Permanent TSB Group Holdings plc (PTSB) Earnings Call Transcript & Summary

[Technical Difficulty] as we added more income and additionally more cost, but it widened to reduce our cost income to 66%. We move to our balance sheet, our customer deposits have grown by 6% to EUR 23 billion. And 70% of these deposits are insured under the deposit guarantee scheme. So it represents a good spread of deposits and indeed safety in our funding model in that sense. Our performing loan book grew by 9% to EUR 20.9 billion. And as mentioned earlier, that was through strong new lending performance and indeed the addition of the Ulster Bank migrations through 2023. Our nonperforming loan ratio was consistent at 3.3%. So we haven't seen any material increase in our nonperforming loans. And they continue to be managed in a good -- well, in that sense. But just turning to capital; all capital ratios remain above the management and regulatory minimum. And with a strong common equity Tier 1 capital on a fully loaded basis of 14%. And you might recall, when we started the journey on the Ulster Bank acquisition, we said that we would land the bank at a 14% CET1 level and that's what we've done without any surprise. So it's landed as we expected. And that 14% level at the end of 2023 is after around EUR 900 million increase in risk rates during the year, driven by the lending growth that I mentioned earlier on. Our total capital on a fully loaded basis has increased -- sorry, decreased, apologies, to 19.7%, which is 160 basis points lower than the end of '22. But also that was expected and indeed is tied into our 14% CET1 ratio as well. A very welcome announcement at the end of the year with the removal of the dividend restriction that was imposed on the bank in -- back in 2016 and that was a positive movement forward and really normalizes our position with regard to how we think about distributions going forward. It also highlights and is a testament to the transformational improvement in the bank's balance sheet over the last number of years. And I see it as a vote of confidence in the bank's ability to generate sustainable returns and indeed develop its business model going forward. Lastly, we were extremely pleased to receive news last week that Fitch, the rating agency, had upgraded our holding company rating to investment grade with a stable outlook. Again, these are very, very important moves by way of how we present our bank, how we present our balance sheet, and indeed how we operate in the market around raising debt and debt requirements and they ran well. I'll just turn to the macro outlook. There's a lot of information on this. I'll just touch on a few things. We can see GDP growth stabilizing, we believe, in '24 and '25, around that 2.5%, 3% level. We also see with a normalization of inflation, we see a relatively strong labor market moving forward, so nothing to -- of concern there. And we see ECB rates moving to 3.25%, that's the deposit rate by the end of the year. So that's what we're predicting it. The mortgage market, we've seen a reduction in 2023 with the switcher market moving downwards. But saying that the first-time buyer market has moved upwards and that's a trend we expect will continue as first-time buyers are more active in the market. And indeed, there's a larger and bigger supply of housing stock as we move forward. And also, we can see the house price inflation normalizing in '24 and '25 as well. If we just move to how we delivered on lending. What you'll see from this slide is that we now have a diversified balance sheet and a diversified lending base. We lend EUR 2.8 billion of lending into the market. You'll see that while our mortgage volume had reduced from EUR 2.6 billion to EUR 2.3 billion, we were able to offset that with new business lending, new lending and asset finance and indeed an increasing customer term loan offer as well. So, again, this is showing a lot of diversity in our balance sheet. And it shows we are starting to fire on all cylinders in that respect. If I just bring that down into the various constituent parts, the mortgage, mortgage market itself reduced by 14%. Our volume reduced by 11%, which gave rise to an increase in our market share by 70 basis points to 19.2%. So around that 20% level by way of share, which means we're advancing 1 in every 5 mortgages in the country. If we look at personal term lending, it increased by 22% year on-year. It's an area where we've been providing some marketing support and indeed 80% of term lending was fulfilled digitally during the year. On business banking, I think we're probably going against the trend here in that we achieved 11% increase in business lending to EUR 167 million. We also now have the Asset Finance business, which for the full year lent EUR 223 million as well. And as I mentioned earlier on, our business book now is over EUR 1 billion and that has increased significantly over recent years and Nicola will touch on that later on. We just turn to our strategy. We have been and we are transforming the bank. We believe we will differentiate by way of cluster experience. That's something that's within our DNA as an organization. And through that, we will drive sustainable profits and now that the dividend restriction has been removed, over time shareholder return. We've executed a bank strategy that supports the delivery of our purpose. And our purpose is around building trust with customers and the communities. And we will do this by building a sustainable organization that's transparent and fair with customers. Our strategic vision has been developed with our customers at its heart. And in consideration of all stakeholders, that is our colleagues, our shareholders, with the regulators, our debt investors and indeed the broader Irish community where we believe we play an important part. And our ambition is to be Ireland's best personal and business bank differentiated through exceptional customer experience. And for all, that doesn't mean the biggest -- it doesn't mean the most profitable, but what it does mean is being best at what we can do and indeed for both personal and business customers. And having those customers tell other potential customers, go talk to PTSB, go give them a chance, do some business with PTSB. They've looked after me well, and I think they'll look after you. And how we measure our ambition and how we measure our purposes across 4 pillars. Of course, the important part of being a secure and resilient bank that's operating 24/7. That protects customer data. That provides customers with what they need by way of service. And indeed, we do that in an efficient and a simple and indeed an increasingly automated way by way of our processes. It's having connect, customer experience where customers are at the heart of how we decide, how we offer our products, how we service them and indeed to deepen that relationship. And as you've seen the clear -- you can see, I should say, the clear diversification of our income and that will continue now over the coming years. We have all the ingredients around supporting both personal and business customers and that will develop. If we think about sustainability in its broader sense, obviously it's around the ESG and indeed supporting customers in the green transition. It's also about us creating a sustainable business that is profitable. That generates capital. That can support future lending and future support into the Irish economy and indeed provide a return for investors as well as we place their faith in us by way of providing with equity and with debt and funding. And indeed, most importantly, culturally, from a cultural point of view, managing our culture, ensuring that we keep our reputational standards where they should be. And indeed using our culture and who we are as a key strategic enabler for how we operate our business. And underpinning these strategic priorities on what we would call foundational capabilities. That's how we manage risk, it's how we're risk aware, how we ensure we're compliant with regulation, how we invest. And we have been investing heavily in technology and indeed operational resilience. And then how we manage data for the purposes of what we have to do from both a regulatory point of view, but also how we support customers and their needs and anticipate and assist our customers in the needs that they have. And these are areas that we are focused on and we're