Ladies and gentlemen, welcome to the NatWest Group Q1 results 2022 management presentation. I would like to remind you that the call today will be recorded. There is the opportunity to ask questions today, and you can do this by raising your hand on Zoom or by pressing star-nine if you have dialed in. Today's conference call will be hosted by Alison Rose, CEO, NatWest Group. Please go ahead, Alison.
Good morning, and thank you for joining us today. As usual, I'll start with a brief strategic update. Katie will take you through the results, and then we'll open it up for questions. Clearly, since we last spoke, the world has changed considerably. Russia's invasion of Ukraine has led to greater macroeconomic and geopolitical uncertainty, and our customers now face higher inflation, rising rates and energy costs, as well as ongoing supply chain disruption. While many of them have built up healthy savings and balance sheets during the pandemic, and we are not seeing any immediate signs of distress, we are acutely aware of the pressures our customers face. Just as we did during the pandemic, we are supporting them as they navigate this period of uncertainty. For example, we continue to deliver around one million free financial health checks a year.
We help customers to understand the impact of different scenarios on their credit rating and improve their score, and we regularly refer our more vulnerable customers to Citizens Advice. Our business customers benefit from having access to dedicated relationship managers with sector expertise in all of our regions. As the invasion of Ukraine continues, together with our customers and colleagues, we have donated over GBP 9 million to the Disasters Emergency Committee Ukraine humanitarian appeal. We are also offering practical assistance to Ukrainian refugees in the U.K.. For example, we are using one of our headquarters as a welcome hub, and we are providing help with opening bank accounts. We have no operations in Russia or Ukraine and minimal direct exposure to Russia.
We believe that our focus on building deeper relationships with our customers, together with two years of strong strategic progress, makes NatWest Group well- positioned to deliver sustainable growth and returns in the years to come. Let me now turn to the financial headlines. We're reporting a strong performance with profit before tax of GBP 1.3 billion, up 36% on the first quarter last year. We generated attributable profit of GBP 841 million, up 36%, and our return on tangible equity was 11.2%, up from 7.9% in the same quarter last year. We are delivering on our income growth, cost reduction, and capital targets. Income was up 8.6%.
Costs were down 4.6%, though we continue to expect an annual reduction of around 3%, and this resulted in positive jaws of 13.2%. Our CET1 ratio is now 15.2%, which includes GBP 1.5 billion of distributions. As you know, we have committed to make annual dividend distributions of at least GBP 1 billion this year. Our CET1 ratio includes an accrual of GBP 250 million towards that commitment, and we made another directed buyback in March of GBP 1.2 billion, bringing government ownership to around 48%, which is clearly an important milestone. We have also executed GBP 377 million of the additional GBP 750 million on market buyback announced in February. We continue to focus on delivering our strategic plan and our targets.
Despite macroeconomic uncertainty, we are updating our income target, as we now expect to deliver income that is comfortably above GBP 11 billion as a result of faster than assumed rate increases. As I said earlier, we plan to reduce costs by roughly 3% both this year and next, taking into account cost inflation and our investment in the business as we continue strong cost discipline. We are targeting a CET1 ratio of 13%-14% with a return on tangible equity comfortably above 10% by 2023. Let me turn now to other ways in which we are supporting our customers to drive sustainable growth. We want to deepen relationships with existing customers by serving them at all the key stages in their lives, whether it's to buy a house, save for the future, or set up and grow a business.
We are also acquiring new customers by delivering a wider range of products and services more effectively across our franchises. For example, by successfully extending our asset management expertise to customers in retail as well as private banking, we increased our affluent investment customer base by 40% in 2021 and grew assets under management and administration 17% to GBP 35.6 billion in the same period. Total AUMA were down in the first quarter as they were impacted by market volatility, but net new inflows were up 33% on the first quarter last year at GBP 800 million, and this included GBP 137 million via digital platforms. In retail banking, we added 159,000 new current accounts during the first quarter this year, and we continue to invest in the SME ecosystem.
As a leading bank for small and medium businesses, we offer both digital solutions as well as an extensive network of locally based sector specialist relationship managers. As we build a comprehensive digital payments proposition for these businesses, the number of customers using our merchant acquiring platform Tyl has more than doubled in each of the last two years. We are also diversifying our income through product innovation, such as our buy now, pay later proposition due to be launched this summer. Demand for buy now, pay later has grown rapidly since the start of the pandemic, and we want to provide a product that is both better and safer for our customers. Our new proposition will offer a fixed credit limit, clear structured repayments, credit scoring and affordability checks, as well as the ability to keep track of payments on our mobile app.
Unlike many providers, transactions will also be covered by all the protections customers expect from a fully regulated bank. Turning to slide seven. This is the second year of our GBP 3 billion investment program, 80% of which is being invested in data, digitization and technology. The majority of our customers now interact with us digitally. 61% of retail customers are entirely digital. 90% of retail customer needs are met either online or via mobile, and 83% of customers in our commercial business use digital banking. We continue to make good progress on improving customer journeys. 79% of retail accounts are now opened with straight-through processing. 99% of unsecured applications are fully automated. Commercial customers made 73,000 digital service requests in the first quarter, compared to just 6,000 in the whole of 2019.
Our digital transformation is helping us acquire new customers. For example, our digital bank for business customers, Mettle, has gained 50,000 new customers since launch. Our acquisition of Rooster Money last year, which provides families with an app that helps children to learn about managing money, added 130,000 new customers. Improving the customer experience has also resulted in a significant improvement in net promoter scores, with retail at 16, up from four in 2019. Affluent at 26, up from -2 in 2019. A business banking mobile NPS of 48. Of course, this improvement creates a virtuous circle, which results in the acquisition of more new customers. Turning now to capital management on slide eight.
We continue to proactively manage capital and risk and have reduced the capital intensity of the business from 54% in 2019 to 48% in the first quarter this year. Our phased withdrawal from the Republic of Ireland is progressing, and we are pleased with what has been announced. We are also managing risk well with a low level of defaults and strong risk profile. 94% of our personal lending is secured, and we are growing unsecured in a responsible way. 92% of our retail mortgage book is fixed with an average LTV of 54%. We have a well-diversified corporate portfolio with limited exposure to at-risk sectors that we monitor closely. We are focusing on capital efficiency in order to maximize shareholder returns.
As I said earlier, we have booked total distributions in the quarter of GBP 1.5 billion for 2022. With that, I'll hand over to Katie to take you through the results.
