Good morning, everyone, and thanks for joining us. I will cover the key highlights for the first half of the year, economic trends and progress against our strategic priorities. George will then cover the financial results in detail, after which, I will conclude, and we will take your questions. Starting with the highlights for the first six months. In the first six months of the year, our simple, low-risk, UK focused multi-brand business model has continued to deliver with improved underlying and statutory profits and a very strong underlying post-tax return on tangible equity of 16.6%. The group also completed the acquisition of MBNA's prime UK credit card portfolio at the start of June, and this has contributed to an increase in customer loans and advances in the period. The group has delivered strong capital generation in spite of additional legacy provisions, and this has enabled the Board to approve an increase interim dividends. In terms of our financial guidance, we have updating our full-year margin and AQR guidance, where we now expect to deliver a margin of close to 2.85% and an improved AQR of less than 20 basis points, both of which include MBNA. All of the guidance remains unchanged. I'm also pleased that the hard work undertaken in the last 16 years to transform and simplify the business has allowed the UK government to fully dispose of their investments in Lloyds and to return more than £21 billion to the British taxpayer. We're paying nearly £1 billion more than the original investments. Turning briefly to the financials. Income was up 4%, with increases in both net interest income and other income, which combined with our continued focus on cost management, delivered positive operating charge of 5%. Our market-leading cost-to-income ratio, therefore, improved further to 45.8%. Credit quality…

Hi, Antonio, and good morning, everybody. Let's start as usual with the underlying financial performance. As you've just heard, underlying profit was up 8% at £4.5 billion, total income of £9.3 billion was up 4%, and operating costs were 1% lower, delivering positive operating jaws of 5% and an improved cost-to-income ratio of 45.8%. Impairment performance remains strong with a slightly improved gross AQR of 23 basis points and a net of 12. As a result of the underlying return on tangible equity was a very strong 16.6% or 1.5 percentage points up on 2016. Looking at net interest income. Net interest income increased by 2% to £5.9 billion, with an 8 basis point increased the margin to 2.82% offsetting a small reduction in average interest-earning assets. This improvement in margin once again reflected low deposit and funding costs, which more than offset lower-asset pricing as well as a small one-month benefit around 2 basis points from the inclusion of MBNA. Average interest-earning assets were slightly lower at £431 billion due to continued reductions in Global Corporates and lower total mortgage balances. Moving forward, MBNA will drive both average interest-earning assets and margin growth in the second half of the year, and we now expect the full-year margin to be close to 2.85%. Turning to other income. OOI was up 8% to £3.3 billion, primarily due to growth in commercial banking, Consumer Finance and [indiscernible] sales as well as a one-off gain of £146 million from the disposal of the groups' stake in VocaLink. Commercial OOI growth of 12% to £1.1 billion was driven by increased refinancing and hedging activity as well as successful equity exits in LDC. In Consumer Finance, growth of 15% was mainly due to continued fleet growth in Lex Autolease. We could - briefly total income…

To conclude, we have continued to successfully execute against our strategic priorities and have delivered strong financial performance and capital generation in the first half. Our simple, low-risk business model continues to provide competitive advantage, while our multi-brand and multi-channel operating model ensures our customers have complete flexibility in terms of how they choose to interact with us. The successful delivery of this strategy can be seen in the significant improvement in profits and returns over the past five years. Our strong financial targets reflect our confidence in the group's future prospects. And we have today updated our 2017 margin and AQR guidance, while all of our other guidance remains unchanged and on track to be delivered. Looking forward, the remainder of 2017 will see us focused on delivering the final elements of our current three-year strategic plan, as well as preparing our next strategic update for the period 2018 to 2020, which will be announced with our full-year results early next year. While the group is delivering in today's environment, it is clear that technology, competition and regulation are driving an unprecedented pace of change across financial services, and the group's next strategic plan will clearly need to respond to these factors. In preparation, I have recently announced a series of organizational and senior management changes. These changes are aimed at aligning and strengthening the group's structure to ensure we meet our customer's evolving needs and deliver the continuous transformation required of the organization in the most effective way. Our strong management talent pipeline means we have been able to promote internally for all the new roles created, and this will mean the formation of a more diverse group executive committee with the right capabilities for the next phase of the group's transformation. This will enable us to further deliver on our core aims of Helping Britain Prosper and being the best bank for our customers and shareholders. That concludes today's presentation, and now loop to take your questions.

Shall we take Raul first and then Andrew? Let's take these two first.

