Vanquis Banking Group plc (VANQ) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for joining us for our 2026 half year results webcast and conference call. I'm Ian McLaughlin, the Chief Executive Officer of Vanquis, and I'm joined, as usual, by our Chief Financial Officer, Dave Watts. Dave, good morning, and welcome.

Good morning, Ian.

I'll start with an overview of our performance and the updates to our outlook that we've announced this morning. Dave will then take you through some more detail on our numbers and guidance, and I'll come back to summarize. And then, of course, we'll be happy to take your questions. So if I can take you straight to Slide 4. The first half of 2026 represented another period of significant progress for Vanquis. We continue to lay the foundations for sustainable, profitable growth and attractive returns over the medium term. Let me draw out a couple of key points here. Firstly, we delivered a further 2 quarters of profitable growth. Statutory profit before tax increased by 44% year-on-year to GBP 8.9 million, so exceeding the profit that we delivered for the whole of 2025. Secondly, gross customer interest-earning balances increased by 24% year-on-year to more than GBP 3 billion, principally reflecting growth in second charge mortgages and in credit cards, and this supported an 8% increase in income. Importantly, that growth was delivered while maintaining stable credit quality, reflecting our disciplined underwriting and the continued financial resilience of our customers. We also continue to improve our operational efficiency while still investing in the capabilities needed to support the future scalability of this business. Now Dave will take you through the key financial metrics and our capital position in more detail shortly. But at the bottom of the slide, you can see that our progress in transforming Vanquis and serving customers who are underserved by mainstream banks was recognized through 2 Euromoney Awards for Excellence, the best bank transformation in Europe and best for consumer lending in the U.K. On behalf of all our colleagues, we were very pleased with that recognition. We know we have more to do, but we are growing with discipline, improving efficiency and building a stronger foundation for sustainable profitability. Let me now turn to some of the specifics that we delivered during the first half to support the medium-term success of the business. and we've made significant progress operationally, delivering tangible improvements across all 3 pillars of our strategy; to serve more, serve responsibly and scale profitably. Now I won't cover every initiative on the slide, but I will talk to 4 areas that we believe are particularly important. Firstly, under serve more, we are broadening our proposition by developing an installment lending solution to reflect customer demand and the introduction of regulation in the Buy Now, Pay Later market. We're also delivering an enhanced prime upgrade credit card proposition for customers whose financial resilience that we've helped to improve over time and who may otherwise be in a position to move away from us to a prime lender. These initiatives will allow us to build deeper and longer-lasting customer relationships. Secondly, underserved responsibly, we continue to see strong evidence that the improvements we're making are translating into better customer experiences. Our customer satisfaction index score increased to 83.2, extending our outperformance against the industry benchmark, which stands now at 82. And for the first time, we achieved service mark accreditation from the Institute of Customer Service. This external recognition again is particularly important because it reflects not only the service that customers receive today, which has been through a period of significant change, but also shows that the standards, culture and processes that we are embedding across the organization are working. Thirdly, and perhaps the most significant operational milestone in the first half, we successfully migrated all our existing credit card customers to our new mobile banking app, which was built in-house and led by our Snoop engineering team as part of our gateway technology transformation program. This was a large and complex build and migration completed while not just maintaining but improving our customer service experience, as I just described. The app has also received external recognition as the market's best mobile app redesign, as you can see from the logo on the slide. Now the importance of this goes well beyond completing just a technology build and migration. This new app is one of the most important deliverables in gateway. It gives us a single modern tech platform through which we can deepen customer engagement, increase self-service, launch new functionality more quickly and therefore, reduce our cost to serve. This will help us build the operating leverage needed to reduce our cost-income ratio over time. Finally, we continue to evolve and scale our use of AI across customer service, analytics, decisioning and colleague productivity. Another milestone was when our first customer-facing agent went live in June, helping us to improve customer outcomes, make faster and more consistent decisions and operate more efficiently. Taken together, everything on this slide demonstrates that we are translating our strategic goals into tangible operational delivery, broadening our propositions, improving our customer experience and leveraging technology to build the modern, scalable infrastructure needed to support sustainable growth and stronger returns. Now everything I've described so far provides an important foundation for the future success of this business. We are continuing to make progress. However, we have had to adapt to 2 emerging headwinds as we begin to see the impact of increasing economic uncertainty emerge, particularly during the second quarter. The first of these was lower-than-expected utilization by existing credit card customers. And secondly, an increased IFRS 9 impairment provision related to forecast U.K. unemployment. Taking each in turn, macro uncertainty has led to more cautious customer behavior with spending lower than we had anticipated. Customers are still increasing spending, just not by as much as we had originally planned. And to illustrate this, our spend per active customer has increased by 10% year-on-year, but the initiatives we had launched to support this carried an expectation of more than a 15% uplift. We do know though that on the same basis, spending among relevant competitors actually declined by 1% over the same period. So our customers are spending more on our cards, and we are outperforming the market just not by as much as we had originally planned for. This resulted in credit card income in the first half being around GBP 7 million lower than we had expected. So we are taking actions to address that, as you would expect. The second headwind I referenced was the additional impairment provision taken to reflect a forecast increase in U.K. unemployment. As you all know, IFRS 9 requires us to recognize potential impairment using forward-looking assumptions. We, therefore, have increased our provision by GBP 8.5 million. The provision was based on the latest forecast published at the end of June, which assumed that U.K. unemployment would rise to a peak of 5.7% from a forecast peak of 5.1% at the start of the year. Together, these 2 factors reduced our first half profitability by approximately GBP 15 million relative to our expectations. However, credit card balances did increase by 2% during the half to GBP 1.55 billion, but this growth was driven more by new customers, including 30% balance transfers and other promotional products, where balances are initially lower yielding than those of existing customers. And this change in mix shows in the reduction in asset yield from 26.5% in the second half of last year to 25.5% in the first half of this year. In total, new customer balances added GBP 127 million, but partially offset by a GBP 98 million or 6% reduction in balances held by our existing customers. So the benefits from our back book stimulation initiatives, including price draws and Vanquis Rewards cash back helped to mitigate but did not fully offset the lower utilization by existing customers. Then when we look at our other product lines, vehicle finance balances were in line with our expectations and second charge mortgages continued to deliver strong growth, as you can see on the slide. I will provide some more product detail in a moment because this is