NatWest Group plc (NWG) Earnings Call Transcript & Summary

Good afternoon, and welcome to NatWest Group Q1 Results 2023 Fixed Income Call. Today's presentation will be hosted by CFO, Katie Murray; and Treasurer, Donal Quaid. We also have Head of Debt IR, Paul Pybus; our Head of Treasury DCM, Scott Forrest on the line for questions. After the presentation, we will open up for questions. Katie, please go ahead.

Good afternoon, everyone. Thank you for joining our quarter 1 fixed income results presentation. I'm joined today by Donal Quaid, our Treasurer; and Paul Pybus, our Head of Debt IR. I will take you through the headlines for the quarter and then move on to some of the detail. Donal will then take you through the balance sheet, capital and liquidity, and then we'll open up for questions. So starting on Slide 3. Our strategy continues to deliver against the backdrop of increased market volatility since we last spoke in February. We are well positioned both for the upside as we build on our strong customer franchise to drive targeted growth and for the downside as a result of our strong balance sheet and liquidity, high-quality deposit base and disciplined risk management. We delivered an operating profit of GBP 1.8 billion in the first quarter, an increase of 49% on the same period in 2022. Attributable profit was GBP 1.3 billion, up 52% on the first quarter last year. Our return on tangible equity increased from 11.3% to 19.8%. And income, excluding all notable items, grew 37% to GBP 3.8 billion. Costs increased by GBP 240 million, which includes the one-off payment we made to staff in January to help manage the rising cost of living. We continue to focus on tight cost discipline. We expect to generate and return significant capital to shareholders this year and intend to maintain our 40% payout ratio. We have completed more than half of the GBP 800 million on market buyback announced in February. The government shareholding now stands at just over 41%, and we have regulatory permission to undertake a directed buyback, so any transaction remains at the government's discretion. Turning to Slide 4 and an overview of the balance sheet. We have seen an expected reduction in deposits during the quarter, which Donal will talk about later. Our funding is well diversified and our loan-to-deposit ratio is 83%, resulting in surplus deposits of GBP 53 billion. Our liquidity coverage ratio of 139% is well in excess of minimum requirements with headroom of GBP 43 billion. On the asset side, we have a well diversified loan book where our top 10 wholesale customers account for around 5% of total loans. We have limited exposure to commercial real estate, which is around 5% of the total book. 93% of the personal lending is secured, and our mortgage books have prudent loan-to-value ratios with an average of 53%. The book's performance demonstrates our strong risk management with low levels of arrears and impairment. Procyclicality remains at low levels, and we continue to monitor this closely. Turning to Slide 5. You can see from this slide that we're making good progress on our objectives and are on track to meet our 2023 guidance on income cost and capital. As a leading provider of sustainable financing, we play an important role in helping our customers transition to a net zero economy. We have delivered over GBP 40 billion of climate and sustainable funding since July 2021 to meet our GBP 100 billion target. In addition to our focus on driving targeted growth, we continue our strong track record of disciplined cost management and investment. We are on track to meet our cost guidance for the year of around GBP 7.6 billion and our guided cost income ratio of less than 52%. And we expect to invest in the region of GBP 3.5 billion over the next 3 years, continuing our digital transformation, which includes improved customer journeys, data analytics, machine learning and robotics. We continue to allocate capital effectively across the business as we continue our phased withdrawal from the Republic of Ireland. RWAs have reduced by a further GBP 800 million in the quarter to GBP 4.6 billion. Around 95% accounts are now closed or in the process of being closed, and we expect the [ Greece ] asset sales to complete by the year-end. As I said earlier, we expect to make significant distributions to shareholders in 2023 and intend to maintain our payout ratio of 40% for which we have accrued GBP 500 million in the quarter. Moving on to net interest income on Slide 6. Net interest income, excluding notable items, was broadly stable at GBP 2.9 billion. Net interest margin, excluding notable items, increased 2 basis points to 327. Wider