Permanent TSB Group Holdings plc (ISE:PTSB)

Earnings Call: H2 2020

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Mar 3, 2021

Good morning, and welcome to our 2020 year end results presentation. I'm going to give you a short presentation of the progress that the bank has made during 2020. And then our Interim CFO, Paul McCann, will provide a more detailed review of the financial performance. And then Paul and I will be happy to take questions at the end. So if we just turn to Slide 4 of the presentation, you'll see that 2020, and we all understand this, has been an unprecedented year. But where customers and colleague experience have changed so profoundly. But I'm pleased to say that business performance in 2020 has been resilient, and in particular, in mortgage lending. And if we look down along the various items, we look at customers, you can see that our total new lending was €1,400,000,000 for the year. And this is a reduction of 15% year on year. And you might recall, in the earlier part of the year, we were saying that our lending could be as low as 30% or 40% lower, but indeed, we did significant recovery in the second half, which I'll deal with. Our new mortgage lending was €1,300,000,000 And the reality there is we took action on mortgage pricing and our service proposition around June, July, which actually helped us turbo boost our mortgage lending activity into the second half of the year and indeed into 2021. And we continue to develop partnerships with for our customers. So recently, we've developed we've obviously very strong partnerships sort of intermediary and brokers. It's a very strong part of our business. And also more recently, we've developed a partnership with Bibby Financial Services in order to provide invoice discounting and invoice finance, and there'll be more to come in due course. If we move toward the transformation that we're going through, if we look at our costs, our costs have reduced by 2% year on year. And indeed, achieving cost savings in the current environment is certainly challenging. However, existing initiatives and programs, which we'd already established within the bank, continue to deliver savings over the last month or over the last 12 months. If we look at this is also a time when we made good progress on our digital transformation program where we met key milestones, and I'll discuss these later in the presentation. Costs continue to be a key focus of the bank. And we launched a bank wide enterprise transformation program, which was again, I'll get into the detail in another slide, but part of that was around launching a voluntary severance scheme. And we anticipated that we would have about 300 colleagues who would decide to take that voluntary severance. And indeed, that is the case, and we'll be reporting on the finalization of that scheme in due course. The bank made a loss before tax of £166,000,000 and this compares to a profit before tax for 2019 of 40 £2,000,000 And that loss is primarily driven by an impairment charge of £155,000,000 where we've taken prudent and conservative approach to the current macroeconomic environment. And obviously, we should note here that the country continues to be in lockdown until the 5th April, and maybe it will be extended past that date. So we have we've taken a very prudent and conservative view by way of our impairment. Our operating profit for 2020 was £52,000,000 and this compares to an operating profit of £84,000,000 in the prior year, with net interest income reducing by 4%. Our net interest margin came in at 173 basis points, which shows a 7 basis points decrease since last year. And this is as a result of lower for longer interest rates and indeed the increase in liquidity towards the end of the year as a result of our the sale of our Glen Bay II portfolio. NPLs increased by £80,000,000 to £1,100,000,000 bringing the NPL ratio to 7.6%. That's an increase of 120 basis points, but it's actually primarily driven by the fact that performing assets, performing loans are 9% lower, again as a result of the Glen Bay 2 sale. If we move on to capital, our capital position remains very in excess of management and regulatory minimum, actually to a high degree. And it came in at 15.1% by way of the fully loaded correctly Tier 1 capital. And that's a 10 basis points increase. And it also reflects that we are recording a loss for the year. So we believe that's a very strong performance and puts us in a good position from a capital point of view moving forward. The successful deleveraging of the €1,400,000,000 of the buy to let performing portfolio in September added 150 basis points. And indeed, it was a very good capital management measure when it happened and obviously has assisted us by way of how we manage our capital position. We've received regulatory approval to call an existing AT1 instrument that was issued in 2015. And I should also note there'll be the very successful issuance of a new AT1 issuance in November, which we issued at a much lower coupon and indeed with a significant increase in investor demand. And lastly, with regard to COVID payment breaks, 99% of COVID payment breaks have required have expired. We had a total of 1,600,000,000 euros of payment breaks, which of mortgage payment breaks, which represented 10% of our gross loans. 4% of those require additional forbearance measures, and that equates to about £70,000,000 And about another 6% are likely to require additional forbearance in due course. So in total, around €180,000,000 of the of mortgage payment breaks will require additional forbearance. So if I just move on to Slide 5 and deal with the pandemic related disruption to the domestic economy. And we can see here that it naturally and we are aware of this that it caused a very sudden and severe contraction in economic activity across the world. And indeed, if we take in Ireland, the consumer spending has reduced by 8% year on year and reduced by 40% through the 1st lockdown period. So a significant shock to the system. And indeed, I think we all remember the first lockdown and the shock we all had as how we dealt with it. But what we've seen on the other side of the equation is that household savings have increased and to in excess of 20%. And indeed, they actually peaked at 35% in quarter 2. So the unwinding of these elevated deposits in due course will, we believe, support strong consumption growth in the medium term. And it's a case of when we exit the lockdown period and also when we actually roll out the vaccination program. In terms of the labor market, on the right hand side, job losses came in waves, which is aligned to the increasing levels of public health restrictions. But there were signs of recovery in the second half of last year and through the summer months as most sectors became operational. However, the 3rd lockdown has seen the numbers of recipients of state assistance rising again, and this is likely to remain the case for the next number of months as restrictions are gradually eased. The labor force is expected to be smaller over the forecast horizon, with unemployment estimated to be around 15% at the end of this year. And it is expected to return to pre pandemic levels by 2022. But this will be dependent on the successful rollout of the vaccine program. And indeed, the key sectors who have been impacted return to work in a more fulsome way. If we just turn to the housing market, which is a key benchmark for us given the fact that 97% of our exposure, our the new mortgage market, the new mortgage market having reduced from €9,600,000,000 in 20.19 to €8,000,000,000 in 20.20 is expected to grow by about 13% to €9,000,000,000 in 2021. And indeed, in 2022 is expected to grow to €10,200,000,000 So what we're looking at there is something in the region of a 27% growth versus last year in the next 2 years. So that's something that is actually quite positive. Demand for credit declined in March 2020, and that followed the initial containment measures with a significant low reported in mid April. And mortgage but mortgage approvals and drawdowns recovered well in the second half, with an extremely positive 4th quarter helping to offset the earlier subdued activity levels. Housing supply, which was already insufficient to meet demand, was curtailed by the restrictions. And estimates before the crisis was that total housing completions in 2020 would be between 20,420. As it turns out, they've come in around 19,400, which is 8% lower versus last year. And with demand expected to be at 35 to be in excess of 35,000 units per annum, We believe this will lead to a continued upward pressure on house prices. But overall, the house price index has performed well to what was from what was expected early in the year with a 0.9% growth in 2020. And this is around consumers choosing to use their savings to look to invest in housing and to buy homes. But also, I'd suggest a very changing social environment, which makes house purchases more affordable outside key urban areas. And we're seeing that by way of our mortgage lending as well and our mortgage pipeline that there is an increased demand in non urban and regional locations. So if we just move on to our actual performance then, and particularly I want to focus on our performance in the second half of the year. Our mortgage market share, as I mentioned before, our new mortgage lending was €1,300,000,000 that was a reduction of 14% year on year. But that reflects the market movements by way of lower mortgage markets. So we're basically in line with the market. Our new if you look at it on the top left hand side, if you look at our the graph there, you'll see that our mortgage drawdowns increased by 40% in the second half of the year versus the first half. And you can see that our market share basically stayed the same, but a significant increase in performance in that time. And then if you look move to the right hand side, you'll see an even more positive picture in that our mortgage applications