Lloyds Banking Group PLC (LYG) 2014 Q2 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Lloyds Banking Group 2014 half-year results fixed income conference call. (Operator Instructions).

Charles King and Andrei Magasiner will outline the key highlights of the Lloyds Banking Group 2014 half-year results, which will be followed by a question-and-answer session. (Operator Instructions). I must advise that this conference is being recorded today, on Thursday, July 31, 2014.

I would now like to hand the conference over to Charles King. Please go ahead, sir.

Thanks very much, and good afternoon, everyone, or good morning to you, for those of you over the pond. Thanks for joining us for the overview of our half one results.

I'll start with a short run-through of the key points, and then I'll hand over to Andrei for some detailed comments on the balance sheet, capital, funding and liquidity. And finally, we've obviously set aside some time for some Q&A.

In terms of the highlights, we've continued to successfully execute our strategy to deliver a low-risk, highly-efficient UK retail and commercial bank in the first half, focused on our customers' needs and on supporting UK economic growth.

Underlying profit in the first half was GBP3.8 billion, an increase of 32% compared to the first half of 2013, and up 58% excluding the effects of St. James's Place, driven by progress on all the lines of the profit and loss account -- income, costs and impairment. Excluding SJP, income was up 4%. Net interest income grew by 12%, supported by loan growth in key segments and an expansion in the net interest market, which increased 39 basis points to 2.4%.

This strong margin performance has led us to upgrade our guidance for full year 2014 margin to around 2.45% from around 2.40% previously.

At the same time, costs reduced by 6%, excluding charges for FSCS, as we further simplified the business. Our cost to income ratio, already the lowest in the sector, reduced to 50.5% in the first half, and we remain firmly on track to meet our full-year costs target of GBP9 billion of costs plus TSB costs.

Impairment fell by 58% year on year to GBP758 million in the half-year. As a result of our prudent credit approach, we have today improved our AQR guidance from around 45 basis points to around 35 basis points for the full year 2014. We delivered a statutory profit of GBP863 million after making provisions for further legacy charges of GBP1.1 billion, mainly for PPI and the Libor and repo rate issues we announced earlier this week.

In terms of the strength of the balance sheet, as you'll hear from Andrei, our common equity Tier 1 capital ratio increased to 11.1%, up from 10.3% at the end of 2013. We've continued to reduce our run-off portfolio. In 2014 to date, assets have reduced by GBP8 billion to GBP25 billion, a rate that's well ahead of the guidance we gave at the start of the year.

As a result of this, we are now guiding to a run-off of around GBP13 billion in 2014, to just under GBP20 billion at the end of the year. We executed the TSB IPO in June, which was very well received, enabling us to increase the size of the first sale of shares to 38.5% from the originally expected 25% as a result of strong demand from both retail and institutional investors.

So, in summary, we've had a very strong first half, at the same time as continuing to resolve the remaining legacy issues, and we're well placed to make further progress in the remainder of 2014.

And with that, I will hand over to Andrei.

Thanks, Charles, and good afternoon, everyone. I will spend the next 10 minutes or so updating you on the strong progress that we have made with the balance sheet during the year.

Let's start with capital. As Charles mentioned earlier, the Group continues to strengthen its capital position with a fully-loaded common equity Tier 1 ratio increasing to 11.1% from 10.3%, and the transitional Tier 1 ratio increasing to 14.6% from 11.7% at the end of 2013.

This was driven by a combination of underlying earnings, further dividends from the insurance business, changes to the Group's defined benefit pension schemes, and a reduction in risk-weighted assets.

The positive effect of these items was partly offset by charges related to legacy issues and the ECN exchange offers. We reduced fully-loaded risk-weighted assets in the first half by GBP15.1 billion, or 6%, to GBP256.8 billion. This was primarily due to disposals over the period, ongoing reduction of the run-off portfolio, and external economic factors.

As a result of the ECN exchange offers completed in the first half of the year, the Group has met its medium-term additional Tier 1 requirement. The Group repurchased the equivalent of GBP5 billion of ECNs and issued GBP5.3 billion of new AT1 securities. The offers also increased our pro forma Basel III leverage ratio by approximately 50 basis points to 4.5%, and improved our rating agency metrics.

The first half has also seen a number of developments in the regulatory environment. The PRA and EBA announced details of their stress tests in April. The scope of the stress testing framework is extensive, and we are currently working with both regulators to agree our position. Results of the stress test are expected towards the end of the year.

