滙豐控股 (HSBC) 2005 Q2 法說會逐字稿

Welcome to our presentation, our 2005 Interim Results for HSBC Holdings. I would like also to welcome those who are joining us via the Internet. My name is Stephen Green, I'm Group Chief Executive of HSBC. Over on the podium there is Douglas Flint, Group Finance Director, and in the front row are Alan Jebson, our Group Chief Operating Officer, Michael Geoghegan, Chief Executive of HSBC Bank plc, John Studzinski and Stuart Gulliver, Co-Heads of CIBM, and a number of other senior HSBC colleagues. And we are joined also by one of our non-executive directors, Sharon Hintze. Morning and welcome.

Before we start the presentation, I would draw your attention to the cautionary words on forward-looking statements showing now on the screen. This is of course to comply with the regulatory environment. And can I please ask that you turn off mobile phones and Blackberrys during the briefing?

Our 2005 results are the first set of results that we have prepared in accordance with International Financial Reporting Standards - IFRS.

Our 2004 comparative figures are also restated to IFRS, but do not incorporate certain new standards, notably the IAS 39 standard on financial instruments, which under the transition arrangements, was not applied until this half year for the first time. Accordingly the comparative figures on an individual line basis may not be strictly comparable.

In July, we published a document summarizing the principal effects of IFRS on the comparative financial information for 2004, and this document is available on our website at hsbc.com.

On hsbc.com, you will also find our news release, our slide presentation and Interim Report, which includes the information which will be filed on form 6-K.

Let me first run through the headline figures, which are presented on an IFRS basis, with the prior year comparisons restated on what you might call an IFRS-light basis. That is, without the application of the new standards on financial instruments and insurance contracts.

Net operating income before impairment allowances was up 11% to $28.1b. Pre-tax profit up 5%, to $10.6b. Profit attributable to shareholders up 9.5%, to $7.6b. Earnings per share increased 8% to $0.69 and the Directors have approved a second interim dividend of $0.14 per share. The first and second interim dividends in respect of 2005 amount to $0.28 per share, and are 8% higher than the dividend declared at the same stage last year. Our capital ratios remained strong, with Tier 1 ratio at 8.7%.

This slide illustrates the movement in profitable -- profit attributable to shareholders over the first half of 2005 and highlights the contribution of organic growth.

Attributable profit increased by $656m. After allowing for the currency translation effect, the growth was $550m, of which $165m was attributable to acquisitions and investments. Underlying growth was $385m.

We would summarize the key achievements for this period as follows.

We delivered strong growth in our emerging markets Personal Financial Services and Commercial Banking businesses.

We continued to make productivity improvements in our European Personal Financial Services and Commercial Banking businesses.

We achieved a stronger performance in our Consumer Finance business in the U.S.

We saw early signs of success in the build out of our new business streams within our Corporate, Investment Banking and Markets business.

We grew our profits in mainland China five-fold, from our strengthened franchise.

The HSBC brand continues to grow in strength. In its annual survey of the world's most valuable brands, Interbrand calculated that HSBC's brand value grew by 20%, making us the 29th most valuable brand in the world.

Looking now at our customer groups, we have achieved strong growth in our Private Banking and Personal Financial Services businesses, which together account for 56% of Group profits, up from 48% last year.

Commercial Banking performed well, with profits up 9% in spite of the absence of credit impairment recoveries and releases recognized last year.

We continued to develop our Corporate, Investment Banking and Markets business, although difficult interest rate market conditions affected revenue in the first half and contributed to an 18% decline in profits.

Now we are going to look in more detail at each line of business, where we show the performance on an underlying basis, with comparative data expressed at constant currency and adjusted for the impact of acquisitions and for the change in presentation of non-equity minority interests.

First, Personal Financial Services, which includes our Consumer Finance business. Here, pre-tax profit increased by 21% to $5.5b.

In the U.S., our Consumer Finance business benefited from both good volume growth and lower credit costs. On top of an improved economy, the benefits of an improved mix, higher quality originations and a focus on collections all contributed to declining charge-offs. Rising short-term interest rates increased the cost of funds.

In Hong Kong, deposit spreads progressively widened as interest rates rose, contributing to a 30% increase in net interest income.

In the U.K., productivity improvements and gains in market share strengthened the results. Improved customer segmentation and better channel management improved customer acquisition and retention. Our share of the U.K. current account market rose to 15%, and an external survey now indicates that HSBC has the joint highest 'share of wallet' of the U.K.'s major banks. The weakening in unsecured consumer credit quality in the U.K., which we talked about in the 2004 results, continued during the first half of 2005 and we have taken further action to address this trend.

In Mexico, we grew deposits, lending products and remittances strongly, and the launch of the first packaged financial services product, 'Tu Cuenta', attracted 300,000 new customers.

In Brazil, our leading position in the Consumer Finance market is growing, thanks to the continuing benefits of integrating the Losango business within our banking operations, and the application of Group skills in the Consumer Finance business.

Our Commercial Banking operations increased their pre-tax profit by 9% to $2.4b. On an underlying basis, the increase was 3%.

Underlying profit growth was much stronger than these figures indicate. The loan impairment charge increased by $295m, reflecting the very significant levels of releases and recoveries last year.

Pre-provision operating profit in Commercial Banking increased by 17%. This growth was driven by a combination of new products, more customers and better customer segmentation, particularly in the U.K.

Progress continued in strengthening cross-border sales activity, with the launch of a further referral program between the U.S. and the U.K. in particular.

Our Business Internet Banking business, the customer Group base grew by 25% and both transaction volumes and revenues increased significantly.

Although there was a more mixed pattern of credit impairment charges across the regions, credit quality and delinquency patterns remained broadly favorable.

Pre-tax profit in our Corporate, Investment Banking and Markets business declined by 15 -- by 18%.

Pre-provision operating income was modestly ahead of last year, despite a difficult interest rate environment and a competitive lending market. And in particular, revenue increased in the key product areas and client sectors in which we have been investing.

Although cost growth in CIBM is materially up against the first half of last year, this reflects the heavy recruitment and investment during 2004 and costs are up 5% against the second half of 2004. Cost growth in the first half of 2005 was in line with our plans and we have now completed most of the new investment banking -- investment in building the business.

Although we are only half way through a five-year strategic plan for our CIBM business, we are encouraged by clear evidence of sustainable progress. This progress is evidenced by improved league table positions and rankings in client surveys within the product areas where we have been building - of which more later. We are particularly pleased with our involvement in a number of key China-related advisory and financing mandates.

