NatWest Group plc (NWG) Earnings Call Transcript & Summary

Delighted to welcome Paul Thwaite, CEO of NatWest for our next fireside chat. Paul has been with NatWest for over 26 years. We were just chatting.

And thanks for reminding me, though.

Long innings and long way, continue. It's just before he took over as CEO this year. Paul was running the Commercial & Institutional business. And obviously, volatile circumstances...

Maybe we start off just zooming out on this year and thinking about next year. What are your priorities as you kind of look at the group? And on a personal level sort of as you take this role to the next sort of stage, what are you really focusing on into next year?

So first of all, good to be here. Thank you for the invitation. As you say, I know the organization pretty well, I think from a couple of perspectives. One, because of -- you mentioned I was running Commercial & Institutional previously before that, I ran the Commercial Bank and have been involved in the last couple of strategy cycles. So I think that's -- I think I kind of understand the bank and understand the strategic moves it's made, which of those have been successful, which of those haven't or could have gone better. So I think the reason for mentioning that, Raul, is I think that influences what's important to me as I look forward because I've got a good sense of the past. And I do think actually, this notwithstanding the events of the summer, I think most would agree, the strategy that we put together in the tail end of 2019 and launched February '20 to the market in the main has been pretty successful, whichever metric you tend -- you look at. So that's a way of saying, I think at an underlying level, the bank is in pretty good shape. It has 3 good customer businesses, the commercial business, I would say that, but the retail business and the wealth business. I think those businesses are in good shape. So therefore, what does that mean for my priorities, probably 3 things, I would say, first one is continuity. I think it's very important when you get this sort of event in an institution to give a degree of calm, decisive leadership and reassurance about strategy. So that's been a big focus for the last 3 months or so. So that continuity, making sure those 3 businesses are delivering on their strategic targets, their strategic metrics, et cetera, has been a big priority of mine and really trying to, I guess, sharpen the -- sharpen things around productivity and efficiency, which I'm sure or will come back to. So that's been the first priority. I think the second one is having alluded to the strategy in Feb '20. Yes. The context now in November '23 is very different. I think that's very important for people to think about. So I think inevitably, when I think about the quarters ahead or the time ahead, I think the sector and certainly NatWest and me are very focused on cost and efficiency and trying to make sure we mitigate some of those obvious kind of inflationary headwinds. So that's on my mind. I think there are big opportunities to drive value from more productivity and more efficiency. And then the third kind of big macro topic that is very much on my mind and again, is driven by where we are in terms of the circumstances and the context is the whole broad topic of balance sheet management in its broader sense. I think we've got a very robust balance sheet. Our cost of risk with anybody who's analyzing the bank can see our cost of risk is very low. I think we're positioned well, both for downside and upside. That's great. Capital ratio is good. Liquidity ratios are good. But to me, one of the big differentiators as we look forward over the next 12 to 18 months is going to be bank's ability to deploy its liquidity and capital well. And I'm determined that we do that because that's what allows us to generate capital is what allows us to distribute capital. So they're probably some of the bigger themes. Continuity. This isn't the time for a 180-degree turn in strategy because we should accept that the -- we should acknowledge that the bank strategy has been effective. Thinking about the things we can control is self-help. I think costs, capital, liquidity or those things, which were in our grasp -- I can't mold the macro, but I can, from a management perspective with a new management team, make sure I'm focused on that.

And before we run through the business, maybe just to dwell on that macro backdrop for a minute. Obviously, it looks like the interest rate picture has shifted. We were talking about the realities that we have to face now. How does this kind of macro backdrop help NatWest? And what are the risks that you see within that macro backdrop in terms of early warning indicators or any other sort of things that you're watching very closely?

It won't surprise you that we spend a lot of time, as I'm sure you do a whole host of different kind of stress testing scenario analysis, thinking about what this might mean Yes, our early warning indicators continue to be, I'd say, remarkably stable, whether you look at our consumer bank, our small business bank, our commercial and corporate bank. What I'm very alive to is notwithstanding the fact that you've got those stable metrics because of these moving parts, the -- I'm not sure all the impacts of Fed have gone through the system. So I'm still very -- I think I and the team are acutely aware that it might take a while for some of those impacts to work through. So I'm -- I'd say I'm suitably disciplined and cautious around that in terms of the outlook. I don't think we've suddenly hit peak rates and we're through. I think there's still a lot to be vigilant about albeit, I guess most of us probably feel slightly more confident than we may have done several quarters ago. In terms of what that means for NatWest, I think I alluded to it in my first answer, I think we've positioned the balance sheet very conservatively, which I think will stand us in good stead. So where we see opportunities to grow in a disciplined way at the right returns, deploy capital, and we should only deploy capital where it's appropriate to. I think that I see as an opportunity. You can see our LDR ratio, you can see where we are. So I think that's important. But net-net, we've got big market shares in business banking, big market shares in commercial banking, big shares in mortgages. So you can't escape the reality of what the U.K. macro will play out. So we just have to remain super vigilant around that.

