Lloyds Banking Group PLC (LYG) 2018 Q2 法說會逐字稿

Thank you for standing by, and welcome to the Lloyds Banking Group 2018 Half Year Results Fixed Income Conference Call. (Operator Instructions) Ed Sands and Toby Rougier will outline the highlights of the results. (Operator Instructions) I must advise you that this conference is being recorded today.

I will now hand the conference over to Ed Sands. Please go ahead.

Thank you, Joyce, and good afternoon, everyone, and thank you for joining this debt-focused call on the group's half year results. My name is Ed Sands, and I am Director of Investor Relations. And I am joined by Toby Rougier, our Group Corporate Treasurer; and Richard Shrimpton, who is Group Capital Pensions and Issuance Director. A number of you may have dialed into the results call this morning and if you did, I'm afraid we'll run through many of the same points again. I'll cover the financials and then hand over to Toby, who will cover the balance sheet in more detail. And we've set aside some time at the end for Q&A.

Starting with the highlights for the first half. We've made a significant business progress and have made a strong start to the group's latest strategic plan. We have successfully delivered against a number of key initiatives, including the integration of both of our recent acquisitions, MBNA and Zurich, as well as launching our non-ring-fenced bank, Lloyds Bank Corporate Markets. We were also the first major U.K. bank to comply with the Open Banking industry deadline.

In February, we announced an ambitious strategy for the next 3 years, under which we have significantly increased the level of investment in the business, which is underpinned by continued reductions in the group's underlying cost base. We have continued to deliver growth in targeted segments, with increased net lending to our SME clients and within our Consumer Finance portfolio. Our insurance and wealth business has also benefited from significant new business growth in workplace pensions, planning and retirement.

Financial performance in the first 6 months has again been strong. And given this performance, the board has approved an increased interim ordinary dividend of 1.07p per share, reflecting our policy of delivering a sustainable, progressive dividend strength.

Now turning to the financials. Underlying profit of GBP 4.2 billion is up 7%, with income up 2%, flat operating costs, reduced remediation charges and the expected increase in credit due to lower write-backs and releases.

Looking at the individual lines. Net interest income of GBP 6.3 billion is up 7%, driven by an improved margin of 2.93% and a 1% increase in average interest-earning assets. In the first half, we have again seen lower funding and deposit costs, offsetting mortgage pricing pressure as well as the benefit from MBNA. For the full year, we now expect the margin to be in line with H1. While over the longer-term and in line with our previous guidance, we continue to expect the NIM to be resilient through the planned period. Other income was GBP 3.1 billion for the 6 months and in line with previous half years. A good second quarter of GBP 1.7 billion was driven by strong new business income in insurance, which, in line with our strategy, was up 75% on the first half of last year, mainly from higher workplace pensions volumes in financial planning and retirement.

Retail performance in Q2 was stable on the first quarter and marginally down on prior year for the first 6 months as growth in Lex Autolease was offset by recent changes to overdraft charging. And in commercial, OOI was up quarter-on-quarter, and we've seen increased markets activity, but down on prior year for the 6 months with lower levels of revaluations and disposals than in the first half of last year.

We continue to be a seller of gilts and other liquid assets, and other income includes GBP 191 million of gains on asset sales of GBP 11 billion compared with a gain of GBP 146 million last year.

A good Q2 means that we now target other income for the full year at around 2017's level after excluding the impact of Vocalink.

Cost, the group continues to benefit from its competitive low cost advantage, and operating costs are flat year-on-year even after MBNA and our increased investment spend. BAU costs are down 4% year-on-year and down 7% excluding MBNA as a result of a range of cost actions, including digitalization, process improvement and procurement. And going forward, costs will continue to be a competitive advantage, enabling increased investments, improved efficiencies and customer experiences and driving superior returns.

On credit, quality remains strong and there has been no deterioration across the portfolio. The group continues to benefit from its prudent approach to risk and its conservative assumptions, and the gross AQR of 27 basis points is in line with the last couple of years, even after including MBNA. And this prudence, along with the strength of the group's underwriting and first half experience, gives us confidence in improving our 2018 guidance to a net AQR of less than 25 basis points.

Turning then to statutory profit, which is GBP 2.3 billion, is up 38%, with lower below the line charges and a lower effective tax rate of 27%. Market volatility and other items include positive banking and insurance volatility, partly offset by the loss on sale of the Irish mortgage portfolio.

