NatWest Group plc (NWG) Earnings Call Transcript & Summary

Look, we're -- maybe as an introduction, obviously, the topic at the moment is we're finally sort of going to a more normalized sort of post-COVID world, and now we have all the sort of political -- sort of geopolitical uncertainty.

Maybe we can start off how you're navigating, how NatWest is navigating the whole current uncertain situation and what are your key sort of thoughts on this.

Yes. I mean, obviously, the Ukraine situation is very distressing for everyone. From a bank's perspective -- our bank's perspective, we have no operations in Ukraine and Russia and very de minimis exposure. So I think that's from our perspective. Clearly, the focus that we have had in the short term is working very closely with the regulators, the Bank of England on deployment of the sanctions, which are being coordinated incredibly well across the U.K., Europe and the U.S. So operationally, we're very focused on that, very comfortable. And then really, it's thinking about the second-order impact. Clearly, there are risks to inflation. Those are challenges that we've already been thinking about and dealing with. And so how that impacts our customers, particularly cost-of-living increases, what that means for them for businesses dealing with a rising-rate environment, inflation, supply chain. Those are all things that we've been actively talking to our customers about and managing those. So I think it's really very little direct impact, obviously, making sure we're supporting all of the efforts around sanctions, and then it's really thinking about what the impact it is from our customers just on an inflation perspective. But really from -- a driver for us, it's really unemployment that would be a big influencer. U.K. balance sheets, both on the consumer side and the business side, have a significant cushion and liquidity and balance sheets that have built up and our focus on things like financial health checks for customers are really helping them manage their household expenses. From a business perspective, we're the largest business bank, dedicated relationship managers, sector specialists. We're working really closely with our customers to make sure they're supported.

Touching on that sort of, obviously, the recovery sort of in the U.K. looks solid so far. I think the employment numbers actually have this morning -- we're still pointing to a very tight labor market. But obviously, the question mark is around what's going to happen to purchasing power sort of coming under pressure soon. And on the CapEx side, we haven't seen sort of -- at least we haven't seen sort of a material pickup, or at least the corporate loan growth hasn't sort of revived. How do you see that recovery shaping up? And what are you looking forward to with the current context in mind?

Yes. I mean, we've given income guidance for this year of above 11 billion, which I think gives you a sense of the recovery that we're seeing. What we've seen coming into Q4 and into this year is a continuing strong recovery from the pandemic consumer debit card spending, credit-card spending back to pre-COVID levels, strong demand as well as balance sheets remaining very robust. Mortgage growth continues to be very strong. Obviously, the market is competitive, but we're seeing more of a balance now with rising rates coming through of sustainable returns in that space, which is good, and we're continuing to grow that business very well. We're seeing very low levels of distress. Obviously, we're not exposed to the subprime, the near prime part of the book. Our book is largely secured. Our mortgage book is 90% fixed but good demand coming back, good recovery on the consumer side and travel not yet coming back fully. So that is a continuing area of growth, so we feel good signs there. And particularly with the diversification and spread across our book, we've obviously gone back into unsecured. We've seen good growth in that area but in a very responsible and clear way. On the business side, there has been a big overhang of liquidity in the commercial market, and we support across from entrepreneurs to small businesses, mid-corporate and large corporate and infrastructure. So it's a broad range. And what we've been seeing is that recovery has been going well. There's still, as you say, muted demand for new investments. But we've seen good trends. Working capital lines are being utilized, invoice financing being drawn down, which shows businesses are transacting and building their working capital lines. The performance of the government schemes repaying well, and in places like infrastructure and ESG very strong, so very strong growth. So in the mid-corporate side, again, good demand coming back. Still a demand-side issue, I think. We're very focused on where we can see growth, but certainly a stabilization, I think, of balance sheet and now that demand coming back. And I think what we would expect to see is that continuing recovery. It's dependent on business confidence, which is good. Obviously, we need to keep an eye on what the impact of inflation is. But that demand's coming back. Defaults remain at very, very low levels, procyclicality very low, corporate balance sheets in good health, and starting to sort of see that post-pandemic recovery, and confidence continuing. So we think the outlook from that perspective is good. There are key segments which are growing very well, infrastructure, ESG, very strong demand, mid-corporates starting to scale, small business stabilizing. So we would hope to see that demand come back as we continue through the year.

