NatWest Group PLC (NWG) 2006 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to our results conference. Now, as many of you will know, this is, for me, the first annual results presentation as Chairman of RBS so I'm particularly pleased it's a very strong set of results. And these results, these very strong figures, they come on the back of a whole series of strong results from RBS. So I think it's fair to say the business is in very good heart.

Group operating profit increased by 14% to GBP9.414 billion and adjusted earnings per share, also up 14% to 200p. The Board also are recommending an increase of 25% in the dividend, and this follows a 25% increase in dividend last year. Indeed, it comes on the back of many years of very strong dividend increases and, if approved, this will mean 14 consecutive years of an increase in dividend of 15% or more.

In reaching their recommendation, the Board took account of a number of factors, obviously, the strong capital-generative nature of our business, importantly, the opportunities for growth in our businesses. We also considered a target payout ratio of around 45% to be appropriate and that's up from 41% last year. We also listened carefully to what our shareholders were saying and their preference was for a progressive sustained increase in dividend and we have reflected that in our recommendation. The Board will continue to review regularly these and other elements in reaching our recommendations or use of capital.

I should also draw your attention to the announcement today of a bonus issue of two new shares for each share held.

But let's get on to the main event this morning. Guy is going to take you through the results, then Fred will conclude with his observations, before we take your questions. So, Guy.

Thank you. Thank you very much, Tom and good morning everybody and welcome to the 2006 annual results presentation. I'm sure by now you will have all had a chance to take a good look at the company announcements. What I would like to do is just share with you some of the financial highlights.

Our income rose from just over GBP25.5 billion to just over GBP28 billion, a rise of 10% over the course of the year. Operating profit, as you just heard, rose by GBP1.15 billion to GBP9.4 billion which, after a tax rate of 29.3% and deductions integration and one or two amortizations, we generated GBP6.2 billion of profit attributable to our shareholders. At GBP2 a share, EPS grew 14% in line with our operating profit. We kept our Tier 1 ratio in the middle of the 7 to 8% range that we have talked about. And our return on equity rose from 18.2 to 19%, reflecting strong profit generation and capital efficiency.

Income grew 10%. All of our divisions contributed to this and, once again, we saw faster growth internationally, up 11%. Our net interest income rose by 7% to GBP10.6 billion, our non-interest income up 11% to GBP17.4 billion. Non-interest income now accounts for 62% of Group income, up a percentage point from this time last year. Our net interest margin at 2.47% was slightly better than expectations and a combination of both mix and market.

With income up 10%, we held our cost growth to just 8%. Our direct expense growth in those customer-facing divisions was skewed towards those with strong income growth and we continue to invest in our client-facing businesses around the world. We see plenty of opportunities for growth here and abroad.

We enjoy the benefits of a scaleable platform. And our base case manufacturing costs fell 1%, which allowed for continuing investments in both IT and infrastructure of an incremental 4% but containing overall manufacturing cost growth of 3% as we share the benefits of process improvement and productivity gains. Our cost income ratio in the Group continued to improve, falling from 42.4 to 42.1%.

At the December trading statement, we talked about our credit metrics remaining stable. We have a high quality, well-diversified portfolio, well diversified by counterparties, by sector, and by geography, and our charge-off rate at 46 basis points was stable over the year, losses broadly rising in line with loans. The corporate environment remains benign.

In the UK, we saw the benefits of conservative credit selection criteria in our unsecured book and the levels of loss within that we highlighted at the interims and we talked about, at that stage, our arrears were leveling. Well, I'm happy to report this morning, in the second half of 2006 our arrears leveled and were flat versus 2001 -- 2005. And whilst impairments in 2006 rose, unless there's some significant change, this is no longer a cause for concerns.

In the US, where there's been some market turbulence and much comment over the last days and weeks, we have prime quality portfolios both at Citizens, where we do not do front prime lending, nor in our Global Banking and Markets business where our role as in intermediary between originators and investors, leaves us both well-protected and with limited risk.

Our risk elements in lending fell from 1.6 to 1.57%, our provision coverage ratio from 65 to 62, reflecting both mix and quality across the portfolio.

So, in summary, Group operating profit up 14%, good organic growth. I think, positive franchise developments across all of our businesses. You'll see the Citizens number there reflects the strong year-end foreign exchange rate against sterling. In dollar terms, the business grew 2 percentage points. International activities now contribute 42% of Group profits.

In our Global Banking and Market division, income rose 22%. The credit environment remained favorable allowing operating profit to grow up 25 percentage points. We have good growth and momentum in the business here and around the world. In the US, our income was up 18%; in Europe, we grew 26%; in Asia, we grew 35%. Our fees, up 26%, reflect our strength in arranging and structuring public and private financings, and what has also been noticeable is a sustained and continuing rise across many of the debt capital market league tables, pointing to our growing distribution capabilities.

Non-interest income grew 27%. Income from trading activities, up 15, complemented by a strong performance in both our asset rental and principal investment businesses. Our cost income ratio up 39.6% is amongst the lowest in our peers, whilst our return on risk-weighted assets up 30 basis points, amongst the highest.

In UK Corporate Banking, it's a very good story. Income up 9%, profits up 12% and good growth in both loans and deposits. We are the market leader in the UK and we are growing market share with 2 percentage point gains in our commercial business and 1% in our corporate activity. We continue to invest in both people and technology and we continue to leverage product capabilities across the Group with a very pleasing 39% rise in sales of risk management products originated in our GBM business. The credit environment remains benign.

In Retail, income grew 4%, costs were held flat, impairment losses rose 15%, and operating profit rose 2. It's a very good performance and I think reflective of customer behavior. We saw strong growth in savings and investment products and unsecured loans flat, so slightly down. Our Bancassurance sales rose 56% and our share of this business rose from 6.5 to 9% in the UK. Our leading service proposition saw us head the big bank switches and took us to joint number one in UK current accounts with slightly favorable -- more favorable economics in the second half of the year; our net new business and mortgages rose 7%.

We continue to reap the benefits of combing our Retail Banking and Direct Channels business holding costs flat. On the old basis, which was included for you for the last time on the company announcement, our Retail Banking business grew 5 whilst our Direct Channels business would have fallen by 6.

As the impairment losses rose 15% to GBP1.3 billion, there was an 18% rise in the first half of 2006 and an 11% rise in the second half of 2006 and, to extrapolate, in fact, it was a single-digit rise in the fourth quarter with the arrears numbers, I think, pointing this issue increasingly being behind us.

