Welcome, everybody, to this session with NatWest Group. Delighted to have Paul Thwaite, the CEO of the company. I believe this is your first time at our conference.
It is.
Presenting, so thanks very much for coming and welcome.
Pleasure to be here.
As usual, we're going to start with a polling question. After posting record profitability, what do you think will be the next drive for NatWest stock price? One, drive loan growth, including market share gains in mortgages and cards. Two, build non-NII revenues in wealth and markets. Three, drive more efficiency via digitization. Four, explore more material M&A that builds on its capabilities. Five, continue to deliver high shareholder distributions. Quite mixed bag, but it sounds 31% non-NII revenues, including wealth and markets, front-runner. Hopefully, we'll touch on a lot of these themes during the session, but maybe we can start a more general question. 2024 was your first full year as CEO. Fantastic share price performance, by the way, must have to say.
Maybe you can talk through your thoughts on your first 18 months on the job, where the bank is, and where you're seeing the opportunities from here.
Yeah, happy to. Thank you, Alvaro. Yeah, as you said, 2024 was a really positive year for the bank. I think to meet or exceed all guidance is a great start. I was particularly pleased that we're showing momentum across our three customer businesses. That was very important to me. To see the growth and to see the momentum driven by underlying customer activity and for it to be broad-based, I think gives us, well, it pleases us, but also gives us a sense of confidence as we look forward. The fact that you've got both sides of the balance sheet growing, lending at 3.5%, deposits circa 3%, assets under management 20%, it kind of talks to the, let's say, the broad growth base we've got. That obviously allowed us to generate great returns, 17.5%, 240 basis points plus of capital.
That puts us in a very strong position. We distributed GBP 4 billion of GBP 4.5 billion attributable profit. I guess proving that the business model is good, it generates a lot of capital, and also it facilitated the sell down of the government share, which was, I guess, another from just under 40% to less than 5%. It feels like there's good momentum there. The lower share count also helps, I guess, the double-digit growth in EPS, in DPS, and in TNAV per share. I'd say the performance momentum of the business is pleasing. What I call the kind of the financial economics of the business as a consequence is pleasing. Where does that leave us? I think we're very well placed. We've got momentum. We're demonstrating growth. We're confident in the outlook as we're at, what, two and a half months into 2025.
The challenge for me, I guess, 18 months in, and my challenge to the leadership team is we've now got to make the most of the opportunity that we've created for ourselves over the last 18 months.
One of the things we've touched on in the previous two sessions, and I'm sure we'll discuss more, is around the government agenda in the U.K. in particular. We hear a lot about potential easing of regulations. What changes have you seen for your business, and where do you see the main opportunities here in the growth agenda deregulation?
Yeah, it's the topic du jour. It literally feels like there's, I guess, new elements of news day by day, week by week. I think there's probably two main components to that question. There's the kind of wider, I guess, government agenda and policy agenda, given we're obviously very U.K.-centric. Within that, there's the kind of regulatory dimension. Let me try and talk to both of them. I think on the wider agenda, nobody's going to argue with, I guess, the intent and the mantra of the government around wanting to unlock economic growth. I think you won't be surprised to hear me say that I support that. I think what's encouraging about it is the, I think, the mindset or the psychology around the financial services as a sector, but also banks are a key component part of unlocking that growth.
You can't step away, though, from the reality of the fiscal constraints that the government has. I think some of the reforms that they're driving, especially the supply side reforms, planning, infrastructure, housing, I'm sure they're topics you'll get into over the next couple of days. I think they are the right things, and I'm very supportive of that. The benefits from those types of activities, first of all, you have to make the tangible changes, and then the benefits flow through in the medium term. For a bank like ours, deep into housing, whichever part of the kind of system, there's deep into infrastructure, project finance, that's naturally where the opportunities on the financing side and the banking side will come. The way I think about that is it's not a, are there opportunities now? Yes, there are.