Right. Maybe if we start looking at the business, and one of the things that you talked about on the last results call was a shift towards a slightly more competitive position on deposits. And obviously, if you think about the context in terms of your very low loan-to-deposit ratio, very strong balance sheet, liquidity position. What's driven that to flesh out that decision? And then linking into that, perhaps a little bit more color around pricing in the marketplace. What are you seeing in terms of competitive behavior, if that's evolved since you last spoke...

Yes, that's an important question. So on deposit strategy is probably the best way to think about it. I mean we did make a very conscious and deliberate decision to, I guess, defend our deposits. I think that's an important way to phrase it, to maintain our share. This wasn't -- the strategy wasn't to grow our market share. It was to maintain our share. And for those of you who watch us closely, you'll see that those changes started really in quarter 1 of this year, both on term products and on to a certain extent on our instant access. And the reason we took that decision at the time -- in many respects, we're simple because the counterfactual of continuing to lose market share and continuing to lose deposits but obviously impact income, impact customer relationships. Obviously, you're losing high liquidity value deposits as well. So it's a very conscious decision to do that. We launched a range of different products, the quarter 1, quarter 2. There's most significant change in customer behavior. We saw latter part of quarter 2 and then going into quarter 3, and that is really the migration to term product and term deposits. So in a way to me the strategy summary is pretty simple. Defend what you've got because we see value in it. You'll also know that during quarter 2, the competitive environment was highly competitive. There's a variety of offers out there from NS&I, from Santander, from others paying very high rates. I thought important that we defended that side of the balance sheet. So that's the strategy. But what I would say is it was a set of activities that started back in quarter 1, it didn't just start in quarter 3. And if you look at the Bank of England data, you can see for 3 or 4 quarters that our market share in -- certainly in retail deposits was gradually declining. So I think it's a very rational strategy. As I alluded to, the counterfactual of then having to win those deposits back would be even more expensive and more impactful on income. On your second part of your question is, what are we seeing now? I mean I think -- we noted in quarter 3 that we've seen a slight kind of a slowdown in terms of the migration from site deposits or instant access deposits to term, I think logic would suggest, as you hit the top of the rate cycle, that's what should happen. I think many of us we're making assumptions, but you can't control those variables, but that's what I would expect to see in the marketplace. What I would add, though, is I don't think competition for deposits is going to go away. I think if you look at the combination of quantitative tightening, you look at the funding profiles of some of the market participants, different levels of dependency on TFSME. And I do think it is going to be a competitive environment in deposits, and that's going to continue, in my view, through '24 and '25. So maybe the acuteness of the competition might dissipate a little bit, but I certainly fully expect it to be highly competitive. Yes, on the retail side, but -- and it will inevitably be so on the corporate side, given as you'd expect, the sophistication of corporate treasurers.

Okay. That's helpful. And then maybe just linking that into the group's NIM. I think we're going through this process of resetting to a lower level. And there's a little bit of uncertainty kind of where we land towards the end of the year to say the least. But when you think about the sort of broad drivers of the NIM. Obviously, deposits is key to that. Could you perhaps talk us through where you get your sense of comfort when you look at those drivers in terms of that stabilization message that you've given to the market around the margin?

