Good morning, and thank you all for joining us here in Dublin and also for those who are joining us via the webcast. I'm going to make a presentation first. Mark, our CFO, will then come in, and then we'll open it up for Q and A. And we'll take people in the room first, then we'll take some of the people online who may have some queries.
Sorry, I have to leave this up for a minute. So Overall, when we look at 2018, profit before tax similar to last year, €800,000,000 continuing sustainable underlying profitability, loan book growth and significant improvements in asset quality. Strong capital ratios, core Equity Tier 1 on a fully loaded basis at 17.6%, continuing capital generation and capacity for attractive returns And continuing progress on NPE normalization at £7,500,000,000 or 12 percent now on an overall basis, 27% down in the period to 6 months. Market leading franchise with customer first strategy, an investment in digital and leading to quite a bit of commercial success. We think pretty well positioned and evolving for the future challenges and opportunities of growing economy.
So we're kind of having this conversation last night. So it was not that exciting, is it? And somebody sort of pointed out that, well, if you're only interested in investing in a bank that as the largest Irish banking franchise, is the fastest growing economy in Europe, has best in class costincome ratios, has very strong capital levels already, generates very significant amounts of capital on an underlying basis, has a rapidly normalizing NPE profile and has a proven track record of delivery. If you're not interested in that, that's okay. But that's basically what we have.
So there's less excitement here than you might want. And there's less stretch to where we need to get to because we've actually delivered quite a bit of where those medium term targets are, which is why we have a lot of confidence that we're going to hit those targets. And really the rest of the deck is hopefully going to try and demonstrate to you why we have that confidence and where we are. There are plenty of challenges there, but there's plenty of opportunities as well. So maybe the first thing is obviously to do with the economy, because fundamentally the vast majority of our balance sheet is in the Irish market and the vast majority of our business in the Irish market.
On the top left hand side, you can see that's not a bad place to be. And on a 6 month basis or 12 months on 12 month basis, the projections for Irish economic growth are constantly being revised upwards. Many of you in the room are responsible for some of those upward revisions, so I need to talk to you about it. But in general, what we're talking about is a very strong performance from the economy. And that creates a really strong basis for us as a bank.
On the right hand side, you can see one of the clear manifestations of that, and that plays across our forward book and also in terms of how we deal with the issues of legacy, strong employment growth and a very significant reduction in unemployment. Ability to deal with arrears is enhanced significantly. And also that consumer side very strongly supported. And that plays into the bottom left hand side, which is what you see happening on the housing market. Again, loads of different debates as what the most accurate number is.
And some of that debate again takes place in this room. But actually, the reality we all know is that every statistic that exists, whichever one you use, is growing. And we still haven't hit what anyone would call the normalized level of demand in terms of its supply in the market. So still a gap between supply and demand in the market. That's obviously manifesting some of the negative things that are out there in terms of where rents are and where property price inflation is.
But fundamentally, you're seeing significant growth year on year in construction, feeding through to new properties, which is feeding through in terms of mortgage demand, and we're continuing to see growth in the mortgage market. And on the right hand side, you see where sentiment is that and pretty much everything is in expansionary mode. Consumer is feeling confident, SMEs are feeling pretty confident, business community in general is confident and Europe is also feeling confident. So that's a backdrop, which is a good position to have if you have a strong franchise. And we think we have a very strong franchise.
And you can see in the period what's happened 6 months on 6 months. The drawdowns have grown from £4,800,000,000 to £5,200,000,000 And growth in the core franchises in terms of what we do from a wholesale institutional side, what we do on a retail, commercial and corporate banking side. So growth happening in both of those. The U. K, a modest downtick.
And we've already said and we've said it before that we don't have a particular growth aspiration for the U. K. At this point in time. We have a wait and see attitude in terms of where the U. K.
Economy is. So we're not driving balance sheet growth in the U. K. So it's pretty much stable during the period, and we're very comfortable with that. If you break out on the right hand side, you can see a little bit more of where the Irish market is at.
So mortgage lending delivering 11% growth in the period. We'll come on and talk about market shares in a minute. Personal lending pretty much flat in terms of the new business flow, but our market share actually growing during the period. And corporate SME, the entire business community doing well, quite a bit of that is actually supporting what's happening on the residential side. So you can see an improvement in terms of our corporate lending into the residential side, very well supported in terms of debt equity positions on that.
So we're very comfortable with it. But it's a sign of what's happening in terms of that continued opportunity to grow the balance sheet, both in terms of supporting residential development and in terms of mortgage market. And on the very right hand side, you see where our stock positions are. Personal currency counts, 36%, really no change in terms of these positions. Overall, the mortgage flow piece is 32%, the mortgage stock is 32%.
So very comfortable with where that is. On the business side, our position is obviously slightly stronger and effectively the main market share is in the 40s. So overall, it's a very strong franchise and it's maintaining its stability in the marketplace. When you look at a little bit more detail than mortgages, and this is a conversation that happens a lot, and I'm sure we'll talk about it later on. Overall, what we've said is we want to invest heavily behind things, not just price, but also the overall experience from a customer point of view.
So we spent a lot of time improving our digital capacity and capability in this marketplace. Convenience is key for the customer as well here. We have effectively put in place a new platform and a new system. And as we're trialing that in 2 of our 9 regions at this stage, we're effectively targeting to get to 7 out of 10 customers with a 1 hour approval. At the moment we're at 5 out of 10 with the 1 hour approval.
And we have a digital center of expertise, which is set up at this stage. And the whole mortgage journey is going very well. So are things other than price, which are really important in terms of how the customer perceives it. Obviously, price is important. We've committed huge amounts in terms of our standard variable rate proposition, we think it's the right proposition over the long term for customers.
And certainly, a large cohort of customers, effectively 1 in 3 customers take an AIB mortgage from the group can see the logic of what we have. We've invested about $190,000,000 if you like on a per annum basis in those standard variable rate price reductions. It's a very stable back book and also gives the customer a lot of comfort about where they're going to be. First on buyer share, you can see at 36% And switcher market is growing quite well, but it's still a very small marketplace. Our target is not the switcher market.
We are there available for the switcher market. We're focused on our core customer base, our current account share and making sure we provide the best opportunity experience for them. But the market is competitive. So undoubtedly, you can see a lot of issues in front book pricing and in terms of fixed rate pricing, I'll probably leave it for Q and A because even if I try and answer it all now, we'll undoubtedly get to it in Q and A. So let's hold the point.
