Secure Trust Bank PLC (STB) Earnings Call Transcript & Summary

Good morning, and thank you for taking the time to join us in person and online. I'd like to make some brief remarks about Secure Trust Bank ahead of David and his colleagues presenting to you. Firstly, who are we? We are not a challenger bank. We are a highly successful specialist lender with a banking license. As Chairman, I was really proud of how much STB has achieved in recent years. We've seen the management -- the senior management team refreshed, have developed a clear strategic initiative and narrative, become more focused on our remaining specialist lending businesses and navigated the uncertainty of Brexit, the pandemic, inflation and the geopolitical volatility of recent times. At times, I felt like a farrow, as one challenge after another was facing. The current level of interest rates will obviously have an impact on consumers and businesses and banks. Although I, for one, believe as the market now seems to expect, that rates have peaked and will start to come down again during 2024. Despite all the turbulences around us, the group has continued to grow, remain profitable and as a team that is determined to achieve their ambitious plans. You will appreciate, therefore, the Boards and my own frustration that the progress made and the opportunities ahead are not at all reflected in the market's view of our future, given where we are trading currently. You will have seen last week's announcement that we've appointed Investec and Shore Capital as our joint corporate brokers and Camarco as our financial PR advisers to help communicate the group's potential and achievements to date. This morning is an opportunity for the team to remind you of the group's plans, showcase the success and ambition of our retail -- V12 Retail Finance business, and provide more clarity on how we intend to deliver our medium-term targets. Our Board is experienced, diverse and the company retains a positive relationship with our regulators. We announced a great addition to the Board last month with the appointment of Vicki Mitchell, who is here today. I became Chairman in 2016 and will, as previously indicated, retire from the Board at our AGM next May. The process to select my successor is being undertaken by our SID and Beresford. And once the appointment is made, we will announce it to the market. Our dividend policy reflects the Board's confidence in our significant growth prospects. The Board is well aware of the different views on the current policy. And I can provide an assurance that all that feedback will be taken into account when the policy is next reviewed. We have a strong management team led by an excellent Chief Executive. When I think of him, I'm reminded of Roosevelt's comment on leadership and diplomacy: speak softly and carry a big stick It is a pleasure to invite him to kick off this morning's event. David?