Yes. I guess at quarter 3, our guidance was for the year, we'd expect NIM to be above 3%. So that we're very clear on that. I think there are 3 building blocks or 3 constituent parts, which you have to make assumptions on all of them, so we should be very kind of open and candid about that as they start with deposits. There's 2 dimensions there. There's the migration to turn and the assumption around does that decelerate? And at what point does it top out? Then there's just a general pricing in the market, notwithstanding the shift to term. So I think that's a trend where you can take a view on. Is the pain over? Is there still some more pain to come? That's one. The second big building block and trend is obviously a structural hedge. And the -- as you refinance that at higher rates, that eventually starts to flow through the income [ PE ] statement. So that's the second one. And I think our disclosures are very extensive on that. You can -- everybody can see kind of what's rolling off, what's rolling on and what that would mean? And in quarter 3, it wasn't enough to offset the reduction in terms of the pricing we'd certainly expect that to help us as we go through half '24. Again, we've disclosed that. That's the liabilities kind of impact. The other part of the equation is primarily the mortgage book, and you have this phenomenon of higher-margin mortgages written not exclusively, but primarily during the pandemic period that are rolling off and obviously being refinanced or new origination at much thinner margins. Now if you look at the impact of that on our NIM, you can see it's been relatively consistent actually for 3 quarters, it's kind of 9 or 10 basis points per quarter. At some point, you would expect that to wash through, number one, because the pool of higher-margin mortgages declining all the time. So that will wash through. And then the other part of that is the front book pricing. Front book pricing has been incredibly competitive. You'll have seen from the actions we've taken. We've kind of -- we've drawn and reduced our flow of mortgage market share by a couple of basis points in quarter 3. And you'll see that it's fallen further since then as the pricing has gotten more competitive. But I guess as the change in capital weights for mortgages, kind of works its way through the, let's say, the market. And one would assume you start to see some changes in volumes and demand and people have different views on whether that demand changes in half 1 or half 2. I don't know if there's been anything announced on mortgages in the autumn statement. But as you see that, you'd also expect some recovery, I'd say, in front book margins. So if you take those 3 factors and then link it to your question, what would you -- what would give you comfort that you've obviously got the effect of the structural hedge. You have to take a view on what's going to -- how quickly the mortgages -- kind of high margin to low margin is going to wash through and what origination margins are realistically going to be? And then you've got the confidence level around movement to term, when we've seen a deceleration, but where does that stop? So to me, for those trying to get a handle on it, they're the 3 constituent parts you have to take a view. You can look at the trend data, but you have to take a view and then work that through in terms of what that means for them. Does that give you a sense of it?

And still comfortable with stable?

Yes. That's what we said, of course, the stabilization.

Bank are obviously very complicated companies for generalists to analyze, and we spend all our time on the analyst calls asking very detailed questions but when we kind of boil it down to the heart of it, one of the biggest challenges for the industry has been this mortgage margin spread, right? I mean, there's been obviously a lot of competition. And we've been waiting for a repricing for a while. What are you seeing in the market currently in terms of mortgage market? Are you seeing...

It's still very competitive. Obviously, the volume is very thin. We can all see the market data. then you can see what I'd call the nonbank providers being very competitive. So whether that's the mutuals so you can see that. So it's very competitive. I don't think the risk weights have kind of have worked their way through into pricing and returns yet. And when you've got relatively small supply or demand depending upon which side you look at it relatively small demand. I think it's inevitable that margins are very tight, and that's -- my view is I'm very clear. We need to be very disciplined in that market. I don't want to originate when we've got better alternative uses of capital. So that's why we've drawn our pricing to a certain extent. We've reduced our flow -- and I think I said it, it will come down again in 4. So I don't think pricing has normalized. I don't -- I'm hopeful as demand -- as the market size recovers I think some of the competitive pressures from some of the nonbanks to compete to capture -- they can capture the same volume of a much bigger market and maybe that eases that pressure. But otherwise, we will stay very disciplined. We -- over time, we've built, I think, a very scalable, efficient mortgage machine. You can see that we've moved to the second biggest mortgage provider in the U.K. That's been fine whilst the margins and the volumes are there. If the margins aren't there and the volume isn't there, then obviously, we have to calibrate our strategy because ultimately, I want to make sure we're generating capital and returning it to our shareholders. So I'm very thoughtful about the mortgage market.

Income diversification is something that we were just talking about around. Obviously, there's -- before we get to the commercial side of the business, maybe we spend a little bit of time talking about Coutts and expand that into the broader wealth, mass affluent strategy, where I think you've expressed ambitions of growth. Firstly, how is the sort of momentum -- business momentum within Coutts? Has there been any impact? And when you think about this kind of broader income diversification drive, where does wealth sort of fit into your speaking?