Wealth Management was another strong year. Income grew 15%; profits grew 30% with a good balance of banking and investment income. On a constant currency basis, our assets under management grew 17%. Our income from these investments grew 23. We expanded our market leading position in the UK with a 9% growth in our client base. We saw good growth in Asia with customers up 13% and income rising 24.

In Ulster Bank, the continuing familiar story now of good strong growth across the board. Income rose 15%, impairments 22, but somewhat slower than growth in the loan book, and profits rose 20%, with particularly strong performance in the corporate sector but all parts of the business are performing well. We're in the midst of a significant investment program to build out both our brand kit distribution capabilities as well as investing heavily in people, and the business continues to reap the benefits of working closely with the Group. Our branch improvement program, with 70% completed, netted 100,000 new retail customers in Northern Ireland and across the Republic. An important milestone was reached when the Ulster Bank Group was successfully migrated to the Group operating platform, which will help bring both product capabilities and benefits of scale in the future.

At Citizens, these numbers are reported in US dollars. Our income grew 3%, expenses grew 1, our operating profit up 2%. The results very much reflect the current dynamics of the market. Slower growth in deposits, our average deposits grew 4%, our customers migrating to more rate-sensitive products. It's a function of the yield curve and it has been impacting our margin. However, the franchise now has considerably more breadth to it. We saw good growth in personal lending of 9%. Good growth in business lending, up 15%, reflecting our expansion into the mid-corporate marketplace. Increasingly, this business worked closely with our Global Banking and Market business providing risk management products to our Citizens customers.

In the period of declining margins, it was important to manage costs carefully whilst allowing for continued investment in our supermarket branch distribution, in our credit card acquiring business, and in our mid-corporate activities. Larry showed you a slide, I think, at the investor day back in November which talked about the pattern of margin and I'm happy to report this morning that in the second half margins in the US only fell by some 6 basis points.

Our credit quality is very strong, $100 billion portfolio. Impairment rose by $90 million from a very low base. This result really reflects the changing business mix and the increasing proportion of corporate lending in our book and one single corporate loss. The retail portfolio is in great shape and impairments across the whole book are only 31 basis points.

In RBS Insurance our profits grew by 3%. Income was up 3, expenses up 2, claims rose 4%, so overall operating profit rose by 3. Across the market, the motor claims inflation remains stubbornly stuck at around 5%. Still, positive signs started to emerge in the fourth quarter of the year around movements in motor market prices as prices are rising and the price rises appear to be sticking, and we are doing our best to take full advantage of that opportunity, although I'm sure you'll appreciate, given the nature of that business, these increases take time to feed through into bottom line performance. We maintained a tight focus on costs, controlling expenses to just up 2%. We continue to leverage the Group's well-renowned purchasing capabilities to keep our claims at 4% below the industry inflation. And our combined ratio rose just over 1% to 94.6, which was also impacted by discontinuation of some partnership business. Our international activities continue to grow very well, Spain, Germany and Italy, with policies up 14%. And our SME business grows nicely with policies up by 10.

Underpinning much of our activities is our Manufacturing division. Cost growth here was contained, as I mentioned earlier, to 3% with the base case down and continued investments in both property and IT. Our IT, in fact, there shows at 1% where we initiated projects, investment projects, with an increasing -- increase of 11% but these are largely offset by reduced production costs, and production support costs elsewhere.

Property costs on a base case were flat, we do continue to invest in our branch improvement program in our UK city center strategy, a number of growing divisional requirements, all of which combine to contribute to an overall 9% uplift in property expenditure.

Our central support costs, focusing on telephony and the like, rose by GBP5 million to GBP976 million with productivity gains largely offsetting volume growth and inflation.

In 2006 we generated GBP6.2 billion of attributable profit. We funded organic balance sheet growth of 8%. We paid dividends, both common and preferred, of GBP2.7 billion. We repurchased 54 million shares at a cost of GBP1 billion.

We reduced our preferred share component of Tier 1 from 35.5% to 32.5% maintaining a stable Tier 1 ratios in the mid sevens. Our returns, as I mentioned earlier rose from 18.2 to 19%.

Our capital guidance for 2007 remains unchanged and we are expecting a very smooth transition to Basel II, our preparations for which are very well under way. And with that I'll hand over to Fred. Thank you.

Thanks Guy and good morning everyone. I'd like to carry on with what I hope you will agree is the theme of good news this morning and begin by saying I'm not going to speak for very long at all.

I'd like to only cover one subject with you this morning. It's a subject which is very important to us and I know is very important to you also, and the subject, of course, is growth.

I don't want to talk about growth that's happened or historic growth, I'd like to talk about the prospects for growth going forward and to share with you why we feel as confident as we do about the prospects for the Group and the growth in the immediate period ahead.

Of course, the trouble with doing that is that growth is in the future and predicting the future is always a challenging occupation, so what I'd like to do today is just draw together some information and some markers and pointers, which I think contribute to and give us confidence and form the basis for our confidence in the Group's future prospects.

As you know, I'm not an economist. As you know I'm famously averse to making predictions of the future, especially when they involve numbers in the near term, so I'll put this slide up and I'll move off it very quickly.

I would just draw two observations out of it though. Firstly, in recent years a consistent pattern has emerged that forecasts of economic growth at the start of the year have been exceeded. I don't know if that's just to do with how economists come up with forecasts but it is a fact.

And secondly, whether you believe the 2007 numbers or not and whether they're your consensus numbers or not, the picture they portray is one of growth and we take from that back and we're not wedded to any one of those individual numbers. They do move around a bit; they're moving around as we speak. But the backdrop that they portray and certainly as far as the economies in which we operate is one of an environment with growth, opportunities will be available, certainly to an organization such as RBS [inaudible]. Our view of the economic backdrop is positive. So much for the economic backdrop, how do we face into that?

Now today the 2006 numbers are in a special place. It's the first time that you have had the opportunity to see them, and it's probably there, the point at which we as the business sever the umbilical with these numbers. These have been around for a long time as far we are concerned. They began as an ambition, they turned into a budget, they've been a benchmark against which we've measured ourselves during the year but they're already disappearing into the rear view mirror as far as the people who actually run the business are concerned, the people at the front line.