I just need to show the normal disclaimer notice, which is on stream now and also in your pack for those who are in the room. And can I also just ask that phones are on silent or switched off. So thank you for joining us this morning for what is our second capital markets presentation. At our first event in November 2021, we outlined to you our refresh strategy, our new vision and our new core purpose. The leaders of our specialist businesses also set out the many opportunities for growth in each of the markets. And as you know, when we'll come on to, we've been capturing that growth. We've focused on these events on 2 key topics: a deeper dive into our excellent V12 Retail Finance business and also to set out a clearer pathway to the delivery of our medium-term financial targets with particular focus on the 14% to 16% return on average equity that we set out 2 years ago. So let's just take a look at the running order for this morning's session. I'll make some introductory comments and provide an overview of the group. I know some of you are familiar with the group, some less so. And then Nick Davies and Andrew Phillips, who respectively are the Chief Executive and Commercial Director for V12 Retail Finance will provide a detailed spotlight on that business. They'll talk about their track record of success, their technology capability and the future ambition. Rachel will then provide an update on the medium-term targets before I make some closing remarks and provide the opportunity for questions, both who are those in the room and also those joining by webcast. We plan to finish the session, as you can see, probably somewhere between 12:30 and 12:45. And for those in the room, I believe lunch will be provided outside where you can get the chance to meet more members of the senior management team who are here today or also just continue the conversation with those of us who have presented. So let me just make some comments on the scene setting before we get into some slides. In our conversations with shareholders, potential holders, analysts and advisers, everyone shares our frustration at the level of discount we are currently trading at. A significant discount to book value, as you know, and the share price at less than half the value it was at 18 months ago. It's deeply frustrating for all of us. For those of you less familiar with our group, at the same time, we've been on a journey in making progress, significant progress over the last couple of years and I'm delighted how colleagues and the management team have worked together to support and help customers and also drive things forward. The group is more focused following our decision to exit a number of our businesses, which were subscale and had no opportunity for growing in quite competitive markets. We are simpler. We've improved the quality of our lending. We've added GBP 1 billion of net new lending over the last 2.5 years and have improved our cost income ratio and have significantly improved our profit pre-impairment. We have confidence in our ability to make continued progress and deliver on our optimizing for growth strategic priorities. The macroeconomic environment, of course, has been challenging. We've been impacted by market segment, I think, sentiment in the valuation rather than reflecting what we've delivered over the last 2 years or the prospects for the future. As we continue to make progress, we've navigated the impacts of the ongoing war in Ukraine, high levels of inflation, which have proven to be more persistent than anyone expected. The volatility caused by last September's mini budget, rapid increases in interest rates and, of course, the cost of living challenges, which impact both consumers and businesses. Of course, we can't control the external environment, but we can keep doing the right things, execute well and communicate clearly to you the strength of our businesses and the direction we're headed in. We can describe the capabilities that help us win and deliver market share growth. we can set out a clear articulation of our priorities and ambitions and the reasons why we have confidence as a team in delivering on the commitment set out few years ago. I want to comment on 3 common questions that we've heard from stakeholders in discussions that Rachel and I, in particular, have had. These are questions related to, firstly, the quality of unsecured lending in our retail finance business, the target to grow lending by 15% per annum and our capital position. In Retail Finance, and you'll hear more about this today, we've been asked whether our unsecured lending is high risk? I can tell you that is not the case. Nick will demonstrate the strategic decision he and the team made 4 years ago to focus on certain retail sectors and categories which reposition V12 to serve lower-risk prime credit quality customers. It's clear the concern is just the fact lending is unsecured. However, based on our review of industry data, I reiterates in our retail finance business are significantly, in fact, materially lower than other unsecured lending asset classes like credit cards and personal loans. These are typically used to finance revolving debt and also for debt consolidation into a single monthly payments, amongst other things. Not surprisingly, different unsecured lending products and customer needs have very different credit outcomes. And Nick will show you the benefits of that the strategic decision has led to a lower cost of risk in his business. On the growth target of 15% per annum, the question was whether having a defined target to grow each year was at risk of driving management to grow, but it may not be appropriate to do so. It was important 2 years ago to set out our ambitious plans for growth and the opportunities in each of our markets. It was also clear that we had no intention, and we have reiterated this a number of times to grow when the environment wasn't conducive to doing so. In the last 18 months or so, we have continually tightened credit criteria in our consumer businesses and the credit quality of our new lending in those businesses as a result is much better than it was previously and prepandemic. Since setting the growth target in 2021, we've achieved the level of growth that we set out. We no longer now need to grow at 15% per annum to deliver our return on average equity in the mid-teens. We are replacing the lending growth target, as you'll seen in this morning's announcement, with our new ambition to grow absolute level of lending to GBP 4 billion. That no way reflects reduced confidence in our ability to grow or opportunities in our markets, and we think it sets a clear pathway to mid-teen returns and hopefully takes away the concern about growing a particular rate each year. And finally on capital, the question is whether we have the capital to support our growth? We absolutely have sufficient capital to support our growth plans. I expect the question will fade to some extent on the back of our dropping 15% lending growth per annum target. And when you've heard today the pathway to delivering mid-teen returns, but we recognize that we have a better job to do in communicating the capital position. We will consume capital for a period of time as we continue to grow before becoming capital-accretive. So let us take you through some slides to give you an overview of the group. These are the existing business units we now operate in. And as you can see and know, we operate across a diverse range of large market segments setting both consumers and businesses. In the green boxes are our consumer businesses. The first one which we focus on today is V12 Retail Finance, which, as you can see, had balances of just under GBP 1.2 billion at the end of the half year in June. The business has grown cumulatively by 79% of its balances in the 2.5-year period to end of June. Our Vehicle Finance business provides credit for the purchase of secondhand cars and grew strongly as well over that same period, cumulative growth of 81%. That has been driven by our new technology investment, which has allowed us to launch a broader range of products and serve a broader segment of customers and of course, by the significant expansion of our distribution networks. In the purple boxes, we have our 2 specialist business finance lending units: Real Estate Finance and Commercial Finance. Both of these, again, have continued to grow and a cumulative growth rate of 16% and 37% are shown on the slide. Total lending and business finance is just over GBP 1.5 billion. Our real estate finance team supports professional landlords and property developers and our specialist team has many years of property finance lending expertise. 