Conference Transcript - LYG 2026-09-22

Pearlie Maung, Analyst — Bank of America

Good morning. I am Pearlie Maung, the lead UK and Irish banks analyst here at Bank of America. It is my pleasure to welcome Charlie Nunn, CEO of Lloyds Banking Group, on stage with me today. Charlie, thank you very much for coming.

Charlie Nunn, CEO

Thanks for having me again.

Pearlie Maung, Analyst — Bank of America

So, Charlie, why don't we start with the UK backdrop to set the scene? There continues to be some challenges in the UK macro backdrop, but households and businesses have been pretty resilient so far.

Charlie Nunn, CEO

So, can you describe what you are seeing and what gives you confidence in the medium-term outlook? and with a budget coming up in the next few weeks to the extent you can can you comment on the new government's agenda and priorities and what they mean for the sector good well first of all thank you for having me and it's great to be here with everyone we were just commenting before I started this time of year seems to be the moment when we're waiting for a new budget it's my fifth Prime Minister in five years my sixth Chancellor and my seventh economic secretary so it does feel like a good time of year to have this discussion um look the underlying economy you know despite those last five years um when i look at the underlying economy when we look at the kind of 25 share of the whole of the economy that we can see running through lloyd's banking group the story remains incredibly similar we see households and businesses are very resilient they've had now three or four years of real wage growth businesses probably for not such good reasons have strong or stable cash flows and they're not such good reasons is they've slowed down investment but their resilience is very very strong and as we have talked about it our outlook for the economy has been consistent now for a few years which is what we call a resilient but slower growth economy and there is the potential to move to a higher growth trajectory if you could re-establish confidence and if we had a policy framework that was encouraging investment and at this moment over the summer we've seen both investor and business confidence slightly strengthen and we're seeing very resilient underlying performance and behaviors by the way uh you know discretionary spending big ticket items the mortgage market we sure will i'm sure we'll talk about remains very resilient but our outlook for the economy is one to two percent real gdp growth over the next few years and so some recovery some increase in investment very resilient but our baseline isn't for a faster growing economy and i'm sure we'll talk about the strategy but you know despite that we still see significant growth opportunities for lloyd's banking group great it's always good to hear a more reassuring

Pearlie Maung, Analyst — Bank of America

take on the uk in the meantime the strategy you have given us our your new strategic plan out to 2030 at the half year you were guiding to circa 20% roti in 2030 without fully marking to market the current rate environment and there are probably other areas where you have maybe applied some conservative assumptions so if I invite you to lean away from that for a second what excites you the most about accelerate 2030 and if everything goes right what can it look like great well if my CFO were here he'd warned me about guiding to different guidance so I'm not let me tell you what we're excited by obviously the first thing is we've kind of completed our first chapter which was the first four and a half five years and you know the key themes there were