Thank you, Alison. I'm going to talk about the performance of the go-forward bank using the fourth quarter as a comparator. We reported total income of GBP 3 billion for the first quarter, up 15.8% from the fourth. Within this, net interest income was up 5% at GBP 2 billion, and non-interest income was up 46% to GBP 964 million. Excluding all notable items, income was GBP 2.8 billion, up 9.8% from the fourth quarter. Operating expenses fell 22% to GBP 1.7 billion, driven by the absence of the annual U.K. bank levy, lower conduct costs, and of course, ongoing cost reduction. The net impairment release of GBP 7 million compares to a release of GBP 328 million in the fourth quarter.
This reflects a continued low level of defaults and an increase in our post-model adjustment for economic uncertainty of GBP 69 million due to increased cost of living and supply chain challenges our customers are facing. Taking all of this together, we reported operating profits before tax of GBP 1.3 billion for the quarter. Attributable profit to ordinary shareholders was GBP 841 million, equivalent to a return on tangible equity of 11.3%. I'll move on now to net interest income on slide 11. Net interest income for the first quarter of GBP 2 billion was higher than the fourth as a result of the higher U.K. base rates and strong lending. Net interest margin increased by 15 basis points to 246 basis points, driven by wider deposit margins, which added 22 basis points.
This reflects the benefit of the higher U.K. base rates, which increased to 75 basis points on the seventeenth of March from 25 basis points at the start of the year, and higher spot rates on our hedge deposits. Lower mortgage margins on the front book reduced NIM by 4 basis points and was partly offset by a positive mix in unsecured, which added 2 basis points. However, as you can see, these impacts were more than offset by higher personal deposit margins and net interest margin in both retail banking and private banking has increased in the quarter. In commercial and institutional, changes in loan mix reduced bank NIM by 3 basis points, and growth was driven by lower margin large corporates, while smaller businesses continued to repay.
As in retail, wider commercial and institutional deposit margins more than offset this, and the C&I NIM increased in the quarter accordingly. Turning to the yield and cost trends on slide 12. You'll be familiar with this slide, but this quarter we have presented the customer loan and deposit rates for our new C&I franchise. I want to highlight two key points. First, commercial institutional loan yields increased by eight basis points to 283, as the majority of these loans are variable rates with an automatic reprice. Secondly, deposit costs were broadly stable. We expect deposit costs to increase further in the second quarter, following rate changes taking place in April. Turning now to look at mortgage margin dynamics on slide 13. The chart at the top will be familiar to you.
However, we are now showing you quarterly average metrics for the group and not just retail banking. We have increased average customer mortgage rates by around 30 basis points in the first quarter. Of course, we also recognize there is considerable pressure from the swap curve. The average five-year swap increased by around 60 basis points in the quarter. Customer deposit rates, however, were broadly stable as customer rate changes only took effect in early April. This led to an increase in customer spread, the difference between what we charge customers for their mortgage and what we pay for deposits. Of course, higher swap rates are good for hedge deposit income. As you know, we increased the product and other hedge notional by GBP 39 billion to GBP 185 billion during 2021, reflecting growth in customer deposits.
In the first quarter, we increased this by a further GBP 8 billion. If we assume deposits remain at the same level as the first quarter, then we expect this to increase by a further GBP 5 billion over the next twelve months. The structural hedge yield of 72 basis points is up slightly from 71 in the fourth quarter. Moving on now to look at volumes on slide 14. Gross loans increased by GBP 6.6 billion or 1.9% in the quarter to GBP 362 billion. In retail and private banking, mortgage lending grew by GBP 2.8 billion or 1.5%, and unsecured balances increased by a further GBP 100 million despite typical seasonality. In commercial and institutional, gross customer loans increased by GBP 2.3 billion.
This comprised GBP 3 billion of growth in large corporate and institutional customers as a result of increased capital markets activity and higher facility utilization. As well as an increase of GBP 500 million in invoice and asset financing within our commercial mid-market businesses. This growth was partially offset by the continued repayments on government lending schemes. I'd like to turn now to non-interest income on slide 15. Non-interest income, excluding multiple items, was GBP 740 million, up 24% on the fourth quarter. Within this, income from trading and other activities increased five-fold to GBP 205 million. As we benefited from higher volatility in our currency business and good issuance volumes in capital markets. Fees and commissions fell overall by 4% to GBP 535 million, driven by normal seasonality.
I will move on now to look at costs on slide 16. Other operating expenses were GBP 1.6 billion for the first quarter. That's down GBP 78 million or 4.6% on the same period last year, as we continue to work to meet our targets. Which as you know, is a reduction of around 3% for the full- year. I remind you that this will not be linear. Turning now to impairments on slide 17. We're reporting a net impairment release for the go-forward group of GBP 7 million, compared to a release of GBP 328 million or 37 basis points in the fourth quarter. This reflects a continuing low level of defaults across the group.
We continue to see further improvements in underlying credit metrics in the good book, with positive migration of stage two loans back to stage one, driving NCL releases. However, we have decided to allocate these releases to our post-model adjustment for economic uncertainty, which increased by GBP 69 million to GBP 663 million. As we recognize our customers face both increased cost of living and supply chain challenges that are yet to impact the data. The economic assumptions we presented in February are unchanged, and we include these on the slide appendix. We will update these in line with our usual practice in the second quarter. We continue to expect a loan impairment rate below 20-30 basis points in both 2022 and 2023. Turning now to look at capital and risk weighted assets on slide 18.
We ended the quarter with a common equity tier one ratio of 15.2%, down 70 basis points since January 1. This includes GBP 1.5 billion of 2022 distribution, which reduced the ratio by 83 basis points. The redemption of legacy equity preference shares reduced the ratio by a further 14 basis points, in line with our guidance. This will deliver an annual saving of GBP 19 million from Q2 onwards. Higher RWAs reduced the ratio by 5 basis points, and fair value movements on our liquid asset portfolio reduced it by a further 9 basis points. These deductions were partially offset by a 44 basis point increase from attributable profit net of changes to IFRS 9 transitional relief.
Our IFRS 9 transitional relief is 33 basis points, down from 39 basis points at Q4, as relief decreased from 100% at the end of the year to 75%. RWA has increased by GBP 500 million to GBP 177 billion. This was driven by higher credit and market risk, partly offset by GBP 1.9 billion benefit from our annual operational risk recalibrated exercise. Turning to slide 19, which shows the strength of our balance sheets. Our CET1 ratio of 15.2% is now 120-220 basis points above our 13%-14% target range. Our U.K. leverage ratio of 5.5% is down 40 basis points over Q4 and 225 basis points above the Bank of England minimum requirements.
