NatWest Group PLC (NWG) 2018 Q4 法說會逐字稿

Good afternoon, ladies and gentlemen. This afternoon's conference call will be hosted by Katie Murray, Chief Financial Officer; and Robert Begbie, Treasurer. Please go ahead.

Thanks very much, Charlotte, and thank you for joining the call. On the line, you have myself, Katie Murray, Group CFO of Royal Bank of Scotland; and I'm joined by Robert Begbie, our Treasurer; and Paul Pybus, our Head of Debt Investor Relations.

We've put some fixed income slides onto our IR website, which Robert and I will talk you through now. I will provide a quick overview of our full year results that we've -- that were out earlier today, and then Robert will provide an overview of our balance sheet performance for the year. And after that, we'll open the call up for questions.

It's a good set of results. The last time we hit the Q4 operating profit was 8 years ago, and we achieved that today. Not only that, we achieved it in a highly competitive market and against the backdrop of continued economic uncertainty.

Our operating profit was up. Our return was up. Our bottom line profit more than doubled versus last year, and we delivered a strong build in our core capital ratio. We have sorted our key legacy issues, and we passed the BOE stress test. That has allowed us to pay our first dividend in 10 years.

Today, we're clarifying our medium-term CET1 ratio guidance to circa 14%, and we aim to reach this in 2021. We expect to get there through capital distribution over the coming years, and we'll be doing this using the most appropriate method as the board sees fit at that time.

Next slide. Having given you the overview, let me get into some detail. We continue to execute against our 4 priorities during 2018: resilient income, continuing cost reduction, actively managing capital and delivering capital returns.

If I look at income first, excluding notable items, NatWest Markets and Central items, income was broadly stable, and this was despite challenging markets. We're growing in areas that we like, with the mix heavily weighted towards secured lending.

Cost reduction continues. Excluding VAT recoveries, we have taken out GBP 278 million in 2018. This makes GBP 4.2 billion over the last 5 years. This is a significant change in our cost base by any standard.

When I focus on capital, our RWAs are down GBP 12 billion or 6% in 2018 at GBP 189 billion. This is ahead of our guidance. We have come to the end of this phase of active capital management, and we are comfortable that we have exited the areas that we wanted to.

We have ended the year with a CET1 ratio of 16.2%. You'll all be aware that we are subject to IFRS 16, which deals with the accounting treatment for leases. It requires us to bring our lease commitments onto our balance sheet as at 1 January 2019. This will take our CET1 ratio to a pro forma of 16%.

As a result of our strong capital build, we've been able to propose a final dividend of 3.5p, supplemented by a special dividend of 7.5p, of course, subject to shareholder approval. That's a distribution of over GBP 1.3 billion to taxpayers and shareholders or GBP 1.6 billion if you include the interim dividend. And finally, as we've previously outlined, we intend to continue to target a regular payout ratio of over 40% of attributable profits by ordinary dividends.

Slide 4. Let me now get into some of the detail of our financials. Our income was 2% higher than 2017. Although to be fair, this comparison is impacted by a number of one-off items. In reality, underlying income was down 5%. This was largely driven by NatWest Markets. Excluding this and Central items, underlying income was, in fact, flat. And this was despite a very competitive environment and uncertain economic times. In short, this a real testament to the resilience of our franchises.

Q4 NIM was a little better than when we last discussed it as the management of our excess liquidity helped offset ongoing competitive pressures in the market. And as I mentioned, costs were down GBP 278 million.

Looking at impairments. They're still at historically low levels, only 13 bps in 2018. And to finish on the P&L, there was GBP 1 billion of strategic costs in the year and GBP 1.3 billion of conduct and litigation, which was primarily related to the DOJ. Taking all of this together, we produced a strong operating profits of GBP 3.4 billion, up 50% on the prior year.

Turning to capital generation. 2018 was another strong year, a very healthy CET1 ratio of 16.2% or 16% following the pro forma IFRS 16 impact. This strong capital position is after we've taken into account of GBP 4.1 billion of payments in relation to pensions, dividends and the DOJ settlement in the year. Excluding these items, CET1 ratio increased by 240 bps in 2018, driven by profits of 130 bps and reduced RWAs of 110 bps. This confirms again the inherent capital-generating nature of our franchises. It is quite clear that we have built a very strong capital position through organic capital build and optimizing our capital usage. We're in a very good place to generate and distribute sustainable returns.

