Lloyds Banking Group PLC (LYG) 2016 Q2 法說會逐字稿

Thank you for standing by and welcome to the Lloyds Banking Group 2016 Half Year Results Fixed Income Conference Call. At this time, all participants are in a listen-only mode. Douglas Radcliffe and Toby Rougier, will outline the key highlights of the Lloyds Banking Group 2016 half-year results, which will be followed by a question-and-answer session. (Operator Instructions). I must advise you that this conference is being recorded today.

I will now hand the conference over to Douglas Radcliffe. Please go head.

Good afternoon, everyone and thank you for joining this [best practice] call on the Group's half-year results. For those who don't know me, I'm the Group Investor Relations Director, and I'm joined today by Toby Rougier, who is our Group Corporate Treasurer and also Vish Savadia, who is Head of Capital Issuance and Structuring. A number of you may well have dialed into the results call this morning and if you do, I apologize as I will run through some of the key points again. I'll start with our strategic positioning, cover our financials and will then hand over to Toby for some more detailed comments on the balance sheet, capital funding, liquidity and regulation. Finally, we'll then set aside some time at the end for Q&A.

So in the first half of 2016 our differentiated business model has continued to deliver with robust underlying profit, a doubling of statutory profit and strong capital generation along with further progress against our strategic initiatives. Following the vote to leave the European Union, the outlook for the UK economy is uncertain, while the precise is impact is dependent on a number of political and economic factors a deceleration of growth is anticipated. Given the sustainable recovery in recent years, however, the UK enters this period of uncertainty from a position of strength.

In particular since the 2008-2009 recession, both households and corporates have deleveraged which is reflected in the reducing ratios of debt to GDP. Mortgage market activity and growth were also low by historic standards and transactions are well below the levels seen in the build up to 2008. House prices have improved which has led to much healthier loan to values and mortgage affordability is significantly better than the long-term average. In addition, unemployment now below 5% is at its lowest level in over 11 years.

In terms of the Group, we are also in a strong position. Over the past five years, we have substantially strengthened the balance sheet and de-risked the business through the successful execution of our strategy. Over this period our prudent approach to risk has resulted in a substantial improvement in the quality of our portfolios. The average loan to value of our mortgage book has improved significantly to just 43% and more than 90% of the book now has a loan to value of less than 80%.

We have also restricted our share of new mortgages in London and as we have mentioned before, we've been growing below the market in spite of that. On commercial real estate our exposure is now less than a third of what it was in 2010 and represents less than 5% of total lending. Elsewhere, in commercial banking, we have reduced our exposure to high-risk segments through selective participation while in our high growth motor finance business, we've maintained tight underwriting criteria with over half of this growth coming from our Jaguar Land Rover partnership. And our resilience to severe stresses in all these portfolios has also been seen in the PRI stress test results in both 2014 and 2015.

Our strategy remains unchanged. We are simple, low risk, customer focused, UK, retail and commercial bank. This differentiated business model continues to provide competitive advantage and we are committed to supporting the UK economy and help [British plan].

So looking at the results themselves, starting with the underlying results, the first half saw a robust underlying profit of GBP4.2 billion and a strong underlying return on required equity of 14%. Underlying profit was 5% lower than a year ago and down 2% excluding TSB with a slight reduction in income and increase in impairments, partly offset by 3% lower operating costs, as we continue to simplify the business. Positive operating jaws of 1% demonstrates our continued ability to manage the cost base in a challenging environment and this has driven further improvements in our cost-income ratio to 47.8%.

Net interest income was up 1% at GBP5.8 billion, reflecting the continued improvement in the net interest margin, which at 2.74% was up 12 basis points on a year ago. Lower deposits and funding costs continue to more than offset lower asset pricing. Looking forward, we expect the full year NIM to be in line with our existing guidance of around 2.70%.

Other income was GBP3.1 billion, which reflects a 9% improvement in Q2 compared to Q1 and the year-to-date run rate is in line with full-year expectations. On costs, operating costs of GBP4 billion were down [3%] with efficiency savings from our simplification program more than offsetting the increased investment in the business. At Q1 we said that given our customers' evolving behaviors and the expected lower for longer rate environment, we would be looking again at our efficiency program. We are therefore now extending the scope of the current program by targeting an additional 200 branch closures and a further 3,000 role reductions by the end of 2017. These actions will increase our run rate savings by GBP0.4 billion to GBP1.4 billion by the end of 2017 with total cost of GBP2.2 billion compared with the original GBP1.6 billion. In addition, we are now targeting a 30% footprint reduction in our non-branch property portfolio over the next 2.5 years.