Okay. Obviously, rates is a very important lever in your business, probably the most important. The market's now pricing in -- well, it's had a bit of a round trip. I've got here over 1.75%, I think it's closer to 2% at the moment, level of rates next year. And obviously, so far, we've had 2 rate hikes, probably a third one this week. And we haven't really seen a significant pass-through to savers. Maybe you can touch on that. And how do you expect to benefit on rising rates? And obviously, the reply from the audience is that people expect lower beta for longer. So maybe you can address that as well in the context of the question.

Yes. So look, I think rising rates clearly a benefit for us, and we benefit from the rising rates more than offset the challenge on the mortgage side and a much more balanced return across our retail book. And so we gave guidance of above GBP 11 billion of income. Rates is one part of that, but clearly, we benefit from that. But that assumption is based on -- we anchor that to an assumption of where it's going to 1.25% by Q4 '22. So clearly, as you say, when I looked yesterday, the rate assumption was at 2%, but it's moving a little bit. But let's see. But I think for us, those raising rates give us a balanced return across our retail book, and those rising rates are positive for us. Clearly, as the rates come through, we would expect to see more pass-through. By the time we get to the second or third, we would look to pass through more of that, and we take a very careful view on that around product and segments and customer segments, and we would review that at the time also based on the competitive environment. But rising rates are clearly a positive for us from an income sort of perspective.

Obviously, there's a debate on the other side of the balance sheet sort of around some of those rates benefit being competed away, obviously, in particular in the mortgage market. How would you describe at the moment the competition in the segment? I think in the recent results, you called out 60 basis points application margins. And we've picked up actually, it could be even lower at the beginning of this year. I mean, more than the spreads itself, which would be interesting to gather your thought is maybe how do you think about sort of the pricing. You have a very healthy sort of liability margin. So do you look at this as a whole -- as the margin as a whole? And when you think about some of the competitive dynamics, it feels to me that some of the challengers are going to really struggle to compete with so compressed, sort of mortgage spreads. So maybe you can touch on a whole sort of competitive environment that space and your high-level thoughts on competition?

Yes. I mean, look, the market has always been very competitive. And I'm very comfortable with our ability to compete. We continue to grow our market share, but we do that in a very considered way. I'm always going to balance volume and value. I think with -- what you're seeing now as we look at our retail business across the whole balance sheet and the balance between the asset and liability side, not just the mortgage pricing and the increase in rates sort of more than offset the sort of competitive pressure on the mortgage pricing. So I would look at that across the whole. And we certainly see for our retail business, NIM continued to increase through the course of this year. So it's the benefit of both. We are able to compete effectively. You've seen real volatility on the swap curve. We've put through almost 20 price increases into our mortgage pricing. So we're applying a very disciplined approach to how we go into that market. We do have the benefit of scale. We are able to compete effectively, and we think very carefully about what balancing volume and value. We're not going to chase the market price down. We're not going to chase volume. We're very confident that we can be agile and compete and continue to grow share at the right price and across the retail book, that balanced NIM will continue to increase for us this year. We've been targeting a lot of our investment on the customer journey for our customers. You can see that we've increased our retention on mortgages. That's really attractive for us. Our investment on digital mortgages being able to renew your mortgage in anywhere between 17 -- 7 and 14 minutes, all online, and those customers then cross-sell into other products for us. That makes it a very attractive position. So with 19 million customers good share in current accounts, which is growing a very competitive and agile way to compete on mortgages and think about it across both sides of the balance, sheet that continues to be attractive for us.