So let me take the Coutts head on because obviously, there's been a significant, what I call brand reputational challenge over the course of the last 3 months, that's played out in -- primarily in the media, I would say. What's interesting is that we've been doing a lot of tracking around brand sentiment, customer sentiment, both for the NatWest brand and for the Coutts brand. The Coutts brand sentiment and tracking didn't really change on the back of events. People very much associated it with the individuals involved and the Coutts brand. And the Coutts brand did take a hit in the kind of heat of the event, but it's actually recovered relatively quickly. And notwithstanding that business flows didn't really change on the back of the event. So it's quite easy to cover off. The broader strategic questions of diversification, I would say, to me, it's important we continue to diversify our income streams. I think that's a stated strategy. It's a strategy that I'm committed to. You can see our dependence on net interest income. That's helped us in certain respects, but it creates vulnerabilities in its own rights. So I think it's very important we continue to diversify our revenue streams, wealth and asset management is 1 aspect of that, but it's not the only aspect. Our payments business continues to grow double digits. Our FX business has grown well as well. So I think there are different levers we can pull on the noninterest income, but wealth management is an obvious one to alight on. As you alluded to, I think the biggest opportunity is really taking some of the wealth management product and distributing it across our mass affluent or retail customer base because what we have in our private bank, we have a very strong brand, notwithstanding what's happened. We've got a very good banking and lending business in there. But what we've also built is a very good center of excellence into the asset management center of excellence. But that -- what we now have to do is make sure that asset management center of excellence can build a distribution into, call it, the mass affluent customer base or the retail customer base. And really, that's about building simple digital journeys. It's about surfacing those journeys in our market-leading digital app. And that's what will lead to the diversification of income. So it's very much an organic strategy, I would say. We've spoken about it before, but that's a steep hill as one would say, to grow organically. Assets under management, which we all know is a scale game is crucial. So it's an organic strategy, and we'll continue to push it, but we need to be ambitious but also realistic about how fast that can change. And even if you're growing your assets under management at certain percentages and your payments at 10-plus percent and your FX, similar. The notional in the context of the size of the balance sheet and the net interest income are still relatively small. So it's -- that's not something that we suddenly transform in 1 year. That's 3, 4, 5 years of continual push. Raul -- you asked a few questions. Did the answer...

Yes. I guess the part I want to pick you up on is this point about whether or not you have the full product suite currently. Do you think there are any bolt-on acquisitions that might be able to infill any gaps...

In the wealth space?

Yes, just looking at, let's say, the non-NII diversification piece, obviously, you're a full-service commercial bank -- but when we think about sort of the other parts within that sort of growth line.

And we -- I mean, you can see some of what I'd call a small M&A activity we've done. We acquired Cushon, which is a workplace pension fintech. So that extends the product range for our, let's call it, our wealth management business. I think that's they're the type of opportunities, which makes strategic sense for us. They're relatively small in terms of scale. So they don't impact the fundamental capital levels of the bank -- both they play to our strengths. We've got -- as you say, we've got a full-scale commercial bank. A lot of those customers require a workplace pensions offer. We've got distribution to those customers, 30% market share. So we can buy a very good provider and then distribute through our commercial bank, that makes a lot of sense to me. I think the bigger opportunity, and there's been some other small acquisitions as well. But I still believe the biggest opportunity in terms of the wealth or asset management business is basically just distributing at scale through the -- not all of the 19 million customers because they're all not suitable. But if you think about us having 19 million customers and 12 million, 13 million retail customers with opportunities. That's where I think the biggest opportunity is. And that to me is about building better product, yes. But I think we've got the core of the product set, I think it's about building the distribution, the digital journeys, even the -- the education within the customer base about the differences between savings and investments, making those choices very easy within what is primarily a digital ad proposition.

Just before we go back to the group level, on the commercial business, you've talked about broadening and deepening relationships for a while. And obviously, the NatWest market is integration, obviously, has worked out quite well. The business is actually doing pretty well when we look at it on a quarterly basis. What more is there left to do you think...

A lot, would be the simple answer. I think there's a lot. So as you know, I've been very high conviction on bringing the Commercial and Institutional bank together nearly 2 years ago because I saw to me, it was -- there was just a lot of latent value that we weren't capturing. I think it's been successful. I think the fact that we've organized -- we have what we used to talk about is NatWest markets. We now have an effective product center of excellence, which delivers FX rates, DCM, financing to the customers of the group. I think glad to see you recognize it, but I think that has been successful. But we -- and we have a very strong banking and lending product set as well. So you have a banking product set, a lending product set and, let's call it, a market product set, and then we have a brilliant customer franchise. And to me that the strategy was very simple 18, 21 months ago, we just want to bring more of this product set to more of our customers. So I think we've done that. And I think you can see the improvements we've made in terms of our penetration of digital FX, rates, et cetera, transaction banking and payments. So that's good. But I think there's a lot more to go after because I think we can, yes, do more on product and revenue, no doubt about that. But I still think there's a lot of efficiencies that we can drive out of the business when you bring together what were in effect, 3 businesses into 1 franchise. So there's still a lot of simplification and efficiencies available to us, I think, in that franchise. So we need to optimize for cost within the franchise, but also optimize for capital. Obviously, we've got, in effect, 3 different entities and balance sheets there. So capital efficiency, cost efficiency, I think are opportunities for us to continue to grow the C&I franchise to build on what's there. So I don't want the guys getting complacent about what we have done in the 18 months because I think there's even more to go after the...