in the second half were 70% higher than in the first half. Now we put that down to, obviously, the recovering market. We put we also put it down to the actions we took on pricing, the actions we took on how we market our product and indeed the actions particularly we took on our proposition that we would provide a 72 hour turnaround for an approval by a customer. And almost 100% of applications are turned around within that 72 hours. And that's something that customers really appreciate. And even if they get a fast no, it's better than a slow no, if you understand. So in that regard, it's been quite successful for us, and we can see it in our numbers. And if we even look at our drawdowns up to the end of February, they're actually in excess of last year. And last year, the 1st 2 months were non COVID months. So there is a momentum in the mortgage market, which we should be aware of, and we can see it in our numbers. The other thing I'd say with regard to this slide is you'll see that we have a better conversion ratio. So if you take our mortgage applications for 2019, we had 14.4% share of the market, but that converted to 15.5% of drawdowns. Indeed, we had 14.5% of 2020 applications, and that became 15.3% of drawdowns. So what you can see is when we get an application in, we can convert it at a better rate. And indeed, if you look at our market share in the second half of the year at 16.2%, we would expect to be achieving at least that by way of drawdown market. And indeed, if you take our previous experience over the last number of years, we should convert drawdowns at a higher rate. So there has to be something positive in that from our point of view. And our track record shows it. If I just move to personal term lending, obviously, the consumer credit market has taken a hit because of the lockdown, less holidays, less car purchases, etcetera, less discretionary spend. And you can see that our own personal term lending is 30% 31% lower versus 2019. And you can also see we've had a higher proportion of direct activity, which highlights the straight through process we have there on personal term lending. And we'll just keep an eye on It's a product area that is actually very linked to the lockdown situation. And with regard to SME lending, we have great ambitions in SME. It's an area that we want to develop. It's an area that we want to compete in. You can see that we actually marginally grew our SME lending this year, which is probably unusual given the year that's in it. But we have intentions and to grow that even further, and I'll talk about that later in the presentation. So if I just move to now to Slide 8. I want to just talk about our strong ambition, our purpose and our priorities. I personally have huge ambition for Permian TSB. And despite these unprecedented times, I believe that we have all the ingredients become a clear number 3 player in the market. Further building trust with customers will be at the heart of what we do. And as I took on my new role as CEO in July of last year, I set out a new purpose for the organization, which is centered on building trust with customers and connecting with the bank's community heritage. And that heritage is over 200 years operating in the Irish market and across the country in key communities. And just to go through this and that our purpose is to work hard every day to build trust with our customers and to ensure that we live up to our promise of being a community of people in this bank that serves the community of customers that we have. And indeed, we will want to welcome new customers in that regard. We will do this by building a sustainable organization that is transparent and fair with customers. And indeed, an example of this is where we reduced our rates our SVOR and MVO rates in July of last year. And we want to do more action in those areas. Our ambition is to be Ireland's best personal and small business bank. It's quite straightforward. And but best for us doesn't mean the biggest. We don't have to be the most profitable. We don't have to be the biggest by way of volume. But it does mean being the best at what we do for both personal and business customers. And to achieve this ambition, we focused on a number of key priorities. And they include, for our customers, increasing the trust, advocacy and loyalty of our customers. If we talk about our digital capability, it's about continually enhancing those capabilities. Indeed, this year, we have made progress. I mean, in 2020, we have made progress on our digital capability. And we will I'll talk about that shortly. And we'll continue that focus. If we talk about our culture, so our culture is about embedding an open, inclusive, risk aware and growth culture, a culture that's focused on customers, a culture that questions itself by way of how it operates internally and externally, and a culture that is progressive and positive. We also want to simplify how we do our business. We want to simplify the interaction with our customers. We want to make that interaction easier, and that is a key focus. And I believe by focusing on those four things: customers, digital capabilities, the internal culture and the way we operate as an organization, the simplifying our business. I believe by focusing on all of those, we will drive a successful and profitable bank that we can all be proud of. And indeed, we have to remember that 75% of the bank is owned by the Irish state. So it's something that all citizens can also enjoy if we become more profitable and we become more sustainable and we become more competitive and our position grows. So to achieve these priorities, we need to focus on building trust and loyalty with our customers. And I can't underemphasize the word trust and what that means and how it's tied into the way we operate. And we have to work on transforming some of the key elements of the bank to build a sustainable future for the bank. So let me move to Slide 9. And I just want to talk about the our COVID-nineteen response. And as mentioned at the outset, the bank is and has been fully committed to supporting our customers, colleagues and communities through this pandemic. And I believe we've shown operational resilience and strength through what was a challenging year. Proactive measures were undertaken from early February 2020, And that was around protecting the health and welfare of our customers and indeed our colleagues. And our colleague response to the pandemic is a reflection of the positive customer focused culture that the bank has and that we kept all our 76 branches open and we had specific hours for elderly and vulnerable customers. All our contact centers were fully operational, and we opened 4 new regional centers to cater for not only social distancing but also to cater for the requirements of our staff who have to travel from different parts of the country. And also we also were able to move 1200 of our colleagues, about 50% of our colleagues off-site into to working from home within a very, very short space of time. So in that respect, we definitely stood up to the challenge of the pandemic. We showed up. We kept every branch open, and that was important. When we talk about key customer supports, we approved 10,650 new mortgage payment breaks, which equated to 1,600,000,000 had 800 approved personal loan repayment breaks for up to 3 to 6 months. We increased the contactless payment increase to €50, and that's been very popular indeed. There's also a demand now to increase that even further. And also, we provided £1,000,000 of cash back rewards to Explore customer accounts. And I mentioned already about the payment breaks in that there's about 100 customers, about 1% who still remain on payment break. There's about 10% of the original applications that require further support and assistance. And we continue to discuss individual requirements on a case by case basis. And indeed, we understand the need to provide, in some cases, additional payment breaks, which provides customers the time in which for their sector or the industry that they're working in to come back to open again and for them to actually start earning salary and wages so they can start supporting the mortgage. And indeed, we are absolutely focused on ensuring that that support is given. And the time is given for the lockdown to cease and for some more normality to come back. If I just move to the next slide, Slide 10, I want to talk about customers. Customers are at the heart of what we do. Personal service is at the heart of everything and how we operate. However, as both customers and colleagues' experience have changed, digital is playing an ever more increasing role in our service offering and our future ways of working. And we are competing very strongly, bringing real innovation to the market, introducing great new customer offerings and winning new customers. And an example of this is that over 40% of our new mortgage customers or sorry, of our mortgage customers last year were new to the bank. And that's fantastic. We love to welcome new customers to the bank, and we love to serve them in a way that suits their needs. And if I just look at a couple of key things on the slide, on the top left is around what we're delivering on our priorities when I talk about enhancing customer journeys, leveraging the digital capabilities and repositioning our brand. Our NPS is plus 12, so we're top 2 in the market, and we're up 8 points year on year. And in that, the key aspects are around the service quality that we have and the service experience. And those things we're very proud of, and we need to develop them. And they all play into our purpose, which is around trust. The 72 hour mortgage approval has been very, very popular. It's something we absolutely measure and we operate under, but it's been quite popular. I mentioned about the 40% new to the bank customers. If you look at our digital activity, it's been quite impressive in that we've had over 100,000,000 logins on our