There was strong growth too in Global Transaction Banking, particularly in Global Custody and Funds Administration.

Pre-tax profit for Private Banking grew to $451m, an increase of 25%.

Funds under management increased by 14% to $183b, benefiting from $9.2b of net new money in the first half of 2005.

There was strong growth in our Strategic Investment Solutions business and in our 'fund of hedge funds' businesses.

The lending book grew strongly, which was reflected in the 23% growth in net interest income.

We continued to strengthen the links between the Private Bank and the rest of the Group. Since the first half of 2001, we have more than doubled profits in our Private Banking business.

This slide shows the balanced geographic profile of HSBC. In the first half of 2005, the Rest of Asia-Pacific and South America were the principal beneficiaries of growth in emerging markets.

This slide demonstrates the growing contribution that our emerging markets business is making to the Group's profits, reflecting returns on historic investments.

In particular, Mexico generated an impressive 23% growth, and its contribution of $428m in the first half of 2005 now makes it the fourth largest contributor to the Group's profits.

Turkey more than doubled its profits to $133m.

Brazil benefited from growth in the Consumer Finance business, which was reflected in a 58% increase in profits.

In the Middle East region, the UAE participated in the region's strong economic growth and increased its profits by 60%.

The fall in profit in Malaysia reflected significant releases of provisions in the prior period, and in Taiwan reflected increased investment spend, particularly in marketing.

Profit growth in China benefited from our investments in the Bank of Communications and Industrial Bank, which are equity accounted.

Turning to the performance and operating efficiency of our businesses in mature markets, you can see here that in our Personal Financial Services and Commercial Banking businesses, the efficiency ratio has improved in most major markets.

In the U.S., although the cost efficiency ratio appears to have deteriorated, this essentially reflects the different profit and loss structure of our Consumer Finance business there. Costs as a percentage of average receivables, which we regard as a better measure of efficiency, improved. The lower net interest margin on assets, which drove the weaker cost efficiency ratio, was compensated by lower credit charges, with the risk-adjusted margin moving favorably.

In U.S. Commercial Banking, the move principally reflects lower disposal gains compared with the prior period.

Let me now hand you over to Douglas, who will take you through some of this in more detail. Thank you.

Thank you Stephen. This slide shows the underlying growth trends for the Group. Reading from the left, we have adjusted for acquisitions in investments, principally an extra two months from Bank of Bermuda, the acquisition of Marks & Spencer's Money, and the investments in Bank of Communication. Together with the IFRS adjustment, the geography change moving some of our Tier 1 capital costs from minority interests up into net interest expense.

After restating the first half of last year into a constant currency basis, net operating income before loan impairment charges increased by 8.6%. Total operating expenses increased by 10.7%. And this reflected investment and strong growth in our emerging markets businesses, as well as the continued investment in developing our Corporate, Investment Banking and Market businesses.

I'd now like to look a little bit more in detail at the evolution of our Corporate, Investment Banking and Markets businesses. We should start by reminding ourselves of the breadth of the business mix, which seeks to service the diverse needs of our corporate and institutional client base.

This slide illustrates the shift in revenue mix in the current period. Against a background of flattening yield curves in major currencies, which reduced the revenues in our money market and balance sheet businesses, we nevertheless achieved growth in revenues in the other Global Markets and Corporate and Investment Banking product lines, and those are the ones in which we have invested in the last three years.

We have a good track record in building sustainable revenue flows in this area. For example, in our Markets business, over the last 2.5 years since we formed Global Markets, quarterly profit before tax is up on average by around a third against the comparable figure in the preceding 2.5 years. And as a market -- as an illustration of market recognition of our progress globally, we now rank first for foreign exchange in London in the Euromoney client survey, we now rank fourth in market share of interest rate derivatives against 17th in 2002.

In debt capital markets we continue to progress, rising in the league table for all international bonds to fifth in the first half of 2005 from eighth in 2003. And within Investment Banking, as Stephen said, we are increasingly engaged on cross-border advisory work, leveraging our geographic strands.

You can see in this familiar slide that daily distribution of market risk revenues, that revenues remain concentrated in similar ranges to previous half years.

This slide analyzes the composition of the loan portfolio. Total Personal lending continues to account for over half of customer lending. The underlying growth in Personal customer balances continued to be strong, with Residential Mortgage growth up 19% over the last year, with robust growth in Mortgage lending in the U.K., and the Rest of Asia-Pacific. And in North America, other Personal lending grew by 15%. The growth in Commercial lending was also robust against -- at 16% up against last year.

Turning to impairment provisions against lending, the level of new provisions taken improved by 14 basis points to 128 basis points. The total charge for impairment losses and other credit risk provisions increased moderately, from 94 basis points to 96 basis points, which reflected a lower level of recoveries and releases and the absence of the general provision released last year.

If we turn to credit quality experience within the customer groups, the level of the charge in Personal Financial Services reduced by 29 basis points, which was heavily influenced by the positive movement experienced in the North American Consumer Finance business, which we shall see later.

Commercial banking no longer benefited, as we said before, from the exceptional levels of releases and recoveries, particularly in Hong Kong in 2004. And CIBM continued to benefit, albeit more modestly, from releases and recoveries within that portfolio.

If we look at the regional splits of loan impairment charges for Personal Financial Services and Commercial Banking businesses, in PFS in Europe there was a notable increase. This reflects not only growth in the book, but some weakening in the unsecured Personal lending portfolio.

Personal credit quality experience continues to be benign in Hong Kong, which recorded a modest credit.

In the Rest of Asia-Pacific, the charge increased broadly in line with asset growth, while in North America there was a significant improvement in the Consumer Finance business and its reduced charge from 3% to 2.2%.

In Commercial Banking, the increase in the charge essentially reflected lower releases and recoveries, particularly in Hong Kong, as well as growth in the book.

If we look at credit quality trends in U.S. Personal portfolio, in addition to charge-offs, we show the trend in the two-month delinquency pattern, as this generally is indicative of future charge-offs.

The improving trends reflect a number of factors - a general improvement in the U.S. economy with increasing employment; a general shift in our portfolio towards Real Estate secured lending and within that, an increased emphasis in Near Prime business; and a move towards Near Prime business in the Auto Lending book. Also there is a benefit from improved collections activity.