deposit margins added 12 basis points, reflecting the benefit of higher average interest rates partly offset by lower average deposit balances, ongoing pass-through to savers for which there is a timing lag and ongoing customer migration to higher interest-paying accounts. Lower lending margins reduced NIM by 9 basis points, driven by lower front book mortgage margins. We continue to expect net interest margin for the full year of around 320 basis points. Turning now to loan growth on Slide 7. We are pleased to have delivered a strong quarter of balanced lending growth across the group. Gross loans to customers across our 3 businesses increased by 1.6% or GBP 5.7 billion to GBP 356 billion. Taking retail banking, together with private banking, mortgage balances grew by GBP 3.9 billion or 2% in the quarter. Gross new mortgage lending for the quarter was GBP 10 billion, representing flow share of around 17%. This is higher than normal reflecting our decision to stay in the market during the market volatility in Q4 when others were drew, and for a shorter period between application and completion of mortgages in Q1. Unsecured balances increased by a further GBP 200 million in the quarter to GBP 14.4 billion driven by new card issuance and market share gains. In Commercial & Institutional, gross customer loans increased by GBP 1.5 billion. At the mid to large end, we saw good demand across RCF's term lending and funds banking. At a small end, demand remains muted, although we have seen some deleveraging by customers with surplus liquidity as well as ongoing repayment of government lending schemes. I'd like to turn now to noninterest income on Slide 8. Noninterest income, excluding notable items, was GBP 918 million. We are pleased with the performance of our markets business, which delivered higher fixed income revenues and benefited from currency volatility. Capital markets income grew as we supported more commercial customers with their issuance. Fees and commissions decreased GBP 32 million to GBP 583 million due to seasonally lower spending. Going forward, noninterest income will be influenced by economic activity and customer confidence, as you would expect. Turning now to costs on Slide 9. Other operating expenses were GBP 1.9 billion for the first quarter. That's up GBP 240 million or 12.5% on the same period last year. Excluding the one-off cost of living payments to staff and higher strategic costs relating to our phase withdrawal from the Republic of Ireland, cost growth was around 7% year-on-year. We continue to expect other operating costs of GBP 7.6 billion for the full year, equivalent to around 4% annual cost growth. I'd like to turn now to credit risk on Slide 10. We have a well-diversified prime loan book, which is performing well. Over 50% of our group lending consists of mortgages where the average loan-to-value is 53% or 69% on new business. Overall, we have lower levels of arrears and forbearance in our mortgage book. 91% of our book is at fixed rate, 5% are trackers and 4% is on a standard variable rate. Over 2/3 of mortgage balances are on 5-year fixed rates and less than 1/4 are 2 years. Our personal unsecured exposure is less than 4% of group lending and is performing in line with expectations. Our corporate book is well diversified, and we have brought down concentration risk over the past decade. Our commercial real estate exposure represents less than 5% of group loans with an average loan to value of 47%. We have carefully managed this exposure for several years, reducing absolute exposure and putting away from retail towards industrial. So we are comfortable with the risk in this actively managed portfolio. Turning now to look at impairments on Slide 11. We are reporting a net impairment charge of GBP 70 million for the first quarter, equivalent to 7 basis points of loans on an annualized basis. We have not updated our economic scenario this quarter as we are comfortable they adequately reflect the current macro uncertainty. So this charge largely reflects Stage 3 [indiscernible], which remained stable. Our through-cycle impairment guidance is 20 to 30 basis points, and I continue to see this as an appropriate level for 2023, given both the economic outlook and the relatively benign trends in our book. Our expected credit loss coverage is broadly stable at GBP 3.4 billion, equivalent to 89 basis points of loans. This includes GBP 330 million of post-model adjustments for economic uncertainty, which are also broadly stable in the quarter. We remain comfortable with the coverage of the book, which is not showing any material signs of stress. And with that, I will hand over to Donal.