making progress on. And you'll see that over the coming years as well. An important juncture for us this year was the launch of our brand PTSB, a modernization of our brand, a communication of something different. It's about how we're repositioning PTSB to be a contemporary full-service bank, a bank that's customer-centered, that is connected to every Irish community across the country, where we have great people who are working locally and indeed essentially in various units, but working directly in unison to support personal and business customers. And indeed, we're complementing that with the investment we're making in technology. And the investment we've made in our -- recently where we launched our new app and indeed, we will see development of that over the coming months and years as well. So our brand reposition reflects our larger scale, a more diversified bank with customers at the center and indeed significant growth ambitions to compete in this market and to make progress in that respect. And through this, we've introduced our new brand promise. And our new brand promise is to be altogether more human. And in that sense, that's our commitment to put some customer needs at the center of how we plan, how we design, and how we deliver. And to combine, as I mentioned, good technology with good people who support customers. And this is also reinforced by our sponsorships. And we're very excited with regard to the journey now to Paris in July and August, where we're the title sponsor for the Irish Olympic and Paralympic teams, is really, again, connect to who we are. It's connected to communities. It's connected to people and attributes, so we're doing the best for competing. And indeed, that's what we want to do. It's not all about winning, that's important. But it's also about competing and ensuring that we have a product offer and a service offer that compete in this market. And we will see, hopefully, the benefits of all the work that the Olympians have put in, in July and August of this year. It's looking good, by the way. So we're happy about it. And if I look at the next slide, which is around how we think about our customers. We see a growth in our customer base. We're up to 1.3 million customers. That's a growth of 10% over 2 years. What's underlying that number is actually more activity. Customers are more active. They're more engaged. They're engaged with the bank. We're engaging with them. And that is an extremely positive aspect to our business. If we look at the customer loyalty by way of our focus on loyalty, trust and our digital enablement, our brand power has increased by 5 points to 13%. Our NPS score is up 10 points. It's doubled in the year, it's 20 points. We would say we're #1 in the market in this space. And we're growing a level of activity by way of content -- the payments has increased by 5% to EUR 119 million. It's only a short -- a couple of years ago that I would say that that number was EUR 60 million. So you can see this significant impact there and growth. Our digital active customers have increased as well and digital activity in the sense of engaging with our app have increased as well. And as I mentioned earlier, we have a brand-new piece [indiscernible] by way of our digital front end, which we introduced during the year. Given our size and scale, we are very focused on partnerships and making positive use of partnerships in that sense of sharing success. We introduced the credit logic mortgage application process, which is a fully digital process for our customers. In 2023, EUR 290 million of mortgage drawdowns were completed through that digital application process. That's an 80% increase year-on-year, but we'll see that. And it's already -- we can see that it's ramping up by way of Credit Logic. All our colleagues in the organization are using Credit Logic. Our customers like it. And it has the added benefit of taking out a lot of paper and process out of the way in which we interact with customers. So that has been going well. We also have our partnership with the SBCI with regard to the future growth loan scheme and the Brexit impact scheme. We've lent EUR 82 million across those 3 schemes in the last 3 years. But again, there will be a significant increase there as we look at the green lending and transition agenda for retrofit that's coming this year as well. And the first home scheme has granted 50 million of drawdowns for eligible first-time buyers since its launch in '22. Again, they're a key party to that. And we supported by way of funding. On the right-hand side, you'll see some of the awards we've won by way of innovative banking products by way of where we are in our community fund and what we're doing there, which is a really, really successful story for us and indeed our best customer service awards as well, which we're proud of. If I just turn to the area of sustainability and the area of ESG, again, this is an area where we're showing continued commitment to supporting this area. On the environmental side, EUR 700 million of lending was in green lending, green mortgage lending. That's a 40% increase year-on-year and 30% of our total new mortgage lending was in -- above the B3 rating. In fact, we're seeing momentum on that rate as well by way of increasing in 2024. We are committed to setting science-based targets in the second half of this year with regard to the reduction of Scope 1, 2, and 3 emissions. So that's something we will be coming with and announcing in the second half. We've also increased our focus on climate risk and indeed how we interact and -- sorry, integrate climate risk and the transition to the green economy into how we do our business. And then as part of that, we've implemented a sustainable supplier charter, which has been recognized in its own right by way of an award where we won the best procurement team award only recently. Again, that's recognized by way of our standards in this space. On the social side, as I mentioned, our title sponsorship of the Irish Olympic and Paralympic teams, very important to us. And really, as I mentioned, really connected to who we are and how we operate as part of our DNA to be in these communities in supporting Olympians. And as I say, we're really looking forward to July. Our cultural index score is 81%. That's 11% above the target, again, very, very strong. We provided nearly EUR 20 million funding to Social Finance Ireland over recent years and that's a partnership that we've renewed. Indeed, I met the CEO of Social Finance Foundation. And we have a very good connection in regard to how we can support them. 58% of our Board are female, by way of our gender diversity and the gender pay gap, while it's still at a level which is really unacceptable at 15.9%, it has reduced year-on-year. We've seen other parties where their gender pay gap has increased. Ours is reduced and indeed, we have a focus on moving that forward over the coming years. And we have made progress, but we need to make more. If we look at the governance, we have a Board-approved sustainability strategy. It's across 4 pillars, which the green transition is one of those pillars, but it's also about supporting small business. We can see that in growth in our balance sheet. It's also about our cultural evolution. But it's also about how we support communities. And part of our brand strategies is clearly about supporting communities with regard to access to physical branches, but also ensuring that we've access to digital channels as well. We have a low ESG risk rating, which is externally measured by Sustainalytics. Again, that's a very positive piece of information. And we've issued the task force and climate-related financial disclosures. And you'll see in our financial statements, a significant level of disclosure in this space which will, again, has increased over recent years. And this year is an important year for landing a lot of that information. And of course, as I mentioned, as we said, our science-based targets for the second half of the year. It will be really measuring against where we are today as we move forward. So sustainability is more and more part of what we do. We think of it in a broad sense. We think of it in the sense of also financial sustainability and how we are as an organization. And with that, I'm going to hand over to Nicola O'Brien, our Chief Financial Officer. And she'll go through the financial performance. Thank you.

