NatWest Group plc (NWG) Earnings Call Transcript & Summary

Hello, and welcome, everyone. Great to see some of you here and also online. This is the first of 3 in-depth sessions we're hosting this year across the 3 NatWest businesses: Retail Banking, Private Banking and Commercial & Institutional. And we hope today that you'll get a very good understanding of C&I, it's strength, the opportunities and importantly, how it supports the group returns. So before I hand to Paul, just a little bit of housekeeping, if you'd like to download the slides, you can use the QR code on the screen behind me or through the website. [Operator Instructions] And if you haven't, please could you silent your phones. I will return at the end of the presentation to host the Q&A, and I look forward to hearing your questions then. So thank you, and I'll hand over to Paul.

Thanks, Claire. Good afternoon, everyone. Thank you for joining us today, whether you're here in the room or you're online. As Claire said, it's the first of 3 in-depth sessions this year on our 3 NatWest businesses. We've chosen to start with Commercial & Institutional. It's an important significant contributor to the bank, and it's gone through a significant transformation over the course of the last few years. So we thought it was a good one to start with. The agenda for the day, I'm going to start with a very brief intro. Robert Begbie, CEO of the Commercial & Institutional business, will then give an overview of the whole business. Many of you know Robert, but for those who don't, he previously led our markets business and has also been the Group Treasurer. Then Andy Gray will go into more depth on our Commercial Mid-market business. Andy joined the group from Barclays 15 years ago, and has led that business since 2014. Robert will wrap things up, and then they'll be joined on a panel for questions at the end by Scott, our Chief Information Officer; and Carolina, the CFO of the Commercial & Institutional Bank. But before we dive into that, let me set the context a little bit. 2024 was obviously a pivotal year for the bank. In addition to delivering very strong financial performance, we carried out 2 directed buybacks, which supported a reduction in the government shareholding from 38% to less than 4% today. We are attracting new investors and are focused on driving the future growth of the firm, primarily by succeeding with our customers. I've always said, and many of you will have heard me say it before, that we shouldn't underestimate the opportunity we have to build on our strong foundations. As a bank, we serve over 19 million customers across the 3 businesses, all have strong market positions, all have strong and attractive returns on equity. Our retail bank serves around 18 million customers, has a 16% market share of current accounts and a strong track record of growing share in other segments at attractive returns. For example, we now serve around 20% of the youth segment, and we're growing in mortgages and unsecured lending. We have an award-winning private bank, with one of the strongest wealth brands in the country. And we are, I'm proud to say, the U.K.'s biggest bank for business with a leading mid-market franchise, which you'll hear a lot more about today. With the major restructuring of the bank behind us and a return to full private ownership in near sight, we aim to build an even stronger business in the coming years. As you know, from our annual results in February, we also spent a fair bit of time in 2024 thinking about our strategy. This entailed the expected in-depth analysis of customers, competitors, markets, industry trends, to really give us a detailed understanding of our position and the opportunities ahead of us. This work confirmed our view that our 3 strategic priorities, you'll see them on the slide, are serving us well, and that we must continue to: one, concentrate on our real strengths, whether that's the scale of our customer base, our robust balance sheet, our national and local presence and our leading market positions; two, drive forward our tech transformation to create greater operating leverage; and three, change the way we operate so that we are quicker and simpler and more agile. And that really speaks to the performance culture and the customer focus myself and the leadership team are driving in the bank. Our aim, as we continue to pursue that disciplined growth, the bank-wide simplification and together with the active balance sheet and risk management, is to generate attractive returns for our shareholders. We are raising the dividend payout ratio to 50% from this year, as I hope you all know, that really reflects the confidence we have in our capital generation. And we've guided to return on tangible equity in 2025 of 15% to 16%, and are targeting greater than 15% in 2027. You'll see these strategic priorities reflected across all of our businesses. And today, you'll hear specifically what they mean for Commercial & Institutional Banking. So with that, I'll hand over to Robert. He will tell you more.