We have achieved a 40% ordinary payout ratio in 2018, but that won't be enough to distribute capital down to a level we think is appropriate for this bank. Therefore, as we have done this year-end, we will be looking at other ways of giving capital back.

Following last week's general meeting, we are in a position to do a directed buyback of shares from the government of up to 4.99% of our market cap over a 12-month rolling period should the opportunity arise.

Slide 5. I thought it would be helpful to put all of our current guidance on one page. Our 2020 targets, a cost-income ratio of less than 50% and a return on tangible equity of more than 12% as we progress towards a circa 14% CET1 level in 2021. There are growing risks to the downside on this, as the ongoing lack of certainty on the Brexit way forward continues to elude us. While we are not seeing issues occurring in our results today, what we do see is our customers seeking approval for funding and then delaying actually using these facilities as they wait for certainty. This clearly impacts us as well.

On other costs, we plan to reduce other expenses by a further GBP 300 million in 2019. And we will see this growing into 2020 as the actions we are taking today bear fruit.

And we are now also required to carry significant extra costs, which are in excess of GBP 100 million per annum as a result of Brexit and ring-fencing. We also, of course, continue to innovate and invest in our businesses. Although these are challenging targets for the business, we do continue to drive the organization towards these targets, but the current environment does make them ambitious.

On strategic costs, we expect these to be around GBP 1.2 billion to GBP 1.5 billion in 2019. On RWAs, as we move into 2019, we will see further reduction as a result of the Alawwal transaction being completed. And we would expect to see a gentle rise in RWAs from that point, such that we end 2019 in GBP 185 billion to GBP 190 billion range.

Specifically on NatWest Markets franchise, we guided you to RWAs of GBP 35 billion, with GBP 30 billion in core and GBP 5 billion in legacy. However, given our Brexit plans, this has increased to GBP 39 billion going forward as we transfer our Western European businesses into NatWest Markets over time. This, of course, has no impact on the overall total RWAs for the group.

Our previous guidance on RWAs beyond 2020 was an estimated 10% increase in 2021 relating to the Basel amendments. In addition to RWA inflation as a result of IFRS 16 of GBP 1.3 billion in 2019 and the BOE mortgage floors, which we now estimate to be GBP 10.5 billion in 2020, we now expect the overall impact of the Basel III amendments to be in the range of 5% to 10% and phased across 2021 to 2023, with the details still subject to significant regulatory uncertainty.

And finally, on capital. Today, we clarified our medium-term CET1 ratio guidance circa 14%, which we aim to reach in 2021. And we remain comfortable on our 12%-plus return on total equity target by 2020.

With that, let me hand over to Robert. Thank you.

Thanks, Katie. Good afternoon all. Thanks for joining today's call. As you've just heard from Katie, the bank delivered a good financial performance in a highly competitive market. And we ended the year with a strong set of balance sheet metrics.

Our progress in simplifying and strengthening the bank was reflected by the clear pass we obtained in last year's Bank of England's stress test and the announcement that, as of 1 Jan 2020, the bank's capital requirements will no longer attract the GSIB add-on. We saw positive credit market reaction to our announcement of a settlement being agreed with the Department of Justice, and then again after Moody's rating actions followed in December by Fitch upgrading the ratings of the Royal Bank of Scotland Group and its subsidiaries by 2 notches to A.

Given our underlying performance and balance sheet strength, I expect solid convergence of our credit profile to peers over time.

I'm pleased that we exceeded our funding targets for 2018 given the challenging market conditions. This leaves us well positioned for 2019. And with continuing uncertainty in the outcome of Brexit, I'm pleased with our decision to prefund some of our 2019 MREL requirements.

We continue to optimize our legacy capital stack with a further GBP 2.1 billion of Tier 1 securities called in December. And finally, we have completed our ring-fencing restructuring with NatWest Bank, NatWest Markets and RBS International stood up as stand-alone legal entities. We have also made significant progress on our preparations for Brexit.

Turning to Slide 8 and an overview of the balance sheet. We ended the year with a solid set of key balance sheet metrics. With a healthy loan-to-deposit ratio of 85%, our customer lending is more than supported by our core deposit growth, which remained strong during the year.

Our LCR increased in half 2 of 2018 to 158% as the net proceeds of issuance were offset by conduct and pension settlements, the call of legacy Tier 1 securities and repayment of GBP 5 billion of our TFS drawings. Our total outstanding drawings under TFS are now GBP 14 billion, down from a peak utilization of GBP 19 billion with plans in place to fully repay before maturity.