And what does that mean? When we maybe take a step back and go back to the group, think about the cost base. You've been on a journey, you're getting more efficient. Obviously, you've got targets out there in terms of cost-income. The environment is still quite challenging is like from an inflationary perspective, even if headline inflation is coming down. Where do you think the sort of pressures on costs versus the investments that you need to put to the business kind of land eventually? And does that give you enough comfort that you're still on track to kind of hit your efficiency metrics?

So like we confirmed in quarter 3, we were on track for our cost target this year. So I can -- happy to reiterate that. So the answer is yes, for this year. We don't have '24 targets out there. We will talk about that in February for costs. More broadly, yes, you're right. There are pressures on inputs. The big 3 costs are obviously people, property and technology. We all know that we can see the pressure on people and technology contracts. What I would say is, I think we've got quite an extended year number of years of track record of making cost commitments and delivering on them. So I think we should take confidence in that as a business because we have proven we can get efficiencies and productivity out of the business. In terms of the intersection with the investment part, I think if your question is, will we need to invest more to take more cost out? We've been thinking about that. So I guess the first thing I'd say is I do think if you think about what we can control in the next 18 months, the cost and efficiencies, I think, is one of those key levers. So we are focused on it. The change that I guess I've driven through is not in the scale of the investments with the quantum of the investment. I think we invest a lot in the business, [ GBP 3.5 billion ] over 3 years. It's a significant investment, but it's in the shape of that investment. So really, given the external environment, we've pivoted that investment to focus on simplification, digitized or more focused on simplification, digitization and automation. There was a lot of money going towards those things, what we've dialed that up. But I think in the current environment, that's a rational thing to do. So that gives me confidence that there's more efficiencies, we can realize more efficiencies. I look across some of our businesses, where there's still high numbers of operational processes, et cetera. So they all lend themselves to drive [ inefficiency ]. So yes, I don't think I need a fundamental change in the size of our kind of investment spend, it's a change in the shape of that investment spend, but I'm confident there are efficiencies that we can drive out of the business and the new technologies we will obviously play a part in that. But I think it's -- and we talked about C&I. That's an opportunity when you think about some of the complexity there. I think we've done a great job in digitizing our retail bank. David and the team have taken that forward considerably, but there's still more to go after.

Sorry to push you on this, but new CEOs like taking restructuring charges in our sector. You've sort of ruled out restructure...

I'm ruled it out on the quarter 3.

Yes, and that's still there...

Haven't changed in 6 weeks.

Excellent. Thank you. The 1 thing that did change at Q3 was the RWA guidance. And obviously, the track record of NatWest has been very significant capital return for the last few years. That did obviously moderate to some extent, the expectations around capital return. So could you talk a little bit about sort of the level of conservatism you put through that guidance? There must be some. What is -- is there any scope for further mitigation there? And then secondly, the sort of importance of dividends versus share buybacks, just given the context of today's potential retail offering. Does that change anything in terms of -- just your thought process, not looking for answers.

So on the where did...

Maybe the RWA...