Charlie Nunn, CEO

de-risking and solving the legacy getting the group back to growth and winning market share in strategic areas and materially lifting through cost efficiency and that revenue growth the capital generation and sustainability of that capital generation for us our shareholders and that's really important because it gives us momentum and the capacity to continue to invest as we look forward when we look at what we're excited by going forward the first thing is we've proven that we can grow our market share in the really big businesses despite a very competitive market but that's an ever-rising bar so we're going to continue to invest and make sure we are the leader in all of the big retail and sme segments and in the key businesses that we've chosen we've chosen we want to be in so that's the the first and most important objective or bigger objective of the strategy the second thing is we have this unique franchise or set of businesses where although we're the leader across most uk businesses in in commercial and retail banking and in parts of wealth and other businesses we'll talk about what we really focus on is being more joined up more connected and having a differentiated proposition and we've shown a significant growth in specific businesses in the last five years and when we look to the next five years there's a massive opportunity for us to use our capabilities the new technologies to join up even better for our customers and drive that deepening of our relationships with our customers and then probably the third thing is we've talked about and we're committed to some new businesses some new areas where we see strategic potential and future growth in the last phase for example we launched a new rental property business that got to about a hundred ten thousand properties a very significant part of our OI growth or a material part of it and we see other new businesses specifically what we call connected commerce which is using data to join up between our SME customers and our retail customers some of the payments and wallets businesses we're launching which we think is exciting digital assets and then how we can use agentic AI to bring intelligence or advice to all of our SME and retail customers which we just see as a huge opportunity looking forward now you said conservatism so i'm not going to avoid that you know what you'll see from us always is we'll be back be ambitious on the things we can control and we'll be realistic i think about the things that we can't control and there's two or three parts to that in the plan um we have talked about in this next phase mid-single revenue growth for the next four years that would be a decade of mid-single decade revenue growth we would have delivered and high single digit other operating income growth we've just come off five years of eight percent kager on other operating growth so those two things are ambitious we've had questions though as to why our nii isn't higher in that and that's linked to two things really the first is we've just assumed that our terminal rate that we think is in our forecast which is 3.5 percent will be the baseline for our reinvestment of the structural hedge um you know that means it's a weighted uh reinvestment return of about 3.7 percent if you use today's market curves you would get a much higher number on the structural hedge about 250 billion pounds worth of deposits being reinvested at that level and then the second thing is we've seen elevated competition in deposits and assets liability pricing in the last period of time we have assumed the market remains rational but doesn't but stays stable and that those margins remain tight through the back end of this period so I think those two things if you want to take a different view on those that could give you more upside in the plan and then maybe the final thing we can't control is the pace of adoption of AI either by our customers or our regulators and so we for example have committed to a less than 45 percent cost income ratio by 2030 if AI gets adopted more quickly the regulators really support it we're right at the front of all of the use cases that are being adopted in the UK so we'll push that faster but we're comfortable we can deliver that the guidance which which shows a very significant step up in capital generation and sustainability of it but there's some upside for those

Pearlie Maung, Analyst — Bank of America

that want to make those assumptions great very exciting prospects indeed and I'll come back to AI later now that we've talked about the medium term I'm going to bring the conversation to the nearer term and ask you a couple of questions on recent market trends so on mortgages what are you seeing in terms of demand and mortgages probably had some pull forward of activities in the first half of the year and what does the front-end application volume look like yes a mortgage market's been remarkably resilient obviously with most people are still buying two or five year fixed mortgages so they have been impacted materially by the change in the yield curve or the swap curves which is the primary basis for pricing but despite that we've seen volumes stable year on year slightly down year on year but really

Charlie Nunn, CEO

quite resilient in the current context and market most biased towards first-time buyers and obviously remortgages but it's been remarkably stable in terms of margins I think Williams now guided for 18 months that margins have been about 70 basis points on the mortgage market it differs by part of the market you're participating in it came down a bit through the back end of next last year and it's strengthened a bit in the last couple of quarters as we've seen deposit pricing be very competitive you typically as you'd obviously expect to see it come out somewhere in the in the mix between assets and liabilities and and mortgages has been slightly more stable in that context um so it's been a healthy market uh last year we grew our assets by 22 billion pounds you know which is a very significant organic growth because we saw both opportunities on the asset and liability side at margins that make sense this year the trading has been tighter margins on both um and on mortgages we've been slightly more selective but um so i think again we've guided towards having slower growth than last year but still strong growth in our asset businesses but it's been remarkably resilient well that's great staying on the topic of mortgages I might take the opportunity to ask about the progress you're making to on the direct to customer proposition your direct application makes this 4% higher than the market how much higher do you think it can go and what are the economics there yeah so this is really important for us as you say actually for the whole mortgage market in the UK about 85% is broker-led and that's great for customers that want to shop the market but of course it means higher cost for you know our customers and higher cost for our shareholders in terms of paying a broker to provide that service and it makes it harder and more timely for people to engage with the market we're about 20 percent of applications we're actually about 24 percent of completions are coming through our own broker channels our own advisors and that's great because it can be a very very quick very turnkey experience for our customers because we know the customers we can offer great deals so for example premier customers get a 20 basis point discount it's one of the ways we've taken our share of kind of mass affluent mortgages from below 10% when I started to north of 22% by offering value by joining up the relationship with our customers and of course we can then also be even simpler for our customers in bringing a broader set of products and so again we've increased the cross-sell of home insurance and life insurance life insurance in this context i'll give you the data has gone from about seven percent cross-sell to north of twenty percent so um those things are easier more joined up and better value for our customers for our direct channel but we obviously massively value the broker channel and we continue to be number one in that channel as well when you look to the future how far could it go look we'll see um again you can't predict always how customers and competitors are going to respond but when we look at the ability to provide really seamless quick mortgages for customers at a price point which recognizes the value we see more opportunity uh to grow that but i think the broker channel plays an important role and will continue to be important in this next phase one more thought because i don't want to jump everything to ai but um when you really start to reimagine the future and of course we're at the front of all of these businesses the role of ai in an advice journey around homes and mortgages is going to be fundamental and then digital assets will start to be used to create tokenized mortgages and totally streamline the mortgage process and so maybe not in the next few years but certainly as we prepare into the next decade being ready for those two things i think gives us significant opportunities to grow further Thank you.

