Barclays PLC (BCS) 2021 Q4 法說會逐字稿

Welcome to the Barclays Full Year 2021 Results Fixed Income Conference Call. I will now hand you over to Tushar Morzaria, Group Finance Director.

Good afternoon, everyone, and welcome to the Fixed Income Investor Call for our full year 2021 results. I'm joined today by Dan Fairclough, our Interim Group Treasurer.

Let me start with Slide 3 and make some introductory comments on our full year performance and outlook before handing over to Dan.

Through the year, the strength of the CIB has continued to offset the effects of the pandemic on our consumer businesses, where we are now seeing initial signs of recovery. Overall income was up 1% year-on-year despite an 8% weakening in the average U.S. dollar exchange rates. Costs increased by GBP 0.6 billion to GBP 14.4 billion as a result of an increase of GBP 0.3 billion in structural cost actions and GBP 0.2 billion in performance costs. However, base costs, excluding these items, were flat at GBP 12 billion, in line with our guidance.

Following an impairment charge of GBP 4.8 billion in 2020, we had a net release of GBP 0.7 billion for the year, while maintaining strong coverage ratios in line with or better than pre-pandemic levels. This resulted in a PBT of GBP 8.4 billion, a significant increase on the 2022 profit -- 2020 profit of GBP 3.1 billion. And the EPS was 37.5p. Overall, we generated a statutory RoTE of 13.4% for the year.

Our capital generation has put us in a position to pay a total dividend of 6p for the year and launch a further share buyback of up to GBP 1 billion, following on from the GBP 500 million buyback executed in the second half of 2021. We ended the year at 15.1% CET1 ratio or 14.8% adjusted for the proposed buyback, above our target range of 13% to 14%. Dan will talk about our capital position in more detail shortly.

Having achieved a 13.4% RoTE in 2021, going forward, we're focused on delivering our target of double-digit RoTE on a sustainable basis. We are seeing some signs -- we are seeing some recovery in lead indicators for consumer income and the CIB franchise continues to be well positioned, and believe our diversified income streams position us well to benefit from the economic recovery and rising interest rates. Despite the impairment release, we have maintained strong coverage ratios, and we expect the impairment charge run rate to be below pre-pandemic levels in the coming quarters.

Although the base costs in [2020] are expected to be modestly higher than in 2021 as a result of inflationary pressure, costs remain a critical focus, and we will be disciplined on performance costs and the extent of further structural cost actions. Overall, we are well positioned to deliver sustainable double-digit returns on tangible equity and making appropriate capital returns to shareholders while maintaining a strong capital ratio.

And with that, I'll hand over to Dan for the balance sheet highlights.

Thanks, Tushar. We ended the year with a robust position across all aspects of our balance sheet, as evidenced on this slide. Our CET1 ratio was 15.1%, the spot U.K. leverage ratio ended at 5.3% and MREL was 34.4% of RWAs, ahead of our end-state requirements that came into effect at the beginning of the year. Liquidity continues to be strong with an LCR ratio of 168%.

I'll start with some comments on capital on Slide 7. Our earnings in 2021 underscores strong organic capital generation of the group, but is slightly more elevated than a typical year. RWAs grew by GBP 8 billion over the year, driven by market risk model updates in Q4 and business growth in the CIB. And we absorbed previously flagged headwinds, such as the reduction in IFRS 9 transitional relief and pension contributions.

Our strong capital position enabled us to distribute 72 basis points of capital to shareholders over the year in a combination of dividends and buybacks, including the buyback announced today of up to GBP 1 billion or the equivalent of 30 basis points.

On Slide 8, we thought it would be helpful to show the effects on the CET1 ratio of the share buyback and the regulatory changes, which took effect from 1st of January this year. The effect of regulatory changes is circa 80 basis points, similar to guidance we provided at Q3 results last year. The combined impact of both of these items would take the CET1 ratio to circa 14%, the top end of our target range of 13% to 14%. We do not expect any further significant regulatory headwinds for the next couple of years.