But I think position in mortgage is more very comfortable with and we're happy with the growth we're getting out of that. If you look at the personal customer side, Again, good experience there in terms of how our investment is playing out in terms of the customer experience side and also in terms of what's happening from a growth side. We've added 52,000 accounts in the 1st 6 months, 57% of those are new to bank and 2 thirds of those that are new to bank are in the 25 to 34 age categories. So strategy to continue to play out well, continue to attract youth and continue to build that franchise that we think will deliver into longer term. On the business side, we maintain our positions across the board, 44% stock and basically flow in a similar position.
We would say though that the SME market is continuing to very, very minorly decline, if you look at the total stock, we had thought that it probably had hit an inflection point if it grow, it didn't. And while our overall balance sheet has nudged forward slightly because where strong marks are. You're not seeing a lot of growth coming out of the smaller SMEs. And what we have in general on the other side is really talking about the activity levels that happen in terms of customers, I think there's better slides later on to talk about it. There is an important one maybe at the bottom, which is the UK was the 1st bank and our CMA platform, which was the open banking, we were the 1st bank in the UK to actually able to do that.
It speaks to the technology we have and our ability to actually be quite flexible in terms of implementing that, which I think is a support for our overall investment profile. So some of the touch points. Busy slide with plenty of stats, but I think we'll try and unpick it. Overall, this is about our strategy. And our strategy is based on our purpose, which is effectively to be there for our customers to back down to achieve their dreams and ambitions.
We think that delivers a sustainable position for all of our stakeholders and, crucially, for investors, we think it gives a very enduring franchise with attractive characteristics. We have 4 pillars to our strategy is the customer first, operate the business simply and efficiently, make sure you're very good at risk and capital management and have the right people and the right culture in the organization. And some of these outcomes that you see there on the left hand side, personal relationship NPS at plus 21%, our homes NPS at plus 46%, a key area for us, our SME NPS at +47, the underlying profitability and capital we've talked about and asset quality down 27%. So the business outcomes coming from what we're doing are pretty strong. In the middle, you can see the touch points and how they're changing.
So customers continue to migrate into digital and online channels, mobile continuing it's dominance and growing in terms of an overall engagement platform for our customers. And you can see just the change over that sort of 5 year period, a massive change in how customers are interacting. The investment is supporting that. And it's also yielding a lot of benefits from it. Some of those come out on the right hand side.
So we have 1,300,000 active online users at this stage. 96% of customer transactions are automated, 63% of key products are purchased online, 78% of personal loans are applied for online or in mobile, 83% reduction in branch paper processing took place as a result of a very significant program to move paper out of the branches and 67% of transactional customers digital channels. These are market leading statistics that show that the bank is perceived very well from its customer base and they engage and activate across the channel is with us. This is a busy slide, which I suspect I'll only ever use when people really ask me a question. But it's obviously one that people talk about in terms of the underlying architecture and where are we.
The piece on the left is one that you've seen before, which is really talking about how we invest in the architecture. Basically, anything that's purple was invested in and anything that's yellow was industry standards such as SAP systems. To break it out and explain the question that people have about core sometimes, on the right hand side, We've unpacked it. And basically, these are the 5 ways we think about it. If people think about a core system, they sometimes say, well, it's all one.
You have to replace it all. It is not. You do not. Effectively, when we think about it, we think about how the customers engage with us. And we've invested heavily to have leading modular formats in terms of how the customer engage on mobile, in Branch, ClientView, all of those engagement technologies.
You have an integration layer which allows those engagement platforms to effectively deal with your database, which has been separated from your records. If people have it all bundled together, it's really hard to dismantle it. What we've been asked for the last 6 years is dismantling it. So your core is actually quite small. That is the fundamental architectural principle and allows you to invest across each of those stacks, all of which are built on a brand new IT infrastructure, which is very, very new because it has to be.
So there is no old kit. There's none. But everything is based on that foundation, that Mainframe Foundation and built up from there. So we can go into it in more detail. But basically, that's the basis in which we're going to continue to invest to support each of these layers, better customer engagement, better ability to use the data and to get insight from it and simplification of the core.
And the business model is going to continue to evolve as well. So it never stops. Fundamentally, it's about taking the operating model and aligning it better and better with the strategy we have, being clear on the structure we have and how we deliver for the customer. So we still think there's more we can do in respect of that and making delivery to the customer simpler across our organization and for the customer. One of the things we've taken on, and you'll see it coming through in terms of some of the one off charges, is the property portfolio.
We've obviously gone from an organization that in 2,009, 2010 had close to 25,000 employees. We now have an organization that is 9,000 employees. It's very different and customers engage with us very differently. So we've been at an active strategy for the last number of years in the property portfolio. Some of that is manifesting quite obviously at this point in time.
So we've in terms of Central Park out in Sandyford, we're actually migrating people at this point in time, creating centers of expertise as the customer sees the business, not as we see the business. Mouldsworth Street in terms of the corporate head office has been talked about. So the property portfolio is progressing well to effectively align in the new business model. And that's facilitated by the flexibility we've been able to build into our work systems to allow people to be more agile in how they work, work from home, work different hours, communicate in better ways. All the underlying technology is there to allow that, which is working very well from a customer or from a staff engagement point of view from a staff flexibility point of view.
And we have to be flexible in the environment we're in in order to allow us to deal with some of the economic pressures that low unemployment going to bring. So we have to be very flexible and modern in terms of how we allow our employees to work with us. The technology that I've talked about earlier is allowing the customer to do what they want, which simplifies our life. So customers dealing with their own requests rather than having to do through call centers online simplifies us. That enabling technology will continue to evolve.
And ultimately, the Board and the business is very focused on the sustainability of the business model. We're much more vocal on the sustainability agenda. At this stage, we had a sustainability conference last year. Fundamentally, this is about the long term sustainability of business for all the key stakeholders, for the investors, for the government, for the regulators, for staff and for customers. How do we make sure that sustainability is embedded in everything we do and build the business forward, which means you have to keep evolving your business model.
So overall, we think we're delivering against the medium term targets and Mark will talk more about this. We will continue to invest to support the customer agenda. All the key targets are NIM, cost income ratio below 50%, strong capital base 13% and target returns of equity of plus 10%, they're all there. We think we've made meaningful progress, and we are definitely on track to deliver against them. We're going to come back at the end for Q and A, but over to Mark now.
Thanks. Thanks, Bernard. I mean, I
think the messages that you can see from the financial performance section of this is that the underlying businesses continues to emerge. And when you look at the health of that underlying business, it's a very solid message because we've increasing volumes, we are maintaining our margins, we are controlling the costs And all the while, there's an improving asset quality. So in terms of the individual highlights then, sustainable profitability Underpinned by stable net interest income and margin. So that NIM story of doubling over 5 years Being driven essentially by the things that you want, which are a solid loan yield and that continued liability repricing has continued and it is now stable and well into our target area of 2.40 plus. Continued cost discipline in a world where we're almost at full employment and we have Clearly, the costs which come from the associated costs which come from our continued investment, we have maintained very tight focus and considerable discipline.