Guy has covered some of the important themes and we'll take questions later but I only put them up here to highlight a couple of points, and that is we enter into 2007 in good shape. We are delivering good results from our business but we're doing it without knocking lumps out of the balance sheet or without overstretching the risk envelope at all. Trading VaR has moved on a little. We're growing deposits strongly as well as we're growing risk-weighted assets. We're improving our return on equity, so the results don't in any sense come from the elastic being stretched. And I think that's also important in getting a sense for growth prospects in 2007.

I didn't want to [inaudible] and spend long on this slide either but just to take you down to the bottom two lines there, to highlight that this organic growth thing has been around in RBS for a very long time. We've been consistently driving out double-digit income growth and doing it in a way which flows through to the profit line.

Growth doesn't happen by accident and existing growth is usually a precursor for ongoing growth and I think in that sense, these numbers also give you an insight into one of the bases for the confidence that we have in our future growth prospects.

This slide too you've seen before. It's updated obviously for the 2006 numbers. A particularly important aspect in this slide is that it goes to the diversity of our income, the diversity of our earnings. The results which you saw today don't represent the Group firing on all 12 cylinders. Guy covered, and we've certainly covered in the past and I'm sure we'll touch on again, some of the individual circumstances affecting some of the businesses in there. You've heard us talking about the headwinds, which Citizens [safe], the headwinds in insurance and retail coming out of what has been a challenging time for UK retail. All of the performances of those businesses, I would put it to you, stand up very well in comparison with their peers. But it would be fair to say that they have been facing into headwinds.

One of the key issues going forward though, is that those headwinds have at least abated and in some cases have done more than that, so the prospects for the Group going forward should be viewed in the context of business units which have been facing headwinds, facing, let's say, rather lower headwinds in the future.

The income which we've generated doesn't come from one source, doesn't come from one geography either. I'm not today going to go through the prospects for growth in the United Kingdom. I think we've a number of very substantial businesses here that are pretty well understood by all of you. We're very happy to take questions and Guy touched on a number of the key features already.

What I want to do is take you through some of the overseas geography and give you a sense of what's happening because there's a lot going on, not just in our business as usual mode, but in the sense of the businesses, us investing in those businesses and taking a step into new areas and new activities.

If I look at the United States, again just to give you a bit of granularity about what went to make up that total number, we've talked about a little bit about Citizens but I have a few more things to say in a moment. But I think an important point to highlight is the corporate market business in the United States in which we have been investing significantly in recent years, has continued to move ahead very strongly. Impacted, yes by what's happened in the asset-backed securitization market, not that we've taken [divots], quite the reverse, but simply the volume of business has been less, so a relatively flat performance there. You'll see the other corporate market activity growing by 35%, a very powerful performance and one that comes off of the back of significant investment in that business.

Looking at Citizens itself, once upon a time in talking about Citizens, we tended to talk just about the top line on that chart, deposits. It was in every sense a deposit-led business. Deposits are still important to us and deposits have been a difficult gig during the course of 2006 as you well know. And I think it's worth noting just how much the Citizens product range has been expanded in recent years, again not by accident but through investment.

The credit card accounts and Lynk, our merchant acquiring business, the treasury for the sale of Greenwich and corporate markets, capital markets products, treasury products for the Citizens franchise have all moved ahead significantly during that time.

Interestingly and [inaudible] observation, if we applied the end of 2005 margin to the Citizens business last year, profits would be up 16%. So just again to get a sense of a lot of activity in running this business, a lot of progress in the business, diminished by the margin impact of the [new] coverage we've talked about before.

I'm a bit cynical about league tables. I know many of your are too and I think that's probably well founded. But I change this league table, I'm not putting up for bragging rights. On the right-hand side of that chart, I would just draw your eye briefly to the left-hand side, just again to give you a sense of momentum of what's happening in our business. Yes, in some instances we're growing our business on a low base but we are having a serious impact in the marketplace. This is just a measure of loan markets. There are a number of other league tables I could put up. I'm not going to -- I'm not going to regale you with league tables, but just to give a sense that this is what momentum looks like in a real sense.

Moving into Europe, got a distribution of individual businesses, individual activities in the European market, this is Ulster Bank, just the Republic of Ireland part of Ulster Bank, leaving the North to one side. Strong double-digit growth you'll see across the waterfront.

A little bit of granularity behind that, in Ulster Bank you have the benefits of the first active acquisition to give us critical mass in deposits and mortgages and it's given us a platform which we're able to grow very strongly. Corporate banking, a significant investment and up-tiering the Ulster Bank corporate banking business, which was perhaps, to be kind, moribund for a number of years. It's no longer moribund as you can see from those figures. As we've moved forward, put in new personnel and bringing a lot of products from GBM into the Irish marketplace, getting very strong results in that business and we are very encouraged by the near-term opportunities in corporate lending in Ireland.

In Insurance we've been following this furrow for a long time. We've crossed the two million policy mark now in continental Europe and it feels to us like we're getting real critical mass now in some of those markets.

Retail markets, making progress, Consumer Finance businesses in Europe though have got a way to go and that will be a focal point for investment in the coming year.

Same caveats about the Retail, let's not bother with the right-hand side of the chart, let's just have a thought for a moment over on the left-hand side and look at the progress that's made as we've been pouring investment into that business.

Again there are metrics other than loan markets we can look at but it gives you a sense of the what the momentum has been as we've moved up the league tables and it's not because these other guys aren't trying, as you can see from the names that appear on that list.

Asia Pacific, relatively new, arena hasn't been there for a long time but we've been there in what I would suggest in a very traditional, almost colonial sense for the past n years. We decided that should change. A couple of years ago we started to invest significantly in our businesses in Asia Pacific. I think to some extent what's been going on in China has stolen some of the limelight from this business but I'd like to remedy that today.

You can see there the growth that's been achieved both in wealth -- the focus of what we're doing in Asia Pacific is around wealth management and corporate markets.

Headcount is not a perfect measure, but again just to give you a sense that there are real things happening in Asia and whereabouts in Asia it's happening. Asia Pacific is a big place, a lot of people going in. In the case of Singapore, we've moved the GBM Global Operations Center to Singapore. We've also moved the headquarters of our offshore wealth management business from Zurich to Singapore. A lot's happening there, a lot more to happen.

The Wealth Management business, again, some metrics, there are others, we would expect to see this sort of performance continuing as we go forward, a lot of business to be done in Asia Pacific and we start from a good place.