Pearlie Maung, Analyst — Bank of America

And then on the other side of the balance sheet, we've mentioned deposit competition a couple of times now, so we'll actually jump into the topic. Deposit is always competitive in the UK, but it does feel like it has increased further this year. What do you think is driving that competition, and how are you differentiating your proposition, and how are you balancing pricing discipline and customer relationships?

Charlie Nunn, CEO

Great. So this is, again, something we've been talking about for probably 18 months um and we saw last summer specifically the pricing in the deposit market harden and then just to reinforce your question uh in the isa and tax season this year so in q1 q2 we saw most of the time deposit market price at minus 50 to 80 basis points gross margins so william will have talked about it at the q1 results we decided explicitly to slow down our participation in time deposits other than where it was really important from a relationship perspective but it's been an interesting uh you know 12 and i think it will carry on 18 months around the deposit markets um as you say that's not new for the uk i i remember the the icelandic banks pre the financial crisis being the primary source of competition in time deposits the uk's always been an incredibly competitive market at different points in the cycle and that's no different today what's causing it and then what are we doing about it let me just answer those two questions what's causing causing it is is what you'd normally expect from a macro perspective which is the growth in the money supply slowed down you know a real wage growth is slightly slowed down the central bank is reducing the money supply both through quantitative tightening and they've reduced their liquidity into the market through a program called tfsme so they've pulled back on on that which obviously makes a difference and then you've got a whole series of competitors who can see asset growth but don't have strong stable liabilities or funding that are pricing at very aggressive prices you know aggressivizing below net negative net gross margins not net margins who are pricing aggressively to try and attract liquidity and so those three dynamics are hitting at a point in the cycle where asset growth is still quite a big opportunity and what are we doing about it look first of all we're very very clear on where lloyd's banking group adds value and how we build sustainable capital generation personal current accounts and business current accounts are obviously the most valuable from a relationship perspective and a shareholder perspective deposits we've actually grown our market share in both of those businesses in the last few years which is something you know we very proud of because most people would recognize the growth in fintechs the level of incentive payments that are being made the growth of building societies paying for business most people would think that the biggest player might be having trouble in that context actually we've grown our market share and that's really important as i say it's important because that's still in this market the heart of the relationship for customers where you can then bring broader products and value to them but it's also the most valuable set of deposits for our structural hedge which as you know is longer dated and we think is positioned better for through cycle returns for our shareholders when rates are going up we'll be slower to get there but when rates come down we'll be able to be able to continue to invest for our customers and for our business so that's the first thing that's important the second then is innovating around the product sect especially for the majority of customers around who need still are trading liquidity with interest rates we get very excited and probably most people in this room are shopping the time deposit market but 80 percent of people in the country have less than five thousand pounds of savings 60 percent have less than a thousand pounds so you know one percent and a thousand pounds is ten pounds a year and i can do the math but it just isn't going to move behavior right so really making sure that the liquidity and investment options are competitive for the majority which is where you have really stable businesses and the same on the sme side is important and then the final thing is actually trading time deposits smartly and you know we operated a 98% loans deposit ratio we could go further if we wanted to but we're very very aware and I know you've heard me say this before in any week or month or quarter or even year we're not going to chase market share as the market leader on either the asset or liability side otherwise you can write quite a lot of business which is negative return for our shareholders and so if you just put that in the context of the last 24 months last year we saw opportunity to capture market share and time deposits and mortgages and we did that and we wrote 22 billion of assets this year we're not going to do that same level of growth on on either the liability side and i think it'll be a slightly slower asset year growth but that's the right decision for the franchise and the sustainability of lloyd's banking group and it means we'll be ready to compete when the market is in a different place that's great um let's move on to the fee income side of the business then um growth in ooi has been consistently strong in the last few years as you say and we continue to expect high single digit cager