important, but our overall message is that balance growth has remained resilient across the group, though mix is moving. The 2 headwinds were therefore clear, lower-than-expected balances amongst higher-yielding existing credit card customers and the additional macroeconomic impairment provision for unemployment. We are obviously keeping these under very close review, and we'll update on any further changes. Let me now take you through that further product detail that I mentioned to show why we remain confident in our outlook. And you can see the credit card detail on Slide 7. The point at which new lending begins to contribute to earnings is central to understanding our medium-term outlook for cards. Back in 2024, credit card balances reduced by 10% as we restructured the business, meaning there are fewer balances reaching maturity and then contributing to profitability in 2026 and beyond than would ordinarily be the case. In contrast, in 2025, we grew credit card balances by 19% and the income contribution from that 2025 growth builds over time. As balance transfers mature and promotional periods end, customers move on to representative APRs, driving our interest-earning balances, and this is all progressing in line with our expectations. As a result, the '25 front book is expected to make a meaningful contribution to profitability from 2027. We intend to grow balances through the second half of this year at a similar rate to the second half of 2025, primarily through new customer acquisition. We then plan to deliver a similar full year rate of balance growth through 2027. We continue to price appropriately for risk and in line with consumer duty. You can see on this slide how these balances translate into profitability through the cumulative profit before tax generated by a typical credit builder customer and a typical balance transfer customer. And new credit builder customers typically become profitable after around 3.5 years, whereas balance transfer customers become profitable in under 2 years once the promotional period has ended. In both cases, profitability then continues to build as the relationship develops. The chart on the right demonstrates the same effect across the portfolio. Newer vintages initially have lower asset yields, but those yields then improve progressively. We're planning on the basis that the more cautious spending behavior that we've seen in the second quarter of this year continues. We will, therefore, focus on acquiring more new customers and building sustainable returns as those balances become interest-earning over time. And this gives us confidence that the customer growth delivered since 2025 will make a more meaningful contribution to our profitability from 2027. If I move to Slide 8 and Vehicle Finance, this product was profitable in the first half and performed in line with our expectations. Our priority during 2026, as I've said before, is to complete the build of the new onboarding and servicing technology platform for vehicle finance. We will maintain profitable lending in the meantime and balances remain broadly stable as planned at GBP 707 million as of the end of June. As previously guided, we will increase balance growth in vehicle finance from 2027, supported by the new tech platform. And that platform will provide better connectivity with our broker network, enhanced underwriting and pricing and faster service for brokers and customers. And these improvements will support higher profitability from 2027. As the slide shows, vehicle finance customers become profitable relatively quickly, meaning that the growth we expect to originate from 2027 will begin contributing to earnings within the first year. If I turn to second charge mortgages on Slide 9. This business continued to deliver strong growth. Balances increased by 34% during the first half, reaching GBP 800 million, and this growth contributed to increased profitability. We expect balances here to continue growing at a similar rate, approximately GBP 30 million per month. While competitive pressures are resulting in some yield compression, new lending continues to exceed our ROTE hurdle and will support our further profit growth. As the chart shows, second charge mortgages contribute to profitability from the outset, making them an important driver of the group's medium-term earnings as balances continue to build. Okay. So as a result of the second quarter headwinds I've described, we have updated our financial guidance through to 2027, and you can see this on Slide 10. The guidance assumes that the more cautious spending behavior seen in the second quarter continues at those current levels and that balance growth is, therefore, increasingly driven by new customer acquisition. Doing this does moderate our returns in the near term, as I've just shown on the previous slide, but it strengthens the future earnings base as those new balances begin to contribute more income. We continue to expect gross customer interest-earning balances to exceed GBP 3.3 billion by the end of 2026 and exceed GBP 3.7 billion by the end of 2027. Reflecting that lower-than-expected credit card utilization by existing customers and the greater proportion of newly originated balances, we now expect net interest margin to be approximately 14.5% in 2026 and more than 13% in 2027. Risk-adjusted margin is also expected to exceed 8.5% in ' 26 and 8% in 2027. And it's important to note that our revised margin guidance principally reflects the product and customer mix of our growth rather than any change in underlying credit quality. The lower near-term income outlook also affects our operating leverage. We, therefore, expect the cost-to-income ratio to be in the low 50s in 2026 and the mid- to high 40s in 2027 as those recently originated balances mature and contribute more income and further transformation savings are delivered. Taken together, these factors mean that we now expect statutory return on tangible equity to be in single digits in 2026 compared with our previous expectation of low double digits. It's worth noting that the additional IFRS 9 impairment provision alone accounts for approximately 2.4 percentage points of this change in our ROTE guidance. This change also reflects the lower near-term income contribution from existing credit card customers and our increased lending to new customers to build future earnings. We did consider all of the options available to us as these headwinds emerged. Constraining new lending volumes could protect short-term profitability, but it would just weaken the future earnings base and limit our ability to deliver sustainable returns over the medium and longer term. We, therefore, rejected that option. We now expect the growing earnings contribution from the 2025 and 2026 credit card vintages, continued balance growth and further operating efficiencies to support low double-digit return on tangible equity in 2027 with mid-teens return on tangible equity now expected in 2028. On capital, our position remains strong and supports our growth plans. Dave will cover this in more detail shortly. The Board's confidence in our medium-term outlook, together with the strength of our capital position supports our intention to reestablish a modest dividend with our full year 2026 results alongside the outline of our wider capital allocation framework and distribution policy. We will, therefore, continue to grow this business while delivering the transformation benefits and operating efficiencies needed to materially improve returns in 2027 and achieve mid-teens ROTE in 2028. And that approach is designed to create stronger, more sustainable profitability and long-term shareholder value. While the timing of profitability improvement has changed as a result of the headwinds I've described, the fundamentals of our medium-term investment case remain intact, and this confidence is underpinned by the points that you can see on Slide 11. We continue to see significant growth potential in the large underserved U.K. retail market. Our plans are supported by the completion of our technology transformation, lower operating costs, increased capital capacity from 2027 and through continued delivery against our balanced growth ambitions. These strengths reinforce our confidence in the strategy and in our ability to build a higher quality, more profitable business. Our objective remains clear: to deliver better outcomes for the customers we serve and stronger, more sustainable returns for our shareholders. With that, I'll now pause and hand you over to Dave to run you through the detail of the financials. Dave?

