NatWest Group plc (NWG) Earnings Call Transcript & Summary

Good morning, and welcome to NatWest Group's Q3 2026 Results Management Presentation. Today's presentation will be hosted by CEO, Paul Thwaite; and CFO, Katie Murray. After the presentation, we will take questions.

Thank you for joining us today. I'll start with a short introduction. Katie will take you through our third quarter financial performance, and then we'll open up for questions. As I said at the half year, we are building a diversified business that benefits from structural growth drivers so that we can deliver strong returns on a sustainable basis. Our track record demonstrates the success of our strategy with 3 clear priorities driving our performance. First, disciplined growth. Our 3 businesses are working in collaboration to drive sustained momentum across the group. This marks the eighth consecutive year in which we expect to deliver growth in customer assets and liabilities of more than 4%. Second, we continue to increase our operating leverage through simplification. This gives us a significant competitive advantage as the most efficient large bank in the U.K. Third, as we actively manage capital and risk, we expect to generate more than 200 basis points of capital for the third year running in 2026. This gives us the flexibility to continue to invest in our business, support customers and deliver attractive returns to shareholders. In short, by driving disciplined growth, leveraging simplification and actively managing capital and risk, we are delivering industry-leading returns with an average return on tangible equity of more than 17% over the past 4 years. Our third quarter continued the strong momentum. So let me turn to the headlines. Customer assets and liabilities grew 14.2%, well above our target of more than 4%. Within this, customer lending grew 7.7%, this growth was disciplined and broad-based across all 3 of our businesses with a strong performance in commercial and institutional driven by infrastructure, renewables, housing and technology. Growth in Retail and Private Banking was driven mainly by mortgage lending, which increased 4% or GBP 8.3 billion as we grew our stock share from 12.5% to 12.7% over the first 9 months. Customer deposits grew 4.3% in a competitive market. This reflects further growth in current accounts as well as operational balances that bring strong relationship and liquidity value. In retail banking, we are delivering on our strategy of growing savings with the launch of new Easy Access products and channels. There was also good growth from mid- to large corporates. Assets under management and administration more than doubled to GBP 132 billion, supported by our acquisition of Evelyn Partners. This includes new flows of GBP 1 billion since the deal completed at the end of June, with positive flows in both businesses. We're excited about the growth opportunity that Evelyn Partners represents for the group. The integration is on track and we look forward to providing further insight into private banking and wealth management at our spotlight in November. We continue to increase operating leverage with income growth of 9.3%, well ahead of cost growth of 4.8% and with a cost income ratio of 45.7% down 2.1 percentage points as we move towards our 2028 target. Continued growth, strong operating leverage and a low cost of risk have resulted in earnings per share of 57.4p up 13.2% and a 9.4% uplift in TNAV per share excluding Evelyn Partners. We generated high levels of capital at 208 basis points. Our balance sheet is strong with a capital ratio of 13.5% and our return on tangible equity remains industry-leading at 20.2%. With that, I'd like to hand over to Katie to take you through the results.