Thank you, Eamonn, and good morning, everyone. I'm delighted to present the bank's 2023 annual financial results. Slide 12 shows the strong financial performance the bank has had in 2023. Our underlying profit of EUR 166 million has increased EUR 121 million, largely driven by a higher total operating income and impairment relief partially offset by higher operating expenses. Our reported profit before tax of EUR 79 million is EUR 188 million lower than 2022, primarily due to the negative goodwill of EUR 267 million associated with the Ulster bank transaction that was recognized in exceptional items in 2022. Overall, total operating income has increased by 63% to EUR 668 million. This increase is supported by a growing loan book through acquisitions and new business and the higher interest rate environment. We remain positive by the extent of the opportunity that we see in the Irish retail banking market and in our ability to continue to grow. Reported total operating expenses of EUR 504 million, have increased by 28% when compared to the prior year, reflecting the impact of the acquisition, the higher inflationary environment, together with the EUR 9 million once off nonrecurring fees for the deposit guarantee scheme, while also continuing to invest in the business for the future. Excluding the once off DGS fee, the bank's underlying operating expenses of EUR 495 million, have increased by 25% year-on-year, which is in line with previous guidance. We've recorded a P&L impairment release of EUR 2 million as the macroeconomic environment remains strong and asset quality remains robust. Exceptional items show a cost of EUR 87 million versus EUR 222 million gain in the prior year as the Ulster Bank transaction was recognized last year. Full year 2023 exceptional items are largely driven by the costs associated with the Ulster Bank transaction, which as you'll know, we completed in full in July of this year of 2023. And the day 1 expected credit loss we had to take this year in relation to the associated acquired assets. Moving to Slide 13. Net interest income of EUR 620 million; increased by 71% year-on-year. The increase was driven by higher yield on tracker mortgage assets as the ECB continued to rise in 2023, interest income on the migrated assets from Ulster Bank. It's worth noting that gross interest income from these assets is EUR 170 million with the bank recognizing a EUR 25 million fair value unwind in the 2023 year. Income from the acquired mortgage assets, which came across in November of '22, were included in last year's accounts. So therefore, we're reporting a net increase of EUR 125 million from those acquired assets. The bank also recognized net organic growth of the existing PTSB performing loan book, together with interest rate repricing on lending and treasury assets. And our overall income was partially offset by higher wholesale funding costs. The exit net interest margin of 2.32%, increased 78 basis points from 1.54% last year to 2.32% this year. The total yield on assets is 2.91%, reporting a 120 basis point increase year-on-year. This increase in total asset yield is due to a higher yield on both the loan book and treasury assets and in a higher interest rate environment. Cost of funds were 63 basis points and increased 45 basis points year-on-year. The bank does remain leveraged to the interest rate environment at the 31st of December 2023, assuming a starting ECB refinance rate of 4.5% and a deposit rate for every 25 basis points increase or decrease results in a EUR 10 million impact on net interest income. These sensitivities should not be considered as a forecast for future performance. But they do give an indication of how the bank's interest income remains leveraged to the interest rate environment. We're also pleased to report the positive performance in net fees and commissions, which remained strong at EUR 42 million, benefiting from the significant growth in our customer base over the last 2 years, together with an increasing and more active customer base. The trajectory on fees and commissions income is positive. It's worth noting that in January, we announced an increase to our current account fee from EUR 6 to EUR 8 per month. This is a flat fee per month to our customers, which will come into effect from April of this year. The bank offers rewards to our current account customers through our explore current account where customers can earn up to EUR 5 per month by using their current account at point of sale, either online or in-person. This together with the investment bank has made in the digital everyday banking services for customers keeps the bank very competitive and gives our customers value in everyday banking. We've successfully grown our gross performing loans by 50% since 2021 and 10% year-on-year to EUR 20.9 billion with the successful completion of the Ulster Bank migrations and organic growth. Mortgages now represent 94% of our gross performing loans, down from 97% despite having grown EUR 6.2 billion over the same period. This comes from delivering on our ambition to grow the business banking book to EUR 1 billion in 2023, which we've achieved, making further progress in diversifying the overall loan book. We will continue this momentum in new lending, reflecting capital optimization and our business banking growth ambitions, which are outpacing repayments and redemptions. Looking at the total performing home loan mortgage book, this has grown by 50% since 2021. Fixed rate mortgages have increased by 11% year-on-year from EUR 12.6 billion to EUR 14 billion. This is the bank's largest cohort of mortgages, accounting for 73% of the total performing home loan book. As we assess the schedule of fixed rate maturities, bank will manage the price transformation for maturing fixed rate mortgages written in a lower interest rate environment will transition to either a variable rate or a fixed rate in a higher rate environment. We've had a good experience of this through 2023 with customers having options to choose variable or fixed rates on maturity and with a very good performance on redemptions through the year, trending below prior year experiences. 36% or EUR 4 billion of the fixed-rate mortgage books will mature in the next 2 years. This repricing on to higher rates of the largest segment of the bank's loan book will be supportive to our net interest margin over the coming years, even as the ECB starts to reduce. While this does represent a rate increase for customers, our customers have been stressed at the underwriting stage to a rate of at least 2% higher than their chosen rate, which has proven to safeguard affordability. Fixed rate products accounted for 94% of new mortgage lending in full year '23. However, this reduced to 75% towards the end of the year and into the start of this year as the customers began to opt for variable rates. Tracker mortgages have reduced by 20% year-on-year from EUR 3.5 billion to EUR 2.7 billion and now make up 14% of the bank's home loan performing book, down from 19% at December '22. Variable rate mortgages are the smallest cohort of the performing home loan book, have increased by 26% year-on-year as some customers maturing from fixed rates opted for the variable rate for the first time in a number of years. The bank has announced an increase to its variable rates by a blended 51 basis points at the end of 2023, which was implemented in January this year. Variable rates are now more closely aligned to the lower terms of fixed rates. The average yield on new mortgages has increased by 117 basis points year-on-year to 3.73%. Aided by the automatic pass-through of ECB rate rises tracker mortgage customers, together with the repricing and inclusion of the Ulster Bank assets, the yield on the performing home loan book has increased by 77 basis points to 3.69%. The weighted average loan to value on the home loan mortgage book is at 51%, with the new mortgage weighted loan-to-value at 69% and these have improved year-on-year. Also to note, 66% of the bank's performing home loan book has been written since 2015 under macro presenters. The bank has delivered on its EUR 1 billion ambition for business banking in 2023 with continued momentum for future growth through providing meaningful alternative for our business customers. 