Earnings Call: H1 2018

Aug 29, 2018

Good morning to you all, and welcome to our 2018 Interim Results Presentation. Perhaps I could ask you to turn to Slide 2, please. I'll start the presentation with some key highlights and then outline our growth and NPL strategies. After which, Eamon will provide a more detailed review of our financial performance. After the formal presentation, Eamon and I will be happy to take your questions. Turning to Slide 3 for the key highlights. We have made steady commercial and financial progress in the first half. Our new lending volumes are up 50% to £600,000,000 Our mortgage market share continued to grow. We're offering competitive rates, 2% cash back upfront, 2% current account related monthly cash reward and most importantly, a superior customer service and experience. Indeed, our mortgage market share of nearly 14% is up from 12.6% last year, 9% in 2016 and low single digits in 2012. The mortgage market has increasingly become very competitive. In that context, whilst it's important to remain competitive, it is also equally important that we maintain a disciplined approach to pricing and underwriting. We have done so. We have reported a 33% increase in our profit before tax. We announced recently the sale of the Project GLOS portfolio. This is a landmark transaction that reduces our NPL ratio to 16% and brings us a long way towards meeting the regulatory requirement to reduce our NPLs from nearly 30% to the European average. Indeed, the regulatory pressure remains very high, and it's clear that any bank with a high NPL ratio is under strict direction from the ECB to deliver and execute an ambitious but realistic NPL reduction strategy. And finally, our capital ratios remain comfortably above the regulatory minimum. These results show that the hard work of the management team and staff throughout the bank is paying off. Turning to Slide 4 on financial performance. We are continuing to rebuild the bank's profitability, strengthen the balance sheet and build the intrinsic value of the business. We have recorded a profit before tax of €57,000,000 Whilst our NIM saw a slight reduction to 177 basis points from 181 basis points as some higher yielding treasury assets reached maturity and we received lower income from NPLs. We also reduced our underlying operating expenses. We had a nil impairment charge, which represented a £6,000,000 improvement on the same period in 2017. In terms of the balance sheet, retail deposits, including current accounts, increased by £300,000,000 and the performing loan book, which stood at £15,200,000,000 reduced by £100,000,000 less than 1%. We expect to return to net lending growth in 2019. As I've said, NPLs are down significantly. In fact, we've almost halved the level of NPLs from December 2017. In addition to Project GLOS, we have taken other actions, including a targeted voluntary surrender campaign, which has resulted in us taking possession of almost 2,000 properties that we are in the process of selling. And of course, we have benefited from natural cures. Eamon will speak about the NPL portfolio in detail later. And finally, our fully loaded CET1 ratio stood at 13.4%, which is comfortably above our regulatory minimum. There are 2 known matters that will impact capital in H2. They are the impact of both the formal completion of Project GLOS and the bilateral stage of the targeted review of internal models or TRIM. Eamon will speak about this in detail later again. Overall, this is a decent set of numbers, reflecting strong progress made in the first half. Turning to Slide 5. We are a really important part of the Irish retail and SME Banking landscape, and we have proven this by developing award winning products and campaigns that have supported our strong business results. Our total new lending grew by 50% in the first half. Mortgage lending, which represented almost 90% of total new lending, increased by 51%, more than double the market growth of 22%. This is an impressive performance and shows the strength of PTSB's brand, the quality of the bank's propositions, the value of the multichannel approach and the passion and commitment of my colleagues to deliver the right customer outcomes. Today, our mortgage application levels continue to grow, leaving us with a strong pipeline in a market where the outlook itself remains positive. We are well positioned to build on the momentum created in H1. However, our business is not confined to mortgages. By way of example, our personal term lending grew by 42%. Indeed, our performance in personal term lending shows that we have increased volumes by 125% in just 2 years. And there is still a lot of scope for us in this area to maximize the opportunities that our large and growing current account base presents. Turning to Slide 6. I'll move away for a moment from financial metrics to give you a sense of how we're approaching our relationships with customers, both existing and new. You can see from this slide that we're seeing positive trends in terms of both customer base and loyalty metrics. Our Net Promoter Score, the degree to which our existing customers recommend us to potential customers, shows that we're now 2 in the market using that metric. Indeed, 29% of our new business is coming from people who have never had a relationship with us before. This demonstrates we are succeeding in people getting the message, either through our marketing or word-of-mouth, that there are very good reasons to do business with PTSB. This slide also shows that we're moving in the right direction in terms of online transactions, active mobile users and use of payment cards. These