Thank you, Paul. I'll cover the third quarter using the second quarter as a comparator. Our third quarter performance was driven by broad-based growth, driving sustained income momentum and continued high returns. Income, excluding notable items, increased 3.1% to GBP 4.6 billion, and total operating costs grew 2.8% to GBP 2.1 billion. with the cost-income ratio improving further to 45.1%. The impairment charge was GBP 277 million, equivalent to 24 basis points of loans. This resulted in operating profit of GBP 2.2 billion. Profit attributable to ordinary shareholders was GBP 1.5 billion, and we delivered a return on tangible equity of 21.6%. Turning now to income. Income, excluding notable items, grew 3.1% to GBP 4.6 billion as a result of growth in customer assets and liabilities or CAL, higher noninterest income from the inclusion of Evelyn Partners and an extra day in the quarter. Net interest margin was broadly stable at 250 basis points, in line with our expectations as deposit margin expansion was offset by ongoing mortgage repricing, lending mix and our regular annual review of customer repayment habits. Noninterest income grew 7.9% or GBP 75 million supported by the inclusion of Evelyn Partners and a gain on the sale of our SME consultancy business, Mentor. This was partly offset by the non-repeat of accelerated insurance income in Retail Banking in the second quarter. We now expect the Bank of England base rate to increase to 4% in the fourth quarter. As you are aware, given the lateness in the year, the resulting benefit in 2026 will be modest, and we continue to expect full year income excluding notable items of around GBP 17.9 billion. Turning now to CAL. We continue to deliver a strong performance across our 3 businesses. CAL increased by GBP 15.7 billion in the quarter or 1.6%. This comprises GBP 8.1 billion of broad-based customer lending growth, GBP 5.8 billion of customer deposit growth and a GBP 1.8 billion increase in assets under management and administration. I'll touch on each of these elements in turn. Strong loan growth of GBP 8.1 billion was broad-based. Retail banking and private banking and wealth management balances grew GBP 1.5 billion or 0.6%. This included GBP 1.1 billion in mortgages and GBP 300 million in unsecured lending. Our mortgage stock share remained stable in the quarter at 12.7%. Commercial and institutional grew faster at 4% or GBP 6.6 billion. This was driven by corporate and institutions where higher infrastructure and renewables lending was supported by structural growth trends such as digitization and decarbonization. There was also healthy demand in commercial mid-market from sectors such as commercial real estate, manufacturing and social housing. Turning now to deposits. Customer deposits growth of GBP 5.8 billion was well balanced across both personal and corporate customers. Retail banking deposits grew GBP 3.1 billion as we attracted savings from the launch of new products and channels. There was continued modest sequential growth in current accounts. In commercial and institutional, deposits increased by GBP 3 billion with growth across both commercial mid-market and large corporates. Our deposit mix remains broadly stable with a slight increase in term deposits now representing around 19% of the total. Turning now to assets under management. Assets under management and administration closed the quarter at GBP 132.4 billion, an increase of GBP 1.8 billion. This includes net inflows to assets under management of GBP 1 billion, assets under administration net flows of $0.4 billion and positive market performance of GBP 0.4 billion. The net inflows of GBP 1 billion are equivalent to 3.4% of opening AUM on an annualized basis and were positive in both businesses. Turning now to costs. We are pleased with further improvement in operating leverage in the quarter as we grew income faster than costs. Other operating expenses of GBP 2.1 billion take the total for the first 9 months to GBP 6.2 billion. We delivered GBP 420 million of gross cost savings year-on-year, giving us the capacity to continue investing in the business. These savings partly offset increased investment spend, the inclusion of Evelyn Partners and higher people-related expenses, including our annual pay award. As you heard from Paul, our cost-income ratio reduced by 2.1 percentage points to 45.7%. We continue to expect around GBP 300 million of cost from the Evelyn Partners acquisition this year and have incurred GBP 156 million to date. Overall, we continue to expect other operating expenses of around GBP 8.5 billion for the full year. Turning now to impairments. Customers continue to demonstrate resilience, and our credit performance remains strong. Our growth is being delivered with a consistent risk appetite supporting a structurally low loan impairment rate. The impairment charge for the quarter was GBP 277 million, equivalent to 24 basis points of loans on an annualized basis. This brings the charge for the first 9 months to 21 basis points, in line with our full year guidance of below 25 basis points. The increase relative to the second quarter was driven by the non-repeat of releases in the retail portfolios. We carry economic uncertainty post model adjustments of GBP 288 million with total PMAs of GBP 350 million. Turning now to capital. Our disciplined approach to capital allocation supports strong and sustainable capital generation going forward. We ended the third quarter with a common equity Tier 1 ratio of 14.7% before distributions. 142 basis points of capital was invested in the acquisition of Evelyn Partners. And as you know, this is a highly capital-generative business, and we generated 288 basis points through strong earnings which was boosted by 47 basis points of RWA management. Our ongoing investment spend consumed 30 basis points and organic lending growth absorbed 96 basis points. We are reporting a CET1 ratio of 13.5% after accruing 50% of attributable profit towards the final ordinary dividend. And we continue to expect capital generation before distributions and the impact of Evelyn Partners of more than 240 basis points in 2026. We ended the quarter with GBP 200 billion of risk-weighted assets including some positive CRD4 model updates in our retail portfolios. Turning now to our CET1 requirements. As you know, we continue to target a CET1 ratio of around 13%. We can confirm today that our Pillar 2A requirements will be reduced by 76 basis points as of January 1, including Basel 3.1 offsets. 43 basis points of this relates to our CET1 requirement taking our supervisory minimum from 11.6% to 11.1%. This was expected, and we took it into account when we changed our CET1 target to around 13%. Our total capital and CET1 ratios both remained strong and comfortably above minimum requirements. Turning now to guidance. Our 2026 guidance remains unchanged, with 1 enhancement. We now expect risk-weighted assets of around GBP 210 billion as at the first of January 2027. This takes into account Basel 3.1 and CRD 4 impacts as well as other movements such as anticipated growth and operational risk in the fourth quarter. We will continue to operate with a CET1 ratio of around 13% and as we told you in July, we expect to announce our next buyback with our full year results in February. And with that, we'll now open for questions.