Slight increase half on half, but you can see it's also flat on half to last year. Inflection point past the third point there in terms of net loans, it's a small growth, but when you disaggregate it and you look at actually what the increase in the performing book is, I think that's a very positive story underpinned by very strong new lending. Significant progress on NPE, 2.7 percent, so down from 10.22 percent to 7.5 percent from the start of the year. And that clearly puts us within sight of our end 2019 target, which is the key to the capital release to investors and strong capital generation. So we have very strong capital position, But underpinning that, 130 basis points of capital generated in the half.
And I'll kind of unpick a number of those as we go through the presentation. P and L, again, this is the as I say, the emergence of the underlying business. Looking at net interest income, when you strip out the impact or a decrease in suspense interest which relates to restructurings, that is a stable number. Other income, again, underpinned by fees and commissions, which have been remarkably robust throughout the periods. The decrease is again just due to the fact that our upside sharing on restructurings is actually a figure that is going down.
But basically, you can see the underlying structure of the income very, very stable. I mentioned already operating expenses. You can clearly see discipline there given an inflationary background in both terms of depreciation and wage inflation. And there is a positive in the write back net provision write back, which largely is as we move through the final stage of NPE reduction, that is underpinned by a very strong economy and therefore very strong security value. All of it contributing to an RoTE of 15.2%, which points us to being able to sustain a double digit RoTE even with a very heavy tangible equity number, which has a big deferred tax asset in it.
As I always say, probably the ugliest Slide visually in the presentation, but it does tell the previous story. So loans to customers, As I said, the spread between those two customers and customer accounts not only been maintained but even continuing. And we have been saying now for some time that the liability repricing curve has sort of reached trough point, therefore, stability in that, but we've actually continued to widen that gap. That is on the asset side, you're seeing loans customers maintaining our yields once you take out that suspense interest and that's reflective of very strong pricing on all our books being that allowing us to absorb the repricing actions or the pricing actions we took last year, which obviously feed into the whole 6 months in our mortgage book, And it is supported by the roll off of our tracker book as well. On the asset side also, Navios and Yvonne's structural issue no longer there.
And we are playing through and being able to absorb the well signposted 60 basis points headwind on the AFS book. The only thing that is a little bit new is a heightened level of other assets, which I'll come to from the liability side in a second. On customer accounts, we have said that we expected probably high single digits decreases, and we've had a little bit more. So on our term deposits and demand deposits, we've had we've outperformed a little bit on that. So we're probably Low 11, 12 in terms of decrease in liability pricing.
And we have started successfully started our MREL program, Two issuances, 1 below Panam, 1 above Pan in terms of coupon, but it's both successful And we are well into the program, 25% of the way there after the 1st 6 months. So the only point I would make on this is that there is obviously an increase in non interest earning liabilities, and that is a cost to us on the other side. So we have attracted, thanks to the exit of a competitor, a little bit more liquidity. And we will now move on non retail deposits To more negative pricing to ensure that, that doesn't weigh on the NIM. Structurally, though, this balance sheet is performing and is being driven by the things that you would want it to be.
Other income, as said on the P and L line, When you disaggregate, look at net fees and commissions, pretty much flat, far slightly down, but all of the various contributors to it in the right place. So current accounts, obviously, upper banded. That's bang on prior year. Credit related fees can be a bit lumpy, also in line customer FX income. That income stream very stable also, cards and other fees and commissions, which include our Wealth and Bank Assurance, slightly down, but nothing no trends there.
That has been robust and bouncing around that level for the last 3, 4 years. So that provides us with a great platform. The other aspects or the comparison in the total number driven by a little bit by volatility on some long term derivatives In the other business income line, which I would discount in trend terms, and we can see the previously restructured loans totaled from 1.46% going to 40%. And that's, as I say, the natural emergence of the underlying business. So we no longer are getting big upside sharing on restructurings, and that is as expected and as signposted.
Costs, again, a story of really, I think, demonstrating the focus And also demonstrating our continued harvesting of the investments that we have been making. So on the Pushing upside, we have inflation of 2.75, as I say, in total in a world approaching total employment, that probably is 2.75 to 3. When you consider kind of out, of course, increases, depreciation flowing through Also from the 870 program, continued investment in our restructuring so that we can maintain that pace and get to normalized levels all being countervailing by continuing focus on efficiency. And you can see that in the Feet, the full time equivalent numbers. So I think that 51%, 53% when you strip out the kind of enhancements still gives us a clear line of sight to enable to get to less than 50 on an enduring basis by the end of 'nineteen.
So As we get closer to it, maybe as Werner says, it's a bit dull, but it's clear to us that we are actually back on target to make those targets. And The last line is exceptional, which is €14,000,000 which is pretty much nothing or immaterial, but it is a bag of a mixed bag of pluses and minuses. So we have gain on portfolio sales, of which there was one significant one. That's a really good signal in terms of the levels of provisioning, the fact that we have always said we believe we will continue to be capital neutral or better as we move through our NPE stock. On the other side, customer address, the major part of that being A signpost is increase of 2 new cohorts in our tracker mortgage review.
Restitution and restructuring costs are really the cost of running the machinery and continuing to run the machinery at a even at an increased intensity as we seek to close out on that. Termination benefits, a small number. Property strategy, I think this is the last leg of, As Bernard said, moving our business to the place where it's aligned with the strategy we have, that might actually improve in the second half and IFRS 9 costs. So by the end of this year, we should have IFRS 9 as a BAU structure. It's been a long 18 month program, But I think those are clearly costs which you don't see on an ongoing basis going forward.
Turning to the balance sheet. Really, again, the messages here are this is a balance sheet which is really well capitalized, which is highly liquid. That liquidity is stable because our we are effectively funded by Loans are funded by retail deposits and therefore positioned for growth in an economy, which continues to normalize. I'll take the individual bits of this on the coming slides. But the main other point are liquidity metrics are Not quite embarrassing, but they're certainly accommodative.
And our capital figure of 17.6 percent and our capital generation shows very strong underlying business. And the customer loans, just to disaggregate, this looks like net loans, €60,000,000 to €59,000,000 I'm going to say it's growing. But the reason for that is essentially the IFRS 9 introduction meant that our opening balance is 59 point 7. And we have grown net loans slightly. And it looks that isn't hugely impressive as a figure on its own Until you start to look at the disaggregation, so NPEs, particularly as we had a singular portfolio sale, And we also did at a BAU level €1,000,000,000 of restructuring at the same time in the first half.