growth from here can you help us understand where that growth is coming from how much of it is selling more products to the existing customers and how much of it is expanding product sets and geographies so obviously this is hugely exciting for us we think this is um one of the key points of differentiation for lloyd's banking group and obviously the context is the uk has relatively low other operating income as a percentage of total income and that's a consequence of the financial crisis and regulation bluntly if you think about it and the backdrop for our commitment around this was we knew regulators and the uk economy had realized that customer outcomes on the back of punitive sales practices punitive approaches to fees and growing other those other businesses and then capital regimes encouraged the banks to sell all these businesses had resulted in a bad place bluntly now in the last cycle as you say we grew these businesses at eight percent kega this year we're already 11 percent up year on year partly because of the acquisition of the schroeder's personal wealth and the build out of our wealth business by the way that acquisition cost our shareholders nothing we were really pleased with that deal and gave us good capability so we're seeing good momentum in those businesses and as you say we think we can continue to grow them at that kind of high single digit rate we've gone from about 30 percent share of our income that was other operating income to about 34 35 percent we were going to guide towards a number but i think it's a hard one to guide towards because it depends on the other side of the revenue stream i.e. NII but you know we're heading towards 40 percent through this strategic plan whether we get there or not or whether we get past it will depend on a whole bunch of things we don't control and i think that's a much healthier place for an organization to be because you know through cycle returns and then the profitability of these businesses is really important to be able to give that consistency of returns and capital generation so how are we doing it we're doing it through um two themes i think are important the first is a very diversified set of businesses so from transport finance through payments businesses through workplace pensions and life protection through our rates and fx and corporate institutional businesses working capital all the way through to lloyd's development capital which is an equity investment business and our professional management rental property portfolio that we've grown from zero to ten thousand homes it's a very diversified set of businesses and that's important for the obvious point but we have lived this in the last five years in any one quarter one of those businesses you know will underperform or outperform on average you can start to deliver that kind of sustainable growth level and even though we are a UK centered organization we have by far the broadest range of products and most diversified set of products and so that's the first thing and of course all of the businesses we have connect or join up across the bank so we sell our transport finance business to our retail customers and our smes and corporate institutional customers our workplace pension customers are sold both ways into our corporate franchise and then we can target the underlying employees with other propositions and services from our retail bank i won't go through every example but every single one of these businesses benefits from the scale of the franchise and going forward the scale and value of data and technology and AI the second way of thinking about it is there's kind of three quite different types of businesses in there there are businesses which are a bit more like banking based businesses which are more predictable so transport finance is basically like a lending business with a three and a half to four year year duration asset and the workplace pensions business we actually book a lot of the value upfront as a liability on balance sheet the CSM and then it predictably rolls off so the nice thing about those businesses is they're much more predictable predictable much more stable we then have a set of businesses which are more transactional but we are focused on growing market share and we've done that successfully whether that's home insurance life protection parts of the transport piece is business which aren't financing businesses or in fact our rates and FX and DCM businesses underpinning our corporate and institutional businesses we're showing we can get market share gains and grow those businesses and they are therefore really about showing differentiation and growth which will enable us to grow faster than our market and faster than the economy and then the final thing is innovation and we've got some really exciting things especially in the connected commerce digital assets wallet space which no one else is going to be doing and which we think could give upside and the range we gave for our 2030 targets was kind of um upper single digit growth or high single digit growth if we deliver the innovation and it adds value we'll be at the top end of that range if we don't we'll be more in the mid end middle of that range but um that's where we're seeing the growth and the portfolio of businesses and at the heart of it if you haven't got scale you don't have the data and the digital assets we have and you can't join up in it from a cultural and a technology perspective with the breadth of products you won't be able to compete with us.