2023 marked a huge step in our diversification journey as we launched PTSB Asset Finance and welcomed 18,000 customers nationwide. At December 2023, the Asset Finance book totaled EUR 500 million. This business has shown strong growth in new lending over the last few years, increasing by 16% from 2021 to EUR 220 million in 2023. The SME performing book has increased by EUR 240 million to EUR 550 million at December '23. This growth is inclusive of the acquisition of circa EUR 160 million micro SME book from Ulster Bank plus net organic growth. SME secured mortgages account for 75% of the bank's new lending in 2023. Managing the cost base in a prudent manner is a key focus for the bank. We're now a larger bank. And we've seen a material change in the banking landscape in Ireland over the last 2 years. Two banks exited the market, customers sought new banking relationships. And we acquired new businesses while continuing to grow. Inflation continues to have an impact, having reached record levels following the reopening of the economy after the pandemic and the energy crisis as a result of the war in the Ukraine. However, most recent data points to an easing of inflation, which is on a more positive outlook. We can see from the underlying operating cost work, some of the key movements, year-on-year. The bank increased its headcount from 2,488 at December '22 to 3,206 at December '23, a 29% increase year-on-year, of which 330 colleagues joined from Ulster Bank, 308 full time equivalents. The additional headcount, primarily in customer-facing customer servicing areas ensures we maintained service levels for new and existing customers nationwide, while we executed the safe delivery of the large-scale transaction. This additional head count, together with the increasing cost of wages and cost of living support to our colleagues has driven a EUR 50 million increase in total payroll costs year-on-year. As part of the Ulster Bank transaction, the bank chose a service provider to service the mortgage assets acquired from Ulster Bank. This incurred an additional EUR 12 million year-on-year. We continue to invest in important areas such as technology and cybersecurity. In '23, we've migrated to a dual location data center, which gives us a safe and secure infrastructure in running the technology of the bank. And we have also further invested in our cybersecurity. As Eamonn mentioned earlier, the bank refreshed its brand promise for the first time in over 20 years, which will further support the bank in driving long-term success. We have experienced a positive response to this modern and contemporary brand, which has already helped to increase our brand power measurement. When we take brand and sponsorship investments for the bank, we see EUR 10 million additional year-on-year expenditure. As previously guided, total depreciation has increased by EUR 15 million, EUR 10 million of which is coming through from prior year investments and an additional EUR 5 million from the investments required in the acquisition of new businesses. The investment over the last 4 years has been a critical enabler for the bank to operate safely and meet customers' increasing expectations in areas such as digital and technology and availability through our nationwide branch network. These strategic investments include further rollouts in our digital banking program, maintaining our operational cyber resilience and allowing us to enhance servicing of a larger customer base with their everyday banking needs in a more direct and efficient way. The underlying cost income ratio, when you exclude regulatory costs, has reduced to 66%, 18 percentage points lower year-on-year as increases in operating income offset higher cost base. The bank is focusing on further improving operational efficiencies through prudent cost management with the ambition to operate with a cost of EUR 500 million in the medium term, while we continue to invest in the bank. The 2024 outlook does expect a mid-single-digit increase year-on-year as we continue to manage the impact of inflation, business growth and required investment while we work to optimize the cost base for the future. Our expectation is to work the cost income ratio down to circa 60% in the medium term. Underlying asset quality remains good. Underlying asset quality remains good. And the loan book has withstood the challenges faced by an elevated inflation rate, which now appears to be easing and a higher interest rate environment. The bank has recognized a P&L impairment release of EUR 2 million for the year. The bank also reports a EUR 13 million impairment charge directly from capital, in line with NPL calendar provisioning guidelines. Provision stock increased by EUR 49 million since year-end '22 with closing provision stock of EUR 570 million. This includes a EUR 135 million post model adjustment, which will ensure that the bank is adequately provided in the event of any deterioration in asset quality. The total provision coverage of 2.6% and NPL ratio of 3.3% are both in line with December '22. Subject to the prevailing macroeconomic environment, the bank expects a cost of risk circa 10 basis points in 2024. At December 2023, total funding reached EUR 25.2 billion, 8% growth year-on-year. Customer deposits accounted for 91% of funding at December '23. Total customer deposits grew 6% year-on-year, while wholesale funding grew 38%, driven by the MREL issuances of EUR 1.1 billion in the first half of '23. As a deposit-led lender, the bank is keenly focused on protecting and growing its customer deposit base. The deposit franchise is performing strongly, having grown 20% since 2021. Current account balances have increased by EUR 400 million or 4% since December '22 and retail deposits, excluding current accounts, increased by EUR 800 million or 7% across the same period. 70% of total customer deposits are guaranteed by the restate. The bank observed a change in the behavior in quarter 4 as more customers moved funding into interest-bearing deposit accounts, which have benefited from the 7 interest rate increases applied by the bank since the ECB started increasing interest rates in H2 '22. These interest-bearing tenants now comprised 23% of total customer deposits, up from 18% at December '22. Wholesale funding at EUR 2.2 billion is 38% higher than prior year, mainly driven by MREL issuances of EUR 1.1 billion. The bank successfully completed 2 benchmark issuances in the first half of '23, EUR 550 million in April '23 and EUR 650 million in April '23 and a further EUR 500 million in June '23. These issuances contributed to the bank's EUR 3.8 billion of MREL-eligible funding, including CET1 at December '23. The bank's MREL ratio of 32.9% is above both management and regulatory requirements. The MREL target for 1 January '24 has been set at 28.15%. Most recently, as Eamonn mentioned earlier, the ratings agency Fitch has upgraded Permanent TSB's long-term rating to BBB up from BBB minus and Permanent TSB Group holdings via the long-term rating to BBB minus upfront BB positive. The upgrade means that Fitch's Permanent TSB Group Holdings PLC rating has now returned to investment grade and will assist with greater market access for future debt issuances. The liquidity coverage ratio, net stable funding ratio and load to deposit ratio are all in a good position. Our regulatory capital ratios remained comfortable above the regulatory minimum requirements. CET1 ratio on a fully loaded basis is 14%, a reduction of 120 basis points from December '22, largely driven by the Ulster Bank mortgage and SME assets. The day 1 ECL of Ulster Bank assets, net loan book growth, AT1 distributions, partially offset by operating profits. The bank continues to operate in excess of regulatory requirements with CET1 9.83% and total capital of 14.75%. Management's CET1 target on a fully loaded basis remains at 14%. The bank has commenced a full review of the mortgage credit risk model. PTSB models were built back in 2017 when nonperforming loans were at a peak level. The profile of the portfolio has substantially improved. And the models will be updated to capture a more reflective view of the improved credit risk of the current and future PTSB portfolio in line with required regulatory expectations. It's the bank's view that the current risk model needs to be updated to better reflect the credit quality of the current and future mortgage portfolio. This is an important project for PTSB and one that we expect an outcome towards the end of 2025. To summarize, the bank has had a strong year with results showing a robust business and financial performance with a positive outlook. Reflecting on where performance landed when compared to expectations, new mortgage lending of EUR 2.3 billion, in line with expectation, mortgage market share of 19%, up 70 basis points year-on-year, total business banking of EUR 1 billion, in line with expectations, strong income performance, delivering EUR 170 million gross income from the newly acquired mortgage assets and other SME assets from Ulster Bank. Cost income ratio reduced to 66% as the operating income grows. And the bank maintains cost discipline while continuing to invest. Favorable macroeconomic environment and robust asset quality, delivering a minus 1 basis point of cost of risk. The capital position remains strong with the CET1 on a fully loaded basis of 14%. Underlying profit before tax, EUR 166 million shows the positive uplift from our acquired assets and our own growth organically in the marketplace, together with the changed interest rate environment. And our underlying ROE has increased to 6%. We actively manage our capital position and having assessed a range of scenarios, the CET1 ratio will remain well above the bank's minimum regulatory requirements. In summary, we have reshaped the balance sheet, acquired businesses with sustainable earning power and are building the business for the future. I'll hand you back to Eamonn now to talk you through in more detail the outlook for 2024 and the medium term. Thank you.