82% of the lending in the property side is for residential investments, financing and 6% for the commercial investments. The remaining 12% of our lending is in development finance, the majority of which is on retail properties. However, only 3% of our lending in property is for commercial financing. All property lending is secured against U.K. assets. And at the end of the half year, a loan-to-value was 56% on the portfolio. Our commercial finance team provides working capital finance and support for strategic events. Typically, this is secured against receivables and it's invoicing discounting facilities of typically up to 90%. Our specialist team has very strong track records in the asset-based lending market. And on the right-hand side you se finally in orange, you can see our deposit capability and function. We only take deposits from consumers and over 95% of their deposits were fully covered by the financial services compensation scheme limit. So the balance is below 85% for the half year. We have a full range of products available from instant access, shorter-term notice accounts, fixed term accounts and also cash ISAs. And we've grown our deposit balances to support our lending growth by 33% in the last 2.5 years. As a growth rates, we've just covered, demonstrate the team has built a track record for delivery and successfully capturing opportunities in each of our businesses. We established positions in our specialist lending markets and have long-standing relationships with introducers as we continue to expand that and nurture those relationships. Our product innovation and expansion has been a common feature mean that loans for improving the energy efficiency of properties within real estate finance, shorter-term fixed rate accounts within deposits or actually our entry into the vehicle stock funding products, a continued progress of adding products and serving wider customer needs. Our ability to raise deposits and deliver significant lending growth gives us a platform to be confident and continue to move forward and achieve our ambitions. We have a clear plan to continue growing in each of these businesses, not only when it's appropriate to do so. We have grown lending by 45%, net GBP 1 billion additional balances over the course of the last 2.5 years. And as I say, that has been delivered despite the fact we've been tightening our credit criteria in quite uncertain environment. And we've also proven our ability and agility to react to those changing market conditions, and we will continue to do so conscious that we are seeing in both business and consumers impacted by some of the current challenges, and it's appropriate, therefore, that we cautiously grow going forward. We are well positioned to continue delivering profitable growth. We typically have low market shares in quite large markets. Although in the near term, there is no doubt that higher rate environment will have the effect of reducing demand for credit and dampening consumer spending. We're not immune to the impact of that. You will have seen in this morning's Q3 trading statement that our lending balances grew by 1.3% in the third quarter, and they have risen by 14.2% over the 12 months. We have sufficient capital to support our growth ambitions, and we are clear in a level of loan book scale that is required to deliver mid-teens returns. Rachel will cover that shortly. At that point, as I say, the group becomes capital accretive, and we have different options and decisions to make. We remain committed to our aspirational longer-term vision to be the most trusted specialist lender in the U.K. Our core purpose to help more consumers and businesses to fill their ambitions is a common focus in each of our business units. So they're very diverse, and we've got a very common purpose. And as you know, we articulated at the half year stage our strategic optimizing for growth priorities, which are to simplify, enhance the customer experience and leverage our networks. And we've started making good progress in continuing the progress of the last couple of years against each of those. Some examples are shown for each of these on the slide. In the last 2 years, we've taken a number of actions to simplify the group, automate processes and simplify our operating model. We've also exited 4 subscale businesses and become more focused. We've reduced the office space we occupy with our -- our staff occupied by just over 50%, and we also have plans to reduce some of the more expensive space that we have in London. And Project Fusion, our cost optimization program, we have increased in the announcement this morning the savings that we delivered from that program by the end of 2024 to GBP 5 million. We also continue to focus on the customer experience. Again, some examples are on the slide. That includes product expansion and vehicle finance to serve the larger and lower risk client segment of the market in addition to our heritage and new prime lending for vehicles. We've introduced electronic documents in real estate finance to remove paper and speed up processes for customers. And we recently launched our first savings mobile banking app allowing customers to self-serve, access information on their account and transfer money, therefore, self-serving and reducing the number of calls that come into our call center. So we're looking to just replicate the exact experience we had in doing the same in retail finance. And we've also launched our AppToPay pilot, offering 3 months into free credit and retail finance, and Andy will give you a bit of an update on the AppToPay pilot when he talks later. And the retail finance team has continued to add new functionality continually to our online self-service portal and have seen adoption increase by customers of 74%, allowing them to drive cost efficiencies. We also continue to leverage the distribution networks that we have. We work with over 1,400 retailers, almost 700 vehicle finance introducers and we are continually seeing the amount of repeat business in both in business finance areas, so real estate finance and commercial finance, grow as our reputation for responsiveness, speed of decision and flexibility builds. Everything we do, of course, is underpinned by our technology platform. We've invested in new capabilities, and we have continued to increase process digitalization, replace legacy platforms and launch new products. In our consumer businesses, we integrate easily with our partners via APIs, allowing us to onboard them at pace. And we also, in our credit decisions and affordability assessments, make automated decisions to allow quick return to the customer and to the retailer; in the case of V12, the decision that we meet on the credit application. And as has been demonstrated in the last few years, the platform is scalable, 45% growth in lending, 1/3 growth in deposits and has future capacity to support the growth ambitions we have. You'll hear shortly about the importance of technology in the V12 business that's helped them meet the evolving needs -- and expectations of retailers, but also end customers, allowing them to keep winning market share. So good progress across all of these new strategic priorities we outlined in August. From the presentations and a lot of information you'd like to hear, there are really just 2 key messages we want you to take away. The first is a V12 Retail Finance is an emerging powerhouse and is well positioned to continue winning business and grow its market share. And secondly, we have a new ambition to grow to a net lending book of GBP 4 billion which is a level of scale that is required along with some other metrics being aligned to deliver the mid-teens returns that we set out in 2021, and Rachel will cover that shortly. So with that, let me hand over to Nick Davies, Chief Executive of V12 Retail Finance, so that he can tell you about the journey he and his team have been on from launching the business, scaling it and continuing to develop it. Nick?