We have also maintained strong liquidity levels with a high quality liquid asset pool and a stable diverse funding base. Our liquidity coverage ratio decreased to 167% due to the redemption of legacy preference shares and the directed buyback, keeping the headroom above our minimum to GBP 83 billion. Turning to my final slide. We are making strong progress and now expect to deliver income excluding multiple items comfortably above GBP 11 billion for 2022. This assumes U.K. base rates reach 1.25% in the fourth quarter and reflects faster rate increases than we had in the plan. We reaffirm all our guidance on expenses, impairments, and capital. Taking all of this together, we continue to expect to deliver a 2023 return on tangible equity comfortably above 10%. With that, I'll hand back to Alison.
Thank you, Katie. We've delivered another strong set of results for the quarter. As a purpose-led bank focused on people, families, and businesses up and down the country, we are acutely aware of the challenges our customers face, and we continue to support them in every way we can in an uncertain environment. Despite the macroeconomic uncertainty, we remain well- positioned with a diversified lending book, strong risk management, and an ongoing investment plan in digital transformation that underpins our growth plans. Our capital strength gives us the flexibility to invest for growth and consider other options that create value as well as return capital to shareholders. We remain fully committed to the targets we have set out today. Thank you very much, and we'll now open it up for questions.
Thank you very much. Ladies and gentlemen, if you'd like to ask a question today, you may do so by using the Raise Hand function on the Zoom app. If you are dialing in by phone, you can press star nine to raise your hand and star six to unmute once prompted. We ask that you limit yourself to two questions each to allow more of you a chance to ask a question. We'll pause for a moment to give everyone an opportunity to signal for questions. We'll take our first question from Aman Rakkar of Barclays. If you could please unmute and ask your question.
Good morning, Alison. Good morning, Katie. Hopefully you can both hear me okay.
We can.
Yes.
Great. Thanks. I have a question on your revenue guide, first of all, on interest income, if I could. Could you help us understand the guide around comfortably in excess of GBP 11 billion? It sounds firmer than what you were saying last year for 2021, but I get it lends itself to a broader range. If I were to take the 2022 center and bank the net interest income, I mean, that number should be comfortably above 11 in that scheme, I think. Any kind of refinement of that guidance would be really helpful. The second was on net interest income. You're clearly benefiting from the really rich scaling in 2022 from rate hikes. It's a good thing to benefit from this year.
If I could ask you to kind of cast your gaze and ask you what it is for 2023. Ultimately, my question is, do you think net interest income can continue growing at a decent rate? As part of that, could you help us understand your expectations for the structural hedge in 2022 and 2023? I think that should be a nice tailwind going through, and that's going to be an important defense against revenue margin compression. Thank you very much.
Great. Thank you. Well, I'll get Katie to take you through those in a little bit more detail. I guess in terms of comfortably above, we are feeling, you know, much more confident in terms of those numbers. Katie, do you want to walk through those questions?
Yeah, sure. Absolutely. I'll just, sort of start by saying that the interest rates that we're looking at is one of the factors which we incorporate into our guidance. that I'm comfortable the total income is above that GBP 11 billion. The degree to which it will be above is driven both by the magnitude and importantly, the timing of U.K. base rate rises. Our guidance of comfortably above GBP 11 billion includes our assumption of further Bank of England base rate rises this year, reaching 1.25% in Q4 2022. We do note that market expectations of further rises are currently above our estimates. our assumptions include two further rate rises this year. While this is below the current market assumptions, we are conscious of the increased uncertainties that face the economy, and we remain comfortable at this level.
We do recognize both sides of the balance sheet, and we have seen continued deposit increases. There has been quite a limited pass-through in Q1, which has helped us kind of improve this guidance. However, with you know, the last deposit rate change that we saw, we saw an equivalent to 40% pass-through there. There are some more attractive deposit accounts around for people as well. You can see with our interest rate disclosures on the slide, it's unchanged for the full- year. This will be updated again at half one, but it gives you a good guide of as rates come through, if they are above our estimate, what that might mean. But in terms of our estimate, it is around the 125. It won't surprise you, Aman, to know that I'm not gonna give you a precise number.
The way that I would think about it is the faster pace of rates in Q1, and then the much lower pass-through of those rates than expected compared to our expectations when we spoke in February. That's where you're getting your additional revenue guidance as you move through. If you think of the structural hedge at this point, what we can say is it's definitely a positive as we move through. You can see that in this last quarter, the yield moved up from 71 to 72 for the whole piece. A small movement, but an important one because what you can see is the benefit that is now kind of flowing through into those numbers.
When you look at where we're kind of rising and what we're adding on in terms of that structural hedge compared to where we were before, it's a much richer rate. If you look to kind of a year ago, it was kind of going on about 10 basis points. It's now going on over 200 in terms of that. So I would say that it is a positive as we move forward from here. We added on GBP 8 billion in the quarter. We'll add another GBP 5 billion on over the next year if deposits stay as they are. I would note that we haven't kind of seen that growth in deposits. Although it's slowed, it hasn't disappeared, so you can kind of take your own view on that.
I would say it is something as we move forward. It should be helpful to us. I'm probably not gonna get going on NII into 2023. I think you can take care of our interest rate guidance and take it through from there.
Sorry for the echo .
Oh, sorry. We can't hear, Aman, so it's fine. Apology for you.
Thank you very much. Our next question comes from Andrew Coombs of Citi. Andrew, if you could please unmute and go ahead.
Good morning. Can you hear me?
Yep. Good morning. We can hear you, Andrew.
Yeah. Thanks for that. Morning. A couple questions from me. That first is a simple one, which is given the NII announcement today with another GBP 6 billion of trackers moving across, is that changing your guidance and also around potential withdrawal costs, disposal losses and so forth? Second question on capital. You've obviously been directed by that already. You've still got a couple of billion in excess capital above the CET1 ratio. You're still guiding 40% by the year end. On slide 30, you flag a couple of moving parts, regulation and dividend pension contributions. Just perhaps you could give us a feel for what this implies for buybacks in your view. Because aside from that, I don't think there's any other major capital charges to come through from here. Can we look at that GBP 2 billion of excess capital you have today as on-market buyback potential?