I think over time, as those wider policy changes take effect, you'd see more opportunities. The reg agenda is, I guess, a very broad topic as well. How would I summarize that? First of all, the fact that we're having the conversation, I see as very positive. I think there is an appetite amongst all stakeholders to make sure that we've got a regulatory environment that is fit for purpose for 2025. I think that's my experience, that's the mindset in which, I guess, the different kind of actors and participants are engaging. We need high-quality regulation. I personally feel it can be a source of competitive advantage for the U.K. My mindset is let's make sure we retain that reputation for high-quality regs, but also let's make sure we've got consistency, transparency, alignment where it's appropriate to other international regulators.
That should create an environment that allows the U.K. sector, or the operators in the U.K. sector, to operate well, but also to give investors confidence in the U.K. If you break it down between the prudential and the conduct side, my summary would be there's been some positive changes, but at this stage, they're relatively modest. I think the intent is greater than the current level of change. Whether it's on the prudential side, on the capital regs, some of the changes that were made to Basel 3.1, positive changes that were made to ring fencing, positive some of the changes around SME and infrastructure and risk weight. That stuff helps.
I think on the conduct side, I mean, the reviews announced on the mortgage side and affordability, the review or the consultation around the wealth advice boundary, I think they're things that can help into the future. They're all things that are still to happen. I guess, Alvaro, I guess my message on these things is the intent feels the right one. I think the spirit of the discussions feel positive, but proof is in the pudding. The reality is until some of these reviews are completed and it's clear to all stakeholders what the changes are, whether that be mortgage affordability, whether that be wealth advice review, whether that be clarity on the end state of the risk weights related to CRD IV, I think that will be the time to kind of take stock about how transformational the change will be.
I think it's definitely a net positive for the sector.
Great. Maybe we can start touching on sort of activity levels, loan growth, and deposits. First of all, on the loan growth angle, specifically, you pulled back a bit on mortgages last year. I'm wondering if that was a deliberate choice and how you see competition in that market now and maybe your views on mortgages overall. You showed very impressive growth in C&I, 9.4% up year on year ex-government schemes. That's very, very strong growth. Where is it coming from, and why do you think you're taking share there?
Yeah. On the direct question, was it a conscious choice in mortgages? Yes, I'll come back to it, but I guess just let's nail that one. Very conscious choice at the tail end of 2023, actually, which feels an awful long time ago. Lending demand generally, yeah, I think 2024, I was very pleased with 2024. I think to grow at 3.5% across the whole business, as I said at the start, it was broad-based. I think that's encouraging. We're doing some work. That's the sixth consecutive year of growth and a CAGR of greater than 4%. I've always believed that the NatWest franchise has latent potential to be a strong lending business. That's what it's grown up as over a large number of years. I think the medium track record suggests that. Very pleased with that.
What it shows when demand's there, we'll capture it and grow our business. That's good. On the specifics, mortgages, I like our mortgage business. It's digitized. It's scalable. We've grown it organically. We've added portfolios inorganic. I still think we have potential to grow our share there, but you'll have heard me say, and I'm sure many people have also heard me say, I won't go and grab volume if the right returns aren't there. Really, last year on mortgages was a bit of a tale of two halves in the first half of the year because I pulled back at the tail end of 2023. What you saw is some of the reality of those application volumes flowed through in the first quarter. Once the market returned, both at volume and also at the right margin, we grew.
Overall, we grew our mortgage business in 2024. We grew strongly in the last two quarters of the year. We added the Metro Bank portfolio, but we did it at the returns that we're happy with. That's kind of the mix that we kind of want to create. At the moment, you touched on the current conditions. I'll come to C&IB. You touched on the current conditions. Mortgage volumes have been good so far this year. Swap rates, as everybody knows, have been moving around. There's been a lot of products coming and going, people changing products, but we're comfortable. We're writing around our target of 70 basis points. We're obviously through the kind of backbook, frontbook kind of effect that we kind of passed that point in the middle of last year. It feels like our momentum in mortgages.