Looking -- turning to credit quality in the U.K. Personal Financial Services business, increased provisioning was concentrated in the unsecured book. This reflected a combination of growth, together with the impact of rising interest rates, a weaker housing market, and rising personal bankruptcies and frauds. Mortgage arrears remain extremely low and are below industry averages.

We have taken a number of measures over the last twelve months to address these credit trends in the unsecured books, including the introduction of positive credit reference agency data sharing, the rebuilding of our credit scorecards and further centralization of underwriting activity.

Let me hand you back now to Stephen.

Douglas, thank you. I'd like now to update you on the development of our business in mainland China, where we have continued to strengthen our franchise in several ways.

We have invested a further $430m to maintain our 19.9% stake in the Bank of Communications. Through the Technical Service Agreement that we have with Bank of Communications, we aim to work with them to help strengthen their operating efficiency.

Last month we announced the launch of a joint credit card with the Bank of Communications and we now have a number of staff working with BoCom on this initiative.

Subject to shareholder and regulatory approvals, we will increase our investment in Ping An by a further $1b, which will take our stake to 19.9%.

We also continue to add to our own network in mainland China. And finally, we should not forget the role of Hong Kong and its development as the financial services center for the Pearl River Delta, one of China's most economically dynamic and fast-growing areas.

Let me finish with a few words on the global outlook.

When we reported our results for 2004 earlier this year, we highlighted certain trends which will shape our business and these remain central to our assessment of future opportunities and challenges. As economies become more open, world prosperity, including that of the international financial system, will depend increasingly on continuing growth in trade.

Long term, this trend will encourage growth. But in the short term it may create challenges as economies adjust to different competitive environments, and there is always a risk of political pressure leading to some protectionism.

The impact of monetary and fiscal policy in the U.S. in correcting the recent slowdown of the economy has been remarkable and is reflected in strengthening consumer confidence and resilient spending.

China's economic growth in the first half of 2005 has again been exceptionally strong.

Global imbalances remain, with the U.S. current account deficit being financed by savings surpluses from emerging markets, and emerging market exports dependent on U.S. consumption.

For the foreseeable future, we believe that a U.S-led Nafta and China will be the main drivers of global economic growth. At the same time, a number of emerging markets are providing exciting opportunities for HSBC to develop its business. Principal among these are Mexico, Brazil, Turkey, the Middle East, India and South Korea. We have a wide range of opportunities to expand by making in-market investments and acquisitions in 77 countries and territories.

In our more mature markets, productivity improvements will continue to be important in generating growth in our business.

We have enjoyed mainly benign credit quality conditions recently, but we expect these to reflect any changes in economic conditions.

HSBC will, as always, continue to maintain its strong financial position that has served it so well throughout its history, to allow us to grow our business and pursue a progressive dividend policy.

Thank you very much. We are now open for questions. If time permits, we'll take a few questions from the Internet towards the end of the session. Thank you.

It's John-Paul Crutchley from Merrill Lynch. I wanted to ask you a question just in terms of the underlying growth you've reported today, roughly the 5% number, in the context of the managing of the growth strategy. Firstly, if I remember, you're happy in terms of aspirational; what do you think the Group could be doing longer term?

And secondly on that theme, I'd like to just reference CIBM, where clearly the investment you put into that business has led to decreasing profits on the last three-quarter period on an ongoing trend. What should we think of that business in terms of the platform, or where you'd like to see that in terms of growth? Because clearly, this time next year you could announce quite strong numbers but not be back to where you were perhaps a year or so ago. So I just wanted to get a context for what you think the flat or base level for that business should be in terms of thinking about growth?

John-Paul, thank you. Firstly, the 5%. We regard this as continuing progress. I think it's important to remember, and we flagged this earlier, that 2004's results were flattered by exceptionally high levels of provision releases. Not only specific provision releases but, of course, the general provision release. And to that extent, we believe that it's important to keep that in context. And indeed, if you look at the growth pre-loan impairment provisions, to use the new terminology, that's nearer 11%. And yes, we do regard that as quite pleasing. We are, of course, never satisfied.

To the point about CIBM, we are in an investment phase, as part of a five-year strategy, which we are 2.5 years into. As we've said in a -- at a number of points in our presentation, we think there are very good signs of progress on the revenue front. Those areas in which we have particularly invested, both in markets and in advisory and in ECM, are areas which have shown revenue growth. So we think that the signs of progress are good.

We also believe that the bulk of the cost growth is now through. And again, we made the point that if you compare first half '05 on second half '04, cost growth is only 5%. And actually, on a constant currency basis is actually a bit less than that.

We will continue to develop the business. We believe it's the right thing to do for our shareholders. But you won't be surprised to hear me say this isn't about the next quarter or the quarter after that. This is about building a business where we believe we have sustainable competitive advantage with our clients, based on this relationship approach, on an integrated basis of a high quality service range. And I think there's plenty of evidence to show that this is coming through.

Good morning, Stephen and Douglas, it's Simon Samuels from Citigroup Smith Barney. I've actually got three questions, actually. The first is whether you could just maybe talk a bit more around the issue of cost growth for the Group. Up 11% up on the underlying basis year-on-year, but as you said in the commentary, only up 2% sequential half year.

Now, I hear what you say about this CIBM business, which clearly cost growth is slowing, but historically there's been quite a lot of seasonality in HSBC's business into the second half of the year on the cost line. I think it's -- whether it's marketing expansion and other things like that. So I was just wondering whether you could just talk about the seasonality of the cost growth, or in the cost line, I should say, between the first and the second halves of the year.

Let's take that question. You said you'd got three. Simon, the cost growth, there is an element of seasonality, inevitably. A number of across-the-board pay increases go through in April, for example, so there is an element of seasonality about that. But we are very clearly on plan in our own minds on cost growth. The other point to make is, you said it already, we've just discussed it, we are in investment mode in CIBM.

And it is perhaps worth noting that apart from that investment, which we are clearly committed to, the cost/income ratio of the Group improved for the other businesses. So I think there was some progress there. But even in those businesses, there are some aspects of the business where we are in investment mode. For example, in the rest of Asia, where we have grown costs considerably, as a result of investing in both incremental sales forces, and also marketing spend. That has come through in clearly improved revenue performance.

So I think that we've got a track record of demonstrating that where we mean to invest and where we are confident of the business case, we are prepared to let costs rise, because those are actually investments in future revenue streams.