Thank you, Ian. Let me start with a summary of the group's financial headlines for the first half of 2026 as set out on Slide 12. As Ian highlighted, we generated a profit before tax of GBP 8.9 million, up 44% year-on-year. Balances grew 8% in the 6 months to June and 24% year-on-year. Average balances grew at a similar rate, up 25% year-on-year. However, the mix of this balance growth in credit cards and in lower risk, low-margin second charge mortgages has reduced net interest margin to 15%. Impairment charges increased 35% year-on-year, driven by the growth in balances and the GBP 8.5 million increase in the IFRS 9 provision for macroeconomic uncertainty. Despite this, impairment charges reduced 2% when compared to the second half of last year, reflecting the stable credit quality of our portfolio. Operating costs decreased 8% year-on-year, generating 16% positive cost-to-income jaws and reducing the cost-to-income ratio by 9.4 percentage points to 53.1%. This delivered a ROTE of 2.5%. Slide 14 summarizes the drivers of our growth in gross customer interest-earning balances, which reached over GBP 3 billion at the end of June. Ian went through the drivers of the balance movements by product earlier, so I will not cover this again. Our pricing discipline ensures that all new lending hurdles our mid-teens ROTE target. However, the mix of growth has been a meaningful impact on NIM, as can be seen on Slide 15. 1.4% of the group NIM reduction was driven by product mix. Second charge mortgages grew from 13% of average balances in 1 half '25 to 24% of average balances in 1 half '26, contributing a lower asset yield of 6.8%. At the same time, the proportion of credit card and vehicle finance average balances reduced 3% and 8%, respectively. This has a dilutive effect on NIM given their asset yields of 25.5% and 17.4%, respectively, in 1 half '26. 1.2% of the group NIM reduction was driven by asset yield. Credit card asset yield reduced 2.3% to 25.5% as growth was skewed towards initially lower-yielding new business, coupled with a reduction in higher-yielding existing customer balances for the reasons described earlier. Second charge mortgages yield reduced 0.8% to 6.8%, reflecting pricing pressure from increased competition. Conversely, vehicle finance asset yield increased 0.5% to 17.4%, driven by repricing initiatives. The combined credit card and vehicle finance NIM remained strong at 18.9%. Slide 16 summarizes the impairment charge, which increased 35% year-on-year. However, the charge reduced 2% half-on-half despite an 8% growth in balances. Group gross charge-offs increased 12%. And within this, credit card gross charge-offs increased 17%. This was in line with expectations given the increase in average balances year-on-year and the maturity of new customer business written in 2025. Importantly, the credit card gross charge-off rate remained stable at 13.7%. This is a key performance indicator, which we monitor in our credit cards business. This increase in gross charge-offs was partially offset by a small reduction in IFRS 9 modeled impairment. In summary, the underlying credit quality of our portfolio remains stable with a group cost of risk of 7%. As shown on Slide 17, total operating costs reduced 8% year-on-year, driven by the GBP 11.5 million reduction in complaint costs. This reduction reflects the positive impact of the funds commencing charging CMCs to submit claims from the 1st of April 2025. Transformation cost savings of GBP 7.8 million has facilitated additional investment for growth in the business and has helped to offset inflation. This investment includes expanded use of AI across the business. This will be a key part of continuous IT improvement once the Gateway program concludes later this year. This investment will pay back in increased transformation savings, which we now expect to be GBP 30 million to GBP 35 million out to 2028 compared to the previous guidance of GBP 23 million to GBP 28 million out to 2027. Investment in credit card and credit risk expertise drove a 2% increase in headcount. Slide 18 summarizes the segmental performance of the group by product. The key message here is that all 3 lending products were profitable in the first half with improving operational efficiency. Let me now touch upon the performance of each of the lending products in turn, starting with credit cards on Slide 19. The business delivered a profit before tax of GBP 12.8 million, marginally up year-on-year. This was driven by the 18% increase in average gross customer interest-earning balances, which more than offset the decrease in asset yield and NIM that we've already talked about. A further increase in 0% balance transfer and promotional products to 17% of the portfolio, driven by the new customer growth, reduced the weighted average APR from 35.5% in June 2025 to 32.8% in June 2026. The cost of risk was 11% in the first half at the lower end of the guided range despite the majority of the increased macroeconomic impairment provision being attributed to credit cards. Slide 20 covers vehicle finance. While balances remained stable, repricing initiatives improved the weighted average APR by 20 basis points to 29.3%. The 5.1% cost of risk was at the lower end of the guided range. The cost-income ratio improved 12 percentage points to 59%. However, the operational efficiency of the business still needs to improve. This will be delivered by both income growth and cost efficiency once we are using the new platform across our broker network in 2027. This will enable us to build both scale and to automate processes. As you can see on Slide 21, and as Ian has mentioned, second charge mortgages continued their strong growth with profit before tax increasing to GBP 7.1 million. The cost of risk remained low at 0.2% with only one customer having defaulted in the last 2 years. Our portfolio has a weighted average loan-to-value of the combined first and second charge mortgages