Maybe to move on to the corporate side. There's been a few changes in terms of the organization. You've created a division in commercial and institutional, which include RBSI, Commercial Banking and NatWest Markets. How do you expect that to improve the offering? And what are you seeing in terms of the recovery in that segment. Until now, corporate lending has been pretty muted we've discussed, but maybe this new offering is an opportunity to revamp that business or...

Yes. Yes. I mean, look, I think of the great advantages we have of the spread of our capabilities is the ability to deliver more to our existing customer bases across the spread of our franchises. Last year, I bought private banking to create a wealth division supporting our affluent customers, which are in retail, and that closer collaboration, delivering the expertise of our asset management business, it keeps into our affluent customer base. We've seen, as you saw last year, 17% increase in our growth in AUMs, GBP 3 billion net new money. That's about bringing the best of the bank to all of our customers. So as we bring commercial and institutional together, we're taking our commercial business, which -- we are the #1 in the market, both from NPS and scale in mid-corporate and SME as well as a significant share in corporate, bringing NatWest Markets now that the restructuring has largely completed, which is really a strong product engine to support that customer base and then RBSI, which is a -- has a very strong funds capability as well. And just -- that close a collaboration means that we can deliver more of our products and services to our customers. So if, for example, you take our infrastructure clients where we have very strong expertise covered by our infrastructure team in commercial, our markets business can access the markets for them with the products, access to debt capital markets, bonds, financing, and our funds business can bring in distribution as well. So it's really putting much more of our customer franchises together so that we can create much shorter distance and collaboration, which we've done very successfully with that change I made to affluent last year. Sorry, I didn't answer your second question. I apologize. On corporate growth, sorry. So yes, demand has been more muted. I think what you saw during the pandemic is the capital markets continue to be very open, and so a lot of corporates manage their liquidity incredibly well to access capital markets, which is why we saw as well a strong performance through our DCM and Capital Markets business. So corporate balance sheets are very liquid, very well-capitalized. We're seeing strong pipeline but starting to develop more stronger growth in things like ESG issuance where we have a very strong position, leadership position in our ESG side. So as demand sort of comes back, we're starting to see stronger pipelines, more demand. But that diversified funding has been why there's so much liquidity sitting there at the moment. But again, as we come out of the pandemic, as demand comes back, we're well-positioned and have the right supply and positioning to support that growth.

Touching on NatWest Markets. Obviously, it's been disappointing in Q4. You made the point of the full year results that with the restructuring of the business now complete, performance should improve. And I think you had said that, year-to-date, the performance was in line with expectations. Is there -- just to help us with -- I'm kind of looking for reassurance. If you -- was there anything in the repositioning of the business that drove the negative sort of FICC revenue prints? And does a new divisional setup mean we'll see increasing volumes? Is the visibility on that business improving? Anything you can reassure us?

Yes, I mean the way I would think about NatWest Markets, if you think about the strategic direction I've taken that business on, it was really to refocus that business around much tighter use of capital deployed to support our core clients, corporate, commercial and institutional clients and really be focused as the core product expertise that we need in order to support the growth in our core franchise. So we've refocused that business very significantly, simplified it very significantly, and obviously reduced the capital that is deployed into that business. We also said as we restructured that business, it would be capital-accretive. So GBP 1.25 billion of capital sort of sent back up to the group from NatWest Markets as we've resized it. The currency and FX businesses have been performing as expected through the course of last year, particular as strong growth in our ESG, and it was really on the fixed income sort of part of our business in Q3 and Q4 that was disappointing. Combination of a couple of things, one, very difficult markets. I think everyone saw that the markets were very difficult. And secondly, that was the area we were doing the most significant restructuring on. And we made those final decisions around simplifying products, exiting markets to really size that business to where we wanted it to be. And so that's now largely complete. We would expect that business to stabilize as we go forward. And then the FX, the currency, the DCM business, to continue to grow and perform very well. So I think that the restructuring is largely complete from the choices around products and capital and markets and front office, and is, I think, more streamlined and focused around supporting the core business, and that collaboration with our leading commercial and corporate business bringing that together will allow us to deliver that. I think the thing to remember is, I'm not creating a full-service investment bank. This really is a very focused product delivery engine to support growth in our core business.