Good morning, everybody. It's Raul Sinha from JPMorgan. Antonio, could I ask you to comment a little bit in detail about the mortgage margin outlook? The group margin obviously remains very stable, in line with the guidance that you have given us. But clearly the pressure on the mortgage market, given the profitability of us is quite severe in terms of what we can see on the pricing. So if you can comment a little bit on the outlook for mortgage pricing? And if - I wonder if I could ask, Antonio, for an update on the savings and term deposit books just in terms of new pricing? How much have you priced to?

Right, I'll take the first question and maybe you can take the second. Look, Raul, I mean, I will sound a little bit boring. But I don't really see a change in the competitive environments to what they have been saying in the past few quarters. I think there will - there is a competitive market in mortgages, which is being built upon very low AQRs, so the adjusted price for risk has been going down in recent years. We have taken a more prudent view, because we believe that the only segment which is drawing this by two lets, we think the dynamics between margin and volume, capital generation, the uncertainty on the economy and the fact that [indiscernible] is the only growth segment, all points out to the same direction, which is to privilege our margin versus volume, which I have been telling you for some time. We manage the margin as the difference between asset prices and savings prices. So as a difference, we manage it holistically and on a weekly basis at the top of the organization. And finally, we strongly believe that our multi-brand model is very effective in helping us managing margin effectively according to different customer preferences in different brands. So all of this has enabled us to update and upgrade our margin guidance over the last few years, in spite of interest rates going close to zero. And this year, as we said at the beginning of the year, we were very comfortable that we would be able to increase our margin with reasonably flat mortgage book, which we are now confirming. So for the next few quarters, I anticipate the same trends on the asset side, and I also anticipate, on our case, the same response on the liability side.

And on the liability side, again, without boring you with too much repetition, as you know, you managed the group as a single balance sheet. I think it's such a great advantage of being able to flex between the various businesses that we have, and some of things that you've seen for, we continue with sort of delta between relationship and taxable brands within retail, the mix between retail and commercial. So commercial savings are I think about something like £132 billion, at start of the year, £139 billion, so we continued to move money around to where we see the best advantage. And then to your question within the retail but within the savings element of that was £160 million, £170 billion of that. We came in this year at about - this is our cost around about 62 basis points. I think it was around about 57 in Q1. It's down about 51, 52 now. And so that's - again, we continue to shape that, we also continue to optimize across the group. And it's more than just moving money, which ways it's taking constructive action in terms of how you term out money, how you basically make most of things like liquidity requirements, et cetera. So we have a massive exercise internally to improve our efficiency. And you can see the benefits of that in the results.

Thanks very much.

Andrew?

I have three questions, just 1 very quick one and two more broader ones. The quick question is, of the £13 billion [indiscernible] finance outstanding, how does that split between PCP and HP? The broader questions. In other income, a very strong result even if you strip out the VocaLink gain. You talked in particular about some of the transactions in commercial bank and the strength of Lex Autolease as well, but perhaps you could elaborate on what's driven such a strong move Q-on-Q and how sustainable that is? And then my final question which is your impairments. And again, you've improved your guidance there, you've seen a very good outcome, your gross charge of 23 compares to a net charge of 12, you're still getting quite a lot them, write-backs within that. Within the text you draw out some of the debts you were paying by overdrafting consumer loans. So again, my question will be how sustainable are those provision releases in write-backs going forward?

So George can take the first two questions, and I'll make an introduction on the third one, we'll be able to [indiscernible]…

£13 billion, [indiscernible] I will say about £4 billion, a number that's materially wrong, but that's about the sort of number that I want to say. Yes, I'll come back and check if that's delta. Okay, in other income, we delivered a good result in terms of headline percentage, I presume whatever it's 8%, within that we benefited from things like VocaLink, which we call out, as said in the presentation, we also called out things like the guild sales. Where, as you know, last year, we basically moved this guilds from HCN to FS, and we have talked about it all the time, basically, so we didn't see ourselves as a natural holder of guilds, that was because of the returns and increase because of the capital that I actually have to put behind them. So we also [indiscernible] a footprint of about £40 billion of those, that's down to about £35 billion, and we probably about 70 of gains in Q1, 70 gains in Q2, so with that going on in there. Within the divisional performances, we've a strong performance from commercial, which I talked at about 15%, as you know makes significant investment in commercial over the last few years and benefited from about equity exits by the sale received by about some £25 million to £30 million. But we've also benefited from call lending, capital markets, financial markets as well. So that's a good growth position. Stays tough in retail, that's a structural change that we're seeing. Within insurance, we've got basically down slightly year-on-year, we've got things like the accidental death benefit, which have benefited both years. But as you look forward, that always been so natural volatility to the insurance number, but as I look forward, as those fall away, I've got things like…