We've got a good foundation for momentum in mortgages, but we'll stay disciplined around volume versus return. Generally, I think the mortgage market will be stronger from a volume perspective this year, but it will stay competitive. On the C&I side, again, the heritage of NatWest is a strong commercial business, which can capture lending demand. The growth was very strong. You alluded to it. It was greater than 9% last year. That's a good growth rate. Since we set up the commercial and institutional franchise, the kind of CAGR lending growth rate there has been 7%. Pretty impressive lending growth. Worth pointing out that the cost of risk last year was 7 basis points in that business and also the year before. We're managing to drive asset growth, but also keep the cost of risk very low. Your question rightly was, where's the growth coming from?
Again, it's quite broad-based. A third of the growth is coming from our mid-market business. To me, that's the crown and the jewel, I guess, of the commercial bank. That's a large number of relationships all over the U.K., whether it's extending their credit facilities, drawing down on asset finance or trade finance. A third of the growth came from that kind of commercial mid-market business. Two-thirds of the growth came from the kind of large corporate institutional business. That is across infrastructure, project finance, funds and sponsor lending. Particularly strong. In that part of the book, transactions are quite lumpy, so I wouldn't necessarily take the kind of half-to picture as the go-forward there, but broad-based in CNI. We also grew, you didn't touch on it, but whilst we've grown mortgages, grown commercial and institutional, we've also grown our unsecured book.
We come off a very low base there. We added GBP 1 billion of lending across our unsecured personal lending and our credit card. I'd say I feel that we've got the inherent kind of strength of the franchise. We've got sources of growth and kind of lending engines, but they're across retail, they're across CNI, and that should set us up well.
On the other side, on deposits, the strong franchise you have has obviously supported the improvement of profitability. You've given very good disclosure on the structural hedge. How do you feel about the deposit pricing and volumes going forward? Have you seen any change in customer behavior? Obviously, we now had three rate cuts. Have you seen any changes there in customer behavior?
Yeah, I think where I'd start there is that deposit growth in 2024 was probably greater than we'd anticipated. I was pleased to see it growing each quarter as we went through the year and across different businesses. That was very encouraging on the deposit side. When you combine that with the fact that the mix of deposits has kind of stopped changing, you've got volume growth, you've got stable mix. That obviously drives, as you alluded to, good income. The benefits of the structural hedge offset the couple of rate reductions that we had during 2024. That was kind of a nice mix as we went through 2024. What are we seeing now? I mean, I think from a pricing perspective, we've had three rate cuts. We've passed through around, in the region, when you do a weighted average basis, around 60%.
That's in line with the sensitivities and the disclosures that we share. I think the pricing response from both the large players and the kind of challenger banks has been very rational. That is encouraging. We're not seeing any change in product mix. The amounts of deposits that have moved to term have stayed pretty much flat. There's been a small tick up from non-interest bearing to interest bearing, but I'm encouraged by both the volume and the mix there. As you mentioned, the structural hedge is a really positive tailwind for us as we go through 2025. We've been explicit that we expect that to add around GBP 1 billion of income in 2025 compared to 2024. Through the life of the plan that we've shared externally, it will increase again in 2026 and 2027.
That's a nice tailwind, and that will help offset whatever the rate reductions are as we go through. Customer behavior, as I say, in my view, is very rational and isn't really changing. I know there was a debate as we hit the peak rate cycle, would we suddenly see more customers move to fixed term, or as rates started to come down, we would see that. The reality is we haven't seen that. I feel like the deposit book is operating as you would wish it to. Household savings are up, so that supports it. They'll probably be up slightly less in 2025 than 2024, given where wage inflation and notional wage inflation and inflation will settle. It's a great source of strength. You can see the business mix we have. It's a great kind of source of structural strength for the NatWest franchise.