Great. Thanks, Andrew. Well, let me take the Irish question. No change to guidance. Obviously, really pleased with the announcement today. I think just you know continuing progress with our guidance on crossing disposals remain unchanged. I think given the momentum now and the repeated announcement today. Katie, do you want to pick up the second question on buyback?
Yeah, no, absolutely. As you know, there is kind of four ways that we can distribute capital. It is a combination of the ordinary and special dividend, and we said it is a minimum of GBP 1 billion for 2022 and 2023. Buybacks, we are happy with the buybacks that we announced in February. We are pleased with the level of liquidity that we have seen in the stock.
That's enabled us to kind of progress that quite quickly. You know, I mean, I would remind you that we reflected that in our year-end numbers. We liked buybacks. They work well. They make good economic sense for our balances. It's something that I think you could anticipate that we would continue to utilize. Clearly decisions will be made by the board at the right time in terms of that piece. We've obviously done the direct buyback with the government, so that window's closed now, as you all know, for the rest of this year.
Thank you very much. Next question comes from Rahul Sinha of JP Morgan. Rahul, if you could please unmute and go ahead.
Hi, Rahul.
Hi. Good morning. Can you hear me, Katie?
Yes, we can hear you.
I was hoping to get a little bit more color on your 30% pass-through point. I was wondering if you might be able to tell us, you know, what retail deposit assumptions you might have made within the retail as well as the commercial set of deposits separately. I'm just very interested in your new disclosure around the split of the margin evolution in individual divisions. Just was looking for some additional color on how you expect the pass-through on the commercial side to perhaps be different from the pass-through on the retail side in terms of certain and again, that 30% pass-through. The first question.
The second one is just honestly on, I think you mentioned that you would also look at other options to create value on top of capital returns for you and retail acquisitions. You've been quite clear, I guess, in past conference calls on this point, but I'm just interested based on some of the sort of press commentary about, you know, has there been any evolution in terms of your thinking around potential areas where there might be additional value that you could create? You know, I'd be interested in any color around what areas since there might be where you think you could actually add a lot of value by doing some of that M&A. Thank you.
Great. Thank you. Well, look, on the M&A, you know, no change to my approach. As you know, my preference is distribution to shareholders. If there's anything as compelling, you know, shareholder value and strategic rationale, then we would look at that. I think if you look at w hat we've done, you know, so far, things like the Metro Bank mortgage portfolio.
We recently, you know, bought Rooster Money which was aligned with our youth strategy. There, there's a pretty, I guess there's a pretty high bar of things that we would look at. It's got to be compelling shareholder value, but our preference remains at distributions. We have obviously a very strong position we're in that I'm able to, you know, invest in the business with the GBP 3 billion investment program, continue to drive positive jaws, you know, with operating those and have a strong distribution story, and then look at other things that's compelling. No evolution beyond what I've told you before. Katie, do you want to pick up the last few points?
No, no. Look, absolutely, it's one of those things with real capital. It's very kind of dependent upon, I think, what's happening in the market. Let me try to give you a bit of a kind of a fuller picture than that answer. When we gave you the sensitivity, what we said at the time is it was built bottom up, incorporating different pass-through assumptions for different products across all the franchises. Those assumptions changed as the rate kind of increased and through those different levels. The actual pass-through rate will be determined by levels of liquidity and also subject to prevailing market conditions, including, I think, the expectation of the pace and number of rate increases.
As we look to the first quarter, we obviously had two rate rises. We put through our rate change in March, which takes effect in April, which was equivalent to 40% of that of the last rate rise, or you could look at it as kinda 20% of the first two. I think that's an important kind of distinction because as you think about it, actually it does really depend what's kind of happening in the market and how much liquidity we've got within there. When you look across the group and then think, well, how much is fixed versus variable in terms of earnings. If you go into retail banking, the vast majority of our loans in retail banking are fixed, so they obviously have no impact on that.
The C&I loans, we do see a kind of reference rate which reprices immediately, so we get the benefit. When you move into deposits, you know, almost all of our retail and corporate deposit rates are managed rates. We don't have any automatic pricing changes due to the external rate changes. You know, retail banking deposits GBP 189 billion, 40% current accounts, 60% savings accounts, an average cost of five basis points. For the first quarter, you'll see that drop very slightly in the second because of the change. In terms of C&I, average cost, two basis points, and that will be very much managed as we move forward from here.
If, as a consumer, you're looking to get a better rate, we've got a very nice digital account which will pay you 2.25% interest rates. Then also the business banking, there's also another opportunity to enhance account there, different paid rate, 40 basis points. It wouldn't be available to you. It is something that we look at as we kind of work through what's happening in the market and what's happening with our customers.
Absolutely. Helpful. Thanks so much.
Lovely. Thanks, Rahul.
Thank you. Our next question comes from Omar Keenan from Credit Suisse. You can please unmute and go ahead.
Morning.
Good morning, Alison. Good morning, Katie. Thank you very much for taking the questions. I've got two questions. One on just, I guess, the big picture question on the interest rate and asset quality outlook, then a second one on NatWest Markets. Just firstly on the interest rate and asset quality outlook. I hear you that, you know, your assumptions in terms of the revenue guidance are Bank of England base rate of 1.25% at the end of the year.
I guess if we look at current interest rate expectations, they indicate that, you know, the Bank of England rates will probably be around something like 2.5% in one year and then settle at a neutral rate of about 2% in three years. I realize it's quite a difficult question, but at what level of interest rate do you think that starts to put at risk the through-the-cycle guidance? Because I get a sense that's where a lot of people are perhaps struggling to think about it, you know, at what level, you know, high interest rates become a negative rather than a positive, and that inflection might be. And my second question on NatWest Markets. Thank you for the continued disclosure of NatWest Markets.
I can see now revenues are higher year-over-year, and it looks like some of the positive impact in capital management units and other, I think that's lower funding costs are starting to come through. Revenues in fixed income are still negative. Could you give us an update on how NatWest Markets restructuring is going? And given that, you know, you printed GBP 150 million of revenues, is that something we can expect to continue going forward on a quarterly basis?
Great. Well, thanks for the question. On NatWest Markets, I think, you know, what I talked about is we would expect to see a sort of stabilization of the performance of that business. On the restructuring of NatWest Markets, that's largely complete. You know, we've made all the decisions around products and capital and the business is very much on the front foot now in terms of growing. I think coming into Q1, NatWest Markets has had a strong quarter, totaling some of GBP 219. I think the disclosure and, as we said, we would keep showing the performance there shows that both capital markets and currency have had good performance increasing by 64% and 34%, respectively.