digital channels, and that's a 20% increase year on year. Have more than 400,000 customers who are active on our app, and we improved our app this year by changing the security login and things of that nature. We saw an amazing increase in activity in our app. But the activity is up 15%. We have 92,000,000 contactless payments made by customers through the year, and that was an increase of 40%. So again, you can see the move away from cash into plastic. We've now 72% of our customers who are choosing to use the bank online. And not only that, our term loan, our credit card and an over our overdraft offer are all digitally available online now. So a customer can operate these from their own home in order to open these products. They can obviously also go to the branch as well because, as I mentioned, we kept them all open, all 72 of them. So that's very, very important. If I just talk about partnerships. So partnerships for us is very important. It's about giving customer choice. It's about filling out our product offering to ensure that we can meet the needs of customers. It's accepting the fact that we can't do everything, that there are other parties out there, other partners who can do things slightly better than us and we can plug them in and link them into our product offering. And if we take about if we talk about the key partnerships we have, we have a very, very strong relationship with intermediaries. It's a relationship that goes back years. And it's a relationship where it's very we provide our intermediary and our brokers with a very successful mortgage broker portal, which allows them operate with the customers that they're interacting with in a very positive way. And we have 25% of the broker market, and it's something that we care for, and it's something that we manage by way of that broker interaction. We also have our new partnership with the SBCI, Strategic Banking Corporation of Ireland. And that was around us accessing, for the first time, a €50,000,000 line for the future growth loan scheme for SMEs. And to date, we're 2x oversubscribed. We've nearly €100,000,000 of demand for that scheme. And we will look to for customers to draw down on that scheme in quarter 2. But it really demonstrates our commitment and our support for SME customers and really that we want to provide something different to customers in this area, a different relationship, a different competition, a new competition. And as I said earlier, and I'll say it again and I'll keep saying it, we will we invite business customers to come and talk to us about their needs and how we can fulfill them. We also recently entered into a strategic partnership with Bibby Financial Services, and that's to provide customers business customers with an invoice financing product and service. Bibby are leaders in this area in both the U. K. And Ireland, and we see the benefit of actually linking with them. And there will be more partnerships which we will enter into, which will provide particularly on the business side, which will allow us complete and fulfill and fill out our offering when it comes to business customers. So if I just move to slide 11, and I want to talk about transformation. And transformation apologies, one sec. Transformation for us is about how we develop our digital offering, how we think about our business model and simplifying that, and then how we embed our values. And we live and behave our values every day. And we've embarked on a 3 year journey to deliver a digital transformation program. And we're investing 100 more than 100,000,000 euros in that transformation. And we're about halfway through. So we've a lot done, but we've more to do to enhance that offering. But a couple of things we've delivered. We delivered Apple Pay, which was extremely successful, well way ahead of what we expected by way of customer take up. And shortly in the coming months, we will deliver Android or Google Pay. We also have brought in digital documentation upload, which allows us to progress our online mortgage journey. We have a direct mortgage journey at this moment, and we've already received applications through that direct mortgage journey, but it's something we want to increase and progress and really show that we can offer such an ancillary and a complementary channel for customers that isn't just branch focused, but also has a direct aspect to it. We've launched video banking, which is the first in of its kind in Ireland. And that will allow us to interact with customers in a remote way, but yet in a personal and a connected way. So it's really, really important. We're working very hard on what we call our customer correspondence management tool, which is a key enabler for how we migrate our correspondence from paper to digital. So it's a really important project for us, and we're making some progress in that way. We're also looking at artificial intelligence technology with a chatbot pilot on the way, and we'll see how that goes. But again, it shows you the direction of travel. If I talk about the branch, the branch and I keep saying about our 76 branches, but they're core to us. And what we're equipping branches with is Ipads, etcetera, and technology to allow them to deal digitally with customers. We've also upgraded across all our network our ATM and SSBM technology. And then lastly, with regard to the SBCI funding, the €50,000,000 line that we had, we implemented a digital portal allowing customers to apply digitally and online to apply for that particular funding. It was that we're the 1st scenario to do it. Did it with a partnership with a fintech, and we had that up and running within a matter of weeks. So really, really important. It shows our where our priorities are and it shows a significant development that we're making. And if I look at 2021, the focus is around a digital current account, which we will launch in the coming weeks. It will involve about a 6 minute opening time for a current account. We will also be further implementing payment strategy around improving that payments experience. I mentioned already Google and Android Pay and also our digital mortgage and SME proposition by way of bringing that fully online and having a service journey that is actually more efficient and more direct for customers. But all that will do will complement what we're doing in branches already. So we just have to be aware of that. On the right hand side of this slide, this is about the people, how we're transferring, how we're transforming our culture, how we're transforming the organization, how we're transforming how we operate. And it's around effective organization design. And we're involved in detailed organizational structure review. And this is as a result of launching a voluntary severance scheme in November of 2020. We already mentioned that we would we were seeking around a 300 FT feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet feet E reduction. In fact, we had about 400 applications for our colleagues. It's about allowing them to take decisions with regard to their future life, their future career and how they want to operate themselves personally. And I think it's a win win. It allows us to carry out some organizational redesign and indeed allows colleagues who have been with us for an extended period of time in some cases to actually to move on with their life and their working life. We're also looking at smarter and new digital ways of working. And that's around how we think about our colleagues working from home, working in the office, how we enable that work in a way that makes sense. If I take the if I move to the sustainable workplace solutions, and this is around our office footprint. So 50 as I mentioned earlier, 50% of colleagues are currently working from home and want to continue that for at least some days of every week. And we want to facilitate that because we believe that is the right way to go. It actually assists colleagues in how they manage their personal life. But also we've seen firsthand that the effort and commitment that colleagues have given us through the pandemic that we can trust them, we can work with them when we can see that the output that we're getting as an organization is increasing. And it also links to the fact that we can utilize our workspace in a more in a better manner. And as part of that, we decided to exit our Park Place office. We had rented offices there for a number of years. We've decided to cease that lease, and that will cease in April 2021. So again, it's part of the reduction in our cost base, but also how we're moving from a more physical presence to having colleagues working remote. If we look at operational excellence and information security and then how resilient we are, There's no doubt that the pandemic was a significant test around operational resilience. I believe we stood up that stood up to operational resilience. We didn't have any issues with our IT platforms. We didn't have any outages that caused any difficulties. We kept all our call centers and our operation centers and our branches up and running and going from that perspective. So these were all very positive things. So if I just move to the next slide, which is around how we're playing a part by being a responsible business and indeed by being a sustainable business and how we are thinking about doing business in a more responsible way. On this slide, I'll just bring you through it. So if you look at the top left, we've actually strengthened our community partnerships. In July of last year, we launched a partnership with the Okulin Co Housing Alliance, where we're providing them with financial support over the next 3 years to build affordable housing, 1800 affordable houses across the country. And actually, that slowed down a little bit because of the pandemic. But the reality is there's a significant demand among society for affordable housing, And we want to play our part in supporting that. We also provided €700,000 in financial contributions