Another league table, again please ignore, well don't ignore but let's just concentrate on the left-hand side of the chart. We've moved up from 45th to 13th. We grew by 35% last year. If we grew by 35% again, where would that move us in that rankings, an interesting thought, but quite far up and quite challenging into some very established place in that Asian marketplace. The Asian marketplace feels very open to us at this point in time, so again there's momentum in our business.

Another important backdrop or element which is necessary for growth is to have the capital to support the growth, and I'd like to just walk through the capital outlook as we see it.

Year end ratios, as you know, 7.5% Tier 1, 11.7 total and you've had a sense from us before and Guy confirmed again today, that's pretty much where we -- we're happy to be there, we're not planning to markedly change those capital ratios.

There's a very important warning popped up in very small print at the bottom of this screen by the way ladies and gentlemen. These lines are not necessarily to scale, just in case anyone wants to go and measure the slide up later on, but we continue to be profitable and we continue to generate a lot of capital and that growth you're seeing continues to come through in cash form. So we start from a good place, we're filling the tank up at quite a rate.

But, of course, a lot of that growth comes at a cost. It comes with the need to put capital up behind it, nothing new there. What is not so much new but an area where we've made considerable progress in recent years is in our ability to distribute much of that growth, to continue to participate in the economic benefit, but to be able to grow our business without the same pressure, putting the same pressure on our own balance sheet. And that's an important tool in a business sense; it's also an important tool in a capital sense.

We do plan to continue investing in our business. We have been investing in recent years and we continue to invest in new products, new premises, more people and that will very much be a theme of 2007. It's already a theme of 2007, They're very active across, as you would gather from what I said a moment ago, a number of geographies and a number of businesses in that respect.

Basel II, Guy touched on this and the truth is none of us precisely know at this point. Pillar 1 is pretty much clear and looks marginally positive for us. Pillar 2, we're in deep discussions with the regulator just now and until we know the answer to that, we don't know the answer nor does anybody else [inaudible] know the answer to Basel II, but it looks -- a pretty safe assumption would be line ball at that point, but it's one of the moving parts in the capital equation for this year.

Preference shares, as you know, we're stepping down, as I would describe it, towards cruising altitude on the proportion of preference shares. We get there during 2007 but that too has an impact on the capital equation as we move through.

And then the final component in the equation is that anything that's left over as surplus goes back to our shareholders. As Tom outlined earlier, the current steer from our shareholders is very clear. They want us -- the first priority is to invest in profitable growth in the business and that is the first call on capital and we happily agree with that. And our shareholders have indicated a preference for receiving returns in the form of dividends at this point; a very strong and very clear preference and one again, it's very easy for us to go along with. Whichever means we use to return the capital, the moral in the guidance remains unchanged that we will return any capital because where we're trying to get to remains the same place at the end.

We can cover off any questions on capital in a moment but that's how we see it and I emphasize again, these lines are not to scale.

So to conclude, a very simple conclusion and I hope a very clear conclusion. The economic backdrop, there'll be ups and downs and these forecasts will change and the reality, of course, will be different from the forecast, but it looks like a backdrop that supports growth.

We do very much feel that we have the scale and diversity which gives us many opportunities for growth across the waterfront of our operations and across all of the geographies in which we operate.

We do feel able to respond to these opportunities. It's one thing to be in a market and to see things happening, it's quite another to be able to respond to it and we feel better placed than we ever have to respond to the opportunities that confront us pretty much everywhere we look.

And you'll have gathered then that we face 2007 with confidence.

So I promised a short presentation for me. That is it and I think if we could now invite my colleagues to join me, we will try and answer any questions that you might have. Thank you very much.

Could I remind people to state their name and affiliation before they put the questions.

Yes, take the one in the middle here.

Thanks, it's Ian Gordon from Dresdner. Three quick questions if I may?

On slide 28, I think you gave us a clue in terms of your expectation of how you will deal with any possible headwinds in the US Corporate Markets business. Clearly you told us about asset-backed securitization's growth of only 4% in '06. Other Corporate Markets earnings up 35%, presumably you'd expect that headwind to continue into '07. Can you just provide a little bit of color as to how you see the overall move forwards within that geography?

The second question is on Retail impairment. Yet again today, we've see your positively differentiated Retail credit experience and your positively differentiated Retail credit outlook. In terms of the drivers of that, do you see the key driver as being your timing in terms of ratcheting back your unsecured appetite or the choices you made by channel, for example, closing down your direct brand, or do you just regard it as a fortunate consequence of the shape of your customer base?

The third question, EPS, clearly you've done 200p today, consensus at 6:59 this morning seemed to be forecasting 6% growth for '07. Clearly that number's wrong and it's going to move up, but no doubt we'll be sat here in August and once again analysts will be carping and wailing about poor guidance leading to yet another earnings beat. In terms where the market's getting your numbers wrong, do you think it's mainly underestimating your existing business lines, or are we failing to fully appreciate the opportunities in small but growing areas, for example, the 86 EV basis improvement in Bancassurance, the growth in Asia which is currently very small, or, indeed, some of the elements within Corporate Markets where you're still clearly subscale?

Well, if that's an example of a quick short simple question, we're in for an excellent morning. We'll do our best, I'm sure, to reply to those. Johnny, are you going to start on the US Corporate Markets?

Yes. We've made a good start to the year in Corporate Markets in North America. I think there's still lots to go for. The successes have been two forms of integration. One is bringing together the GBM businesses in the shape of Greenwich and what was traditionally the New York branch. Those two coming together has -- that's really one of the things that drove the 35% that you saw in Fred's slide. The other synergy that's happening is the coming together of GBM and Citizens where, again, we've seen considerable growth. And I think there's lots more to go for there. And, more importantly, I think that the market in America, as I've said before, is open to the emergence of another large-scale corporate bank. America's a very big country. There are only three really significant corporate banks there. We have a clear ambition to be up there in the top five, and if we got anywhere near there that will be further growth. So lots still to do but lots of momentum.

Gordon, on -- oh sorry, I'm looking in the wrong thing. Gordon, retail impairments.

Yes. I think you did a very excellent analysis which was based, pretty much, on what I said at the last half year. If we go back to June 2005 I said we were in for a two year slog, so I think you still owe me four months yet before I feel this is clearly behind us, but it's all looking reasonably positive. We were very early in. We were quite aggressively in as well. I don't think you can deal with the historic problem and pretend you can still pump in new business or even sub-prime business while you're at it. You actually have to sort of take the pain and get on with it. That shows very clearly in the results in Retail Direct this year where basically we were through from the Direct Channel market. That is really toxic waste in this sort of environment if you're not very careful.