Thank you, David, and good morning, everyone. I'm Nick Davies, and I lead Secure Trust Bank's retail finance business trading into the V12 Retail Finance brand, which is a business that I originally founded. This morning, myself and Andy Phillips, V12's Commercial Director, will provide you with an insight into the retail finance market and explain how our business has grown into a major player in recent years, thanks to our strong record of profitable growth. V12 has more than 20 years' experience of trading in our specialist market. And today, we will look to provide you with a deeper understanding of how V12's focus on interest-free lending has allowed us to produce a high-quality, low-risk loan book, which compares favorably to other unsecured loan products such as credit cards and personal loans. You can see on the first slide that retail finance has grown from being 30% of the group's lending at the end of 2020 to being 37% of the group's lending in the first half of this year. We'll also explain how we've been able to leverage V12's technology and to fully digitalize the customer journey, which has provided an extremely cost-efficient and robust operational platform, which is capable of supporting our future growth ambitions. To give you a better sense of how V12 works with our customers and our partners, I will now show you a short video, which brings this to life. [Presentation]

I'll come on to a more detailed explanation of how V12 delivers these services in later slides. However, a key point to stress is that the technology support in it is proprietary. Originally built by V12's in-house developers more than 20 years ago, we have constantly evolved it in the period since, ensuring that it remains agile in the envy of our competitors. Our technology is one of our core strengths and has been key to ensuring that our proposition meets the ever-changing demands of both customers and retailers, which has been the central pillar of our growth story in recent years. Over the past 20 years of trading, we have earned a reputation as an innovative and reliable specialist lender, which gives us the credibility required to work with some of the biggest names in the retail -- the U.K. retail market. Retail finance for V12 simply means providing credit for customers at the point of sale to allow them to make purchases from retailers working with V12. Our operating model sees V12 integrated software via API links into our retail partners who then use this link to introduce customers wishing to purchase goods from their stores and websites in a seamless and highly efficient way. Once we've undertaken our affordability and credit checks, we are able to provide a credit application decision where you -- within minutes and V12 pays the loan proceeds directly to the retailer, less our charge, allowing the customer to receive their goods. The customer then makes the repayments for their loan directly back to V12 via monthly repayments. This creates a win, win, win scenario with retailers able to make more sales customers are able to bring forward purchases with affordable fixed monthly repayments and allowing V12 to build a loan book providing attractive returns. The retail lending market is predominantly promotional credit, such as interest-free lending, which is a highly desirable product to the consumer due to the fact that it has no hidden charges and which has also been proven to generate significant incremental sales for the retailers. Whilst V12 has the ability to provide retailers with a full range of products, we've always primarily focused on the provision of interest-free loans. These have traditionally had loan terms ranging from 6- to 60-month repayment terms. However, our newly launched AppToPay product extends the range even further as it introduces a 3-month option. The charge you make to the retailer increases as the loan term increases. So commercial necessity dictates that the longer-term interest-free options are only typical available on larger purchases. Over many years, and after completing comprehensive counterparty checks, V12 has built a distribution network of more than 1,400 retailers. We work with the majority of these on an exclusive commercial basis, and all of these retailers offer interest-free loans to their customers. As can be seen from the slide, interest-free lending made up 90% of V12's volumes during the first half of 2023, with the remaining 10% being interest-bearing loans. Interest-bearing options are offered by retailers in the small minority of sales where the charge we levy for interest-free is not commercially viable for them to offer due to lower margins on certain products that they sell. The mechanics of an interest-free loan are very simple for a customer to understand with fixed monthly repayments starting 1 month after receipt of goods in the amount of the loan value divided by the loan term, which in this example is 12 months. The commercial relationship between V12 and the retailer means that a charge, known as a subsidy, is made by V12 to the retailer for each loan process. The charge is deducted from the loan proceeds before they are paid across to the retailer in settlement of the customer purchase. We will provide further detail on the commercial pricing process later in the presentation. However, it's important to note that if V12 wishes to increase its charges, for example, due to a rise in the cost of funds, then this is managed directly with the retailer and has no impact on the price charged to the customer, which remains interest-free. The unique features of an interest-free loan means it is attractive to customers who don't necessarily need credit to complete the purchase, but who view interest-free as a deal allowing them to spread the cost of the purchase with no additional charges. V12 are highly experienced in this type of specialist interest-free lending, credit losses for interest-free loans are materially lower than other types of interest-bearing consumer credit products due to the fact its ability to attract higher credit quality customers don't need the credit, and you could otherwise potentially pay in cash. Also, those who are less confident and being accepted for interest-free credit, don't tend to apply. In 2019, we saw an opportunity to further derisk our loan book by targeting even greater volumes of interest-free lending and the successful execution of this strategy over the past 4.5 years has seen our interest-free loan book mix rise from 62% in 2019 to almost 86% in the middle of this year. Andy will provide further detail on the sales strategy that we deployed to acquire increased volumes of interest-free lending later in the presentation. I previously mentioned interest-free lending attracts better credit quality customers, which in turn leads to a lower cost of risk. And one of the key benefits of the strategy has already been seen in the reduction of V12's credit loss impairments over recent years. Historically, V12's credit loss performance has always been one of our strengths. However, since 2019, the growth in interest-free lending has led to further improvements in this area with a significant drop in the loss rates linked directly to our strategy to focus on interest-free lending. Our ability to deliver credit losses lower than other unsecured consumer credit products is linked directly to the unique nature of interest-free lending and the improved credit quality of the customers that it attracts. Our technology platform is at the very center of the business with the original software developed in-house more than 20 years ago to process some of the first retail credit transactions on the web during the very early days of Internet retailing. In fact, the original developer of that software is still very much part of the business, working as the IT Director of V12 and he is here with us in the audience today. He's led a team of developers for more than 2 decades overseeing the evolution of the software into its market-leading position and ensuring that it remains at the cutting edge of technology in the retail finance market. The ability to quickly deploy the flexible solutions needed to meet our ever-changing retailer and customer demand has been one of the key reasons behind V12's ability to grow its market share as our competitors struggle to match our capabilities in this area. As the slide sets out, we have a long track record of building a robust system capable of handling ever-increasing volumes of lending while adding improved levels of functionality to retain both the retailers and our customers and hence, constantly enhancing our customer experience. This culture of constant evolution is very much part of V12's DNA and the work to develop new products, enhance functionality and bolster the resilience of our system simply never solves. Our success in being able to quickly and seamlessly integrate with our software with a huge range of different retailer IT systems covering all of the retail sales channels is the single most important requirement needed to secure new business contracts with prospective retail partners. The growth in our new business volumes and acquisition of increased market share are evidence to our ability to meet the requirements of our retailers. However, the software is also customer-facing, as you've already seen earlier in the presentation with the video. Credit applications are processed and decisioned in real-time with automated credit and affordability checks, ensuring that customers access products appropriate to their needs with the system being available online 24/7, 365 days a year. 90% of applications are decisioned and processed within a matter of seconds, whilst the remaining 10% are quickly assessed by our credit underwriting teams. In 2017, we launched a customer self-service portal, allowing our customers to manage their accounts with us online, and this feature has been extremely popular with our more than 1 million customers. Today, we see self-service transactions account for 74% of all customer account activity, meaning the highly digitalized end-to-end customer journey, a journey has provided customers with an outstanding experience when dealing with V12, but this has also allowed the business to enjoy significant cost efficiencies. Perhaps the clearest example of this has been V12's ability to maintain its high levels of service to both retailers and customers since 2020 despite a more than 79% growth in our loan book. All of this, but with no increase in our overall staff headcount. I spoke this morning of V12's growth in recent years and to provide more detail on that, it's very appropriate for me to introduce Andy Phillips, who's been with the business for more than 8 years. And as our Commercial Director has been the architect of that growth. Andy?