On credits, our asset quality remains strong. The impairment charge for the half year was GBP245 million, which represents an AQR of just 11 basis points. With the increase on prior year, reflecting lower releases and write-backs and a stable gross AQR of 26 basis points compared with 25 basis points a year ago.

In terms of guidance, while we expect slightly lower releases and write-backs in the second half, we now anticipate the AQR for the full year to be less than 20 basis points. Statutory profit before tax has more than doubled to GBP2.5 billion in the first half boosted by the robust underlying profit and a low level of below the line items in the second quarter.

On PPI no further provision has been taken with complaints in the first six months averaging around 8,500 per week although this is dropped to around 7,500 over the last six weeks. We are currently still awaiting the final outcome of the FCA's consultation on a potential time bar and treatment to complaints relating to Plevin.

Briefly on the balance sheet average interest-earning assets excluding one-offs were broadly flat in the first half of the year at GBP426 billion with growth in consumer finance and SME lending offset by lower mortgage lending as we focused on margin preservation. Risk-weighted assets were also flat in the six months at GBP222 billion. Reductions from optimization and disposals were offset by around GBP3 billion of increases due to adverse FX movements following the outcome of EU referendum.

Finishing then with capital, the business remains well capitalized and continues to be strongly capital generative. In the second quarter, the Group delivered 50 basis points of capital after a 30 basis point adverse impact primarily relating to FX movements on RWAs following the referendum. Given the referendum impact, we now expect to generate around 160 basis points of capital pre-dividend for 2016.

Given the current uncertainty, it is too early to determine the impact on our formal longer-term guidance at this stage. However, while the business will remain highly capital generative, it is possible that this capital generation may be somewhat lower in the future years than previously guided. We will formally update guidance when we have a clearer view of the likely outcomes.

I will now hand over to Toby who will cover the balance sheet in a more detail.

Thank you, Douglas. Good afternoon everyone and good morning to those dialing in from North America. Douglas has provided you with an overview of the half-year results and I'll now discuss the shape of the Group's balance sheet covering the Group's capital funding and liquidity positions. I'll then touch on some of the key market and regulatory developments from the first half and comment on our issuance plans for the remainder of the year.

As Douglas has mentioned, post the referendum there are many questions that will need to be resolved over time. In the context of that uncertainty the Group continues to perform robustly and this is reflected in our strong capital funding and liquidity positions.

Let me start with capital. Our differentiated business model delivered good financial performance in the first half of the year with underlying profits of GBP4.2 billion and underlying core capital generation of 110 basis points. After the charge for redeeming the ECN and the impact of the referendum and other items, we ended the half with a core equity tier 1 ratio of 13.5% before dividends, up 50 basis points in the quarter.

Total capital also remains very robust at 21.8%, one of the highest levels globally, providing significant capital protection to our senior creditors. As I said before our strong capital position and the capital generative nature of our business continues to position us well for further changes in the regulatory environment including the introduction of MREL, which I'll cover later in this call.

Whilst the ability to generate capital remains strong, the outcome of the referendum will impact the rate at which we build capital this year. As Doug just mentioned we're now guiding to a core capital build of around 160 basis points for this year, slightly down on the previous guidance, but still a strong number.

And finally on capital, the Group's leverage ratio reduced slightly, 4.7%, post dividends at the half year reflecting an increase in balance sheet assets, but still well ahead of requirements. The asset growth was mainly due to holding slightly more liquid assets and the run-up to the referendum rather than any more fundamental change in the shape of the Group's balance sheet.

So turning next to funding and liquidity, the Group continues to maintain a prudent funding and liquidity profile. For the half year we held around GBP142 billion of LCR eligible liquid assets, an increase of roughly GBP20 billion from the year-end. Some of this increase was due to collateral received following the referendum, but as I mentioned earlier, we chose to maintain a slightly higher level of liquidity going into this period in case of market volatility. To put our liquidity portfolio in context, it's broadly equivalent to the Group's total outstanding wholesale funding or nearly six times our short-term money market funding. Our LCR ratio is in excess of 100%, well in excess of regulatory minimums. And in addition to our primary liquidity, we also have around GBP110 billion of non-LCR collateral, the vast majority of which is eligible for use in a range of central bank or similar the facilities. Hence the Group's overall liquidity position remains strong.