Simon, I think if you -- I think slide 12 is a fascinating slide and the growth that's been achieved in those emerging businesses was not done without cost. The revenue growth exceeded the cost growth but the cost growth was very strong. And frankly, if we can find more opportunities to develop these kind of profit performances by growing cost strong double digits, we will do so. There was great opportunities for growth in those markets over the last three or four years and we've been investing in them and we've had the returns. So if we can continue to do that, we will be delighted to see the cost growth reflect it.

The second question was to your credit, actually, you were probably the first major U.K. bank to give early warning signs on credit quality within the U.K. So I am particularly interested to hear your thoughts in terms of the near-term outlook, in terms of what you are seeing in the unsecured portfolio within the U.K. In particular, how the credit performance evolved during the first half and what your near-term expectations are for the remainder of this year.

I think it's difficult to forecast. We've seen further deterioration. You can see it in the numbers for the first half. One way of looking at the numbers say -- would suggest that there's a slowdown of that deterioration in recent times. But I don't want to place too much emphasis on that, I think it's too early to tell.

What we are doing is making sure that we are as strong as we can be, in terms of the way in which we process credit decisions at the front end and control credit once it's on the books. We've taken a number of steps to increase the resources devoted to collection activity. We've enhanced our scorecards; we've centralized some of the decision-making. We've gone wholly scorecards, so there's no overriding of management judgment. All the emphasis in that area, that as soon as you override, you have a worse result. And so we've taken a number of measures to strengthen the credit control process.

And the other point, which is an industry point rather than a specifically HSBC point, is that we've led the way, we believe, in committing to positive data sharing. We already do that with a number of credit agencies, but we are looking forward to the industry as a whole joining in this initiative. Because frankly, it's in the interest of the customer base and it's actually in the interest of the industry to get this right.

So just a last question, it's probably more for Douglas, actually, sorry, is I'm just -- I'm actually on page 94 of the release. I want to stress, I haven't read pages one to 93, but just on 94, which is to your loan impairment charge analysis. I am just wondering if you can just give us some sense of the -- I am trying to reconcile this, actually, with slide - what is it - slide 19. It doesn't quite seem to be the same number. You quote $3,277m as a charge-off but the collectively assessed impairment allowance is showing a release of allowances no longer required of $330m.

Now I know it's not the same, but obviously that's the closest we have in the new world to some kind of concept of a general provision release. And I was just wondering whether you can give us some sense of what we should be -- whether you think that number is normal, large, small, some kind of sense as to what that shape of that number should be going forward.

The difference between $3,287m and $3,277m is, of course, cunningly in the other 187 pages because it's a release in relation to non-customers, it's banks. So that -- yes, I know, well, one-all. The release of allowance is no longer -- I don't think is a general provision release. Because even with collective impairment provisioning, there are adjustments for -- well, the models take into account the current state of affairs in relation to impairment. And if impairment changes or the expectation of impairment changes, then there will be an adjustment to the allowance.

So I think I would look at these as the old specific provision releases that were modeling future losses and the model of future losses turns out with a lower number. So there is no element, as you say, any longer of general provisioning. And therefore all of this is a specific release. I think it's -- I don't think there is anything abnormal about it. I don't think there's anything abnormal about it.

Robert Law at Lehman. Can I have a couple of questions, please? Firstly, if I can go right to the cost issue. And if I'm looking at slide ten of the CIBM, obviously there's been something like a 10% increase in the cost/income ratio over the last year in that business. You obviously are in an investment phase. Can you give us some idea of where you think that ought to settle, once you've come out of this phase?

And supplementary to that, now we are past the build up of this division, do you think you can start to generate cost/income ratio gains at Group level?

I think that you should expect to see the cost/income ratio a little higher than you've been used to seeing in the case of HSBC. But if you look at that business in the market, our cost/income ratio is actually lower than some. What you want, of course, to see is very strong revenue growth in return for the investment that we've made. And as we've mentioned, this year, in common with at least some of our peers, we've had some difficult conditions in the balance sheet management area in the markets business. But over time, we've had a very strong record in the markets business.

We mentioned that the last couple of years or so, compared with the previous period, before we unified markets into a single global business, we've seen something like an average of a third growth in our revenue. So we've demonstrated the ability to pull revenue through in that area. And as you will be well aware, you can't really look at the odd quarter here, this is a business where market conditions will sometimes make it difficult. But over time, that's what we've demonstrated.

I don't think you should expect to see the cost/income ratio settle back down to where it was before. I think you should expect us to be a relatively efficient business compared with some of our competitors in the market. And so, I am not saying you should expect us to see -- to have a cost/income ratio as high as some in the market. But if the cost/income ratio in that business was in the 50's, it wouldn't surprise me but that's not a prediction. At the end of the day, our task is, of course, to manage the cost as efficiently as possible and to grow the revenue as sharply as we can, and that's what the strategy is about.

If I can answer that, Robert, I think there's a mix impact. The business in CIBM with the lowest cost/income ratio is the balance sheet management business, because the deployment of our excess liquidity is a relatively -- very efficient and relatively low-cost business. And that's why, in a sense, that when the revenues in that business go up or down, it has a disproportionate effect on the aggregated efficiency ratio.

The businesses that we've been building -- the balance sheet management business is a reflection of the size of the Group. The businesses that we've been building, being market related, are higher cost/income ratios than the balance sheet management business, which historically was a higher proportion of our CIBM business than it will be going forward. So we will have a mix effect if we are successful and we will be pleased with that.

And Robert, to your question about the overall effect on the Group, yes, I would expect, as that business matures in the implementation of its strategy, to have a favorable effect on the overall Group cost/income ratio. As we say in the interim release, there is something like a 1% improvement that occurred in the other businesses. Now, as CIBM comes into maturity in terms of its performance, you would expect the overall Group position to improve.

The second thing I wanted to talk about was Hong Kong. I see the Hong Kong profit number has come down a bit, I think that's due to the provisioning change. But on a pre-provision basis, it's up about 3 or 4%. Can I ask you to comment on whether you think the impact of short-rate changes is now in the figures we can see? And what does it take for more significant pre-provision growth in that region?

The result -- you saw a very increase in net interest margin, something like 30%. That's partly affected by IFRS. I don't know, Douglas, do you want to put an underlying number on that?

I think it's horrible to say. If you look at the releases in Hong Kong for the Bank and for Hang Seng, you can see that the major -- there's quite a lot of IFRS noise. The major changes are to the benefit, the value of the deposit base to the dis-benefit, as assets are maturing and redeployed there is still a constraint on the margin. And the surplus liquidity comes down to a relatively modest improvement in the margin. The dramatic margin improvement is IFRS geography.