And given the uncertainty over Brexit, for the moment, I'm comfortable with our liquidity position well above regulatory minimum. And we ended the year with a strong capital position with underlying profit generation and RWA reductions, the CET1 ratio increased to 16.2% or 16% on a pro forma basis after the impact of IFRS 16.

Now turning to Slide 9. 2018 was a busy year for Treasury as we supported the bank's progress in a number of strategic areas. On funding, we exceeded our issuance plans, issuing GBP 7 billion of MREL-compliant senior unsecured from our holding company via 7 well-received public transactions. I'd like to thank all those investors who have participated in our deals.

Our market activities last year mean that we have now have over total stock of GBP 15.5 billion of MREL-eligible securities raised since 2016. In addition to senior MREL, we raised GBP 4.8 billion of senior unsecured debt for NatWest Markets Plc, and we entered the Irish RMBS market with a EUR 1 billion transaction for Ulster Bank.

Our strong underlying capital generation gave us the opportunity to further optimize our legacy capital stack, with GBP 2.1 billion of noncompliant endpoint legacy Tier 1 securities redeemed. Our active management of legacy Tier 1s has reduced our outstanding power balances to GBP 1.5 billion.

As a result of delivery of an extensive Treasury transformation program, we achieved compliance for ring-fencing requirements. We completed the stand-up of NatWest Bank as a wholesale bank, implemented a front-to-back operating model to support participation in financial market infrastructures and support the transformation of NatWest Markets into a separate legal entity.

We commenced downstreaming MREL through additions of internal MREL from a number of material operating subsidiaries. In Q4, NatWest Holdings issued GBP 4.8 billion of internal MREL, which was further downstreamed to certain ring-fenced entities. Outside the ring-fence, NatWest Markets issued GBP 5.1 billion of internal MREL and GBP 0.7 billion of internal AT1 instruments.

And finally, we've made significant progress on our Brexit plans, which are focused on operational readiness for the U.K.'s exit on 29th of March. We received regulatory and legal approval to provide continuity of service to our non-U. K. EEA customers through our NatWest Markets N.V. helping the Netherlands and are finalizing the required approvals for our NatWest Bank and NatWest Markets branches in Frankfurt.

Turning to Slide 10. I'm pleased with the positive actions in our ratings from all 3 agencies during the year. To recap our progress, in May, S&P upgraded the ratings of the ring-fenced OpCos and RBS International, affirmed the ratings of NatWest Markets Plc and assigned a positive outlook to all entities.

This was followed in July by Moody's upgrading the senior unsecured ratings of RBSG by one notch to Baa2 and assigning a positive outlook to all RBS entities. And most recently in December, Fitch upgraded the ratings of RBS Group and subsidiaries by 2 notches to single A, with ratings now on stable outlook. I expect the progress we have made on the bank's performance and balance sheet strength to be recognized in our future ratings profile.

Turning to our 2019 funding plans for each of our issuing entities. For 2019, the group holding company, we will look to issue GBP 3 billion to GBP 5 billion of senior unsecured as we build out our MREL stack. In delivery of those, we will continue to look at diversifying a range of currencies and maturities.

NatWest Markets Plc plan to issue GBP 3 billion to GBP 5 billion of senior unsecured to meet general funding needs. And we may also look to issue GBP 2 billion to GBP 3 billion of the NatWest Bank covered bond program for funding diversification purposes.

The details of the HoldCo and NatWest Markets Plc issues profile are provided in Slides 12 and 13.

Given the balance sheet structure and capital requirements outlook, we do not foresee the need for additional Tier 1 in 2019. There is the potential for Tier 2 refinancing of up to GBP 1 billion likely in H2.

So to conclude, we have delivered a good set of results in a highly competitive market and commenced the return of capital to our shareholders for the first time in 10 years. And as we head into a period of uncertainty, we have strong capital and liquidity.

I'm particularly pleased that Treasury has delivered on our priorities for 2018, exceeding our funding targets, completing our ring-fencing transformation and taking action to optimize our capital stack. We have a full agenda for 2019, embedding the new Treasury operating models, leveraging NatWest Bank's wholesale bank to generate more efficient funding and liquidity and continue to divest via funding and optimized capital.

And with that, I will open the call up to Q&A. Thank you, Charlotte.

(Operator Instructions)

Can we take the question that's come through on the web forward? What's the current expectation regarding the timing of the completion of the merger of Alawwal Bank? You take it, why not?