to Irish community organizations. And that was by way of staff volunteering and by way of staff charging activity. But it's a significant amount of funds we've provided and they make a real difference the communities and where we operate. By way of supporting our colleagues, our culture index is up 7% to 72%. Our new engagement index registered 71, which compares very favorably against industry standards. We have a significant program ongoing internally in the organization called Living as Leaders, where we partnered with Lift Ireland around developing personal leadership qualities, behaviors and the way we act every day. And to date, over 600 colleagues have participated in that. And by the end of this year, all colleagues will have participated in that. If we think about diversity and inclusion, we've been heavily involved in the Work Equal campaign, which is our 3 year partnership promoting gender equality in the workplace. And if you look at our gender balance in PTSD, 47% of the staff are female, 53% of the staff are male. If we look at SEDAR leadership, 37% are female leaders within the organization. And that's a 7% increase in female leadership year on year. And indeed, we have ambition to increase that even further. For the first time this year, we've announced our gender pay gap. We're at 14.9% for 2020. The national average is 14.4%. And while this compares favorably, let's say, to the U. K. Financial Services sector, which is around 31.9%, so it's arguable they have a lot of work to do in that area. We also have work in order to improve our gender pay gap from the level we are at, and we are absolutely committed to doing that. And it is linked obviously to the senior leadership female senior leadership development that we have within the organization. And lastly, I want to mention that we achieved the mark. And what is the mark? It's an accreditation by the best in class responsible business programs. And it's assigned by the Business and the Community Ireland initiative. And we're very, very pleased to get it. It took us a number of years to actually get that accreditation. And it really shows the progress we've been making. And if you look at if you take our carbon emission intensity, it's reduced by 10% in 2020. It's reduced by 55% since 2,009. Today, 100% of our electricity supply is renewable. 10% we're looking at a 10% as I mentioned, a 10% reduction already in our Scope 1 and 2 carbon emissions, and we're moving on to Scope 3. We've signed up to a lower carbon pledge with the business in Community Ireland. And there's a significant focus internally on sustainability. As an organization who's been around over 200 years, we are we understand what sustainability means. It's in our DNA by way of our positioning and the way we've operated over that period of time. And we want to play our part in lowering the carbon footprint of PTSD over the coming years. So with that, I'll hand you over to Paul McCann, our Interim CFO. He'll go through the financial performance, and then I'll come back and talk about the outlook in due course. So thank you. Thanks, Eamon. I'm pleased to present the financial statements of permanent TSB Bank for the financial year 2020. The first thing to say is there's no question that 2020 was a challenging year in terms of the COVID-nineteen pandemic. What is true to say is it's the same for banks across Ireland, Europe and indeed the world. But I'm pleased to say that we have beaten guidance for 2020 and we remain on a good sound financial position for 2021. So just as our customers have been resilient, our bank colleagues have been resilient And you'll see resilience in the financial statements for 2020. So to discuss the numbers. The bank made a loss before tax of £166,000,000 And the moving parts Our operating income is down 9% to £375,000,000 I'll discuss in more detail in a moment our net interest income. Our fees and commissions are down £9,000,000 and that's mainly as a result of reduced transactional activity in the market, the inability of people to spend money from last year. And I'll also discuss our other income in a moment. Our regulatory charges are up £2,000,000 which brings our operating profit to £52,000,000 We have an impairment charge of £155,000,000 for the year, which I'll discuss late in a moment. And we have exceptional items of £63,000,000 which relate to restructuring costs of £31,000,000 a large part of that is a provision for our voluntary severance scheme, deleveraging costs of £26,000,000 and exceptional COVID-nineteen costs of £5,000,000 So to discuss the net lending income. The net lending income was €332,000,000 in the financial year 2020, which has increased by 4% year on year, as new lending mortgage volumes yielding an average of 2.8% exceeded outflows at a yield of 2.5%. There was a decrease in our other interest income, which has decreased to £9,000,000 from £37,000,000 and this is largely due to our treasury income reducing by £18,000,000 due to the continued maturity of legacy high yielding treasury assets. These assets have now matured and we're now in a low interest rate, lower yield environment. We also have lower income from our non performing loan book, which we sold in FY 2019 and that has resulted in a negative charge of £6,000,000 So what does that mean for our net interest margin? Our net interest margin has declined from 1.8% to 1.73%, primarily due to an increase in excess liquidity and lower investment yields on treasury assets. We are guiding NIM of less than 1.7% in 2021 before increasing again in 2022. Our asset yield is 1.95%, which is 15 basis points lower year on year, mainly as a result of the continued maturity of high yielding legacy treasury assets, the cost of excess liquidity together with some pricing adjustments which the bank made in 2020. On a positive note, the bank continued to actively manage our cost of funds and that has reduced 7 basis points year on year. To look now at our performing home loan book, it's remained stable at £11,700,000,000 in 2020, which is the same as our FY 2019 figure. Our home loan mortgage book has grown 4% since 2018. There's a good new business performance considering the year that it was, as Eamon has mentioned, with 95% of inflows or £1,300,000,000 to fixed interest products. And you can see from the graph the change in the mix of our performing home loan book. As our fixed interest percentage increases, our variable rate decreases and our tracker rate decreases and we'll continue to do so. 92% of new business to customers are availing of the 3 and 5 year intra fixed interest rates and the average yield on those not new business is 2.8%. Our new business equaled our outflows in 2020 with 38% of the outflows from tracker products yielding a lower 1.3%. So our tracker mortgage book is now circa 40% of our total book. What does that mean for our home loan yield? The stock has decreased to 2.49%, which is a reduction of 9 basis points year on year. However, our flow is at a much higher 32 basis points higher at 2.81%. A significant transaction that happened during the year was the sale of our Glen Bay 2 performing by Tolette book, which has significantly transformed that part of the book. The gross figure has gone £3,200,000,000 to £1,500,000,000 Our buy to let book is 85% tracker with 14% variable and 1% fixed. 47% of that book is interest only. After the sale of Glen Bay 2, our average yield has increased 22 basis points to 1.64 percent from 1.42% before the loan sale. The loan sale was CHF 1,400,000,000 which has resulted in a 40% reduction in the performing buy to loan book as a transformational transaction. And the average yield on that book was 1.08%. Moving on to costs. And the bank and everyone in the bank has maintained really good cost discipline throughout the year. Our total costs have gone to £323,000,000 down 7% or £7,000,000 year on year. Our regulatory charges has gone up £2,000,000 resulting in total operating expenses of £274,000,000 down £9,000,000 in the previous year. After charging depreciation and amortization, our total addressable costs are £237,000,000 which is down £13,000,000 from £250,000,000 in the previous year. So our cost income ratio has gone up to 73%. But as you can see, that's nothing to do with our cost line and more to do with our income line, And we see that lowering in coming years. Our average staff numbers have increased during the year by 43. And again, all the initiatives that Eamon was discussing earlier, a lot of our work colleagues are working on those initiatives during and they've been busy with that during the year. I think that the cost discipline is best described in the graph on the right hand side of the page. And just to draw your attention to the £15,000,000 decrease in non payroll savings, And this is a huge amount of effort, not just by finance, but everyone in the bank to have cost discipline and to be ensuring value for money in everything that we procure. And there was significant savings during the year on management consultancy, legal fees, IT and Telecoms, professional services, marketing and there was a lot of work around contract renewals and optimizing those contract renewals for the benefit of the bank. And just in terms of the costs, it's not a 1 year wonder story. This reflects a number of years of cost discipline and cost control. In the last 4 years, there's been a 13% reduction in addressable costs. And it is the firm intention of the bank to continue this cost discipline over the coming years with an estimated 11% reduction in addressable costs. How was this achieved? It was achieved through a rigorous approach through the management of the 3rd party costs. It's also been achieved through the Enterprise Transformation Program, which was launched in November 2020, which is looking for a reduction in headcount, mainly in the management side of things of And also customer behavior is driving how we will distribute our products into the future. But we don't want to