Looking further out, we provided an estimate of the initial quantitative impact from Basel 3.1, which is a 5% to 10% increase in group RWAs from our end 2021 position. As you'll be aware, there is material uncertainty in the quantum and timing of the Basel 3.1 impact, particularly in the U.K., and it will be some time before the impacts can be assessed with accuracy.

Alongside the rest of the U.K. sector, we are awaiting the consultation paper from the PRA on rule finalization and timing of implementation. This is now expected in the second half of this year. We note that for the rest of Europe, implementation was further delayed to 2025, and we await to see if this will be followed in the U.K.

On Slide 9, we've attempted to lay out at a high level our philosophy towards capital management and how we intend to allocate capital going forward. As 2021 has proven, the group is able to generate meaningful organic capital from earnings. Achieving our greater than 10% return on tangible equity consistently would translate to 150 basis points of annual capital ratio accretion.

This capital can then be used in 3 ways. Firstly and most importantly, to maintain a strong capital position, which is the foundation of our 13% to 14% CET1 ratio target. Secondly, to selectively invest for growth in demand-led and capital-light organic and inorganic opportunities. And finally, to distribute an appropriate proportion to shareholders.

Holding an appropriate headroom above our MDA hurdle is a critical part of our capital management framework. And looking ahead, we are comfortable that the 13% to 14% target range accommodates for the regulatory measures that we see on the horizon. At the end of the year, our buffer to the MDA hurdle of 11.1% was 400 basis points or circa GBP 13 billion of capital.

With the Bank of England reintroducing the U.K. countercyclical buffer, or CCyB, from December 2022, the MDA hurdle will increase over time, as illustrated on the slide. The U.K. CCyB translates to circa 50% for the group, given our geographical exposure. Therefore, the 1% CCyB application in December 2022 becomes a circa 50 basis points capital buffer, which would increase our MDA hurdle to 11.6%. If the CCyB were to be increased further to 2% in Q2 2023, as the Bank of England has indicated it may, then this would result in a circa 100 basis points total additional buffer for us, bringing the MDA hurdle to 12.1%.

However, as we experienced in both 2016 and 2020, the PRA has moved swiftly to remove the CCyB in the event of a real or potential macroeconomic stress. And so we do view this element of our capital requirement as a stress buffer. The PRA have also said that they intend to review their Pillar 2A methodologies in more detail by 2024, in light of changes in buffers and improvements in the way RWAs are measured following the finalization of Basel 3.1. As such, we may well see some offset in our Pillar 2A requirement. This would be consistent with prior official sector comments on the adequate levels of capital in the U.K. banking system.

All in all, we believe that the 13% to 14% target is calibrated to provide an appropriate headroom for the MDA hurdle, reflecting this evolving regulatory environment.

Turning to the next slide, which illustrates the structure of our total capital stack. We continue to run a robust AT1 level and maintain a conservative headroom over the regulatory minimum. Our thoughts in this area are unchanged. The headroom primarily serves to manage any RWA and FX fluctuations.

In addition, as we've noted before, running at this AT1 level also supports leverage, and we continue to see attractive opportunities in parts of our markets business, where returns on leveraged balance sheet are in excess of the cost of AT1.

Finally, I would note that we do have a regular call profile of AT1. For example, the recently announced call of our $1.5 billion, 7.875% Tier 1 bond, 2 weeks ago. So we have the ability to manage this ratio dynamically if we choose. Of course, this is subject to market conditions and regulatory commission at the relevant time.

In Tier 2 capital, we aim to hold appropriate levels of Tier 2 to meet our total capital requirement.

On legacy capital, we remain comfortable with our position, given it's a very small part of our capital stack and is not counted within our MREL position. We have around GBP 1.7 billion worth of legacy instruments which could exist beyond 2022. The vast majority of these instruments continue to qualify as own funds until 2025 or beyond.

Our approach remains unchanged and the own fund eligibility aspect that I just mentioned is a component that informs our decision-making on resolvability when assessing each instrument. This reflects the understanding that qualifying own fund securities remain in scope for regulatory stabilization powers. We continue to assess our position and we'll consider each security on a case-by-case basis.