Okay. Yes. We've said this morning that we would -- we continue to expect that, that will happen this year. Clearly, the timing of it is not totally within our guess. It's going through the regulatory approvals process in Saudi. But we have an expectation that it would be completed towards the end of H1. And clearly, that has an impact on our RWAs as we're able to deconsolidate around GBP 4 billion, which is part of the guidance, the GBP 185 billion to GBP 190 billion RWAs.

And it will also, at that point, create an extra 40 bps of CET1. Charlotte, have you got some questions on the telephone?

Yes. That question comes from the line of Robert Smalley from UBS.

I say this every time, but thank you for doing the call in U.S. hours. It's greatly appreciated by the folks over here. Actually, 3 questions, if I could. First, through an amendment a couple of weeks ago, your majority shareholder may sell down another almost 5% stake in their holdings. The credit market took this with a touch of consternation. Could you talk about that? And why this should or should not be seen by the credit market as some kind of negative? Or should -- they shouldn't have concern over this from a credit point of view? It's my first question. Secondly, in the presentation, you talked about downstreaming MREL and AT1. Could you talk about the rate or the cost to that? And should that inform market rates for what you're paying for AT1 and MREL? And finally, in terms of overall costs. In the equity presentation earlier this morning, on Page 18, a discussion of the NIM, there was a little note about competitive costs. Could you talk about your overall cost of funding? I know the equity community is talking about that for European banks overall as a headwind. Could you talk about that? What are you seeing in the future? And what other offsets may be optimizing liquidity more you could use to offset that?

Well, I'll start with the directed buyback one, then you can build from there. So in terms of the directed buyback, what we have basically done is to enable via shareholder votes that should the government choose to sell down, that we will be able to buy 4.99% of our market cap over a rolling 12-month period and in addition to -- as part of their sell down. We see this as a very positive thing. It's a way for us to normalize our equity shareholder base. The government, at the moment, are 62% holders, which creates a bit of imbalance in this shape. From a debt perspective, I guess, I'm slightly surprised by your comment of kind of consternation because we actually feel it's a really important thing for us to do. And if you look at our capital ratios at 16% and our target of the 14%, we have a lot of capacity to do that. If I were just to give you a feel, if we did [defuel] of almost 5% at the last share price, the government did do a sell down. That would be equivalent to GBP 1.5 billion in terms of the amount of capacity that we could do. So something that's certainly at this stage well within the difference between the 16% we are today and where we're heading towards on the 13%. Robert, do you want to start on MREL and maybe bring NIM with it at some stage?

Yes. So I'll kick off on the MREL, kind of AT1, and Rupert Mingay, our NatWest Markets Treasurer, can pitch as well. And then I'll -- Katie and I can cover off NIM. But yes, I mean, I suppose the actions we took at the end of the year were partly around completing our ring-fencing restructures as well as starting to comply with MREL requirements. As you're probably aware of, we set up various ring-fenced bank and nonring-fenced bank legal entity structures last year. So a lot of moving of balance sheet and capital and positions and so on went on during the year. And really, the actions we took towards the end of the year were really settling all that down and finalizing the capital and debt stacks for all of the legal entities with another ring-fencing structure. We very much view the transactions internally as arm's length transactions between the group holding company and the subsidiaries, also reflecting the price that we have to pay to go to markets to actually raise those kind of securities. So they are internal transactions. They're not the external transactions just downstream, but they're very much arm's length pricing and certainly based on what we believe is the cost. And we've raised a bunch of MREL ahead of downstreaming. So clearly, we had that kind of that ongoing cost in the holding company. Rupert, I don't know if you want to add anything else to that.

Yes, it's Rupert Mingay, Treasurer of NatWest Markets. I think, as Robert said, last year was about restructuring the balance sheet through ring-fencing. So one of the transactions we took part in was really upstreaming surplus equity that we had and, in fact, redeeming a number of internal instruments, and then replacing them with the ones we now have on the balance sheet, so that we have a fairly conventional capital stack. And I think, as Robert said, we think it's important that we price these on an arm's-length basis internally. Clearly, we have to infer some kind of pricing for the AT1 because we don't have a direct comparable. But we do have a debt curve for our senior unsecured. So we've used that and the view of where the group could issue to triangulate on that. But I wouldn't see any read across between the rate that we had put that between ourselves and the holding company and an issuance rate externally. Because in the scheme of things, the amount of capital downstream is not a large proportion of the total group capital.