Thanks, Katie. Good afternoon, and thank you for joining today's call. I will start by sharing some highlights from the first quarter before moving into more detail on deposits, liquidity and capital. I'll then give an update on our progress against our funding plans for 2023 before we open up for questions. Starting with the highlights on Slide 13. We ended the quarter with a strong capital MREL and leverage position, comfortably above the retro minimum with a CET1 ratio of 14.4%, a leverage ratio of 5.4% and a total loss absorbing capacity ratio of 32.4%. The group's funding is well diversified. We have a strong deposit franchise and a robust liquidity position. Liquidity coverage ratio was 139% at the end of the quarter, giving us a comfortable surplus of our minimum requirements with the liquidity portfolio primarily concentrated in central bank deposits. We've made good progress against our funding requirements in the quarter, achieving over 50% of our annual issuance requirements despite challenging market conditions. It was very pleasing to see further progress on our credit ratings this month, with S&P upgrading all NatWest Group entities, recognizing group's strong earnings outlook, resilient balance sheet and solid funding and liquidity. Turning to liquidity on Slide 14. Our liquidity position remains robust. Although we are seeing a reduction from elevated levels with an LCR ratio at 139% at the end of Q1, reflecting around GBP 43 billion of surplus primary liquidity above minimum requirements. Our liquidity coverage ratio was 151% on a 12-month rolling average view. The decrease in the ratio in the quarter was primarily due to a reduction in the customer funding surplus as customer deposits reduced and lending grew, partially offset by treasury funding activity. We continue to manage a high-quality liquid asset pool with primary liquidity of GBP 149 billion and secondary liquidity of GBP 61 million. Primary liquidity is concentrated in cash with GBP 120 billion deposited with central banks. The remaining GBP 29 billion comprises highly weighted government and other Level 1 LCR bonds, the majority of which are held on the balance sheet at fair value. Approximately 4% of our primary liquidity or GBP 6.5 billion is held to collect at amortized cost, so the fair value is not reflected in the group balance sheet. Looking at customer deposits on Slide 15. Customer deposits across our 3 businesses were GBP 422 billion at the end of the quarter, resulting in a loan-to-deposit ratio of 83%. During the quarter, we saw a reduction in balances across our 3 core franchises, from the elevated position built up during the pandemic, reducing by approximately GBP 11 billion, driven by increased competition and tax payments, which were around GBP 8 billion higher than the fourth quarter. Retail banking deposits reduced by GBP 4.4 billion in the quarter, driven by tax payments and higher customer spending. In the Private Bank, the impact of tax was most pronounced given the customer demographic. In Commercial & Institutional, deposits reduced by GBP 2.8 billion, mainly reflecting the reduction in system liquidity. Within Central and other, we saw a further GBP 8.7 billion reduction. Around half of this is the result of our phased withdrawal from the Republic of Ireland, with the remainder due to treasury repo activity. Going forward, our deposit flows will be a function of macroeconomics, changes in net lending and customer behavior. And we think deposit balances at the end of 2023 are likely to be stable to modestly lower than the GBP 433 billion at the end of 2022, although the evolution of balances remains difficult to predict. Looking at the deposit mix on Slide 16. We operate with a diverse deposit franchise with a mix of retail and commercial deposits across [indiscernible] and noninterest bearing product offerings. During the quarter, we saw a