Thank you, António. And good morning, everybody. I'm delighted to be here today to share the strategic progress we are making within the retail bank. I'll start with an overview of our business. We have an outstanding customer franchise with significant reach through our multi-brand and multichannel model. The combination of these allow us to interact with a broad spectrum of customers, generate data and insight and deliver excellent service through whichever channel they wish to engage. We are a truly customer-focused business and continually strive to make things simpler and more transparent for our customers. And our success here is reflected in an improvement in customer satisfaction scores by almost 50% since 2011, as you've heard from António; and a reduction in customer complaints by more than 75% during the same period. On the back of these strong foundations, we are delivering on our targeted strategic priorities. We remain on course to maintain our #1 branch market share by the end of the plan. We have the largest digital bank in the U.K. with 16.4 million digitally active customers and 10.7 million mobile app customers, both of which are up 3 million since 2017. And finally, we are delivering more tailored propositions to our customers. I will provide more detail on each of these later in the presentation. During the first 2 years of GSR3, we have delivered a resilient financial performance against a challenging backdrop which has been characterized by low interest rates, heightened levels of competition and a number of regulatory developments. On the latter, we have often proactively made changes ahead of those implemented across the industry. Despite this, we have delivered stable income in the period with resilient margin trends due to the result of clear management actions in light of the competitive environment, a…

Thank you, Vim. As António said, I will now give you an overview of the group's financial performance in 2019. We can then open up for Q&A. Turning to the first slide with a summary of the financials. As you've already heard, in 2019, the group delivered solid financial returns and a resilient underlying performance in what was a challenging external environment. NII of GBP 12.4 billion was down 3%, with a resilient NIM of 288 basis points, in line with our guidance. Other income of GBP 5.7 billion continued to be somewhat pressured in Q4 and was down 5% on the year. Moving down the P&L. The 5% reduction in total costs was driven by both operating costs and remediation being lower year-on-year. Within that, operating costs were down 4% year-on-year, meeting our guidance of less than GBP 7.9 billion. Remediation was down 26%, albeit a bit above our expectation for 2019 as a whole. This operating performance resulted in solid pre-provision trading surplus of GBP 8.8 billion, which was relatively stable on the prior year. Moving further down the P&L. Credit quality remained strong with a net AQR of 29 basis points, again within our guidance. Together, all these translated into a resilient underlying profit of GBP 7.5 billion. Statutory profit before tax, however, of GBP 4.4 billion was down 26% compared to previous year. This is given the impact of PPI. PPI is also reflected in the earnings per share of 3.5p, which was 36% lower than in 2018. I'll now discuss the individual items into more detail. We'll begin with net interest income and margin on the next slide. NII of GBP 12.4 billion was down 3% on 2018 based on a resilient net interest margin and broadly stable average interest-earning assets. The NIM of 288…

It's Joe Dickerson from Jefferies. Just on the outlook for the noninterest income, can you talk about what you're seeing in the Insurance business? Others are talking about a potential hardening of rates in 2020. Are you seeing anything like this or expect anything like this to help drive that business? And then in terms of the full year on the capital guide, can we expect that you will distribute down to that 13.8% level in respect of the full year in terms of excess capital repatriation? António Horta-Osório: Thanks, Jeff -- thanks, Joe. William, shall you take these ones?