Pearlie Maung, Analyst — Bank of America

That's great and I'm glad you mentioned innovation because clearly the success in the here partly reflects the investment decisions you've made in the last few years right and you've said in the previous strategy cycle that you have invested four billion above your normal run rate what were those investments in and how do they support the current cycle and looking forward how are you assessing investment opportunities from here especially in relation to ai yeah i'll try and answer the question and then probably keep me honest because it's a hard question to answer in terms of detail but broadly the investments we've made historically and in the future have been in kind of three buckets things which really are around differentiating and driving growth and i know that's a simple statement to make but when

Charlie Nunn, CEO

you're winning market share and you're driving increasingly connected and digitally led services there's investments in those digital services the data the the frontline colleagues and rms to drive that growth so that's one area the second is around operating efficiency and risk management and capability to be a kind of what i call a better faster cheaper organization and as you know we delivered over two billion pounds worth of gross cost savings in the last phase we've committed to another two billion pounds worth of gross cost saves and so there's a whole series of investments in that that space and then there is finally a set of stuff more around dealing with our legacy and and ensuring we remain a resilient well-regulated business and it's harder to put those investments into hard dollars or hard sterling sorry still very us-centered um but they're really important both for ensuring the resilience and trust in the organization today but building and future-proofing some of the capabilities for tomorrow so some of the big investments we did around our data environments for example to modernize and port the data into really reusable environments even before we knew of AI a generative AI they have been foundational for our ability to then innovate and drive pace on what we're doing going forward so that's the kind of framework we run a very disciplined process as you'd expect around both ROI and then tracking benefits and returns and you should expect that from us going forward and we've kind of given you a broader number this time which is we're spending about 3 billion 13 billion over the next four years per year in that investment portfolio when we look forward the mix is similar we're still driving operating efficiencies improvements in capabilities and then driving this significant revenue growth that we talked about and as I say in some cases it will be frontline colleagues and capability to drive the extra activity at the frontline sometimes it will be around new digital services and then acquisition strategies to drive the revenue growth and sometimes it's much more traditional cost so we still have opportunities to drive customers to support support themselves through

Pearlie Maung, Analyst — Bank of America

digital engagement rather than through our colleagues to optimize our real estate and portfolio to demise legacy technologies and applications and those investments are important for the future as well well I mean I know AI is something that you're very excited about so I'm not going to miss an opportunity to ask you more about it and you've previously said that from your experience technology tends to reduce margins in banks but allow you to scale to the extent that that increase in volumes more than offset the fallen margins so where do you think we are in that cycle and are there products or areas that you are actively building scale to prepare for that eventuality yes it's such an important question I don't know if everyone we've all been looking at the financial services markets for a long time look I started