Okay. Good morning, everyone. Again, thank you, Nick. Good morning, everyone. Slight technical glitch on microphones. Following the acquisition of V12 by Secure Trust Bank in 2013, we delivered very significant new business growth, having progressed from a niche provider of lending GBP 163 million per annum to a major market player lending GBP 1.1 billion of new business. As you can see, I'm on a slight blip for COVID in 2020, our growth has been consistently strong with our new business volumes growing by 55% between 2019 and 2022. 2022 was a particularly strong year for us with a 46% uplift on the prior year, driven by our success in penetrating the furniture markets, in particular. This year's new business performance so far is also strong. And at the halfway stage, we're 15% up on the same period last year. I'll talk more about the reasons for this success in the following slides. As a result of this new business growth, our market share as measured by the finance leasing association data has increased significantly, too, having growth of 8.2% in 2019 to 13.2% in H1 '23. The fall in market share in the COVID year of 2020 was as a result of taking a prudent approach and tightening our credit risk appetite during a period of significant uncertainty. This is the right thing to do and it certainly helped our credit risk performance, giving us strong foundations from which to continue to build. Despite the success that we've had in growing our market share, our addressable market of approaching GBP 10 billion per annum is still considerable. So there is still plenty of market opportunities for us to develop. Our tried and tested approach will continue to be applied and a mid-teens market share is realistically achievable for us. So why are we being so successful? And why are we confident in this trend continuing? To explain this, I'd like to talk to you about some of the differences between V12 and our competitors and the ingredients that have fueled our success. V12 compete with a number of businesses varying from major banks through to more specialist major lenders to more small fintechs, brokers and niche lenders. Much is made of the large bank's inability to complete -- to compete with the slick technology integrations at the fintech as well as the fintechs inability to compete with the banks on credit underwriting experience and for the competitive cost of funds required to compete at scale. Both of these observations are generally fair and certainly a feature of our market. All of our competitors fits into 1 or other of these categories, with the exception of V12 who fits into both. V12's technology has been the envy of our competitors for well over a decade and continues to be so today. But if we're a small private year and fintech, scaling would always have been challenge. The acquisition by STB changed all of this, bring banking hygienes together with enviable technology, technology which is enhanced, proprietary and easily integrated. To put that into perspective, this means that while some of our competitors are able to complete 2 or 3 retail integrations in a year, V12 can complete several in a week. These integrations aren't just listed to retailers either, they also tend to major e-commerce checkout plug-ins and middleware, enabling the acquisition on onboarding of retailers on mass and the leveraging of third-party systems. A good example of this was our successful integration with ticketing platforms, which open up an opportunity to penetrate the football season ticket sector, a market that we now dominate being the season ticket lender of choice for many of the premier league clubs. In short, V12 and STB's combination with the flexibility and technology of fintech and the bank funded by retail deposits is incredibly powerful. But these aren't the only ingredients in the recipe, the reason we delivered such strong growth in the market over the last 20 years is also because of our cost-efficient operational capability, highly experienced team, a strong consultative sales process and exemplary levels of customer service. All of these factors combined to present really significant barrier to entry for potential competitors. But most notably to prevent the ability for those new entries to scale in the way that V12 has. V12 has a clearly defined process for passing on increases in cost of funds to retailers. 60% of our retailers automatically applied pricing adjustments and fluctuations in cost of funds on a quarterly basis. The remaining 40%, we see immediate pricing changes. Whilst the process of applying the price increases is applied on the day, the impact will only show through and paid out business was then we kind of deliver the products that they've sold. This can cause slight delivery lead time lag, which can be a shorter a couple of days or as long as 12 weeks, for example, on Sofa deliveries. Pricing is strictly managed with retail partners understanding the requirements and the mechanism of the adjustments as well as having agreed contractually to receiving them. Changes to retail pricing has no impact upon the price paid by the customer, as Nick has already mentioned, it's always range in trust free and the payments are fixed for the term of the loan. This slide gives you a snapshots of the market sectors in which we operate. When determining market share and rankings, the Finance and Leasing Association split out the markets to clearly define retail store and online credit. This measure excludes market is not addressable by V12 such as credit cards and deferred payment credit, giving us a true ranking against our competitors. As you can see, the ranking show where V12 features in each sector among the 8 [indiscernible] axis shows our market position in each of the sectors in the circles, with ranking 1 being the largest market share and ranking 8 being the smallest market share. The y-axis shows the quality of customer associated with each of these market sectors. The furniture and jewelry sectors represent highest customer quality to lowest credit risk with low performance on the electrical sector represents the lowest customer quality at highest risk and arrears performance. As confirmed by the FLA rankings, V12 currently has the largest market share ranking 1 in the furniture and leisure sectors with leisure in things such as bicycle, gym equipment and camping equipment. And the third largest ranking 3 in the jewelry sector. So we're strongly represented in these low-risk sectors. By design, we have a lower share in the higher risk electrical sector, ranking as only position 8. In fact the business we write in electrical sector reduced from 19% of our volume to just over 0.3% over the last 5 years. Whilst the business we write in the furniture sector has grown 20% to 47% of our overall volume. As Nick already mentioned, with our focus haven't shifted towards other risk sectors, the interest-free credit is a feature of our loan book has increased notably, too, from 57% in 2018 to 83% in 2022. This has had a corresponding impact on the cost of risk, which has fallen materially over the period, which shows that our pivot towards lower risk sectors offering a greater proportion of interest-free lending products has been successful, yielding a high-quality customer and significantly reducing our arrears exposure. This will serve us well in the current economic and provides a strong foundation for which to build in the coming years. As mentioned previously, with the addressable market approaching GBP 10 billion per annum, there's still very significant opportunities for growth available in both our current markets and new sectors such as home improvement. I previously mentioned what an important differentiating factor our customer service is. We have more than 1 million customers, and they've always been at the heart of everything that we do. As a business to business to consumer lender, we have 2 sets of customers to consider both our retail partners and the end customers to whom we lend. As you can see, with Feefo and Trustpilot ratings of 4.8 out of 5. Our end customers are clearly to be happy with the service we provide, and they rank us above both of our closest competitors. As you can see from the reviews here, customers generally tend to credit the ease of use of our application process and how well this integrates with the retail shopping journey as one of the main reasons why they love our service. We also make it easy for them to communicate with us any way they choose. So what about our business customers. This slide shows you a few of our retail partners all of whom are names I'm sure you're used to seeing in the high streets retail parks and stadiums of the U.K. Many of these partnerships have been placed on multiple years now, including those who've occasionally looked to see if the grass might be greener on the other side for a cheaper price elsewhere and have subsequently returned. They also quote the ease of use and integration with our application platform and how easy we are to work with as well as the impact made by highly experienced account managers whose primary objective is to seek to deeply understand their business and play an integral part in driving their performance as well as our own. Indeed it wasn't many years ago that retailers care about only 2 things when it came to retail finance, price and customer except rates. Whilst these factors remain high on the priority list, it was retails focus on technology and customer journey, which really changes the landscape. Now retailers care just as much about being able to serve all sales channels from bricks and mortar to online with the most efficient customer application process possible. Every stage of that process from the product purchase to the selection of the finance product right the way through to checkout is a potential customer dropout point or a point of customer dissatisfaction. In particular, the checkout be it online or in store is for the retailer sacrosanct. V12 has always promoted a champion challenge approach, asking retailers to sample our technology and integrations to compare them with their incumbent. It quickly becomes clear to retailers that conversion through the purchase funnel is notably superior with V12 because of the ease of use of the system and its seamless integration into their shopping journey. Strong conversion rates, the number of customers successfully complete in the purchase journey and customer experience still became a priority and our major factor for retail partners. Their high level of satisfaction with V12 are still driven by the fact that we lead the way in this area. At our last Capital markets event, you may remember Nick talking to you about our plans to launch our new app enabled short-term interest-free credit product AppToPay. And I'm pleased to announce that the pilot was successfully launched in April. Here is a quick reminder of what AppToPay is. [Presentation]