Sure, sure. Well, maybe just to address the insurance point first. The -- just to give some background, if you like, on what's going on in the Insurance business because it's important context really. We see 2019 performance, as you know, as being a year of investment in the business. It was partly influenced in the first half by the change in investment manager and by the longevity benefits that we got, but it was also characterized, if you like, by building the business across all lines really, auto enrollment being one, annuities being a second. As we go into the second half, those benefits from the change of investment management provider and the longevity benefit drop out; and the underlying business, if you like, starts to perform. So looking forward into 2020, there's a number of factors going on. One is the change of investment management provider and the annuity -- and the longevity benefit are unlikely to repeat, but having said that, the engines of the business, including annuities, for example, including protection, for example, start to take over. There are within that also some cost benefits which should be coming through probably in the second half of the year, and that also will help build the Insurance contribution through the other income line. In terms of specifics of your rate hardening, to a degree, I'm not sure whether that's a particularly general insurance-related question. I imagine it is to a degree, but I don't think we're relying upon them for the performance in the Insurance business during the course of 2020. The capital question. The -- we have taken a deliberately prudent stance in relation to capital. We've obviously observed the countercyclical buffer change. We've observed what we think is very likely the partial mitigation through Pillar 2A. We have a view on what will happen to capital requirements in the years thereafter, as António and I articulated in our message. It is the case that we have the benefit of being at 13.8% now and therefore have anticipated the change in the countercyclical buffer mitigated partly by Pillar 2A. And therefore, in theory, if you like, the build that we enjoy through the course of 2020 of 170 to 200 basis points that I mentioned in the speech, in theory, if you like, is distributable capital, but that will be a matter for the Board, at the end of 2020, to decide what the capital repatriation policy should be. António Horta-Osório: Rohith?

Rohith Chandra-Rajan, Bank of America. I had a couple of questions on net interest income, please. The NIM guidance for this year. So your exit run rate is 2.81%, so guidance for 2.75% to 2.80% is a -- is pretty resilient on that exit position. I was just wondering if you could talk through some of -- some specific areas. So you talked a little bit about the hedge. So what's the impact of the reinvestment that you've done in Q4 and also an expectation that the 5-year swap is slightly above current levels? So you were previously guiding for [indiscernible]] headwind from the hedge this year. How has that changed? And also, what do you -- any guidance on the impact in 2021? The second thing is the SVR book fell by GBP 12 billion in the year. What impact does that have? And what pace of attrition do you see going forward? And then finally, on the NIM, the repositioning of the commercial book, what impact does that have in the year? And I guess, relative to those 3 potential headwinds, where do you see the offsets? And the second was just a clarification on the balance sheet. You've talked about flat interest-earning assets. Is that flat on the Q4 number of GBP 437 billion or the full year number of GBP 435 billion? And how do you see the balance sheet mix or the loan book mix, I guess, evolving over the course of the year? António Horta-Osório: That's a lot of questions.

Thank you, first of all, for the questions, Rohith. Maybe I'll start with the net interest margin and give you some sense of the dynamics going on there. When we look at the net interest margin, there's a number of features. There's a number of factors going on. One is, as you say, the structural hedge and the replacement, if you like, of the structural hedge balances that roll off during the course of 2020. Two is what is happening in our major product markets, mortgages obviously being a big one but also what we're doing in unsecured, what we're doing in motor. Furthermore, there's also the dynamic introduced by the corporate optimization and Commercial Banking optimization that I described earlier on. Savings, on the other side, the liability side of the balance sheet; and then what our -- your question was just to our sensitivities, if you like, to market rates. So those are the dynamics. To give you some context and color around them: We -- in terms of our guidance, we see about 200 million less structural hedge income in 2020 versus 2019. That's been factored into our guidance of 2.75% to 2.80%. In terms of the mortgage picture, there's 2 features going on. And Vim may want to comment, I'm sure, on the SVR point, which we'll get to in a second, but there's 2 features going on principally. One is we are seeing a much more benign front-end pricing environment now to what we were seeing this time 12 months ago, which means that, as we roll off, if you like, our fixed mortgage book is rolling on to more attractive rates. That differential is favorable. It's positive today versus negative as it was 12 months ago. When we then look at what else is going on, on the balance sheet, there's a bit of a mixed effect. It's modest, to be honest, but there's a bit of a mixed effect in terms of unsecured and motor. There is a little bit of growth there, as I pointed out, historically and looking forward. And then our corporate optimization, our commercial optimization, it's very much about addressing the low-yielding relationships, if you like. And that comes through in part in net interest margin and, again, feed through into the guidance that we've given. Savings maturities, there's a little bit of that going on in 2020. And then finally, your point about sensitivity, your question on sensitivity: There's not a huge differential between 75 basis points versus where the 5-year swap curve is today. It's about 10 basis points, I think, off the back of last night's pricing. António Horta-Osório: Yes.