in the low 70s. This underpins our confidence in guiding to a cost of risk below 1%. In addition, as the product is secured, the growth is capital efficient as it attracts a lower risk weighting than credit cards and vehicle finance. Liquidity and funding remain a core strength, as shown on Slide 22. High-quality liquid assets increased 22% in the first half to over GBP 1.2 billion. This was driven by our first credit card asset-backed security public issuance in June. We've also been more proactive in the investment of our HQLA with 34% now invested in higher returning assets, including U.K. gilts, T-bills and other sovereign equivalent instruments. The liquidity coverage ratio reduced to 221%, well above the 100% regulatory minimum. This reduction was driven by upcoming fixed-term savings maturities and increased ISA balances. Total funding increased 32% year-on-year and 13% in the first half, reflecting the increased funding requirement for higher lending balances. The increase in retail deposits, which represents circa 84% of the group's funding was driven by the growth in ISAs as we broadened the product range. ISAs are generally sticky balances, which now account for over GBP 1 billion of the nearly GBP 3.2 billion of retail deposits that we now hold. Average deposit rates reduced year-on-year. However, given the increase in swap rates in recent months, we would expect industry deposit pricing to increase, creating a potential headwind for our future funding costs. We have factored this into our updated guidance. We continue to deploy capital for growth as set out on Slide 23. As expected, the group's CET1 capital ratio reduced by 90 basis points to 15.6% in the first half and 9% growth in net receivables translated to GBP 108 million of RWA growth, accounting for 80 basis points of the ratio's reduction. Continued investment in the technology transformation of the business by Gateway drove increased intangible spend, which also consumes capital. This was partially offset by the GBP 4.4 million of statutory profit. The group continues to maintain significant surplus CET1 capital, currently GBP 93 million, above the 11.3% disclosed regulatory minimum. We further optimized our capital stack in 2Q '26 as set out on Slide 24. We tendered GBP 100 million of outstanding Tier 2 capital while concurrently issuing an equivalent amount via new issuance at tighter spreads. This transaction had no impact on the total capital ratio. However, we have an additional GBP 41.5 million of the original Tier 2 instrument, which is not effective for capital purposes based on our current business plans. This is subject to call in October of this year, which if called will reduce the total capital ratio by 1.9%. Importantly, we have surplus capital at each of the CET1, Tier 1 and total capital levels to deliver our growth plans. As you will be aware, the group will be subject to a new regulatory capital framework in the start of next year when the Basel 3.1 rules come into effect and the group adopts the small domestic deposit takers or SDDT regime. The impacts of this regulatory change are set out on Slide 25. Under Basel 3.1, we expect RWA to increase by around 15%. This is driven by a 10% risk weighted on undrawn credit card balances and an increased risk weight on higher loan-to-value second charge mortgages. There is also a new calculation method for operational risk that drives RWA inflation. Importantly, these regulatory changes also drive lower CET1 ratio requirements with the disclosed requirement reducing from 11.3% to 9.9% on a pro forma basis. These are transitional capital requirements. A formal C-SREP review of our final capital requirements is expected in 2027. However, given the clarity now provided by the PRA, the Board are confident to reduce the target CET1 ratio from greater than 14.5% to greater than 12% from the start of 2027. This effectively creates GBP 15 million of additional CET1 capital to support our balanced growth plans. Slide 26 provides further detail on the updated financial guidance that Ian summarized earlier. We remain confident in our balanced growth guidance and all our products are expected to grow by the end of next year with the proportion of second charge mortgages continue to increase. As previously guided, the continued mix shift towards this lower risk, lower-margin products is a key driver of our reducing net interest margin guidance. However, the main reason for the revision downwards from the previous NIM guidance is the source of growth in credit cards. We are now assuming that this growth continues to be driven by the initially lower-yielding new customer business rather than higher-yielding back book growth. This dynamic also drives the reduction in our risk-adjusted margin expectations. Note that our cost of risk guidance for all 3 lending products, which underpins our risk-adjusted margin guidance remains unchanged. As a result of the reduced income expectation from the lower NIM, we have marginally increased our cost-income ratio guidance. Note that this reducing trend will be driven by both higher income and lower costs with the expectation that year-on-year costs will be lower in each of 2026 and 2027. Finally, before handing you back to Ian, Slide 27 lays out an illustrative updated statutory ROTE bridge for 2026 and 2027. The reduced income expectation in both years is driven by the lower-than-expected credit card utilization by higher-yielding existing customers. This drives some offsetting reduction in impairment on back book credit card customers. However, in 2026, this is expected to be broadly offset by the increase in the IFRS 9 impairment provision. The income growth next year, although lower than originally expected, will be driven by maturing new credit card customer balances alongside continued growth in second charge mortgages and vehicle finance, which has a faster profitability payback. With that, I'll hand you back to Ian.