That means we're it's certainly a beat for us in terms of the progress we've made on that versus plan. And that's compensated by increase in the performing book. So performing book going 53.7 percent to 55.3 percent demonstrating Essentially new lending, outstripping, redemptions, building quality, building asset quality. And all of that being done In markets which are partially or maybe arguably only 50% of the way to normalization. So even I think Our Goodbody's friends have mortgages and housing supply figures in the marketplace, and people are starting to converge around accepted numbers in terms of Newhouse delivery, and it's still only approximately 50% of expected of need to clear.
Equally, SME is a market which is on the turn, but there's still quite a bit of deleveraging. So While that's happening, we are actually building our performing book. And as I always say, those 2 discs on the right hand side, they should align the net the front and back book as those markets normalize. Turning to asset quality then in a little bit more depth, 27% reduction or 2,700,000,000 to 7.5%, which is now a 12% number, and I'll take you through our new post IFRS 9 NP walk. But you take again, take the provisioning level away and we're at €5,100,000,000 you take away what's in probation and you're down to 3.6%.
So these are numbers that were Certainly a long way away when we were at 30, 3 or 4 years ago at €30,000,000,000 IFRS 9, there is an impact. I'll go walk through that in a minute. And the adoption of definition of default, which is the regulatory definition, which is not actually going to be mandatory until early '20s. We have a net credit impairment. So again, write back, we're seeing again, that we as we work through, we are better than capital neutral.
And we had a very successful portfolio disposal, which it may be forgotten now, but that was into a very Choppy market in terms of politics, in terms of potential legislation. And what we saw were the buyers stayed at the table and there was considerable competitive tension And therefore, a very significant result in terms of profit over our provided level. So this is a slide redesign, which we spent, I'd say, with every investor quite a bit of time on over the last 18 months. So this is now the IFRS 9 version of that. So it's taking from the left hand side our IAS 39, 10.2 year end number.
We basically have a harmonization, which is a plus and minus. So we had an increase as our definition of default actually widens the net in terms of the universe of NPE. But We also, on the flip side, were able to release some of the loans that were in extended probation or trapped potentially for a longer period. That gives us an opening number of 9.6 percent in terms of unlikely to pay, which is a bit of a combination now of what was impaired and what used to be not impaired because it was over collateralized, all of that then walks you through €1,000,000,000 of BAU activity, redemptions and restructures as FSG work our clients through, portfolio sale of 1.1% and down to 7.5%. And as I say, At June, 7.5 NPE number, 0.9 and 0.7 of that in old money or in IAS money essentially being probationary pure probationary or probationary subject to collateral disposal.
So would have been sort of post treatment. And then you take the provided amount away from that and you're at a 5.1 level of NPEs. So that would be 3.5% untreated or un restructured. That is our kind of new way of looking at this. And you can see from all of that, we have the momentum and you can see how we get to a normalized balance sheet.
I'll speed up from there. This is, again, a little bit of conversion old money to new money. We used to have a satisfactory watch vulnerable criticized. We now have strong criticized NPE in terms of our definitional. And on the right hand side, you just see we expect obviously Actual probation, a flow, a flow through BAU restructures and likelihood portfolio sale a level of portfolio sales our other activities to get us down to that GBP 5,700,000,000 This slide I'll get through quickly, it does have a couple of really important messages.
First one is that as you look at each of these portfolios, we are making progress. So residential mortgages, which is considered to be intractable in an Irish context, 4.8% to 4.2%, that's a 12.5% reduction in the half. Very few other economies would have that in any portfolio. You would see that. Other personnel down by 33%.
And the property and the business lending lines from €2,900,000,000 to 1.7 £1,900,000,000 to £1,200,000,000 clearly benefiting from both BAU and portfolio sales. All of that means we're getting through all of the aspects, And there aren't sort of ones that are set to one side. And the coverage is actually increasing. So our coverage should, by arithmetic, by simple arithmetic, go down. Our coverage should go down by virtue of the fact that we're restructuring the higher more of the higher coverage portfolios, And yet, we have increased the quality of coverage from 27% to 32%.
Funding structure, main story here. We talked about liquidity metrics is really MREL. So we've had 2 issuances. We have a €4,000,000,000 expectation or need By 1 Jan 'twenty one, we've had 2 issuances, both successful, 1 of the 5 year, 1 of the 7 year, 1 slightly ahead of plan, 1 slightly behind plan when you go back to what we said in terms of €150,000,000 over mid swaps. And also, we're able to do those in the latter into pretty choppy markets.
We now have an upgrade. So we have effectively 2 of the rating agencies giving HoldCo IG status. That opens up the universe of potential of funds with mandates to take us. So the MREL program, both in terms of achievement to date And what's open to us now in U. S.
And European markets over the next 2 years to achieve leaves us in very good position. Capital ratios already mentioned, 17.6%, 130 basis points of Production, there are a couple of things just to note about that. Obviously, we have the signpost is IFRS 9 impact of 50 basis points. We thought it was 70. It was a little bit less than that when we actually finally finished the analysis.
We do have now in our IFS portfolio, which used to be held to maturity, but is now mark to market in a post IFRS nine world. That gave us a 40 basis point impact, negative impact. So that is probably why some of the numbers are a little bit higher in terms of expectation on 17.6%. And our RWA line pretty much stable with new lending being offset by IFRS 9 and redemptions. We are not getting and have not got the impact of the RWA impact of the portfolio sale come through in the first half.
So that again will You can see Eamon looking at the numbers here, wondering why it didn't add up in his head. And last, to kind of re to sort of recontextualize this in terms of medium term targets. So 253 NIM And it's been in that region, 250,000,000 has been 250,000,000 for 2 periods, stable and well into target territory. Cost income ratio, good line of sight And clear focus on cost to get to a sustainable less than 50, Fully loaded. We're clearly building capital, and we still believe 13% is the right percentage.
We're clearly building capital so that it can be released. And it will be and we have line of sight on that release because we have line of sight on the normalization of NPEs and our return on tangible equity. Again, obviously, getting into the double digits on an ongoing basis is certainly a target that we believe we can consistently achieve. Dividends were still in the same place, so trajectory to normalized payout of between 50% 60% And ultimately, by way of special or buyback, the ability to give the excess capital to shareholders upon normalization. So that is it from me.
I think we'll go to Q and A.