And Andrew, on the impairments, I mean, we continue to see a very, very stable position in terms of impairments and in terms of the underlying factors behind impairments. In all portfolios, we don't see any sign of uptick. And as you said, our growth AQR is the same, actually, a little bit lower. And what is interesting is that we have higher write-backs than we thought, which, to be very frank with you, only shows what we have been telling over the years, which is we are a prudent bank, with a low-risk profile, we position prudently, and that's why you continue to see write-backs, which is the evidence of previously prudent provisioning. Now, Juan, can you give more color on the [indiscernible] portfolio? Juan Colombás: I have a little more to say because that's exactly what happened. So you should see an element of recurrence on the write-backs. Because the sooner you take the provision the more likely, the write-back will happen, really so. And if the releases are also included in this difference between the net and the gross. And in debt sales, it's the latest part of our recorded process. So at the end, there would always be a flow on debt sales.

And also the mortgage impairments [indiscernible] to mention. Juan Colombás: On the mortgage impairments, the mortgage portfolio is - we continue to see improvements in the new two collections. So we are seeing a steady improvement recently, so no sign of deterioration at all. And on the impair loan side, you'll see a table number, it is influenced by this delay in the recovery process so that we have to do for legal reasons. But we have resumed the collections activity in the last month. We have started to see reductions in inter loan number.

And Andrew, I think, this is part we, obviously the reflection of our strategy. But when I look at the sector as a whole, and as I said in my introduction, the economy continues to grow at a resilient pace. Employment has reached record level, 320,000 people employed in the last 12-month and the record level since statistics start in 1971. And debt levels have been going down in the household sector in the last 10 years. In the last two or three, now that inflation is going above disposable incomes, consumers are rightly so are using the previous deleveraging to smoothen the shock of inflation and adjusts through time. I have said here repeatedly, I thought the fact that UK economy was growing, with two important tailwinds: less tax and rising house prices, would elongate the business cycle. And that's what's happening now, and you see consumers reacting logically to inflation going up and saving a bit less and consuming a little bit more. Juan Colombás: And, if I may, so in the commercial side, just to complete what we look at carefully is on watch list, which is over the indicator of potential, future problems and we are seeing no signs of deterioration on the portfolio.

So two more questions. So take Jonathan and Chris, we'll take them all.

Thanks very much. Jonathan Pierce from Exane. I've got the questions. The first one is on the structural hedge. Obviously, increased in nominal size quite a lot in the first half of the year, and thanks for giving us the rates associated with it. Could you just give us an idea as to how that was built over the half year? Was it fairly linear from December to June? I'm just trying to think about how much of this is going to benefit the second half margin. And maybe as a supplementary, can you give us an idea what the incremental [indiscernible]? It must have been £35 billion, £40 billion gross. At what rate did you manage to get that at?

I think we'd put on gross, because obviously [indiscernible] £47 billion I think in the six-month period. I don't recall, I think pretty linear will be my starting place in terms - we've been pretty active throughout that period. We've turned off back end of last year when we were down to £98 billion, I think we were £111 billion when we came in, but I think if you make an assumption - I'm not going to give you the new business amount, but in terms of, when we are hard to find out, so we're still on the short end. So it's a sort of three-year-type weighted average life. We were £143 billion, which I think is the number we disclosed. Just so you know, we continue to add, we're not at 100%, we continue to move towards 100%. So since June 30, we continue to be a bar in terms of the fixed received. So we continue to build towards what our maximum would be. And as we look forward, we have kind of limited maturities in the back half just because the nature of limited maturities is back end to this year and actually the next as well, when I look at the life and the shape of that hedge. So that should give you enough to sort of at least get a feel for it. But we continue to be active, we continue to build towards, because the natural position is to be 100% hedged, so I'm moving to that limited maturities back end of this year and next year. Juan Colombás: And this is being done by derivatives, presumably. So the five years operates...

Yes, that's correct. Yes. Well, just to complement [indiscernible]. Our strategy, as George is saying is our strategies to naturally be 100% hedged. Current accounts have an average maturity of four, five years. And we match that through derivatives as you said on the other side. We took his exceptional decision, following the referendum, which we shared with you, that we would not be doing that hedge at 35 basis points because [indiscernible] money, in the Bank of England at 25. And we have not invested for more than nine months. We started investing as rates started to rise, but given our perspective about rights, which I said in my introductory remarks, we expect rates to raise slowly over time. We have done lower duration that we would normally do. So we are going towards 100% hedged position, but we are not under the four, five-year maturity, because we thought it was better to concentrate ourselves on the short term, even do we expect rates to go up, and how we want to be able to renew these hedges as they mature sooner than the normal average life.