In addition, we have no legacy capital securities issued from our group resolution entities, Barclays PLC. This is something we've mentioned previously and is important to us as legacy capital will not impact the single point of entry resolution model. We continue to be engaged with our regulators on legacy capital, which forms a part of our overall Resolvability Assessment Framework, the summary of which is due for publication later this year alongside our peers.

2021 was a milestone year for MREL. As the transitional requirements have come to an end, we are pleased to have been compliant with our end-state MREL requirements for some time. The culmination of a near decade-long journey from when we started in 2013 with our first HoldCo issuance. As you can see on Slide 12, we have a prudent MREL position and are in excess of regulatory minimums.

For 2022, our MREL issuance requirements are expected to be around GBP 9 billion, lower than the circa GBP 12 billion of total redemptions of holding company and operating company term securities. Within this GBP 9 billion issuance plan, we expect to be active across all MREL debt classes as usual, in senior, in Tier 2 and AT1 formats. We are pleased to have already kickstarted our plan with a EUR 1.25 billion senior transaction at the start of January, leaving us with around GBP 8 billion of MREL issuance still to do for this year.

1 of the 3 strategic priorities for the group that Venkata laid out this morning was to support the transition to a low-carbon economy. This transition will involve a fundamental reorganization of the global economy, and treasury is playing a critical role in supporting Barclays' initiatives in this space. We are facilitating investments, including our own capital, into new green technologies and infrastructure projects that will build up low-carbon capacity and capability.

Within treasury, our sustainable impact capital program has a mandate to invest up to GBP 175 million of equity capital in sustainably-focused startups by 2025, helping to accelerate our clients' transition towards a low-carbon economy. The program is seeking out and supporting clear, scalable propositions that deliver both environmental benefits and economic returns. GBP 54 million of our target has already been deployed, with GBP 30 million invested in the last year.

In terms of future fundraising, we have ambitions to continue to expand our environmental and social issuance. These include the continued building out of our green liability programs and issuance on existing programs, such as our green structured notes program. We continue to develop the product offering, such as our green commercial paper program launched this month. We are also active as an investor, with GBP 3.4 billion of green bond assets held in our liquidity portfolio.

On that note, let me now turn to Slide 14 to talk about our liquidity position in more detail. The liquidity pool of GBP 291 billion and our Pillar 1 LCR ratio of 168% represent GBP 116 billion surplus above the minimum regulatory requirements. You'll see that the LCR position has been stable throughout the year, maintaining a prudent balance between holding a healthy excess and deploying the liquidity to our businesses, enabling them to capitalize on the prevailing market opportunities. Maintaining this prudent liquidity position comes at low cost to the group in the current environment.

Let me now turn briefly to our funding profile on the next slide. We continue to see the group loan-to-deposit ratio trend lower. In 2019, it stood at 82%. And at year-end, it was 70%, with deposits across the group of GBP 519 billion, up 25% over the past 2 years. The deposit growth has been observed across the market, largely due to global monetary policy actions.

Looking forward, we believe that deposit trends will depend largely on the wider macroeconomic environment, and in the U.K., determined by how rapidly the Bank of England unwinds QE. The deposit book currently remains stable, but as you would expect, we continue to monitor it closely.

In our structural hedge program, we identified further deposit balances suitable for hedging and grew the program by GBP 40 billion last year. However, we retain a significant buffer of unhedged balances that we keep under review.

Before I conclude, let me spend a moment on credit ratings. Improving our credit ratings profile continues to be a strategic priority for the group. We ended the year with positive outlooks for Barclays PLC with S&P and Moody's. With S&P, we went -- we underwent a double revision in the space of 4 months, from negative to stable in February last year, followed by stable to positive in June. With Moody's, the outlook was revised from stable to positive last November.

These were actions in recognition of strengths specific to our credit fundamentals, most notably in how we've demonstrated an improved and sustainable profitability level throughout the pandemic. We will continue to seek active dialogue with the agencies to move forward with the positive momentum that we have.

So to wrap up, we continue to manage the group with a strong balance sheet, a prudently managed CET1 ratio and robust liquidity metrics. Our diversified business model continues to deliver meaningful capital generation, giving us comfort in our 13% to 14% CET1 ratio target. We continue to approach our capital markets issuance in a responsible and measured way.