[Operator Instructions] Our first question today is going to come from Alvaro of Morgan Stanley.

The first question is on -- it's kind of the NII outlook, but obviously, I know you're not going to give guidance for '27, but the volume growth, lending growth continues very strong. I assume that you expect that to continue. I'm more thinking about the funding of that loan growth and as you see it evolving going forward, deposit competition and deposit growth and that how much of that strong loan growth is actually going to feed into extra NII growth because when I think about the structural hedge, there obviously is a lot of tailwinds, but I wonder if the competitive dynamics of funding that loan growth will sort of it sort of hold back in NII growth as we think about NII going forward. So maybe some color -- if you could give us guidance some color as to what to expect from those moving parts in terms of competitive pressures eating up the the hedge upside? And then on capital, I know your comments, Katie, on the 13%. I was taking already into account the reduction in Pillar 2A, but there is obviously, the buffers are being reviewed, making them more flexible, encouraging the banks to use less management buffer. Have you taken that into account? Or could that give you an extra visibility sorry, flexibility next year when they firmed up the proposal from that.

Thanks, Okay, Katie.

Alvaro, good to hear from you. So let me quite a lot in that 2 questions there. So I'll kind of take you through a few different bits. So first of all, if we look at income in 2027, we remain on track to deliver income ex notables of around GBP 17.9 billion in 2026. So that's an increase of over 9% year-on-year. And although, you're absolutely right. I'm not going to give you a specific 2027 income guidance today. But I can't share how we are thinking about the drivers several, which I think you've got correct in your head as well. So first, -- we are confident that we will continue to deliver strong customer balance growth, in line with our greater than 4% CAL growth. And on the backhaul growth, we know that it supports both NII and noninterest income growth. including the AUMA income from our large and growing PBWM business. Secondly, we continue to expect income from the structural hedge to be more than GBP 1 billion higher in 2021 versus 2026. That will contribute over GBP 7 billion into the income line. We've got a high degree of confidence on that outcome, given that there were already 3 quarters of that hedge has been locked in, and the higher investment reinvestment yields in 2026 have underpinned that confidence. And finally, our current expectations of the mix of balance sheet growth across loans, deposits and wholesale funding does mean that margin continues to be broadly stable through 2027. We don't assume any further changes in the bank rate during the year. We're expecting it to remain at 4% throughout 2027, and that 5-year swap rate to moderate to a 4% average for 2027 as well. But you can be confident in the ongoing income growth in '27 and beyond, driven by balance sheet growth, the strength of the hedge. And obviously, when we talk in February, we'll talk more about where we might land in terms of the actual numbers. If I then kind of jump on to funding and liquidity. Look, we're pleased with what we've delivered in terms of the really strong broad-based loan growth in Q3. You can see the balances were up 2% or GBP 8 billion over the quarter and 6.4% year-to-date. We also saw strong deposit growth at 1.3%. And you can see that ourselves, like the rest of the industry, we are seeing that lending growth is outpacing that deposit growth. To date, we've utilized our surplus deposit liquidity with minimal wholesale funding issuance to meet customer demand with a loan-to-deposit ratio of 90% at the end of the quarter. We benefit from a strong liquidity position, high-quality deposit franchises with the flexibility to access diverse funding sources across deposits and wholesale funding markets as well. And what we're really seeking to do here is to manage both the lifetime value of our customers and also their liquidity value. If I then you really want to work on this morning over most for your 2 questions. If I jump on to capital and where we are there, what we did announce today our Pillar 2A requirement will be reduced by 43 bps on January 1, including the Basel 3.1 offset. So that takes our supervisory minimum from 11.6% to 11.1%. This was expected and we took it into account when we changed our CET1 target to around 13%. Why I would say it's 1 part of the regulatory change, a step in the right direction. We do await the next capital update in the financial stability report on November 2026. We continue to engage very constructively with the PRA on the case for reducing overlaps for domestic exposures. So I would say let's see what's announced and then we will take stock. Thanks, Alvaro.