are all signs of a bank that is vibrant and growing. That said, of course, we can't take any of this for granted, and we're continuing to invest heavily in our branches, in technology, in our digital channels. By way of example, we recently introduced the ability to apply for and drawdown personal loans through our mobile app. Indeed, it's noteworthy that 54% of our personal loan payouts are now happening through voice or digital channels. Turning to Slide 7. This slide gives you a snapshot of how we have successfully reshaped the bank, following the deleveraging of our noncore mortgage business in the U. K. And our commercial property lending portfolio in Ireland. We are now domestically focused on our core strengths, retail and SME Banking, and our balance sheet is shaped to support profitable growth. We are well placed for a bright future. Turning to Slide 8. We remain committed to our vision, which is to be the bank of choice. This vision translates into our strategic objectives about delivering for the company, our customers, our colleagues and the community we operate in. As a bank, we are all aligned in achieving this vision, and we are collectively working really hard to deliver on our promises. Let me return to the key highlights. We've grown our new lending by 50%. Our profit before tax has grown by 33%. We've been successful in achieving a material reduction on our NPLs through Project GLOS and other measures, on a capital basis comfortably above minimum requirements. Looking ahead, our priorities are to invest in our franchise, enhance the relationships with our customers, continue to grow our profits on a sustainable basis, derisk the bank and thereby protect the taxpayer and shareholder capital and develop a high performing team that knows what customers want and how to deliver for our shareholders. We're in a really good place with solid foundations for profitable growth. So on Slide 10 and before I hand over to Eamon, I want to stress that continued progress over this reporting period must be seen in the context of the journey the BAG has been on since 2012. We can see 3 distinct phases in that journey. In 2012, our initial focus was on managing the state capitalization, facilitating the disposal of Irish life, repaying the huge amount of system funding that we'd borrowed, introducing the new management team and developing the detailed restructuring plan that would underpin the bank's recovery. From 2015, our attention shifted to implementing that restructuring plan, undertaking an ambitious and complex deleveraging program, successfully concluding the capital raise and taking our first steps back to profitability. Now in 2018, we are both managing our return to being a profitable competitive force in the Irish Retail and Banking Markets and taking the decisive action necessary to tackle the NPL issue. In summary, we are very close to completing the rebuilding of the bank such that we can focus solely on competing in the retail and SME markets. That is good for our customers, my colleagues, the taxpayer, our shareholders and for Ireland. So with that, I will hand over to Eamon for a more detailed presentation on the financial results and on our NPL reduction program. Eamon? Thank you, Jeremy, and good morning, everyone. I will discuss the financial performance in detail, but before that, we will turn to Slide 12. The Irish economy continues to grow at a strong pace and is expected to remain well above the euro area average. The economic fundamentals underpinning growth are very strong. Consumer spending and employment are continuing to grow, and credit flow is now increasing after many years of deleveraging. When you look at the housing market, the picture is also very positive. The mortgage market is expected to increase by 26% to $2,900,000,000 or $9,200,000,000 this year. Housing completions continue to improve. And while the number of houses being built may not be meeting current demand, the progress and trajectory of rebuilding Ireland's housing market are positive and are trending in the right direction. So with strong demand and an increase in both primary and secondary supply, it presents a very positive outlook for the bank over the medium term. Let's turn to the income statement on Slide 13. The key message I want to convey is that we continue to rebuild the bank's profitability. I would like you to focus on our profit before tax of £57,000,000 which has increased 33% year on year. This is driven by higher operating income and marginally lower cost base, partially offset by certain exceptional costs in the first half of twenty eighteen. Net interest income reduced by 5%, mainly due to lower income from NPLs and treasury assets, offset by lower funding costs. While the underlying income from fees and commissions were broadly flat year on year, we recorded other income of $22,000,000 which is primarily driven by treasury activity and the sale of some treasury assets during the first half. Operating expenses were broadly flat, and I'll provide more detail in the following slide. There's no impairment charge reported in the first half of twenty eighteen, reflecting more stable economic conditions. It should be noted that the NPLs sorry, the impairment charge includes the GLAS transaction, and these have been fully reflected in the P and L and the balance sheet at fair value with limited impact on the impairment line. Exceptional items totaling $16,000,000 consists of an additional provision of $15,000,000 in relation to an increase in the accrual for legacy mortgage related expenses, together with restructuring costs of £1,000,000 So turning