We look forward to engaging with all of you and the rest of our fixed income stakeholders over the coming months.

And with that, I'll hand back to Tushar.

Thank you, Dan. We'd now like to open up the call to questions, and I hope you have found this call helpful. Operator, please go ahead.

(Operator Instructions) Our first telephone question today is from Paul Fenner from Societe Generale.

Tushar, congratulations and all the best for the future. I've got -- I guess I've got 3 questions. The first is on the plan for funding. So you're saying GBP 9 billion. Would it be -- and across the spectrum. Would it be fair to assume it's going to be something like GBP 5 billion HoldCo senior; GBP 2 billion, Tier 2; GBP 2 billion, AT1? Just a little bit of guide around the quantum at each level would be very helpful.

And the second question is just looking at your asset quality figures, and I know the outlook is all pretty benign, but the stage 2, at what I think is around -- still around 10% or so, is still historically quite high. Where should that end up being? Or are we kind of at a naturally sort of higher state of -- stage 2?

And then the third question is around -- the thorny question around sanctions in -- against Russian institutions and potentially an escalation of the size of the banks over there. What -- how should we think about the impact on someone like Barclays of these sanctions? What does it do for you? And where does it hurt?

And in particular, I guess, what is the nervousness around shutting off SWIFT? And why is that the place where no one wants the governments to go, switching off SWIFT off the Russians? And what would that impact be?

Thanks, Paul, and I appreciate your comments at the beginning of your question. Why don't I ask Dan to cover the funding plan and sanctions and the impact it may have on us. And why don't I quickly cover your question on asset quality and sort of impairment staging.

I'm not sure I'd be able to give you a sort of a straightforward answer on what you'd expect stage 2 balances to be. The only thing I would say is that it's a little bit complicated, where we are at the moment, because the way our models are written under IFRS 9, we didn't really have the pandemic in mind in terms of modeling sort of credit behavior, particularly on the consumer side. And therefore, we've had to use a series of management overlays to really adapt the models to take into account some of the unusual features of the pandemic. And it's really the speed of building into a recession and the recovering from it. And then -- and once in a while, you get a sort of a temporary lockdown, which the models find really, really difficult to calibrate to.

But having said that, when you take a step back and I look at sort of general asset quality and the credit environment, I'll just make a couple of points. One is that the environment itself on all our lead indicators looks incredibly benign at the moment. If I look at delinquencies, we look at spending patterns, look at customer indebtedness, we look at affordability levels. All the sort of lead indicators you'd expect us to be monitoring both on the consumer side but even on the wholesale side look as benign as we've seen. Our watch list, when we look on the corporate side, is very low at the moment, and again, probably towards the low end as I've seen it.

Now we are, of course, got geopolitical events, we'll come on to that in a bit. And we've got issues around potentially the cost of living rate cycle and whether it's energy bills or other forms of inflation that are coming through. So one of the things we'll spend a lot of attention just monitoring very closely is affordability levels and the transmission effects on this. But at the moment, it does feel there's quite a decent level of resiliency, at least as we see in our assets, to any shocks.

The other final thing I'd say, Paul, on the asset quality is we do look at coverage ratios in a lot of detail. And one of the areas that -- we want to be conservative in the speed at which we are building our provisions, and also cautious in the pace at which we release them. One measure of that will be the coverage ratios we have. You look at our unsecured books on the consumer side, they're still quite a bit above where they were pre-pandemic levels. And even on stage 2 balances on the consumer side, I think they're running, in the cards business, something around 30%. And most of these balances aren't even past due.

So some of that is a feature of deliberate sort of caution on our part in terms of Omicron was still an ongoing item when we were closing the books at the year-end, and so it was appropriate for us to be cautious. But that gives you a sense that we feel very well provided at the moment against a relatively benign sort of credit backdrop, consumer credit and wholesale credit backdrop.

But Dan, do you want to talk to some of the other questions?

Yes. Paul, so just on the funding plan, I mean, as I said, we'll be active across all tiers of capital. Actually, I won't comment on the individual makeup, but it won't be dissimilar to prior years. And the largest portion of it would certainly be in senior MREL.