Thank you. The second question is on TNAV. As opposed to focusing on capital, I just want to think about TNAV, because the TNAV fell quite a lot in the second quarter. I just want to comment from the perspective of that being now, quite a lot of income and profit going through the income statement, which isn't benefiting TNAV. And you've mentioned the AFS gains and the fact those are likely to repeat, that clearly just recycling out the equity through the P&L. On top of that though, my focus really is on the cash flow hedge, because, presumably this largely/relates to the structural hedge, quite a lot of the structural hedge revenue also looks like as you would expect it, recycling out of equity through the P&L accounts. You're not getting any benefit from a loss of the structural hedge revenues or TNAV, either. Really, all I want to try and confirm is, is that the case? And then can you give us an idea of what the value of your structural hedges within TNAV? I know the cash for hedge reserve is £1.7 billion, but I think it's a big negative within there for the mark-to-market [indiscernible] last year? Is the value of that hedge about £3 billion?

Many questions. One thing is capital and the other thing is TNAV, so let's split to three questions.

Look, I'm not going to give you precise numbers, but it's of that order type thing. But what that represents, I mean, it's interesting the aspect you latch on to here. That is a lot to value of future earnings, the group has secured. So this is a fantastic asset of the company that we have. To your point around the TNAV, it's reflecting TNAV and there will be an unwind over the duration, I would much rather, be in this position than not have this thing. So make that simple point. Secondly, I mean, on things like the AFS and those gains, this is a few hundred millions. Guess they will continue to - I will continue to sell and recycle so you will see continue to see that as a feature as well. What you will there, continue to see, is the strong, sustainable profit. And TNAV, this time's been impacted by things like - well there's always things like that it faces, dividend payments, but obviously I've got things like the MBNA acquisition that's gone through and impacted it. But the sustainable profits will continue. Between us, there's no great surprise. One of the things that I point to in terms of benefits to TNAV would be the long-awaited day when my conduct, my customer [indiscernible] charge isn't £1.6 billion for the first six months of the period. Now, within that, without moving the question onto something else, there will be an element of other conducts simply because that's the nature of the world we're in. I don't expect it to be at the current level, there will come a day when it's the last PPI provision. But that's the biggest swing factor. AFS, that type of stuff [Technical Difficulty]

And also you - that everything that you said and you just take away the MBNA goodwill which decreases TNAV and the dividend [indiscernible], so we have a goodwill loan TNAV because of the MBNA, but on the other hand, our underlying post tax return on tangible equity goes up because MBNA is at higher return business and it has initially impact on Brazil, so. Even with everything you said, just removing MBNA's impact and the dividends paid, TNAV would have gone up. Chris?

Thanks. Good morning. It's Chris Manners from Morgan Stanley. So I had a question on underlying returns and capital. So you've generated if we x out the conduct provision, which may be generous, but if you x out the conduct for about 180 basis points into capital generation in the first half. And you are saying that you are going to only manage 70 and 200 basis points in the second half. I still lookout, is there something that impairments might go up a little bit, you may have the bank levy, and you are going to have some of the one-offs in the revenue line. It looks like there's a missing piece in terms of why your capital generation in the second half might be stronger. And then following on from that even if you hit the bottom end of your guidance range and you have 170 basis points of capital generation on 220 billion of RWAs that gives you pretty chunky surplus capital versus 13% target. How should we think about special dividends buybacks and how that mix going back to challenges? Thanks.

Been here before.

Same question. Look, we talk about 170 to 200 [indiscernible], but as you said, if you sort of deconstruct that, we have got some big elements in that. To be crystal clear, the missing piece in your sort of the math which is absolutely fine. Is that absolutely not that I sit here expecting a repeat of 80 basis points conduct to the second quarter, so let me be sort of clear about that. So it's not we are expecting that. The answer is, there are things that move that capital number, underlying will stay strong. In any period I'll get other things like AFS, pension movements stuff like that, RWA movements, so you do get a bit of nice. That noise will persist, but there is no big thing that I sit here, that I think it's going to happen in the second six months. You are right, things like pension levy impacts, so this is a sign of SKU H1, H2 profitability. We also got most of the insurance levy. We've had a small interim dividend by the way for insurance in the first six months and that was really just to get the principle up and running. So there is range to insurance dividend which goes against that. There is no missing piece. We just think it's appropriate and prudent to stick with what we previously said about in terms of capital generation, but your math is absolutely correct. And then nothing has changed, round 13 is the guidance. The board will make a decision at the end of the year. And seriously, I mean it is at the end of the year when the pieces come on to the table in terms of plans and in terms of stress tests, in terms of outlook possibly makes the business external environments et cetera as to what we do with capital loan that required for the ordinary dividend. So nothing is…

We can't see the both extraordinaire and buybacks, the decision to be taken then at the time as George says. But [indiscernible] More questions, Claire?