Restructuring costs of GBP 377 million include GBP 155 million for severance as well as the ongoing costs of the integration of Zurich and MBNA, property rationalization and the implementation of the non-ring-fenced bank. The PPI charge of GBP 550 million includes GBP 460 million in the second quarter, and the increase in Q2 takes our expected weekly run rate up from 11,000 to 13,000 complaints. This increase reflects both current experience with claims running at just over 12,000 per week and the expectation of increased volumes as we approach the time bar.

With that, I'll hand over to Toby who will cover the balance sheet in more detail.

Thanks, Ed, and welcome to everyone on the call. Ed has covered an overview of the first half results, and I'll now go into a bit more detail on the group's balance sheet, particularly around capital funding and liquidity [for this year].

I'll also update you on our ring-fencing progress and on our issuance plans for the rest of this year. So starting with the balance sheet. The group's balance sheet remains healthy and stable. Customer loans and advances were only slightly down at GBP 442 billion, with growth in targeted segments offset by the sale of the Irish portfolio.

Customer deposits were up slightly at GBP 418 billion and the loan-to-deposit ratio was stable at around 106%. Capital generation remains strong with 121 basis point of CET1 build in the first half, which resulted in a pre-dividend CET1 ratio of 15.1% on a pro forma basis.

The increase in CET1 includes 111 basis points of underlying capital generation, 8 basis points related to the insurance interim dividend, 25 basis points from the sale of the Irish portfolio and 5 basis points from market and other movements, partially offset by the 28 basis points of PPI charges. We're now guiding to a CET1 capital build of around 200 basis points for 2018 pre-dividend. This is the top end of our previous guidance of 170 to 200 basis points.

As Ed mentioned, the group (inaudible) announced an interim dividend of 1.07p per share. And so post-dividend accrual, the group's pro forma CET1 ratio is 14.5%. In terms of capital requirement, we received the annual update of our Pillar 2A requirement this month, which was reduced to 2.6% on a CET1 basis, down from the previous level of 3%. It increases to 2.7% in January as a result of ring-fencing.

Turning to buffers. We've obviously got the capital conservation buffer and the U.K. countercyclical buffer transitioning in, and we expect to formally hear about our systemic risk buffer in early 2019. Putting all this together, the board's view of the required level of CET1 capital remains at circa 13% plus a management buffer of around 1%.

The group's U.K. leverage ratio at the end of first half stood at 5.3% on a pro forma basis, which is broadly unchanged on the half and well in the excess of current minimum requirements. Our total capital ratio improved slightly to 21.6% and our MREL ratio is now over 29%.

And so in summary, this is a continuation of our usual message on strong capital build and robust capital ratios.

Looking now at funding and liquidity. We continue to maintain a strong and prudent funding and liquidity profile, with the group LCR ratio of 129% at the half year. This is up slightly from the year-end position. LCR-eligible assets at the end of June were GBP 129 billion, 7% higher than at the end of 2017 due to us temporarily increasing our liquidity ahead of the ring-fence transfer process. The liquidity portfolio represents over 5x our money market funding and exceeds our total wholesale funding, providing the group with a substantial buffer in a stress scenario.

In addition, the group has significant secondary liquidity from collateral placed at the Bank of England. [Also] funding over the first 6 months increased by GBP 21 billion to GBP 122 billion. As I mentioned, this largely reflects the decision to increase short-term liquidity ahead of the ring-fence transfer. The remainder of the increase reflects the ongoing refinancing of the Bank of England funding for lending scheme, and the early completion of a large proportion of the group's 2018 funding plan.

Term issuance year-to-date is around GBP 15 billion compared with the total wholesale funding requirements of around GBP 15 billion to GBP 20 billion per annum. Just over half our issuance this year has been out of our holdco Lloyds Banking Group. This includes around GBP 2 billion of Tier 2 and around GBP 6 billion of MREL-eligible senior unsecured. We're likely to remain active in the funding markets during the second half of this year, with further holdco transactions and maybe some more opco funding.

The continued strengthening of the balance sheet has again been recognized by the rating agencies with S&P upgrading the long-term rating of Lloyd's Bank to A plus in May. This follows the Moody's upgrade to AA3 in September last year.

Moving on then to ring-fencing. The first half of 2018 saw the successful migration of relevant client businesses into Lloyds Bank Corporate Markets, our non-ring-fence bank. As a reminder, for us the non-ring-fence business is relatively small with over 95% of our customer lending remaining within our ring-fence banking group. This includes Lloyds Bank plc, HBOS plc and Bank of Scotland plc. The existing wholesale funding from these entities remains within our ring-fence bank. Our non-ring-fence bank now houses our Commercial Banking Finance and Markets businesses, together with the business undertaken by our branches in the U.S. and Singapore. The non-ring-fence bank is also the parent of our small subsidiaries and branches in Jersey and Gibraltar.