And maybe just on your third question, Robert, I'll kick off on NIM and the liquidity side, then talk maybe a little bit about margins. So I think we did take a number of actions in the fourth quarter. Some of them were predetermined in the sense that we paid -- we had a full quarter of the benefit of having paid the RMBS. We paid the pension scheme. We called some securities albeit that was late in the quarter. But we also repaid GBP 5 billion of our TFS. That all culminated in reducing our liquidity position and enabled us to get a bit of a pickup. I think if you think about liquidity going forward, firstly, I'd start with the point which I made in the presentation, which is we are intentionally running with a very strong liquidity position at the moment, given the uncertain environment and certainly given what we've seen towards the tail end of Q4 and probably in Q1, more specifically around Brexit in U.K. banks. It was the right decision as well as prefunding and some of our funding for this year. We still have GBP 14 billion of TFS on the balance sheet. Obviously, it can be repaid at any time and will be repaid over a period of time, certainly before we're required to repay it. I think the surplus liquidity position also puts us in good stead in terms of deposit pricing. It means that we don't necessarily need to go chasing pricing if and when new entrants or existing banks tweak their pricing, which is partly linked into the competitive pressure and pricing offset. I think in the core products, I think the main focus has been on mortgages. I think we're more comfortable with the current pricing on mortgages than we were and certainly towards the back end of last year. I think we are starting to see some of the impact of the withdrawal with TFS, albeit it's very early. That level playing field for all banks to be able to borrow at the same rate no longer exists now. So the banks are now having to borrow either through the deposit market or through the wholesale markets. And as we know, the wholesale markets have been challenging for U.K. banks in the last 2 or 3 months. So we think that's working its way through, certainly into some of the pricing that we might see going forward. So I think that won't impact some of the larger players, who will still be able to compete at aggressive margins. But I think around the edges, you'll start to see some of that competitive pressure easing off. So maybe positive, Robert. Hopefully, that answers your questions.

Our next question comes from the line of Tom Jenkins from Jefferies.

Just a quick one from me. So just referring to a couple of your slides on the fixed income slide deck, I think it is #12 and #21 sort of interlinked. You mentioned the possibility of refinancing of up to GBP 1 billion of Tier 2. I think, Robert, you mentioned you'd maybe look to that in the second half of the year. If so, obviously, you have a EUR 1 billion group issuance due for -- it's called in, I think, March, late March. But I was also just wondering in the context of that, vis-a-vis also Slide 21, where you talk about the eligible and ineligible or compliant, noncompliant capital securities, those included -- those issued out of, say, NatWest Bank, NatWest Markets, the old N.V. I just wonder if you could sort of talk me through your thought processes on whether they've developed in terms of external and internal legacy capital and the refinancing of the GBP 1 billion that you mentioned as well on Slide 12.

Yes. So -- I mean, maybe I'll kick off, and I'll get Rupert maybe to talk more specifically about the NatWest Markets and N.V. piece. Because I think there's more specificity around some of the reasons those securities are where they are. I mean, as you pointed out, we have some securities, which are up for call this year. We also have some maturities which are up this year. So I think we will kind of, obviously, take a view on the call feature as we move through there. And overall, Tier 2 levels are above minimum. So the end point -- so I think we'll just take a view as we go through the year on that. I mean, on the Tier 1s, as you know, we've made a lot of progress. And we're comfortable, we've got down to GBP 1.5 billion still to access. Do you want to talk a little bit about NatWest Market N.V. because it's a little bit more your arms behind that?

Sure. I mean, obviously, within the context of the resolution strategy going forward, we're looking for our capital to be fully issued to the holding company over time. I think we don't have any externally issued capital from NatWest Markets Plc. So that's less of an issue. We do have some securities beyond their call dates in N.V. And obviously, over time, we'll look to address that. But I think it's not a priority compared to some of the other capital moves that we're looking to undertake in the meantime.

And I think at an overall level, we still -- we have maintained a fairly conservative stance on eligibility, and that continues to be our kind of key work.

Okay. And just to follow up briefly there. I mean, in terms of maybe discussions, I'm sure you have frequent discussions with regulators. I'm sure they're all lovely. But in terms of the discussions, the internal, external MREL, does that come up much? I mean, there was a paper that was written last year, it was -- made it seem to make a big play of it. But obviously, one of your competitors decided that they were quite happy to reclassify a bunch of their internal -- or, sorry, I should say external capital securities from OpCos. Is that conversation progressing with the regulator? Do they bring it up? Or is it still something that is a "like to have" rather than a "want to have"?