In terms of the rates business, I would categorize it as, you know, the start of the year pre, you know, that extreme volatility we saw, created by the geopolitical events. It started well and then had a more difficult environment as a result of the volatility between Ukraine and a small loss. Overall, I'm very happy with the performance of NatWest Markets. I think if you look at it from the three business lines, it's up 15% versus Q1 2021. I think we're very comfortable that the business managed well during the volatility, and I'm really pleased with the refocusing. I think you would expect that business, obviously, you know, it has, you know, different movements through the year.
I think that stabilization I talked to, the restructuring is largely complete. It's performing well. On your interest rate and asset quality point, I think in terms of, you know, interest rate rises and at what point does it become a negative, very, very significantly higher than, you know, any of the forecasts on interest rates. And what we can see when we look, you know, through those, you know, leverage that's sitting with our customers and, you know, the level of liquidity, we have no concerns from a credit perspective caused by interest rates at these levels or forecast levels. I think as I look at it, our book is largely secured, good quality.
We can see our RWA intensity continues to reduce and we actively manage the capital that we're not seeing the interest rate rises as anything that would cause us a concern on credit events across our book. You know, we're very comfortable with our through the cycle guidance that we gave you.
Very clear. Thank you.
Okay.
Next question comes from Guy Stebbings of Exane BNP Paribas. If you could please unmute and go ahead.
Hi. Good morning. Good morning, Katie. Thanks for taking the questions. The first one was back on the above GBP 11 billion guidance. If I take your rate assumptions and rate sensitivity and where we start from today, you're deriving now, I figure, approaching GBP 9 billion this year. Net fees and commissions are up 10% year-over-year in Q1. I'm guessing that might moderate. Call it 5% or so, that's another 2.2. You get to about GBP 11 billion, just from that. Trading other income is GBP 2 billion in Q1. One would hope that, you know, that grows over the year. It looks like you could end up nearer GBP 12 billion than GBP 11 billion even on some pretty conservative assumptions.
Am I missing something or is this just you know conservatism which is understandable given the you know the very uncertain environment? I follow up specifically on managed margin. If I put asset spread compression to one side and focus on the tailwind that you outlined inside eleven, I mean the benefit from managed margin looks to be you know roughly double the scale of what was captured in the rate sensitivity slide. I'm just wondering how much we should be tempering that sort of benefit on future hikes as you pass on more to deposits. I think you mentioned the change in government reflecting lower pass-through to date and then quicker hikes. I'm guessing your assumption on deposits and future hikes hasn't changed perhaps. Thanks.
Thanks. On the first point, I think, you know, Katie's answered that, comfortably above any assumptions that we've made on, you know, interest rates and the mix there. So I think we're feeling very comfortable on that number, which is why we've strengthened it a little bit. Katie, do you want to say something?
Yeah. If I take the next piece. The way that I would think about the comfortably above is we're obviously at 125 basis points. Our kind of pass-through assumption up until that point are already kind of built into there. The way I would think about it, Guy, is to say, well, actually, if I have a view that the forward curve is the one that we're going to land in, it's more of those kind of 2.5 pieces. I think we've given you the guidance in the managed margin piece. When we gave that to you in February, we talked a lot about that was already assuming that you were above the kind of 100 basis points.
You'd kind of got up to a kind of normalized level of pass-through. I think that's where you can use to kind of use to how much further that could be if our guidance is exceeded as market consensus has suggested it may be. Let's see how the year progresses on that.
Thanks. Could I maybe just come back briefly on underlying income? Because it was down Q-on-Q, but I think that seasonality is maybe something kind of overlooked during trading discrepancies and distortions, and it was up 10% year-over-year. I mean, is 10% maybe gonna be tempered because the base gets a bit tougher as the year progresses, but ultimately you are seeing good underlying momentum in underlying income after you adjust for seasonality. Is that fair?
Yeah, no, look, yes. I think what we're seeing is this kind of recovery in the underlying kind of businesses and there is always a little bit of seasonality you might expect Q1. There's nothing to read into that. I'll leave you to make your own view on the 10%. I'm not really commenting on that specifically. If I just look even at the 5% and 15%, you can see that the Q1 is often that little bit lower.
Okay, thank you.
Lovely. Thanks very much.
Thank you. Our next question comes from Jonathan Pierce on the line. Jonathan, if you could please unmute and go ahead.
Hello, guys. I've got two questions. The first one is on this pass-through comment again. Apologies to come back to this. Just slightly surprised that you're talking about a 40% pass-through on the latest rate hike, if I've understood you correctly. I mean, you can see you've pushed ISA rates up by about 10 basis points in the business reserve account by about 10 basis points. Most of the other bigger portfolios look to be unchanged. Could I just make sure I understand what this pass-through rate is being applied to? You've got GBP 465 billion in deposits when we go forward, bank. You're hedging about GBP 193 billion of those now. GBP -250 billion unhedged. Is that what you're referencing when you talk about a 40% pass-through?
You pass through 40% of the latest 25 basis point hike to GBP 250 billion of balance. Is that how I should think about this?
Just try and answer that quite quickly, Alison, in terms of that.
Yeah.
I think the one you've missed is the main retail instant saver change, and it's up 10 basis points in terms of that. Obviously no change on current accounts. You saw across our various savings accounts different changes. The main one you've not picked up on is the retail saver change, and that went up.
I may have missed that. From the website, I think it was still talking about one, but that's gone up to 10 basis points.
Yeah. That's all. The reason. I'm not sure about the website, apologies on that. It only takes effect in April in terms of the early part of it, because it should be updated. We'll have someone follow that point up. That's the one that you've missed.
Right. Okay, that makes sense. Okay, thank you for that. Can I follow up with a question on structural hedge again?
Yes.
Yeah, exactly. I'm slightly confused as to why the hedge isn't turning the corner more quickly. You added a basis point on in Q1 versus Q4 in terms of the pay-fixed yield. In the fixed hedge in the second half of last year, there's only 57 basis points. You've obviously added GBP 8 billion net to the hedge in Q1 and the swap curve, you know, most durations is 1.5%-2% through the quarter. You've got the old hedges rolling off again onto, you know, up to 2% during the quarter. It's certainly equity hedge is still a drag, but is there some headwinds at the moment in the hedge holding the yields back or, you know, are we actually going to see this NII income start to move up much more appreciably over the rest of the year?