Turning now to funding, the Group continues to fund its balance sheet predominantly through customer deposits with a loan to deposit ratio of 107%, which remains within our target range. Customer deposits have risen by about GBP5 billion over the last six months, with the increase coming mainly from commercial customers. Also funding has increased by GBP10 billion in balance sheet terms to GBP130 billion at the end of June, although this increase includes about GBP4 billion of cash collateral received from banks, which we include in the definition of wholesale funding and about GBP10 billion of translation effects from the lower value of sterling. Excluding these items, wholesale funding was actually down by about GBP4 billion following the redemption of the ECNs earlier in the year.

In terms of issuance at the start of this year, we guided through the cycle wholesale funding requirement of GBP15 billion to GBP20 billion per annum with the expectation that 2016 issuance would be at the lower end of this range. So far this year the Group has issued an equivalent of just over GBP8 billion across a range of products and currencies. While market conditions in the first half of the year have been challenging, the Group's strong business performance, diversified funding platform and strong investor support have enabled us to manage through this volatility. This was recently illustrated by the issuance of our inaugural holdco senior trade reopening the funding markets for financial institutions after the referendum and demonstrating the strong investor support for the Lloyds credit. I'll come back to our plans for issuance in the second half a little later.

Taking step back to the broader market and regulatory environment, one of the developments on the horizon for us and other is the introduction of MREL or loss-absorbing capital. As a reminder, Lloyds is not G-SIB and as such we're not subject to TLAC, but we are also subject to MREL. The PRI published its consultation paper on MREL at the end of last year and we're now waiting for a policy statement. So we don't yet know what our requirements will be.

However, with our strong total capital position we remain well placed to meet MREL and will do so with regulatory capital and senior unsecured debt issued out of our holding company Lloyds Banking Group Plc. We anticipate being able to do so primarily through the organic replacement of sub debt and some OpCo senior debt as it matures. To give you a sense of quantum, we have about GBP5 billion of OpCo senior unsecured debt, about 2.5 percentage points of current RWAs, maturing in each of the next four years and it's proportion of this debt that we're likely to refinance over time at holdco level together with maturing sub debt that we've seen in the first half.

Given the issuance volumes I have outlined and our strong total capital position we don't expect the transition to MREL to fundamentally change the funding model of the Group. Another development of note is the preparation for ring-fencing in the UK in 2019. We are continuing to expect the vast majority of our business to fit within our ring-fenced banking group which will include Lloyds Bank Plc, HBOS, and Bank of Scotland, together with debt outstanding from these entities. Our non-ring-fenced bank will be a new legal entity and is unlikely to have a significant external term wholesale funding requirement.

Finally, in terms of our issuance plans for the rest of the year, as I said earlier the Group's funding requirement is broadly stable at around GBP15 billion to GBP20 billion per annum, maybe a bit more or less depending on market conditions and how maturities hold. In terms of volumes, for 2016 we expect issuance to be closer to the lower end of this range. And as I mentioned we've already completed around GBP8 billion of issuance in the first half.

In terms of products to expect in the second half, it's unlikely we'll share anymore AT1s having already reached our target for these. However, subject to market conditions, we may look to issue further HoldCo senior paper in public and/or private markets as we progress with our transition to MREL. We'll also continue to have a natural need for funding at the OpCo level, unlike some of our peers. We'll continue to meet this through the issuance of OpCo public and private debt, covered bonds, securitizations in a variety of currencies to maintain our diversified funding platform.

And so in summary, the Group continues to be highly capital generative and to maintain a strong funding and liquidity positions. We're well placed to meet future regulatory changes, including MREL and to navigate current uncertainties post the referendum.

Douglas, back to you.

Thanks, Toby. So to concluded, we've delivered a robust financial performance and have been a successfully executing against our strategic priorities. Our simple UK focused business model remains the right one. Our cost discipline and low-risk approach continue to provide a competitive advantage. Whilst the outlook for the UK economy is uncertain and a deceleration of growth is expected, the UK is well positioned to face it.

Regarding Lloyds, the successful transformation and simplification of the business, together with our low-risk appetite also position us well to weather this deceleration and continue to deliver for our customers and our debt holders and shareholders.