Great. Thanks, Nicola. So I just want to cover a couple of slides here around our strategy and indeed our outlook as well. So if we take this from left to right, you'll see that we've delivered a lot in the last 4 years by way of bringing, as Nicola closed off, it brings the balance sheet to a safe position. I'd argue, we've one of the safest balance sheets in Europe. If you look at our leverage ratio, it's over 7%; an equivalent U.K. mortgage lender would be something around 4%. So on any measure, we have an extremely safe balance sheet. The other thing to mention here is that with no CRE exposure to whatsoever, so it's not an area of concern for us at this moment in any sense because we don't have a closure, where I know that's an area of concern elsewhere. But to come back to the balance sheet, NPL ratio of 3.3%, real improvement in the quality of earnings in that sense, very high-performing assets with an increasing yield as Nicola has mentioned, and in good quality. The Ulster Bank acquisition has been absolutely transformational for the balance sheet. You can see it in the numbers. And it really provides us with an additional base to move on from. We've been investing in digital resilience and innovation. I mentioned our app. Nicola mentioned our investment in cyber. This is really important to us. And we will see the results from all of this investment as we move forward, which we would see will yield both efficiency in our cost base, but also it will yield additional income on the top line. And as I mentioned, the dividend restriction was lifted, again, an external endorsement of where we are. So we have a strategy in place to drive further growth. And if you stand back, our strategy, our strategic and business positioning has changed unbelievably by going from 5 banks to 3 banks. We are now a clear challenger to our 2 larger competitors. And we are making headway. You can see it in our business banking story. You can see it in asset finance. Indeed we can see it in our personal business as well and that will continue. But as part of that, we will continue to focus on being efficient and effective. Nicola has outlined that our direction by way of our cost base, which is under our control, we have a cost base in the region of EUR 0.5 billion. That has increased. But we see it as a reasonable level for the bank as we move forward. And we drive top line income. Our customer experience will continue to improve. We continue to invest in that space. And we will see that as a differentiating factor as we move forward and indeed, our ability to leverage our data and deepen customer relationships is a clear area of focus. If I think of the key catalysts that will drive this on, it's about protecting and growing our deposit franchise. It's the oxygen that we need in order to grow our balance sheet and to support lending growth. Again, you'll see more developments on that. We will maintain appropriate pricing. And we will focus on margin over volume in the sense of protecting our margin and not just getting volume at any cost. And again, the differentiating factor here is how we do and connect with customers. And coming back to the business side, we are faster to a yes, but the way of a yes decision, which means we're faster to cash. And we're closer to customers in what we built by way of our business banking offering. So again, we believe that is something that will really pay dividends for us going forward by way of increased income. And by way of our capital, Nicola has outlined where we are by way of our IRB models. It's clearly on us now to prepare the IRB models in line with the required regulatory requirements and indeed submit them. But we are on a defined road to have those models ready and submitted. And indeed, given the fact that nearly 70% of our balance sheet has been created in the max potential rules. LTV on our book is around 50%, again, an enormous transformation in the last 5 years. That would have been up around 100% 5 years ago, 6 years ago; so an enormous transformation by way of safety. Our level of delinquency on the book is extremely low, and indeed, the book is performing extremely well and a sound in that sense. We would believe that our risk weights should adjust to reflect that performance. And indeed, that's something we are working on and are responsible by way of our control of that process over the coming months in 2024. If we just look at our outlook for 2024, it's about our organic capital generation. And there was a time when we couldn't say that with a lot of surety and that we now have a profitable business. We now have secure income. We now have a cost base that we can manage. We have invested in our business. A lot of that investment has done. We have some more to do, but it's at an incremental level, not at a fundamental level in that sense. So that's generating capital. We will have a positive ROE. We've made significant progress this year by way of our ROE. And indeed, our dividend policy will be announced in the second half. Our distribution policy to say will be announced in the second half of the year. By way of our income, we project our NIM to be at 2.25%. Probably unlike some of our competitors, we see our total income being broadly in line year-on-year. Our level of sensitivity to the interest rate reduction is we have some sensitivity, but it's not material in that sense. So we see total income broadly in line where it is. So loan growth together with margin management will assist us in how we manage that income. Our operating expenses in 2025 will increase by a mid-single digit. And then we see over time through the focus on the management of our cost base, that's coming down in around the EUR 500 million; level over the next couple of years. The cost to income ratio, which will increase slightly on the back of that, but again, showing a very solid level of cost income that we can work with, again, over coming years as a target to reduce. Our asset quality, which I've touched on already, we're saying a cost of risk of 10 basis points. The reality is the cost of risk this year was 0. In fact, we had a release, as you rightly saw. And indeed, we don't see any stress in our book nor are we exposed to areas of stress. So again, that is something that is in good shape. So that's the outlook for 2024. And I will just move on to the medium-term targets. We would have announced targets in previous results to 2025. What we're seeing is those targets are probably pushed out a year out to 2026. We see net interest margin coming in 2.30%, rather than we had projected 2.50%. We see our cost income ratio at around 60%. We see our cost of risk below 30 basis points. We see an ROE in the region of 10%. And we see an EPS of EUR 0.30 per share. And that's in a situation where our CET1 target is over 14% on a fully loaded basis. This medium-term guidance doesn't assume any change to risk weights because naturally, as we've said, we have to go through a process where we prepare a submission of models and then we see what the outcome is. But we are saying that within this period of guidance that we would expect to have an outcome with regard to that project and that review and indeed an outcome with regard to what our risk weights for our book should be going forward given the experience, given the exposure we have in the book and indeed the experience of that book over the last number of years, which has been very positive. So I'd like to thank you for listening to me, myself and Nicola. And we're more than happy now to take some questions. So thank you very much.