I hear you sort of talk quite constructively about volumes, both in loans and deposits. Great dynamics look very healthy. Then I look at your guidance of GBP 15.2 billion-GBP 15.7 billion revenues for this year. It looks conservative, and we have a consensus as well. We are already at the higher end or even slightly above that range. Where would you say you are being more cautious than consensus?
Yeah, so I shared, I guess I shared a range in February. My view is, yeah, I think if you look at the bottom end of the range, that's about just over a 4% revenue growth. If you look at the top end of the revenue range, GBP 15.7 billion, that's a kind of 7% growth. I think it's my job to give a balanced view of where I think the outcomes would be. I'm not trying to land the kind of the income number on a pinhead, not least because you and your peers and colleagues would criticize me if I missed that pinhead. That's what I'm trying to do. As you know, there's a number of variables, a number of factors that could affect the revenue, I would say. You're right. I've talked to confidence around organic growth on both sides of the balance sheet.
That's obviously going to be impacted and influenced by just the rate of the underlying economy and how customers and their confidence respond to that. That is one particular aspect. On non-interest income, we had a very strong second half of the year last year, taking advantage of the volatility that was there in our markets business. I do not want to make the assumption that that continues. That being said, we have had a very strong start on that front this year. I guess there are examples of the puts and takes. As we continue to do more capital actions, there are some contra revenues. There is a variety of things. What I like to do, and hopefully it is appreciated, is I like to give a balanced view of where we are. I think our disclosures are very extensive.
If analysts want to take a different view on some of the assumptions, whether that's the number of rate cuts, whether that's the reinvestment rate for the structural hedge, I think our disclosures allow people to, I guess, to work that through. I am not going to guide you to, are we 10 weeks into the year, kind of to a point in the range. What I'll say is we feel confident about the way in which the year has started, and we'll keep people updated as we go through the quarters.
Fair point. Maybe I want to go into some of the strategic priorities. One of the three strategic priorities is simplification of the business. Do you think that there's more that you can do to simplify the business, and to what extent is that dependent on tech investment?
It is a very big priority for me and the leadership team. I have been very high conviction on, I guess, that if you think about my broadest priorities as kind of discipline, growth, and simplification, I have been very high conviction for the last 18 months that that is a good path for us to be on. After 18 months, in a way, I am even higher conviction because wherever I go in the business, whether it is with customers or whether it is colleagues, everybody points out the opportunities there are for us to get simpler and better and quicker at the way in which we do things. That encourages and frustrates me in equal measure because it is opportunities. That is good. That encourages me, but it frustrates me because I would like us to go faster and get more done.
What I would point out, though, is simplification is much more than tech investments and cost out. It is a much broader program around improving the customer and client experience, improving our risk controls, making our colleague experience better, simpler. It touches tech, but it touches operational processes. It touches legal entities. It touches governance. It is really just how we get things done in the organization. One of my observations internally and externally is that on one hand, we have a very simple business and business mix. When you look at our business, it is not simple. I think that is the opportunity of simplification. We are going after Alvaro, all of those things, not just tech simplification. There is a very broad program.
If we get that right, it will continue to drive very good operating leverage, which we already have, but it will also improve much better client experience and colleague experience. Maybe just to give you a flavor on the tech side, given you mentioned it, first of all, I should point out our cost guide has everything in. We do not have things below the line. Our cost guide has wage inflation, tech inflation, the investment in the business, the restructuring charges, whether they are people or property. It is all in. A big part of that overall cost guide is our tech and data spend. To bring the opportunities to life, we think we can decommission the best part of 600 applications, which would be a significant percentage of our current technology estate. We feel we can move from 23 customer data sets to maybe a couple.