I refer you to the BBC website actually in terms of our customer base. There's a very nice map up there which plots delinquencies across the country by geography. You will find there's a 100% negative correlation between where all the problems are and where our big market shares are. But nice of them to arrange that for me, especially for you.

And the other one was the cycle life. As I've said before, we've got 27% of the ABs in the country with earnings over 50,000 so while that's a customer basis, we'd like to deal with them in all sorts of other ways, it doesn't tend to go bad on you in terms of bad debts. The only bit you are missing from your analysis might actually be the quality of my management team but I wouldn't want to float that one too obviously. But, I think, to be honest with you, it does require a degree of discipline when you see this coming at you. Bankers have a natural unwillingness to admit there is a problem and hope it will go away. I think we did sort of grip it early and we're getting the returns from that. But, at the end of the day, we're doing it with a superb customer base.

And, Fred, if I paraphrase the third part of the question, why do these guys get it wrong all the time?

It's not an invitation I've had often but I will take it in the spirit in which it was given.

I don't know, Ian. I think if you can go back through your models, no-one having the benefits of having the results out, it's always a bit difficult to talk to the market through trading statements. It's all smoke and mirrors. But we've got the numbers on the table today. I think we do present the numbers in a pretty consistent format. There's no change to accounting policies, there are no inorganic aspects to look at in these results, so it probably isn't too hard for people to go through their particular models and see the bit that they may have got. Inevitably, going forward, there will always be things we're trying -- you're trying to predict the future, we're trying to deliver the future. Things can drift.

The EPS one did seem a big gap to me. Some got the EPS closer than others but I guess it's for individuals to do that in the model. I think the most important part is that the results are now out there for people to understand the quality of our results. And the bit I'd like the market to get right now is the valuation rather than the model.

If maybe I could just add. It's certainly not chance. These guys do a good job. Yes. We'll take this question here. There's a load of hands up. We'll get to you all, don't worry. Or, at least, we'll do our best.

Yes, sir. Thank you very much. It's Tom Rayner from Citigroup here. Could I be the first person to ask a question on slide 38, please? I'm guessing the investment part of that can include acquisitions, if so be it. I'd also -- I just want confirmation on that, but I'd just like to question you on what you're hearing from your shareholders because, clearly, there has been a preference for higher dividends. I'm wondering if this is more to do though with the fact it's maybe harder to reverse the increase in the payout ratio than it would be to not renew a share buyback program. And, again, choosing between the dividend and the buyback, if you do believe the shares are undervalued, which I guess you do given the rating, possibly a buyback is more in the interest of shareholders than they realize and maybe you should save them from themselves and consider giving them one whether they want it or not.

Fred, go ahead.

Well, if I deal with that last point first, Tom. I think it's not for us to save shareholders from themselves or anyone else. It's for us to -- the shareholders own our business and that we do take their views into account. The beauty of where we are though this is not -- nothing is forever. The dividend is what shareholders want just now and I don't think their views are in any way confined to RBS. And there seems to be a very general sentiment shift away from buybacks towards dividend. It's something we can easily accommodate within our numbers. It brings our payout ratio to -- it's not -- we're not like in a dramatic place with the payout ratio. We're in a better place with the payout ratio, so it doesn't seem to me like an extreme that I wouldn't rule buybacks out going forward. But, I think, the most important part is generating the surplus capital so we've got the choice and listening to what our shareholders say. And those will be the driving aspects. And views change. So it may well be by the time we get to the end of '07 that shareholder views have changed, in which case we'll be listening just as hard as we're listening just now and have listened during the course -- in the past.

Acquisitions. No change in the guidance there. We've got no plans to make any large acquisitions. We made a little acquisition in Citizens last year. A great bank and there may be other things of that ilk but not things that I think customarily you're on people's radar screens.

Could I just have a second question for Johnny? Just, clearly, in your rearview mirror you're seeing a fairly healthy second half in terms of some of the revenue items in your business. I'm just wondering if you could update us on what you're seeing so far this year in some of those areas which look fairly big relative to the first half of the year on the revenue side?

I don't think -- are you thinking of anything particular?

Well I haven't gone through all the breakdown of detail but this summer I think some of the realizations, possibly, in Global Banking and Markets look reasonably high second half versus first.

I think the split -- I assumed that's what you were asking, I just wanted to clarify. The other operating income number, I think, Fred and Guy made an important point there. We have got two businesses, and I emphasize the word businesses, that contribute to that. One is the physical ownership of assets such as ships, property, aircraft. We characterize them as rental asset businesses which create rental income and capital gains. Those businesses have got some very strong positions in real estate in the UK. We're now expanding that into Europe. We've always had a strong business there in America. In aircraft, we're one of the major players in that market in the world. And they are businesses which I expect to sustain continued earnings.

In principal investments which the other sort of area there where we've made investments, I think the only thing I'd emphasize is the portfolio churns. We've bought things, we've sold things during the year. Quite significant moves in the portfolio. The portfolio of those two things taken together; we started the year around 7 billion, finished the year around 7 billion. There's plenty left to go so we're expecting -- I expect those businesses to continue to contribute.

Thank you.

I'll go over here now.

Thanks. It's Mark Thomas at KBW. A couple of questions around some of the higher risk elements in the US, if I may. If we look at the site returns, historically, Citizens' second [inaudible] write off was about a 50th of HSBC's but in the --

[I can't hear you, I'm sorry.]

So we're talking about second [inaudible] write offs. In the US, you were running at about a 50th of HSBC up until the third quarter and then that charge-off ratio rose to about 6% of HSBC. So I'm just wondering if you can give us a feel as to whether there was something funny in the third quarter numbers or whether or not you feel your risk profile, relative to HSBC, has actually gone up?

You know, I left Boston last night and I thought to myself, gosh I hope somebody asks me about credit. We had one large charge-off in the third quarter, a commercial credit in Rhode Island. The first commercial credit of any significance we had charged off in 14 years. We have never -- we don't do sub-prime. We have never done sub-prime. We have no plans to do sub-prime. Sub-prime brings with it operational risks, regulatory risks and, of course, credit risks. And our entire residential portfolio, which I think you understand includes both first mortgages and what are called equity lines and equity loans is a little over $50 billion about standings. And in 2006 we charged up $18 million.