just be top of the class for costs. It's not for cost sake. We're focused on cost because we are looking to invest in our key priorities, a lot of the priorities that were outlined earlier in the presentation. Just to give you some numbers around this, between 2018 2020, we spent an average of £48,000,000 per year and £27,000,000 of that relates to commercial and technology spend. After investing a lot of money in our core platforms and core base, we will spend less in the coming years, reducing to 33%. But I would like to single out today that our depreciation from that CapEx spend will begin to take effect over the coming years. Of course, we will try to offset that by further cost savings as we go. So over the coming years, we intend to spend money on the digital current account, the launch of Android Pay, developing the digital mortgage and digitizing the SME customer journeys and having a digital service for all routine transactions. The demands on a bank will continue and we will also have to invest in regulatory and mandatory spend including cybersecurity, data centers to ensure we have enough data storage for our customers and anti money laundering. Over the last three years, we have invested over £100,000,000 in technology and digital programs, over £30,000,000 in branch refurbishment and modernization, along with other business programs around people and culture to make the bank a better place for our people and our customers. In terms of the impairment charge for the year, we have booked a further €80,000,000 in H2 for 2020, resulting in a total charge for the year of £155,000,000 And this charge reflects the changes in forward looking macroeconomic scenarios. Largely driven by the COVID-nineteen pandemic, we have included post model adjustments of £110,000,000 in that £155,000,000 with the remainder being mainly P and L items. We're very comfortable with this prudent approach to impairment. We believe the economy will take a few twists and turns as the epidemic draws to a close. And we want to make sure the bank is in a well provided and stable position launching into the challenges in 2021 and beyond. We would also say that we do not see the charge for 2021, we would see that being significantly lower than our 2020 provision. Looking at our provision coverage. There are 10.6 €1,000,000,000 at Stage 1 €3,200,000,000 at Stage 2 €1,100,000,000 at Stage 3. Our non performing loan book increased by £80,000,000 to £1,100,000,000 But the bank remains committed to mid single digit NPL ratio. We estimate that 40% of our NPLs are going to cure organically or technically over the next 12 to 18 months. And the balance will be assessed using all alternative options as the months progress. In terms of our provisions by stage, there's €100,000,000 at stage 1 €300,000,000 at stage 2 €400,000,000 at stage 3. Our Stage 1 and Stage 2 coverage remains flat at circa 2.5%, but we've increased our Stage 3 NPL percentage by 2.1 percentage points to 34.3%. Percent. And again, this emphasizes our prudent approach to making sure the bank is in a stable financial position for the future. In terms of funding and liquidity, we are in a strong funding and liquidity position. We remain a bank that is largely funded by our customers and the customers that trust us with their money. Our deposits retail deposits increased to £10,500,000,000 during the year, which has increased. In line with other trends across the market, the bank has also increased our current account position by 23% year on year to £5,800,000,000 Our loan to deposit ratio is now 79%, which is a reduction of 12 percentage points year on year. And this reflects the overall higher level of deposits in the market and also the result of our performing loan sale. So our liquidity ratio is 276%, which is significantly higher than our European Bank peers. That reflects the higher deposit levels from our COVID 19 lockdowns as people save money and also the proceeds from our loan sale. The bank's current MREL target becomes binding on the 30th June in 2021 and the bank expects to be compliant in advance of this date. The bank awaits confirmation of a new MREL target based on the bank resolution and recovery directive 2 framework. As of 31 December 2020, the excess liquidity held with the Central Bank of Ireland was €1,700,000,000 which attracted a rate of minus 50 basis points. Our CET1 ratio in relation to capital, it remains strong. Our CET1 ratio increased by 10 basis points. There would not be too many banks that have increased their CET1 ratio during 2020. It increased from 15% to 15.1%. In response to the COVID-nineteen pandemic, the Central Bank of Ireland introduced measures to support the sustainable provision of credit to the economy, specifically the removal of the countercyclical buffer of 1% and the early introduction of the CRD IV regulatory amendment. In November 2020, we issued an AT1 issuance of £125,000,000 which added 130 basis points to total capital. That issuance was oversubscribed and there's a lot of interest in the market in where the bank was going. Our pro form a December 2020 total capital transitional reflects the impact of the derecognition of the 2015 AT1 issuance following Central Bank approval in February of this year. So our CET1 remains above our regulatory requirements of 8.94%. And the moving parts in relation to our capital during the year was the Glenbe II sale on one hand and obviously the credit impairment on the other. We had capital generating generated from operating profit and that was offset by some of the exceptionals that I outlined earlier. Our risk weighted assets decreased significantly from €9,700,000,000 pro form a to €8,500,000,000 And that was largely again driven by our sale of our Glen Bay 2 portfolio. So management CET1 expectation over the long term is 13.5%. So to summarize the financial year for 2020, there was significant resilient lending during the year of £1,400,000,000 despite the challenges that 2020 brought. Mortgage lending was £1,300,000,000 Our mortgage market share was 15.3%. Our net interest margin was 1.73%. Our net fee income was circa 8% of our total income. And customers trusted us with their money and our total retail deposits, including current accounts, grew 9% year on year, strengthening our brand and our franchise. From an efficiency perspective, we reduced our addressable costs by 3% year on year. We now have a proven track record of managing costs over 4 years with a 13% reduction over 4 years. We have been conservative and prudent in our impairment charge of 103 basis points of total gross loans. And we continue to take a prudent approach as we await the outcome of the economy in this pandemic. Our NPL ratio is 7.6%, but we remain committed to mid single digit percentages. And again, we have a proven track record in dealing with our NPL loans. In terms of returns, the bank generated an operating profit of £52,000,000 We're in a stable funding and capital position. We had a very successful transaction, again, not many €1,000,000,000 plus or €1,000,000,000 transactions in 20 20. And again, that improved our CET1 ratio for the year. We had a very successful AT1 issuance in November 2020, which added 130 basis points and our leverage ratio remains strong. So the financial statements for 2020 are resilient and give the bank and the management team a good platform for the medium term. Just to talk about the medium term, I'll hand you back to Teemann. Thank you, Paul. So I'm just going to talk about the medium term outlook for the next 5 years, so the period 2021 to 2025. This outlook is based on permanent TSB stand alone. So naturally, when we get to the Q and A, you might have questions on Ulster Bank, but it's not that obviously is not part of this. And indeed, when I talk about the numbers, they're actually prepared on the basis that Ulster Bank remains in the market and that only their decision to withdraw from the market or NatWest's decision to withdraw from the market was only made on the 19th February. So again, I'll talk about that when we get to the numbers. So really about on Slide 27 here, we're talking about what's our ambition, what's our purpose, what's our priorities. And I cannot underestimate or understate our purpose and our ambition and how we think about it. And the fact as an organization, we are absolutely focused on achieving both of those aims. And how are we going to do it? We're going to do it by maintaining our physical footprint. We have been investing in our branches, and we will continue to invest in our branches. And as I've mentioned earlier on, we've seen an increase in mortgage activity in branches, particularly outside urban centers this year. And we believe that is something that will continue. We will be digitally led. We'll have an omni channel approach, which digital capabilities across key sales and service journeys. And again, you'll see enhancements over the coming years, and we're putting money behind that. You'll see the right products at the right price and a strong market share in our target segments. And our target segments are in the personal and small business area. That's where we want to play. That's where we can make a difference. That's where we want to attract and support and service customers. And by way of our how we think about routine service transactions, there's aspects of our transactions today that are in branch, and we have to move them in a more fulsome way onto digital channels. And that's something that we will be doing. For example, we talk about the online current account, which will be which we could open in 6 minutes. So these are examples of how we're moving things. If you think about what where we're focused, I talked about partnerships and innovation. I talked about digital support and digital progress. I talked about the enhancing journeys. If you think about the mortgage journey as an area that we can enhance, we're on it already, simplifying how we do business. And indeed, we have