LBCM, the non-ring-fence bank, is predominantly deposit-funded, with additional capital and term funding downstream in holdco. We've established a money market program for the business and, over time, expect to issue senior unsecured debt as well, although this won't be a large program as its wholesale funding requirements are relatively limited.

LBCM was assigned strong final credit ratings during the first half of the year of A1 from Moody's and single A from both S&P and Fitch, with all 3 agencies also assigning their highest short-term rating.

Finally, on ring-fencing. During the first half of the year, we moved the insurance business, Scottish Widows group, to become a direct subsidiary of the holdco Lloyds Banking group. We'll make some further minor intergroup transfers during the second half as we complete the ring-fencing preparation.

And so in summary, we continue to maintain strong capital funding and liquidity position supported by strong profitability and capital generation. We've made good progress on our issuance plan for the year and our ring-fencing preparations are well advanced, all of which leaves us in a good position for the second half. Ed, back to you.

Thanks, Toby. To conclude, we have made significant business progress in the first half of the year with a strong start to the group's latest strategic plan, and we have again delivered strong financial performance and capital build. Looking forward, and as a result of these strong results, we have upgraded our financial guidance for capital margin and AQR. We remain on track to deliver against all other guidance, which remains unchanged, including delivering a return on tangible equity of 14% to 15% from next year.

Our differentiated customer-focused business model continues to deliver. Our multi-brand, multi-channel approach, our cost leadership, low-risk positioning, increased investment capacity and execution capabilities will produce further competitive advantage, enabling the group to continue to help Britain prosper, whilst delivering strong and sustainable returns to shareholders.

Thank you, and we will now take your questions.

(Operator Instructions) The first question comes from the line of Lee Street with Citigroup.

I have 3 questions, if I may, please. Firstly, you mentioned issuance in the second half of the year and some opco and some holdco's in. Any plans to look at anything in the subordinated space will be my first question. Secondly, thanks for all the disclosure on IFRS 9. I guess, we're all trying to get our heads around really what this means, I suppose. Just trying to understand, obviously, it looks like you got around 10% of your book in stage 2 loans. Just trying to understand, have you done any back test or anything just to understand how those stage 2 loans might move in sort of different economic scenarios and how volatile that might be? And linked to that, how should I think about the level of provisioning on those stage 2 loans. Obviously, it's a bit low on the stage 2 relative to the stage 3. And the final one, and I know, it's only a small one, but just interested in the Pillar 2A. Obviously, it's gone down and it will pop up by another 10 basis points next year, I think, to ring-fencing. Do you have any comments as to why that change happens linked to the ring-fencing. Could you just give us any clarity on that? That will be my 3 questions.

The last one, Lee, was around the Pillar 2A and ring-fencing?

Yes.

Let me have a go at this. So let me take the first one first. So I know it's a little frustrating, but we're not allowed to disclose much in -- well, we're not allowed to disclose anything in terms of the components of what makes up the Pillar 2A charge. And there is -- without going into the detail, there's a new component for this year, which is, what they call, group risk, which looks at how the group works relative to the subsidiaries. And so if you think about something like concentration risk, for example, the concentration risks of subsidiaries can be greater than the concentration risk of the group, given how the subsidiaries work. And that would be an element of group risk. So that -- without, obviously, getting into the details, we're not wanting to break down a number, that's why we're likely to get a slightly different number in January '19 than the number that we will have up to then. But we are -- in slightly broad terms, we're very pleased with the reduction in [the, let's say, way that] we've seen this year. We think it reflects the derisking of the group and the journey that we've been on. And having said that, our CET1 guidance, obviously, remains unchanged, but we are very pleased to have seen the reductions this year. So I think your -- another question about the second half issuance and whether we're thinking about doing any subordinated issuance. Lee, was that the first one?

That's correct.