More recently, the Bank of England has published a consultation on the capital framework for banks, focusing on the design of bank leverage. This consultation period runs until December 12.

Looking ahead in the second half, we expect the regulatory environment to continue to evolve, but believe that we are well placed to respond to such developments given our strong capital and leverage position and our strategy to create a simple, low-risk UK retail and commercial bank, focused on its customers.

In terms of liquidity, we continue to [main] a strong liquidity position, with primary liquid assets totaling GBP92 billion as at June 30.

In addition to primary liquid assets, the Group has a significant secondary liquidity holding of GBP119 billion. Primary liquid assets represent approximately five times our money market funding, with a maturity of less than one year, and approximately 2.2 times all wholesale funding with a maturity of less than one year, and this provides a substantial buffer in the event of market dislocations.

The total volume of liquid assets is likely to increase as we move from the current ILAS regime to the liquidity coverage measure as our main regulatory measure. The mix between Level 1 and Level 2 assets is dependent on clarification of these final rules. We await the final definition and calculation of the LCR, and we are confident that we will meet whatever regulatory requirement is set for us.

Moving on to funding, the transformation of the Group's funding positions been completed. The Group's loan-to-deposit ratio is now 109%, down from 113% at the end of last year, with wholesale funding now primarily used to fund the runoff and the primary liquidity portfolios.

In the first half, total customer deposits grew 2% to GBP454 billion. This was driven by growth in retail relationship deposits and in commercial transactional banking, partly offset by a reduction in retail's tactical brands.

This growth in customer deposits, coupled with the reduction in total loans and advances across the Group, was the driver behind the 4% strengthening of the loan-to-deposit ratio.

At the same time, the Group reduced its total wholesale funding by GBP18 billion, or 13%, to GBP119.5 billion, with 65% of this having a maturity of greater than one year at the end of the half. This reduction was driven in part by the increase in customer deposits mentioned previously, a further reduction in run-off asset portfolio to GBP25 billion from GBP33 billion at the end of last year, ongoing debt buyback activity, and the balance sheet effect of exchanging ECNs for new additional Tier 1 securities, now recorded as equity rather than debt funding.

In light of the strength and credit position of the Group, recovery in the UK economy, and improving market conditions, we have seen a further reduction in term issuance costs.

In the second quarter the Group issued a EUR1 billion, 7-year covered bond at mid-swaps plus 15 basis points. The Group's previous covered bond had been issued in January 2012 with a 5-year maturity and was priced at mid-swaps plus 180 basis points. A reduction such as this goes to underline the market's recognition of our progress in strengthening and derisking the balance sheets.

Term issuance in -- for the first half totaled GBP3.9 billion. This is between securitizations, covered bonds and private placements. Utilization of the UK government's Funding for Lending scheme continues to underline the Group's support of the UK economic recovery, and the Group remains committed to passing the benefits of this low-cost funding on to its customers. To date, the Group has drawn GBP14 billion.

During June, the bank issued its first ESG bond. That's an Environment, Social and Governance bond -- in support of its initiatives to help Britain prosper. The bond attracted orders close to GBP400 million, enabling the bank to print a transaction totaling GBP250 million at mid-swaps plus 70 basis points. The proceeds of this issue will be used to support lending targeted at small- and medium-sized enterprises, and agricultural enterprises, that meet the ESG criteria.

Looking to the remainder of the year, we expect to have a modest wholesale funding requirement, and anticipate that this will require in the region of GBP45 billion of wholesale funding. Of this, we expect to issue a good portion in the form of private placements. We will of course continue to look at strategic benchmark issues, but only where it is economic to do so.

We regard wholesale markets as a key source of funding, and wish to maintain market access to allow us greater flexibility and to offer diversification in achieving our funding needs.

In 2015 we expect our funding requirements to reach a steady-state volume of between GBP10 billion and GBP15 billion per annum. Our expectation is that the overall volume of wholesale funding will remain stable from here. The combination of a strong balance sheet and access to a wide range of funding markets, including government schemes, provides the Group with a broad range of options with respect to funding the balance sheet in the future.

Moving on to structural hedging, in line with the Group's aim to be a low-risk and simple bank, the Group has a structural hedge in place to reduce the volatility in net interest income from short-term changes in prevailing market interest rates.

During the course of 2014, the Group has maintained its level of protection against volatility in net interest income.

And finally, we continue to work closely with the major rating agencies and continue to see acknowledgement of the progress we have made in improving the Group's capitalization and transformation of its financial profile.