27 partner retailers have now gone live across store channels. And due to the ease of that in store integration, these existing V12 partners received the facility overnight, as it became a new available product type in their existing V12 application portal. Further web launches have now taken place along with the completion of a number of integrations with check out plug-ins. The product has been well received by both retailers and customers, and the pilot phase has presented us with a great opportunity to learn and shape our proposition throughout 2024. We're really pleased to have achieved such a successful launch and excited about how the product can develop for our customers. So in conclusion, we've had incredibly successful 3 years building a strong track record for creating profitable growth. We've achieved this whilst improving our credit quality and cost efficiency. Whilst our market share is growing considerably, there's plenty more to go at both our existing and new market segments with mid-teens market share being a very realistic ambition. Thank you for listening. I'll now hand you over to Secure Trust Bank's Chief Financial Officer, Rachel Lawrence.

Thanks, Andy, and good morning, everyone. As David mentioned earlier, we announced a set of medium-term targets in 2021. These are outlined on the slide with our main financial goal of delivering a return on average equity of between 14% and 16%. The macroeconomic environment has been challenging, more challenging than expected since we communicated these targets with the high levels of inflation, rapid increases in Bank of England base rate. But despite this, we have made good progress in delivering on these targets over the last 2 years. Having achieved our target of delivering loan book growth, we will now replace that particular target. As I said, having grown lending by 45% in the last 2.5 years, I'm cognizant of market feedback on having absolute growth targets, we are replacing this target to a net lending book of circa GBP 4 billion. The other target we are updating is the cost income ratio. A GBP 4 billion net lending balance sheet drives a ratio of between 44% to 46%. This replaces the previous target to deliver a ratio under 50% and gives a more precise view of the operating leverage that can be achieved at that level of net lending. All our other targets will remain same. The remainder of my presentation will focus on outlining the pathway to delivering 14% to 16% return on average equity. This next slide shows at GBP 4 billion net lending, the ranges on each of the financial metrics that are required to meet our ROA target. So firstly, net interest margin of between 5.5% and 5.7%, cost-to-income ratio of between 44% and 46%, a stable cost of risk between 1.3% and 1.5%, with a CET1 ratio above 12%. So I'll now go through each of these in a little bit more detail. We've heard a lot about our track record of delivering growth in our specialist lending segments. The net loan book has grown from GBP 2.2 billion at the end of December 2020 to GBP 3.2 billion at the end of June 2023. That is GBP 1 billion of net lending growth. The vast majority of this growth is in our consumer divisions where we've seen 80% of it, and this has been delivered by gaining market share from 7.5% to 13.2% in retail and from 0.4% to 1.3% in vehicle finance. The broader product range and expanded distribution in vehicle finance provides us with significant opportunity to increase our market share and deliver that at an improved credit quality. In Retail Finance, market share gains have been achieved by focusing on larger sectors with better quality, lower risk customers and with the withdrawal of a significant competitor from the market, there is potential for further gains. Our Business Finance divisions continue to grow, but at a lower rate in comparison to our consumer divisions. We still have low market shares in all of our markets and have significant opportunity to continue to grow. It's worthwhile to note to achieve a net lending balance sheet of GBP 4 billion, a much lower level of growth is required than what we've achieved in the last 30 months. Moving on to net interest margin. The rapid increase in base rate and the raising of GBP 90 million of Tier 2 has impacted on our interest margin in the last 12 months. We have previously indicated that the Tier 2 reduced NIM by 20 basis points, but importantly, provides capital for growth, and I'll give you some further insight on that later on. The rapid increase in base rate has put pressure on margins in the short term as it takes time to pass through those rate rises to our consumer divisions, retail in particular, with the lead times for delivering on furniture orders as the team have discussed earlier. We raised our retail funding by being competitive in the rate tables, which has naturally pushed up our cost of funds. It does appear that those rate increases may have now peaked and as rates flatten and potentially come down, that pressure will diminish and there is potential for some margin expansion. The other lever we have is the mix of our lending. This slide, that I'm showing now, illustrates our different NIM profiles across consumer and business, which provides us with mix optionality. Based on our half year 2023 NIMs in Consumer and Business Finance shown on the left-hand donut, the group NIM was 5.4%. The other donuts show the impact of a 1 percentage point mix shift towards consumer lending and then to a 55%, 45% mix on consumer and business, which would increase and then by 30 basis points. The current strategy is to continue to increase our mix of consumer as a percentage of our overall net lending. I should point out that in each of these scenarios, the group NIM in the center includes the benefit of treasury balances. Containing our cost growth while growing net lending is a key priority and has a significant impact on our returns. We have demonstrated our ability to achieve this with a 10% reduction in our cost income ratio in the full year 2022. Our Project Fusion program continues to deliver, and we are now on track to deliver circa GBP 5 million of annualized savings by the end of 2024. The main areas of cost optimization coming from property, supplier, renegotiation of contracts and digitization. However, high inflation will moderate our ability to deliver that same level of reductions in 2023. But we are confident in continuing to reduce this ratio to the mid-40s with increased lending balances providing operational leverage. The group has a track record of prudent lending with an improving cost of risk in our consumer divisions. There has been a deliberate strategy to change the mix of lending within each of the retail finance and vehicle finance businesses. As Nick explained earlier, there's been a step change improvement in cost of risk in retail from 3% in 2019 to 1.6% at half year 2023, and that has been delivered through the strategy to target better quality customers in retail sectors such as furniture and jewelry. Similarly, in vehicle finance, where we now also serve a lower risk prime customers, we've seen the cost of risk more recently operate at a lower level than it did pre-pandemic. We expect through-the-cycle cost of risk in the range of 1.3% to 1.5%. As David mentioned, we have sufficient capital to support our growth. As you can see from this slide, we currently have excesses above our regulatory minimums, 1.7% TCR and 3.46% of CET1 at the half year. It's also worthwhile to note that the current capital stack is fully loaded, 4.5% of buffers, which are represented on the chart by the orange bars for countercyclical and capital conservation buffers. As we look forward to the GBP 4 billion net lending balance, we will continue to consume capital, but we'll still retain excesses of 1.17% of TCR at 2.88% of CET1 and remain above our own internal management target of above 12% CET1. Additionally, the GBP 90 million Tier 2 raise is earlier this year, provides us with the ability to lend an additional circa GBP 700 million when fully utilized. In the absence of this Tier 2, that growth would have had to been funded by CET1. Post the GBP 4 billion net lending target, the group becomes capital accretive, and we will have opportunities to deploy that capital for enhanced returns. So in summary, the pathway to delivering our 14% to 16% return on average equity target can be summarized as shown on this slide. Firstly, in net balance sheet, circa GBP 4 billion with a stable cost of risk, that's a further increase in the mix of our lending towards consumer businesses delivering a higher group NIM and assuming that the cost base increases by circa 5% per annum. We believe that will deliver an RoAE in the region of 14% to 16%, and that's what we've obviously been targeting over the last couple of years. So I hope this walk-through has been helpful and provides more clarity on the impact of continuing to scale our lending, improve our cost income ratio and achieve our return target. Thank you for listening, and I'll pass you back to David to summarize and close.

Thanks, Rachel. And also thanks to Nick and Andy for the comprehensive presentation on retail finance. I just want to take a few comments ahead of working out for questions. I'm sure I've given the details can share today, there will be quite a number. So we have a clear focus, as you've heard on our special lending businesses where we've proven we can win and take market share. You've heard it repeated a number of times, but net lending growth of GBP 1 billion representing 45% growth over the last 30 months or, 2.5 years. Although we're focused, we remain well diversified. Our business model has proven to be resilient through quite challenging times. And of course, it remains a strength of group that we are so resilient and can deal with those changes, challenges and adapt our plans as required. We have been as you've heard, improving the quality of our lending, particularly in Consumer Finance. And you've seen the benefit of that both in Rachel's chart and in the 1 that Nick showed earlier for the Retail Finance business. We're optimizing our growth strategic priorities are guiding us as we continue to simplify and enhance customer experiences and extend and leverage our distribution networks and as you will better appreciate now V12 Retail Finance is an excellent business. The team has great experience, strong relationships with retailers has got a technology advantage, a great track record and its lending is lower risk than other segments in the unsecured space in the U.K. The team is well positioned to make further market share gains. And on our medium-term targets, I'm sure Rachel's explanation of what needs to happen to deliver those mid-teens returns is clearer and has been insightful. Our ambition to grow lending to GBP 4 billion is clearly a key part of the equation. So we have significant opportunities to continue growing. We've got sufficient capital to support the growth to get to GBP 4 billion of lending. And we are moving forward positively and we're confidence towards that GBP 4 billion level. We're really excited to have about the future. We're really proud about what the team have achieved in the last 2.5 years. And also, we look forward to sharing with you the progress that we continue to make and appears ahead at the normal reporting points in the cycle. With that, we're going to open up to Q&A.

We're going to start in the room, but there are quite a number of people joining on the webcast. [Operator Instructions] So with that, just open up to anyone like to ask his question, please. Gary?

It's Gary Greenwood from Shore Capital. I'm just going to ask about competition for V2. I think you've said earlier in the year that one of the major competitors have pulled out to the market. So I'm just trying to understand to what extent you benefited from that being able to win some of their clients? And I guess also linked to that, I'd be interested in just understanding a little bit more about the marketing process, so how you approach customers, retailers, how you effectively replace the competition and to what extent you end up being the sole credit provider to those customers or on the panel?

Thanks, Gary.

Can you hear me okay? So in terms of the exit competitor, it's difficult for us to quantify what element of market share we picked up from that exactly. But I think that the best way understand believe that we benefited significantly from it the best way to to that point. add to that, Nick?

No. I mean it's sure that we pick up some of that on this, but we've not been in [indiscernible] traction of some of [indiscernible] Sorry, second point?

The second point was on how you attract customers, how you [indiscernible]...

Okay. That's very much the effort of the direct to business sales team so we have a field team out in a marketplace. So marketing is incredibly limited in that perspective, not the way we've ever acquired business. So we just have a really skilled team of people around the U.K., that build relationships with retailers, and that's how all of our businesses work.

It's very much a relationship [indiscernible].