Our next question comes from Chris Cant of Autonomous. We're going to move on and come back to you Chris in a moment. We're going to go on to Benjamin Toms of RBC.

I just want to pick a back -- something you just said about a stable NIM going into '27. Can I just clarify that's stable versus the Q4 exit rate whatever that might be? And then secondly, there's a one-off gain in your other income. I don't think you class that as a notably -- so can you just help us quantify that to help with our run rate modeling. And mortgages continued to grow strongly in the quarter. What do you expect from mortgage growth from here? I mean you've got your first home coming in the spring. Do you think that could lead to a loan demand over the first -- the next 6 months with first-time buyers making up 25% of volumes.

NIM of our income and then mortgages.

Yes, perfect. So if I look at NIM, the simple answer is yes, I am thinking sequentially. We said we expect NIM flatter in H2 and so we think those drivers are continuing into 2027. And I guess, as I kind of think of the drivers, you know, Ben, there's 3 things we think about lending margins. We continue to expect growth weighted towards lower risk, lower margin, attractive returning -- returns lending business and for the front and back book mortgage margins to align by the end of 2026. On deposit margins, we see expansion driven by the ongoing tailwind on the structural hedge with over another GBP 1 billion of higher hedge income in 2027 than 2026. It's going to obviously a little bit offset by mix. Funding and other, that's going to be impacted in terms of the increased wholesale funding. And on interest rates, in my last answer, I said 4% for the year, holding stable as we go out and that 5-year swap rate kind of moderating to that 4% as well. Let's see how that goes. I do think we need to think a little bit about what that means for customer sentiment and credit demand, but we are really comfortable in terms of growth. And that together brings us to the kind of broadly flat that we've talked about. In terms of the one-off in terms of income. It was the sale of our mentor business. It's a small SME consultancy business, and it's in the tens of millions of that gain. If I then jump over on to mortgages. So it's been another good quarter of mortgage growth. Balance is up GBP 1.1 billion or 0.5% in Q3 or that's 3.9% up for the whole year at GBP 8.3 billion for the first 9 months. Our market share has remained stable in the quarter at 12.7%. That's up 12.5% from the start of the year. It's our ninth consecutive quarter of net mortgage growth. We've got a healthy pipeline into Q4. When we look at the kind of market level, we can see that Q3 applications were 9% higher than Q2. You've got modest declines happening in house purchase numbers, and that's -- you've all seen that in the Bank of England data but that's been offset by higher remortgage activity, especially during the period of rate volatility that we saw in September. As you know, we remain very dynamic and disciplined in our pricing throughout the period. The margin continues to be impacted by the roll-off of the higher-margin 5-year fixed mortgages as well as the behavioral life adjustment that you saw come through in income as well. We have guided you previously to the -- we expect to set at around 60 basis points for the year. No change in that guidance as we move forward from here. If we look forward, mortgage rates remain materially above 5%. There might be a little bit of a drag on house purchase lending with a bit of a mix shift towards remortgages. And I think we'll see what the government's new our first home scheme, which is announced in the budget this week. We think it will be supportive overall. While the impact will be modest for the market overall, we are we're positive about it. I would say, overall, we're really pleased with mortgages and the continuing growth that we're seeing in this area. We expect it to continue to grow, of course, at appropriate rates of return for us. Thanks very much, Ben. .