In March, Fitch affirmed the Lloyds Bank single A long term rating, and upgraded its stand-alone rating to A- from BBB+. However, as a reflection of their belief that sovereign support for UK banks is weakening, they also revised their outlook to negative from stable. For similar reasons, we remain on negative outlook with Moody's and S&P.

Separately, Moody's upgraded Lloyds Bank's stand-alone rating to Baa1 from Baa2, driving an upgrade of the bank's long-term credit rating to A1 from A2 in May. Moody's rationale for this cited significant progress in achieving strategic targets, improved asset quality, and reduction in the run-off portfolio. We expect that these improvements in the stand-alone ratings will help to mitigate the anticipated reduction of sovereign support in ratings over time.

In summary, the Group's funding and liquidity positions have been transformed. We now combine very modest wholesale funding needs with strong market access. The strengthening of the Group's capital ratios leaves us well-positioned to continue growing our core business as we support our customers, and in turn the UK economic recovery.

Although uncertainties remain with respect to Pillar 2, including stress testing, the derisking of the balance sheet should result in lower buffers going forward. We look forward to the continued derisking, and return to sustainable profitability.

I will now hand you back to Charles for some closing remarks.

Thanks, Andrei. So, to sum up, the strong results we've delivered today are a direct outpost of the strategic decisions we took in 2011, and the execution against that plan. Our transformation has been substantially delivered. We've strengthened the balance sheet, reshaped and simplified the organization, restored profitability, and improved returns. And at the same time we've addressed head-on and sought to resolve all our legacy issues.

As a result of the progress we've made on our strategy and the consequent improvement in our performance, the UK government in March of this year was able to continue the process of returning Lloyds to full private ownership, with its shareholding now reduced to 24.9%.

We've also confirmed today that we'll be applying to the PRA in the second half of this year, seeking approval to resume dividend payments, starting at a modest level.

So, with many of the targets we set for our organization in 2011 achieved, we've now been looking at how we'll take the Group into 2015 and beyond. These plans are well-developed, and we intend to share them with you in the autumn.

So, thank you very much for listening. That concludes our presentation, and we'd now like to take any of your questions.

(Operator Instructions). Robert Smalley, UBS.

Just a couple of questions. I know yesterday a competitor of yours talked about -- spent a lot of time talking about Pillar 2A guidance and what the requirements were for them. Could you talk about that at all, and how this factors in? I'm specifically looking at a slide on page 23 in the deck.

Yes, I'll take that. Hey, Rob. It's Andrei. Yes. We haven't disclosed our Pillar 2A requirements at this stage. I think there are a couple of reasons for that. I think, in the first instance, we're fully expecting the PRA to be consulting on the methodology for the calculation of a Pillar 2A requirement, and we look forward to that. And that, we expect to happen in the second half.

And in the second instance, we're actually in the progress right now, as George mentioned in the equity call this morning, of actually going through the review process with the PRA -- the regular review process, commonly referred to as the ICAAP process, when we actually work through with the PRA the different elements of the Pillar 2A. And it just felt like we should wait for the results of that process before we contemplated disclosing our Pillar 2A.

But I think we appreciate the significance of the Pillar 2A element of the buffer stack to your good selves as credit investors in the Group's securities. And we would look forward to disclosing that as quickly as possible. So, towards the end of the year, or very early next year.

Okay. And the process you just described -- how does that -- if it does at all -- intermingle with the UK stress test?

That's a good question. It doesn't directly interrelate. If you recall the way the PRA has designed the -- with the publication last year of their final rules on how all of this works, they've effectively created a sort of Twin Peaks-type approach to capital requirements -- risk-based capital requirements.

And in the UK version of that -- I'm going to ignore the CRD IV one for the moment -- there are two buffers. There's the Pillar 2A buffer, or -- which we commonly refer to in the UK as the ICG; and then on top of that sits something which the PRA is now calling the PRA buffer. It used to be called the capital planning buffer, and is also now commonly referred to as the Pillar 2B buffer.

So, the stress testing -- it's obviously an independent process. It's going to look a lot, in my opinion [of the time] like the CCAR stress testing process. But from a regulatory perspective, the way that comes to life in terms of the capital regime is that that stress testing exercise informs the calculation of the Pillar 2B.

I don't -- I do not expect the stress testing to directly result in your Pillar 2B. I think -- but, obviously, we're working through the regulator on how this is all going to work. But I think the results of the UK or PRA stress test will inform the calculation of the Pillar 2B buffer.