Look, there's nothing underlying that's kind of holding it back. What I would say is on the capital hedge, it's obviously still a little bit of a headwind, but we can see that continuing to improve as we go through. We would expect to see the hedge income come up. I mean, I know you're incredibly familiar with this, Jonathan. As you looked at that, the loan schedule over the one, two and three years, you can see the first year comes through quite gently, and then it kind of grows as you go into year two and year three, as you come up. It can also be a little bit lumpy depending on when you put it on over the last number of years as well. There's nothing untoward in there. You'll see it start to move up.
Okay. All right. Thanks, Katie.
Lovely. Thanks. Thank you for your question, Jonathan.
Thank you. Our next question comes from Ed Firth from KBW. Ed, if you could please go ahead.
Yeah, morning, everybody. I wonder if I could just bring you back to credit because I guess this is the thing we're all struggling with. I mean, it, whether it's sterling, it's at 1.25%, whether it be share prices, they're all pricing in, I see some sort of reasonably material downturn. You know, I hear your comments at the beginning about cost of living and your worries, you know, you accept people are stressed. On the question about interest rates, you seem to imply there's, you know, no stress at all. You know, 2.5%, 3% doesn't seem to matter.
I'm just maybe I'm really struggling, I'll be honest, trying to square what where not just you, it's really the whole sector, where all the sector management are saying they've got no worries at all, and yet what I'm seeing in the market. I just wondered, what is the scenario which does make you nervous. You know, at what point do you start thinking, you know, we could have a credit downturn here, and we do have to start, you know, being more cautious in the lending, right, raising provisions, et cetera. I saw the non-performing loans up a little bit, even if you exclude the regulatory adjustment. I don't know if that's something some days in particular, but I don't know if you can try and help us square these two extremes that we seem to be bashing with at the moment.
Yeah. Let me try and help. What you've got, if we look specifically at our book, it's, you know, we're primarily a term book. Our book is largely secured. I think its shape is important. In terms of the trends in the market and the issues we're seeing in all of the leading indicators that we would look at, whether that is, you know, calls into our financial health and support lines, requests for, you know, deferments, any sort of movement into, you know, what we would call heightened monitoring or, you know, increased drawdowns on things like credit cards or overdraft. We are not seeing any of those leading indicators coming through.
Now, there's an element of the fact that there's, you know, across the U.K. economy, GBP 186 billion of extra, you know, cash that is sitting in people's savings and deposit accounts that they built up during the pandemic and GBP 26 billion less consumer debt. You've got, and across corporate balance sheets, lots of liquidity sitting there as well. There's no signs of t hat distress coming through.
What we are being very mindful of though is all of those concerns around cost of living, and inflation and supply chain. We're really being very proactive, but we're not seeing any signs of it. Then if you look at the shape of our books where we actively manage it. The big sort of driver in terms of what the dynamic would be with unemployment, that is, you know, that really is the issue of, you know, employment remains, you know, very high at the moment. I think once you start seeing unemployment rising, that would really be more of an event that would buy into affordability and start migrating into credit migration from that perspective.
When we think about ECL, the key driver of that is unemployment. When you step back and look at interest rates at, you know, 1.25% or 2%, wherever the consensus is going, that is a you know not gonna be a driver of credit impairment and the shape of our book is pretty good. It's unemployment that really will feed into ECL. Hopefully that helps. What you've got, you know, some very different dynamics happening. We're being very proactive in how we're supporting customers. You know, the proactive support going into them through our relationship managers, through our teams and making sure we can address that. Leading indicators, no signs of distress. You know, the area you would focus on would be unemployment. Hopefully that's helpful.
Yeah, no, it's very helpful. During your internal modeling perspective, do you have a sense of what level interest rates would have to be for unemployment to start going up? Because I guess there would be a correlation somewhere.
Well, I think, you know, when you sensitize the books, you know, interest rates really are a driver of affordability, so that's gonna affect affordability. Unemployment is another driver of affordability. If unemployment goes up and people aren't getting wages in and salaries in, then clearly that's a dynamic. When you look at the cash buffer that has been built up, you know, and generally the overall level of liquidity that's sitting across corporate balance sheets, and across businesses, it's very high. If you look, for example, around the amount, you know, so think about in our small business banking side, our small business customers, 50% of customers are on fixed rates. You know, things like the Bounce Back Loan, those are all on fixed rates.
You know, a high degree of our mortgages are on fixed. That interest rate sort of rising will go into affordability. Unemployment is gonna be a much more dramatic side of things. We are not concerned about interest rate rising into affordability at this point.
I think, Ed, the only one thing I would add is to repeat our guidance. What we have said to you is we expect our impairment charge to be below our 20%-30% through-the-cycle guidance in 2022 and 2023. While we recognize the cost of living crisis, what we think in terms of the resilience we have and where we are, it's not something we're expecting to manifest, particularly in our impairment rates.
Great. Thank you very much.
Thank you. Our next question comes from Rob Noble of Deutsche Bank. Rob, can you please unmute and go ahead.
Morning, all. Thanks for my questions. Can I ask you on inflation? I appreciate it's lumpy in this quarter. Looks particularly good. Is the underlying cost base performing in line with your expectations or is higher inflation pressuring cost target for this year? I appreciate you're saying that interest rates aren't a concern for credit, but you did take a post-model adjustment for, presumably cost of living in inflation. So what parts of the books are you worried about? Where does inflation negatively impact your book? Then just leading on from that, one of the points you just made is that people have a lot of excess savings.
One of the more cautious arguments in the U.K. is excess savings are held by wealthier people and corporates that are in liquid positions. What proportion do you know in C&I data where the proportion of your customers actually holds the excess deposits?
Okay. So let me start on the cost question. Yes, costs are performing as we expect them to. We've taken out GBP 78 million or the 4.6%. We're very comfortable we're on track for the 3%. We obviously considered inflation when we set our cost target, and we're now comfortable with the 3%. I've always said that costs will not be linear. The takeout will not be linear. I know last year I said that as well, and everyone still times the first quarter by four. Our guidance is 3%, but the cost performance is performing as we expect it to, and we're comfortable with the 3% sort of target we've given you for this year. Katie, do you want to pick up the next question?
