here, given that the flat NIM and maybe some modest balance sheet growth, is kind of a low point on the net interest income side moving forward? Is that kind of the hope that you guys are looking to achieve as we kind of are starting 2020 here?

Do you want to take that too?

As I articulated, Mike, you should expect that NIM is broadly flat on Q4. So at 1.3%, we're not going to be driving assets in 2020?

Yes. So I think, Mike, the thing you need to think about a little bit is that because we have the TFS repayment, and so while we're growing liabilities and I know you've already been all over this, Chris, the reality is, as we pay TFS and everything else, I don't think it would be appropriate for you to model balance sheet growth in '20. I think the balance sheet will be probably slightly down in total asset size between '19 and '20. So you just -- you need to keep that in mind because as we repay TFS, obviously, it drives the balance sheet down. So actually, if NIM stays flat, and the balance sheet's lower, I don't think this is a low point for NII for the cycle.

Okay. Yes. Yes. No, that makes sense. And then just lastly, I was wondering if you can comment on kind of the -- I think with rates where they are, how -- can you talk a little bit about how you're going to market deposit rate in the stores moving forward? I mean just -- I don't know, conceptually, the hope is to grow the lower-cost deposits with not a lot of net balance sheet growth. But obviously, there was some higher cost deposit growth in 2019. And I was just curious how -- has there been a change into kind of the cost of deposits that are being marketed as over the last 6 months in the stores? Or has that not really occurred yet?