Okay. Thank you. I think we have a couple of mics in the room. So who's for the first question? Eamonn.
Eamon, Hughes and Goodbody. Thanks, Bernard. Maybe just 1 or 2 maybe on lending and maybe 1 or 2 on capital, if that's possible. Just in relation to lending, I mean, you kind of have invited the question in your conversation around the mortgage market share. So maybe if I can kind of open with that in terms of thoughts, clearly, there's been many price moves over the Last quarter, so the last few months.
So maybe kind of get our first formal chance to kind of get your kind of views on that in terms of the competitive dynamic. I suppose your mortgage market was up 11% of new lending in H1. Ireland was up 2%. So does that mean that SME lending was down maybe early teens? Is that a Brexit impact?
How should we be thinking about that? So maybe that's just new lending. And maybe just in terms of capital, we had to move from the Central Bank over the summer on the countercyclical buffer. So maybe, again, first chance to maybe chat about that in terms of Mark. You just touched there on we're very happy with 13, so Maybe elaborate on that a little bit more.
But also we've had the cultural review, conduct issues. We talked about NPEs, Mark, in the meeting there or in the presentation around, we can see line of sight of getting down to a level where the excess capital is available. But maybe does the cultural review or issues like that kind of Slide that a little bit. So I'll leave it at that.
Okay. I'll take the first pieces. I'll make some comments on the culture piece And then I'll hand over to Mark for the capital and any longer term impacts. So the issue on pricing from our point of view is, and we've had this debate many times and as well as at various points in time, there's always been some pricing action in the market. And there's no doubt that there's competition in the marketplace.
And people are out there fighting for market share. I think what we've said fairly consistently is we're not going to be driven quarter on quarter by market share statistics. We're not going to be driven by desire to hit a certain market share at any point in time. We think we've a long enduring strategy that's going to make sense in this marketplace, which is going to deliver growth for quite a long period of time. What we've done has been obviously to invest in the back book in terms of our standard variable rate offer.
And we think we've got a very stable back book. And we have priced that already to a level where it gives us a lot of comfort on the consistency of that back book. And the statistics support that position. We think that's fair to customers. And we think that a large group of customers understand that and can get that.
But we also understand there's other ways in which customers are looking for value. And sometimes that's a fixed rate offering and sometimes that's a cashback offering. So we use the EBS brand as the Challenger brand that we have in the marketplace, particularly around the fixed rate piece and in terms of the cash back offer associated with that. And we think EBS will play that role. And from time to time, its market share will change.
And we get to learn quite a bit in terms of the dynamic around that as we can look at that. We've effectively sort of a living experiment in terms of how that positions. We're very comfortable with how the core market for AIB plays. And I think what our customers are clearly demonstrating is that if you can give a really good experience, if you can constantly improve that experience and make it market leading and you have a very consistent position on price and customers kind of can understand how you're valuing that and valuing them, then actually you can deliver very strong market share. So the core franchise for AAB has been very stable through all of this, the position around some of the issues on front book pricing from time to time that will happen.
The switcher market per se is up quite a bit. And what a lot and this is experienced from other marketplaces and you'll have seen it. You can create a competitive dynamic around the switcher marketplace, which isn't necessarily the highest quality business. And in fact, a lot of the competition is taking place at the moment, and certainly headline terms, is very short rate fixed. It's not really fixes.
I mean 2 years is not a fix. It doesn't take you out of an interest rate cycle. It just locks you in at the first point. And then given the cycle that we may be heading towards, may cause you a challenge later on. And that is absolutely the dynamic that plays out in other marketplaces.
And you can see that. And most people ended up switching within their own institution. So 2 thirds of people who switch in the UK switch to themselves. So you can create a lot of momentum, you can create a lot of noise, I'm not sure you create the quality of the underlying book. So our focus has always been quality, volume, price, get that dynamic right, short, medium and long term.
So not driven by market share. We are the largest lender to mortgage market. Our stock is 32%. Our flow is 32%. So we will look at it from time to time in terms of things we need to do to change react to the market, but we're not going to be reactionary.
Oh, sorry, that was one point. Yes, in general, I mean, what I said about the SME, I think I made the comment earlier is, the SME market has definitely been a bit more sluggish than we thought. Our new lending site has maintained the position and you can see that from the charts in terms of the new lending piece into that marketplace. There will have been some redemptions and some acceleration of redemptions. I don't think it's quite as high as you said.
I don't have the exact stats in terms of but I'd say single digit positions on small SME. If you take the overall SME market and you take business sort of larger SMEs into a case, that isn't the case. So they've counteracted what's happened on the small SME side. There could be some Brexit effects associated with in terms of people thinking about their business. There could be some deleveraging.
But overall, the market for SMEs has definitely just declined a little bit. It's very small. I think it's €100,000,000 over the period. It didn't grow, which was probably the piece we were expecting. The conduct and culture piece, I think we all have to accept the fact that not just banking, all industries basically, completely different conduct agenda than existed 3 or 4 years ago.
And you can see it playing out in technology. You can see it playing out across every industry. I think what we are saying generally around this is we accept that's a feature of where we're at. You have to get your culture right. We welcome to the Central Bank review because I think it creates a baseline.
While there was some excited commentary in the media on it, when you actually read the reports, they're not saying exactly what the headlines are. They're much more balanced in terms of their position. We obviously have our own report, which is on ourselves, we're in agreement with the actions that exist in terms of what we're trying to do, because we think we're focusing on the customer and trying to deliver there's no big news story there from our point of view. We need to do more. We need to keep going on it.
But there isn't anything brand new in that direction. However, we think that everyone needs to accept the fact that this conduct agenda and the standards
in which we're all held to, which is
a good thing, will rise and continue to rise. So we don't want anyone to think it will never ever be an issue that we talk about again. I think all industries will face this issue and need to invest heavily to get it right over time. So it's an enduring piece from that point of view.
Yes. Just on the capital side, I think the first question is the countercyclical buffer and the arithmetic effect is clearly given our levels, it'd be 0.7 0.71%, I think, in terms of increase. And that's not hugely relevant. It's more in terms of our 13% number, our target fully loaded that we consider it. And the analysis for us is that we can absorb that countercyclical buffer.
And we did put out an RNS at the time saying we are comfortable with the 13% in light of that. And that's not necessarily relying on any reductions or any impact in terms of changes in NPE over time. It is ultimately a transitional based number that is relevant. So we think we can we know we can absorb. The point I would make is though that that is not a limitless discussion.
So if there are other buffers then which added, then we would have to come back to renew that. However, that would be an industry wide issue.