Charlie Nunn, CEO

by electronifying trading floors in the early 90s and if for those that went through that many of us will have gone through that you saw massive reduction in costs massive improvements in efficiency you know phenomenal volume growth we ended up you know deploying low latency trading by the end of the 90s and massive reductions in costs for both institutional and retail investors you know my favorite one is the start of the 90s it would cost about 200 pounds to call a stockbroker to buy an equity and by the end of the 90s Ameritrade launched their first five dollar trade and I was on the west coast building that with Ameritrade. So that's our history. That's what financial services does. At the same time, if you create differentiation and growth, that's sustainable. So when you just take out cost, typically you should expect over a period of time the efficiency will be competed away, but the differentiation and growth and scaling you can get can be sustainable. That's been my experience, whether it's in retail, corporate, SME, or institutional activity and so when we look at our the AI opportunity in front of us we have kind of got a mixed portfolio and I'll be simplistic between kind of efficiency better faster cheaper stuff which is going to be a hygiene factor and important and we are right at the front end of that in this market but also differentiating for customers and trying to drive growth and we think you need a portfolio of both things if you're going to really be positioned for the future and what's so exciting about agentic AI more than just generative AI is it's a technology that's going to enable us to do things we've wanted to do for 30 years and and but you can really make it happen in a in a controlled way if you don't in controlled way in this next period of time let me give you some examples look just on I'll talk about two just to be quick on one side both sides we've launched something called an invest AI agent which is allowing our customers to have a conversation with an agent about what is risk what is compounding how should I think about my risk appetite what an investment option options what would a financial plan look like for me today later in my life how do I think about goals the stuff that we all in this room understand but the vast majority of retail customers and even SMEs in the UK don't have an intuitive understanding of and under the new regulatory regime in the UK we're in a sandbox working with the regulator in the next month or so we're moving that to what they call targeted support that can get them through to an understanding of what they might want to do and then by next April if we can get cut the regulator comfortable with the outcomes we'll move into actual product recommendations that'll be the first time the UK's ever had mass market intelligence around investments available to retail customers so really differentiating really exciting if you've got the kind of franchise we've got with 28 million people 22 million of which are logging on 7 billion times a year with a pensions platform a self-directed platform and great simple investment products and we still have people they can talk to if they get nervous right which yeah you need to have that combination of things so that's one example you can multiply that by a big factor across all of our businesses and across the different activity we're doing but we've come up with this phrase for our vision for customers experience whether they're a sophisticated corporate or individual which is to be simpler smarter more connected and if you if you use those words and you use them and look at way financial services delivers today we're nowhere near being actually simple smart you can say for intelligence AI and then connected is properly connected across product services today tomorrow the breadth of products we have across financial services so that's an example on the kind of differentiation side I could wax lyrical on this for the next two hours on the efficiency side look it's what everyone looks at what's that what I think is really important on the efficiency side and what we've already learned in the first two three years of this is the vast majority of use cases aren't that complex they do require a use of generative AI they typically don't require frontier models and if you build to use frontier models the economics won't work but I'll give you an example we have 2,000 people helping customers who have a declined fraud card debit card on a fraud activity on the on the telephones that's a kind of 12-step process very quickly we identified 50% of the time was taken up by four steps and we could build an agent that was better at predicting what the customers issue was and whether or not it was a fraud and they could do it in less than a few seconds as opposed to five minutes so the customer got the cut resolution quicker there was a significant efficiency opportunity and the risk management is better and we built that deployed it created iterated learning and we know we can get if the regulator gets comfortable with it with those outcomes and we can prove it we could do all 12 steps but we have hundreds of journeys across the bank which are going to create that kind of better for customer experience more efficiency for the bank and actually better risk management and you need to deploy that with highly qualified engineers great product managers and a culture that empowers that level of

Pearlie Maung, Analyst — Bank of America

change and that's what we're doing so I'm really excited about the next five years I think we're all as excited as you are and I'll take the opportunity to open the floor up for questions please raise your hand if you have any questions for charlie not immediately so i'll take the opportunity to ask you more so i think william said last week that any discussion on uk macro and taxes etc should be taken um together with what's happening on the regulatory side of things um so i mean the treasury has proposed reforms to ring fencing to create a more agile and proportionate regime and the new growth allowance could enable banks to provide up to 80 billion of additional lending I know this is something that