And to what extent do you end up typically being the sole credit provider or [indiscernible]...

In the majority of cases.

Yes, the majority of cases. There are some especially large retailers where there will be multiple vendors all present at the same retailer, but that's a small number generally with a service provider. But we welcome instances where we're not because that's the challenge thing I said we often encourage that to become a second lender so that we can actually put the test to one of the main ways we tend to grow the business.

The market itself is very much based on [indiscernible] relationship with the retailers and that's as much because the technology integration that they need from the retailer, it's very difficult for them to do that on a multiple basis, since they once build that relationship becomes [indiscernible] The larger retailers from their perspective, more from a supply concentration risk, will invest in [indiscernible] there to be able to have multiple partnerships, but that's very much for the large retailers to be able to do that. As Andy said, in many instances from our perspective, it helps us with our own treasury risk as well, which is [indiscernible].

Jens Ehrenberg from Investec. Probably another one for Nick and Andrew. On the technology piece, within V12 retail, how does that compare to the other players in the market when you think about your proprietary technology infrastructure? And also, once you have retail customers integrated, how sticky does that relationship become that they say, well, we're part of this way, we're plugged into this technology platform now. And how easy is it for them to move?

So comparing to our main competitors there is -- the barrier to entry is the market quite high, and it's really as much to do with the market expertise that we need to understand how retailers think what they really want. Technology won't get there, it will get you into the group but you really need to understand what they're looking to obviously within the [indiscernible] team a lot of experience being able to do that. The technology that we tend to see in our main competitors, we are -- we will be very confident saying that it's market leading and that we -- what we do is perhaps significantly better than some, but marginally better than most. But it's the ability to integrate it. That's where we really have a book difference. That's where retailers really look to us to be able to sort of plug and play card quickly. And then I guess the answer to the second question related to that, once we are plugged into that, from a retailer perspective, I guess, one of the insights that we move in over the last 20 years for me, is the fact that retailers see retail finance as free credit, they see it really as just a hygiene factor. They're interested in selling what they sell. So all they want is that product to work and interest free is very simple to understand. So everyone knows what it is. It's not like there's a very different product out there. And so for that reason, once they find a partner that works, it gives the technology, it gives them highest level of service, obviously, prices a different feature of that as well. It tends to be the sticky for those reasons. And I think that similarly, when you bear [indiscernible] how sticky it is with our competitors as well, I think that gives me an even greater sense of product that we've been able to [indiscernible] retailers away from that. But it's particularly sticky we need because of the technology with the lack of effort they want to put it to changing their partners once they've got [indiscernible].

Nick, is there any indication you could give both the average length of our retailer relationship?

I mean it's multiple gigs -- it's measured in years. We have growing contracts with all of these retailers, obviously, that we trade under. But these are -- I mean, some retailers would be dealing with 10 years-plus. And so I would have mentioned that we would be dealing that for next 10 years. I think to say[indiscernible] the sales team that we have is definitely the best in the market. They're all experts in retail finance. They've all been with us long but the average tenure is very long within that lot of experience. It's very bespoke. V12 finance is very different to perhaps our motor business. It's the same principle that you dealing with a partner, but the way the motor teams work is very different the way that retailers work. And it's that subtle nuance that really gives us the edge [indiscernible] the market.

It's Steve Keeling at Investec. I just want to understand the relationship with cost of funds falling. I think we're in account that, that will happen as rates have peaked and come down. How much of the benefit is passed on to -- in pricing to retailers and how you've indicated that quickly? But how sensitive are your retailers to that pricing?

I mean, obviously, it's sensitive to price [indiscernible] really is when we look at that. I think prices seen more as a [indiscernible] in our industry. Retailers know exactly what prices are available. There are a limited number of players in our sector large enough to deal with some of the retailers. So they do test the more I think, as Andy said in his presentation. However, I think what that also gives us is there isn't a huge bank of price, so we're not competing on price. Price has to be there. It has to be in the bank we're typically able to charge a small premium because our technology is better, and you sort of trade those to [indiscernible] In practice, the ramping of cost [indiscernible] which we simply pass through to the retailer, we simply pass that through to the retailers that there are practically speaking, we have a significant number of retailers on sort of matrix linked pricing. So it simply goes up in direct correlation to how much cost of funds has been going up in the market. So to that extent, it sort of goes up and comes down directly in line with cost of funds. The other half, which is typically the larger retailer the smaller retailer partners where we will again look to pass on cost of funds. There are opportunities to sort of benefit from some of the falling cost of funds as the market comes in, as the rates sort of dropped down. How much that will -- how much the market will allow us to do that remains to be seen because obviously, there's been no movement in interest rate for 10 years. So it's very cliff to talk about the current environment. But like I said, I think there will be opportunities to do it, but not on a huge scale.

Okay. So your book is not a -- it's not sensitive really is what you're saying?

Yes. I mean there's a time delay in [indiscernible] because we price the day for [indiscernible] 4 to 3 months [indiscernible]...

And sorry, last question, just a matter of interest. People take interest free, I mean, I'm sure we've all been when we've bought in to buy something. Do they tend to just hold it to term, just pay every month to term or do they pay off much earlier? What's your experience on your books?

I think the accountants of this will hold it because they realize the benefit [indiscernible] from that. But I think the reality is most of them hold it [indiscernible] we've been doing this for so long [indiscernible] you can pretty much predict what the real term of that is going to be [indiscernible].

Yes, I was just -- yes, I have the [indiscernible] so that's why I was...

Just a have line as contractual [indiscernible] 1 month or 2 months [indiscernible]...

Nick, one I'll direct to you, just to give an indication -- well, the question is what's the effect of interest rates on interest-fee lending once fees retailers are considered? So -- I mean, I think probably just giving an indication of the sort of gross yields currently would be sufficient on average in your business? Or just -- yes, you can give an indication?

I mean it varies by term, but it will be into the low double digits, I think is a -- so the kind of gross yields will obviously be affected by the cost of funds push that out. And then as [indiscernible] they actually come down to move back down again similar to the answer that I gave to the last question. It's dynamic to that extent that directly in line with [indiscernible] I think now new business that we're introducing into the book this month, for instance, will be around 12%, I think, that's kind of indicative I think that we're at today.

[indiscernible] I'd like to be passing on. What percentage of lending is from online sales as opposed to in-store and does it make any difference to the the NIM or impairments performance?

I'll let Andy answer that.

So on the mix between in-store and...

Yes, so in terms of the mix, that's over recent years, switch much more towards store base of sort of more 70, 65, 35 these days in favor of store, which is reflected in the furniture market so much it is store based in terms of those customers that are different. Yes, they do when customers do look at store customers. Typically speaking, they gain that variety from 1 retailer to another. And I would say that the retailers and the sectors that we are in, that variance is much, much less than it might be in some of the high-risk sectors like, for example, consumer electronics.