Thank you. It's Claire Kane from Credit Suisse. Two questions, the first one's quite quick. I think on MBNA, you've given us the cost number and the pretax number. I was wondering if you could give us the income and impairments as well for the quarter. And secondly, a follow-up to Chris's question on the capital. So clearly since you last reported, we have the capital buffer come in, which would imply 1% you have very little management buffer to 13%. I wondered if you could comment whether you still think that's appropriate given potential IFRS 9 volatility going forward. And second to that, on IFRS 9 I see you've chosen not to give us an estimated impact unlike some peers. Just wondered, is there still a lot of uncertainty in your views the ultimate outcome that we can expect? And how do you expect that to impact your consideration for year-end dividend, would you expect to run with 13% post the full impact for IFRS 9 at year-end before you considered the capacity to pay dividend? Thank you.

Okay. The longer second question first. On MBNA, yes, sorry, and the contribution is, income line, I think it's about £63 million and impairments I want to say about £14 million. I think they're the missing pieces. Then on capital, yes, you asked me at Q1 I seem to remember about [indiscernible] in terms of imposition of [indiscernible]. So a few things to say, from a starting position, obviously, we have around 13%, which used to be somewhere around 12% plus the management buffer. And as we said, at the full year, I think,, there have been reductions in our requirement. But we weren't allowed to tell people what it was. But all I can say is, my around 13% is less than 12% plus more than 1%. So that's a current good place to start from in terms of capital requirement and headwind. In terms of looking out over the longer term, the longer term becomes - we believe, it should be around about the 13%. And when we look at that, that would include the full imposition of the counter-cyclical, yes it's going to come in slightly earlier than we thought it was going to come in. But within that around 13%, you would also expect there to be offsets and things like the Pillar 2B and the Pillar 2A. So that was our sort of going assumption and for the long-term, that remains our view of the capital requirements. We'll see what happens in the intervening. The IFRS 9 stuff, there's no great mystery around - not telling you numbers now, it's just that we'll continue working through these, refining these, you've got to look at small matters and things like multiple economic scenarios, which the more relevant you'll get the closer you get to actual the dates in terms of - so it's just working that through. In terms of impacts, as you know, from a capital perspective, there's things like the proposals around the transitionals, which I think from a sort of capital perspective, doesn't make it an issue in terms of immediacy. I actually think even on an unsmooth basis, you're looking at a manageable number within that. As you sort of allude to in your question the bit that's out there, to be resolved is the interaction between the IFRS 9 and the stress test and in terms of - obviously the key features of IFRS 9 in terms of accelerated impact. So on a current stress test, your peak-to-trough, your trough is I don't know about other companies [indiscernible] people would be two, three, something in that order, which accounting brings it back forward. Does that make any difference because nothing's changed economically, it's just accounting? And people getting their minds around that, and determine it's still out there to be decided. And so, I can't give you the answer because I don't know what the answer is at the moment in terms of how that actually plays out.

Additional questions? Shall we take…

Thanks very much. It's Ed Firth here from KBW. I just have two quick questions. The first one was on motor finance. I see that book was up about 11% in the first half, which I guess, is it sort of contrasts a little bit with some of the comments the Bank of England is making in terms of nervousness in that market. So should we expect that to slow markedly going forward or do you have a fundamental sort of disagreement with them in terms of attractiveness of that market and whether that is actually something we should continue to grow going forward?

Now, we don't have any disagreements with the Bank of England, I think the Bank of England has looked at the market as a whole, not only motor finance, but the rest of the market. And has concluded that there is no systemic issue, whatsoever, of course, we have to ensure that growth continues to be sustainable, and what the Bank of England's now doing through the PRA is looking at underwriting standards firm by firm, because as you know, some firms, especially out of the banking sector have been growing a lot in sub-prime or near-prime segments, which we absolutely don't do. The reason why our motor finance business is growing significantly as we have been saying over the last few years are basically two. First, we are underrepresented. Secondly, within our low risk appetite, we have one - the Jaguar Land Rover ready to presentation, which is new businesses in very important brands, as you know. And as we said four years ago, for the first four years, all gross business that we do is new vehicle - business because there are no redemptions. This year, redemptions start to kick in, so you have new business and redemptions and therefore the growth of our business will slow down significantly because it will become more BEU and more comparable. We still only have a 14% market share in car finance. So we are still significantly underrepresented, but given the Jaguar Land Rover tailing off, it was slow down significantly.