Okay perhaps on Johnny's side then, can you actually in terms of the revenues say how many dollars, millions of pounds, millions was made in trading sub-prime and mortgage-backed?

And secondly could you give us an indication of credit lines extended to originators of sub-prime? Thank you.

Yes I mean that's -- that's asking for quite a lot of detail, the -- some of which I think is more commercially sensitive than I'd like to discuss with this audience. But what I will say is that we had a small decline as Fred laid it out. Asset-backed business last year which basically reflected the residential side of asset-backed. The other parts of asset-backed had a good year last year. As it happened we made a really very good start to this year as well, both in residential and asset-backed more generally. Where that market's going, it is in a bad state just at this moment but markets recover. We'll have to wait and see.

But in terms of trading we made no significant trading losses of any sort. Fred's very keen, I use the phrase, we've taken those divots out. I'm concerned he'll think that's about my golf but it is also true. We've taken no divots.

And so credit lines to sub-prime lenders?

We have -- Greenwich has been in this business a long time and it's worth recalling that they started rather like a partnership, and like a small partnership they've always been very risk averse. We have got credit lines to originators like everyone in the Street in this business, but we're being highly selective. We've obviously had a further review during the last few weeks. Very comfortable with what we've done, it's highly over collateralized. Mark-to-markets are fine. We've got no concerns with our lines to the originators.

Yes, there is one here.

Yes. Thanks. It's Michael Helsby from Fox-Pitt Kelton. Just to answer Ian actually, the reason why we got the numbers wrong is we didn't have the 870 million of increase on the other income line that Johnny was talking about in the numbers. And I think Fred, at the conference call in December, when you talked about the increase in consensus that you were signaling then, you talked about it being a lot more broad-based. So I was wondering first thing. I mean Johnny mentioned the two business lines, principal investments and the assets. Could you tell us of the 870 million in the second half, what the mix is in terms of principal investment and other assets?

And also, clearly there's been a big jump up. You've been helpful in telling us the 7 billion. What type of annual return should we expect on the 7 billion book? Feels like '06 was a very big number. And I've got a follow-on question for Johnny as well if that's alright.

I think the principal finance number is shown separately as you went back in to the meat of the pack. I can't remember offhand what it is Michael, so I'm not trying to be clever about it. But it is disclosed I think back in the later analysis of the --

[550 to] just under 800 [inaudible]?

So that's 250 in the principal investments line. But it's, to the comments made it is broadly-based. It goes across a number of different asset [inaudible]. There are a number of businesses in there as Johnny described in his answer. So there's nothing remarkable about it. None of them are new businesses that were in, they're not businesses that haven't been in for, for some time.

[inaudible question - microphone inaccessible].

I mean I think that some of the guidance could have been looking to this, that 2006 was a very good year for a variety of different reasons. I would be very disappointed if the business didn't generate something coming up towards the numbers we've pulled out this year. I think that we were looking at the number that moved up from what was it, 780 up to [inaudible]

[inaudible]

Yes we will be looking at, it'll be disappointing if we didn't get into something with four digits in it going forward, so it feels sustainable but I would be the first to acknowledge that 2006 has seen a very good performance which the business will do well to repeat. But I wouldn't rule out repeating it.

And you had a supplementary I think?

Yes. I was just wondering just following on from Mark Thomas' question on the mortgage-backed. At the moment or just before it started to blow, what's the warehousing exposure you've got in the mortgage backed?

And also your retained interest in the securitizations?

[Johnny?]

Well there are a different forms of warehousing but we have, let's give you the exact numbers, we have around 4 billion of collateralized lending. The amount of [technical difficulty] very, very small. A minuscule amount of that, a minimal amount of that -- those totals.

Thank you very much.

Okay. There is a question over here.

Yes. Robert Law of Lehman. Could I press you for a bit more clarity on some of the capital and distribution comments you've given please? The 45% pay-out ratio, is that now a target we should be expecting going forward?

On the capital position, I think in a statement you referred to, raising the level of ordinary equity as a proportion of the total you referred to, I think cruising altitude. Could you give us some clarification as what you regard as cruising altitude please?

And, why the change to move towards a lower level of equity leverage?

Can I just say, I mean I said in my introductory comments, the Board will keep revisiting this. Don't, I mean, the 45% pay-out ratio is broadly where we are at the moment. We will keep reviewing all of these things. So we are not locking in. I think it would be quite wrong for any Board to lock in its capital policy one time forever. Okay.

Perhaps I can expand on that, the reason I asked the question a bit better is that I think you accepted the level of pay-out ratio in the past was too low. You've now raised it to 45. My question is, is that done now? Or --

Yes. We were targeting raising it up to about this kind of level and we are very comfortable with that at the moment, but we will continue to review and take the views of shareholders into account.

Fred Goodwin On the other side of the house Robert I was talking about preference shares [inaudible] one time [decided] there was nothing new in what we said. I mean you've -- I think you heard me before talking about the normal state ceiling on preference content was about 30%. We went higher than that for the NatWest deal. We went higher than that for the Charter One deal and have been sort of working our way down as a proportion followed by sort of some repaying but also just keeping it flat as the rest of the capital base is brilliant. And I think Guy has touched on it in the past.

My comments about coming down to cruising altitude is getting down to 30% which is the level of leverage we would expect to see on an ongoing steady state basis. We're at 32.5% I think at the year end so as we go forward there's another de-leveraging if you like of the capital base which is germane to that line I was putting up. But it's certainly not intended as that, a change of strategy, of policy. That's something we've been aiming at for a while.

Could I just ask you to clarify what your position is on the guidance on the UK personal unsecured credit outlook? And I think you've referred that the issue being behind you or two year [peer] or whatever. It has been a range of guidance given by banks in the last couple of weeks. Do you think your charge is going to go up? Do you think it's flat? Or where do you think you are at this point for '07?

Gordon, do you want to comment?

Probably not. That would be the obvious question. I think looking at bad debts you're going to have to look at a range of likely outcomes aren't you? Because I don't know what's going to happen in the economy over the next six months. But Fred showed you those slides those slides which show the reasonably benevolent economy. And if that emerges, then if you'd asked me a year ago where did your bad debts being flat or coming down, fall around a range of likely outcomes, I'd have told you I would need a pair of binoculars to see them.

If you told me now, will my bad debts be flat next year? It was in a range of likely outcomes I'd have to say, yes. Even I would I have to agree with Fred that probably that might be doable. I think we're in a different place to where we were 12 months ago, and having looked at the other figures I would have probably said we're about at least a year ahead, unless there's something I'm missing.