There are these big kind of strategic tech changes that drive efficiency and hopefully drive more opportunity. There is also a lot of tactical stuff, which we, I think as an institution, have a very good track record on as driving efficiency, driving out costs from the organization. That should just put us in a stronger place. We have this tailwind of kind of balance sheet growth, structural hedge, and the harder we work on the efficiency of the bank, that will set us up well. I often quote some of the numbers I see in my European peers who have a very similar business model, but some of their cost income ratios are lower. We should make sure we have a mentality of continuing to drive that.
Maybe a couple on capital allocation from my side, and we can open up for Q&A from the audience. You raised your dividend payout to 50%. How are you thinking about capital allocation as the government exits the register? Do buybacks still make sense given your share price valuation?
Myself and the Board thought it was the right time on the ordinary dividend with the very pleasing kind of pace of progress on the government shareholding down to less than 5%. We thought it was appropriate to look at capital allocation. We made the decision to move the ordinary from 40%- 50%. To me, that shows, I guess, the confidence we have in the business, but also the underlying capital generation of the franchise. We still do have the potential, of course, to do on further directed buyback should we get the opportunity to do that. When I think about capital allocation, that is still in my mind. With the 50% dividend ratio, that still gives us the potential to both invest in the business and return surplus capital via buyback.
I think we're striking a happy medium there of strong ordinary, invest in the business, potential for buybacks. To your final question of, yes, we've seen significant increase in, I guess, our valuation and things related to that. Given the continued momentum we've got in TNAV, my view is that the buyback still makes sense at the current level. That's how I'm thinking about capital allocation. We've upped the ordinary. There's the potential for one further directed buyback should we have the opportunity. Where we have surplus capital, we'll consider returning that to shareholders. The buyback still makes sense at the current valuation, in my view.
Maybe last one for me. We've discussed at length your organic growth opportunities. How do you think about inorganic growth opportunities? You've announced two add-on deals last year. There are areas of the business, like wealth, where you might look at, would you look to make an acquisition in areas like that one? Given the returns the group is generating, does it raise the bar for potential M&A?
First of all, I'll come to it in organic. On organic, I think you can see that we're very focused on the organic plan. I'm very confident that we've got runway in all three of our businesses to grow, and we can put capital to work very effectively there. That's how we think about it. On the inorganic side, we're pleased with the two transactions. In some ways, they're opportunist. We saw the opportunity to add customers, scale at the right returns. We've learned a lot by doing them. From that perspective, I think they've worked through a variety of different lenses and stakeholders. More broadly, how do I think about inorganic? Very clearly, it has to, and you've heard me say this before, but it has to offer really compelling shareholder value, but also strategic congruence.
That's an absolute requirement. Given the returns that we're generating in the business, you can see 17.5% last year. You can see our guidance this year, 15%-16%. It's a very high bar. It's a very high bar financially, especially when you compare it against the counterfactuals of deploying internally or share buybacks. That's how I think it through. What I would add, though, is it's not just a financial high bar. There's an operational high bar as well. Given the momentum we've got in the core business, the distraction factor is high. We're very mindful of that. Not only are the financial bar high, the operational and culture bar is high for anything that could, I guess, distract from delivery of the plan that we've put out externally. On wealth specifically, the punchline here is that the multimodals make it very difficult.
Are we very committed to growing our wealth business organically? Absolutely. We've got a very strong new leadership team. They're driving momentum, and they'll continue to do that. To add to that within organic is just very difficult the way the current kind of multiple differentials work. If we were sitting here last year, you could argue the multiples have converged, but it's still a meaningful gap. It is hard, in my mind, to create a value creation case that is really compelling at those multiples, be it for scale or capability. We will always look there. What I'd say is the economics of it look pretty challenging at the moment. One would love to have, I guess, exposure to some of the, I guess, the dynamics of a bigger wealth business, the demographics, the capital light income, how that helps distributions.
That's why it's in our minds. We can't be seduced by that if the economics don't make sense.
Makes sense. That's for me. I want to give the opportunity to the audience to ask questions. Who wants to ask the first question?