to net interest income and NIM on Slide 14. Net interest income reduced by £11,000,000 year on year, and this was due to three factors: lower income on the non performing loan portfolio as we are now approximately £700,000,000 lower in NPL balances year on year lower treasury income due to the maturity of higher yielding bonds, and this was offset by higher income from performing loans and lower funding costs. Income from performing the performing loan book increased by £3,000,000 year on year. And while this amount is small, it does show that we've hit an inflection point for the growth in good quality income. The reduction in net interest income due to lower NPL and treasury income is somewhat is something that we had anticipated for. And net interest income will continue to reduce as we look forward to reduce our NPL numbers. However, I would state here that the quality and composition of our net interest income will improve as we reduce those NPLs and focus on the performing book. The net interest margin for the first half was 1.7%. This is 3 basis points lower than the reported full year of 2017, but it is one basis point higher than the Q1. So there has been some increase quarter on quarter. We continue to actively manage our funding costs and with the H the first half cost at 37 basis points, which is 9 basis points lower than 2017 and 12 basis points lower than the first half of 'seventeen. And this was achieved through a range of funding actions, including retail, corporate and institutional deposit rate management. Overall, we expect the net interest margin to remain at a stable level for the remainder of 2018. A key point to note is that we remain highly sensitive to interest rate movements given our exposure to tracker mortgages, and we estimate that a 50 basis point upward movement in interest rates would equate to $40,000,000 in additional interest income or net interest income, I should say. If we turn now to Slide 15 and cover the loan book. Our performing loan book was £15,200,000 at the end of June, which was broadly flat when compared to the book at the end of 'seventeen. As you will see from the graph on the top left of the slide, we are progressing towards performing loan book growth at the current volume of new mortgage lending and the forecast growth in the mortgage market remain positive. This outlook is balanced against the current runoff rate of around 3% on the back book attributed to scheduled repayments and increased early redemptions as the housing market recovers. We've lent approximately €600,000,000 in the first half of twenty eighteen, and this is a 50% increase year on year. And as mentioned by Jeremy, through this, we increased our mortgage market share to 13.8%, and this was based on a positive trend throughout the first half of twenty eighteen. Taking a closer look at performing the performing mortgage book, which totals $14,900,000,000 62% of the loan book continues to be on ECB tracker rates, 29% of the book is on variable rate and 9% of the book is now on fixed rate. Over 80% of new mortgage business written 2018 was on a fixed rate. The yield on the performing mortgage book of 2.33% has remained relatively stable over the past 18 months, while the yield on new mortgage assets on new mortgage loans, I should state, was 3.21% for the first half. This is a reduction of 21 basis points year on year. This reduction is in line with our aim to remain competitive while also remaining or maintaining price discipline with regard to how we price our mortgages. If we turn now to operating expenses, and that's on Slide 16. We've marginally reduced our cost base year on year. Within this, staff costs have remained flat, while other costs have reduced by 3% with efficiency from efficiencies gained from ongoing cost reduction initiatives invested into the business. And examples of this are the implementation of the GDPR directive, the implementation of PSD2, digital and customer enhancements, which are ongoing within the business, and Jeremy has indicated those earlier in the presentation. And obviously, the finalization of the IFRS 9 implementation. Regulatory costs for the first half remained flat year on year. And on a like for like basis, the underlying cost income ratio, and this is when you exclude regulatory costs, which are obviously outside of control, was 61% or 4 percentage points lower than the first half of 'seventeen. Obviously, our costincome ratio remains elevated, and we have been taking a number of initiatives to address this. We've recently announced a management structure review together with a voluntary redundancy scheme, and we expect this to result in some savings going forward. We're also reducing our NPLs, and we expect to achieve associated cost savings from this reduction over time. With that, now let's look at the nonperforming loan position, and that's on Slide 17. We stated at the March presentations that we were looking to reduce our NPLs to a single digit percentage level over the medium term, and I'm pleased to say that significant progress has been made during the first half with the announcement of the sale of $2,100,000,000 of NPLs through Project GLOS. Excluding this, in the first half, we reduced NPLs by 4% or $200,000,000 and this is mainly due to improved cure performance and the continuation of the successful voluntary surrender program for some of our BioSelect customers. And I'll come back to you with some detail on that in the following slide. The sale of the £2,100,000,000 of NPLs will reduce the overall NPL ratio to around 16%, and this represents a 43% reduction in NPLs when compared to December 