Thank you, Paul, and good afternoon, everyone. As Paul said, I'm going to give you an overview of our Commercial & Institutional Business before handing over to Andy Gray, who will talk about the Commercial Mid-market in more detail. Commercial & Institutional was created in 2022 when we combined Commercial Banking, NatWest Markets and RBS International into one single franchise. We believe that by bringing those businesses, legal entities and capabilities together, we could create a franchise that serves the needs of our customers better. Today, Commercial & Institutional serves around 1.5 million customers, ranging from sole traders and start-ups, through to mid-market customers, through to large corporates and financial institutions. It provides a significant financial contribution to the group as well as having scale on both sides of the balance sheet. In 2024, we delivered 54% of the group income and 58% of its operating profit. We ended the year with deposits of GBP 194 billion, representing 45% of group deposits. And we grew lending, excluding government schemes, 9% last year, to GBP 140 billion, about 35% of group lending. And alongside this lending growth, we have taken a disciplined approach to managing our capital and risk-weighted assets. And as you can see, we have increased our return on equity from 10.9% in 2021 to 17.2% in 2024. We serve our customers across 3 businesses: Business Banking, Commercial Mid-market and in Corporate & Institutional Banking. Business Banking serves over 1 million small businesses across the U.K., with turnover of up to GBP 700,000. This acts as an entry point to the bank for sole traders, small businesses and entrepreneurs. Our Business Banking customers are mostly digital first, but they also have access to relationship support when required. We are the leading bank for U.K. business start-ups, and share of around 20%. We have 13 accelerator hubs across the U.K. that help entrepreneurs grow and scale their businesses. These hubs offer sector expertise and advice, ranging from strategy and business plans, to hiring teams and building partnerships. To give you just one example, GoJoe, a fitness app that offers companies a way to help their employees keep fit and healthy. Its founders joined our accelerator program, and in their words, as little more than 2 guys and a PowerPoint presentation. They went on to raise over GBP 1 million in seed investment and have now completed the second funding round. By helping customers like this, we are both promoting growth in the U.K. economy and developing our mid-market pipeline. Commercial Mid-market Banking serves around 100,000 customers, with turnover ranging from GBP 750,000 to GBP 500 million. We are the leading U.K. bank for those companies and the leading provider of asset finance through our specialist business, Lombard. We serve our mid-market customers, mainly through a relationship-led extensive relationship manager network, supported by our digital platform bank line. We believe our significant presence on the ground, up and down the U.K., gives us a key competitive advantage, broadening our reach and enabling us to develop close relationships for those customers. And we see the mid-market as a significant growth opportunity for NatWest, which Andy will touch on later. Corporate & Institutional Banking serves around 7,000 customers, with turnover of over GBP 500 million. This business focuses on key areas of specialism where we can best serve our customers' needs. So we provide core banking services as well as transaction banking, project infrastructure and leverage finance, currencies, capital markets and fixed income. We've made very good progress since we created the franchise almost 3 years ago, and can see clearly the opportunities ahead of us, not just to grow, but to simplify our operating model and improve the customer and colleague experience through greater digitalization. We are the biggest U.K. bank for business, and our future plans are completely aligned with the group's 3 strategic priorities. So let's start with disciplined growth. First, we want to build on our leading position for U.K. start-ups and continue to grow our SME business. Second, we are a leading provider the financing for social housing and the commercial mid-market sector, and have recently updated our ambition to lend to this sector. We're also a leading provider of funding for U.K. infrastructure and project finance and plan to build on this position to support expected growth in this sector. We also see an opportunity to grow in trade finance as we support international trade for U.K. connected businesses. This will be accelerated by our new platform, Trade360. And finally, sectors like the innovation economy such as life sciences and technology, are growing at a faster rate than others. So again, we're building on our strong position by developing specific propositions targeted to support them. On simplification, we're making a major investment in our digital platform bank line. This will enable us to create a single shop front where mid-market customers can access a full range of products and services in one place. And Andy will talk more about this later. There's a lot more we can do to automate our customer journeys and harness the use of AI to improve customer and colleague experience. And we continue to simplify our operating model. For example, we recently announced a number of changes to our European footprint. Our third priority is active capital and risk management, and I'll talk more about this on the following slide. We have developed a capability to ensure that we allocate capital to the right sectors and customers in order to optimize sustainable returns. And we are managing our capital and risk in 4 ways. First, by allocating capital strategically with a focus on returns and relationship value. Second, by applying a consistent approach to pricing through greater automation, with a focus on risk and return. Third, by enhancing our data to understand track performance over the lifetime of a customer, redeploying capital that is not delivering our targeted returns. And fourth, by actively distributing risk through a range of means, including significant risk transfers, credit risk insurance and asset sales. In 2024, the actions of our balance sheet management team resulted in GBP 5.7 billion reduction in risk-weighted assets. This includes 4 successful significant risk transfers accounting for GBP 3 billion. Now you shouldn't assume that RWA reductions will continue at this rate every year, but we now have the capability to identify and prepare assets for sale and distribution much more systematically. So you can expect us to allocate and continuously recycle capital to areas where we see the best risk reward for returns. So let's turn now to how we're investing in technology to improve the experience of customers and colleagues, increase productivity and make us more efficient. We start from a position where around 83% of Commercial & Institutional customers are digital first, with the convenience of being able to access products and services at any time, in any place. There are 3 major drivers of our technology delivery and commercial and institutional. The first aim is to improve the experience of our customers. Our most significant investment here is Bankline, which will support the customer interactions, allow us to offer a single portal entry point to sign on for customers to access a wide range of products and services. We also want to use data better to deliver greater personalization for our customers. Second, we want to become much more agile as an organization. So we're moving more of our technology into the cloud, enabling us to release new capabilities faster and at scale. We have decommissioned applications that are no longer necessary, and we are rolling out the use of AI. We're already seeing some benefits from this, to give you examples. We're using AI to summarize phone calls in our CRM system and to automate customer reviews. This reduces the time that relationship managers need to spend on administration. We're deploying AI to clients in our markets business so they can easily search analyst reports and recommendations. And a growing number of our staff use AI internally to increase productivity. Third, we continue to invest and protect the bank and our customers from fraud, financial crime and cyber attacks as well as to strengthen our pricing, risk management and capital distribution. I'll turn now to our 3 businesses in more detail, starting with Business Banking. Business Banking is a digital-led business, offering a full range of products, including lending, savings, cards, payments as well as additional services such as insurance and accounting software. Business Banking revenue has grown at 15.8% a year over the last 3 years to GBP 900 million. A strong deposit base provides the group with a vital source of funding and liquidity. Borrowing at this end of the market has been more muted, partly as a result of the ongoing government loans taken out during COVID. But there was a strong appetite last year, with gross new lending increased around 50%. And we've been investing in the digital transformation to improve customer experience and increase efficiency. Last year, 95% of accounts in Business Banking were opened by mobile or online. And loans of up to GBP 100,000 are now available digitally within 24 hours. And whilst the business is mainly digital, customers also benefit from our network of direct relationship manager hubs across the U.K. And we are very proud to have supported 10,000 business banking entrepreneurs on our accelerator program, which marks its 10th anniversary this year. Coming to our future priorities and starting with disciplined growth. Deposits are central for the need of small customers, and we want to grow and fully digitalize our deposit offering, including digital term accounts. We plan to increase digital lending, making it faster for customers to borrow by increasing the threshold for 24-hour decisions. And we expect to grow small business lending by broadening our distribution through brokers. Under simplification, we're improving our digital credit card experience with straight through processing, dynamic credit limits and self-serve capabilities. We're also working to make our communications with customers more personalized with useful prompts and insights. This part of the business is capital light, with a strong deposit base. So we're more focused on risk management and pricing than RWA reduction. We aim for more than 90% of our origination to be priced within standard frameworks as manual decision-making is replaced by more automation and straight-through processing. This will result in greater consistency and ability to adjust pricing dynamically in response to market conditions. Our Commercial Mid-market business is broad-based, serving a wide range of customers across all regions of the U.K. through our network of relationship managers as well as our digital channel bank line. Revenues have grown at an annual rate of 12.8% between 2021 and 2024 to GBP 3.6 billion, with 4 quarters of consecutive loan growth and a strong deposit base and low cost of risk. We see the mid-market as a major growth opportunity. These businesses are the backbone of the U.K. economy, and we are well placed to help them grow. The breadth of our regional coverage, depth of local knowledge and strength of our sector expertise gives us clear competitive advantage, and the commercial mid-market is where we will focus on the innovation economy. As I mentioned earlier, we are a leading provider of social housing funding in the U.K., and we expect to build on that strength and see significant opportunities in both transition and trade finance. On simplification, Bankline is our digital platform. We are mid-markets, customers, and we've made good progress on our multiyear investment to get them access to our full product range. Andy will expand on this later. And finally, on capital management, we intend to make greater use of significant risk transfers to improve capital velocity in the mid-market business. Moving on now to Corporate & Institutional Banking. We created Corporate & Institutional Banking in 2024 to bring a greater customer focus with single coverage teams covering large corporates, funds and sponsors and financial institutions. Within CIB, our markets business now focuses on currencies, capital markets and fixed income, areas that consume less capital and where we know we can compete. We restructured NatWest Markets between 2020 and 2023 and have broadly have the risk-weighted assets since 2019. Corporate & Institutional Banking has strong specialist capabilities in structured finance, transaction services and trade, funds lending, capital markets, sales and trading and sustainable financing. It's client base is made up of large organizations trading with and from the U.K. And we have a focused international footprint across Western Europe, Asia and the U.S., designed to specifically support the needs of global clients. The aim is to help domestic U.K. customers operate internationally and to support international businesses and capital providers who want to access and invest in the U.K. In addition to facilitating trade flows, our international footprint also enables us access to international capital markets and risk distribution through our global ecosystem. Let me give you an example. Take a private credit manager domiciled in the U.S., who wants to set up a fund to invest in the U.K. We provide the services they need to set up that fund, in [ Jersey ] or Luxembourg. Once investor subscriptions are gathered in the fund, we help with services such as cash management to help with liquidity. The subscriptions may arrive in dollars and may be invested in sterling, in which case we could provide FX and potentially interest rate hedging. Then if the fund requires leverage, we also provide debt structure. And if the client, for example, wants to set up a sustainable fund, we have the full capital markets and advisory business to help them do that. We have focused our geographical footprint and specialist capabilities in order to provide exactly this type of ecosystem. Corporate & Institutional Banking has grown revenue 25.3% annually between 2021 and 2024 to GBP 3.5 billion. There is a large and stable deposit base with loans and advances of GBP 66 billion. Last year, we were recognized as the Best U.K. Corporate Bank by the Coalition Greenwich Survey, and our expertise in key areas as highlighted by the awards you can see here. Last year, we were voted the best U.K. trade finance provider by Global Finance. We ranked #1 in debt capital markets for all U.K. borrowers in sterling and euros, and we're in the top 3 for cash management. Customers also turn to us as a leading provider of climate and sustainable financing and funding, where we provided over GBP 60 billion since July 2021 towards the group's GBP 100 billion 2025 target. So our strategy here is to focus on targeted growth and our specialisms and to manage our capital effectively to drive returns. So looking at our future growth priorities. We are a leading provider of U.K. infrastructure finance and lending. It's one of our top priorities, especially given the government's plan for a new 10-year infrastructure strategy. We also want to support U.K. businesses in U.K. economy by enabling more trades, planning to use the new trade platform, Trade360, to increase volumes in trade and working capital solutions. This will help customers to facilitate payments, manage risk and access liquidity to drive growth. Moving to simplification. We will plan to continue to simplify our operating model and to share capabilities across product verticals so we can remove duplication. And finally, you can expect Corporate & Institutional to actively manage risk-weighted assets, reallocate capital when it's not meeting return hurdles and continue to scale, originate to distribute lending models. And with that, I'll hand over to Andy to talk in more depth about commercial mid-market.