I think the more general comment on, is it fully through in the rate yet, no, it's not. I think you saw better deposit spreads in PFS and Commercial Banking. I don't think that's fully through yet because it will take some maturation as liquidity rolls off. We also had weaker results in terms of the balance sheet management business in Hong Kong, which we would hope will wind its way through and that will come back. So I think no, it's not fully through the numbers yet.

Two further comments to the same theme. There's been some offsetting declines, particularly in capital guaranteed product sales. And therefore, you'll see non-funds income negative in Hong Kong. That's the inevitable result. As interest rates move up, customers start to switch back from products like capital guarantee products back into on-balance sheet savings.

And the other thing is to say that I am not sure that there is any good reason to expect mortgage spreads to start improving.

Thanks. It's Alastair Ryan from UBS. On the U.S. consumer finance business, there still seems to be some material margin pressure, with people pushing into the environments of prime lending. Clearly you've got the benefit on the business you've written historically, through lower bad debt charges. Are you comfortable that the risk-adjusted margins on the business you are writing today are still attractive or is there a degree of putting business on the books to stay in the market?

And second to that, one assumes you are not in negative amortization interest-only mortgages, which seem to be the latest fashion. Could you just comment?

Well, we are comfortable with the quality of our business and we don't think its gone ex-growth in any way. We grew managed receivables by 17% over a 12-month period. The, as we said in the presentation, costs per receivable have declined. Yes, there's been further compression on net interest margin, but the risk-adjusted return has stabilized and indeed is slightly up. But the basic message is it's stabilized. We like the quality of that business. We think there is still plenty to go for in terms of growing that business. It is not a market that has gone ex-growth, as I say.

And to your point about negative amortization, we've got close to zero. I wouldn't probably say absolutely zero but effectively zero in that business. And very little in the consumer finance end of the market, in interest rate only mortgages. We have more in the bank at -- where the customer base is higher up the [FICA] scale and where we are confident that the credit is good.

Yes, the interest-only mortgages in the finance companies are about 3% and there's no negative amortization in mortgages. The other thing to say is that the finance company has an extraordinary database of modeling. They would say that the underwriting focus is sharper. They have given up market, addressing your point, they've given up market share in a number of markets where they think the pricing is irrational. And they are tracking very carefully the housing. Given that we are lending on median houses, it's not 3m condos in Florida.

But their -- the proportion of their book in the mortgage -- or in the real estate markets that are deemed to be most heated is relatively lower than the competition. And in those markets, the loan-to-value ratios are lower than the average to the book. So we have better security and lower proportion of our assets in the markets that might be regarded as the most heated.

Overall, it's perhaps just worth adding that the cash-on-cash return on this business is 20%. This is a very profitable business for us.

Good morning. It's Michael Lever at CSFB. I just wondered if you can help me a little bit in terms of the impact of the move from light IFRS to full IFRS and how that impacts, if you can give us high-level guidance on revenue costs and provisions?

And also, there is one specific item in here which I've run out of wet towels trying to work out, which is the negative fair value item, I think it was something like $354m. I'm trying to decide whether this is something we should strip out, keep in, double, halve or just give up on.

I think those questions are definitely for Douglas.

Right. Easy ones first. The impact of IFRS at pre-tax profit, we reckon, from IFRS light to IFRS heavy is, we reckon, less than 1%. It's noise, it really is. It's probably slightly negative but it really is -- you're talking -- and that's why I say it's slightly -- you're talking, we think, less than 50. So it's noise and I could argue plus or minus 50, to be perfectly honest. Because it's quite difficult to go back and say what would it have been.

The impact on individual lines is horrendous. And I think that we are going to have to get better, this is the first time we've done it, in trying to work out how to present the trends in individual lines. And we are obliged under the U.S. presentations to only compare GAAP against GAAP, so you've got this accounting noise. One's better going down to net operating profit before impairment provisions and looking in aggregate, because the individual lines above are undoubtedly impacted. I could take an hour on this and I'd better not. But very happy to have a session with any or all of you, if you want to.

The negative fair value item, the biggest way, the easiest way of explaining that is the biggest element of that is net interest expense. Because when items, and again this is one of the anomalies of IFRS, when items are dealt with on a fair value basis, the whole movement on the item, including the interest impact, goes through that line. So what you've got there is fair value changes, together with the interest expense of debt that's treated on a fair value basis. So the biggest element of that is the interest expense.

So the margin has been benefited by the fact there is now net interest -- there is interest expense through the fair value line that would otherwise have been in the net interest line. But similarly, in other parts there is net interest income that's down below, that would have been up above. That's why there is a lot of noise in the lines but it all nets out.

But it's fair to say that that -- that therefore it legitimately remains in the profit numbers?

Absolutely, absolutely.

Some banks are splitting out what we call volatility but it seems to me that what you've described, to have a double entry, if you like, and hence should remain in.

There is an element that -- there is an element of acceleration in the fair value accounting of items that would flow through anyway. But since you'd have to track what was coming in and going out, it's better to leave them in. The only thing that I would point to in that, and there's a note on it, is that there is an element of that which is to do with the fair value of our own credit spread, which is very small. Which clearly is a nonsense, but it's small. Just take the numbers as they are, I wouldn't adjust anything for volatility.

But I think the net -- the pre-tax profit line, there probably will be a 1 or 2% accounting impact period-on-period plus or minus, from just either acceleration of interest and expense because of fair valuing. And then the fact that it doesn't appear the next time round, but it's noise, I think.

Okay. Thank you.

From a business perspective, I think the area into which IFRS has injected the most fog is insurance.

Which was foggy to start with.

You cannot, from what we have said, tell you what -- tell what the fundamental growth of our insurance business is. The answer is we believe it's about 6%, but that doesn't come through from inspection of the way these accounts are laid out.

This is Mark Thomas of Keefe, Bruyette. Two quick questions, if I may. First of all, trying to work out whether your comments about 10% of capital is available for investment, that you want to focus on organic, is any different from you'd do tactical in-fills of up to 5m market cap?

Secondly, just again, I'm afraid it's IFRS, and particularly in terms of the $1.1b transfer from net interest income into dealing profit. Some may or may not give a better value for doing 'in profit' compared to net profit interest income. Would you regard that as being a normal type of transfer or was the dealing actual action in this period exceptional in any way?