The ICAAP process, which is to effectively quantify the non-Pillar 1 risks, or the risks not captured by RWAs or excess expected loss, will effectively get quantified through this ICAAP process, which then results in the quantification of the Pillar 2A buffer. And so, effectively, the stress testing informs Pillar 2B, which sits on top of your Pillar 2A buffer to get you your total PRA regulatory capital requirement for the UK.

Right. So -- and in terms of timing, we'll see one, then, after -- one then the other. They'll be somewhat related, but they kind of come to their own conclusions.

They do come to their own conclusions. I think -- as you're alluding to, I do think the timing are going to be pretty close. It's our expectation that the UK PRA stress testing results will sort of come to conclusion towards the very end of the year, whether that be late November or December time.

And as I said, we're sort of expecting a similar sort of a timeline around, at least from a disclosure perspective, our intentions with respect to disclosure of Pillar 2A. So, potentially, those two things do end up pretty close to each other.

Last one on funding. You'd mentioned GBP10 billion to GBP15 billion a year. How much is that impacted, if at all, by TLTRO, and is that something you're looking at?

Yes. I -- at this point, the Group has noted (inaudible) in the creation of the targeted LTRO by the ECB. We don't have any plans to use it at this juncture. It just forms an additional sort of facility -- a backstop facility, if you will, for the Group. We obviously have a significant collateral management process here, and so do have the necessary operational capability to make use of it if we wanted to.

But at this juncture, we do not have any plans to use it. Getting back to your question around the GBP10 billion to GBP15 billion, I think -- as we've said, the Group's wholesale funding requirement settles about now at around GBP120 billion, and we look forward to issuing around GBP10 billion to GBP15 billion a year, which gives you a sense of, sort of, the average maturity that we're looking to try and create with the (inaudible) funding book.

That's great. Thanks very much.

Robert Montague, ECM Asset.

I've got a question about the Financial Policy Committee's consultation paper on leverage ratio, issued a few weeks ago. I just wanted to know what your views were on it, and in particular them floating the kite that perhaps AT1 instruments shouldn't be included at all in the leverage ratio.

Good question. Question of the moment. Sorry. You had a followup?

No. No. Just that, and generally your views on the paper.

Yes. Look, I think it's probably too soon for us to make any significant comment. We're still working through our reading of that particular consultation paper. It is a fairly complex consultation paper with some fairly sort of complex ideas on how the leverage framework might be -- sorry, how the risk-based sort of buffer and capital framework might be transposed to the leverage ratio.

I think -- as a high-level comment, I do think we are concerned about the addition of all of this complexity into an additional metric. The original leverage ratio has been from the outset supposed to be a fairly simple backstop measure, which was there to control the levels of leverage in the UK banking sector, which of course we completely supported. And we've seen similar moves in the United States to create that kind of similar backstop.

The consultation paper obviously suggests -- and it's quite clear, right? -- suggests backing -- moving away from something fairly simple and moving to something more complex. And we do worry, as issuers, that this will be -- will make the whole AT1 market significantly more complex.

But I think that's about as far as I'm going to go at this point. I think all of the responses to the consultation paper will likely be public. We have to respond before the -- before September 12. And so, feel free to read our responses online when -- once we have submitted our consultation responses.

I think it's also worth saying, isn't it, Andrei, that we feel we're -- as you probably heard this morning from George, we're going into these processes in a strong position. So --

Yes.

-- we start with capital here right now, fully loaded at 11.1% -- as Andrei said, a leverage ratio of 4.5%, and a strongly capital-generative business behind it. So, that's clearly a good starting point.

Uh-huh.

Thank you.

(Operator Instructions). Corinne Cunningham, Autonomous.

Hopefully -- well, I'm not sure they're very quick, but two questions. First one -- I think you mentioned about GLAC on the equity call this morning. Just interested in your thoughts on that. And I think you mentioned 20% as being a possible requirement. But what would you expect that to be made up of?

And then the second question is -- surprised nobody's asked it yet -- is about your -- the ECNs, and what the plans are for the remaining ECNs that are outstanding.

No problem. Yes, I think that the comment made this morning was less about where we actually thought the requirement was going to be, and more about the fact that, with a circa 20% total capital ratio, we felt like we were well-positioned for any developments that might come out of the implementation of some kind of GLAC approach or regime, or even the transposition of the BRRD framework from Europe into the UK, as the Treasury department's currently consulting on.

I know -- we -- there isn't a hell of a lot of information, to be honest, on calibration. And the G-20 have been at pains to say that the November Brisbane meeting is really not about calibration, and calibration will only really get started from 2015 onwards.