Thank you, Robert, and good afternoon. I'm going to start by talking about the overall market before talking more about our own business. Last year, we carried out research into the critical role the midsized corporates play in the U.K. economy. In particular, companies with turnover between GBP 25 million and GBP 500 million, which is a subset of our overall business. There are around 13,500 businesses of this size, less than 1% of companies in the U.K. Yet they account for 27% of U.K. business turnover of GBP 1.3 trillion and 28% of gross value added at GBP 420 billion. These businesses are also growing at a rate higher than the U.K. economy. So they are vital growth engines. They employ over 7 million people, play an important role in regional economies and are more productive than smaller businesses. They generate nearly double the turnover per employee compared with SMEs. The government's modern industrial strategy has identified 8 key growth sectors: advanced manufacturing, creative industries, clean energy, defense, digital and technologies, financial services, life sciences, and professional and business services, which will help drive investment. And in addition, the government's infrastructure strategy will support the construction and housebuilding sectors as well as the green economy. Our report estimates that 1% growth in this segment could add a further GBP 35 billion of GVA and GBP 115 billion in business turnover by 2030. So it's against this backdrop that we see a significant opportunity for our commercial mid-market business to drive growth, both for the U.K. economy and the bank. As the largest commercial bank in the U.K., we serve over 1 in 4 U.K. businesses in the mid-market segment. This includes a wide range of customers, from SMEs with turnover between GBP 750,000 and GBP 2 million, all the way up to large regional corporates, with turnover of GBP 500 million or more. As you can see, mid-corporates, the businesses, as I just spoke about on the previous slide, are just one part of this market. In order to serve such a broad customer base, we need an equally broad range of products, covering standard banking products, such as lending, savings, cards and overdrafts, together with more specialist services, such as trade assets and invoice finance, transaction banking, payments and foreign exchange to help these companies raise funding, manage payments, optimize their balance sheets, trade with other countries and manage risk. Robert mentioned earlier that we are also a leading provider of asset finance. And this video demonstrates how our specialist asset finance arm, Lombard, is helping customers invest to improve their businesses. [Presentation]

As you saw, Westlands have worked with Lombard to fund upgrades to their assets so they can grow their produce sustainably. This includes about GBP 0.5 million to finance LED lighting, which will increase yields by giving the plants more light and reduce the electricity required; GBP 160,000 for solar panels so that when the sun shines and crops need more irrigation and cooling systems, solar panels can meet this demand; and finally, additional funding for new packing line to improve productivity. Taken together, this will help to halve Westlands' carbon emissions, reduce their costs and increase efficiency. One of our key strengths when it comes to serving the commercial mid-market is our unparalleled presence across the U.K. Our customers are spread across a broad range of sectors, with no one sector dominating, and our lending portfolio is well diversified. We serve our customers through a network of around 1,000 relationship managers distributed throughout the nations and regions of the U.K. This enables us to build deep relationships with strong local knowledge and an understanding of what's happening in key sectors. A very good illustration of this is M Squared, a commercial landscaping business based in Scotland. They work with building contractors and clients to create and maintain high-quality outdoor spaces surrounding their developments. Their founder, Kerr McEwan, was a personal customer of RBS from the age of 15. When he started M Squared in his final year at university, he opened a business account and he went on to join our accelerator program in business banking. We have benefited from that as M Squared then grew rapidly, becoming one of the FTSE 1,000 fastest-growing companies as well as a commercial mid-market client. [Presentation]

Over time, we have supported M Squared with loans and asset financing. And more recently, the founder also became a customer of Coutts to help plan his family's financial future. So this relationship-led approach helps us develop strong relationships where customers go on to use other parts of the bank. And it complements our digital platform bank line, giving customers the best of both worlds. Let me share another example, which shows how we are working across the businesses in commercial and institutional to help meet customer needs. Zenobe is a leading owner and operator of battery storage in the U.K. It was founded in 2017 when they saw an opportunity to ensure a stable electricity supply from renewable wind power. So they started acquiring batteries to capture and store excess energy from wind farms that could be deployed to the grid when demand is high. Zenobe then wanted to help bus companies switch to electric vehicles. But in order to do this, it needed to provide them with capital upfront to buy both the charging infrastructure and the electric buses. It didn't have that capital. So in 2021, we worked a structured asset finance team in Corporate & Institutional to help Zenobe find a solution. We did this by advising on and structuring an innovative banking package, which enabled them to raise debt against their contracted cash flows with the bus operators. This gave Zenobe a funding platform, which could then be used to raise additional financing over time as it expands its fleet activities into the U.K. and Ireland. Since 2021, NatWest has gone on to help Zenobe grow further. In 2023, Corporate & Institutional, with a sole financial adviser, introducing additional banks when Zenobe needed to fund the construction of new battery energy storage systems on 2 sites in Scotland. Then last year, Zenobe approached NatWest to increase an existing CapEx facility to enable greater energy capacity as construction started on one of those sites. Zenobe now has around 735 megawatts of grid connected batteries, powering around 25% of the U.K.'s electric buses, and is expanding internationally. This is a good example of the way in which capabilities in Corporate & Institutional support the growth of commercial mid-market customers. Robert spoke earlier about our strategic priorities. So I'm now going to focus in more depth on 2 areas: our plans for growth and our digital platform back line. Over the next 3 years, the commercial mid-market business plans to grow in the following ways: we see the U.K. innovation economy as a key opportunity in sectors such as life sciences, medtech, technology and energy transition. As you heard from Robert, we are planning to offer these businesses, especially tailored products and dedicated coverage. While we provide a wide range of products, we have particular strengths in certain areas. For example, we are one of the largest funders of the social housing sector, with balances of GBP 10.8 billion at the end of last year. We want to continue growing in this sector, and aim to provide GBP 7.5 billion in lending between 2024 and 2026. We also plan to increase the number of trade customers we serve, supported by our new platform, Trade360. Trade360 provides customers with a portal that offers a seamless experience across both products and geographies. In particular, we aim to grow trade finance and foreign exchange, drawing on the foreign exchange expertise in our markets business. And we also intend to expand in transition finance and regional infrastructure. And finally, we continue to innovate to support high-growth businesses that have a few tangible assets to use as collateral, but are rich in intellectual property. Last year, we became the first U.K. bank to issue loans using intellectual property as collateral in order to help scale ups grow. Open Bionics is a good example. Open Bionics develops 3D printed bionic arms for amputees that are lightweight, comfortable and stylish. This even includes hero arms for young children with Disney designs in the style of their favorite superhero. Open Bionics were founded in Bristol about 10 years ago, and they needed funding for international expansion. [Presentation]