Just on the sanctions question, I mean there's obviously a couple of different avenues that we could be impacted by that we focus on. Firstly, is obviously the direct credit exposure that could arise either in direct exposures or in securities form.

And the second, which I think probably gets to your point about SWIFT, is where we might have nostro or vostro exposures. So money is due or from to Russian banks. And obviously, that could either be direct with them or where we are using them as a clearing counterparty. I mean, fortunately, from our perspective, we've got very limited exposure to the Russian banking sector, or indeed Russia as a geography, full stop. But we're clearly keeping it under close review. And hopefully, that's helpful.

Yes, on the Russians, I just [want to tie this asset down] is we -- and you've been following us for some time, Paul, you probably recall when we opened our noncore unit way back when one of the areas or geographies that we exited was Russia at that time. And so this is just part of our geographical shape now. As Dan mentioned, we don't really have any direct exposure. And therefore, even indirect exposure is fairly limited.

Our next question is from Lee Street from Citi.

I have 3 questions for you today, please. So firstly, you flagged no regulatory headwinds for capital after the start of this year and you'll be somewhere around 14%. So I guess my question is after accounting for growth in risk-weighted assets, are you sort of effectively saying you're going to be distributing 100% of your earnings if you're going to sort of manage to that 13% to 14% range? That's the first one.

Second one, and this might be an impossible question. But are you able to give us any thoughts around what is the level of interest rates that you think represents the biting point where the benefit of the higher rates to the benefit of revenues, it starts to become more than offset by higher underwriting loan losses? Or to put it another way, at what level do you think interest rates effectively become a hindrance or destructive to the business model?

And finally, a technical one on the resolution assessment framework. What level of detail do you actually expect to publish in May? Is this like a 1-page summary? 5 pages? 10 pages? 100 pages? And is it up to you, or will the Bank of England effectively dictate to you what you can actually publish?

They would be my 3 questions.

Yes. Thanks, Lee. Why don't I take the first one on distribution, then I'll ask Dan to comment on the other 2. So yes, we don't see -- outside of the direct changes that we'll be putting through in the first quarter, we don't see too much on the horizon over, let's say, the next 2-year time frame.

We've obviously called out Basel 3.1, remains to be seen exactly what that is. The Bank of England will publish their -- I guess it's a consultation on that, some time before the end of this year. Well, we don't know exactly when that will be, but it feels like it would be towards the sort of latter half of the year rather than the earlier part of the year. And that feels like, if Europe's any guide, it's 2025 or perhaps even a bit beyond in terms of implementation.

So therefore, given that there's no headwinds, I think -- look, I don't want to sort of say we'll be distributing literally down to the very last basis point because we're prudent and we're a bank. So we will sort of always be cautious in terms of ensuring that if there are changes in market environments or business cycles or whatever, that we're appropriately capitalized.

But distributing excess capital when we don't think there's a need to retain it as a prudential matter, or indeed, as a productive matter in terms of putting those -- that capital to work is something we would look to get back into shareholders' hands. But I think you've seen hopefully in the past, us operating fairly prudently, well above any sort of minimum level as we would define it. And that's obviously well above any regulatory minimum.

So I guess the message I'd give is we will be a distributor of capital back to investors, but always ensuring that our stack remains prudent and appropriately prudent, depending on where we are in the business cycle.

Dan, do you want to cover the other 2?

Yes. Just on the interest rate point. I mean, obviously, we've disclosed the potential impact of a 25 basis point rate move. So clearly, we've got good positive gearing to higher interest rates.

I mean, in terms of when would we begin to see an impact in credit, and obviously, that needs to be sort of impact on credit beyond what we're already provisioning for. I think the point that I'd probably make is just that we do stress test for materially higher interest rates at origination, we do that in particular on mortgages, where we will be stressing up to interest rates of 6%. And obviously, there's the benefit of the LTV protection there. So hard to give a specific answer, but I do think we're pretty well protected, and we stress for that pretty thoroughly at the point of origination.