a history of increasing efficiency and reducing costs. And that's something which we will continue to manage. And I would suggest that is clearly in our DNA. We clearly have an ability to manage our cost base in a way that makes sense, not only for us, but for shareholders and all stakeholders. So if we look at the what we believe is the medium term outlook for the bank, We're looking at a mortgage market share between 16% 18%, but I believe we can actually do something better than that. And indeed, that market share is with Ulster Bank still in the market. And we should get our fair share of Ulster Bank market share. By way of SME new lending, we're looking to grow from a very low position today, but they are green shoots to having around 8% market share in the coming years. We're looking to double our consumer lending per annum. Again, we might exceed that, but that is at this moment, that's a reasonable target. We're looking at bringing our net interest margin to 1.9%. And by the way, that is not on the basis of any interest rate increases. And we've talked here not in recent years, but in prior years, we talked about the very positive impact that an interest rate increase would have on our position given our tracker book exposure, which has been reducing, but it's still a substantial part of our balance sheet. So that would be an interest rate movement, would be very beneficial to us by way of a return. And then our net fee income is currently around 9% of total income, and we're looking to move that above 10%. In fact, we have a target of around 15% if we can get there, but we're definitely looking above 10%. If we take efficiency, Paul has already talked about the outlook with regard to our cost base. We're looking to reduce our addressable cost by about 11%. That will bring us to about a 65% cost income ratio. That actually includes regulatory costs. If you took out regulatory costs, it's probably going to be in the 50s area. Just don't have that number to hand, but we're looking at a 65% costincome ratio overall. NPLs, Paul has touched on that, but we look to further reduce those. We have the lowest nominal amount in the market. We've got a track record here in ensuring that we do that in a way that protects capital. And that's something we again, over the coming years, we will be looking to manage. And then a net impairment charge. 2020 was quite exceptional given the COVID impact, but we're looking at around a 30 basis points charge over the period. If you look at our experience pre COVID, it was well below that. But I think it's reasonable that we should think about it at that level. Given that we are changing the mix, we want to have more unsecured lending, more SME lending. So we'll change the mix in our impairment charge, but naturally also changes the mix in our interest income and our net interest margin and that is positive in that regard. Paul has already mentioned that our target as a bank is around 13.5% fully loaded correctly Tier 1. And we're in a very good position at this moment with regard to our capital position. And you will see over previous years that we mined our capital position like a baby. It's something we focus on. We manage we actively manage it and we ensure that we have enough capital as an organization to manage the risk profile we have, but also leave enough capacity to grow as a bank and to support customers and to support wider society. Our leverage ratio around 7% over the period the next 4 to 5 years. That is a leverage ratio, which is very safe. If you compare it to an equivalent U. K. Bank, we're about twice as safe as an equivalent mortgage lender. But it does highlight some of the more recent market information around the capital levels that are required for an Irish bank of our size. And then lastly, we're looking at a return on equity of in excess of 6%. That is more towards the back end of the outlook given our growth trajectory trajectory, I should say. But if you I have to just emphasize again, this is on the basis that Ulster Bank are competing in the market with us and that we wouldn't pick up additional market share, whether it's an SME where we have great ambition or in the mortgage area. So there might be some additional pluses there to offset any particular minuses we might have in other aspects. But the reality is we're looking at a 6% return on equity, which in where we're coming from, I think, is a respectable level. If we went back to last year's presentation, we were looking at that around 2023, 2024. But the reality is that the COVID pandemic has probably pushed it out a little bit. And as I say, the offset, the positive offset there is the fact that we should generate more business from the fact that Ulster Bank will not be present in the market over this medium term. So I just want to finish off by saying that the results show a high degree of resilience. They show a high degree of progress in lots of aspects of what we do. We have not been sitting idle during the pandemic. We've been doing an awful lot by way of how we think about the culture of the bank, how we think about the digital transformation, how we manage our capital, how we manage our risk, how we manage our balance sheet and how we transform the business. And indeed, I think you can see that this year, as in 2020, has been a changing year in that respect. And indeed, the coming years will give you more of a flavor of how we're progressing and how we're proceeding. So on that basis, I'd like to say thank you for your time. Thank you for your attention. And we'll now move to questions. And myself and Paul will be more than happy to talk to you and answer your questions. So thank you. Our first question comes from the line of Dheerma Sheridan from Davy. Dheerma, you are now unmuted. Please go ahead. Thank you, and good morning, Eamon, good morning, Paul, and thank you for your presentation and taking my questions. I hope you're both well. Firstly, maybe just on Ulster Bank and Appreciate discussions remain at a very early stage, but I wonder if you might provide us with some details around the parameters that you're thinking of and looking at it at this point. Clearly, there are a number of portfolios and scenarios. Just trying to get a sense from you around that, please. Secondly, just on the cost outlook. Obviously, you've done significant investments in the last few years in both IT and your digital capability. I think how should we think about cost in that context over the period that you set out in the latter slides there, Eamon? And also just in regard to the branch network in the context of recent competitive moves, please? And then finally, maybe just on nonperforming loans. It looks like in the disclosures that a large chunk of the impairment charge in 2020 was related to Stage 3 loans. I just wonder within that context, should we expect further deleveraging given the market for loan sales has reopened? Thank you. Okay. Thank you, German. I'll cover the Ulster Bank question and the branches, and Paul will cover the other two questions. So I'll just kick off, if that's okay. With regard to Ulster Bank, if you take our ambition, our ambition is clear to be the best personal and small business banks. So if you look at the type of areas that we're interested in Ulster Bank, it's in that area. So it's effectively the retail business and the small business aspect, whole SME or micro business exposure that Ulster have. Naturally, those discussions are at an early stage. And there's aspects of it that we'd have to reach agreement on and negotiate. And we're talking about Ulster would have in the region of 1,000,000 customers. So you're talking about a significant lot of complexity and lot of challenge around how one would migrate and close a bank on the Ulster and NatWest side. So there are things we are discussing at a high level. So it's in the retail SME space. Naturally, we're also interested in the funding position attaching to those, so the deposits that come with those, the customers that come with those positions. And we will then just enter into that negotiation to understand the dynamics, the perimeter and then obviously the financial aspects of it and what it will require by way of what value it will produce for our shareholders. And indeed, if there's capital required in order to purchase those aspects of the Ulster Bank business, what level of capital will be required. But it's too early to speculate on those levels. With regard to branches, we have 76 branches across the country, as I mentioned. And they're a key part of how we offer our service to customers. We made it a key priority that we kept all those branches open. So they were open every morning during the pandemic and closed in the evening for customers to access. And they are key by way of our presence. We have no plans at this moment to close any branches. And indeed, obviously, when we think of Ulster and how they operate and indeed the nature of their business and the nature of the extent of the retail business, if we were to be successful there in getting through the negotiations, getting a value story that makes sense for everybody, obviously, then that seeking capital to back that value story, we would be looking to, in effect, extend our branch network in due course because of the Ulster Bank position as well. So that's how we think about branches at this moment. So for the other two questions, I'll hand over to Paul. Thanks, Eamon. Yeah, I mean thanks, Dermot, for your question. Yeah, in relation to costs, I think what we're aiming for over the period that you described is an 11% reduction in addressable costs. And again, because of our track record and the rigor at which we go after our costs, I'd be confident of that. That is going to be offset by depreciation. And I think we outlined today in a lot of detail the amount of work and investment that's going on there. So I think our guidance would be our cost to be in line in 2021 from last year. And then I