Thanks, Dave. So look, to conclude, we demonstrated continued progress in the first half, though more cautious credit card spending than planned for and the additional IFRS 9 provision and unemployment has affected our near-term performance and outlook. We're having to adapt to these headwinds, but must not lose sight of the progress being made. Our profitability is increasing. Our first half PBT exceeding the profit delivered for the whole of 2025. We grew balances by 8% during the half. We maintained stable credit quality across the portfolio. Our net interest margin and risk-adjusted margin reflect the changing mix of growth in second charge mortgages and credit cards. And we maintained a clear focus on cost discipline, delivering transformation savings while continuing to invest in the business and to complete the Gateway technology transformation. And as David just said, our capital funding and liquidity position also remains strong, providing capacity to support growth. The headwinds we've described today will slow returns in the near term, assuming that they persist. But we've made an active decision to drive more new credit card lending to compensate, and this will contribute more to income over time. Together with continued balance growth and further efficiency benefits, this gives us confidence in a material improvement in profitability from 2027. That confidence, together with our strong capital position supports the Board's intention to reestablish a modest dividend with our full year 2026 results, assuming no further significant changes in the U.K. economy. In the meantime, we remain focused on delivering our strategy, serving more customers and building a more efficient and sustainably profitable Vanquis. Thank you. We'll now be happy to take your questions.