Yes, the RWA. So I think the -- so our view on RWA is we had an obligation on the back of the treatments of our models to make sure that we shared that. So we shared that in quarter 3. I'd probably take a step back first, though, I say so full voice out RoTE is the North Star because that's what allows us to generate capital and return capital. And I know how important that is to the central to the investment case. So we don't take those decisions lightly. So that's what guides me, it's what guys the management team. We're absolutely committed to accumulating capital and distributing it appropriately. I think to me, there's a bit of a disconnect in the rhetoric at the moment between what I call the regulatory regime, saying that Basel 3.1, CRD4 is kind of capital-neutral at a system level. I guess that's not our experience on the basis of a couple of big kind of product categories. So that's what drove some of the changes in guidance. I would say, as you would expect us to be, we're heavily engaged with the regulators on that to make sure that the loss data that we have, the track record of that low losses is properly reflected in the model. So I'm I determined to try and mitigate some of those impacts? Of course I'm. Any responsible management team would be so. So we will try and do that. I think there is probably a phasing point about where people kind of take the kind of RWA inflation. I think it was the right thing to do. My general philosophy is to be a straight shooter. If we can see that the RWA uplift, will share the RWA uplift you alluded to, I guess, in 2 dimensions: I think we've got a good track record of working hard to mitigate and we've got a very good track record in distributing capital as well over the course of the last 4 years. So they're very much the focus. And then in terms of the wider piece, we're trying to strike the balance. You can see how we've distributed the capital across the different mechanisms that are available. We know different investors value different parts of that. We're committed to the 40% dividend ratio. Obviously, we've executed a number of DBBs on market buyback. So we'll try and get the balance right on that. But I want people to be in no doubt about how clear we are and how central that is to the investment case, and that's what guides putting together the strategic plan, putting together the financial plan. That's what we're doing. It's also the high bar for comparison because on some of the topics we talked about earlier, distributing capital back versus some of the product classes that we talked about, that's all inorganic opportunities that's the bar against which we assess things because that's what shareholders will do the time.

Right. Before I ask my final question, I just want to give the audience a chance if anybody has got a question, I want you raise your hands. One here.

Can I just ask about the treasury announcement half-an-hour ago or an hour ago on the potential retail placing and what impact you think that would have? How it could be structured. Would it change the way you think about running the bank at all given the volatility in the share price as well?

Yes, no problem. So I've obviously seen the announcement, but I haven't seen that there's been any detail distributed as well, not much detail, okay. So to me, it's quite simple. I mean, I'm very focused on getting the bank back into private hands. So that's -- so anything -- any policy support that shares that ambition, I would -- I'm encouraging of. I think that's a good thing. I think to have a shared ambition around returning it to private ownership, it's a good thing. So I welcome the announcement I've always said and we'll continue to say the mechanics for doing that -- is ultimately up to the government in UKGI, how they choose to do this. If I'm understand the wording correctly, what they've said is, they're going to explore a retail offer over the next 12 months. But if the net effect is to reduce the government shareholding, and we can do that in a way that is appropriate -- done in an appropriate way, creates appropriate value for all the relevant parties, then I'm supportive of that. But ultimately, it's a decision for them in terms of what, when, how? And we'll be very boringly consistent on that because it's their decision...

More questions? One here.

There's been a lot of debate over the last 6 months to 9 months or whether your net interest margin is 2.9%, 2.95%, 3%, 3.05%, and it's been driving the share price volatility, not only for you, but for [indiscernible]. Yet when you look at the last 20 to 25 years, the margins have always been around 3% for any U.K. retail bank in any rate circumstances. And I guess the bigger question is when people who maybe spend less time looking at the details of quarterly NII for U.K. banks and others, they noticed that in other countries, actually, these margins are much lower. And they tend to ask analysts, why are these U.K. margin so high? And is aren't we witnessing the first line that competition is finally kicking in and these margins will come down? What is your view on that? Do you see any reason why for more structural reasons these margins could be trending down in the next 3 to 5 years?

I think it's hard to pin it on structural things. I mean, I think we've probably all seen the graphs on the deposit side which compares all the different countries and the relative rates of pass-through. I think the reality is the pass-through in the U.K. market on deposits has been higher than many different -- many alternative European markets and to some extent, wider than that. And I think that's a combination of some of the -- I guess, the messaging -- been candid with you in terms of kind of regulatory messaging. So I think that's affected, I guess, some of the pricing strategies on that side. I think the mortgage market, which is primarily the other driver, is at a strange juncture because the mortgages have -- mortgage margins historically have been healthier. So to me, that's -- I'm optimistic that at some point, that will reset. So I don't think it's anything structurally different about the U.K. market. And I think we can obviously see that if you take the commercial bank, assets have repriced and deposits have repriced. You take the retail bank, deposits have repriced to a certain extent, but assets haven't repriced, and that's the missing part of the jigsaw. But I think when you've got a very thin volume and you've got what I call effect mutuals, et cetera, competing. I think you're seeing some strange pricing outcomes on the retail asset side. But I think they will dissipate as volume -- I would hope they dissipate as volume in that market increases. And as we talked about, the different institutions kind of start to flow through the risk weights into that asset class. Does that help?

Yes.

All right. That brings us to the end of the session, Paul. Thank you very much. Wish you all the best for your...

Thank you. It's good to see you. Thank you, Raul. Thank you.