And actually, just that's a good segue actually into another question online. to finance section had a usual slide showing credit quality versus market share. How large is the cost of risk differential versus old from a low-quality segment to a higher risk segment? And what drives the difference in the payment quality between segments, which is also down to the different customer circumstances and why they're buying credit versus the buying credit? Is there anything you could give a sort of indication of the cost of risk between some of your lowest furniture sectors, for example, versus I think you had in the far right-hand side electrical's [indiscernible].

Yes. So I mean, as the -- I think there's a slide Andy had different market where the different markets [indiscernible] in relation to risk sort of electrical in extreme it. And the reason that electrical sits there is because electrical could have very little margin in them. So therefore, they can't afford interest free, that's what we rarely see interest for electrical goods. What that means is typically electrical goods are sold on interest-bearing credit, which is why the credit quality it attracts lower. So that's the kind of premise is the reality of what we're dealing with. In terms of sort of comparable loss rates, -- the other thing you need to bear in mind, of course, is the longer the term, the higher the risk, function of how long customers are But generally speaking, if you look at interest-free lending through the cycle and across all different sectors, you will typically see loss rates I mean they can be low as 0.5%, but they'll be in the range of 1% to 2%. As a general rule say that's the typical interest-free lending. Whereas if you're looking purely at the interest-bearing segment of customers that you would attract working perhaps in the electrical sector. priced for a reasonable APR. So we're talking about a sense of all risk appetite or the kind of risk appetite. I mean an operation like ourselves would look at, you're probably looking at loss rates in the region of 6% to 8%, I would say. So that's the sort of difference in terms of losses. Obviously, the yield on those products will be different to reflect the fact that there's a significant difference in the loss rates.

Thank you. So there's a broader question beyond V12. Can you talk about your market share progress in the past few years and future targets for the business segments? I can pick that up. I mean Rachel did mention the performance in vehicle finance where market share has gone from 0.41% to 1.3% over look at the last few years or so. There's a very large market we've opened up to serve the prime segment as well as the new prime segment. So we also expect our market share to be lower, but clearly at that level, a significant opportunity for growth. It's obviously much harder in the business finance areas. So in commercial finance and real estate finance to answer the question of what was the market size and therefore, what's your share? So we don't tend to do that. It's just much easier when you've got clear published data on a regular basis in consumer businesses to share that with you. Clearly, we've got just over GBP 1 billion or GBP 1.2 billion lending in real estate finance, there's over GBP 1 trillion of property lending in the U.K. So clearly, plenty of opportunity, but we're also seeing a subsegment of that total market. And yes, we don't give out forward forecast on business unit targets. Just a question, what does the time can you expect the GBP 4 billion loan book to be delivered? Again, I can cover that off. I think what we've tried to do today by having listened to the feedback of having a specific level of lending growth every year. We've taken on board the feedback on that, and we've replaced it with a GBP 4 billion ambition. I think in the current economic environment, it would be appropriate not to be too definitive about when we'll be looking to deliver that GBP 4 billion level. I mean, you can look at some of the analyst news that are available. We wouldn't actually be too out of line with that view. But we don't want to be wedded to saying it's going to be this amount that extra GBP 800 million in the next 3 months, 6 months, 9, 12, et cetera. We just want to make sure we're doing the right things, underwriting appropriately when it's prudent to do so. And I think you can take -- we have a track record of what you said today of delivering strong levels of growth and doing so prudently. So no specific timing given on that. On the 1,400 retail relationships, is there a view on what the size of the market is by number of retailers that you could serve? And second question, what's the concentration within say your top 10 retailer relationships.

I think the answer to the first 1 is there's a lot of retailers, but it's almost like the law of diminishing return. So we deal with a wide range of retailers ranging from the very small to the very large. The very large retailers we have, as we were saying earlier, typically a shared relationship in terms of other members sitting alongside us, which is attractive to us because we don't want that concentration risk. I would say that there's probably -- if we have 1,400 relationships, I could see us growing the business to acquire 2,500 relationships, but you would just be dealing with a lot more smaller retailers. One of the ways that you can achieve that with our created a huge amount of operational cost me and manage those relationships because, obviously, we do monitor them and work with them quite closely to make sure they're appropriate partners for us is to work through aggregator sites and brokers and whatever else, you typically don't do it the moment. So it's something that we will -- we have looked at in the past, but I think we'll probably look at that getting in the future. In terms of concentration risk, I just what's our largest...

Largest client traction risk about 14% of what we do.

So we're pretty well spread. We very consciously didn't want to build the business when we started the growth phase, some years back. off the back of a single or very small number of relationships. So we have a very broad spread of it. Even the 14% concentration in our largest partner today, that's only actually broken through 10% recently. It kind of got into a very big growth rate. But we're very well spread across a number of different sectors. And I think that sort of sets us in a good place going forward for the next kind of phase of [indiscernible].

Okay. And just one final on V12 online. Could you comment on your product and how it compares to the likes of the new entrants like And I'm assuming it's a question a little bit up to the Andy.

So in terms of how it compares, it's designed to be much more of a retailer-focused product to the -- there are a number of ways you would distinguish it, right? For me, the main one is common style products are very much a consumer-focused products. So they are marketing-led, they're marketing to find the consumers to drive into that consumer-facing product. AppToPay is different to that. AppToPay is designed with retailers in mind as well as in consumer, which is a good fit with our business model. One of the things that the [indiscernible] of the world that put had in the early days would be the retailer relationship. So what they've done is quite customers in a way to lure the retailers. Obvious thing for us was typical way around because we already had a significant estate of retailers. So it's been built with those retailers in mind and that's the differentiator. So there's more reasons why a retailer would choose to promote it.

Thanks, Nick. Any last questions in the room. Yes, thank you. Again for joining us today. I hope you find the presentations informative and insightful. Two key takeaways, as I said earlier, V12 Retail Finance is on a fantastic trajectory and on its way to building its market share further and getting to the mid-teens level seems eminently feasible in the near term. and our other businesses continue to grow as well. It will be important factors in building up to that GBP 4 billion level. The timing, as I say, we're not defining. We'll only grow and it's appropriate to do so. And I hope that you take comfort from that. And we are on that way to that GBP 4 billion, which as Rachel has outlined, is the level required to generate the return on average equity target that we set out a couple of years ago, assuming the other lending spots and regions that shale are in the right place. And we do have, as Rachel demonstrated, sufficient capital to show the growth to get at that level. Beyond that, different options to consider. But listen, we thank you again for coming. Hopefully, you've enjoyed the session. We've answered the key questions that you had, and we look forward to sharing more with you as we progress. So thank you again.