suppose that we're hoping to reap the benefit of a lot of our investment in terms of a better customer experience. So we'll generate more income in the future and our cost income ratio will then arrive at what Eamon described around circa 65%. In relation to your second question, Dermot, I think obviously we watch all the transactions in the market with interest. We noted the transactions in 2021 with interest. As you know, we have a really good track record of deleveraging our NPL book. And we will look at all options, but that will depend on the market and the prevailing conditions. And so we will evaluate it this year as the year unfolds. But again, we're in a very good position in terms of what we've delivered from that regard and we'll continue to monitor it. Very helpful. Thank you both. Thanks, Stuart. Our next question comes from the line of Eamon Hughes from Goodbody. Eamon, you're now unmuted. Please go ahead. Thanks very much. Eiman, Paul, thanks for the presentation. Just 2 or 3 for me, if that's okay. So just firstly, on capital, I'll kind of direct this to either of you. Just the 13.5% sort of target over the medium term, I'm kind of conscious your P2RNG are probably elevated now, but that's still for the type of bank that you are. And I know the mix is changing a little, but it just looks a little bit on the high side. So I just wanted to get maybe a sense around the thought process on it. Secondly, in relation to revenues, I suppose one point is probably a clarification on my part. I thought, Eamon, you had mentioned that maybe you're looking or reviewing your SVR and NVR pricing. So I just wanted to make sure I heard that correctly or incorrectly in first point. And then more strategically, given that you're now with Ulster Bank, say, exiting, you're the kind of the main challenger to the big 2. So would there be an opportunity for you, particularly now since track is a 40% of your book and they're fixed at 20%, so there's only 20%, let's call it variable. You could have an opportunity here to significantly go for market share around pricing. So just wanted to get your thought process on that. And then finally, just on volumes. You talked about kind of good interest outside urban areas. Does that mean you might struggle on the Arbus loan size this year in relation to your mortgage lending? Okay, Eamon. So I'll pick up on those a bit, if you don't mind. And I just missed the last we struggled on what? I just missed the last piece. Just on the urban side. The last question, struggling for that. You made a reference in your piece about you're seeing good interest outside urban areas in terms of mortgage activity or maybe outside Dublin. And I just wondered, does that change the loan book, the average loan size potentially? So you could see kind of good volume uplift, but lower Yes. So I suppose I'll take that one last actually since I just clarified. And thank you for your questions, Eamon. No, the increase outside urban areas is actually complementing or increasing our volume. It's not actually detracting it in any way. We're seeing increasing volumes from brokers in recent months. And we're also seeing increased volumes through our branches. So our branch market share has increased. Our share of mortgages through branches has increased on a consistent basis over the last years. It's actually increased every year for the last three. And naturally, we complement and supplement that by the broker, the very positive broker interaction we have. So you tend to see a bigger ticket coming from the brokers and then a smaller ticket or slightly smaller ticket coming through the branch system. And that's just the nature of customer choice really and how they operate and how customers operate, I should say. So your point on the 13.5% is fair. We do look at it in a conservative manner. We also have to be conscious of how a regulator and how a regulator thinks about capital requirements. And indeed, sometimes our regulator tends to be in the rearview mirror, which is fine. They're looking back at risks rather than forward at how the market's evolving. So we feel that 13.5% is a reasonable level. Indeed, if we got the 13.5%, you'd be wondering, should we be moving to another level? But at this moment, it is reasonable. We still operate under a dividend blocker. So our ability to reduce our core equity Tier 1 is either we lose money or we actually lend more. And we're in the lending more category by way of how we manage that capital going forward. And as I say, today, our benchmark is around 13.5%. Indeed, if we have a chance, as we see naturally the risk profile and of course, we've just in recent months got clarity on Brexit, etcetera, we see all those things reducing. We may have the chance to reduce that requirement. But at this moment, that's where we're operating. By way of my point on SVOR and MVR, I mean, I think we were somewhat bold, if I don't mind saying it about ourselves. We were somewhat bold to reduce our rates and to actually to give something back to 70,000 customers, loyal customers who had SVO rates and MVR rates. And we gave back in the region of 55 basis points for SVO customers and a range of 20 to 50 for MVR customers. So quite attractive. We do see today, we have a raise only product offering on sorry, an incentive only product offering on mortgages. And in the next couple of months, we'll be bringing a non incentive price, because we think that's an area of the market we should be competing in as well. And we will continue just to review our SVO rates and MVR rates as we move along. And it's just part of how we operate now and trying to balance customer loyalty and customers who've been with us for an extended period of time with our financial position and where we're going by way of competition, etcetera. By way of the Ulster Bank and pricing, it's on new mortgage volumes and maybe other lenders will talk about this as well this week is around we have seen some increase in activity, increase in applications. As I mentioned during the presentation, we tend to once we get an application and we approve it, we tend to convert it at a higher market share percentage. So we can actually grow our drawdowns, if you understand, as a percentage of those applications. And that's been happening for a number of years. And it's all about that customer service that we offer customers who apply the 72 hour approval. All of that is really, really key to that engagement of customers. Indeed, as an aside, I actually talk to customers every 2 weeks. I spend time and call customers on an ad hoc basis. And what I've found is all our mortgage customers who've dealt with us in the last year, 2 years are extremely happy with the service they've got and how the bank has engaged with them to ensure that they can draw down their mortgage successfully. So we don't envisage reducing price at this moment. We do see we are competing as it is. We're growing by way of applications. And therefore, we're doing something right by way of the price offering we have. But I think it will be enhanced by the fact that we will be able to offer a non incentive price into the market in the next couple of months. And that will attract customers who value the incentive aspect of 2% upfront less. And we want to play in that aspect area of the market as well. So hopefully, they answer your questions, Eamon, unless you might have some follow ons. Yes. Do you mind if I do actually Please, yes. Two points. Just I mean, slightly maybe disingenuous in relation to the question on capital in that. I'm wondering is that how you would think about any if there was any loans coming across the Mulster that it would be premised on that same sort of 13.5% CET base around any requirements that are needed or not? So that's kind of just a follow on to that point. And just maybe if I can go back to Dheerma's question just in relation cost. Am I looking at this 2 simply and that in terms of the guidance you've given, you're looking at addressable costs up or say down $26,000,000 $27,000,000 and investment, I. E, depreciation up, the cuts of $15,000,000 So we could be looking at that high $320,000,000 s cost base down closer to the teens, somewhere like 315, that sort of range. So sort of a net sort of 10 to 15 benefit. Is that how we should be thinking about it? So I'll answer your first question last, if you're okay. And Paul, you might pick up on the cost, if that's okay. If you want to answer it now, Yeah. No, I think, yeah, Eamon, you're right. Yeah, that's how we would see it as you described it, Jack. Okay. So coming back to your point, if you look at how banks look at our competitors, look at their capital positions, obviously, their business models and profit generation and things of that nature, we're all around this level of Core Equity Tier 1 fully loaded. And we have to be conscious of that as we think of Ulster Bank and think about their business. But there's lots of moving parts within that, Eamon. It's not just capital. It's also there's an income aspect. There's a cost aspect to it. There's a migration aspect if it was to work. So it's not all about capital. But saying that, we have to ensure that we operate if we're successful, and indeed, it's possible that we may not be successful here. That's the reality. But if we're successful, we have to ensure that the new PTSB, the enlarged PTSB is on a sound capital footing, has a sound profitability aspect to it that it is generating profits and generating capital and is in a position that it can compete in that respect. So I won't naturally answer your question head on. But if you look at the market today, you can see that we're all operating around these fully loaded levels today. And how that will evolve in due course will be a matter of loss history, the regulatory environment by way of the risk profile of the Irish economy and the banks still operating within us. So that's how I would leave it, Eamon, if that's okay. Yes. No, that's great. Thanks