In terms of the legacy capital publication, I mean, we're in close discussions with the Bank of England on that now. And obviously, we'll be guided by them a little bit as to how much disclosure we put in that. And obviously, when we can say more on it, we will.

All right. Best of luck in your next role.

Yes. Thanks, Lee.

Our next question comes from Corinne Cunningham from Autonomous.

One of them was actually also on the RAF. I think most of it, you've just answered. But have you already had your discussions in terms of what counts, what doesn't count? And is it just literally kind of the what's published part that you're discussing? Or are there still meaningful and the material conversations about exactly how your resolution framework should work? Are they still ongoing?

And then, a U.K. bank's call wouldn't be complete without a legacy question. We don't have a lot of questions for your book. But just looking back, I wondered if the reason for calling the Sterling DISCO, was the rationale for that largely LIBOR [situation]?

Do you want to cover that, Dan?

Yes, sure. So I mean the resolvability dialogue with the Bank of England is quite a broad topic. So it's not just legacy securities, it covers capabilities in funding and resolution, capabilities in value and resolution, amongst other things. So it's a pretty broad-ranging topic. We've submitted a self-assessment to them and we've had sort of very detailed interviews with them. So I don't think there's too much more engagement for us to have there. Really, it's now just about finalizing the publications for June.

In terms of the sterling, the sterling call, I mean, that was an instrument that lost own funds capital eligibility, and it was economic for us to call. So they were the 2 main drivers for that security. Obviously, as we've said before, we'll look at all securities on a case-by-case basis.

Does that answer your questions, Corinne?

It does.

Our next question comes from Robert Smalley from UBS.

And Tushar, congratulations, and thanks for all your help, especially on these calls over the past couple of years.

A couple of questions on credit cards and then one on liquidity. Could you talk about payment rates? Are we starting to see that turning into revolving balances, differences in the U.K. versus the U.S.? On the earlier call, there is discussion on -- in the U.S. about the acquisition of debt portfolio. And is there really -- is there going to be more divergence in strategy, U.S., U.K., U.S. more targeted at buying portfolios, U.K. more broad-based, where do you see credit normalizing for -- in the card space?

And then on liquidity, obviously, you're carrying a lot of excess liquidity. You've also got, still, COVID reserves. Are you looking to deploy that excess liquidity as rates are going up? And do you think that that's reflected in perception of where your net interest margin is going for 2022?

Thanks, Robert, and appreciate your comments at the beginning of your question. Why don't I cover the point on the cards questions, and Dan will -- I'll hand over to Dan on liquidity.

On credit cards, in terms of payment rates, they were certainly more elevated than we'd hoped for, although not wholly surprising to us, over the course of last year. It's probably a little bit too early to tell because of the seasonal effects we sort of currently have going on at the moment, obviously, off the back of the holiday spending period over Christmas and New Year. And we're sort of not even 2 months into this year. So it's a little bit hard to tell.

But generally speaking, I think the ingredients are there for balances to -- revolving balances to grow, particularly in the U.S. I mean, we've seen very good card opening metrics for our cards in the U.S. We've seen very good utilization metrics. And we certainly haven't seen payment rates increasing, although I'll just sort of caveat that with the fact that I think seasonally, we'll have to sort of get through another month or 2 to know for sure. But we are reasonably optimistic that we'd get into revolving balances, actually both in the -- certainly in the U.S. and in the U.K. as well.

In terms of the strategy there. Yes, there is a divergence in the sense that, in the U.S., we are very, very focused on partnerships. And the purpose of the GAAP portfolio is really to diversify into -- we were very heavy on the travel and hospitality, leisure, sort of sector in the United States with respect to partners. And this takes us into retail.

And if you look at it in real simple terms, half the market in the U.S. is in the hospitality, leisure, travel space; and the other half is in retail. So our first foray into retail is almost a brand-new market for us. It also takes us into white label or store cards, private label card, which is a very different product, a different sort of credit proposition, different sort of socioeconomic demographic that we're dealing with. So if we think about it literally almost a business line in and of itself. So they are quite divergent.

In the U.K., because of the lack of interchange, you don't really be -- get the opportunity to run a sort of a partnership business in the same way that you can in the U.S. So we see that more as a sort of a Barclays-branded product rather than issuing cards on behalf of partners.