limited change between interest-bearing balances, which account for 60% of the mix and noninterest-bearing balances, which make up the remainder. Within interest balances, we continue to see migration from instant access into term accounts. Term deposits are around 8% of total deposits, up from 6% at the year-end and 3% at the end of 2021. Around 40% of total deposits are insured, although this varies by customer type. Across our Retail and Private Banking businesses, 68% of deposits are insured, although this is higher in Retail Banking than in Private. For corporate customers, around 11% of balances are insured, and this will be higher for small business banking customers and for markets and funds banking customers. Our cumulative pass-through is now around 40% across interest-bearing deposits, up from 35% at Q4. And this includes pricing decisions after the base rate increase to 4.25% in March. Turning to our capital and leverage position on Slide 17. Our CET1 ratio at the end of the year was 14.4%. The CET1 ratio is well above the current maximum distributable amount of 9.5% and above our target range of 13% to 14%. This leaves us well positioned to participate in a directed buyback from the government, should they choose to sell. Our total capital ratio for the first quarter is 19.6%. Given our CET1 target range of 13% to 14%, we expect to operate with optimal levels of AT1 and Tier 2 capital relative to minimum requirements. We have a comfortable AT1 position with GBP 3.9 billion equivalent in issue, an AT1 ratio of 2.2% compared to a minimum ratio requirement of 2.1%. We have no near-term AT1 considerations with the next call date in August 2025. Our Tier 2 ratio is 3% with our most recent issuances last December and in March of this year. Our U.K. leverage ratio was 5.4%, leaving around 115 basis points of headroom above the Bank of England's minimum requirements. Moving to Slide 18 and our quarterly movements in CET1 and risk-weighted assets. We generated 50 basis points of capital pre distributions. This includes 72 basis points of capital from earnings, partly offset by the change in IFRS 9 transitional relief of 8 basis points and risk-weighted asset growth of 16 basis points. The ordinary dividend accrual is equivalent to 29 basis points. RWAs increased by GBP 2 billion in the quarter to GBP 178.1 billion. Credit risk or RWAs increased GBP 1.7 billion, primarily due to stronger lending. Operational risk RWAs increased following the annual recalibration exercise. This was partially offset by a GBP 0.8 billion reduction in market risk. Looking at our issuance during the quarter on Slide 19. I'm very pleased with the transactions we've executed in the quarter, particularly in light of the challenging market conditions. And again, thank you for your continued support for NatWest Group and NatWest Markets. From NatWest Group, we issued around GBP 2 billion equivalent in senior MREL format, including a $2 billion dual tranche trade as well as a EUR 500 million social bond, with proceeds dedicated to supporting women-led enterprises, the first such issuance by European Financial Institution. In addition to issuing senior MREL, we also issued EUR 700 million of Tier 2. And finally, from NatWest Markets Plc, we issued EUR 1.5 billion in fixed and floating formats. Turning to credit ratings on Slide 20. It's pleasing to see further progress in our credit ratings this year. This month, S&P upgraded the ratings of all NatWest Group entities. The NatWest Group Holding Company is now rated BBB+. The ring-fenced bank core operating companies are now A+ and our non-ring-fenced banking operation companies are now single A. The outlook for Moody's, S&P and Fitch are stable across all group entities. We will continue to proactively engage with the agencies to support ongoing progress in our credit and ESG ratings. With that, I'll hand back to Katie.