No. It's noise. What it basically says is that to the -- we look at the markets business in relation to the aggregation of net interest income and all the fair value changes. It helps us to put the net interest income of the trading assets in the same line, and indeed we used to in the strategy accounts split that out. So it's a simple geography split.

Where it gets, in my view, made more complicated than it needs to is under IFRS. We're not allowed to attribute internal funding costs, so to the extent that you have businesses with trading assets funded externally, you've got the margin in that line to the extent that you have trading assets funded internally. You've got the interest income but not the interest expense. To the extent you've got trading liabilities in that line, you've got interest expense and not necessarily income. So there is a bit, more than a bit, of geography that complicates that.

We're hoping that IASB will change that because it is an anomaly, but don't hold your breath.

Thank you. Thanks for that.

Yes, good morning. It's Tom Rayner at Citigroup. Given the answer you've just given, I don't think you are going to want to answer my question. I was just going to invite you to expand on slide 14 a little bit. Just wondering whether you could break it down at the attributable profit line, and also maybe split the revenue into net interest income and non-interest income on the same basis you're giving?

Sorry, slide 14 starts at net operating income before impairment charges.

Yes.

So I -- there's no net interest income or expenses. That line is probably the -- we gave you that line because we think that's the one with the least noise in it. That's effectively total operating income less insurance, and insurance is volatile because to the extent that you've got savings-linked insurance products, you've got large moves and premiums reflecting the saving element coming out below the line is attributable to policyholders. So it's neither really reflective -- it's not really reflective of income. The net, which is what we used to show, is. So that line is probably the closest on an underlying basis to what used to be revenues, and I think that line is clean. All the IFRS impacts are netted out when you get to that line.

And the attributable profit, if we had that after the profit before tax, would that just show exactly the same trend as the pre-tax?

It would. There is a slightly higher tax impact than there was, but very similar. Yes, very similar.

Thank you.

Good morning. It's Ian Smillie from ABN. Two questions please. The first one is we've spent a long time this morning talking about cost growth and I believe that revenue growth has accelerated now for the third half period in a row on that underlying number you've just talked of, Douglas, of 8.5%.

Could I invite you to give a comment on whether that number might go up or down in subsequent periods?

Don't like forecasting. But if -- but you're right, we are pleased with the way we have generated reasonably strong revenue growth. Breaking that, as just discussed, breaking that out into fees and interest margins is a difficult one. Underlying, I see no reason to believe that the general trend of narrowing interest margin has gone away. I think that's a secular feature of this industry in most markets.

You have seen some noise showing, actually, an improved interest margin, but that's plainly the effect of IFRS. Underlying, it's not. So all of the time, as we move forward, it's our job clearly to grow interest margin but unless we're growing non-funds income at a good clip, we're not going to be able to deliver on bottom line growth. So that's our task, and that's actually true of effectively all of the lines of business, whether you're talking Personal Financial Services, whether you're talking Commercial Banking, CIBM, and Private Banking. In all cases, we want to be growing non-funds income, which is both trading income and also fees and commissions of one sort or another.

But to answer the last question, Tom, slide four in fact does that. It shows you the movement in the attributable profit on an underlying basis, just over 5%. There is a slightly higher tax rate but the geography of moving the minority interest up is a higher proportion when you get down to the after-tax number, which is why it's a slightly higher percentage. But it's on slide four.

Morning. It's Simon Willis from NCB. My question relates to slide 22, credit quality in the States, PFS. All of those lines, with the exception of residential mortgages in the bank, showing quite markedly improving trends in delinquencies and charge-off rates. Can you say -- give us some guidance perhaps as to how you see the outlook over the next six or twelve months, and in particular whether the kind of improvement we've seen over the last six and twelve months can be sustained?

I'm tempted to say that as long as the economy continues robust, then the improvement will continue to be sustained. But much does depend on the evolution of the economy and clearly, the first thing is it's slower than last year. Secondly, the second quarter looks as though it may have been slower than the first quarter. So it depends what happens, and it's our job to keep on top of that.

And in the bank, it's actually mix because virtually almost entirely all the production in the bank in the first half of this year was sold into Fannie Mae and Freddie Mack. And the net growth in the receivables book was transfers of near prime mortgages from the finance company that qualified. So therefore, there is a marginal change in the mix of mortgages because all the prime mortgages are effectively securitized, and the near prime mortgage is added and that's why there's a tickle in the delinquency rates. Purely mix.

Two bits here. Our overall central view, if you will, is that the U.S. economy will slow somewhat in the second half and into next year. That's one of the reasons why we've been repositioning our books in the consumer finance base, both in terms of mortgages and also auto finance. We're more comfortable in that kind of environment with nearer prime business.

And just as a rider, can you perhaps say whether, in the light of the sharp rise in interest rates in the States, there would have been any material difference if the H1 '05 figure was split between quarter one and quarter two?

Remember that the most credit-sensitive books we've got are in the finance company, which are not interest rate sensitive, it's fixed rate lending. So no, I don't think it would make much difference.

Thank you. Simon Maughan at Dresdner. I just wondered if you could comment a little bit on the combination of mix and spread impact on margins in the U.K. and France, please?

Well, there's margin pressure in both of them.

Yes. I think, Stephen, across the world product margins are under pressure. But I think that's increasingly the wrong way to look at it because I think that the net operating income presentation that we've got now, I think, is beneficial. Because the margin is only one element of the profit equation, the others being fees and the other being bad debts. And therefore, in a sense, there is an increasing challenge in terms of determining the appropriate mix of spread, fees against costs and against delinquency charges, to get the right answers.

To look at one on its own, I think doesn't necessarily give you the picture. You can get the net interest margin going up dramatically by doing a lot of badly priced, unsecured lending and then eating it in credit charges and the like. You can do some, what looks like, deterioration of margin but doing very good lower yielding consumer assets but with lower impairments. So I think you've got to look at them in aggregate. And I think increasingly we're going to move the analysis away from pure net interest margin, more to net operating income risk-adjusted revenues, because it is actually much more the way the business is moving.

Thanks. Could I then ask if you see the same opportunity to raise non-interest income in France, if your margin's coming under pressure, that you do in the U.K.?

I don't know about the same opportunity but it's definitely part of our strategy for France, particularly in commercial banking. Whilst we have grown the lending book in the commercial banking sector in France, we are strengthening the approach to the relationship management of that sector, such that we can market more products - pension services, deposit products, trade finance-related fees. But that is precisely part of the strategy.