We do reach an inflexion point where obviously this becomes my biggest profit center. And it's very nice for Guy to tell me that it's actually behind him but it isn't behind me. Because GBP1 billion is still a lot of money and when we reach that inflexion point we start creating a lot of shareholder value quite quickly. So the sooner we get there, happier I shall be.

Question here, then I'll go over there.

Thanks, good morning, it's Simon Samuels from Citigroup. I've actually got three questions as well.

First it's the margins. I guess it's for Guy really. It looks like your margin expanded about four basis points for say the second half compared to the first half. Which -- well the question is, is that the end of that long decline from 3% margin to 2.5. And is it just flat line here or is it going up again or was there something unusual in the second half?

I'll take that now. Really reflecting mix across the portfolio because Fred alluded to the many moving parts and the mix of corporate and personal lending activities as well as on the liability side of what [technical difficulty] I think the [technical difficulty] appear to be abating so I would say levels are slightly down I don't know whether [technical difficulty] to 10 down feels like the sort of range that we would want to think about as a base case going into this year.

Thank you. The second question is, I guess it's the last time we can ask it as well, it's about the Direct Channels business, because you obviously do give us still a bit of disclosure although I know even that's been restated from previously, but it looks like -- if I just look back at the half year stage, the contribution before manufacturing cost allocation from the Direct Channels, I think rose about 4 or 5% and for the full year it's down 6%, so obviously in the second half it must have fallen about 15% year-on-year. Can you just talk a bit more around that business in terms of what's gone wrong there really?

Sure, it's not so much what's gone wrong, it's what we decided to do in terms of changing priorities, it really came through very clearly in the second half of last year. We've actually -- it's in the second half of the year before where we actually made the changes; we more or less pulled out of most of our Direct Channel lending which was a significant chunk of that business which was still moving along at a reasonable pace this time last year, that's been operating in a very small gear, obviously that's resulted in a fall in volume, also a matching fall in PPI which you could argue is not a bad place to be actually, I don't think historic levels of income in that area are going to be with us in the future.

So you saw, one of my colleagues described it as going cold turkey, which I thought was a bit inelegant but there's actually an element of truth in that, that we were coming off perhaps an over-excessive reliance on Direct Channel ending with [inaudible] PPI. The good news is, we've reached a base in that position and I think we're at that base figure now. Our priority in the coming year is to concentrate on lending through our organic branch channels and underlying retail asset quality, I feel we're in quite a good position now to actually move forward.

Thank you and the third question which I'm sure is for Fred is [technical difficulty] where are we going wrong or what are we missing here? In 2006 you did a GBP1 billion buyback and raised the dividend 25%, and you're obviously inviting us to think about the current levels of profitability as being sustainable, your risk assets grew 9 or 10% and I guess with more securitization they're not going to really accelerate much from here. You said you don't want to do major acquisitions, you told us where the Tier 1 was going to end the year after the mid-point, well basically where it is now. So last year you had to do GBP1 billion buyback to stop the Tier 1 going up and an extra 10% of the dividend only consumes an extra 150, GBP200 million in capital. But my question is what gives on all of those matters, is it that we're too low on our RWA forecast? I guess you don't think we're overestimating profits? Or could you see that payout ratio step up further, even if it was just a creaming off the top of surplus capital generation?

I'll again resist the temptation of the kind invitation, Simon, but to answer the core of the -- the kernel of the question, yes I think that we will end up still with surplus capital. So it seems like quite a good problem to have and again, as Tom mentioned, and I agree we'll be better not to rush our fences in that, but we've got no plans to hold it within, the capital guidance remains unchanged, we don't want a war chest, we don't want it to build up, it goes back to the shareholders. At this point dividend is a priority, and we've made that decision, and as we go forward the surplus capital starts to build up. There are a range of options that we'll consider in light of what the shareholders have to say.

Thank you.

But you're right in your kind of arithmetic.

Good morning, it's Ian Smillie from ABN Amro. Two questions please, both on investment. The first one is you've clearly set out your confidence for this year, could I ask you to clarify how we should be thinking about positive operating leverage or the cost income ratio and at what stage there must be a temptation for you to accelerate some of those investments in order to capture future revenue growth please?

I think it's important, Ian, that we go about it in a manner that doesn't cause alarm, and one of the benefits of the position that we're in at the moment is the way we have always invested in our business, so even in this year's P&L the numbers you're looking at today have got the cost of all those headcount increases and so on that you saw out in Asia Pacific and in the United States and in Europe. The IT investments and so on in Ulster Bank [inaudible] are in there. So we've got a stake in the ground already in the numbers that allows us to -- now that we've finished doing the IT piece in Ulster Bank for the time being, we can switch elsewhere.

So I would not be conditioning anyone to expect any reversals of general direction in terms of cost income ratio. There will be -- I think you can see it this year in GBM where costs went up a little bit more than income, but I wouldn't condition anyone to expect anything drastic or unpleasant. It is important I think in how we run the business that we do temper the rate of growth with its impact on the P&L. That doesn't feel like a constraint at the moment but it's a discipline rather than a constraint.

Thank you, and the second question I wouldn't normally ask, but as the analyst at ABN Amro, could I invite you to share your thoughts on larger scale M&A in the bank sector this year? And you've been very clear.

I'll tell [Reisling] on you, not that I'm in contact with him I should add. I think Tom gave me the indication earlier to make a comment on that and I made it and I'll say it again, we have no plans for any large scale. I don't think [Reisling] does either as I read the press, but --

Yes we have a question here.

Thank you. Peter Toeman from HSBC, I'd like to ask Simon's question in a different way, which is to say that there's about 5 billion of preference capital within Tier 1; the retention for the Group are only at around about 3 billion a year net of dividends, and I wondered if actually the missing capital is repaying the preference dividend with equity and might that act as a constraint on dividend going forward?

I guess the short answer is no. I don't think those numbers add up, Guy?

The short answer to that one would be no, I think we don't see it as a constraint because our preference share dividends I think represented 200 million of the GBP2.7 billion of dividends that I put up in my slides and I think we'll continue to be significantly capital generative and we will continue to have choices about the level of common dividends going forward. I don't think in our plans we see it as constraining.

I was thinking more about the 5 billion stock of preference capital within Tier 1. The stock in relation to the 3 billion of retentions.