Yes, absolutely. Rob, I think I do recognize the juxtaposition of below 20%-30% data point guidance. Yet, Katie, you've held back GBP 69 million into your PMA because of cost of living and supply chain. What I would say, I think that's kind of a step of caution as we see how this rolls through. It's not a particularly significant number. We just felt that given where we are, given what we're looking at, let's just be a little bit cautious on that. We'll do a full update on economics and everything at Q2, and we will move to much more of our normal competitive kind of base. We'll see where that is. At the moment, it's not something that we are kind of concerned about.
Inflation's clearly in the numbers, but it's in our assumptions, but it's one of many different things we look at. As we've kind of done those numbers, we really tested against kind of where economics is sitting at the moment. Comfortable on that. It was our kind of judgment decision to kind of hold a little bit back. It's not a kind of significant number. In terms of the kind of excess savings point, yes, they are held very well, but they're also held across our retail and our retail franchising and also by small businesses in terms of that piece. So there, that's where we've seen a kind of our slight kind of increase.
I think when you think of what happens in an inflationary environment, it's the discretionary spend that starts to get impacted. When you look at the discretionary spend over the last number of years, we focused a lot on the retail real estate exposures, our leisure exposures to make sure that they're well managed. If there's impact on those, then we can kind of watch the follow through on that to make sure that we're not kind of at risk in that space. We're obviously not immune. You know, people will struggle.
When you look at our books and we look at the people that we lend to, it's not the people that are going to be having the greatest impact, unfortunately, of the cost of living impact on them. We need to keep mindful of it. We need to keep that, but we need to keep an eye on inflation. Sorry. Unemployment is the thing we need to look at most closely. At the moment we continue to see that U.K. unemployment stats are excellent.
All right. Thanks so much.
Thanks, Rob.
Thank you. Our next question comes from Chris Cant of Autonomous. Chris, if you could please unmute and go ahead.
Hi. Good morning. Thanks for taking my questions. If I could come back to NII, please. If I think about your NII run rate, it's about GBP 8.2 billion for the quarter, and the average change in rates that we saw that generated something like GBP 730 million benefits based on the deposit margin improvements you show us on the slides. If I trim that down for the most recent 25 basis points and assume the 40% pass through that you've indicated, even allowing for a bit of incremental mortgage pressure, and I think it was 4 basis points on average for the quarter, so maybe another two to get to the end of the quarter.
It feels like your NII implied run rate at March coming into April would have been back in GBP 8.5 billion, and that's before we have any further rate hikes. Am I missing something there? Because I'm trying to think about this in the context of your comfortably above GBP 11 billion. As with some of the other questions, it feels like it could quite easily be close to GBP 12 billion if market rate expectations prove to be correct. I appreciate what you said on the 1.25%. Just in terms of where you actually were as of March, is that about the right level for sort of a GBP 8.5 billion annualized run rate for NII in the going forward bank? I had a question on markets as well. I can ask that now as well.
Let me do this one, then we'll come back to the markets one sort of thing. I guess as we look at it, Chris, you know, constantly evolves consensus from sitting at GBP 8.2 billion, we'll please kind of push it on a little bit from where we were. We had slightly faster rates coming through. We did a pass through on the in terms of the interest rate rise into our deposit bases. You're very familiar with what deposit and what current accounts, so actually how much that kind of cost us. We've got two more rate rises in the pipes. We think we'll only get to the last one by Q4. If you look at consensus, that's obviously a bit different.
I think about your timing of where you are. I guess you think of those words comfortably above 11% quite carefully. I'm gonna probably leave you to kind of work out what all of those means and not give you a kind of precise number. It's good to see, I think, the positive way that we're viewing the year and the continuing income color that we're generating across the piece, as we move forward. Do you wanna do your NatWest Markets question?
Yeah. So on markets, rates, you indicated that the sort of volatility, I guess, caught you offside or something to that degree. Are you expecting the rates business to be a non-negative revenue number for the coming quarters absent any further unexpected volatility? I'm not asking you to forecast a massive positive revenue number but, you know, is the rates business expected to stop being loss-making at any point? It's had a string of really horrible quarters and obviously you're indicating the restructuring is now done. I presume you weren't gonna be keeping that business if you weren't expecting it to actually represent positive revenues at some point. Thank you.
Thanks. I think the volatility was managed really well by the NatWest Markets team. My reference to the volatility was as a result of the invasion of Ukraine. We saw very extreme volatility in the market and our team managed that volatility very well. I'm very pleased with the performance of the rates business. As I said to you know, in Q3 and Q4, it was a disappointing performance in a combination of market and us doing the restructuring. The restructuring was complete. That business has stabilized. You can see the contribution from NatWest Markets into this quarter, and the rates business have continued to trend and perform positively. It is not loss-making, and I don't expect it to be loss-making. I think that stabilization I expected there.
I didn't actually forecast the volatility in the market caused by the invasion, but the team handled it very well. I mean, we have a much less volatile business as a result of the restructuring we've completed. I'm very comfortable with how that business is performing. I think, Alison, if you look at what our partners in the capital markets, you know, increased over GBP 200 million of their income in the quarter. I think we're pretty pleased with how they've dealt with volatility. It's helped them across the board.
That's helpful. Thank you. If I could just ask one follow-up on the first question. If I put it slightly differently, what would your cost of equity mean for WACC, please? The 2.6% or 2% what would you expect then?
Guys, I give you a lot of detail. I give you all sorts of numbers on exits and things. I think let's just work with what we're giving you. I'm not gonna give you the exit NIM from there. The way that I would kind of, you know, think about looking in for the whole year, we're definitely expecting it to continue to increase, you know, and if I look at the kind of rate rises, we've talked about how they've got two more kind of baked in. Given where the rate rises landed in Q1 and the timing of those, I'd still expect to see some further improvement of them as they come through, and we get a full kind of quarter impact of that.
You know, we've got very strong and growing deposit base, which I think is really helpful. I've shared with you how much more we're going to put on the structural hedge. You can then work out how much more is going to get the benefit in terms of those ongoing and rate rises directly. I'm probably not going to get caught on that exit NIM, 'cause quite I feel that will cause me trouble in the quarters to come, but we're very comfortable with performance.
All right. Thanks.
Thanks.
Thank you very much. Our next question comes from Martin Leitgeb at Goldman Sachs. You can please go ahead.
Hey, Martin.
Hey, Katie here. How are you doing? Thank you for taking my question and, congratulations, you got a good set of numbers, first of all. I wanted to ask on mortgage pricing. In the release, you say that application margins have fallen to around 44 basis points in the quarter, down from around six to seven in the prior periods. I'm just wondering if you could comment a little bit on the outlook for mortgage pricing. You know, are you comfortable writing business at this level? Would you expect some of the pricing normalizes and balances back as banks increase the pressure on swap rates? Could it be a scenario that banks just more on the liability side, liability margins, and that we could be heading into the kind of a new normal here in terms of mortgage pricing? Thank you.