So, it's difficult to speculate on what the total requirements might look like, and in fact even what -- the shape of those requirements.

So, I think all we can say at this point is, we are monitoring the developments, on both the GLAC front -- the Bank of England has -- Andrew Gracie at the Bank of England has discussed in some detail in public speeches, sort of the developing thinking on the resolution and recovery framework going on in the UK. And obviously, Treasury, as I said, is already consulting on the transposition of the BRRD, which would bring along other measures, potentially like MREL.

We continue to monitor those. But we do feel like operating with around a 20% total capital ratio leaves us in a good place. Comparatively speaking, I think we're well placed to handle any kind of requirements that result from those two.

ECNs. ECNs. ECNs. Yes. When I saw your name pop up, I knew I was going to get an ECN question.

(Inaudible).

I mean, I don't -- to be honest, I don't think anything's fundamentally changed from any of the messaging that we gave you last time. I think -- last time we were very explicit that we as a management team thought that the risk of a capital disqualification event occurring was definitely more likely, which obviously gave rise to all of the transactions that occurred earlier in the year.

We definitely still do not believe that the capital disqualification event has occurred, otherwise you would have heard from us in the form of an RNS. We feel that this is obviously material information for investors. And if a capital disqualification event had occurred, we would have felt duty bound to RNS that information to investors.

I think -- and George said this this morning, we did -- as part of the stress testing guidelines, we got quite a bit more color in some of the comments in the stress testing guidelines, and some of the developments in Europe on the use of contingent capital as it relates to stress testing.

And we felt like, although we got pretty close to a capital disqualification event, it just wasn't categoric enough at that point for us as a management team to conclude this -- that a capital disqualification event has occurred.

But it was just another signpost for us, that we -- just to reiterate, that we feel that it is increasingly more likely that these instruments will not count for the PRA's sort of stress testing of core capital going forward.

We're obviously engaged with the PRA on stress testing right now. We've just submitted our results in July. We expect to be working through the results of -- our results of the stress test with them over the course of the coming months, and look forward to receiving the results of that towards the end of the year, at which point we will likely have much more information.

Thank you.

(Operator Instructions). James Hyde, Pramerica.

I have two unrelated questions. First of all, on the LCR, you mentioned that the transition from ILAS to LCR will require you to hold greater liquidity. Which is good news for fixed income holders, I guess.

But I want us to understand, what is it about your business model, and maybe even UK business models, that seems to weigh upon the LCR? I mean, you haven't disclosed yours, and it sounds like it's not that great, under whatever you already know about it. So, can you sort of explain, what is it? SME deposits? What is it exactly?

Second question is about a question that was raised in the call this -- the equity call this morning. Someone asked, what is the balance sheet size capital allocated, and what's going on with your market's activities? I didn't really get the answer and it's not in the transcript. I just wondered if you could give some color on that.

Okay. LCR -- yes, ILAS to LCR is clearly a material change for us. I think that the reluctance from our side to discuss the LCR absolutely not driven by inadequate liquidity. We obviously hold almost GBP100 billion of primary liquidity, and on top of that another GBP120 billion of secondary liquidity.

It's more from outside, around the definition. So, the definition that the particular parts that relate to how you consider the liquidity value of various pockets and deposits, are still moving around fairly materially as we look at the different drafts, and they have a very material impact on our -- on the different outcomes of our liquidity coverage ratio.

And so, rather than publishing a liquidity coverage ratio that would then move by, in our opinion, significant amounts, and then having to explain that, we're just going to wait until the definitions settle down before we publish. And it's really quite that simple, to be honest.

On the second question, do you want to take that one?

Yes. Sure. I mean, look, we haven't disclosed the exact balance sheet size there, but what I can say is that it is relatively small in the overall context of the Group.

What will -- and what Andrew has been focused on particularly in that business, is improving the returns. And as you can see the, he's been very substantially successful in that. So, we've gone from 1.36% return on risk-weighted assets before he set his strategy, and we're now at 1.96%. So, that's very close, obviously, to that target of 2%-plus where he set for next year.

So, you can be sure that we are being very efficient in terms of the capital utilization of our business. We know we need to, because when we first looked at it, and when Andrew first looked at it, it was half the Group's RWAs. So -- but he's optimizing that position very nicely and growing that business, and investing behind that business to grow it as well. And that is, as I say, boosting the returns very strongly.