Okay. Changing to costs. Obviously, it's an issue for the whole economy. Inflation is an issue for the whole economy. And now it is not an exception, you have to deal with it. And you changed the cost guidance from minus 4%, and now you're targeting minus 3%, including restructuring. So it's not the same sort of definition. The more -- holistically, when you think about costs and cost inflation, are you -- sort of this change in target, is it purely driven by cost inflation? Or have you reassessed sort of how you think about investments as other players have done, not only in the U.K. but internationally? So how do you think about costs? And how do you decide really what's the right amount of money to invest?

Yes. I mean, we obviously have a strong track record of delivering sort of cost efficiency within the business. And when I set out the strategy 2 years ago, it was really focused on continuing to drive efficiency and digitization and straight-through processing within our organization. And we're 2 years into a GBP 3 billion investment program. 80% of that investment is in digital data and technology. And you can see the benefit of that investment coming through. 60% of our customers in retail are now entirely digital. That is how they interact with us. That is their primary interaction. And 90% of our retail customers have their needs met digitally. And the investment that we've been making in digital and customer journeys, you can see through improving NPS scores but also some of the straight-through processing. So just to give you a sense, in 2019, our account opening journey, only 17% of that was done through straight-through processing. It's now 70%. So that's the type of investment that we're driving, which is delivering real value productivity, efficiency and growth. We're acquiring primary banking relationships in retail because of those improving performances. So we're investing significantly in the business. We're also ensuring that we have excess capital that we're generating from our business and a clear capital distribution plan as well as continuing to drive cost efficiency from the business. Now the cost guidance I gave really trying to simplify our story for you, a much simpler, clearer cost story. On the go-forward business, our GBP 6.8 billion of operating expenses, excluding conduct and litigation, will reduce by 3% in '22 and '23. That is a result of the benefit of both the investment and the efficiency that we're driving. We have taken into account inflation. We have a higher degree of engineering staff, data staff, that type of thing, which are more expensive as well as ensuring we're paying fairly and building in inflation fairly to our employees. There are higher costs to the business, things like National Insurance going up. There are -- as you get back to a post-pandemic world, a little bit of back to normal in terms of people coming back into the office, of course, not going back to the same level. We're keeping those benefits. So we've built in inflation, whilst also protecting that investment we're making in the business and ensuring we're continuing to drive that accelerated digitization, data acceleration that you're seeing in our business overall.

Before -- maybe last one from me before we open up to the audience on capital return. The guidance is for 14% CET1 by year-end. First of January is 15.9% pro forma. That's a lot of distribution despite what some people replied on our numbers is probably GBP 4.5 billion, even GBP 5 billion or more in a single year. Maybe can you run us through the logic of that fast distribution versus the temptation maybe to distribute over a longer period of time, that -- sort of that temptation, in my mind, might make it easier also for the government to sort of gradually sort of sell down. But maybe you can -- sort of how did you come up with that?