By supporting Open Bionics, we're both helping them to scale their business overseas and enhancing the U.K.'s reputation as a global leader in innovation. I'd like to move on now to our digital channel, Bankline, where we are investing GBP 100 million to improve customer and colleague experience. At the end of 2024, Bankline served over 71,000 customers and had over 370,000 users, processing GBP 1 trillion worth of transactions each month. In 2023, we launched a multiyear investment program to transform the customer experience on Bankline. Our aim is to give customers a single point of access to a wide range of products and a much better user experience across both mobile and desktop. We are already starting to see some very positive results from the first year of the program. For example, service requests initiated via Bankline increased by 60% between 2023 and 2024 to 461,000. In March last year, we moved international payments onto Bankline and introduced automated international payment tracking. As a result, nearly 10,000 international payments have been tracked via Bankline since then, rather than through customer services or relationship managers, and they're currently around 900 such requests a month. We have also integrated our company credit card proposition, ClearSpend; our asset finance arm, Lombard; and NatWest Markets foreign exchange platform, Agile Markets, into Bankline, and we plan to integrate our trade platform, Trade 360 later this year. This will help us to retain customers and reduce friction as they won't need to look elsewhere for services, resulting in higher product penetration and share. We also plan to complete the transition of Bankline onto cloud-based technology to improve the agility of the platform and transfer the majority of customers' journeys to Bankline to enhance customer experience. Our aim is to create a state-of-the-art platform with the best offering in the commercial mid-market. So in summary, we are the U.K.'s leading commercial bank with an unrivaled presence on the ground across the U.K. We bank more than 1 in 4 customers in this faster-growing segment. And we are building on this strong position by investing to deliver the leading customer proposition for the mid-market. We have clear plans for growth, whilst managing our costs and capital in order to drive returns. So thank you very much. And with that, I'll hand back to Robert to wrap up.

Thanks, Andy. So in conclusion, we have strong foundations from which to grow. We have transformed our business to focus on areas where we can deliver strong returns and to serve customer needs much better through 3 closely connected businesses. In Business Banking, we have a leading market share with U.K. startups as we help them accelerate their growth through our accelerator program. In Corporate & Institutional, we support the flow of capital in and out of the U.K. as the partner for large corporates and the financial institutions, with well-recognized capabilities in key specialisms. And as you've heard from Andy, we see a significant opportunity in the Mid-market, where companies are growing faster than the U.K. economy. We're in a strong position to deliver on this opportunity. We have unrivaled breadth of coverage across the U.K. And as Andy touched on, we offer our customers a relationship model supported by Bankline. We believe this combination gives us a strong competitive edge. In short, this is a business with a great deal of potential and with clear priorities to deliver disciplined growth, further simplification and active capital management in order to drive returns and create greater value for our customers and our shareholders. Thank you very much. We'll now invite our panel speakers to join us for questions.

Thank you, Robert. As you can see, we have Carolina, our Finance Director for Commercial; and Scott, our group CIO, joining the panel for questions. [Operator Instructions]. And for those in the room, there will be a microphone going around so that everyone online can hear you as well. And when you ask your question, if you could please give your name and institution. Ben?

Ben Caven-Roberts from Goldman Sachs. So I think the first question I'd sort of be interested in is when you're looking at that ambition of disciplined growth, how would you characterize what portion of that is led by effectively industry wallet expansion in the client areas that you're looking at and how much is, relatively speaking, market share gains? And if it is market share gains, obviously, you've given a lot of helpful color around areas you think you excel in. Would you say there are particular areas you'd call out where you're stronger relative to peers?

Let me take that one and then Andy can maybe add a little bit in terms of the more color on the mid-market where we see significant opportunity. I think, look, our start point is we should absolutely keep pace with market growth, right? That's a baseline for us in terms of whether it's lending or deposits or other associated products. In some of the areas that we've talked about, we believe there's further opportunity with our penetration of our customer base in terms of products is not relative to our market share where it could be. So we start from that point. I think what we've demonstrated over the last couple of years is that in spite of some of the challenges that's been around the economy and so on, we've continued to grow our business. And we see opportunities to continue to do that. There are obviously key areas. As the U.K. growth agenda rolls out, that we feel we're well placed to lean into around social housing, around U.K. infrastructure, around trade and so on. So I think that we see a lot of opportunity ahead of us. And just because we are a significant player in certain markets, that doesn't mean to say we don't think we can continue to grow our market share.

I think just to build on that, clearly, we would benefit from faster growth. We -- driven by macroeconomic or government policy, we're well positioned to take advantage from that. We cover all the sectors of the U.K. economy, and we're present in all the regions and countries. So we're also well positioned to, say, take advantage of those changes. And they're great businesses and great opportunities in some of the less fancy sectors as well, and we continue to see good growth and good revenue from those areas.

Ben?

Ben Toms from RBC. Earlier on one of the slides, you show your split between NII and non-NII. Just wondering, firstly, how you think that split might evolve when the mix evolved over time? And then secondly, you talked about active capital management and SRTs mid-market and exiting lower-return relationships in the CIB. Should RWA density in the division fall from here? And you showed up front that RWA is a portion of the group. Would you expect that number to come down as well over time?

Okay. So let me take the mix of our business first, and then I'll talk a bit about capital and maybe ask Carolina to come in there with a few numbers. I think on the slides, you'll have seen that both our NII and our non-NII has grown well over the past couple of years. And we're pleased with that growth. We have grown non-NII through both the performance of our markets products, which you've seen over the past couple of years have performed well, but not just that. You would expect as our overall lending growth, the lending fees and transaction fees. And as our business grows, non-NII will grow proportionately. So I think we're comfortable with that split. It's about 2/3 non-NII -- it's 2/3 NII versus non NII. But we see opportunities to grow both of them going forward, partly through some of the growth opportunities that Andy talked about.

Yes. And just to add to that, we had a good start of 2025 in the first 3 months, which continued with the trend that we saw particularly in the second half of 2024 where we benefited from increased volatility in the market. I will caveat that, obviously, too soon to tell you that trend will continue through 2025. We are still managing uncertainty in geopolitics, in the macroeconomic environment, and we will see how the trend continues. In addition, in our 2024 results, we guided you to consider the impact of the cost of capital actions that is reflected in the non-NII line. So this is specifically for '25, which as we -- as you saw, we are pleased with the significant progress that we did in our terms of our capital actions in 2024, and the cost is reflected in that non-NII line. Having said that, and as we alluded in the presentation, when we consider the impact of our overall capital actions, it's a holistic approach. So it's not just that cost. It's also the relief that we get from an ECL and RWA perspective. And of course, the income that we gain from redeploying that capital into highly generating returns.