Just to understand, I mean, Antonio, you have made it very clear that you are very largely a bank that would fit in the ringfence. But have you got anything you can tell us about how you're going to handle the -- these markets' activities? Are they going to sit in a subsidiary that's going to be sort of bonded and held by the holdco -- by LBG -- or can you give any color on how you will -- where this will go?

Honestly, I think it's too early for that at the moment. I mean, there is much detail to be worked through between now and implementation, and we'll just need to work through that and update you as we go along.

Right. Thanks, Charles. Thanks a lot.

Marcus Rivaldi, Morgan Stanley.

I've got a question, please, about how you're managing the capital structure of your insurance businesses to ultimately feed through to you managing the deduction from Tier 1 that you've got at the bank group level.

So, if you talk about whether you feel the capital structure there is efficient at this point in time, or there's more you can be doing there. And then clearly, obviously, you've got some older-style instruments came up to call at both Clerical and Scottish Widows next year, and what you're thinking about those please. Thank you.

Yes. Sure. No. I mean, completely comfortable -- well, I think an opening remark, which probably opens the discussion on an old war which is now done and dusted, which we've accepted, which is, they were alternative approaches to capital treatment of insurance businesses which were debated, discussed and proposed within Europe.

The PRA obviously went, to your point, with a deduction approach for amounts that exceed 10% of the bank's -- of the bank entity's capital requirements, which also required risk weighting.

So, we do, as you rightly point out, have an amount of capital that's deducted. As we look at the returns on capital from our insurance business we're completely comfortable with that -- with the actual returns. But we do obviously optimize the capital structure of the insurance business within the framework within which we find ourselves right now.

The insurance business is separately managed; separately governed; has its own Board; is separately regulated by completely different regulatory team; is rated separately; and has its own risk appetites and so forth around capital that it keeps; and runs significant buffers to minimum regulatory requirements and the results of its own testing, as required by its own stand-alone, independent group of directors.

Again, that is a requirement. The Group obviously takes excess capital out of that insurance business, over and above those buffer requirements, that sits within the -- that insurance business.

We then also, as you rightly point out, maintain market access in that insurance entity. And we've been at pains to reintroduce Scottish Widows to the markets as an issuer on its own, so that it can in fact issue, if it's optimal to do so, instruments out of the insurance entity. And we do optimize the Group's capital issuance between the bank and the insurance company here in the center as one team, as we manage the Group.

As we come to those -- as we come up for those particular capital calls that will occur over the course of the next few years, in Clerical and Scottish Widows, we'll obviously make those decisions at the time.

But all of what I said will apply, in the sense that we will optimize between where we hold hybrid capital versus cold capital against the regulatory requirements and the risk appetite in that entity; and again, the optimal decision on where to replace that capital -- hybrid capital -- should we decide to do so, between the bank and the insurance company. Those decisions will be made at the time, and will depend on capital requirements at the time and prevailing market rates at the time.

Just a followup, because clearly, I mean, there is a whole web of corporate governance here. But given the fact that you are sort of making almost cross-legal entity decisions where to issue and optimize capital, do you feel the leverage of the insurance business is optimized at this -- at the current sort of levels now, or could it go further to help ultimately manage the broader capital of the Group?

No, I think, to be -- and as we said fairly publicly at this point, we've transitioned from a period when it didn't make any difference where we held the capital, between the insurance company and the bank, to a new capital regime where it does make a difference.

We have spent a number of years optimizing that capital structure to run it up against those particular risk appetites and those particular capital frameworks as I -- as described earlier. That exercise is complete, and all we would expect to do from here on out is to extract excess capital from the insurance company as it earns profits and as it generates returns for its shareholder.

Brilliant. Thank you very much.

There are no further questions at this time. I will now hand you back to Andrei Magasiner.

All right. Thanks, everyone. Just a quick word of thanks to all of you who've dialed in. We hope these calls continue to be useful. We enjoy doing them. We enjoy all of the work that we do with you during the course of the year. And please, in the interim, if you have any questions, you know how to get hold of us, and we would look forward to answering any of your questions.

On a personal note, this is probably my last call as I will be moving on, as has been acknowledged. And I just wanted to say, just on a personal note, I've derived a great deal of satisfaction personally.

I've really enjoyed meeting all of you. Getting to know you has been an absolute pleasure. I've learned a lot from you; hopefully you've learned a little bit from me. And I look forward to my -- to our paths crossing at some point in the future again. And so, thank you to all of you for an incredibly rewarding 5 years.

All right. We'll leave it at that and we'll say goodbye. Thanks.

Thanks.

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