Okay, thank you. The other question was, we've got PSD2 coming in at the beginning of next year, which I guess feels to me like it could be quite a major change in terms of the industry. And I just wondered if you could just give us some comments in terms of how your preparation is, whether you feel it is a major change? And what the sort of opportunities and perhaps risks there are?

We think it's a major change, that's what I meant when I said in my introductory remarks, regulatory, significant regulatory changes. I was not speaking about the PRA side, but on the FDA other spaces. We see it as a major change, as you correctly said, we see that there are big opportunities there, as well as threats and that is one of our major points of analysis as I said on our preparation ahead of time of our first strategic plan. So you'll hear more about that in February next year.

You can't give us some idea of what those sort of opportunities and threats might be and how you see...?

No, not at this stage for two reasons, first, because we just start doing the review and I don't want to anticipate the end of the review and secondly, because those opportunities we want to retain for ourselves for the time being.

Thanks very much.

Michael?

Thank you. So it's Michael Helsby from Bank of America Merrill Lynch. I've got three actually, just a follow-up on Jonathan's question on the hedge. You mentioned you're not fully hedged yet. So I was wondering if you could share with us where you think you are in terms of notional size.

Yes.

And also I'm conscious of the fact that you anticipate rates to go up so you're going shorter. So I'm just wondering, but I can't find what your interest rate sensitivity is anymore. So I was wondering if you can update us on what your rate sensitivity is for a rate rise, whether you give any of that away? That's question one. And question two would be just an update, George you always give us that really helpful data on the SBR, both in terms of brand mix and rates, that'd be very helpful. And then finally - yes third one, on loan growth, I know it's only small, but Europe grew 14% half-on-half the year. This is actually quite a lot relative to the growth?

It's only FX.

It's just FX?

It's just FX with the euro as you probably could guess.

Yes, it looked like it could be more than that.

No, it's basically FX. The euro is at 11. It was at 140, 12 months ago.

Half-on-half hasn't really changed.

Well, I will take that and George will take the SVR, which we have the information you want. Look on the hedge, when we'll be fully hedged, I'll let you know. Right, we are around £150 billion now because as George said, we have continued to invest because rates have gone up post at June 30. And we do this [indiscernible] dynamically as we told you, we think this is our obligation to our shareholders, not to do this mechanically. Hence, with hindsight, we have significantly paid off and we are now back close to 100% hedged position, although not yet there. So next quarter, I will tell you how we are. In terms of the impact on rates, I mean you know that - and that one of the things, which we find very useful in a UK context versus a European context is that the balance sheet matches both on the asset side and the liability side, they have quick maturities in terms of repricing. And we as managers can in a holistic way, we have many more levers than for example, you have in Europe where spreads are locked in for life because of mortgages. So this just to tell you that there many impacting factors here, but on a very simple basis. And if you want to think on a long-term basis, we have a hedge of £100 billion, £150 billion at the moment. If rates were to raise 1% after a series of FX, this would increase our earnings by £1.5 billion.

Just to give you a very basic idea. We always report to you if there are 25 basis points. What happens, what we report to you is not on a steady-state basis, it's based on next 12-month when it happens, et cetera. But I think your question is more, let us know what is your strong sensitivity to rising rates. So we expect rates to rise only slowly. We said we would expect them to be less than 1% by 2019. They're now at 25 basis points. So if rates suddenly rise to that impact that is basically reflected over time, assuming everything else constant, which is not as I just told you, in the hedge being accretive, revenues by that amount.

That's a parallel shift?

Yes, exactly. So that's why I'm trying to simplify. But if you want to know with everything together what the basic impact is, you should look at it that way.

And then on the S&R book, we talked about attrition that Q1 was about 10.5%, on the total book, which is almost 129 billion, 130 billion. It's 11% Q2, half-on-half. It's slightly higher - and we was to expect it to be slightly higher simply because there's a lower level of maturities into the book. But it's still sort of roughly the same areas, as I said 10.5% it's now 11%. And again, there's not a huge variation between the books despite the differential in rates, so Halifax, 374 was about 10.8% in terms of attrition, half-on-half, and that book is now about £45 billion, £45.2 billion. And the other level, the Lloyds book, which [indiscernible] that's 12% that was sort of 11% in Q1 and the others are still in the same ballpark. So it remains pretty constant in terms of the level of attrition as I said compared to a mid - simply about mature differential levels of maturities into rather than people out of.

Shall we take those two questions? Yes, you too, Chris.