[Operator Instructions] We have a question from Abid Hussain from Panmure Liberum.

I've got 3 questions, if I can, please. The first one is on card utilization. It's down in the second quarter. Can you help me, can you separate how much is macro versus customer migrating or something else? And what's the signal you're watching for a recovery in spend. Or have I got that wrong. Do you not need that spend to come through to meet your new guidance? So that's the first question. And then the second one is on the mid-teens 2028 ROTE. What's the split between the new card vintage seasoning cost income ratio improvement and second charge mortgages scaling? Which of those has the widest range of outcomes or put another way, where do you have the most control? And then the final question is on Basel 3.1. It looks like we have some GBP 15 billion of surplus. Where does that get deployed first?

Thank you for those 3. I'll take the first one and then, Dave, we can come to you, and then I'll take the second and maybe you can comment on the third one about Basel 3.1 in particular. But -- so look, there's a mix of factors at play here, Abid, as we just said in the presentation. So we are definitely seeing -- while the card spend of existing customers is increasing, it's not increasing as much as we had originally planned, right? I said that a couple of minutes ago. But it is increasing, and it is increasing more than our competitors. So we are watching that very carefully, which kind of links to your second question about what are the triggers. But what we can't do is rely on that miraculously bouncing back. That wouldn't be a sensible way to plan. So what you've seen us do, which these things happen in any business, it doesn't always go the way you exactly plan at the outset. So we are reacting. We are -- we've worked out what we think the best way to drive growth that we can control, which is based on our confidence of the 19% cards growth that we delivered in 2025. So we're going back to that. Now we have the capital clarity for the rest of this year and into 2027. And we firmly believe that is within our control. As I said, we did it last year. There's no reason we shouldn't be able to do it this year. So I think that is really important. Dave, do you want to add anything on that?

No.

Okay. And then to your second question on the mid-teens ROTE 2028. Look, there are 3 asset lines at play here. And we've always said we try to resist locking ourselves into we expect X on this, Y on that and Z on that. We deploy our capital where we see the best opportunity for return, and we'll continue to do that. But second charge mortgages is performing very consistently and steadily. And as I said in the slides, it pays back very quickly, but at a lower rate. So we'd expect that to be a bit of an underpin for the business going forward. The vehicle finance, you didn't ask about, but I'll add in anyway. From 2027, we believe we can much more efficiently grow that as we get the new operating platform in place that I've talked about at length. So we're feeling good about that. And then on the cards, again, where it contributes is that 2025 increased book growth seasons and matures from 2027 onwards in terms of delivering profitability. So all 3 products actually come into play 2027 onwards, which gives us the confidence for 2028 and beyond. So I'll maybe pause there. David, anything you want to add to those first 2?