Could you just ask about Coutts? It's a great brand name, but it feels like it's never really gone the places I might have thought it would have gone within NatWest. So her thoughts on the investment needed there, maybe getting more fee revenue coming through there, and maybe the utility of the brand more broadly beyond the sort of current focus on high net worth individuals.
Hi, Fiona. Good to see you. I agree with you. I think, and I guess more importantly, not that I agree, but whenever you do any sort of benchmarking around private bank brands, with the greatest respect to all my peers who may or may not be in the room, the Coutts brand indexes incredibly highly from a kind of value and attribution perspective. We have a very good brand. We have a very good banking business within our kind of Coutts and private bank. Like you, I think it presents a significant opportunity, both organically in terms of how we currently use it, but also how we think about some of the product manufacture and distribution that we could have across the wider retail base. We are very ambitious for what we can do with our private bank. Coutts is part of that.
It's not the whole private bank in of itself. We have a good underlying tech platform. We have a product set that we probably need to broaden a little bit to appeal to the client base that the brand attracts. We need to distribute that product, not necessarily always under the Coutts brand, potentially under the NatWest brand in a very seamless, frictionless way across our mass affluent and our retail base. We are optimistic about the organic plan. I have heard, as you will have heard, Fiona, I have heard a lot of people talk in the sector about the opportunity in mass affluent. I guess our philosophy here is to get focused on the delivery, give you the proof points, rather than make very grand claims upfront about what it could be.
If you're looking at the raw ingredients, a brilliant brand, a good tech platform, a strong banking business that has the potential and should be doing more on the wealth management side, that's how I think about it.
Thanks. Next question, please. I've got a couple more, but I just want to give the audience an opportunity as well. Here in the third row, please.
I have a question about where do you see the opportunity from the government agenda, notably in terms of focus on defense? Maybe it would be an opportunity for your business clients or just to have your view on that.
Yeah. Thank you for the question. There's no doubt as governments and sovereigns increase their commitments to defense, I think that presents opportunity to ourselves. We're a big supporter of the defense sector already, as you'd expect, I guess, for a bank that has a big corporate base. I think that will only accelerate. We're in very positive engagement with our defense clients, but also with some of the government departments in terms of how they're thinking about investment in the sector, growth in the sector. It's a place where private capital can definitely be deployed quick and at good returns. Within our commercial institutional business, we're very focused on it. We do think there'll be opportunities. A little bit similar to what I've said in relation to kind of housing and planning earlier, these things kind of evolve over a couple of years.
The reality is that as national budgets change, as contracts get awarded, it takes time. I'd feel it's a strong underpin to the medium-term growth rather than a very kind of short-term sugar hit.
Next question.
I'll touch on I've had a question on asset quality. I think across the board, where we look at all the banks, it remains very, very benign. You mentioned seven basis points in CNI. And Katie obviously often talks about 20-30 through the cycle. How should we think about asset quality? It remains very benign. Can it stay like that for much longer? How do you think about it? You should, obviously, as a CEO, I'm sure you're.
Yeah. We spend an awful lot of time on it, both in this job and in my previous job, given the, I guess, the amount of credit we've put to work in the CNI franchise. So yeah, nine basis points last year overall. We've guided to less than 20 basis points this year.
We still have kind of post-model adjustments of the best parts of GBP 300 million that we haven't released yet. If you look at the current performance of the asset books, incredibly strong. In 2024, basically our mortgage book cost of risk was zero basis points. The asset quality is very strong. When I was in my previous job, I guess I was the one always, I guess, agitating, thinking that this was going to deteriorate. The reality is it hasn't. We've got a really strong book that's being built up over an extended period of time. Also, we need to be mindful that NatWest and some of the other large U.K. banks, there's been a period of de-risking post-crisis as well. The reality is the clients and the risks that are left in the book are those that you've very consciously chosen to have.