Thank you. Good morning. It's Rohith Chandra-Rajan from Barclays Capital, if I could please. First one, I'm just sort of coming back [indiscernible], so I guess consumer credit. The comment that you made earlier about where the regulators now focus seem to imply that you're relatively comfortable with the quality of your book and potential impacts going forward. So I was just wondering, to what your expectations are in terms of any remedial action that the regulator might take and to what degree that might form parts of your thinking in terms of capital at the full-year? That was the first one, please.

Okay, all right what I think will happen is that the PRA going firm-by-firm. I think they will find out, and this is actually if you look at the Bank of England numbers in terms of consumer debt, and you compare them to the DDA numbers, which have the major banks, you see that the growth in Consumer Finance according to the Bank of England is much stronger than the DDA numbers. And this is the reason why I'm telling you that I think, most of the growth in consumer finance is being done in sub-prime or near prime segments, which we don't participate in. And that is, we see this very clearly, when we get granular data from the DDA versus the Bank of England. So some firms outside of the banking space are going into riskier customers. They are also giving higher amounts per customer on those segments. And I think the PRA going firm-by-firm, will have their own conclusions about what each firm should do. On our case, as I told you and taking a longer view if you want to. If you look at our total Consumer Finance broker, it has Credit Cards plus UPLs, plus motor finance. It has been growing at 4%, less than 4% over the last six years, which is nominal GDP. And then you look at Credit Cards and UPLs, which are reasonable substitute of each other, our portfolio today of Credit Cards, Ex MBNA, plus UPLs is 10% lower than it was six years ago. And we have a significant growth, as we discussed before on car finance for the reasons that I told you. So we feel very comfortable about our Consumer Finance portfolio, because it has been growing in a prudent way and within a low risk profile.…

Thank you very much for that. The second one was a little bit more detail. Just looking at the credit card [indiscernible] the NPL ratio has fallen from 3.1% to 2.3%. I'm just wondering if you can break that down between sales, MBNA acquisition impact and the underlying trend.

I cannot give you the details of these numbers.

The answer is yes, but not now.

Is the underlying trend of that [indiscernible] stable?

I think it's improving, actually. So the transit we see in Consumer Finance business and you can see that total [indiscernible] loan trends is positive.

Thanks.

Good morning. It's James Invine here from SocGen. I wanted to come back to the mortgage pricing please, particularly ask about your appetite for direct business versus intermediary has changed, this year, I see that you cut your prices that you show on your websites by more than your competitors. Whereas for the intermediary offering you stay quite high and in fact I think you put your prices up there a few weeks ago. So I was just wondering, how much can you shift the mix away from intermediary towards the direct customer? And when you look at the customer as a whole, what is the difference in profitability between to two channels?

James, the fact that we have a multi-channel, multi-brands approach to the markets gives us as I said, this is well in deposits many more levers. And on the intermediary branch, different branch side, the same thing. So the fact that we have more levers enables us to get quicker in our opinion, to changing customer preferences and also between channels. It has happened in the UK in the past that you have intermediary prices, below branch prices. And following the crises, they went above branch prices, and now they have come recent month as well below branch prices. But this is not necessarily a trend. So we are constantly adapting our pricing to what we see in the market, and that is not necessarily a pattern. So I really can't tell you much more than that, but I want to say is that it is a big advantage for us to have a multi-brand strategy, also in terms of the assets side.

It there a difference in the churn rates between customers that came through intermediary and customers that came through the website, the branches?

In terms of the quality of the mortgages that we have, no, the quality is very similar. Of course, the customers that come through the branch network are our customers in other products as well. And they usually buy more products, which is also a reason why we focus ourselves on first-time buyers. So we have a market share higher in first-time buyers than in other products and although it has a higher LTV and therefore it consumes more capital. We think it is the right strategy because first-time buyers buy also more insurance, and they will be with us for a longer period of time, and we want to get them loyal to the bank from an early start. So the branches tends to be more first-time buyer business, intermediaries tend to be more mortgage business as broad trends.

It's David Lock from Deutsche Bank. I've just got two please. The first one is on deposit costs. I think the most recent Bank of England data has shown that deposits appear to have started falling for new deposits in UK. Just wondering if you give any color on what you're seeing and whether you or how long you think you can keep reducing your deposit cost for your Retail business in particular? And the second one, which is on car finance, just wondering if you can give any sensitivity on the residual value provision through car sales on the secondhand market. I appreciate you probably selling several thousand cars every quarter for [indiscernible] auto lease. You must have a very clear picture of the market. Can you give us a little color on that, that'd be great?