Just on the ROTE point, as we've already said out in the presentation, we can control costs more than anything else. So we said that costs will be lower in '26 and '25 and in '27 will be lower than '26. So we should expect a degree of trajectory on the same lines on that, which should help the ROTE out in 2028. Moving on to the Basel 3.1. Look, first of all, it's positive we got clarity on what our requirements are going to be from the 1st of January 2027. And it's also positive to see that we have about GBP 15 million more capital to deploy into assets for growth in the future. So where we deploy that exactly as I said, where the best returning product is from a capital perspective. And we're very comfortable that we can deploy that in new customer growth in credit cards.

The next question is from Gary Greenwood from Shore Capital.

Can you hear me okay?

We can.

I've got 3 questions, if I can. So the first was, I recall you saying that all of your new lending achieved your 15% return on tangible equity target. Your credit cards certainly for new customers take sort of 2 or 3 years before they turn profitable. So when you're talking about that 15% new lending, is that more like an IRR or a return at maturity because presumably they sort of return negative sort of on day 1. That was the first question. Second, just on vehicle finance. I think previously sort of indicated the balances would start growing again in the second half of this year. I think you're now signaling that will be 2027. So a slight delay to expectation there? And then lastly, I think in your -- pretty much your opening remarks, you talked about potential to start an installment credit offering. So if you could just talk a little bit about what you're thinking about doing there given that credit business, installment credit has not been a great hunting ground for the group in the past

Super. Thank you, Gary. Let me take the first one then. So in fact, David, I might just come to you on this. The new lending and ROTE. I think Gary's question -- sorry, you were slightly muffled, Gary, was just for everyone, is the ROTE hurdling at outset or when the product matures post 2 years?

Thanks for the question, Gary. It's basically the lifetime of the product.

That's one of Dave's [ distinct ] answer.

I hope that's quite clear. So literally, you look at marginal capital deployment, what's your return on that from there for that product lifetime. We know the average life of a vehicle finance transaction is between 30 months and 36 months, and we do that return on that basis. So that clears the hurdle. I hope that's clear.

And Gary, then on your vehicle finance question, I mean this is one to watch at the minute. We are really focused on getting the new platform out because this product has still got roughly a 70% cost-income ratio in it, which is too high. So we are thoughtful and careful about not putting too much new business through that because it is inefficient compared to where we know we can get it to. We'd rather hold back on the growth until the new platform is in place. That said, we do see opportunity in that market. So we are in discussions with the teams right now as to, well, what does that look like for the second half of the year and how do we best calibrate that for not writing lots of volume, but at expensive underlying cost to do so versus there is opportunity. And you've seen we've squeezed our pricing up a little bit in that product line. And I think that's very indicative of the way we're thinking about it. If we can get the top line to move up a little bit, then that kind of covers the higher cost to serve or cost to implement that we're currently sort of stuck with on the current platform. So I think one to watch. But again, Dave, anything you want to add on that?

I mean just a couple of points to raise on that one, Ian. Last year, you saw the volume, the receivables come down in vehicle finance. What you've seen in the first half of this year to maintain the same level and the operating efficiency associated with that has improved. So we are doing the best we can to deliver the vehicle finance lending with improved efficiency.

Yes. Okay. And then, Gary, to your third question, and look, you've got as much history with this business as anyone and more than I do. Installment lending, I mentioned in my remarks a couple of minutes ago, we do see an opportunity and a demand in our customer base for this kind of thing. It's primarily being fulfilled by Buy Now, Pay Later. Obviously, the regulation is changing on that, and therefore, we are almost reacting to customer demand, but in cards, not as a stand-alone product. So we're looking at installment options in the cards line rather than something brand new as a product line that, as you said, may trigger some memories and some fears in people. So just to reassure on that. But again, David, anything you want to add on that one?

I need to add that is continue to meet the needs of our customer.

So would that be used more for customers that are sort of finding the environment a bit more challenging and therefore, an installment product may be a better option in terms of sort of managing their exposure? Or would it be for all customers?