I wouldn't want to mislead. I think the French market's a difficult one, in terms of growth prospects and in terms of specifically margin pressure. And making that up through other areas of business is something we're working hard on. We start from the advantage of having a reasonably small market share, so I think that even in the context of a market which is clearly slow growing and very mature, we've got some opportunity, as we get ourselves into gear, to grow market share.

Thanks. It's Richard Staite from SocGen. Can I ask two questions? First, can you talk a bit more about seasonality of profitability? I think you mentioned this on costs, but historically we saw first half profits generally stronger. Is there, without asking you for a forecast, is there any reason under new accounting standards or because of the mix, your business, that we shouldn't expect that in the future?

Well, I think that we've -- the new accounting standards.

The new accounting standards. We could have [slowed] up the year-end results for '04, showing that historically that's right. And I guess that you would say that there are a number of dynamics that reflect that trend. One is you've got most geographies having their tax year-end in the first half, to the extent that there are tax advantage savings.

That activity tends to concentrate in the first half. You've got the tax refund business in the States, which is purely a Q1 business. You've got the holiday months of August and December, part of, which tend to impact volumes going through PFS, investment products and to some extent, market volumes in trading activities.

So there are two quieter months in the second half, being August and December. So there is a seasonal trend to revenue, no question.

And the second question, on slide 16, on money markets revenues declining. I think you mentioned that it was both a difficult and challenging first half. Are you making that comment relative to first half of last year, or in some absolute sense?

Well, both. It was a weaker half than the first half of last year, but of course there are some facts about the market that explain that, not least a very flat yield curve in a number of currencies. That's the basic fact which has affected market performance quite generally. We've noticed in some of our peers some of the same phenomena.

[Ray Cyber], Cyber Consulting. Following on to that last question, actually, you mentioned in your presentation that in the CIBM costs, cost growth was pretty much on plan. And I invite you to make a similar analysis of the revenues. I realize it's difficult to do, given that so many of them are market-driven, but how do you look at the revenues when you compare it with your plan?

Well, we don't publish plans, of course. What I would say is that our markets revenue was behind plan because of the phenomena I've just been talking about. We expected -- we found that the first half had difficult trading conditions in the balance sheet area, largely because of a flat yield curve. But then a number of other areas have done very well, in terms of what we were hoping for and aiming to achieve in revenue - derivatives business, foreign exchange business, structured credit business.

So, and interestingly and importantly, those are all of the areas where we've been investing because we think we need to strengthen those. And so it's not just league table improvement, we quoted the very strong improvement in both foreign exchange and in derivatives and in bond Issuance. It isn't just league tables, this is translating into profits. And again, you'll be well aware of this, these products are linked with each other. You don't just do debt issuance for its own sake, you do debt issuance because there's a lucrative derivatives opportunity that goes alongside it.

So does that mean that we're -- would we have liked to see a stronger revenue half? Yes, of course we would. We would have liked to have seen better trading conditions in terms of the balance sheet area, but that's what the markets are. They do come and they go.

Our revenues from balance sheet management are down about $450m against the first half of last year, and our pre-tax profits are down about $500m. So if we'd made the same money in that business, our -- we would have covered the increase in our costs, which were fairly significant. Which would have, I think, been a very good result.

Yes.

So that's another way of looking at it.

Mr. Greenspan decided to take away the freebie. All banks have, I think, reported that issue, that the market, well, the balance sheet management revenue was not as easy to earn as it was.

No, that's certainly true. But Mr. Greenspan, along with the rest of us, is struggling to understand exactly what's happened on the longer-term rates. The famous conundrum, yes.

Thank you, Barrington Pitt-Millar from ABN. Just back on asset quality, you talk on page 21 of the interim report to a small number of delinquent accounts in the U.K. commercial book turning sour. Can you just mention whether that is literally just a couple of specific cases or is it the extrapolation of obviously the more difficult retail environment we've witnessed? And if it's the latter, does that have further to run?

We don't have any evidence to believe yet that the retail difficulties, or the consumer finance difficulties, because to be clear this is a consumer finance thing not a mortgage problem, have infected the commercial banking book. Clearly we watch this and if this were -- if the market were to soften significantly further, it's hard to imagine that commercial banking is going to be immune from that. But as of now, there are one or two specific situations (you obviously wouldn't expect me to name names) but we don't see an overall deteriorating trend in commercial banking.

It's John-Paul Crutchley again from Merrill Lynch. Two questions, one on Mexico, one on Hong Kong. Mexico is a business where you were -- you've clearly talked a lot about growth. If I look at the trends in that second half last year on the first half this year, the PFS business looks to be weaker and the strength has come very much in commercial and CIBM. I was just wondering A, if there's any seasonality behind that or is it costing less in terms of business, and whether you can comment on that?

And the second question was just about Hong Kong mortgage margins, where Stephen you, in your presentation I think you made the point or maybe it was an answer to a question, but you don't expect margins to improve in that business. And clearly, some of the more recent HKMA data is suggesting that new business margins are starting to improve. And I'm just wondering if you think that is therefore not a sustainable trend, and then just comment on that? Thank you.

To the first point, Mexico, yes, it's the result of continued cost investment in the PFS area, and in commercial banking of an enhanced focus on commercial banking. I think that the banking industry in Mexico in general is now beginning to get more proactive in lending in the commercial sector, having, to be honest from the point of view of the authorities and Mexican development overall not being active enough in that area. And we believe that there is good business that we can do, so we're firing on all cylinders there, I think.

And I still see plenty of growth opportunities in the Mexican environment. They are not without risk, needless to say, but it's frankly a fabulous emerging market. And our track record since investing the $2.3b in what was then Banco Bital has been superb.

To Hong Kong, I wouldn't want to get hung by forecasts on mortgages. Just seems to me that there is a fundamental tendency, if ever the margins start to get better, and yes, they -- you're right, they have trended a little bit better recently, competition picks up. So I don't think there's any -- much hope for sustained improvement there.

Is it me?

Yes.

Sorry, it's me. Tom Rayner again at Citigroup. Can I just come back to slide 14 and slide four again, please, because I'm just a little bit confused now. Because slide four seems to just reconcile the two statutory numbers, but one's IFRS light and the other is full IFRS. So would there not, in there somewhere, be an adjustment for the new IAS 32, and I guess 39 and possibly IFRS 4 as well? But slide 14 seems to be adjusting the statutory first half '05 back onto the first half '04 basis. I'm just trying to reconcile that. So I guess what we really want to know is the statutory basis against the pro forma first half last year bit.