We actually set out the portfolios for the property and non property portfolios. You can see the business is growing. The NPE issue does have an impact on the balances, but otherwise it's growth.
And your second part of the question was, does any of this change our view in terms of capital return. And from the very outset, this has been A story which is as we normalize the balance sheet and as we are capable of evidencing that that is so, in other words, we have reached point rather than around the road to the point, then we will be able to return the excess capital over the 13%. So at 17.6% today with 130 basis point kind of run rate of generation. That still is what we believe is the case.
Stephen Lyons from Davy. Just a couple of questions for me, please. Firstly, on the capital outlook, I'm just curious as to whether you've got any update on the ECB review of risk weight models and any thoughts as where the RWA balance might evolve from here? And secondly, just on the WIB business, very, very strong lending growth in the period there, 50% year on year. Just if we get a bit of greater detail, I know you call that syndicated lending and real estate finance, but a bit of greater detail on maybe other activities there in sectors and The sustainability of that growth rate presumably it will taper off not quite 50% thereafter, but some sort of likelihood of where that might go to?
Thanks.
You want to take the sample, please?
Yes. I'll take the simple one. And it is reasonably simple because what we have basically said is Our understanding and our expectation on RWA would be point to point, 17 to 19 that we wouldn't have much increase that it would be reasonably flat And the balance sheet would have slowly expanded. That we believe is still the case. We have effectively no feedback on TRIM to us at this point.
So it is an inexorable process, but it is glacial. There is that is effectively the world of Frankfurt. We then have to follow in with the next model. And that will again, if the timelines are anything like this, it will be well into 'nineteen. And remember, we're only getting an evaluation of what our redeveloped current IRB models.
So anything in terms of efficiency is very much at the back end of any process, which is even more slow than we would originally have thought. All of the experience of TRIM is at best neutral. We have said didn't expect any great increase. We certainly don't expect any improvement. So it will not be a positive factor.
And then thereafter, I think you're still looking for efficiency in the long as we go from standardized for a number of our books. So it's the same story. It just looks like taking a longer period of time. And that means that as we get outside our original 'seventeen to 'nineteen period, then you should probably see both the volume and net loans and the RWAs move in reasonable sync.
If you look at the question on what's happening on the corporate wholesale and institutional side, Overall, the economy is strong, so there's good activity in the corporate markets generally. What we see coming out of sort of the more mainstream corporate and what we see, as I said, structured or buyout type markets. Decent level of activity, so you're seeing some growth there. But the main growth is, as you say, probably coming in terms of the growth piece and the change year on year from real estate finance. And I think we're going to be facing into 2 time periods.
We're still in a growth phase. So that for the reasons we talk about in terms of newbuilds for quite a period of time, there's still going to be more newbuilds coming on. So there's going to be more finance available, both in terms of working capital finance to support that and in terms of the assistance that exists, albeit at lower debt levels for actual property transactions per se. So I think we're still in a growth phase there. So probably not at the same sort of level, so I wouldn't guide you into that sort of growth phase.
But you're not going to see a big retraction in respect the residential side there. On the commercial real estate side, I think that's kind of normalized at this stage here. I don't think you're going to see big growth coming out of the commercial. We will then get to a point where I think I'm assuming supply and demand works well, which of course it never works perfectly. When supply and demand are closer to matching, then you would expect the level of real estate finance that we would provide as somebody who targets 30% to 40% market share to normalize over the period.
So I think for the next year to 2 years, maybe 3 years, because we'll be this part will be leading, you would expect to see better growth coming out of that, then it should normalize as the market normalizes. But that is going to be dependent on where the marketplace gets to. So hopefully that's helpful.
Thanks. Owen Callan from Investec. Just two quick questions. First one on Dividends and capital, obviously, you're adding significantly to the excess capital on an underlying basis as well as some of the one off items helping out as well in terms of disposal of NPLs. I'm just wondering why you chose not to have an interim dividend, for instance, to help with that normalization process on the ordinary dividends before we even start the stage where the special dividends are buybacks or something further end of line.
So just how should investors and the market think about that process? Do we need to do The full normalization of the ordinary dividend before we can really start to look at the specials or could they cross over to a certain extent? And then the second question around tracker mortgages. Obviously, I think 6 months ago, we probably had hoped that the tracker mortgage issue might be closed off, whether formally or informally, by the middle of the year. And that clearly hasn't happened for
a
few of the banks involved. I'm just wondering how much longer Does that process have to go? Could it start to move into 2019 given where we are today?
Mark, do you want to take the?
Yes, I'll take the dividend one first. I mean, this is a pure reiteration in the sense that We are exactly on the trajectory we originally set out, which we started at 25% of underlying profitability paid out, Growing to 50% or 60%. We haven't yet had any conversations about interims. It's That we would start to look at that in 'nineteen. And that would be a kind of normalization of dividend flow.
But equally, we have been clear that the excess capital we would expect to be available effectively having reached normalization, Having that gone through an audit cycle, therefore, you're into the Q1 of 'twenty before we can look at the serious number of capital coming back to shareholders and that being by way of special buyback or we're in negotiation with investors as to what is the best form for it to come back. So it's really it's an absolute no change. On the tracker question,
we don't control the timing of that because ultimately the Central Bank is the determinant of whether that program is finished or not. What we can say is that, and we said it in this results set, that we think we're entering the very final stages of that in terms of what we know. In terms of any of the groupings and discussions with the Central Bank, we've agreed and aligned on all of those. But obviously, they have to complete their industry piece and there can be to's and fro's associated with that. The main reason that we would say that we're always open to and available to deal with this issue is that there's an appeals process.
So we don't control the appeals process. Obviously, people can appeal. If they don't like the outcome of an appeal, they can go to an Ombudsman. If they don't like the outcome of the Ombudsman, they can go to court. We can't say that this program is finished until quite a lot of time.
What we can say is all of the work that we've done and all of the work that the Central Bank have done in discussion with us is effectively in the final stages. And anything we know is done and dealt with. So we're not expecting anything from that point of view. But what we can say because of those issues is that this is a closed program at that point in time. But obviously payments to people we know 96% done at this stage within the next 6 weeks.
100% done, but then there are other pieces that we don't control. I'm going to just ask if there are any calls in from okay, 2 calls. So we might take a call from the UK.
We have 5 calls on the line at the moment. We'll take our first question from Alastair Ryan of Bank of America.
Thanks very much. Good morning. So just sort of understand that the TRIM is now basically Wrapped up with the review of moving standardized onto internal models, so the whole thing has just drifted off into the distance. Is that correct? 1st, 2nd, what's the RWA relief, please, from the loan portfolio sale that took place?