'seventeen and a 70% reduction in NPLs when you compare it to 2013. If we move to Slide 18 and provide just talk about Glass for a second, the project Glass, I should say, you will see from this slide that the Glass portfolio consisted of 10,700 properties, and this is a mixture of buy to let and private dwelling houses. And the portfolio itself was characterized into separate subsections. The buy to let element of it totaled 3,300 properties. Customers or properties related to customers who have been offered long term treatments that have failed, and this is on numerous occasions in some cases, or refused to take off for treatments. That totaled 3,850 properties. Properties related to customers who had not cooperated or engaged with the bank, that totaled 2,500 properties and lastly, customers who were either in long term arrears or lacked affordability to either support or sustain the treatment in the future made up of the remaining 1050 properties. The average arrears in the last portfolio was €29,000 with the days past due at 3.5 years. That was an average of 3.5 years. The portfolio was sold at a net book value of £1,300,000,000 and on completion, the associated release of risk weighted assets will have a positive capital impact of around 2%, but it should be noted that that's on a transitional basis. And I'll come back to that aspect when I talk about TRIM in a second. The sale is on track to complete in quarter 4 of 'eighteen, and it is a very positive development for PTSD as indicated by Jeremy because it lowers our overall NPL ratio by 16%, It demonstrates material progress in meeting the direction set by the regulator that all banks in Europe produce their NPLs, and it lowers the risk profile of the bank. And most importantly, it provides capital headroom for capital growth credit growth, I should say, and further NPL reduction as we move forward. If we move to Slide 19, we look at the remaining NPLs post the last transaction. They total 3 €1,000,000,000 They consist of €1,500,000,000 of treated NPLs. And under these long term contracts, which include the split contracts, the customer makes a principal makes principal industry payments based on agreed terms. However, should we stress that these loans continue to be classified as NPLs under the regulatory definitions and will do so for an extended period of time. We continue to assess all options available to us with respect to this cohort of NPLs. In the next category, we have around €200,000,000 of NPLs that we expect to cure and move to performing over the next 12 months. In the next category, we have around €150,000,000 to €200,000,000 of NPLs where we believe they qualify for the government backed mortgage to rent scheme or solution, and we're continuing to engage with these customers in an active manner and with the relevant authorities to conclude solutions in this regard. And in the last category, we have about $1,000,000,000 of NPLs. This is a variety of loans. For example, they include insolvency cases. They include cases associated with the CBI tracker examination and other cases where there are specific legal issues that have to be worked through. But we expect that this cohort will be worked out over the medium term. As always, case by case restructuring continues to be part of our strategy, and our overarching objective remains that we protect the capital of the bank as we look at those restructures. If we turn to Slide 20, we can look at the properties we have in possession. This is an area where we've been very active in the first half. We've made significant progress in managing this portfolio in 2018, and we do plan to exit the majority of these properties within the next 12 months. At the end of July, we have 1900 properties in possession on our balance sheet. That's because we continued the voluntary surrender campaign into 2018. And through that campaign, we have taken possession on a voluntary basis, it must be stressed, of a total of 1500 properties from buy to let properties over the last 12 months. Most importantly, we have sold 500 properties in the last 18 months, of which 350 of those properties were sold up to the end of July. We have another 250 properties that are sale agreed and a further 800 are either on the market or are being prepared for sale. So extremely very active by way of the movement in these properties. Obviously, the market is quite strong and we continue to take advantage of that market with regard to these properties that we've taken into our possession. As well as this, we are also engaging with the housing agency with regard to properties that are suitable for social needs and that equates to between 152 100 properties within that cohort and we continue to have active discussion with agencies in that regard. So in summary on this slide, we believe that we have marginal conservatism built into the valuation of these properties, and therefore, our objective here is to sell these at or above book value. And we believe that over the next 6 to 18 months that this will also support our P and L performance as we work these properties back into the market. If we turn to Slide 21, this covers our funding and liquidity position. Our funding and liquidity position remains very strong. Our strategy is to continue to fund our balance sheet with customer deposits while keeping other funding lines open and accessible, which is exactly where we are today. We are over 80% funded by customer deposits, and retail balances have increased by £700,000,000 or 5% year on year. So very strong performance way of customer engagement and activity on this side of our balance sheet. All