Yes. So, I mean, I think sort of the key guidance I've given you is really this business, given its risk diversification, given the capital-generative nature of the business, we have capital-generating businesses that 13% to 14% CET1 is the right sort of level of CET1. It's also important for our RoTE targets where I said those will be comfortably above 10% as well as we're continuing to invest in the business. So if you think about the shape of the business, we're generating very strongly focused on keeping a safe and resilient balance sheet that you can see that we have, a business that is generating capital with good risk diversification as well as a good distribution story. Now we have excess capital. I've been very clear, my preference is to distribute capital to shareholders. I've given guidance that I would expect to distribute a minimum of [ GBP 1.1 billion ] every year. We have a 40% payout ratio. You've seen that I've announced dividends that would mean GBP 1.2 billion through. The course of last year, we would have distributed GBP 3.8 billion so clear intent of what we will do, and we'll do that through a mixture of ordinary 40% payout ratios and specials if we need to. Clearly, I want to keep the capacity to participate in any sell-down by the government and directed buybacks. If they choose to do that, that's up to them. But I think that is a good use of our capital. And also, I announced market buybacks as well. So there are lots of different routes that we are pursuing there. Equally, I'm investing in the business. That's already built in. And then we do have capital if there are opportunities that we think would be accretive to shareholder value. You will have seen that I've bought a few years ago, a mortgage book. For Metro, we recently acquired a fintech. We used the money to augment our youth strategy, which is growing very well. So there are lots of different routes that we have. We're targeting to get to 14% by the end of this year, 13% to 14% by the end of next year, comfortably above 10% ROCE. So I think there are lots of options there that hopefully gives people color around what our intent is. But I think most importantly, what we're building is a business now that is no longer a restructuring story. It is a strong franchise, good risk diversification with good growth potential. You can see the growth coming through organically, whether that's through our primary customer acquisition in retail, strong mortgage growth, our reentry into unsecured, which in a very balanced risk way is now growing our market share up at 6.4%. Our new credit card saw 33% new credit cards. Our affluence Wealth business growing very strongly, 16%. And the powerhouse of commercial and corporate well-positioned for recovery in demand as that loan growth comes back, and a refocused NatWest Markets that gives product power to that growth. And obviously, with our ESG capabilities, we've committed GBP 100 billion target to grow in climate, green and sustainable financing. We grew GBP 17.5 billion last year. So I think, hopefully, that whole story as well as that strong investment story accelerated digital straight-through processing. Predominantly, investing in data and technology should give comfort both on capital accretion and growth as well as a steady distribution story.

That's very clear. Thanks for that. We've got time for a few questions. Who wants to ask the first question. There's one over there, James.

If rates go up as much as the Mark is forecasting, rates are going back to where they were pre-GFC. And pre-GFC mortgage spreads were 30, 40 basis points. and you were making more of the margin on the deposit side. I mean, could you see a time where -- considering the amount of liquidity, consumer credit quality is very strong where mortgage margins go ever lower. And at what spread do you stop making the returns you talk about that are above cost of capital, please?

Yes. I mean, the way I would think about it is think about we've been in an artificially low rate environment. And now we're going back to where we can make returns on both sides of the balance sheet. That's how I would think about the retail business. So rather than just being mortgages, which are a good asset class, but we can actually offset lower mortgage rates with higher sort of deposit rates and actually look at the overall NIM on the retail book as well as the diversification into products. So we're comfortable, as I look forward, that the deposit rates and the overall return on the balance sheet for our consumer business will be positive, and I'd look at it on more normalized both sides of the balance sheet return perspective.

Next question, please. Alex, there.

Alison, thank you very much for the update. Question on Ulster. Can you just help us understand the GBP 600 million cost attached to your exit from Ireland? And what is the driver of the cost? And what is -- I mean, what is the degree of visibility you have on the GBP 600 million?

Yes. I mean, with Ulster, obviously, I've talked about the decision that I made to withdraw from that market, and we're doing that in a very careful and considered way. That is being accelerated with some of the transactions that we've announced, the AIB and the PTSB transactions, which represent now around 60% of the balance sheet. We continue to expect that withdrawal to be capital-accretive during the life of the withdrawal. In terms of the cost of exit, we're exiting a bank, and we're exiting a market. So those costs relate to a mixture of winding down the bank, redundancy costs, the cost of technology. It is the withdrawal. Obviously, as we exit, we'll do that in a very measured way. But hopefully, the guidance I've given you is that and as we continue to execute transactions that may accelerate that we'll let you know about it. But the cost is really as we continue to exit that market. But it will be capital-accretive, just to reiterate.

And the remaining 40%, what visibility do you have on selling or exiting for the remaining -- because you said 60% is almost done, and the remaining...