Is that coming through in the second half? Presumably, that's an increment to capital. And 3rd, the current account inflow, very strong in the quarter, as you say. Was there actually a cost then in effect because you've got the current accounts in and you've just held them in cash? So as you rebalance the funding, There's actually a bit of income to come from that new high quality funding, but that actually cost you.
And then lastly, on wealth, Are there any signs that there's going to be momentum building in that? One would imagine your customers would be looking for more investment products It's their current accounts and their savings aren't paying them anything. But as you say, that hasn't happened yet. But is there any reason it's about to or that small, medium term? Thank you.
Okay. That was a short question, Alistair. So first of all, I have to go back. Remember, the TRIM suggestion was the mix from standardized and IRB. It has always been the case that TRIM and REVIEW essentially will work in tandem.
So our It's our redeveloped IRB, which has been the submitted model. So all of The sequence of this in terms of TRIM and submission will be all IRB first, all standardized coming later. And that has been our understanding. My point on the timing is just because it is glacially slow, it is definitely it seems to us an elongating timetable. And the benefits to the extent that there are will come later for us.
On RWA on I think you were asking on the impact, Capital impact, we're sort of straddling 2 periods in terms of capital impact. So we have a P and L impact on the disposal, But you're not seeing you're only seeing a fraction of the RWA impact come through. So there's probably another 20 basis points to come through in terms of capital impact on that. Already the profit being booked in June. The 3rd point was current accounts.
And yes, I mean, we are the beneficiary of a considerable inflow of liquidity, that is clearly a net cost as you see it in the Other asset side as we essentially pay the price for that liquidity, our response to that has to be graded. So in the specifically in the non retail area, as in excess probably $5,000,000 we would very carefully calibrate negative interest rates and increase those so that we do not attract more liquidity in the shorter term. And the last question was wealth. And I'm not sure what the actual question was. Okay.
I think, Als, your overall question is, at what point in time do you think we might see some income characteristics or discussion coming into that. I think we've always said this is a slow burn issue in terms of how we look at this. The Irish market definitely has for the next quite a long period of time the opportunity to deliver given our franchise and our customer base. But at this stage, we wouldn't be guiding anything, Alastair, in terms of starting to factor that into the model.
Very clear. Thanks very much, James.
Thanks. We might move on to another call from the line.
Next question comes from Charles Loul Gune from UBS. Please go ahead.
Hello, it's Amsel from UBS. Thanks for taking my questions. So first one is on your investment Ben, the guidance of €200,000,000 to €225,000,000 per annum. Can you please tell us how much you have spent in the first half? And if possible, How much was included in P and L and how much was capitalized, please?
And second question, sorry to Come back to the mortgage strategy. But I see that some of your peers are competing intensively on fixed end mortgages. And I think They offer like even 5 year fixed mortgages lower than your variable term mortgages. So I just wanted to ask your view whether it An option for you to focus on fixed and mortgages, at the same time still providing competitive rates to your customers' own variable mortgages? And one minor question related to this.
I think your disclosure of first time buyer share of 36 Sandy, it's really helpful. And may I ask what is your share in switches? And what was your shares in these two products a year ago, please. Thank you.
Okay. Well, I'll take the latter part of the question and then Mark might see what details we have disclosed in respect to the first piece. I think broadly, we've addressed the issue on the mortgage strategy in terms of how we're positioning. To add something to that, I would say, Obviously, in terms of a net interest margin impact, anything you do on the front book pricing around fixed rate is effectively negligible because you're not dealing into the back book. So an easy strategy to turn on at a flick if you wish.
But what we've said is it's not part of our strategy in overall terms of this type of a longer term strategy. We have price down some of the fixed rate offerings. And we have offered longer term fixed rate across both brands. So it's not that we're not doing it, but we're doing it in a measured way. If we need to do it, we can.
And as I say, because it's front book pricing in effect, it has very little impact. So it's an easy mechanism if you're trying to get a bit of market share on a flow basis, But we don't have it as a long term strategy in terms of building that recurring income on the back book. That's really our position in respect of it. Mark, are you?
Yes. Our disclosures are limited in relation to the investment spend, but the investment As you say is 200, 225. It is well progressed, so probably over 60% of that already spent. You won't see it hitting as a lot of it is assets under construction. And I think that they were the main points that it is we still expect that The level of spend over the year.
Sorry, can I follow-up one day share, please?
The only statistic we did disclose at this stage was in terms of the first time buyer piece. That was because people had an interest and inquiry around that So we haven't disclosed comparability in that, so I'm not going to do that on a fresh basis at this stage. I would say that switcher is not a key market for us in terms of our activity. We have a position that obviously we facilitate switchers and we will pay the legal costs associated with it, which on average is €2,000 piece. So we cover the cost of that.
But our core proposition is around the AAD customer base, 36% market share. So we're targeting that core customer base. So it is not something that we will target in terms of switcher activity. And basically, people who are targeting switcher activity tend to use teaser rate pricing around short term fixed rate pricing as an attraction, which is inconsistent with what our strategy is.
Okay. Very clear. Thank you.
I'll take one last one on the phone and then just check back in the room.
Next question comes from Raul Shinha from JPMorgan. Please go ahead.
Hi, morning. Maybe if I can have 2 broad questions, please. Just the first one, going back to Project Redwood. I was just interested in whether there was any impact. I think you referenced market volatility at the time, whether you thought that there was any of this volatility on the size of the disposal as well as maybe the pricing.
And maybe can you comment a little bit on the general pricing outlook for NPEs in Ireland, if that's changed in any way? And then the second one is on just on Some of the comments that Bernard has made in the press around pricing and clearly the impact of the countercyclical buffer. I was wondering if you might have any thoughts about the link between pricing and capital buffers. And I was just wondering if repricing is a viable response for the industry, If there was a further increase in capital buffers and if there is scope, what are the areas in which the industry could look to reprice? Thanks.
Okay. So just on the first, on Redwood and its impact and the impact of, I think, the politics on pricing. So at the time that Redwood was really coming to the market, there was a significant amount of political noise. And our at the time, we would have said that there there were 2 possibilities. 1, that there would be a the buyers would have essentially leave the market or 2, that the potential for legislation, which would limit their ability to realize their investment, would actually mean that there was price chipping.
The experience actually was and particularly it was very much counter to that. So all of the buyers stayed at the table and there remained a considerable level of Competitive tension, thus resulting in what we thought was a very good result in relation to that portfolio. Therefore, We can't assume that that remains the case, but it certainly is a good data point that in a pretty volatile market with a bad backdrop, There was a very successful execution. The second question?