Looking ahead, we will not be immune to the consequences of the EU referendum results and regarding 2016 specifically, we expect to generate 160 basis points of capital, reaffirming our NIM and cost to income ratio guidance and are improving our AQR guidance.

Our strategy hasn't changed. We are open for business, have a strong financial position and remain committed to doing the right thing for customers and helping Britain prosper. That concludes today's presentation and we are now available to take your questions.

Ladies and gentlemen, your question-and-answer session will now begin. (Operator Instructions) [Lee Street].

Thank you for taking my questions. First one, we have seen other banks have impacts from the common equity tier 1 from pension deficits, but looking at your capital statement it looks like actually your surplus has increased. So I was just wondering if you could give us any color on why that is and what your potential sensitivities are to movements in rates and [give us some light] on your pensions schemes? Secondly, I note the comment at the back of your report about IFRS 9 suggesting there could be a material increase in provisions and an associated impact on the capital position, I was just wondering if you can give us any context based on the current statements what that might mean, we're looking at 20 basis points, 50 basis points or 100 basis points plus any form of context would be really helpful.

And finally operational risk, RWAs, are you expecting much move in these as we head out through the year or from the potential changes from Basel? That will be my questions. Thank you.

Thanks, Lee. So I'd pick up those early. So, let me start with pension. I guess just a bit of history first. So since about 2013 we've been progressively de-risking our defined benefit pension schemes working together with the pension trustees and our asset strategy is to move out of the equities more into fixed income. And we've also significantly increased the amount of hedging that the pension schemes have done.

And so as of today we are broadly fully hedged for rates and for inflation but we still do have some exposures to credit spreads given the difference between the accounting rates that you use and the underlying asset rate that we're invested in.

So in the first half there was a big movement in rates but you would have seen that our net pension asset is broadly stable actually. So we haven't seen a big impact from that given the amount of rates and [insurance] hedging that we have done. And clearly, we have a sensitivity to credit spreads.

I think George in the presentation this morning gave some indication about what that will be. He talked about -- well, I think he talked about the sensitivity of about GBP60 million per basis point movement in credit spreads to give you a sense of it. Hope that answers that one.

Let me -- So I pick up the other two as well?

Yes, please.

So, IFRS 9, yes, we have provided some additional disclosure on that in the news release this time around. And we do -- for us one of the bigger changes is likely to be around provisioning and specifically around the timing of provisioning, which may have an impact on regulatory capital as well. It's still -- Lee, it's still quite a long way out for us. And so we -- I can't give you any sensitivities or any numbers at this stage. It's still quite a long way out. And I'd refer back to the fact that we start from a very strong capital position and with a very strong level of capital generation. So we are comfortable that we should be able to absorb any headwinds as and when they materialize.

I'd have the same sort of answer on corporate structure as well. So, of the various Basel proposals, the operational risk is something that we do think will be implemented. It's likely to result in an increase of Pillar 1 RWAs for operational risk. We hope that we would see some offsets against the level of Pillar 2 operational risk that we currently carry. But again, given our capital position and given our capital generation, we're comfortable that we can absorb any headwinds as we travel through time.

And the other thing, probably to add on that, is obviously the consultation paper with regard to operational risk. Clearly at the moment the consultation risk is, yes, particularly harsh with regard to conduct which certainly ourselves and the regulators are having active discussions because we don't feel it's an equitable way of actually approaching operational risk across the piece by actually taking into consideration historic conduct provisions where we've particularly taken PPI in the past. So clearly although we would expect to be impacted by operational risk going forward, we wouldn't expect it to be or we would certainly hope that it wouldn't be to the extent within the current consultation paper.

[Greg Cass].

Just a couple of questions from me, if you don't mind. Firstly, if we were to get an extension of the FLS scheme incorporated into perhaps the MPC statement in the next week, the inflation report, I was wondering if that might make a difference in terms of how you think about OpCo funding in future. I assume you're starting to look at your significant FLS balances running off over the course of the next couple of years in 2018. And then also I appreciate your comments on MREL, TLAC and also your holdco senior issuance you've done very recently. I was wondering if you had a new target for where you want the total capital to land and what that could mean for and how you think about your tier 2 run-off profile and how that might get replaced or refinanced into holdco senior? Thank you.