Maybe just building on that because Carolina went into the capital management answer a little bit. I mean, yes, we've done a lot in the last 12 months. But we have a track record of managing capital over a long period of time. I mean what we've done in the markets business between 2020 and 2023. So it's not as if this is what the start point of this, we've been at this for some time. We definitely have stepped up our capability over the last couple of years, investing not only in the expertise aspect of it, but some of the technologies that we need to deliver those types of transactions and the data to measure customer returns better. So you should expect us to continue to evolve that capability. When we stand back though, our start point is always, does this make economic sense for us as an organization, either within the franchise of the business, we're looking at. But it has to make economic sense, i.e., as Carolina said, we look at where the market demand is, we look at where we're likely to be able to issue an SRT and what the cost of that capital is relative to whether where we can reinvest either within the franchise or in a different franchise or there's a better use of capital at a group level for that. So it's driven by really the economics of that. Now the underlying market has been incredibly strong, partly driven by the growth in private credit. That's great. It enables us to really look at those books and really drive some incremental capital returns out of that. So that's really the start point. We don't -- we measure RWA density, but it's not the key driver of how we assess whether to do an SRT or no.

Okay. And Chris?

Chris Cant from Autonomous. I just wanted to follow up on the SRT question, particularly in the slide where you mentioned within NatWest Markets appetite to expand, originate to distribute. And I guess it speaks to both the CIB segment, but also the mid-market SRT opportunity. How do you think about pricing business in the context of appetite and ability to do SRT at the back end? So when you're actually writing business, does the fact that you have this in the background as a tool enter into your pricing? Or is it actually somewhat separate and SRT is more of a kind of a back-end capital management tool?

Yes. I mean the slide I showed that journey from origination right the way through to distribution, I would say, work in progress. We've made a lot of progress on that. Firstly, we need to be considering as we originate going forward, where the potential for that distribution would be. Whether we choose ultimately to distribute assets or not, we should at least take on those assets in a way that allows us to have optionality around those going forward, which -- that takes time because you've got back books that weren't necessarily all originated that way. So we need to walk that through. You mentioned markets. Markets are just part of this. It goes all the way through into Andy's business as well. So yes, increasingly, we look at it that way, not that we're going to distribute all our assets, but just that we understand where a potential distribution trade might be at some point in the future, if we feel that's economically viable. To build that into Andy's business, and I'll ask Andy to comment in a moment, we need to build out the technology and the pricing tools that go alongside that to really drive that end-to-end model.

If I can just add or to repeat what Robert has said, in the Commercial Mid-market, it's about originating in a way that makes distribution relatively easy, possible. I mean it is a competitive market. So probably competitive forces are the biggest driver of pricing, but we've spent a lot of time and effort to instill really good pricing discipline in the business. And we take on business that is accretive. So we are happy to hold it because it is making an acceptable return. If we can then see an SRT that makes economic sense, we'll do that, and that's been a positive market for us in the last 12, 18 months.

I guess that last comment is probably key. So you would not write business, you're not comfortable [ holding on ]...

So in the Commercial Mid-market, certainly, we're not originating business that we're assuming that someone will take it off us at a rate that then makes it okay to have originated. We are originating to hold in our business.

Andy?

It's Andy Coombs from Citi. Three questions, but they are all related. So the first is just on the loan growth. You had tremendous loan growth last year, but it was quite uneven in terms of the split, a very heavy weighting towards the large corporate space, a couple of billion in Mid-market and then flat in Business Banking ex the government repayment. So interested if you think that's going to be a similar trajectory in 2025 or if you think it's going to be more evenly balanced between the 3 segments? This -- I'll give you all 3 because they're all kind of related. The second question is, you talked about 20%, 25% market share and depending on deposits or loans and pretty much I think every slide was how you're #1 here or close to #1. So are there any gaps? Anywhere where you think you could do more? And then the third, and forgive me for asking this one, but as it's a topic to [indiscernible], defense. How much lending or financing do you do for the defense sector?

Okay. Let me -- why don't I take 1 and 3 and then you can build on it. So I think, look, we've seen growth in -- you said we've seen growth in all 3 businesses last year. I mean, the highest growth rate we had was in Business Banking at 50%. Now it doesn't show up as much because it's off a lower base and so on. So we're happy with the 50% growth we've seen there, with the 4 quarters of consecutive growth in Andy's Mid-market business in a U.K. economy, which was pretty flat last year. And yes, we grew at the CIB end of the business where transactions tend to be much larger. So should you expect that to be similar? Well, look, at the end of the day, if we see more U.K. growth, we would feel we have a bigger part to play in that, and that probably leads into growing the mid-market, which is where we see some real opportunity. Why don't you pick on that? And I'll come back to defense.

Yes. So I mean I think in terms of the area -- or the gaps, the gaps are less in our kind of lending portfolio. We've got some product gaps that we've worked hard to fix. So yes, we would have a lower market share in trade finance, for example. So we've invested a sizable amount of money and effort in building that capability. In CMM, we grew our FX revenues where that's been quite heavily completed space. We grew them by about 20% in 2024 as we recaptured flow from customers. So the bigger opportunity around market share is in specific product lines in CMM. Innovation economy, we think that's relatively underserved by banks in the U.K. So that's probably, to some extent, some de novo opportunity for us. So we'll focus on that. And then yes, it's already a big business. You got GBP 72 billion of drawn assets. There will be opportunities within that as there are structural changes in the market. But yes, we play in all the geographies and all the sectors. So yes, I think we're well positioned to take advantage of opportunity. And we haven't got particular areas of kind of sector weakness that we think we should be addressing.

And then just to pick up on defense. I mean we are already a significant supporter of the defense industry. We don't report it as a segment. It sits with certain customers. It's part of their business or it flows through Andy's business through the whole supply chain front to back with that. We are -- we see ourselves playing a part in the increased spend that will go on in the U.K. and defense. As you would expect, we're in good conversations, both at a government level and at a customer level, and how we are playing a part in that. But the chancellor made some further comments around defense earlier today, and we see it as a medium-term growth opportunity.

Alvaro?

Alvaro Serrano from Morgan Stanley. Mine's a couple of follow-ups on loans and loan spreads. Credit spreads in the market are quite tight. Can -- when you price -- can you give us a bit of commentary on when you price these loans? What are the trends in competition you're seeing? And between the segments of Business Banking, the Mid-market and Corporate & Institutional, any [ CIO ] or handholding you can give us in terms of the difference in spreads in these segments? Obviously, there will be all sorts of products there. But any sense on differential spreads between the segments would be helpful.

So why don't I cover off CIB, I'll let you cover of CMM, and we'll make a general point around, I think, Business Banking. So yes, I mean, look, we've all seen what's happened to credit spreads generally in the markets over the past probably 18 months. They have tightened considerably. We benefited from that in a number of ways. Firstly, there's been a big uptake in terms of customers going into the debt capital markets to raise the financing. So we've led and we've supported our customers in doing that. And you've seen that reflected in some of the results we've had through our markets -- debt capital markets line, and we'll continue to do that. So as long as we're picking up the business on that side, we're comfortable. We're pretty disciplined, very disciplined in terms of our pricing execution. So there will be transactions we'll just say not for us because we don't think the price reflects either the risk or if there's any compromise in terms of lending standards or documentation. We'll just walk away from transactions if we don't like the return on them. So at the upper end, that's the way we look at it. We definitely -- we're still seeing good growth in the last 12 months or throughout 2024 even on that side. The flip side is, where we benefit and we talked about it earlier, is where we are doing SRTs and so on, where there's this enormous demand for issuance. We can take advantage of some of the credit spreads that we're able to issue those SRTs out.