Yes. So I think the second question around pricing and I've heard you've asked specifically in the context of capital and if there's any change in pricing that would take place as a result of growing capital requirements. Well, obviously, overall, when we look at pricing, we factor in the capital associated with it, the risk weights, market behavior, there's a whole series of things we factor in. So for now, and given that we've already issued the commentary on no impact in terms of our guidance on capital because of the countercyclical buffer, it's unlikely to see how those 2 will play at this stage. But were capital levels overall to continue to increase?
Then there clearly will be an impact that must be factored in, in terms of the cost associated with each individual product. That plays a little bit back into the RWA conversation. So we haven't locked anything down. It's very flexible. But for now, there is nothing new that's coming in that will cause us to think about it.
Thanks very much.
Okay. And switch back to the room now. Is there any other questions in the room? We probably are in our last sort of 10 minutes. So thank you.
So keep it short.
We might try and keep our answers short
as well.
Ryan McGrath, Cantor Fitzgerald. Just on MREL issuance, you've given good guidance there on the timeline of it. Just wondering if the recent rating upgrades may cause you to front load any further issuance. And if you could give color on Kind of what you're looking at in terms of non senior issuance, maybe even non euro issuance going forward?
I mean, I think There are 2 competing things. One of them is liquidity is hardly something we need more of. On the other hand, it would be our So general approach to markets and general approach to things that we have to execute by a certain time that when the markets open and you're ready to go. Given that, we would have a timetable anyway, which is probably pretty much front loaded to start with. The fact that we have now got IG ratings and that gives us a considerable ability, 1, in terms of the U.
S, but also A much bigger universe in both U. S. And Europe facilitates making sure that we at least hit those timelines. And in general, we will probably go earlier rather than later if markets are good. So I think It was already expected that we should get there early.
All of because you don't know how many other people or you do know how many other people And that there is a big queue in relation to this.
Okay. We're going to take one last in the room and then one last on the phone. Thank you. It's working its way over.
Thank you. Dheermit Sheridan from Two quick questions, please. Just obviously on the exceptions, Mark, you called out a lot of positives and minuses in there. How should we think about that for the second half of the year and maybe in 2019, if there's anything we should, in particular, think about? And secondly, clearly a very strong result on the impairment with the write back in the first half of the year.
I mean, if we look at the economic outlook, as you alluded to, Berners, it's still strong in the next year. And beyond that, Should we still see a level of writeback coming through from your provisioning on the stock? Or should that begin to normalize within the next 18 12 to 18 months, I guess. Thank you.
Yes. I mean, answer to the second one is, yes, it should begin to normalize. It's been a bit better than We actually expected, so it probably is a little better in the second half. But we continue to stick to the fact that the level of provisions we have should be appropriate. We also take a prudent approach to it.
We have obviously done more than we might have expected. So you're going to see a smaller level of flow, therefore, a smaller absolute nominal as we go into the second half in relation to provision write backs. Your first question was? On accessions. On accessions, yes.
I mean, as you tick down through them, clearly, the portfolio sale, we'll have them when we have them. The property, I would say, we are we have really finalized in terms of how we optimize and how we reposition ourselves and therefore have our owners lease provisions. So Again, not something you'd expect to see an increase in. IFRS 9, yes, it is probably there's probably some element of it in the second half, But we are and should be BAU by the end of the year. There's still a fair bit of kind of redevelopment of models, etcetera, as we bed those down.
And in terms of the other areas of restitution and the machinery around restitution, That should start to tail off as we get into Q2 Q3, Q4 of this year, Subject to, as Bernard said, the expectation or the hope that CVI closes out and we're back to the normalized levels. Okay.
And on the phone.
Next question It comes from David Lock, Deutsche Bank.
It's 3 quick ones, I hope. First one is on other income. I appreciate that net fee and commission income has been very stable, and we should Continue to think it will be stable. But in terms of the other elements within the other income line, I just wondered if you could give a bit of color on Where you see these landing, particularly kind of out to 2019, conscious that the dividend income is, of course, going to be coming out The further out we go in 2020. But also just in terms of the gains on disposals, the restructured loans income, How should we be thinking about forecasting this out as of 2019?
And second question, just clarification on costs. Could you just remind us what the future wage inflation you've agreed with staff is? And then finally on EDS, I know you cut the mortgage pricing there in May. I just wondered if you could give any color on the kind of flows you're getting between brands and if you'd seen any change, Any kind of significant change perhaps since that pricing change? Thank you.
I'll take the first two. So yes, stability of other income, the other elements. So if you ticked down through them on the page, the main part in to do with kind of volatility of of derivatives that sort of bounces around a little bit. And it bounces around in the plus 15%, minus 15% over the years you see it come through. The big move in the half on half was that 146 down to 40 on Bs and Cs.
And the B's and C's are upside sharing. We would expect that to be de minimis as you go through 'nineteen and 'twenty because we should have at that stage worked through all of those. And they were largely speaking upside Sharing on significant restructurings and those restructurings being property and business related. So I would see that all of those tailing off on a reasonably linear basis as you go out through the next 2 years. The other question you had was costs and wage inflation.
So wage inflation, we had actually agreed at 2.75 and That was a 'seventeen and 'eighteen agreement. As I said, there is we do not have an agreed position, But we are in full employment, kind of are running towards full employment. So it wouldn't I think it would be the right kind of thing to expect and a continuation of those kind of levels. And they certainly wage inflation certainly won't be going down in that period.
Although we don't want to negotiate over the airwaves here. So the other aspect to look at is obviously where the brands and the mortgage brands are positioning. And if I take the sort of time period for your question, so the last 12, 18 months in terms of pricing behaviors that we see. On the AIB brand, what I'd say is we've seen a very stable position, some growth coming in. So as we've taken the actions to improve the customer experience and improve our ability to interface.
We've seen a very stable to growing position in terms of that core brand offering. In terms of the broker and the EBS positions, those do move around a little bit more in terms of some pricing positions. So at this stage, it's still quite early because the flow through in terms of application sanctions to drawdowns can vary quite a lot. And particularly in what I might call the more transient nature of the switcher market, you will find people have multiple applications. So it's harder to call how they flow through.
I always find it easier to see a prediction of how an AIB sanction will play through versus something that comes from the other brands. So it's too early for me to give you anything useful or to call at this stage. But we've certainly said that I think the pricing action will cause more activity, yes. But how it plays through, we will see over the sort of Q3, Q4 because that's when these things play out. Okay.
We're going to call it at that stage. Thank you very much for the time. I know there'll be other questions. And Grace, you all know the team. And so thank you for your time this morning.