Diarmaid Sheridan from Davy. Thank you for the presentation and taking my questions, a couple, if I may. Firstly, on income trajectory, maybe specifically thinking about net interest income, if we could think about the moving parts in both 2024, but also out to 2026 in terms of what you expect to see maybe around loan and deposit growth, but also the repricing of both of those, please? Secondly, on cost trajectory, just thinking about the timing and the initiatives to get down to the EUR 500 million, how should we think about those? And how many potential costs that you may need to incur to achieve that as well as part of that. And finally, on risk-weighted assets, and I appreciate there's a process that you're kind of currently going through. There will be a submission during 2025. Maybe just to try and help us think about from a quantitative perspective, one of your peers yesterday talked about going through a risk-weighted asset rebuild on their credit mortgage. Is a level similar to where they are? Is that something that we should think about as being maybe reasonable in terms of when we do get results at a point in 2025?

So Nicola, do you want to pick up on the first question?

Yes. I'll take the income evolution. So our ambition is that like we're at 2.3% net interest margin. Now that's our ambition going forward is actually to actually try and maintain that 2.3%. How will we do it and grow it further? When you look out to full year '26, look, we see the bank actually lending into the market at EUR 4 billion or thereabouts of new lending to the market. That will be a mix across mortgages and other business. You've seen the growth that we're actually starting to make within our business banking. And we have strong pipelines there. And we've put in the infrastructure to be able to do that. So that's one of the areas for us is to actually lend into the marketplace. You might see the trajectory might not be straight line. And we'll definitely be looking at mortgages, consumer finance and SME and asset finance in their own rights. And we'll definitely be looking at margin with regards to that. So selling at the right price and optimizing our capital. And we're a deposit-led lender. That's really important for utmost for us will be deposits. And actually, as such, like that has been -- allowed us to execute our cost of funds down. We have a lot of our MREL issuances are done. We will be a benchmark issuer most years. And actually, that was a strategic decision that we made this year to actually bring -- or last year to bring Fitch into the conversations with us because actually, even on the marketplace today, we would have operated maybe operating at 50 or 60 basis points above 100 basis points above our peers. But we would have operated previously at 200 basis points. So that's actually important for us. So managing that overall cost of funds, growing our asset base in the right way and maximizing where we can in relation to our own treasury assets and fees on those.

Just on your -- I'll just take your second and third question then. So on costs. We are presenting a mid-single-digit increase in costs. We have ongoing discussions with regard to pay negotiations. They haven't come to an end yet. So I can't necessarily comment on those. But within our cost base, we have some one-off aspects which won't reoccur. And the part of our -- also our headcount base that you'll see it in the financial statement, 11% of our headcount, which we've increased significantly in the last year to really to support customers, but also to support that transition of the Ulster Bank business and settled it down. You can see that 11% of our headcount is non-permanent. It's flexible workforce as well. So we have some optionality in how we think about that. And if we go back to a period before the Ulster deal, we were very, very well attuned. And you could argue a much more challenging time in managing both investing in the business and managing our cost base and that hasn't left us. That is still within our DNA. And it's about ensuring that the investments and the support and the costs we're incurring and how we're structured internally as well is the efficiency we can bring through. So I don't see anything material the way big announcements in this space. It's just an active management of our cost base. But to come back to this, I see a bigger focus on our top line and a much more significant focus on how we generate more income, how we generate our position in the market. It has fundamentally changed in the sense of even if you take our brand and what we're positioning by way of our brand has been a modern bank, a contemporary bank that is competing in the market. There's resonance in that brand. We're seeing it already. It's then about attracting customers to PTSB through that. So I wouldn't underestimate our ability to perform well on the top line as well by way of income in a situation where rates are coming down, except in that and realigning. On models, I'm not going to comment on what other people are doing in the models. We have our own work to do by way of putting forward our credentials with regard to the performance of our book in recent years. There's still 30% of our book that was written pre-crisis. And we can't deny the fact that as a bank and because of decisions made by people who are sitting in my seat 16 or 18 years ago. The bank incurred significant losses on its mortgage book by over-lending just in advance of the crisis. And in a market that was overly competitive at that stage, you could argue. So we can't deny that and that has to be also reflected as part of our history. So it is honored to prepare our models to submit them and then to interact with the regulator under the roofs that are designed in order to get to an outcome. And I wouldn't want to predict it. I would sense that it should be lower because the performance of our book. But we will let that play out in the sense of where we are. Have we any questions from outside the room?

[Operator Instructions] Our first question comes from Andrew Stimpson of Stifel.

Two questions and I suspect there's a bit of repetition here. But one on net interest income and then another one on the risk weights. On the net interest income, I guess it's a timing question more than anything. It sounds like you still see the absolute net interest income revenue greater in the out years. But it feels like kind of not yet comment given the guidance. I was just wondering if you could talk about the timing of when you'd expect to see the net interest income improved from the second half '23 level. If you're guiding '24 flat on '23, that implies a slowdown on the second half run rate despite the larger average balance sheet and the other things you mentioned like repricing of the variable book et cetera. So wondering if that's worse in the first half then improving in the second half of '24 or whether the improvement is delayed entirely into 2025? And then, secondly, on the risk weights. My gut feel tells me you won't be able to answer this. But any idea on where the risk weights could drop to and then connected to that; would it just be the mortgage model that you'd expect to reduce? Or you think some of the other books would reduce as well? And then do all those reviews happen at the same time or would the timing of different models kind of different time through 2025, please?

Hello, Andrew, thanks for that. Just on the income and I suppose on the 2024 position. We have the ambition to do a similar type of lending that we actually have done this year, into the market next year. We also have the benefit, I suppose, of almost EUR 4 billion of fixed rate maturities coming through that actually probably average somewhere around 2.7% today and they will reprice. And even in the lower end of mortgages today, you would actually have around a 4% rate that would be offered to customers in the marketplace. So that gives us that income uplift equally from an operating income perspective. Our fees and commissions will increase. And that's another element that will actually grow our total operating income. And so while I'd say it won't be linear, we will actually be phasing into a reducing interest rate environment. We anticipate that that's coming from midyear down. So actually, we'll have some pluses that will actually come into our income numbers and we'll have some minuses. And that will actually help us to actually maintain that overall level as we go forward. Still, it will be a different position then as we go through 2025. We see the opportunity to actually lend more. We'd equally have more repricing from our fixed rate maturities. And so that's the sequence of events that it will grow to where we get to full year '26 and we'll actually have almost EUR 4 billion of new lending into the marketplace across our products. And then underlying that is managing that cost of funds and making sure that we're actually paying on interest-bearing assets or deposits to customers because we're -- it's important for us to actually gain those deposits, but equally managing that cost of funds so that we can actually have that top line income.

Just on your question on models, obviously, I can't answer to the extent of what it would reduce to. But I think it's fair to say that for the 3 banks operating in the market, writing a mortgage under the macro prudential rules since 2015 is something that would be very similar. It appears that the performance of those mortgages are extremely similar in that sense. And therefore the history on that book would be quite similar. I think the differentiated path for us is the fact that we still have mortgages on our books. And we've written pre-crisis and had a higher rate and the probability for default. And obviously, we can't deny that for the purpose of how we think about our modeling. So there is a difference in the market between what risk weights are on mortgages. And as I say, it is an out now to update our model submit them and interact with the regulator to see if we can highlight based on absolute performance that the risk weights that we carry at this moment should be realigned to the performance of the more recent book, but not forgetting the fact that we had a higher loss history in the earlier book. So unfortunately, I can't answer to give you a number. And we just -- we will go through a process in that respect. And as I say, it's up to us to justify based on data and information what that should be and if we act accordingly then with the regulator.