Thank you, Donal. I'd like to finish with guidance on Slide 22. For 2023, we continue to expect income, excluding notable items, to be around GBP 14.8 billion. Net interest margin of about 3.2%. And group operating costs, excluding litigation and conduct to be around GBP 7.6 billion, delivering an improvement on the cost-income ratio to below 52%. We anticipate a loan impairment rate in the range of 20 to 30 basis points. And together, we expect this to lead to a return on tangible equity of 14% to 16% and to be at the upper end of this range. We expect to return significant capital to shareholders this year with a payout ratio of 40% and capacity for additional buybacks. In the first quarter, we have already accrued just over GBP 500 million for deferment payments and completed more than half of our GBP 800 million on market buyback. And with that, I'll open the line for questions.

[Operator Instructions]. And as we wait for you to ask, we have a few pre-submitted questions. And the first asks, can you tell me about your funding plan and expected currency mix for 2023?

Donal, do you want to take that?

Yes. Sure. Okay. Thanks for the question. So from -- we're 50% complete, as you can see in our slides, year-to-date. So in effect, what we have left -- if I remind you, what we guided to, I'd say, full year results. So from a Tier 2 perspective, we said we had up to GBP 1 billion to do. You see that we did a -- we did one transaction. So there is a further transaction that we'd look at probably in H2, but we'll keep our options open on that. And then from senior MREL, we guided to GBP 3 billion to GBP 5 billion. So from the midpoint there, we are 50% complete with the $2 billion dual tranche and also the EUR 500 million social bond. So I would expect to be active in Q2 on a senior MREL perspective. We will, as always, keep our options open from a currency perspective. But I think sterling, euro is probably too that we would look at just given current levels. So expect -- probably expect at least 1 to 2 MREl transactions in Q2.

Our next question comes from Rob Smalley of UBS.

Just wanted to talk 2 things: one on -- if you could walk me through the provision line, why the 7 basis points? You're keeping your economic assumptions the same as they were to start the year. And your base case is still pretty big fall off in house prices and commercial real estate. So if you could just walk me through how that squares up with the provision where it is? The second part is, how does that translate for the rest of the year? And are you concerned about a market perception with that going up to meet the guidance? And then third, unrelated question, one of your competitors bought Silicon Valley Bank's U.K. operations, and there is a change in -- or an allowance in the ring-fencing rules around that. Can this prompt the discussion about changing the ring-fencing rules and some of the corporate structure for banks in the U.K.?

Thanks, Rob, and thanks very much for joining us. I'll take the first one, and then I'll let Donal talk a little bit about the second one bit. If I look at the provision line. So in terms of why 7 basis points, when the reality is this book is incredibly -- it's performing incredibly well. If you look at the underlying at 7 basis points, what you actually saw was a quick coming through from C&I, reflecting the lack of any kind of deterioration within that book. So where we've made provisions that kind of move from stage 2 back into stage 1. There's the normal kind of stage 3 charges you'd expect to see in retail, but again, not kind of significant, which is why you get to the GBP 70 million charge. If I look at the kind of the economics that are -- I mean, obviously, we built them in at the end of the year. We then re-examine in each quarter. And what we kind of felt was they were broadly basically where they were, and we're not keen to kind of keep moving economic lines by small amounts, rather wait there's actually something more significant. So we'll do another review of them as we go into Q2. And when I look to the 20 to 30 basis point guidance we've given you, I'd probably say that I'm increasingly comfortable about the kind of that number in terms of where we'd land on that, particularly given where we've kind of started at 7 basis points. We probably expect to be a bit lower -- the lower end rather than at the upper end in terms of where that would be. But as you -- as we look at the book, it's performing well. If I look at the macro, it's still a challenging kind of macro environment. We would expect companies to have, at some point, to take a bit more pain than they are taking. And I think we're also very conscious. It's only Q1. So this -- let's not kind of get ahead ourselves at this point. Let's see what happens or sort of H1 and then into Q3 in terms of making any change on that. And then in terms of Silicon Valley, I mean, obviously, the change they made was very much out of a resolution kind of action in terms of that change. But I mean, Donal, I know you're working a lot on some of the [indiscernible] and things. How would you look at that question?

Yes. Sure. Rob. So no, I think Katie rights. I think the exemption that you've seen from HSBC's perspective is purely under resolution is very, very specific to what went on. But I think in terms of potential changes to ring-fencing rules, we're in the process of just finalizing our response to the first call for evidence, which will be submitted next week. And that's really related to the -- I suppose, the resolution -- potential overlap between resolution regime and ring-fencing regime. And there was, I think -- one of the recommendations, which raised the question of whether ring-fencing is required going forward if resolution is embedded. My own view is I'm not expecting any material change, I think, to those regimes in the near future. Probably more importantly, as we move into H2, it will be the second call for evidence, which will focus on the other recommendations that were laid out in the CET reports and including those at the definition of RFI, non-EEA activity and excluded activities as well. So that's one probably where we'll be more focused and probably there's more potential for change potentially to some of the ring-fencing rules, but we'll probably update if there's any progress on that into. It will likely be into '23 before we get more clarity.