Yes. I mean it's -- and that pressure at the large end of the market does come down into the mid-market. The mainstream U.K. banks are well capitalized, have liquidity, they're able to lend. So in what is a okay, but probably slightly quieter than we'd all like demand metric, there's some competition for transactions. But I think, from our perspective, we hold dear to our returns discipline. And yes, there's room for flex sometimes to defend names, and we will defend long-standing names with significant ancillary wallets. But yes, there's a bit of pressure, but we're not seeing it as a kind of a crazy race to the bottom, if that's the question. And then as you go down to the bottom end of CMM and Business Banking, you've got a higher broker-driven element, which is pretty more price-sensitive, spreads are wider. But that's probably a slightly more responsive to rate market with quite a different competitor base at the bottom end. So again, we monitor it closely, and we can make adjustments if we think that there's still business to be done at a slightly lower margin, but at accretive rates. So we monitor that very actively.

Aman?

It's Aman Rakkar from Barclays. Two questions, please. One on deposits. So I guess your deposit performance in '24 did lag your lending performance within the division quite markedly. I think you grew around 8% lending, but your deposit base was flat. So what's going on there? And what does it mean for deposit growth relative to -- I think you've primarily talked about the lending opportunity that's available in front of you. Should we think about deposits below? Then -- sorry, there's a slight follow on to that question, which is, can you also talk about current accounts? I mean a lot of the franchise value in your business is around your ability to originate interest-free deposits. I'd say that's like a key part of the investment case at a group level. You've obviously seen that come off. Kind of what's your take on that? Has that churn kind of run its course now? Or are you still thinking about a contraction or reduction in current accounts. Then the second actual question is on costs actually. So your cost-income ratio has benefited from margin expansion, we all understand. But actually, I'd say that under some measures, cost efficiency has gone backwards in the division. If I look at cost per asset or loans, actually, that metric has been going in the wrong direction for a few years now. And I think Paul kind of laid up at the conference last week that he's targeting a pretty significant reduction in the kind of cost income ratio of the business. Speaking on your behalf there. So you alluded to looking at European peers who've got some of the business models they've got low cost-income ratio. So is that -- do you think you can get the absolute cost base down basically? Or is this just something that's going to materialize in 2035?

So I'll talk about deposits and then, I guess, what we call simplification. And Scott, from the technology piece, is definitely a key part of that. So let me talk about deposits. Without going back into history, we all understood what happened in 2023. Rates went up very quickly, customer behavior changed, and we, like all banks, seeing the impacts of that coming through. What we've seen in the past 12 months is that normalized, stabilized rates have started to come off a bit, and customer behavior has been probably much more predictable and certainly in line with what our expectations would be. We intentionally took a view at the beginning of last year that at the most price-sensitive end of the market, we would manage for value. We didn't need the deposits. The group didn't need those very expensive deposits. And in many cases, they don't provide a lot of liquidity value either. So we took a very conscious decision that we weren't going to overpay or pay for deposits that had little value, either from a relationship perspective or from a liquidity perspective. And that's the way we've kind of run the book. So the book has been largely flat. I think we have an opportunity to grow deposits over the medium term. Part of that will be driven by some of the investments we'll make around digitalization of our deposit proposition, better understanding of data, cohort, pricing, particular customers, flexibility of product, Bankline, all of those things that effectively, I think, give us a better, more sophisticated deposit proposition for our customers. So I think there's room for us to continue to grow in deposits, but we want to grow the right type of deposits at the right price, and technology will play a part in that. I'll maybe talk a little bit -- did you want to comment, no?

No, I was just going to say, just in terms of the composition that you mentioned, we see at the end of 2024, we have 33% of our deposits in noninterest-bearing, and that percentage has remained stable through 2024. So as we're reassuring in terms of customer behavior and the pace of migration that we saw in 2023 has stabilized.

So maybe pick up on what we would call simplification. I think the group has and I think we have managed our cost base appropriately over the last couple of years and delivered against the targets that we set against the backdrop of inflation and various other aspects of that. Do we think there's simplification we can do across the franchise? Absolutely. I mean we're still 2.5 years in. We still have a multitude of different platforms, processes, technology, areas to work through. The more we digitalize our customer journeys, the more that we can do the whole end-to-end digital experience for our colleagues and our customers, the more efficiencies we can drive out the model. So we absolutely believe that there's further efficiencies we can do within the franchise, and some of it will be driven by the work that Scott's doing.

Yes. I mean maybe I'll add a few specific things. So obviously, you saw on the slides earlier, when we talked about simplification, there are multiple drivers and customer experience, better agility protection, but obviously, operating leverage is a big part of that. And I think, at the macro bank level, I think we've done a pretty good job actually digitizing for our customers. And you saw that the 83% digital first in C&I. You look at Retail, [ 79% ] of the retail customers are digital-only. And so we have, I think, a fantastic digital share for our customers. But actually, when you look inside the bank, it still runs pretty analog, which obviously requires a lot of FTE to drive and so on. So we're seeing a lot of obviously, evolution in technology, as you would expect at the moment, that we think gives us a lot of opportunity to both eliminate manual work, but also then to automate and ultimately augment people with AI and other technologies to help drive that and help drive that digitization. If I bring -- if I think about some of the specific challenges we talked about in C&I, we've been through a period of remediation over the last few years. I think as people know, we were on a journey with financial crime remediation, which came back under into risk appetite last year. That was an extensive program. Obviously, we're very focused on bringing us back to appetite. There have been a number of investments in our payments infrastructure, which, again, has required some significant investment over the last couple of years. But I think -- so firstly, there's a strong opportunity on looking at that analog core, looking at augmenting our colleagues as much as possible to really drive operating leverage. And then the simplification of the underlying technology itself. We run around 2,500 applications across the bank today. We said last week that we aim to take out around 600 of those. So 25%, give or take. Actually 250 of those happen to be in C&I. So I think we've got further opportunities there to kind of simplify the actual technology state as well. But the short answer is that, yes, we still think there's a lot of opportunity to drive operating leverage, operating efficiency across the entire estate.

Perlie?

It's Perlie Mong from Bank of America. So 2 questions. One is a follow-up on the securitization point. I guess maybe wider -- in wider Europe, one of the themes that we were talking a lot about is Capital Markets Union, and a lot of that is about increasing balance sheet and capital velocity and also making better use of, for lack of better phrase, lazy savings. And I guess in the U.K., I guess, there are some talks about maybe limiting cash ISA as well. So do you think the regulators are on top of that theme, that they want -- do they want to help make securitizations easier, increase velocity because obviously, the financing need in the U.K. is no less in Europe. So first of all, is that the theme that they are thinking about? And secondly, you've just mentioned that you don't originate, assuming someone's going to take it off. So even if that were to come through, how much of that would benefit you? So that's the first question. And secondly, spring statement, we just heard that this afternoon, I guess. I guess the OBR reduced forecast near term, probably unsurprisingly, but actually increase it in the outer years. And I guess the drivers is maybe some higher cost in businesses since October budget. But apparently, a lot of that is going to be offset by maybe better planning reforms. Is that the theme that you're seeing? Like is that from your -- from your interactions with customers, is that one of the things that is actually playing out?

So let me -- maybe I'll touch on the capital piece and Andy, you can talk a bit about what your customers are doing and seeing. Yes. I mean, look, we have regular engagement with the regulators on these transactions. They see them before we go live with them, and they've been supportive of the transactions we've done. I mean, I don't -- this is just part of an overall way that we manage our balance sheet. So it's -- they're not really driving an agenda here. We're keeping them up to date with what we do and why we do that. And so they fully understand that. I mean, Capital Markets Union in Europe has been talked about for 20 years. I'm not sure I'll still be on the stage whenever that happens. But look, constructive with the U.K. regulators, they see all the deals before we do them. They're free to ask questions if they have any specific questions, and so that works quite well.