funding and liquidity metrics remain strong, and they're well above regulatory requirements. Our indicative MREL target has been set at 25.8%, but we're waiting for the formal communication in that regard. But we believe, based on this, that our total issues will be in the region of about £1,000,000,000 over the next 3 years, which is manageable and is also manageable from a net interest margin perspective. We expect to start issuing MREL paper in 2019. If we turn now to our capital position. Our capital ratios remain comfortably above the regulatory minimum requirement with transitional core equity Tier 1 at 16.2 percent and this is versus a regulatory minimum of 9.825, so plenty of headroom in that regard. The fully loaded Core Equity Tier 1 is 13.4% at the end of June, and this is 1.6% lower versus the end of 'seventeen. And the reduction is due to 2 aspects, the impact of the IFRS nine transition, and you can see on the bottom left of this slide that, that was an impact of 1% on the fully loaded ratio, And also the partial embedding of TRIM in the first half, and that had an impact of 80 basis points on the ratio, which is they're the 2 component movement main movement parts. On TRIM, we've now received communication from the ECB, which provides clarity with respect to the impact of this phase of the TRIM exercise. And this is a welcome result in that it removes the movement that we've been seeing with regard to the TRIM exercise, but we believe now we're at the end of this phase with regard to our interaction with the regulator. It should be noted that the increase in RWAs arising from TRIM will be offset by the release in RWAs from the Project GLASS sale, And this will lead to a manageable decrease of approximately 50 basis points in the fully loaded correctly Tier 1 and obviously in the transition of the well, but the fully loaded one is the one that we look at. And that's the net impact of the movement, both upwards and ordered ways and a reduction based on Project Glass. But as mentioned, the combination of Trim and Project Glass significantly reduced the level of capital uncertainty that has existed in our capital stack recently, and it places the bank in a position where we believe we're adequately capitalized to deliver profitable growth and target further NPL reduction. If I turn to Slide 23, just to sum up my part of the presentation. In the 1st 6 months of 2018, we've made significant progress on a number of fronts. We've increased our lending volumes by 50%. We've improved our profitability with profit before tax up 33%. We continue to manage our cost base while creating capacity to invest in and transform the business. We've announced the sale of Project Glass, which reduced our NPLs by more than 40 percent, and we will proceed to deliver we will proceed further to deliver on our single digit target NPL level. We continue to maintain strong funding and liquidity positions. And lastly, our capital ratios remain well above the registry minimum requirements to support growth and execute further NPL reduction. So in that and to sum up, I'd like to thank you for your attention. And Jeremy and I will now be happy to take your questions, And we'll take some questions from the floor first before we move on to the phones. So thank you very much. Stephen Lyons from Davy. Just if I can start with a question on TRIM, first of all, and then on to a somewhat related question on mortgage market competition and discipline. If you could just help us explain the moving parts and the various variables at play with the overall TRIM impact. Is it primarily down to the defaulted loan balances performing both loan balances? And then as we work through, it looks like you've got a credit RWA now of close to 60%, and we've seen others in the market also be impacted negatively in terms of higher RWA densities. Against that, we're seeing increased rate competition. Do you think that puts a natural cap or will impose a floor in terms where rate competition could ultimately go when we look at sort of rare rock assessments? Yes. I suppose the a couple of aspects there. Within the trim extra size, the regulators built in extra conservatism into their measures. Naturally, it isn't necessarily negotiation that you have with the regulators. You undertake the review based on their rules. They come in and review that in detail, and then they come back with their assessment. So the negotiation level is it happens, but at a lower level. If you take that concentration, you just have to be careful that, that includes defaulted loans. So there is a difference by way of the level of capital concentration between a performing loan, a defaulted loan and then between the home loan and a buy to let. And if you look at a performing home loan, it's something in the region of just below 40% for performing home loan. And buy to let's by their nature have a higher waging and that also reflects the experience in Ireland in that particular segment over the last while. But just to sum up on TRIM, the outcome here is really a reflection of what's happened during the crisis. Indeed, it's the fact that we will have to carry that excess capital requirement as we work our portfolio out and as Ireland itself and the market returns to more normalized performance. And just that related impact on mortgage competition and pricing? I can only comment obviously from our perspective. We price in a scientific way. We take in all the inputs, cost of funds, OpEx, cost of risk and obviously, cost of capital. At the moment, we are competing well. You can see that from our results. And I generally, I don't see any reason why