very much for all the color. That's great. Thanks, Simon. Currently, we have one further question queued via the phone lines. So I'll just make a quick reminder. Comes from the line of Alastair Ryan from Bank of America. Alastair, you are now unmuted. Please go ahead. Thank you. Good morning. So it's the framing of the Ulster Bank thing, please. Clearly, an historic opportunity for permanent TSB. You've a pile of surplus cash on the balance sheet, but equally, you've a share price, which is pretty trivial. What are the constraints you're applying to yourselves when you're looking at the opportunities around what you can do without issuing shares? Or the opportunity is so big that it you might be able to make it work even if your share price is as low as it currently is? Thank you. Okay. Well, our share price has improved, Alastair. And by the way, thank you for the question, and hello. Our share price has improved, but naturally Irish share prices have been depressed in recent years across the sector. And the that obviously makes any deal challenging no matter what deal you have, if you're seeking capital support for any particular transaction. So it's about through negotiation trying to make sense of all that, trying to make sense of the proposition that we would be trying to create here, which is an enlarged permanent TSB, which is a permanent TSB that has an increased profit line, obviously, an increased cost line as well associated with it. It, but indeed a higher return because that's where we would create value. So I would suggest the there are challenges and all that. And there are the things we will have to work through in due course. But it's very early to actually talk about them in any particular detail. But naturally, we won't be putting forward any transaction that we would agree unless it made sense to all shareholders and indeed created value for those shareholders. And that will be the things we will look at when we get there. Thanks very much. And if I could just have a follow-up. I mean, when you're talking about the scope, so you're talking substantially about all the customers of Ulster Bank, certainly outside of the larger corporates. Can you imagine the whole balance sheet? I mean, clearly, there's a range of options you'll be considering, and the small business piece would be the most natural. But the mortgage book is very substantial, excluding the NPLs even. So that's subject to negotiation. And we're not ruling anything out at this moment by way of how we look at it and how we frame it and how we think about it. The Ulster has a fully funded position by way of its liabilities and its assets. And naturally, we want to acquire a balanced position as well. We have excess funding already, but indeed, we want to try and acquire a business with customers with assets and liabilities. And the scale of that has yet to be agreed. And indeed, there's nothing ruled out at this moment. It's for negotiation and which what makes sense for both parties. And indeed, if it doesn't make sense for both parties, then it may not happen. But the reality is we should be stronger even without an uncertain transaction. I do appreciate and I do agree it's a historic opportunity for us. But on that basis, we will still be stronger given our market position, given where we're going as outlined, not only by Paul, but by myself and how we're trying to address the market. So and just to finish it, that's the reason why we're interested because we do understand the transformational nature it would have for our organization and the position we have within the banking sector. And that's why we're interested in talking and trying to make sense and create a value position that works for everybody. Thanks very much. Thank you, Alastair. Thank you. Our next question comes from the line of Rob Noble from Deutsche Bank. Rob, you are now unmuted. Please go ahead. 3, if I may. Can you give us an idea of the underlying asset quality of book towards the end of the year if I take out the loan book sale that's deteriorated or stable? Secondly, have you got a sense as to whether the government would be willing to provide capital should the deal with us to look attractive enough? And lastly, just a clarification on numbers. Is your costincome ratio target ex depreciation or including depreciation? Okay. So I didn't catch the first question, Rob. But let me answer the other 2 and we'll come back to your first question. So our target of 65% includes all costs. So it's regulatory depreciation and addressable costs. So that's and I appreciate we did present our 2020 cost to income ratio excluding regulatory costs and we showed a 73% cost to income ratio. But the 65% target is all costs. And with regard to the government position, naturally we have 75% of the bank is owned by the state, 25% of the bank is free float. I cannot answer for how the state would think about supporting any transaction. But what I can do is try and ensure that if we're presenting a transaction to all shareholders, that it has that it is something that is value accretive and it makes sense both from a strategic point of view and a financial point of view. And in that regard, it's then up to the government if they're as a shareholder to decide whether they would support it or not. And that's all I can say. And we would not put ourselves and the Board obviously would not put a transaction in front of our shareholders unless we believed in it. And we felt it was value accretive and made, as I say, strategic and financial sense. With regards to your first question, Rob, just maybe just clarify that with us again and just say it to it again. Yes. Could you give us an idea of the underlying asset quality on the book towards the end of the year if I strip out the loan book sales? Is it stable? Or would you see it as deteriorating? Or it's just stable? No, it's stable. And obviously, the one area that you can see the movement in is in the payment break area. So naturally, that is an area where we have something in the region of €180,000,000 of exposure, which requires further forbearance. It's about 1,000 customers. So if you think about our asset quality, it's in that particular area that the any movements have been. If you think of the overall book, we've actually quite a conservative position on an impairment and as a material amount of post model adjustments as well. Just to reflect the movement in the economy and the exposure that may or may not result. But at this moment, if you look at the core aspects, 97% of our portfolio is secured by property and property prices look like they're increasing. And we have a situation that subject to vaccination rollout that sectors, the main sectors that have been impacted will return to work. And indeed, one of the key sectors for us is construction, not only because we have customers who are who work in construction, but also we are interested in house building and housing supply for the purposes of the mortgage market. So it suggests, bar the payment break situation, our credit quality has been stable. So thank you for your question. Thank you. Our final question today comes from the line of Dheermaat Sheridan from Davy. Diarmaid, you are now unmuted. Please go ahead. Thank you. Maybe just two quick questions, if I may. Thank you for the disclosure around the buy to let portfolio as it stands at the end of the year. I just wondered, now that you've disposed of the other parts of the portfolio, should we think of that portfolio now as being core to the bank? Or is there certain aspects of that where depending on market conditions that you might look to dispose of in the future? And then just finally, appreciate it's very early in the year, but just any anecdotes that you might have around activity levels on the mortgage side so far into 2021? Thank you. Okay. So I'll just pick up on those 2. So by way of the buy to let portfolio, so the Dan Bay 2 transaction, a 1,400,000,000 euros transaction was a significant transaction in its own right. And indeed, that closed very fast given the accounting treatment. And in fact, we got the capital benefit. But in fact, we're migrating all of the customers relating to the bitelept portfolio in the next 2 weeks. And that is actually going quite well by way of that migration and that management. With regard to the remainder of the portfolio, the question is, is it core or not? I mean, the reality, if you look at the dynamics of that portfolio, we've increased our yield on that portfolio. We've also we still have an outreach program with some of the customers who are on an interest only exposure and that continues on. So we don't rule anything in and run anything out at this moment, Guillermo. But the reality is we did a large transaction last year. Our capital position is in good place. And we're balancing that the risk profile of that portfolio together with the income situation. So I wouldn't it's more core, but there won't be disposed of, but we keep all options open. With regard to activity, what we've seen is and indeed if you take the 1st 2 months of the year up to the end of February, we're still in lockdown. But if you compare those to the 1st 2 months of last year, where we had didn't even we had no idea what COVID was going to bring, We can see that our mortgage drawdowns this year in the 1st 2 months are in excess of the mortgage drawdowns last year. So that would give us some hope by way of not only the activity in the market, but the fact that we're gaining more market share by way of applications. And that is converting to drawdown activity at a higher level than it was last year. But of course, last year, in the first half of the year, we were slower than in the second half as I already mentioned. But anecdotally and even more than anecdotally, the real message is our mortgage drawdowns are ahead in the 1st 2 months than they were last year. So thank you for the question. Thank you.

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