In terms of impairment normalization. I mean, pre-COVID, I think both businesses, coincidentally, were running at about 3% loan loss reserves. I think earlier on in the credit cycle and probably credit feels still benign, notwithstanding the sort of questions from earlier with potential inflation shocks and rate rises and stuff like that. But even then, I'd expect it to trend below 3% for some time, actually. At some point, if the cycle matures and seasons well, then that may sort of build back up to 3%. But I think we will take some time to figure to 3% loan loss rates this time around.

Dan, do you want to cover the funding? Or sorry, liquidity.

Yes. Yes. I mean, obviously, completely agree. We've got very high levels of liquidity right now. I would point out that it's very low-cost liquidity, both in terms of the [developed] franchise that we've got and obviously, the TFSME draws that we've made in the year. It's certainly available and ready to be deployed into the business. So that's something we would like to do, subject to the client demand. Obviously, that's going to be most impactful in the U.K. sector in terms of actual impact on NIM.

I think as Tushar alluded to this morning, there is some expectation of growth in those NIM forecasts, particularly in the secured space, given the likely activity that we'll see in the remortgage market and some expected normalization of the unsecured card balances. But yes, certainly, that liquidity remains available to be deployed.

(Operator Instructions) Our next question comes from Alvaro Ruiz de Alda from Morgan Stanley.

And best of luck with the new role. And I have 2 questions. The first one, I think it's quite difficult to answer, but I'm trying my best. It's about the Resolvability Assessment Framework. Given that deadline is in June and you already had all the most relevant conversation with the regulator, do we expect any kind of surprise in terms of, not only about legacy instruments, but as well about the structure of the bank? If -- basically, I just want to see if we can receive any feeling about any big changes once the document is published.

And the second one is about legacy. And if you can give us an update regarding the remaining DISCO securities. And that's all.

Yes. Thanks, Alvaro. I appreciate your comments at the beginning of the question. Why don't I talk about the Resolvability Assessment Framework, then I'll ask Dan to talk about the legacy instruments, including the DISCOs.

You're right. It's a tricky question to answer. We are in close dialogue with the PRA. We've been in close dialogue for some time, and they've obviously looked at our Resolvability Assessment Framework. They've looked at the work we've done; the assurances that we've taken; the governance that we've had; the substantive nature of the work that's completed, whether that's funding and resolution, evaluation resolution, operational continuity, contract continuity, [end-states] and what have you, all of the 8 sort of objectives or impediments that they seek to resolvability.

Where we are at the moment is we are sharing with them our final work, which they've given us feedback on our draft work. So we've received feedback from them. No surprises there. And so we've taken on that feedback and addressed it, and we're sharing that work with them.

The next stage will be to share our own disclosures with them, and they will probably give us -- we expect to receive feedback on that. So I don't think the Bank of England are interested in sort of creating any surprises here, either at the point of disclosure or in terms of what to expect between a bank's own assessment of their own resolvability and their own assessment, but it is something that we'll know when we get there.

But at the moment, I would say it all feels like it's going to plan, and there's a very healthy two-way dialogue to be transparent in our communications between each other in terms of expectations. But there's probably not much more that I can say at this stage, Alvaro.

Dan, do you want to cover legacy?

Yes. I mean, at the risk of repeating myself a little bit, we're very comfortable with our legacy capital position. It's obviously a small number of securities outstanding. We've got no legacy securities outstanding at the BPLC holding company. So we do feel pretty comfortable.

In terms of the DISCO specifically. Obviously, as we've disclosed, it's in the Pillar 3 report, these are own funds until 2025, in our view. So we don't need to do anything specifically on them. Obviously, we won't comment on future calls, but we'll look at the security portfolio kind of on a case-by-case basis as we go.

Thank you very much. Operator, are there any other questions?

We have no further questions, so I'll hand it back for closing remarks.

Okay. Well, thank you very much, all. Hope you found the call helpful. I'm sure Dan and the team and even myself will maybe see you on the road. But with that, I'll close the call, and thank you very much for joining us.