that is going to fall away. Owen Callan from Investec. Two questions, if I may. The first one on kind of almost related to that previous answer you gave on NIM and market share. I know previously, probably a couple of years ago at this stage, you had suggested an aspiration for a mid teens market share, and it looks like you're kind of thereabouts at the moment. Will that maybe does that suggest that the focus will now be a bit more on NIM going forward or margin rather going forward? You can kind of balance that a bit easier now that you've kind of made that move up on market share and how you're kind of thinking about that balance? Or is it simply just a bit more balanced now? And then on the cost outlook, obviously, as you've indicated, there will be cost savings to arrive as the NPLs reduce and as the administration and management of those reduces. But can you give us some color for how much is being spent managing the NPLs at the moment and therefore, maybe what we can hope to forecast in that regard? So I think I've been consistent, Owen, since really the day I started that I've always seen market share as an output, not as something that we chase. So we've never chased market share. Where we've got to was always an aspiration, and I think it's as a result of good products, good proposition, really good people. Going forward, we'll just continue to do what we've always done, which is we'll put the right products in front of customers. We will underwrite against the person, not the asset per se. And the outcome will be what the outcome will be. In terms of the pricing of those mortgages, as I said to Stephen, I think we are relatively scientific in the way that we price our assets. And they need to wash their face. And at the moment, I see no reason why that won't continue. Sure. On the costs, obviously, it is our intention to reduce overall loan book by something regional 20% when you take those NPLs out. Today, that is actually we're actually doing more work at this moment because we're actually working them out by way of the sales process and everything else. So that is actually adding to our cost rather than removing it today. So however, once we tidy that up, we would expect to see some savings. If you look at it's hard to measure this totally or completely, but you're talking about $15,000,000 $20,000,000 of direct costs associated with managing that book. Now that they occur in a number of different places. So as we work the book out, we will have to manage that. What I would say about our cost base is that while it looks to be flat, within that we have actually been making significant underlying cost savings. Indeed, this year, we expect to generate something in the region of £20,000,000 of cost savings, but we have been investing that into different items. And I mentioned some of those GDPR, everyone had to spend money on. We are a smaller organization versus competitors, but still we have to comply with the full rigors of GDPR across our customer base. PSD2, we have to comply with the requirements as any other bank does. So these are areas where we are investing. But we would expect that over a period of time that they will that demand will reduce and we'll start to see some savings. I would not envisage that until into the second half of next year that we would start to see some more movement in that regard. But believe me, we are making cost savings because if we weren't, our cost base will be going up. So because we have to take on these additional responsibilities. Just one follow-up question to that because I know the other 2 domestic banks have made comments on it. It's about a tight labor market and wage cost inflation becoming more of an issue now than perhaps in the last few years. And have you seen something similar? Well, we undertook a pain modernization program within the bank a number of years ago. And within our cost base, we have wage inflation because wages are increasing. So again, we have to take that into account by way of how we manage our cost base. You will see that our average headcount actually year on year is slightly lower, it's about 2% lower. And indeed, with NPL reduction, we'd expect further reduction in headcount going forward. So there's no doubt that the labor market is getting tighter. Brexit will bring additional challenges with regard to particularly experienced people within all banking organizations in Ireland at this moment. And the so that is something we have to be conscious of. But saying that, we also have to manage our cost base and ensure that we're making the right return. So there are challenges we have to deal with and we will face them accordingly. Shall we move to the phones then? Question coming from the line of Alastair Ryan from Bank of America. Very helpful disclosures today. Could I just push a little further on what you mentioned on the loss of income from NDL. So as you said, this is not necessarily good income. Certainly, it's not a good return on capital. But just for me to have in mind. So in the first half, for example, what would the income have been on glass? And then as you work down the remaining 16% NPLs, how rapidly are you progressing that? There was some talk in the media of securitizations and what have you for part of that portfolio. You seem to have a very broad approach to bring down the rest of the NPLs. But just a sense of how fast you're going with those and how much income is associated with that bucket of NPLs that's also to go as you get down to single digits. So we can think of the starting point for the net interest income of the group once you've finished with those