So we -- as I mentioned, we will remain active in the funding market in the second half of this year. We will definitely look at -- so long as markets are conducive and investors demand is there, we'll definitely look at some more holdco transaction as well as a little bit more sort of opco funding. We've, obviously, done quite a lot of Tier 2 -- we've done an amount of Tier 2, about GBP 2 billion worth of Tier 2 in the first half. So I don't think in the second half we will be doing anymore Tier 2 issuance. We haven't ruled out doing some AT1 issuance. That's not to say that we will do some. We haven't ruled that out. We do have a few legacy securities that are coming to the end of their grandfathering period. So at the end of each year, they -- we lose an amount of our current Tier 1 bucket. And so we're thoughtful about that. And if we think the market conditions are right, we haven't ruled out doing some AT1. And your middle one was the IFRS 9 stage 2. So yes, we're all -- IFRS 9. It is, obviously, new this year. We're all -- I guess, we're all still learning how to manage with this new accounting standard. I think it's not just us. I think the regulators are similarly trying to learn how to manage with this new accounting standard. Obviously, we're required to -- we're now required to categorize our loans and advances into stage 1, stage 2, stage 3. The transition between stage 1 and stage 2 is a sort of relative judgment. It's still a little bit subjective, I guess, from firm to firm. I think the technical standard states that it happens when there is a significant change in credit risk since origination, and clearly that leaves a bit open to interpretation. We have -- as you correctly point out, we have about 10% of our loans and advances in stage 2. The vast majority of these are in our mortgage portfolios. So over 70% of these -- of those balances will be mortgages. And again over 75% of the stage 2 mortgage balances will be up-to-date. So there's not -- they haven't -- they're not in arrears or anything, they're up-to-date balances. For whatever reason, they have seen a change in credit risk since origination. I think your question is how back testing and economic scenarios. I was not going to (inaudible) that, Lee, because I think it's something that we're all still working through. We haven't seen much change in the first half of the year. I think our stage 2 balances have declined a little bit in the first half of the year since the introduction of the new standard at the beginning of January, but we're all still learning how to manage with the new accounting standard. And we haven't really done any -- we haven't seen any material moves in the first half. That said, I mean, it's likely to lead to greater volatility. I just -- I think that it's -- by its nature, it's procyclical, so there is likely to be an element of greater volatility introduced by IFRS 9.

And does it matter to -- I guess, [retail rates] haven't changed. But is it something which risk and management is concerned with this [all probably] stage 2 loans? Or is it just -- or do you just regard it as an accounting classification [your separate] risk parameter that you follow through the...

No, I think it isn't -- I think it is important. And we do -- I mean, we clearly look at our credit portfolios very carefully. I mean, the main message on the credit portfolios in the first half is that we have seen no deterioration at all in our credit portfolios. And in fact, our AQR at 27 basis points -- the gross AQR at 27 basis points was actually slightly better than last year despite the inclusion in MBNA. So our credit performance remains -- still remains very strong. I think one of the challenges for IFRS 9 that we will possibly see towards the end of this year is how it behaves in stress testing and in a stress environment because by its nature, it is procyclical. And I think it's not just us who are thoughtful about this. I know the regulators are also thoughtful about this because in -- and I think they've said publicly that the accounting standards shouldn't change how we think about capital plus the procyclicality of IFRS 9 will be -- will mean that you would see P&L charges earlier than the old standard, the old IAS 39 standard. And we've clearly got the transitional release and that sort of stuff that, at least, currently sort of neutralize a lot of that from a capital perspective, but we are very thoughtful about how the change in accounting feeds through into capital.

The next question comes from the line of Paul Fenner with SocGen.

Just a quick follow-up on the supply front. Thank you for clarifying the potential AT1 issue. I mean, I think you've been doing that since the very beginning of the year when we had very, very strong markets and then very weak markets and kind of now somewhere sort of in between. I just wanted to get a bit of color from you as to what you perceive to be a good market environment to issue into? I mean, if spreads stay flat, is that a good sort of level for you in your minds? Or do you need to see significant compression? I just want to get an understanding of how you think about it.

Look, I'll have to -- thank you for the question, Paul. So let me correct something first. We didn't say -- I didn't say potential issue. I did say that we haven't ruled it out. And so there is a subtle distinction between those 2 things. I don't want to mislead people. In terms of market environment, I'll leave, Richard, why don't you pick that one up?

Hi, Paul. Yes, you're right. I mean, the first half of the year was pretty strong. And as Toby outlined that's why based on our supply schedule we issued around 75% for argument's sake of our funding in the first half. So I think there, we completed the majority of that funding. I think we -- Toby commented on possible AT1 and how we would consider that need to be factored in. Obviously, alongside the reduction in Pillar 2A as well, which naturally reduces our regulatory requirement for Tier 1. So we did talk at the start of the year about modest requirements for AT1. As you may be aware, we have about GBP 500 million a year that would fall out of the regulatory bucket because of grandfathering. As regards to markets, we sort of take them in due course. We're not going to -- as with any of our issuance, I wouldn't necessarily talk specifically about AT1. But as with of any of our issuance, we'll look at the market dynamics at the time. And what we want is a market that has investor demand. The price will fluctuate throughout any given period of time. And we are a through the cycle issuer. So we'll -- we're more focused on making sure that there is investor demand and then, obviously, consider the price and relativity, but we don't have any specific targets for coupons or for spreads.