So, on the first one, as I said earlier, so when you look at the spread across the savings, the cost of savings probably dropped from 62 down to - starting it down to about sort of 51 here. And then at the moment in that is predominantly around some of the fixed pricing and when we're taking that down. We're obviously lower than we were, but there is still some headroom and going back without repeating everything again, the multi-brand, multi-channel strategy gives us enormous advantages in terms of being able to manage the book. So we still definitely see that there is value there. And then in terms of the residual value as you saw from the presentation, et cetera, we talked about being prudent with reserve. As you're right, we have great info in terms of the profits that we make upon car sales and we'll continue to make the pricing that we do whether it's on some PCP contracts, explicitly allows for discounts to projected value. So I can build in headrooms that allow for percentage points reductions in terms of car market. So I've got that headroom. My additional provision then sits above that is exceedingly prudent. What I do is I don't take credit. I don't look at it on a net basis. I provide for losses and don't offset that against those sitting in credit. I will just provide for the losses and I will provide at a considerable factor to what the model loss is at the moment. So the pricing that we do, when I look forward, I assume a discount to projected price, and then I provision for a further discount over and above that, in terms of what I hold on the balance sheet.

So we take this question here.

Yes, good morning, Martin Leitgeb from Goldman. I have two questions, please. And the first one's a bit more generic on impact of the Term Funding Scheme and what impact this have on closing off drawing window next February 2018, will have on the mortgage market. The background of the question, from what we can observe, it seems like there has been a little bit of disconnect between of the DFS back in August last year, which I think the desired outcome. With the DFS expiring with a maturity out and drawing window closing next February, would you expect some of that to bounce back or is the situation such that banks have loaded up substantially with liquidity and that liquidity overhang will drag on pricing a little bit longer? And the second question is, just I was just curious if you could share what your share in gross mortgage lending was in the first half 2017? Thank you.

Sorry, the second is?

The share in gross mortgage lending?

So George will take the second. I will take the first. I would tend to agree with you. Although as I said, we are not assuming any change in competitive behavior of the following few quarters. I tend to agree with you and I think what you saw in recent challenge bank results show that as well. I think, that the TFS closing and the fact that the challenges the banks took a very significant chunk of it versus their own balance sheets will make them rethink their strategy. Also as you know, their growth is not being matched by the growth of retained earnings, which is a problem I had flagged last time. And that together, with the fact on the bigger banks, that the leverage ratio for the ring-fence bank will be known soon, I'm saying this for a few quarters now. And as you know, that will be the restriction going forward, because the mortgage is obviously at much lower CET1 requirements than leverage requirements. I think all of that points to a rethink about those margins in the 12-month view. But I normally don't speak very much, as you know between beyond one or two quarters because many things might change. And so we are not assuming any change in competitor behavior. But thinking longer term, I would agree with you that are several factors, which should point in the direction that you are mentioning, but we are not counting on it.

In terms of mortgage share, I mean, as we said in terms of overall directions, I think we said previously we were looking to basically be flat year-on-year. And in terms of the underlying book, I think we were down - this is the open book, we were down 1.5 in Q1. I think it was just down 0.5 in Q2. And now we've obviously got the benefits of the reacquisition of [indiscernible] and as a consequence, we would now expect to be slightly ahead when we come to the year-end. And within that, in terms of the direction we have across the first half of this year, I think, our gross was about £18.5 million, which compares with £18 billion. I think last year and that is about a 16% or so market share. But again, in terms of trajectory, it's interesting. I think in June we were up to about 20% numbers, and I will say 20% will persist. But just in terms of the shape and you see that coming through. So it was 16% across the whole court.

And then Martin, a very important thing that you have to combine with us to have the whole picture as we have discussed before several times, is obviously the rate of retention and the internal products transfer when things get to maturity. And that we have a very good insight on our customers' behavior and in terms of retention capabilities. Juan Colombás: Additional questions, we have one here from Chris.

Hi, it's Chris Cant from Autonomous. If I could just have two on NIM points, really. I might have misheard you George I think you said it was a two bps benefit to the NIM from MBNA for one month inclusion. I think we're both working on the base. It was 10 bps on an annualized basis. I was just wondering if you could confirm what the full, annual benefit of MBNA to the NIM would be. And secondly, on mortgage spreads. I know you don't tend to like to talk about in front of completion spreads, but if I just throw the virgin completion spread out for a half of 176 bps, could you let us know if you are above or below that please?

So the first thing, we expect it to be around about 10 bps. No, I did say, it's two for the sort of one month in the first six months. So when you look at NIM…

It was round.

Yes, I mean these are always round.

And then on the second one?

I'm sorry, but I don't think we can share that information, right about the front book strategy. Any more questions?

No.

Thank you very much. Thanks for coming. Thanks. We'll keep in touch.