things, please. Okay. So just on there's a couple of questions there, Al. So thank you for those. On Glass, you the associated income is in the region of £10,000,000 to £20,000,000 on the Glass portfolio. Naturally, this isn't the free you don't get a free lunch here because while you record it in your interest income line, you definitely have to impair it then when it isn't paid. So it's a little bit of a false situation and you rightly indicated that it isn't necessarily the proper way to apply your capital. So, we would expect and foresee that that interest income line will reduce over time, but you should see a stabilization and possibly an improvement by way of the return on the capital allocated to that portfolio. Obviously, TRIM comes into play there now, but that's something we'll be able to provide more clarity on in future results. The so there will be further reduction. Glass isn't sold yet, so we are still reflecting interest income on Glass. But again, that transaction will the finalization of the transaction will again will bring the final numbers. With regard to the rest of the NPLs and particularly I'll highlight the €1,500,000,000 of treated NPLs which I highlighted on Page 19. These, as we are fully aware of, are different because they are customers who are long term restructuring agreements and they're in the main adhering to those agreements. Indeed, anybody who had failed those adherence to those restructurings were actually in loss. So these we're looking at all different options with regard to that transaction or that cohort of exposure. Nothing is set in stone at this moment. So we've nothing to discuss at this moment. But there is an interest income element associated with that cohort. And in the event that it leaves our NPL stack, we will also suffer the NPL reduction on that. But I do I would like to say that over a period of time, we'd expect given a lower risk profile, given the fact that we've actually executed loss on a net book value basis, I. E, e. No additional provision and this included the cost of that particular transaction or accrued cost on that transaction. Our provision stack looks like it's okay and on a lower risk profile balance sheet with lower NPLs and the way we manage impairments and the way we think about that impairment line should normalize over time as well. So I'd expect some movement in that perspective as well. And your next question is coming now from the line of Eamon Huk from Goodbody. Maybe just 2 or 3, if you don't mind. Actually, just firstly, Eamonn, just when you're answering there, just in relation to maybe kind of further, it was just my phone kind of got scrambled. I just didn't pick up the commentary. So maybe just something in relation to, I think, Alastair asked there on possible securitizations that were mentioned in the media, just maybe timing. Secondly, just in relation to NIM. You seem to be guiding on Page 14 kind of NIM kind of flat from here. I just kind of when you look at kind of front and back book, it seems we have a 90 bps differential. And in terms of the income return there, even on the glass portfolio, the return on that is asset yield is pretty low. So just surprised that maybe guidance on NIM wouldn't be for a little bit stronger move forward. And then maybe 3rd point just on capital. You reiterate the point around 12% CET point of comfort, I suppose, since we've last kind of met you guys 6 months ago or so, we've had obviously the CCYB. The TRIM number is coming a little bit higher. I suppose just comfort around that 12% number. I mean, it would require probably I'm conscious and kind of focusing here maybe on fully loaded that the if you kind of look at it, start with your P2R and previous guidance on your P2G, they need to probably reduce around about 260, 270 basis points to be comfortable around 12. That seems pretty tall order over the next year or 2. Maybe just your comments on CET targets. Okay. So, first of all, you can't believe everything you read in the paper is naturally the speculation about the securitization, but we have made no public announcement on anything with regard to this cohort, only to say that we do recognize that it is different. We removed it from the glass an element of it from the glass portfolio recognizing that differential, and we believe that the outcome with regard to that particular cohort will be fine for us once we decide which way to go, I. E. Fine by way of our ability to exit and to manage that NPL position. But the securitization aspect at this moment is just pure speculation, and I don't want to comment any further. We did mention that it is our intention to move the book to single digit levels over the medium term, and that is still the case, and we will continue to pursue that strategy. With regard to NIM, your point is well made, I. E. That and maybe you're saying to me, Eamon, I'm a bit being a bit conservative on the NIM. I don't like my trajectory at this moment is for this year. We've a lot of moving parts within NIM by way of both the NPL reduction, the treasury asset yields and also how we're building up our performing book. I would the interesting thing about Glass is that it was a mixture of not only trackers, but it was also variable higher rate by to let portfolio and you can see that it made up a significant part of that portfolio and also home loans that were on variable rates. So these are on higher rates. So the rate mix in that portfolio was reasonably consistent with the average yield on the portfolio. But the quality obviously is the key aspect here. Naturally that is another side to this. So I think on NIM, it's difficult