The next question comes from the line of James Hyde with PGIM.

I've got three questions -- or three question topics. So first of all, the MREL indication that you gave and the calculation, that 25.4% requirement, I assume that whatever the single resolution buffer is given to you in early 2019, we double that to -- add on the double of that to. And also the 29.7%, I assume includes grandfathered elements that will fall out. So I'm just -- I mean, to me, this could be like you have more like 30% need or over 30% need and actual qualifying is sort of maybe in the 27% range, is what it looked like to me assuming this single resolution buffer -- this systemic risk buffer is actually at the 2.5% that's been given to you for the stress test. So if I can have color around the systemic risk buffer and how that will play into that? Secondly, there is a topic that vaguely touches on Lee and IFRS 9, but also it was mentioned in the equity conf call. The default definition consultation paper, does that only have possible play through on CET1 capital? Or does it also have a play -- readthrough to NPL or impaired loan definition, do your reported impaired loans go up meaningfully, especially with this 180-day mortgage instead of 90-day mortgage? And the third question maybe a bit cheeky of me, but I have to ask it anyway. Should TSB come back and say, okay, we'll switch, we'll reuse your systems. Are you still in the position to offer that, given that you have a lot of system spend, a lot of systems upgrade going on all the time. Is that still feasible? Hello?

(technical difficulty)

Ladies and gentlemen, bear with me one moment. We are experiencing technical difficulties.

Sorry, I think, we are back on now. Joyce, can you hear me?

Yes, we hear you just fine.

James, thank you for the questions.

Did you get the third question about TSB?

Yes, thank you. It was on TSB. So let me try and take them in order, if I may. So on MREL, there is some disclosure in the RNS in terms of what our MREL requirements are, but let me just run through it for you. So we have an interim MREL requirement, which is what we have to meet by the end of 2019, so by 1 January 2020, which is broadly 2x the Pillar 1 plus the Pillar 2 plus the buffers. And so in the buffers that would include an allocation for the systemic risk buffer, which will be reflected up at group's level. So broadly for us that is -- I think we stated in the RNS, that's 20.7% plus the buffers. If you add in -- we clearly don't know what the systemic risk buffer is yet. But if you add in, let's say, 5 percentage points for capital conservation for a U.K. countercyclical and for a systemic risk buffer, I mean, it's going to be for the mid- to late 20s in terms of percent of RWAs for our MREL requirement. We are currently in excess of that at 29.7%. So we're very happy with our -- with how we're progressing towards the interim MREL requirement. There is a final MREL requirement, which we have to meet by the end of 2021, so 1st January 2022, which adds another element of Pillar 2A in, and so roughly just under 5% for us now. So you could imagine that a final number might be late 20s, early 30s for us in terms of percent of RWAs. I should say though that the Bank of England are going to review the calibration of MREL sometime in 2020 before those final targets are set. And clearly for us, the Pillar 2A number is an evolving number. So we've seen a decrease this year. All other things being equal as we pay into our -- and as we make deficit contributions into some of our pension schemes, you might expect the numbers to come down more. So we have pretty clear visibility on the interim target and we're well progressed on the interim target. We have less visibility on the final target.

Should we take the 2.5% for the stress test as a realistic indication of where the SRB will be?