Okay. Let me start with the FLS. So, yes Greg you're right, in the past and we continue to be an active supporter of the government's Funding for Lending Scheme which is in its most recent incarnation designed to promote lending to SMEs. We have about GBP33 billion outstanding as of the half year under the scheme and we pass the pricing benefits associated with that funding onto our customers. The current scheme is broadly closed for us and we can't generate any additional capacity. We drew down the final portion of our funding in the first half of the year and that's absent an extension of the scheme, that's limited now for us.

The maturities are fully built into our funding plans for the year. So in the context of the steady state funding requirement of the GBP15 billion to GBP20 billion per annum that I gave you, that fully bakes in the FLS maturity profile.

Well, I think just in terms of how we think about funding, I think Antonio gave a good description of it at the equity call this morning. And we look at -- first we will look at on the asset side of the balance sheet and how we would like to grow that in the context of market and in the context of customer demand and then based on that we look at how we intend to fund that asset growth.

Clearly we have a loan to deposit target. So that sort of -- that gives us the amount of deposits we are looking to raise at any point in time. We normally target a loan to deposit ratio of between about 105% and 110% where we have been up -- I think at the end of the first quarter we were around 109% and we are still 107% as of today.

And then the difference between loans and deposits, we would look to fill the difference with wholesale funding. And so we will -- perhaps unlike some of our peers we will continue to have a funding requirement at the OpCo level and if there were an extension to FLS and if we thought that was the right thing to do we could perhaps use some of that as well as looking to migrate over time to meet MREL requirements with issuance out of the HoldCo. So I think, gives you some sense of where we are in FLS. I think your second question if I remember was around total capital and total capital targets and that sort of stuff.

It was indeed.

So, we announced -- as part of our strategic update, we announced a target for total capital of around 20% and that still remains relevant for us today. We are clearly a little bit higher than that as at the half year. So, more like just under 22%, but we still think -- so we still think there is real benefit in maintaining a good buffer of sub debt and we still think a target of around 20% is the right sort of level in terms of total capital.

Okay. Thank you very much.

Robert Smalley.

And, again, I always say this, but thanks very much for doing this call in US business hours as well. It's very helpful.

Unfortunately, I missed the first couple of minutes. But I have some questions on issuance, but before that on commercial real estate, I know you don't have a big portfolio, but you're a keen observer. Could you give us an idea of what's going on with commercial real estate trends and if there is any kind of fall-off do you see this as an opportunity?

Well, okay, so let me just cover that stuff. [Toby if you have] anything to add, feel free. So from our perspective, as you probably are aware we particularly transformed the Group and de-risked the Group over the last four to five years. So actually when you look at our commercial real estate exposure, it's decreased dramatically. So over the last, what, like five years, it has decreased from, what, over GBP70 billion to less than GBP20 billion.

So, from our perspective that exposure is significantly less than it was. It's actually now less than 5% of our total loans and advances. It's another example of where we are very prudent in the, not just our assessments of lending, but also the individual asset classes in which we will participate.

When you look at that across the piece as well, in the commercial real estate, what you will also see is that the loan to values on that book are also particularly strong. So you see actually the high-quality LTV profile reflects the prudent new business policy. We focus on investment transactions and they account for more than 90% of our portfolio. When you look at, I suppose, how the market has moved over the last three weeks, most of it you will be able to see in the press in the fact that initially there was an element of concern with regards to the different property funds. That does seem to have stabilized more recently, however, and that do seem to be both buyers and sellers in the market at the right price.

Okay, that's very helpful. And do you think that this might be an area though we do see some gaps down that you look at opportunistically?

I think it will be one of the areas across the piece. But we will continue to have a prudent risk policy, so my suspicion is that it will not be a significant area of growth for us as a Group.

Okay, thanks. And just a quick one on funding. Within the GBP15 billion to GBP20 billion budget that you have laid out, does that include what you mentioned the GBP5 billion from OpCo that will have to move to HoldCo?

Yes, it does, Robert. It's our total requirement as a Group, the GBP15 billion to GBP20 billion. So it includes both issuance out of HoldCo and issuance out of OpCo.

Okay, great. And you'll want to keep your tier 2 right at the top of the bucket?

Yes, so over time our model will be to issue our tier 2 out of the HoldCo, yes. As OpCo -- as we have tier 2 -- at the moment we have tier 2 across our structure. As it matures and as we have a requirement to issue new tier 2 that will be out of HoldCo.

Okay. And I know this is a question that has been asked before on different places, but you see those two, HoldCo and OpCo, tier 2 as pari. So I am assuming that you just want to move everything to the OpCo and just for efficiency sake and also take that question off the table.