We're going to come back to Chris Cant of Autonomous.

Can you hear me?

Yes. Second time looking, we got .

I seem to now have 3 separate toggles between browser headset and the button on the website to play around with. So I apologize.

It's too much information, Chris.

Can I just come back on the the capital and then 1 on rates looking into next year, please. So in terms of thinking about the capital target, obviously, we knew Pillar 2 was going to come down a bit better than I expected, but ballpark. [ OSI ] releasability is obviously a new development during the course of this year. So if you didn't get any further reduction in MDA, but the Bank of England does follow through. Are you going to respond there in terms of the targeted level of management buffer? I mean, they're doing that to try to encourage banks to run with smaller buffers. It's quite a material change in terms of your MDA being sort of 3% flexible under severe stress. So if you could comment on how you're thinking about that, that presumably wasn't factored in when you set the 13 and on international competitiveness, which is something that Chancellor called out in the letter to the FPC this week. Is there anything on your shopping list there beyond domestic overlaps? I know the Bank of England talked about that last year, but it felt like maybe there's something broader going on. So is there anything you think that is particularly penal in the U.K. framework? And then the final thing is on rate sensitivity looking into next year. I understand you've given us your rates assumptions. Quite a few European banks broadly this quarter talking about deposit competition all of a sudden. And I can't help but think that maybe partly this is about management teams trying to discourage analysts from taking stated rate sensitivities and sort of truing up previous guidance. So in terms of your own rate sensitivity looking into next year, your planning based on flat NIM, 4% rates, 4% swap rates, that's not where rates markets are. Do you still believe the sensitivity disclosures you give us? If the rates outcome is different, is that still a reasonable basis for us to be thinking about adjusting your spreadsheet when we model our own spreadsheets.

Okay. So Casey, do you want to go with kind of the narrow question on capital, I'll talk a little bit about international competitiveness and then the rate, growth rates. Does that work? .

Shall I do capital and REITs together and then get back to you perfect. Let me kick off on capital perfect. So if we -- if I look at capital, look, it's a relatively kind of simpler sort of answer. The buffer usability is relevant in the systemic stress rather than idiosyncratic stress. And we obviously manage for both. So for us, the most important is that it's fallen to 11.1%, reflecting our strong and leading performance in the U.K. bank stress test that you saw last year, we are looking and we're looking to see what the FCR comes out with next month, and then we will take stock at that point.

And then, Chris, on the broader question around I guess, international competitiveness around the framework. 4 things I'd quickly call out where we think there are opportunities to calibrate the framework in a better way. First would be the kind of countercyclical capital buffer. So bring us more in line with some of the other regulatory jurisdictions. I think that would be a simple and fast way to deliver capital relief. It also maintains the kind of the wider macro flexibility as well. So that's the first one. Second opportunity would be there is a kind of a cumulative capitalization of U.K. domestic risk. So if you think about the interaction between the countercyclical buffer, the [ OSSI ] and the Pillar 2A, the kind of geographic aspect of that mean the very similar risks are captured in different parts of the framework. So we think that's worth looking at to make sure it's proportionate and doesn't isn't disproportionate vis-a-vis the domestic risk. Then you've got, I'd say, making third piece is making sure the risk weights are commensurate with the underlying risk. U.K. mortgage is a very obvious example. Very historical low loss experience. And we need to make sure the levels of capital generally reflect the risk and are proportionate. So there's kind of different things to look at in that third piece. And then Fourth and final, the output flows, the output flows inevitably reduce some of the risk sensitivity of the framework. But as over jurisdictions review their approach, we need to make sure the U.K. keeps its implementation under review as well. So we don't see regulatory drift or dissonance. So they are the 4 things that from a framework perspective, we think, offer opportunities and they're about competitiveness, but they're also in part about resilience as well making sure we get the right calibrated framework, which ultimately obviously helps more lending get into the U.K. economy and, I guess, the wider challenge of growth and returns. Katie, back to you on rates.