Let me -- I'm not sure I understand what you're saying. Let me tell you what we've done and -- let me tell you what we've done. The only flip on slide 14 is the geography. It's not restating for full IFRS, it's simply restating for the geographical shift in the profit and loss account for the cost of the Tier 1 capital that is now deemed to be interest-related and therefore interest expense. It's simply moving from the P&L minority interest below the line to net interest expense above the line. It's not adjusted for all the other IAS-heavy numbers.

And of course, at the attributable level on slide four, it has no impact because it already was deducted from attributable profit. So that's making that single geographic adjustment, because otherwise it is slightly misleading. Because at the pre-tax level you've got a hit, which was not there before, it was just in a different part of the P&L account.

And again --

Pure presentation.

Yes, I understand that now. I wonder, is there any way you could add to slide 14 and say what the change from IFRS light to full IFRS was [inaudible]?

Well, as I said, it's less than 1%. It really is. It's 50-ish, 50 to 100 type. To the best of our -- it's not an easy number because there are about 20 moving parts, but to the best of our analysis, it's a 50 to 100 number. It's --

Is that made -- is that possibly made up of a small sum of potentially large numbers split across the --?

No, it's made up of an awful lot of small numbers.

Thank you.

We've got time for maybe one or two more questions. Yes.

[Eric Camus] from Standard & Poor's Equity Research. Perhaps starting on a similar theme, on the -- on page 41, discussing CIBM, you say that without adverse mark-to-market movements on non-qualifying hedges and financial instruments designated at fair value, you'd have had a 4% increase as opposed to the reported decline, which gives a swing of about $200m. On page 150, you say that ineffective derivatives gave a loss of $68m. So I just wondered if you could say to what extent are these normal expected fluctuations, or to what extent these are one-off transition effects because of -- because you didn't have documentation in place?

It's certainly a one-off.

I think to the extent this documentation is one-off, to the extent that you get --

Second one certainly is.

To the extent that you get ineffectiveness. That will be recurring, and of course over time it all nets out to nothing. Because ultimately, the cash flows are identical whether you recognize on a discounted basis a higher or a lower value because of ineffectiveness. That ineffectiveness flows through back into the rate, to the maturity of the instrument. So over time it's the same number. So it's got to be a consistent piece of noise.

In the old days, as long as the ineffectiveness didn't take you outside an 80 to 125% boundary, you just accrual-accounted everything. Now you take the swings on the ineffective and through the P&L. If the swings get outside of parameters, and occasionally that happens, when the basis changes, then you just -- you have to fair value the whole instrument. So there's noise in it.

You make the point that there is an impact on CIBM. That was in Europe, that comment that you were making, and of course the net number is smaller than the number you highlighted, which means there's a positive number somewhere else and that number is in PFS. In America, if you remember, the consumer finance business in the U.S., when it announced its results last year, said that they had some hedges that were ineffective cash flow hedges, which actually were in the money. And those came through there on course, with profits in the first half. So that's an offset to this.

So net net for the Group, it wasn't very much, but there's a positive in PFS and there's a negative in CIBM in Europe. I hope the noise will be lesser, but there will be noise from this, it's the basis of accounting.

I believe the cash flow hedge fluctuation in the -- taken straight to equity, is that fluctuation of over $200m something you'd normally expect or is just because of the initial transition phase?

No, it's something that happens every period. It'll be plus or minus, it's purely marking to market the hedges. And again, that will recycle through the P&L account, which is why it goes to equity and not to P&L. But that benefit or dis-benefit will cycle through. It's just noise, that really is noise.

Probably time for one more question.

Robert Law of Lehman. Sorry, could I come back again? I was looking at the table on page 89 and following on bad debts, there seems to have been a substantial growth in commercial and industrial, etc., lending in Europe in the first half. Can you explain what that is?

And secondly, congratulations on the bad debts, it's $500m below my estimate again. Due to recoveries in the leases and obviously you've grown the loan portfolio, the stocks and provisions has fallen again, could you help us on how much more you think there is in that, please?

Well, firstly on the growth in the corporate and commercial loan book in Europe, that's a real fact. We've been working at growing our position both in the U.K. and in France. In both cases, most of the growth is at the commercial end rather than the big ticket corporate end, it would be fair to say. And that goes alongside, as I was saying earlier, a strong focus on other kinds of business with those same names. So that's a real result of bringing new products to bear, particularly from small and medium enterprise segment, careful customer segmentation, frankly managing the business professionally, and of course paying due attention to credit quality as we go.

Robert, you've got to be right. The stock of provisions, particularly in the corporate books, are not being augmented at the same rate as they were five years ago. So there has to be a -- and indeed the releases are -- they may be more than you had modeled, but they're less than they were in prior periods. So it has to come down, it has to come down.

We've got one question through from the Internet, which I will take if I may, and that's probably, it better be, the last, from Patrick Leclerc at Exane BBP -- BNP, excuse me. "What consequences do you expect from the change in some Asian currency systems? Are there business opportunities in CIBM and in commercial banking?"

Well, the change in the currency system for China is one that's been much commented on. We think it was a sound development of the Chinese authorities' approach to managing their external position. There has been a lot of discussion, of course, on whether this is the start of something much larger in terms of real exchange rate movement or not. I think, myself, it's unlikely to lead to any significant shift over a short period of time, and indeed recent signals from the Chinese authorities have been exactly that.

But it's a -- it's certainly an evolution in the sort of direction that we were expecting, makes sense as they develop their external account management and their domestic financial system.

Does that create opportunities for us? In a direct sense, I think it's probably less interesting than the overall sense that this underpins their continued economic progress. And therefore the indirect effect on our business, both in CIBM and in commercial banking, yes, should over time be very helpful.

You'll probably see, you've seen, movements of course in one or two other currencies in Asia as well, the ringgit in particular. It's our job, as we run our global markets business through the world, to be alert to the opportunities and the challenges of trading conditions. And clearly, this move towards basket-related currency management is a new thing and does create opportunities and certainly needs to be servicing our clients. I think the client business is perhaps particularly interesting.

I think, ladies and gentlemen, if you don't mind, we'd better draw to a close at that point. We have our friends from the press fairly shortly. But thank you for your attention to our business and we look forward to seeing you again at the full year. Thank you.