So 60% of the asset book, we have signed transactions to exit. Of the 40%, that is made up of a tracker mortgage book and a small NPL book. You will have seen we've got a very good track record on managing NPLs and the tracker book. There are lots of interested parties in that. So if and when we sign more transactions or we have plans on that, we'll let you know about them. And then on the liability side, we have a very clear plan on how we would manage our withdrawal in a very considered way. As you can see from the 2 transactions that we have announced, those assets involve moving to include both people and, in some cases, branches. So we are doing it in a very thoughtful and considered way.

Next question. Maybe I've got a couple, but maybe one follow-up to this one. We sometimes receive questions on the deposit side of Ulster -- the exit of Ulster. When you're selling these businesses, are you going to -- is there a risk you can find yourself with some of the deposits that you're going to struggle to...

Yes. I mean, we have a very clear plan on how we will manage that. Obviously, the transactions that we've signed are the asset side of the book. One of the things as we were considering how we exit in a thoughtful and managed way was not tying ourselves into long-term sort of TSAs, which is why we are selling it on an asset basis. On the liability side, despite announcing our withdrawal, our deposits remain very stable. But we have a very clear plan on how we will manage that transition, working very closely with customers, working very closely with the industry. As assets move, I would expect customers to want their deposits to move with them. So there will be partly that. And then there's a very considered way in which we're managing the liability with our customers in Ireland to make sure that we end up getting them to the right place. The other banks are very keen to have them as well. So we'll ensure that's done in a very careful way. And then we have, as part of our transaction, ensured that as we wind that down, if there is a residual left, that we have solutions to be able to manage that in order to give back the license at the right point.

The [ rate of ] look in Europe maybe makes it easier, maybe. The other question I had is on investments. You touched on credit card sort of recovery. And in the past, this is an area where you're underrepresented. And in the past, when you would discuss M&A or add-ons, you've got, what, maybe if something is interesting in cards or in payment. Where do you see the parts of the business where you would be open to sort of complement your offering with M&A when we think about how much capital is available for distribution in that context maybe?

Yes. I mean, look, I think we've been very clear that we have capacity and are showing our ability to grow organically within our business, do more with our existing customers. And you can see that with the results that we're driving. Clearly, we are underweight and unsecured. We have capacity to build on growth in wealth and affluence against strong-performing business already. And we're continuing to build and grow our data capabilities, which are driving a lot of growth. I think if we were looking at M&A, it's really in those areas where we could augment that strategy in terms of continuing to drive growth, not disrupt it. So we don't want anything that's going to significantly disrupt our technology transformation, where it can add capability. The acquisition of RoosterMoney is a great example of a fintech that fills a particular need in a youth strategy which is growing very strongly or asset books that would add to it. So those are the areas that we would look at, but it's got to offer compelling shareholder value. It's not got to be distracting to our technology transformation, and it's got to be capability adding. So that would be the bar that we would set when we look at things.

Any questions from the audience? James, another one.

Alison, just on, I suppose, culture costs, you know, employee morale, I've been doing this job a long time, and NatWest seems to be in cutting costs for 15 years. When does it kind of stop, and how is employee morale with this? Because it's a mindset that people -- it can be taken positively where people sort of realize they've got to get cost down to get income up, but it can also be quite bad for morale and employee retention and things like that. So can you talk a little bit about that, please?