Our next question comes from Paul Fenner-Leitao of Societe Generale.

Can you hear me.

We can.

Just a very quick point on the -- Donal, on the Tier 2, I don't know if your comments around Europe and Sterling were specific to a senior unsecured or also included Tier 2. So you're thinking of doing up to GBP 1 billion. You've done GBP 600 million. So you've got a maximum of GBP 400 million sterling left to do. Obviously, that's a pretty small transaction in euros. And it's probably a pretty small transaction in sterling. I'm just trying to understand what it is that you're thinking there or maybe you go to another market?

Yes. No, what I'd say is Paul, yes, I think we'll be open from a currency perspective on Tier 2 as well, obviously, just depending on the time. I would say I know we did guide up to GBP 1 billion. I don't think we would hold itself strictly to a cap of GBP 400 million or whatever is left. I think we'd be confident the fact doing a benchmark transaction size when we did come. So we'll look across the 3 majors, I think, and decide when the time is right.

Okay. But it could be another euro?

It could. We wouldn't rely on another euro, but I think a number of our recent -- the recent Tier 2 issuance in euro, so we probably will have a preference for another currency, but we won't commit to that at this stage.

Our next question comes from Jesse Norcross of Ninety One Asset Management.

Just 2 questions for me. The third question was just asked by Paul. So in terms of your deposits, particularly on the corporate segment, like noninterest-bearing deposits. Is there any reason for you to potentially look at changing your assumptions in terms of duration and stressed outflow levels, just given obviously the recent volatility in the U.S.? And then the second question really on the recent proposals from the European Commission on implementing [indiscernible] positive preference. I was just wondering if you've had any discussions with U.K. authorities on something similar? Or what your expectations would be potentially if this would be implemented in the U.K. as well? Just from memory, I think there has been a review, but I'm not sure about any updates.

Yes. I'll take that. So maybe starting with the second question. No conversations to date on [indiscernible] references. And no indication that it's something that they're looking at in the U.K., I think any of the kind of comments I think to date I've been really around the financial service concession scheme and potential, I suppose, increases in the level of secured deposits. But again, no active dialog at this stage on that topic. And I think in terms of duration and flow assumptions, I would say when you get events like SVB and CS, you'll always look at your internal assumptions. We're very, very comfortable in terms of the way we approach our risk management and liquidity management is very, very prudent. But again, we have seen comments from regulators around looking at potential outflows, so which is more under kind of liquidity coverage ratio. And again, we'll keep well up to date and engage with the regulator on any potential change. But we're, as I said, overall, very, very comfortable with the approach we take internally on our risk management process.

And maybe just a quick follow-up, if I may, on the Tier 2, actually. Just given your guidance up to GBP 1 billion, but you've already got a Tier 2 tranche of 3%. Yes. My inclination would be to think that then there wouldn't be any Tier 2, but is that correct or incorrect?

Yes. I think probably just -- so far, I would say, point in time, 3%, we do have 2 maturities through '23. June '23 maturity and also December '22 maturity as well. So expect us to kind of -- when we guide that kind of GBP 1 billion it is taken into account maturities and what we said is we do try and run our AT1 and Tier 2 to more optimal levels. So really, there's looking ahead and refinancing that needs to take place.

[Operator Instructions]. We do also have an additional pre-submitted question, which asks, can you give us an update on the shape of your bond portfolio? Do you hedge or your securities in your liquid asset portfolio?