Sure. Thanks very much. So I mean, Chris, as we look at it, obviously, we're comfortable with the sensitivity we give you is a point-in-time sensitivity I think there's other things you need to think about when you're looking about implications for customer behavior in response to higher rights such as sentiment and lending demand, while accepted, we are confident on loan growth within there as well. And so we are encouraged by what we see in terms of that lending demand as we go through. We've guided you to 4% for next year and the swap rate kind of moderating over the year. I would sort of say is we looked at -- we've been reinvesting our product hedge during '26 at 4.2%, so a little bit higher than that. You know what markets are doing at the moment. It's kind of difficult to give a number of any specific point. You can take your own kind of view on that, but you've got the right tools within which to do that.

Next, we're going to go to Benjamin Caven-Roberts of Goldman Sachs International.

So firstly, just a follow-up on some of the helpful NII comments you gave earlier, Katie. So if we zoom out and think about income overall -- are there any comments you could give on how you think about the pace of income growth changing in 2027 versus 2026? As you say, you've been posting solid volume growth, but mentioned stability in the margins as 1 of the factors to bear in mind there as well, at least on the NII component. And then secondly, just on asset quality. Are there any comments you could give around the key moving parts you're seeing under the hood of the business, the impact from higher rates, which bits of the portfolio are more or less resilient right now.

Sure. Let me let's start off with the asset quality and then I'll come back to you on the pace of income. Just -- so as I look at kind of the asset quality piece, I think Ben you're familiar with our book. We remain pleased with the quality of our diversified prime loan book. There's no significant areas of stress that we see around the 3 businesses. The impairment charge for the quarter, GBP 277 million up from GBP 140 million in Q2. That's really a question of kind of nonrepeating releases that were happened in Q2. And so actually, we see it as a more normalized charge. And that's where we get to the 21 basis points for the 9 months, so well within our kind of guidance as we move forward from there. There was a slightly higher Stage 3 charges in Q3, but not anything that I would highlight that I'm overall worried about. Total PMAs are stable in that quarter is by a small increase in economic uncertainty, but about GBP 4 million, really not really that relevant. And we remain confident about our impairment outlook for the remainder of the year. And then probably also guide you, we still have that guidance out with either 20 to 30 basis points on impairment through kind of through the cycle, and we see us very much operating within there. If I look at kind of the pace of income growth, I've already spoken about how we think 2027 is not going to be -- so I'm not going to go into that much further than I have done already. You can see that the pace of income growth, as you look at the quarters it's developed through this year, One thing I think you should be mindful of, though, is the gap that we've seen in our -- the growth of our lending and then the growth that we see in our interest-earning assets, which is obviously correlated to the loan growth. What you've seen in 2026 within there is that we've utilized a lot of our surplus liquidity. So you've seen average interesting assets growth at 3% year-on-year, and we're that's well below the kind of 8% growth that we've seen coming through on the lending. That's been positive for NIM in 2026. And given the closer alignment going forward means you should expect stronger average interest in earning asset growth. and more stable NIM as a result of that. And that strength comes from the strength that you see in our balance sheet growth, and it's very consistent with what we've delivered throughout this year. And then I would say that kind of is what's driving our stable NIM as we go forward from here. Thank you very much.

Our next question comes from Sheel Shah of JPMorgan,

I've got 2, please. First, on the LCR. So that's been coming down quarter by quarter. I see what you're saying in terms of the surplus liquidity being utilized and is driving some of that as well. where do you think the floor is for this? How do you expect to defend that floor? And should we think about an impact on deposit and funding margins as a result of you trying to defend this floor as well. And then secondly, on the corporate momentum. So that seems to be broadening out to the mid-market space, which is encouraging. Can I ask about the sustainability of this, whether there were any factors that may be uplifted that in the third quarter or whether that's going to be more sustainable going forward and the associated margins because you've talked about mix shift in terms of the corporate side of things driving the pressure. But in terms of sort of pricing pressure, are you seeing any of that to come through?