So the short answer is we don't know. And James, I don't want to mislead you, [we genuinely] don't know, we hear what the number will be in the first quarter of 2019. It is the systemic risk buffer for us, it does apply to the ring-fenced bank. And so it's based on the assets of the ring-fenced bank. And there is a translation up to group level, but it gets diluted as you translate up to group level. So if for example, it were 2.5% at the ring-fenced bank level, it would be a lower number at the group level. So as I say, we don't know what it is. We will find out in the first quarter of 2019. We'll be able to give a better guidance when we understand what it is. Your second question, if I remember, was around definitions of defaults and RWAs [in our profile], which you're right, was touched on this morning. So on RWAs, in general, there's a few things -- clearly, there are a few things that are out there at the moment. There is -- that's a consultation paper, James, that you referred to in terms of definition of default, and moving from a sort of 180-day definition to a 90-day definition. There's also the -- there's also another policy statement out there from the PRA on the approach to residential mortgage-risk weight modeling. If I were to aggregate the 2, we don't think that they have a significant impact on our RWAs. I mean, the definition of default will increase the RWAs by a little bit, moving from the 180-day number to the 90-day number, but we also think there's a slight benefit from moving to a hybrid approach on the risk modeling of mortgages. So in aggregate, we don't see a significant impact from those 2, one is a policy statement and the other is still a consultation paper. I mean, it will -- if the consultation paper becomes policy, it will be reflected in our stage 1, stage 2, stage 3 definition because currently there's a -- stage 3 is the defaulted asset. So for us, that's the 180-day definition. And if that were to change, that would change the proportion slightly between stage 2 and stage 3. But it's -- to say, it's -- we don't think in aggregate. We don't think there's a material effect. And your -- James, your third was on TSB, which I'm going to hand over to Ed, if I may.

James, would you be able to just reframe your question for me?

Yes. So the question is, given what was said in the morning's presentation about how you're investing in systems and how you've come to a top of the sort of peer range proportion of spend that is systems, can we still assume that whatever you have off the shelf is something that would reabsorb the TSB? Can you still provide something for TSB, should they need to come back to you?

I mean, I think TSB is now an entirely separate organization, which is a part of Sabadell, not part of Lloyds Banking Group. So I mean, that is clearly a very hypothetical question and not one that we would ever foresee that situation arising. So and I think, the answer has to be no.

The next question comes from the line of Corinne Cunningham with Autonomous.

A couple of questions, please, on legacy debt. You've mentioned that you might consider raising AT1s. But how do you think about the outstanding legacy debt? Obviously, it's winding down anyway in terms of regulatory credit, but you've got some instruments that are either long dated or truly perpetual. How do you think about those? I suppose another couple of slightly linked questions. Do you think there's any read across from what happened with Aviva and the pref situation there? Are there any implications from that discussion on your potential actions? And also do you think there's any potential read across from the recent Dutch action to introduce or to remove tax deductibility on AT1s? Are you hearing anything along those lines in the U.K.? Or has that come across your radar at all?

Corinne, thanks for the questions. Let me take the middle one because that's very clear. So just on the prefs, so we have -- I think as we said at Q1, we have 6 series of prefs outstanding, 2 of which were irredeemable, and we have no plans to use the capital reduction process to cancel the irredeemable preference shares, no plans. We said that at Q1 and we confirmed it in the RNS as well. And then on the legacy debt, let me just start by recapping the situation. So very broad brush numbers, Corinne. We have about GBP 20 billion of capital securities outstanding, which around GBP 10 billion would be CRR compliant and maybe 10 of which are -- would be deemed sort of legacy. Of that -- of the legacy, most of that rolls off or matures pre the end of 2021. So I think, final GBP 6 billion is pre the end of 2020 -- pre the end of the grandfather period. So we will look at refinancing some of that to the extent that the business needs it and to the extent that the market is receptive. And then in terms of the other stuff, some is surprisingly that but some is even when it loses its regulatory capital qualification, it's still quite attractive fundings, given the spreads that it was issued at. And so we will -- as we've done in the past, we will look at securities on a case-by-case basis. I'm obviously not going to comment on individual securities on this call, but we'll look at things on a case-by-case basis to see -- to work out what we do about this or we do about them, if anything. In the past, we have done some large LME-type exercises. I don't think we will -- we don't have in the plans those sort of large exercises. Again, we have more recently done some more targeted LME exercises. And if we think that makes sense both from sort of a issuer point of view and from an investor point of view, we might consider those [opportunities]. And then your final question, Corinne, I think it was on the Dutch tax on AT1. We haven't picked up anything in terms of what if there's any read across for the U.K. in terms of those securities. We haven't picked up anything.

(Operator Instructions) There are currently no further questions in queue at this time.

Okay Joyce, should we -- it looks like we've exhausted the questions. Should we wrap up the call there? Thank you all very much for joining and I appreciate your time.

Ladies and gentlemen, this concludes the Lloyds Banking Group 2018 Half Year Results Fixed Income Conference Call. Replay info for those of you wishing to review this call. The replay facility can be accessed by dialing 0 (800) 032-9687 within the U.K., 1 (877) 482-6144 within the U.S. or alternatively use the standard international on 00 44 (207) 136-9233. The reservation number is 22657853. This information is also available on the Lloyds Banking Group website. Thank you for participating.