Yes, I shall take that one as well, Katie. So from a bond portfolio perspective, we have actually included some more detailed disclosure on in the fixed income desk. You can see actually our bond composition of our liquid asset buffer is quite small at GBP 29 billion. And the large majority of our portfolio is sitting in cash, 81%. But in terms of that GBP 29 billion of securities, the large majority of it is hedged. And maybe just to give a little bit more detail there. We've also broken it down by the securities component of [indiscernible] and fair value through OCI and amortized cost. So fair value to OCI portfolio, which makes up 77% of it is fully hedged. Within the amortized cost portfolio, there is a small portion of securities there that sit within our RBSI and to the offshore, where those securities form part of the structural hedge in that legal entity. So that would be the only component of our liquid asset portfolio that's unhedged. And you'll see in our full year '22 disclosures, we will disclose all our securities held at amortized cost and the carrying value of those securities as well. Thank you for the question.

We do have another way hand from Stephane Suchet Point72.

If you don't mind, I would like to ask 3 pointed questions on commercial real estate. The first one is, is it possible to know what is the level of provisioning you hold against your commercial real estate portfolio? Secondly, do you plan to expand this portfolio? Because for a number of real estate companies, wholesale funding is more challenging to get. And thirdly, if I may, do you expect more deterioration on this portfolio? Obviously, you made point around LTVs being lower, what do you see on the ground? And do you take advantage of that to expand margin on this part of the portfolio, if I may ask?

Yes, sure. Let me take that. Thanks so much, Stefan. So if you look at the provisions, I guide you to Page 17 of our statement where you can see the -- sorry, that's the BBLs forgive me, the -- forgive me, sorry, Page 16, where you can see in terms of what we've got in terms of the loans and the amount of ECL provision that we have against them. So you'll be able to pull that up. And [indiscernible] my eye is not landing on real estate just immediately. But overall, if I look at the total portfolio, I mean, we've got GBP 377 million of loans, and the total Stage 3 we have against that is GBP 1.7 billion. So it's very small in GBP 1.7 billion, thanks very much, in terms of the numbers. Sorry, I just -- Sorry, forgive me. Thank you very much. So Paul just help from this side. So we've got total loans within real estate of GBP 32.5 million and GBP 229 million of provisions at Stage 3 against them. Total provisions of GBP 441 million. And if you went to your [indiscernible], you'd be able to see how that's evolved. No particular plans to expand CRE per se, happy the size it is within the portfolio. Just at kind of around 4% and a 47% kind of LTV. Obviously, we work with our customers as they're coming up for renewal, we start -- that process starts about 18 months before they actually do renewed to see what they have in mind. So we've worked well over the last 10 years to really kind of limit the amount of exposure that we've got in this place, but make sure that we're exposed to the things that we see as very good credits and very good quality companies within the organization. And then just remind maybe your third point, sorry, stephane?

Yes. It was around margin expansion potentially because self funding is more challenging for some of these companies. And in terms of asset quality, what -- even though LTVs are quite low, what do you see from here, if I may ask?

Yes. I mean, I guess the way that I would look at this in terms of margin expansion is it's not something I would say the philosophy overall for the portfolio was an aimed for the organization. As each of these trade will be coming up for renewal, we'd be looking that on pricing on a case-by-case basis, very much linked to the underlying risks that we're covering and the exposures that they have within there. It wouldn't be -- and obviously, we would look at that time to the funding that we are paying, but it's not something that we go actually, that's a strategic thing that we're going to financially expand that. They'll be priced on an individual basis.

There are no more questions at this time. So I'd like to hand back to Katie for any closing comments.

Super. Thanks very much, indeed. Just as ever, thanks very much for joining us this afternoon. We hope that it was helpful just to be able to touch sides given the volatility that has been in the market. As ever, we also thank you tremendously for your support. We really do appreciate it. And if you have any other further queries or anything you'd like to follow up on, Paul Pybus from our debt IR is always happy to take your call. Thanks very much indeed. Take care, and enjoy your afternoon and weekend when you get to it.

Thank you.

That concludes today's presentation. Thank you for your participation. You may now disconnect.