Our next question comes from John Cronin of Goodbody.

A couple of questions on my side. Mortgage market share, it looks like Q4 was below 15% in terms of share of origination. Talk about what's going on there. I understand the bank was very aggressive in '23 on pricing. What's your lending appetite now? Can you talk to us about how you feel -- how that interplays with the relatively high risk weights on your new flow relative to the other banks? And how we should expect to think would volatile over the short and medium term, which I appreciate is contingent on pricing behavior of other players in the market? And then secondly, look, how are you struggling here on this '26 ROE guidance of circa 10%. Can you talk to us about what the underlying PBT you're expecting to achieve there because on these numbers, I'm not quite going to -- quite a bit off the 10% work actually. And maybe some help in terms of volumes as both on the asset liability side.

Okay. So just obviously, on the mortgage market, I mentioned earlier on. We are focused on margin over volume. We can see particularly the growth of other players in the market in the second half of the year who are primarily paying on price at this moment. And John, if I look back a couple of years ago, this type of situation will be detrimental to our business. But actually, what you've seen is our level of lending this year is the same. And 2023 is the exact same by way of volume of last year -- 2022. So we're seeing a better mix in our lending. We're seeing a better mix of high-margin business. And we will place our capital in areas where we make a better margin. And if that means we have to pull back somewhat on mortgage volume because other players want to play price in the sense of where they are. We will do that. And hence, you'll have seen that in the second half of this year -- of last year, where our volume of mortgages has been lower based on the outcome. But saying that, we will manage margin over volume. And indeed, we will still be a player in the mortgage market. But we're not going to do it at any price. And at one stage, I think other players will have to pull back based on their current volume trajectory from where they are and the price levels are at. But that's for them to decide. We're ready to pick up that pace at the right price. And we're also ready to lend into the business sector into the asset finance sector and leading commercial consumer lending, where we actually make a better margin. On the ROE target, Nicola, you might just pick up on that side.

Yes. I mean from our projections at the moment, John, getting to that 10%. When I think about net interest margin, we're looking at that 2.30% or above. And that's that growth trajectory that we're on. Our yield on assets will be above 3.5% as we actually go out and maintain that throughout the next number of years. Our cost of funds will be low, like we won't actually be above 1.25% cost of funds. It will be below that. And then our impairment numbers, we believe that given the trajectory that the Irish market has the economy that we're actually operating in, given the robustness of our asset quality through a pandemic, through a cost living crisis, high interest rate environment. We believe that that's actually strong for going forward. And we're prudently provisioned as it stands today for anything that could come as a headwind against us. So overall, I mean, when we get to 2025, our balance sheet, our position on our balance sheet. I would imagine is that we will get to more than a EUR 30 billion balance sheet in 2025. And we'll have a greater than EUR 30 billion balance sheet in 2026.

And just to add, John, is if you look at our performance over the last decade, and you could argue over the last 6 years, what we said we would deliver, we've delivered. It has tended to focus on deleveraging acquisition, different aspects of how we have got to this position here today and a clear focus now is on return on equity, return -- and generating return for shareholders. And we're heretofore where we were focused on other aspects of our activity. This is where the clear aspect is now, which is how we generate top line, how we're managing our cost base, which is in our control, how we're interacting them by way of risk weights, which isn't part of this plan. What you would expect by 2026 to be through the IRB model review in the sense of reaching an updated model. And we'll see where the risk weights will end in that sense. So we'll be through that. And there's clear momentum in our business. And there's clear -- our strategic and business positioning here has changed phenomenally by way of -- we are a clear alternative at the top 2 banks. And we are competing in that sense. And we're not going to do it at any price. We're going to manage our margins. We'll manage our volume. We'll keep ourselves tidy. But we'll drive the business on with an absolute focus now on return on equity and profitability in that sense, which we wouldn't, as I said, have that space in the past, now we do.

Can I just come back on the first one. I mean, to put it slightly differently. Would you be rising more business if your risk weights were on par with AIB and Bank of Ireland?

Well, I could answer the question in a slightly different way. We have to, based on risk weights, apply more capital to the same mortgage that Bank of Ireland or AIB, rise. The reason for that is because of our historic performance. The reason for our store performance is because of decisions that were made now almost 20 years ago around how Permanent TSB at that stage should position itself in the mortgage market. So it is clear that we have to both manage our capital allocation and indeed manage our margin coming off that capital allocation. And we have optionality now. We can decide, well, we don't have to concentrate fully on mortgages. We can lend into the business space. We can lend an asset plan. We can do more personal turn business at higher margins. We wouldn't have that optionality before. But there's no doubt the numbers will tell you. We have to, in effect, make a better return than others because we're applying more capital to the same mortgage under macro-prudential routes. And hence, it's on us to prove that it will be lower. And to ensure through the project we are now well in advance on that it has sufficient data and evidence to prove that under the requirements that are set out in Europe.

The next question comes from Rob Noble of Deutsche Bank.

Two questions, just one more follow-up on the business [indiscernible] issue. Is the front book lending risk entities, the same as the back book or if not there for currently lending app in terms of risk testing? And then secondly, just on the green mortgages, what's the spread difference between the green mortgage and the regular mortgage you might have, given a 30% of your flow? And is there any returns difference or capital consumption differences?

Okay. So the straight answer is there's no differentiation on the risk weight allocation between -- across our book. It's the same allocation across the mortgage book, so any new mortgage which we make is that a risk weight density. That averages at 40%. But actually a first-time buyer mortgage would have a higher density risk weight density than 40%. That's the average for the book because obviously, the book is maturing over time. So there's no differentiation. That's the first question. On the margin, on the green mortgage, Nicola, do you want to take that?

And for green mortgages, we offer somewhere between 50 and 70 basis points of reduction from our standard rates if they are a 3-year or a 5-year. But actually, to Eamonn's point, there's no differentiation on the risk-weighted assets in that regard. So it is actually, I suppose, what we're doing to support our customers in relation to their own transition to a more sustainable lifestyle in their home choice and so that we're benefiting with them from that perspective.

And actually, this is an area of interest because how the ECB will evolve the differentiation between a green and a brown asset over time and either maybe penalized banks were not having green more green assets from a capital point of view, it really depends. So it's an area of ongoing discussion. And there isn't clarity on either a benefit or green lending or indeed an additional capital charge if you have an exposure to brown assets in the sense of non-green exposure, if you understand. So that's how I'd answer that question.