to give you better guidance post the end of the year at this moment. But I would definitely suggest that it will stabilize and then we'll start showing some increase on the back of that as we move forward, okay? With regards to your the perspective on the 12%, with the finalization of trim, with the finalization of glass, with the further reduction in NPLs, we will have a capital position that will be actually relatively stable. We'll have a risk profile in the bank, which will be actually very straightforward by way of what we have. And then we expect to be generating profits, which in itself will build that capital base. So we still believe with a cleaned up balance sheet primarily in the Irish residential mortgage market with a very simple business model that a 12% level is reasonable over the medium term. And that's really what we're targeting. Jeremy, do you want to comment or X on that? I totally agree. Yes. There are no further questions. Please continue. Any further questions from the floor, please? It's Dermot Sheridan from Daily Research. Just two questions. Sorry to come back to TRIM again. I think maybe 12 months ago, you asked a similar question around the profile of TRIM in the longer term. I mean, if the extra level of conservatism, is that something that we should think about baked in kind of in a permanent until we go through a number of cycles and you can demonstrate a longer period of data to put into your models? Is that something that we need to think about? Or should we, as over the next couple of years, as performance, you can demonstrate that it should then begin to alleviate somewhat? And then the second question around your IT infrastructure, and I suppose it really replays into your operating cost base. To what extent do you see kind of opportunities to bring down your cost by digitizing further or making further investments? And over what time frame maybe that might play through? So I'll just I'll pick up on TRIM. We've been speaking about TRIM for a number of reporting sessions. Why? Because of the impact it had on our particular type of balance sheet versus, say, our competitors. And so that's why we've been keeping the market very well up to date with regard to the developments in that regard and how we'd manage how it's reflected in our capital stack. It's taken a number of years to get to this stage. We appear to be one of the first set of the blocks by way of finalizing it. I would suggest you should think of your models over a number of years post this year that these levels will continue until we have the ability to demonstrate that the experience of the new book that has been generated really from 2012. And by the way, the resilient book that's been there that has gone through the crisis as well, how we demonstrate that that is actually performing at levels of LGDs, which are 0, particularly the specifically the book since 2012. So I think it's for the purpose of models, this is a slow bicycle race for how you think about it. But we will once we've got through the reduction in our risk profile over the next 6, 12, 18 months, we will be able to actively engage with the regulator by way of what our experience is being put. I think that should be an answer to your question at this moment. It's taken some time to get here. It'll probably hang around for a little bit longer because of that. Jeremy, do you want to take on the second question? Yes. Maybe one perspective on TRIM for me as the Chief Exec. I suppose this is the end for us of the bilateral stage. My understanding of TRIM is that there is also a horizontal piece that the European Central Bank will undertake, And I assume that's by country, by bank in country, by portfolio in bank in country. And I will be intrigued as to where both permanent TSB and Ireland ends up on the waterfall chart because I have to say I do remain mildly bemused at the level of artillery intensity which is being applied to PTCSB, particularly in terms of how long since the crisis and then the performance of the bank since the crisis. So the horizontal piece is something that I think will be an interesting dialogue. So maybe I'll just leave it at that before I say something that gets me into even more trouble than I normally get. In terms of IT investment, I was very clear or tried to be clear in my own presentation that I think I've always said that the rebuilding of permanent TSB is through a series of stages. And Eamon and I really do need to get to the end of this year to what we consider to be a baseline. Once we get to that baseline, I think we'll just be much clearer on where to compete, how to participate and where to invest. Will that investment involve technology and digitizing the bank? Yes, it will. Do I think we have the capacity to do that? Yes, I think we do. Technology has moved on significantly or banking technology has moved on significantly over the last few years. I think if you'd asked me a few years ago, really the only option was to unplug and replug. Whereas actually, I think there's more flexible solutions that you can get to probably a proxy replatform. And we're certainly considering that. So I'm confident in my people. I'm confident in their ability to think. I think we'll come up with the right strategy. And through AIMON's good offices, I'm sure we can find both a cash and a capital capacity to invest. So again, just to conclude, I think both of our remarks, we're pleased with today. We're pleased with where we're going. We're pleased that we're getting to a baseline. And then we're pleased that both of us will be able to concentrate solely on running a retail and SME bank.