Great. Okay. Thanks, Katie, why don't you talk a little bit about corporate lending growth and commercial mid-market lending growth in the new cover LCR if it's okay. Yes. So Sheel, As you rightly point out, another strong quarter on -- from a corporate kind of lending perspective. Pleased to see that it's kind of becoming in repeat delivery really. And to be that speaks to the underlying strength of the commercial and corporate franchise that we've got. The lending itself is, in my view, has been driven by quite fundamental kind of structural trends. There won't be new themes to you, digitization, decarbonization, infrastructure, et cetera. The reason for mentioning them is that's what gives us confidence about the sustainability of the lending demand, and we can see that in strong pipelines that we've got. I am pleased that the growth is in the mid-market as well as the kind of CIB. You can see nearly GBP 5 billion up in the mid-market year-to-date, GBP 12 billion of -- in the large CIB space, relatively flat in the small SME space, which is probably what you'd expect given the wider economic environment. And then -- then if you ask ourselves where is that lending growth coming from? And therefore, why should we feel confident it's sustainable. When you get to the detail in the disclosures, you'll see it's very broad-based. You'll see infrastructure, housing, renewables, professional services, utilities, tech. So the strength is there across a broad based set of sectors, but also across, as I say, both mid and large. And when we look at the pipeline ahead of us, it looks strong. That pipeline is there, and we've -- and we've kept our appetite very, very consistent and very stable. So encouraged by the demand. From a mix perspective, I would say that the pricing dynamics haven't changed. Obviously, at the top end, -- it's lower risk weight, lower margin but nicely returning business. In the mid-market, slightly wider margins. That's always been a competitive space because you're dealing with impressive mid-market companies who know the value of lending, but we're not seeing any new specific margin pressure there. But net-net, another good quarter of corporate lending demand, very good line of sight on the pipeline and very confident we can continue to deliver that looking forward. Katie, LCL. .

Perfect. Thanks, Paul. Sheel, we are seeing a normalization in U.K. banks, LCR from the elevated levels that we all saw post-COVID. And the same is obviously true for us. We reported an LCR of 137%. There's no change to our approach on liquidity, whilst you would expect us to maintain a buffer over the minimum requirement of 100%. We do remain comfortably above that. And we have a broad range of funding options that are available to us. So it's certainly not anything we see as a constraint to kind of loan growth. As you would expect, we manage our funding and liquidity needs on a dynamic basis seeking to optimize across the various levers depending on market conditions. First of all, we operate a high-quality deposit franchise. We've got great flexibility across our multiple brands and product channels to grow deposits where we see attractive customer and liquidity value. Secondly, we've got significant funding flexibility beyond deposits to support future loan growth as that required. As you're aware, our non-ring-fenced bank are predominantly wholesale funded as our retail and corporate deposit franchise sits in the ring-fenced bank. We've had minimal requirements for wholesale funding today within the ring-fence bank, which means we've got a lot of significant capacity access secured wholesale funding markets to support growth when it makes sense to do so. So overall, we remain very well positioned, strong liquidity position with levers across deposits and wholesale markets. All of that is embedded into our outlook for NIM, which is a function of the growth of the balance sheet that will continue to drive strong top line growth and support continued operational leverage and sustainable strong returns. Thanks very much, Sheel.

Next, we're going to go to Aman Rakkar of Barclays.

Katie. Just got a couple of questions, please. So could you just -- look, we're kind of a matter of weeks away from the end of the year. Could you just help us tighten up NIM into Q4, your expectations for like your share price is clearly very, very, very sensitive to your commentary around forward net interest income and in particular, your margin expectations for next year clearly below where the Street is. I think you've been pretty clear around the trajectory. But that jumping off point for Q4 and if you're not able to kind of just give us what you think that NIM will be in Q4, which I understand. Could you just help us think about the sequential drivers that you've laid out in Slide 24 lending margin, deposit margin and funding and other kind of directionally what we might anticipate there? And then just coming back to your commentary around your expectations that average interest earning asset growth might better reflect lending growth in '27. Hopefully, I've captured that comment right. So then I guess my question is around your view, what's your kind of take on the sustainability of this line growth rate? I mean, you've done -- you're growing your loan book at 8% in Q3, I think actually both annualized and year-on-year. I think we understand that there might be some ease in mortgage momentum, given higher interest rates. But I'd be really interested to see your take on that lending momentum? And ultimately, it's the volume, it's the volume component to your NIM commentary next year, right? I guess you've guided down in. Is there a volume offset.

Okay. NIM? .