Yes. And on the -- I guess, on customer sentiment and opportunity, yes, there's been a degree of, I guess, grumpiness in business from some of the government announcements, business relief and National Insurance being probably the 2 obvious ones. But actually, as people have got on with it, customers are just getting on with it. Yes, they can see lots of opportunity. And there's actually a lot of opportunity. I've only had a quick glance at what the chancellor announced earlier, but it looks positive in terms of what our customers have access to skilled matters, improving the planning system, investing in infrastructure. And that's what it's focused on. So if those things start to come through, that will create a lot of opportunity for U.K. companies, which they're resilient and they're ambitious. So I'm reasonably confident that will flow through into economic growth. Maybe not in 2025, but lifting up thereafter. And we do try to be a patient long-term through-the-cycle partners of those businesses.

Ed?

It's Ed Firth here from KBW. Yes, I had just a couple of questions, I guess, or 3 questions. The first one was in terms of the U.K. economic outlook, I guess we can all have our own views on that. But to what extent do you see yourself as subject to that or drivers of that? Because I guess, with 20% market share, whether you lend or not is obviously going to have a huge impact on what economic growth is going to be. And a lot of your presentation, you're talking about whether or not growth picks up. So to what extent is that something you have to accept? Or can you actually drive that yourself? And how do you look at that internally? And I guess related to that, I guess the question I get a lot from a lot of clients is to what extent can your performance diverge from that? I mean your 20% share, we can pick up like innovation areas and stuff. But ultimately, other than the vagaries of the interest rate cycle, am I right that broadly speaking, you're going to take whatever growth is there in the market as a whole? So I guess that was the first question. The second question was, I guess, one of the startling numbers I saw in the presentation was in the small business sector, where you take GBP 25 billion of deposits and lend out, I think, just under GBP 3 billion, GBP 2.5 billion, something like that, which is quite a startling gap. I don't know what the statistics are like over the last sort of 20 years, but has it always been like that? And to what extent do you think you could actually start to grow that lending because it seems to me you're taking an awful lot of money out of the sector, but not putting an awful lot back in, would be a sort of top line look at that. And then the final question was in terms of SRTs, could -- I suppose we've always been sort of pushing around on this. But can we just -- is it possible just to tell us what -- how many [ RWAs ] have you effectively taken off balance sheet through SRTs? What do you think is the maximum that you could go to? And I guess the background to that question is clearly, if the SRT market dries up, a lot of this is going to come piling back on balance sheet. And therefore, there is a risk for a bank investor to be thinking about in terms of how much is off and how much could come back on?

Do you want to first do the...

You can do the tricky capital question. So in terms of us versus U.K. macro, clearly, we are heavily influenced, particularly in CMM and Business Banking by U.K. macro. But there's quite a lot we can do in terms of influencing sentiment, giving customer confidence, support. So there's a demand and supply point, and supply isn't the issue, as I touched on earlier. And we have within CMM, over recent years, yes, we've outperformed what we use as the kind of key U.K. macro indicators when we budget and plan, not dramatically with our market share between 20% and 30% depending on region, sector and products. We're not going to grow at 20% if U.K. is flatlining. But yes, we can grow faster and we have grown faster than that because I think our proposition enables us to capture more of the growth than some of our competitors in that context. So I think we are, yes, influences and subject to it. We clearly have an important part to play, which we take very seriously, that if we don't do our job well, that does slow down the U.K. economy. So the basic existence of commercial banks to move money through space and time is important, and we take that seriously to try and make sure we are supporting good business to achieve their ambitions and growth. On the Business Banking point, it's quite a different market. So at the bottom end of that, you have quite a lot of challenger FinTech organizations, 60% plus of origination in that space in a sub-GBP 250,000 is broker-driven. So it's a much more fragmented market. And clearly, the name, brand, reputation in NatWest means we are probably more attractive as a deposit holder than we are necessarily as a digital lender. We have invested and have expanded the capability of our digital lending capability up to GBP 100,000 as a digital-only journey. James Holian, who runs Business Banking, is very focused on growing lending through both broker channels and digital channels. But I think it is a more fragmented market. So we probably will see a lower share relative of lending than we will have deposits in that segment. Tricky SRT question?

So I think it was on the slide, but we've done GBP 5.7 billion last year, GBP 3 billion of it was through SRTs. We've done 4 transactions. I think the point is SRTs, just from those numbers, are only one of a number of different ways that we manage capital. As we've said, we'll only do it if it's economically attractive to do so. So what does that mean? Well, we have assets that we think could go into an SRT and then there's the demand on the other side and at what price. So if the market dries up, which it certainly hasn't shown any inclination to do over the past couple of years. And clearly, we can't issue into a market where there's no demand, but I think that would be -- and then you'd have to see an awful lot of volatility in the market, I think, for us to get to that point in time. The other part is the more we manage and dynamically allocate our capital, we would expect that we're improving the overall returns of those portfolios and customers over time. So the availability of assets that we believe it makes economic sense to put into SRTs, you would expect over a period of time if we keep dealing with underperforming capital, then that will decline over time. But -- so that's the kind of way we look at SRTs. But even pre that, and we've talked about some of the other areas we've taken capital actions where we haven't used SRTs in the past. So it is one -- it gets a lot of the headlines, but it is just one mechanism by which we can -- we manage our capital.

Guy?

It's Guy Stebbings from BNP Paribas Exane. The first question sort of builds on Ed's first question sort of around demand and risk. I mean the question is often raised is whether NatWest is taking enough risk, and I see very sort of pertinence of the commercial franchise in particular. I mean impairments certainly performed better than, I think a lot of people expected and sort of takes the question whether some revenues were given up with the benefit of hindsight. . And the sort of response we often get is moving the needle a little bit on risk appetite really wouldn't change the sort of flow of volumes. I don't know if that's true as you see things today, true as you've seen in commercial and across different sort of areas of the business.

So let me answer it and then Andy can give reflections on the mid-market. We showed the slide. We delivered 17.2% return on equity last year. It's a mix of different aspects of the business, including lending, including deposits, including non-NII and so on. So we're comfortable with the returns we were able to generate within our existing risk appetite. There are certain parts of our existing risk appetite. We're not at risk appetite, so there's room to grow within that, some of them are in Andy's business. In some of the newer areas we're looking at, like innovation economy, clearly, we need to look at where our risk is. But those are at the margin. They're really not part of the core risk appetite. So we're comfortable with the returns versus the risk that we take. We want to do more, but we think we can do more even within our existing risk appetite.

And, look we have a team of sort of sector-focused specialists who look at how we're performing and competing in the market. We look if we're losing business as to is that because of price return? Is it because of product capability? Is it because of risk? And if it's because of risk, we'll have a look and understand. Is that risk that we think we should take and we could make sustainable returns by taking that risk, and we will change if that's the case. And sometimes, we'll look at it and say, actually, we think our competitors are wrong on that, and we'll stick to our guns and stay there. So I think it's an active dynamic. We work very closely and very well with the second line in that regard as well in terms of very much a collaborative view debate discussion around where there's potential constraints on risk appetite. But I'm pretty comfortable that our proposition is to be there with our customers through the cycle. And that means a degree of discipline. If you're maxing the leverage out on day 1, it's going to be hard to stick with them when things are harder as well. And that's kind of important to us as a business.