How do you manage the flow then? That's quite a wide spread between a brown mortgage and a green mortgage and you've done 30% lending. Are you going to move the price to maintain that at 30%? Or how does it work?

Well, that's what we have done. And I suppose if you look at the market rates that are out there and some of our competitors as well. Your price per LTV band, your price per a standard mortgage or a green mortgage, it's primarily the competition is in the 5-year space. And actually, we have a lot of our customers are interested in that 3 and 5-year space. But – like, that's the only product that's out there in the marketplace today around the green mortgage. And that is that it is a discount from your standard mortgage. And I suppose as we think about product proposition and things like that as we go forward. And I'm sure our peers will be the saying. We will be looking at a completely different set probably of sustainable type products for our customers for the future.

The next question comes from Borja Ramirez of Citigroup.

I have 2. Firstly, on NII, I would like to ask if you could please remind me. In your balance sheet, what the assets and liabilities are at floating interest rate or hedged to floating? And linked to this, where do you see the deposit beta going forward or the cost of deposits? And then my second question would be; it's great to see the potential dividend announcement in the second half of '24. I would like to ask if you would consider also share buybacks or would you only be allowed to start with the dividend and then potentially execute a share buyback after that? Or is there no other limit?

So I'll take the second question first and then Nicola will pick up on your first question. So I suppose we did -- we want to call it a distribution policy in order to show that we have some optionality there. And that's something we will come by way of the policy at the end of the year. And the second half of the year, I should say, by way of our distribution policy, which will encompass all methods of returning funds to shareholders and paying out funds in that case. So I would not rule out share buybacks in that sense. And then we'll have to see how that develops over the coming years based on the level of profitability, our capital position, indeed, all the moving parts. But it is a welcome move and indeed, as I say, I wouldn't rule out the ability to do share buybacks as part of that distribution policy, particularly as we look at our current price and where it is and coming back to a point I made earlier on. From my perspective, a price actually doesn't reflect where we are -- doesn't reflect where we are as a business. It doesn't reflect our strategic positioning. It definitely doesn't reflect where we are at the balance sheet, or where we are at the level of safety. And we would obviously be looking at that as optionality as of when the time would come because we personally and I personally believe there's more value in the stock from where it is today.

And just in relation to the question on floating, Borja, I don't have the floating treasury assets that we would have. But I do have the mortgage book is actually split 27% is variable. So that will be the biggest portion of our assets, 13% is variable and 14% is on tracker rates at the moment. And I suppose if you do look at the -- one of the slides that we have there, our interest rate sensitivity on a 25 basis points move is EUR 10 million, on a plus or a minus. But I can actually follow up. And I'll ask Dennis to actually follow up with you to actually give you what our treasury floating rate assets would be.

And sorry, I would like to ask, if possible, could you kindly provide more details if possible, on the cost of deposits that you would expect for the following years, please?

Yes. Sorry about that. So on the -- we don't actually talk about data and things like that. We look at our overall cost of funds. And I suppose that's where we would have said that that will remain low. And it will remain below 1.25% overall cost of funds basis as we go forward across the medium term.

Indeed, we should think about cost of funds in the sense of where our ratings are now are an investment-grade ratings where traditionally, we would have had to pay an extra margin for the purpose itself, not having investment grade indeed. And that investment grade also prevented some investors buying our debt. That has now relieved itself by way of that investment grade. So we should, again, by way of evolution of our funding cost for MREL, see a reduction in that over time, depending on where market rates are. But again, it's a positive input to how we think about the cost of funding our balance sheet over the next number of years and are very welcome. And again, personally, I'd say deserved rating in that sense, given our positioning and the safety of our balance sheet in that regard. So thank you.

And our final question comes from [indiscernible] of LGT.

I just want to see if you can give any color on the trajectory on the NPL that you have? Like obviously, I appreciate it was pre Ulster Bank acquisition. And certainly, the percentage number was a bit higher. But you could historically you could articulate what you expect like a natural? If I can say that, part of the volume. So any trajectory or comment would be great on that front. Also, I was just also wondering, you made the point that 5 to 3 banks is a big change. And you're the challenger and you get better quality of earnings. How does that -- in terms of the lower quality of lower asset quality, I suppose, in the Irish market? Do you see like new players popping up and maybe nonfinancial ones or nonbanking, I should say? And how do you think about the potential challenge that they can represent to your business? And maybe one last comment just to clarify. I see a bit of unsecured lending. But for the moment, you don't have any credit card business, right? And I'm not even sure if you want to take that fruit. So that would be just one clarification.

I'll take the second 2 questions, and Nicola you might pick up on the NPL one. So on first question, yes. So what we've seen, obviously, with the increase in interest rates that deposit-led lenders have some advantage by way of funding costs in the market, particularly in the mortgage market. And we did see intermediaries -- sorry, nonbanks entering that market. When rates were low, they did take some market share. But in fact, we defended that. And we were able to grow our market share at that time. And will we see other players coming in. It's arguable that the mortgage market in Ireland should grow over the coming years because there will be an increased supply of housing. Indeed, we have a demographic profile that supports the acquisition of housing. And indeed, I would expect that mortgage market over the next 5, 10 years to continue to grow on an annual basis. And it will continue to be a lead product for us. I want to reemphasize at the right margin in that sense and with regard to how we ensure that we get the right return on capital. But we will continue to be a player in that market. And we will enjoy the growth in that market. So, new players coming in wouldn't necessarily challenge us in that sense. And indeed, it's about how we think about the overall market and its growth. On consumer lending, we do actually have a credit card book. We do have active credit card holders. And we do have a balance on our credit card book. It's not at a level that for the purpose of how we round to billions is something that we highlight to a great extent. But it is a book that has been growing over recent times at a modest level. And indeed, as we increase our customer base and they become more active, we are seeing more penetration on the credit card and some increase in the balance. So we do have that business in the background as we speak. Nicola, just on the NPL?

Yes. Just on NPLs, like with EUR 700 million of NPLs, they have moved year-on-year. There's EUR 300 million there that will most likely cure themselves. And over the last number of years, we've seen that level of curing. And it takes probably 12, 18 months to actually see that EUR 300 million cure. There's a EUR 400 million book there of the NPLs that have been around for some time. EUR 100 million of them is definitely deep, deep arrears. They're greater than 5 years and longer. And so there's optionality there in relation to what we've done in the past. We have done some significant loan sales. We're very familiar with how that operates. But there's no doubt that we actually can see secures that are actually coming through and like we have probably EUR 300 million of that. So a EUR 400 million book would be where we would assess the deeper arrears and the more sticky NPLs.

We have no further questions on the phone lines. I'll turn the call back to the management team.

Thank you very much.

Thank you very much.