You know, sure. Thanks, Martin. I'm beginning to worry we weren't going to get to mortgages at all on the call, so thanks for bringing up. Let me talk about the mortgages specifically, and we can do any follow-up if you need more. As we highlighted in our group NIM, we increased it by 15 basis points and our retail bank NIM increased by 16 basis points in Q1. We expect to continue to see that NIM expansion based on interest rate assumptions and market consensus as well, based on the rate sensitivity we've talked about a lot on the call.
I guess all of that said, our mortgage application margins at 44 basis points for the quarter are not where we want them to be and are below what we consider a sustainable level despite the overall profitability improvements that you've seen in retail and the group. I think you shouldn't expect to see our application margins remain at these low levels. We don't have a lot of appetite to write business at this level for sustained periods of time. The market conditions in Q1 were exceptional, with swaps increasing very steeply in the latter part of January and then through the rest of the quarter. In response to that, we increased our mortgage pricing 12 times in the quarter, increasing customer rates by over 50 basis points in Q1 and by over 100 basis points since mid of Q4.
However, that still was not enough to keep pace in terms of the movement we're seeing in swap curve. As I said, we don't see these levels as sustainable for long periods of time, and you should expect to see us continue to kind of price up. If I look at the Q2 application margins, I'm comfortable that they are going to continue to improve as we move forward. I speak to you more specifically, there are fairly large positives to the rate environment which more than offset this pressure overall. Not least the rollover of the structural hedge, which we've talked about the benefits the swap increases there. Although that puts pressure on the mortgage application, that combined with the base rate rises is something that's very positive for us.
You know, the business overall earned a 23% ROE even on the basis of the uplifted then tax bill. Clearly, very strong and that we would expect to continue to kind of price up to work through a more kind of normalized level. I think, you know, we are kind of aiming for Q2 margins in the 60s for the group in terms of those applications. You should start to see them come through.
Very clear. Thank you very much.
Thanks for the question, Martin.
Thank you. Our next question comes from Robin Down of HSBC. Robin, could you please unmute and go ahead.
Hi, Robin.
Hi, Robin. If you could please unmute and go ahead with your question.
Hello. Yep. Does that work?
Yes, we can hear you.
Okay. Good morning. Good morning. I've got one question, one request. Maybe if I start with the request first, which is obviously with the cost of living crisis, I think, you know, one of the key elements is that it feels like it's the lower income households who can be most impacted. I'd just request that maybe in future you could give us a bit of a demographic breakdown, maybe of your mortgage book in terms of kind of income levels and any kind of FICO scores you've got for the credit card book. You know, might just make it easier for us to see kind of where your customer base is positioned, you know, relative to those lower income households.
Coming on to the question, dare I say, can I come back to the 40% deposit beta? I was just wondering what the rationale was for raising rates. I appreciate there'll be a number of kind of factors that go into that. Is that to do with you seeing kind of deposit flows slowing during the quarter, or do you feel there's some kind of political pressure to kind of raise rates? I'm just curious as to, you know, what the sort of fundamental drivers were to decide to raise rates. You know, because otherwise, you know, we haven't really seen that, I think, elsewhere from your peers. Thanks.
Thanks. Well, just on, you know, our customer base. One of the things I would say is we're a large lender, so our demographics largely reflect the U.K.. If you look at the diversification of risk on our books, it is well diversified. You know, not predominantly a secured book. We're relatively low in unsecured and we're a prime book, and you can see the shape of that. What we can see is it's been very resilient in terms of its performance. We're very comfortable with where we sit. We're also very active with our customer base in terms of helping them manage the challenges. I would look at the risk diversification.
On your point around the deposits and passing on interest rates, actually, I would say we're not out of line with the market. You know, we've seen that being passed on as well across the market. Katie, do you want to pick that up?
In terms of the deposit book, I think it's important. There's been 75 basis points or 65 basis points of hikes here. You know, our deposit franchise is incredibly valuable to us. In reality, we've passed through 10 of that 65 basis points of hike that's come through. We think it's the right thing to do. It's an important franchise. If you look at our cost of funding overall, it's still incredibly low. I think there are probably no more comments than that on it.
Can I just come back on the mortgage point? I think, you know, what the demographic data shows is that the low-income households don't have a great deal of mortgage borrowing. It would be nice to be able to see that too, like within your kind of data disclosures. You know, if we could see kind of median income levels, for instance, for your mortgage customer base, that would be kind of helpful going forwards. Maybe it's something I can take offline with you and Alison.
Yeah, no, I mean, and Robin, very happy to have a chat with you on offline. We always happy to receive requests. I think you recognize there's been good disclosures of a lot of information, but I know we've been doing a lot of work on this, so we're very happy to have a conversation offline on it.
Good. Thanks.
Thanks very much, Robin.
Thank you very much. I would now like to hand back to Alison for any closing comments. Alison, over to you.
Great. Thank you, and thanks very much. Well, look, you know, it's just a few closing comments. We're really pleased with a very strong performance in this quarter. I think what you've seen is, you know, strong continuing delivery against our plans. We, you know, have growth in income. We're delivering on our cost reductions as planned. We have a strong capital base with a clear plan to distribute capital, and a strong ROATE performance. We are very comfortable with the risk diversification of our book. We're very mindful of the challenges that our customers are going through, but we are seeing no signs of default or distress in our book, and our book remains incredibly well diversified and well managed.
We have strengthened our guidance on income a little bit to give you a bit of comfort on the outlook. As Katie and I sit here, we see a strong set of results building on two years of progress. Income and profits up significantly on a year ago. Costs down. Strong capital. Continued growth across a well-diversified loan book. In terms of the strategic capital restructurings that we've done, NatWest Markets, a strong performance in this quarter as the restructuring has completed at the end of the year. Obviously, we've announced continued momentum on our Irish business with now almost 90% of the assets allocated and agreed for sale.
I think, you know, we are working hard with our customers to make sure that they have the right support through the economic uncertainty and challenges that we believe as a bank we're well- positioned, to support them, to continue to deliver on our plans. We're very confident about the outlook. Thank you very much everyone for joining.
That concludes today's presentation. Thank you for your participation. You may now disconnect.