And as a sort of supplementary, I think a few years ago you used to talk about an optimum level of capital for the Group which entailed a level of leverage within Tier 1 which was much higher than other banks and clearly you've changed your view on that and I wondered what had been the factor behind that change?

Our view hasn't changed on prefs and we -- 25 to 30 was the guidance that we gave historically and in fact we're aiming now to -- cruising altitude we would see as being around about the 30s or at the top end of that range, but in exceptional circumstances such as NatWest where we ran it up to 40% and Charter One we ran it up to the thick end of 40%. If you go back and look at what we've said, we would bring that back down and that's what we have done, we're at 32.5 now, but there's no change in our thinking around the attractiveness of prefs.

As an element of gearing, I think if anything if you look at practice now around the world amongst banks, people are moving in that direction, it's a very effective form of leverage without placing any real constraints on our ability to run the business or indeed to place any threat on our ability to pay out dividends. The pref dividend is de minimis [inaudible]. I don't, Guy, is there anything you want to --

No I think we had a good discussion around that and I think that a certain level of gearing that wouldn't be construed as being too aggressive, nor would it be construed as being a particularly conservative level of gearing either. I think it's one that, given our mix of businesses and the overall risk profile of the Group, we feel very comfortable with.

Okay, question here.

Good morning, it's Jonathan Pierce from Credit Suisse. Two quick questions, probably for Guy. The first is on the tax charge and why it's so low in the second half of '06 and if you can give us any guidance on '07 for the Group tax charge?

And secondly, would you be willing to give us the reserve release number in RBS Insurance rather than having to wait for the annual report? Thank you.

On the tax line 29.3, a little better than expected, a number of moving parts in that. One, the weaker dollar, so our tax jurisdictions in the US and that had some impact. The second was some recoveries earlier and third is that some of the principal investments which Johnny referred to have a tax positive consequence to them, they're low tax gains and so the combination of those things and a number of other smaller moving parts contributed to about the sort of 1 percentage point or so benefit that we saw. If you add that sort of percentage point back on 30.5 feels like a good planning number for 2007.

And on the reserve release -- on the reserve release again, no change to our policies there. We continue to provision on a prudent basis. Reserve releases in '06, in fact were slightly lower than reserve releases in 2005, to the tune of I think 60, GBP70 million and will continue to sort of, take a prudent reserving policy going forward, so I think net net, no change.

Question here.

Thank you, Daniel Davies, Exane BNP Paribas. Can I ask a question about the rental assets within CBFM, because looking on the page 44, there's about 2,100 million of rental and other income and then on page 13, it seems to be being made on a portfolio of 13.9 billion of rental assets. I mean, even if I subtract 700 odd of operating lease depreciation from that, it still looks like a sort of 10% rental yield. Is there some other depreciation somewhere in the cost lines, or is there some other rental assets that's been made on or is it just a very high yielding portfolio?

The rental assets number -- yes, but the rental assets that generate the gains, as opposed to the rent assets that generate rent, we've been at a much lower number actually. There's a number of things in the 13.9 that are -- I don't know, well, vanilla rental if you like. The -- you're right in that obviously you've got to gross up for operating lease and funding costs for the numbers on page 44 -- that's the other, the gross up. Does that help?

Maybe I can ask it in a different way. What is the sort of average kind of realised yield on the rental portfolio, either on the 13.9 or on the kind of smaller number that we've got.

Certainly on the operating lease portfolio you know, we're looking to have 2 to 3% over cost of funds, as a sort of running yield.

Yes. Quick questions now. I think one here and then one just behind.

Thanks yes [Johnny], can I just follow up on the realizations. You've changed the disclosure for the full year versus the half year, so we don't actually have the principal investments number or the other sort of disposable gains that you were talking about at the half year, to work out the split, so if you could just help us out on what the second half mix was please?

Do you want to start with that Guy? [technical difficulty]. Okay.

And then just a quick -- it's related. If I look at the revenue growth [technical difficulty] 900, 1 billion ongoing basis then the revenue growth was 14% in global markets and the cost growth is 23%, so that's -- I think clearly you're investing in that business but [technical difficulty] jaws should we think about [technical difficulty].

I wouldn't assume that [inaudible] come without cost so I wouldn't -- make that comparison, would be my first point, and jaws going forward, I wouldn't give you a number for that again. I guess for you guys to work out for yourself. And I think the comments I made earlier I think, in response to Ian's question about going forward, we are -- we will invest in the business, but not in a way that's going to cause drama. I don't think actually, given what's been achieved in GBM would be 23% increase in cost is anything other than remarkable. [Technical difficulty].

I can assure you that the sort of jaws you imply wouldn't work with Fred, I'll go without giving you any more guidance but -- and the other thing I make a point of emphasizing is [technical difficulty].

Back on -- on the retail bank, I just wanted to get an idea of the sort of likely income cost trends going forward. Costs -- direct costs were held flat and I just wonder if that is a sustainable performance going [technical difficulty].

Okay, what was interesting actually was, when I was getting ready for this I actually went back to the slides I used in June '05 just in case any of you actually had read them and were going to ask me some difficult questions off them. I think what's interesting is the way the shape of the business has changed. I used the analogy of a boxer, in June '05 we were very heavily down on our asset foot, where a lot of our income was coming from. We were a bit overweight round the middle in the sense that our cost growth was at 4%, and quite frankly we didn't know which way the impairments were going because we'd seen it in the personal market, but I think the industry didn't know how bad that was going to get and whether it was going to spread to the other sectors. Wind on from two years and I think there's been a hell of a change. The weight is off, we're now running at a level or flat cost.

The headcount figure you see is actually a bit deceptive. I think it shows 300 for the year, but the fact of life is we still grew the headcount in the first half of the year. By the end of the year, second half we actually shed 800 people and at the time we're still investing in private bankers, in financial planning managers and the Bancassurance business. So this business is now actually getting pretty nimble in terms of cost and I've absolutely no intention of changing that. Because I think you are into a single digit income growth environment, and I think you should plan for that. The good ones will be at the higher end of that and the bad ones will be very much at the lower end of it. But the other issue is also the impairment issue is now [technical difficulty] and I think going back to the analogy to a boxer, I think we're now pretty light on our feet. We can be pretty nimble and then as we've shown in things like market share, we can also sting like a bee.

Enough of the boxers now --

I think we're probably all done at this point, in which case, thank you very much. There should be coffee outside. Well done.