And I had a second question, if that's all right. Just around sort of efficiency gains and AI that you referred to some examples before and gave an example of time being saved on administrative tasks for relationship managers. I suppose you can sort of contextualize that a little bit more for us. How much time is being saved for certain employees, and sort of where we are in that journey? Are we going to see a big step change in a year, in 2 years, in 3 years' time? Anything around that would be really helpful. .

Do you want to start macro and I can go to micro?

Yes. No, absolutely. So I think -- the first thing I would say that we're in the middle of one of the fastest technology revolutions that certainly, I've seen in my career, and I've been doing this 30 plus years as all of us, I think on the panel have. And it is happening -- well, not maybe not all of us -- three of us on the panel. But I think -- but it's happening now. And you're just seeing -- if you just follow the tech market, and just say how quickly new innovations are coming in even this year. We've seen -- we obviously saw what happened with Open AI and GPT and then obviously, DeepSeek just comes in and boom, everything is -- all cards off the table and something is happening again. So what are we seeing inside the banking industry? And just to give you some context. So roughly speaking, today, we have about 750 models across the bank, 150 of them are already AI, 22 of them are generative AI, to give you kind of a current macro view of the world. I think the good thing around banking and financial services is obviously model risk is not something new to us. And whether that's the discipline around credit risk, market risk, et cetera, are quite transferable from kind of how do we actually manage this thing effectively and control it, et cetera, and put the right guardrails in place. So we feel that, as an industry, actually, we're quite well positioned to take advantage of everything going on. But to answer your kind of direct question, where do we see the real secret sauce here. Now obviously, if I think about customer, and customer engagement, we do think -- and I'll give you 1 or 2 predictions. One is that we think there will be a fundamental shift in how customers consume financial services over the next few years. And whether that's through the evolution of agentic and how that plays out, whether it's through direct chat channels like Cora that we have, we think there's going to be a fundamental shift in that. And the second prediction is that I think every role, regardless of where you are within the company, is going to be augmented in one way, shape or form by AI. But just to give you a couple of numbers to give you a sense of where we are today. So as of today, we've deployed AI in many areas. If I look at coding, in my world, already today, 26% of our Java code is generated by AI, which, given we only started looking at it 6 months ago, really just to give you a sense of the pace at which it was moving. When we look at Cora, obviously, we have around [ 80 million ] Cora conversations last year, which was historically powered by IBM Watson. We rolled out a ChatGPT version of it to a small subset of customers, just to see relative improvements. We saw a 50% improvement in containment around that, i.e., the amount of times that our chat channel was able to actually serve the customer and fulfill their needs went up 50% now. And obviously, that is an area where safety and we're being quite conservative about how quickly we roll that out, but it's clearly a key area. Where we can take a little bit more risk internally is where we are using AI to augment our existing staff. So in Andy's world, for example, actually providing AI to our relationship managers, to be able to actually track the meetings, figure out things like an expected action, suggested client activity, et cetera, where we can really use AI to analyze the customer and give the relationship managers much more information in their fingertips, which then they can have that last look then act upon. That's a very obvious one. We are seeing huge opportunities in knowledge to -- giving knowledge to our workers across the bank. So things like CoPilot. I'm not sure you're using that in your personal lives. We're rolling out to all staff over the next few months. We're rolling out [ Aiden ], which is our internal safety backed version of ChatGPT so that people can actually ask questions of our own internal documents and with information up to confidential. And ultimately, we're going to highly and secret, but at the moment not too confidential, but in a safe manner, i.e. not putting bank confidential information out into the public domain. But that's now rolling out. So we're seeing a lot of areas where there is very immediate impact. And look, the amount of work that has been eliminated there varies task by task. But I would say every manual process we do today, in one way, shape or form would be -- either be automated or augmented by AI, and we'll see, I think, significant changes in how people work as a result. Now what I won't say is that's going to result in x number of savings. I think making those predictions is very, very difficult. Because what we've seen in every other digital revolution that we've been -- we've seen is that whilst a huge amount of work is digitized, what you'll see is a whole set of new opportunities and threats evolve. Just think about what's happened in fraud as we've digitized the payments world, the amount of negative interactions we see, the evolution of that market, unfortunately, is, as you know, now, the biggest crime in the U.K. and nearly all of that starts digitally. 80% of fraud originates in social media. You see other things pick up to kind of offset some of it. So it's hard to articulate exactly how that workforce evolution will play out, but I think we can safely say that all activities, all work will be enhanced in one way, shape or form by AI over the next few years. And I think it's sooner than 3 or 4 certainly.

We probably have time for one last question, maybe 2. So I'll come to you, James, and then Amit.

It's James Invine here from Redburn Atlantic. I've got 2 quick ones, please. I mean maybe just a follow-up on the previous 2 questions. Can you tell us what proportion of loan applications that you refused, please? And then the second question is, we can see that for the division as a whole, you've got a 17% return on equity. Are you able to break that down by the 3 segments, please?

Well, we don't give guidance on returns across the 3 segments. So unfortunately, that's not something we disclose.

And the rejection rate, is that?

It varies across the segments. I don't have that number off the top of my head. Yes, it would vary the segments in terms of decline rate. I mean once you get into the relationship managed business, it's a much lower number than the automated business. So I mean we do track it and report it particularly in business banking because we have to, but I'm afraid I don't know that number off the top of my head. It's not one that's caused us consternation recently, if that's any comfort.

Amit, take your last question.

It's Amit Goel from Mediobanca. Actually, it's a bit of a follow-up. So I don't know if you will answer this then. But again, it is related to Slide 18. So you gave obviously the various customer size segments. And I think last time we did the presentation a few years ago, you did give an indicative ROE per segment. And at that time, it looked like what you class now as large SME was by far the most profitable piece, and the other slightly larger customer segments were a bit less profitable. In the slides, it looks like the mid-corporate is the piece which you see the best growth opportunity coming from or where you see the most growth. So I'm just kind of curious whether that piece has a better or weaker profitability level right now versus the broader 17.2% divisional profitability. And so the incremental growth there, is it accretive or dilutive to divisional RoTE?

Yes. I mean, -- that's not quite the way we look at it. I mean, obviously, we're targeting an overall return for the franchise as a whole. I think what we've tried to reflect is that we believe there is value we are extracting within the franchise in terms of those 3 customer businesses being far more connected across the piece. Where we are strong, which is our commercial mid-market, we believe that we can continue to grow and continue to grow at returns that we will be more than happy to generate in terms of the future trajectory of both the franchise and the group results.

And then within Commercial Mid-market, yes, it's a broad range, and there's quite a range of returns within that based on the ancillary wallet, capital intensity, et cetera. So we seek to deliver growth opportunity, but in an accretive way.

Brilliant. Well, thank you all for your questions. We hope you have a better understanding now of the C&I business and its priorities. For those of you in the room, please do join us outside in the reception area for drinks. We can follow up your questions with all of the speakers here, and Katie Murray, our CFO, will also join us. And for those online, thank you. I know we didn't come to some of your questions, but I think a lot of those were answered in all the questions we had in the room, and we can actually follow up with those of you who didn't get a chance to have rest of their questions answered. But thank you very much, and we look forward to speaking again at Q1 results.