Charlie Nunn, CEO

Lloyds Banking Group has been supportive of so how do you expect that to the benefits of those proposals to come through yeah look it's really good question I think it's if I take a step back it's a there's a kind of obviously complex moment because we have a new administration for this government and you know obviously had a chance to meet the Chancellor a few times in the last few weeks but we actually don't know what choices they're going to make on a whole series of errors including on ring fencing what he has said both privately and publicly is they recognize that growth is the most important thing to get going in this economy which is important they recognize that businesses including financial services will be the core to enabling that growth and that for businesses to drive growth they need to be more profitable that's your quotes from our Chancellor and the Treasury in that context and he said on top of that he's going to keep the existing regulatory reform process what's currently going through Parliament called the financial services markets bill and critically some of the Foz reforms which historically have been the most difficult political reforms to push through around consumer duty and he's going to keep those going forward at pace and certainly that's what we've seen so really interesting set of positions very consistent with the last administration and for that matter because I've got the history the last governments as well whether they were conservative or labor because at the heart of it that conundrum around to really build a more equitable and successful UK society we need growth and the government doesn't have the finances however it organizes its fiscal policy to drive that growth without the private sector and there's a good recognition now that financial services is at the heart of all of those choices so I think that's a very positive backdrop for us let's see what specific choices come in the next few weeks on ring fencing reform which was your specific question yes they have created this proposal to allow 10% of the assets within the ring fence to be enabled to enable new growth that would be important for us and so we're very supportive of it there's some other operating changes within ring fencing that we think would make sense as well we have the FPC review of capital going on at the moment which is independent of both the treasury and the bank of england but it does have representatives of both on the fpc and so far their proposals haven't reduced the level of capital to support real economic growth but there are some proposals on the table for that and so we'll need to see how that comes out for example um for those that do do want to go into the details of our capital stack the domestic oc buffer which we think materially overlaps with other buffers if that were offset or reduced it would get make it lower cost of equity and therefore more available funding to the real economy in the UK and obviously we that's our job we support real real real customers whether they're corporates institutions SMEs or in individuals to borrow and to invest in the economy so that's still to go out in front of us and I probably because you're going to go there is have I had any discussion around bank taxes or reserve remuneration look the answer is at this stage no proactive outreach they have been with the Chancellor three times in the last few weeks he hasn't raised it, that doesn't mean they're not going to consider it because it's always on the list as you know just tactically about three weeks before the budget is when they finalise what they're going to do, but I think importantly for us I know William shared this, for every 1% increase in a bank surcharge, if that were to happen, and I don't think it's guaranteed, let's be clear, I don't think it's clear that that's the path they're going to go down given everything I just said. But for every 1%, it would be about 75 million pounds of profit. If that were a 2-3% increase, 150-200 million, 50 basis points on our roti, none of that would change my guidance. And I don't think it would change the investments and the strategy we've got in place. And if they did a reserve remuneration change that looked a bit like the Swiss model, it would be a similar impact. so these things you know they'll be driven by the politics we're very clear that we don't think that would be the best thing for supporting the real economy but look we our focus is on delivering our strategy our shareholder proposition through cycle and building this stronger more sustainable bank that's great I'll just check for last minute questions I think there is some over towards the back thank you maybe just round out in the macro we've had a significant move up in the rate environment um how's that filtering through the customer base are you seeing any sort of attenuation of capex as i think you saw almost pointed to a little bit earlier um and then on the mortgage side yeah so um uh thank you for that look at this stage uh we're still guiding from our expectations is that um rates will be stable uh through this year and um the terminal rate will be 3.5 obviously the market's been a very different place all year we're having a discussion at the moment as to whether that is our forecast when we get to q3 but i still think you know that's not a bad starting point for now as you say specifically on mortgage customers and those looking at five-year mortgages they've seen an increase in the cost of their mortgages and they were trading it sorry they were being priced at around four and a half 4.75 at the end of last year they're now up about five and a half and some are going up to 5.9 percent we're seeing no deterioration in any of our portfolios as you know all of the mortgage customers have been stress tested to seven to nine percent depending which cohort they were over the last few years so we're not seeing any any change in behavior and yes of course i think the latest data i saw is depending on if it's two year five year interestingly some of the two years are not getting an increase but um for those people stepping up i think on average it's about a 200 pounds a month increase which is material we're seeing for those customers they have the capacity to do that and it's not materially changing their spending capacity either so it's obviously a very important change for those customers um but it's not driving any concerns that we have at this stage around risk on the portfolio and we're seeing exactly the same on our cards loans and sme portfolios which look both based on the current backward looking data and our forward looking early indicators uh incredibly resilient and strong relative to history um if the follow-up around that is when do we get nervous i suppose we got to that question in 2022 23 when we got up to 5.25 even then we were stress testing broadly my view is you'd have to get towards seven to percent interest rates to see a material impact on customers struggling to make ends meet partly because they've been originated now for 12 15 years with that as their stress test stress test case and of course the big driver in the uk of a more level playing field around challenges on the portfolio will be unemployment which is still really quite resilient that's great we're almost out of time now so i'll draw the session to a close thank you very much charlie for joining us