Yes. We always have pleasant conversations. But yes, I mean, for us personally, that hasn't been a feature of the conversation. I think because we haven't changed our assumption, we haven't really been having an active dialogue. I think where there is an ongoing conversation, it's certainly with the Bank of England in regards to resolution and the progress on MREL across the U.K. bank space. And that is a regular feature. Certainly, the resolution updates with the Bank of England, clearly, we're certainly on plan, if not slightly ahead of plan. And I think that helps us with those discussions in terms of the overall requirements to get to resolvability by 2022.

Our next question comes from the line of Corinne Cunningham from Autonomous.

Following on from Tom's really, same slides. With your MREL, you described yourselves as having 30.7%. Why are you on track then rather than meet? And the residual MREL required, is that just to take care of maturities that pop up between now and then? Or am I missing something?

Yes. No. I mean, I think we've kind of indicated that we need to issue senior HoldCo unsecured billable debt of up to about GBP 24 billion, and we're at GBP 15.5 billion. So the trajectory of that, we're on track with. We've clearly not finished that aspect of it. So it's really that kind of balance in act between maturities, securities that we believe are not eligible at the point that we have to be compliant, and the buildup of our MREL stack in the holding company, which is what the Bank of England want in terms of a single point of resolution. So whilst you could make that point that we're compliant at any point in time because of where we are, it's a kind of journey from here to 2021, and beyond.

So on 21 where it says LAC value, that's not necessarily the same as LAC value as in compliance with the final rules in 22? Because it looks like it is for me. But maybe I'm just misreading that.

Yes. No, no. That's right. I guess, what we're showing there is a point in time, effectively valuation, which we might put that at the top of the slide going forward.

(Operator Instructions) Our next question comes from the line of Israel Da Costa from Daiwa Capital Markets.

I have 2 quick questions actually. The first one is regarding your stack in HoldCo MREL, you mentioned GBP 24 billion. And I was wondering if that's already taking into consideration the reduction in your CET1 ratio that you're targeting for 2021. And the second question is actually on your classification as a GSIB. I was wondering if you would be able to provide some color on what drove your bank to be dropped from the list and whether there's any chance of you coming back to the list next year or this year we're in.

So I think -- sorry, the first question, I think, it was the GBP 24 billion take any account of CET1. I mean, the calculation itself is really based off of our RWAs and our Pillar 1 and Pillar 2A requirements. So to the extent it's -- we hold minimum Core Tier 1 based on the RWAs we have on the balance sheet, yes, it's totally correlated. Clearly, if our RWAs move, then the absolute endpoint number moves. But I think based on where we currently sit, we'll take at that point in time an assessment of what compliance looks like. On the GSIB, I mean, it wasn't a total surprise. It's not an easy one to try and work out yourself because it's effectively a lead table, and you can't always be down, to be at the bottom of that lead table as others may come down or shrink their balance sheet or the qualifying aspects to GSIB faster than we do. But we kind of felt that given the contraction in our markets business that we've seen over the past 2, 3 years and the contraction in the derivatives that at some point, we were going to get to that point. Do we see ourselves going back in? I don't think we'd see ourselves going back in because of any strategic change we have in terms of the type of bank we are and the scale and size of those aspects that qualify -- we qualify as a GSIB. But needless to say, you can end up -- I think one of the French banks dropped out and ended up back in again simply because of the fact that we probably dropped out. So you can't guarantee you'll never go back in because it is a kind of ranking rather than an absolute level. But it wasn't a huge surprise. It doesn't really change fundamentally our capital position because whilst we're not a GSIB, we're definitely a DSIB in the U.K. regulators' eyes. And therefore, the buffer we need to hold for that at a ring-fenced bank level is at least the same, if not more than a GSIB add-on.

There are no further questions. I would now like to turn the call back to Katie for closing comments.

Lovely. Thanks very much, Charlotte. Thanks so much, everyone, for your time this afternoon. I think, from our perspective, this a strong set of results for the bank: costs down, very strong dividend payments, GBP 3.4 billion of operating profit, up 50% on prior year. And our attributable profits doubled the prior year. We created a 4.8% return on total equity, which is very much on the journey in terms of towards our 12%. And I think ending the year at 16% CET1 with the guidance to get into circa 14% by 2021, I think gives some comfort around our plans. Thanks very much for your support this afternoon and your ongoing support, and enjoy the rest of your day.

Thank you.

Ladies and gentlemen, that will conclude this afternoon's call. Thank you for your participation. You may disconnect.