Yes, absolutely. Well, our employee morale is very high. And so we do a sort of regular survey, and our employee engagement scores are well above the global financial norm. So we have a really engaged and motivated and performing sort of set of colleagues who are feeling very supportive. One of the things about what we're doing, we're investing in the business, and we're investing for growth. And that's a really positive story for employees to be part of. And if you think about the example I gave on that straight-through processing, that's a really horrid colleague experience if it's very manual, and it's lots of complaints and the customer experience isn't great. So although that changes people's roles, it does create a better colleague experience. So when I talk about customer journeys, internally, I also talk about colleague journeys and investing to make the colleague experience better, which I'm investing for growth. But we're also -- I talk about being a learning organization. So a big part of our culture is as rapidly as our customer behavior is changing, our jobs are changing as well. So we have a talent academy, we have a learning academy where we're helping our colleagues retrain for the future as well. I have, for example, a group of colleagues at the moment whose jobs have -- no longer exist who are retraining to be software engineers because that is a future skill that is part of what they want to do. A lot of the investment in digital and data tools make my colleagues' jobs much easier, allow them to be more effective, allow them to do a better job. And you can see our NPS is improving across our customer journeys, retail banking for us, which has been a bit stuck on NPS for a number of years, is improving because of the investments we're making in colleague and customer journey. So yes, costs are always difficult. And it does affect people. But I think when you have a purpose strategy, which people are really bought into about creating long-term value, our colleagues are part of that long-term value. We're investing in them. We're training them. We're developing them. Whether their future is with us or someone else, they are going to be well-versed and well-supported in what they do, and we can see that through our colleague schools. So I spend a lot of time asking my whole executive team on colleague engagement. And also, we're attracting talent into the organization as well as growing. And we can see a much more diverse workforce. 43% of my top 4,000 layers are female. That is creating a really positive dynamic and culture for people to want to be part of.

One question there at the end.

I have a question about the self-assessment for resolution. I think we're expecting those in June. And it's just a very broad question. Do you feel -- I know it's a horrible question as well, actually. Do you feel completely ready for resolution, clean balance sheet, any liabilities that might need to be looked at or, in fact, any structural changes that still need to be made?

Well, no structural changes. A huge amount of work on the resolution -- planning in the resolution regime, which my team and all of us have been working incredibly hard on. So I think it's a huge amount of work for everyone. I think we're in good shape. We're well-prepared. We've been working very hard on it, but no structural changes for us.

Okay. Just to follow up on that. And I know there's still the Dutch subsidiary with a lot of debt there. That's not causing any difficulties from a resolution perspective...

No. Our Dutch -- our N.V. is an important part of our non-ring-fenced bank and seen part of NatWest Markets in terms of the shape of that. And obviously, we think about that in the whole.

Any last questions? Maybe I'll finish up with if there's -- I'll finish up with a question. It didn't actually come up at Lloyds either, so that's a sign of confidence, but maybe some reassurance around the guidance of lower provision charge than normalized levels this year. With the concerns we get, in particular, from [ JRPMs ] around stagflationary shocks and the -- squeezing the consumer, maybe some reassurance of how confident you feel on the asset quality front and the high bar for any asset quality cycle that could be at the moment. I think you still got the 800 post-model adjustments from memory, but maybe you can touch on that.

Yes. I mean, look, I think when you look at the shape of our book, we've really focused on risk diversification, and our book is largely secured, 94% secured. So the shape in risk diversification of our book is very strong. When I look at the level of impairments and distress across our book, very, very low. I mean, you saw through the course of last year, we were not seeing the procyclicality come through, and I think that is as a result of the strong support put into the economy during the pandemic and now recovery coming through. We've obviously been very focused on making sure the shape of our book is actively and positively managed both from a capital and risk perspective. We're very comfortable with our coverage levels. But we've actively managed our capital. So the action in our commercial and our NatWest Markets teams to reduce capital, both in areas of business that we don't want to be in but also as we manage the portfolio of risk has meant that our impairments and single-name impacts have been very, very, very low. As I look going forward, balance sheets are in very strong position. Coverage ratios are good. The sectors that we have under heightened watch coming out of COVID, we're not concerned around the impairment outlook. And we changed our through-the-cycle guidance to 20 to 30 really given that view of where we think are through-the-cycles, and we're not expecting to get to that level. On our post model adjustments, we've reduced the amount held for economic uncertainty, but we will keep that under review, and I will always take a cautious view on that. But overall, when we look at the book, very well-diversified from a risk perspective, very low levels of distress. We're not seeing any signs of concern or what we would call our forward-looking indicators coming through at the moment. But we actively manage our capital and our portfolio, and we'll continue to do so and manage that capital from a risk lens so that we have a strong and resilient balance sheet.

Great. Well, that was a very comprehensive overview. Thanks very much, Alison. Thank you very much.

Thank you.