Sorry, Robert. You broke up a bit. Can you repeat the question?

Just a quick question on OpCo versus HoldCo tier 2. You see that as equivalent, you see it as pari passu, but you're of course moving everything to the HoldCo for the whole number of other reasons.

Yes, that's probably right. So, over time we will migrate all of our tier 2 in our legal structure all after HoldCo, so at the endpoint, the only entity issuing tier 2 in our structure will be the HoldCo.

Okay, terrific. Thank you again.

(Operator Instructions)[Paul Fanner].

Most of my questions have been answered. I've just got two remaining. The first is on derivative exposure. I notice there is quite a big jump in derivative exposure in the last six months. I wonder if you can just provide some color as to what that's about, whether Brexit related, whether it's going to remain, if it's a one-off, any color you can provide?

And the second question is just to understand how sensitive you are, what worries you around sort of, Article 50 and Brexit negotiations, what are the key sort of sensitivities that might influence your business away from immediate kind of macroeconomic trend?

I could talk about the derivatives of the house.

So, on derivatives, yes, the balance sheet value of our derivatives have increased, both on the asset side and on the liability side actually and they broadly increased in line with each other. And it basically reflects the movements in rates and currencies that we have seen largely since the referendum actually. And so in terms of the market risk of the business that we're running, we're not running more market risk than we were. The balance sheet numbers just reflect the mark-to-market of the asset side and the liability side and broadly net out.

No, I get that. It's the big jump in sort of -- well, you've marked them as trading positions. So are you saying that these were existing positions that are just being demarked?

No, so you are referring to the disclosure, are you, in our [O&S]?

Yes.

Maybe the disclosure is not as helpful as it could be. So we disclosed some things as hedging and some things as trading and other. The distinction there is really around hedge accounting and how we use hedge accounting. So the first would be derivatives that are part of the hedge accounting process and the second would be those that are not. And so a lot of the rate and interest rates, exchange rates and interest rate hedging that we do will be on the back of effectively our currency issuance and our structural hedging positions.

Okay. So I guess we should be seeing this at the other UK banks and in that case.

Well, I can't comment on what positions that they would have, but if they are issuing currency and largely bringing that back to Sterling and if they have a structural hedging program then yes you should see similar things. Article 50?

The second thing was with really regard to the referendum and such. I suppose Lloyds is in a, I suppose, unique position in the fact that we're very much a UK focused entity. So from that perspective the concerns to us are very much driven by the impacts on the UK economy rather than any of the perhaps trading arrangements that are actually in place with Europe as a whole. So passporting, for example, is possibly less of a concern for us than it might be to a number of our peers. For us the primary concern is more about what the impact on the UK economy is.

[Gogina Absten].

It's [Jogina Absten]. Just one quick question. We're hearing from some other banks about the potential reaction should the Bank of England cut rate? And I wondered to what extent are you already in a sort of negative deposit rate territory or would you go for either corporate or retail depositors?

So you look at it from two aspects there. Firstly when you look at the interest rate [cut, clearly the] speculations that that could come next week, but we'll see how that works. Clearly from our perspective, Toby has already indicated that actually we talked originally about a GBP140 million impact of a 25 basis point cut within the reports and accounts. That's probably more like the GBP100 million impact now in isolation. Now from that perspective, I think we will tend to look from a deposit side just across retail depositors, commercial depositors and make the decision at that time depending on what the market criteria is. So anything you would add to that Toby?

No, I think that sort of broadly covers it. So, Jogina, just to clarify the GBP100 million point. We were asked this morning just to estimate what the impact on income might be if the Bank of England cut base rates by 25 basis points. And so our current estimate of that would be around GBP100 million of income over a 12-month period. In terms of how we reflect that in customer pricing, well we have to work through that when it happens.

But you have no sort of principals at this stage about charging negative deposit, right?

No, we'll address that concern if and when we get to it.

There is no further questions at this time.

Okay, in that case if there are no further questions thank you very much indeed for participating on the call. Thank you.

Ladies and gentlemen, this concludes the Lloyds Banking Group 2016 half year results fixed income conference call. For those of you wishing to review this conference, the replay facility can be accessed by dialing 0800-032-9687 within the UK, 1-877-482-6144 within the US or alternatively use standard International on 00-44-207-136-9233, the reservation number is 68291024#. Thank you for participating. You may all now disconnect.