I think we get rewarded for having a very kind of low-risk business model, kind of relatively thoughtful risk appetite. I'm not convinced kind of widening our risk aperture would kind of be rewarded in valuation versus the value we get for having a low-risk business model that we currently do. We are thoughtful. Where there's opportunities to get better risk-reward on a tactical basis, Alvaro, we take it. You can see the growth in our unsecured book, for example. We've expanded our credit card proposition. We went whole of market early 2023. The credit quality there has been good as well. We've taken a bit more risk. Likewise, if you look at our infrastructure business or our project finance business, we are very thoughtful about risk-reward. Where we see opportunities to do a little bit more, we will do it.
What that isn't is this fundamental change in risk posture, because I think we're valued and rewarded for being a low-risk business. I am hyper-vigilant around it. I think it's good to be paranoid about it, to think that it could get worse and what would that mean. We've consistently beat where we, I guess, we've consistently beat our guidance for quite a bit of time there. I'm comfortable with that. As long as we have this mentality of where is the good risk-reward and where is the take the defense opportunity or take the housing opportunity. Where we see those opportunities, let's make sure we're thoughtful and participate if we think it plays well.
Yeah, you look across mortgages, you look across unsecured, you look across the small business book, you look across the large corporate book, asset quality is very strong and we're not seeing any deterioration at all. The two books, I guess, just by the two books I always look at because where I think we'll see the early signals are the unsecured kind of small business bank and the unsecured kind of retail lending book. We're reassured that even though the impairments have gone off in unsecured, it's very proportionate to the size of the growth in the book. So far, so good. Big picture, I know I'm giving you a long answer here, but big picture, what I'd also say is if you look at some of the fundamentals, employment remains pretty robust, which obviously supports the kind of retail side of things.
Businesses, it varies between sectors, that's fair. Businesses have been relatively cautious. If you look at their leverage relative to other periods of time, there are some exceptions to this. In general, the relative degrees of leverage is limited. That gives you confidence to me about the kind of the structural position and also where we lend into. A lot of the lighter covenant activity, arguably wider activity, does not necessarily happen in the banking sector anymore, which I'm sure you know.
Yeah. I guess the risk is outside the bank's balance sheet, it looks like. Any last questions? There's Ian here. Third row, please. Fourth row, actually. Third row.
Hi, Ian. Morning. Thank you. Just following up on that last answer, which was very full, so thank you. Some of the soft surveys of the employment market and parts of the employment market in the U.K., particularly at the lower end, are looking to be sending quite a difficult message over the coming months. That does not seem to resonate at all with what you are seeing in the business. How do you square what the economists are looking at and what you are seeing? Is it just that you are not exposed to that customer group with your loan book, or are there other things happening which are more positive to offset those potential challenges? It is just, it is an unusual time when the top-down people are saying something very different to what you are seeing.
Yeah. We have the same debate. You'll be pleased to hear, Ian. We have the same debate internally. What I'd say is that it depends which survey you read. I think that depending on which economist and which group, you get slightly different sentiments. We look at them all. It's our job to have the 360 view. I think there is something in what you say about our business model. The reality is of a 15-16 year kind of rationalization, consolidation into certain, on the business side, certain sectors and certain exposures. I think the reality is where we are exposed is probably the less riskier parts of the U.K. economy. There might be a slight kind of disconnect, decoupling from the whole economy versus, I'd say, where the larger banks lend. What I'd finish with, Ian, is that there's different surveys, literally daily, weekly.
They move around. We try to not get excited either way about one or other. We look at the underlying activity. We speak to our customers. I often hear that customers are worried about the economy, but they feel okay themselves. That's a common refrain. There are some sectors, aspects of retail, aspects of leisure, where some of the changes that are coming through in April are obviously putting pressure on profitability rather than, I'd say, kind of solvency or credit. Thanks, Ian.
Great. There is room for one quick question if anybody has a quick last question. Okay. If not, we can leave it here. Thanks very much, Paul. Very interesting session. Thank you very much.