If we were to take a more market-aligned scenario into account, we would think that shaves off a couple of basis points in terms of our view on the NIM, which puts us in turn at the lower end of our guidance. So still within guidance but at the lower end of our guidance. And that's a cumulative effect of, if you like, the ongoing or introduced part of the structural hedge coming in at slightly lower levels than we anticipated 75 basis points, plus the absence of a base rate rise. That cumulative effect, as I say, shaves off a couple of basis points, shifts us towards the lower end of our guidance. António Horta-Osório: Before Vim goes to SVR, do you want to comment which was the best within IEAs?

Yes. I think you mentioned GBP 435 million. António Horta-Osório: Vim?

Okay, yes. Just to add to William's point. I guess, on the mortgage side, Rohith, I mean, 3 key elements that matter. One is where the reversionary book goes. So like your question in terms of attrition: That's been stable in the second half of the year. So -- and that's obviously on a smaller base as that keeps coming down. So that's sort of a -- stable. Then retention of customers, that's also stable during the course of the year, which is good news. And then as William called out, the new business margins that we're seeing right now in the market are looking better than maturing margins at the moment. And therefore, we get a carry there, which is obviously we've started to see that happen in the sort of final quarter of the year, and that's obviously a positive in terms of what we see coming into this year. António Horta-Osório: Thank you, Vim. Shall we go here, please? Can you bring the microphone. We have 3 questions on this side. Guy, please.

Guy Stebbings from Exane BNP Paribas. Can I come back to the other income line and Insurance, first of all? You referenced the strong benefit from auto enrollment rates picking up and coming from the workplace plan and retirement income. My understanding is, given the embedded value accounting approach without another step-up in auto enrollment rates, that line goes backwards in 2020. So if you could just confirm whether that's true or not. And also you referenced strong general insurance. Presumably the runoffs in St Andrew's becomes a headwind there. So if you put that together with some headwinds on regulatory changes for other income line, with some of your peers giving guidance around the overdraft fee changes, for instance, and high cost of credit, I'm just trying to gauge whether 5.7 is a sort of sensible run rate or the H2 5.1 to 5.2 is more like where we're going to end up for the full year. Then just a quick second question on current account growth, which has obviously been very strong and helping the growth in the structural hedge. If we look at the current account switching data, it tends to be quite negative over the last few quarters for Lloyds, so I'm just trying to understand the very strong data that you're reporting for kind of current growth rate and how we'd reconcile that with the current account switching data. António Horta-Osório: Okay, that's fine. Okay. So William will take the first, and Vim will speak to you about the second.

Sure. Well, thanks for the question, Guy. On the insurance topic, you're right. Auto enrollment is effectively better value accounted. The step-up that we saw in 2019 was in part a function of the contributions step-up. We do ultimately expect that to be insufficient. And there will in turn be a further step-up, but I very much doubt it will be 2020. So as a result, what you see in auto enrollment is an ongoing business, which is again one that we very strongly believe in and we'll continue to invest in, but you'll see it slightly dip or slightly lower, if you like, in 2020, that piece of the business, versus 2019 simply by virtue of that accounting. But again I want to underline it's a business that we strongly believe in and we'll continue to invest in, and we will see that as a going-forward point. The GI point: I -- there is a -- there are a number of factors going on within GI both as to premiums and growth of the business and the opportunities that we see around the business. I wouldn't identify St Andrew's as a -- I mean, to a degree, it's relevant, but it -- I wouldn't identify it as a particularly strong issue in the overall profile of the GI business that we are building, in the process of building right now. There will be other factors that will be far more important. The regulatory changes. You mentioned a higher cost of credit in particular and the overdraft pricing issue. The -- we're not going to put a number on the overdraft issue. Most of the overdraft issue is in the net interest margin line, not in the other income line. Much of the overdraft issue has been to a degree contemplated and anticipated by some of the product changes that Vim can talk about that we've introduced in years prior to today. So some of the pressure, if you like, from that overdraft change has been preempted by some of the moves in the product line that, as I say, precede 2020. So that particular issue is unlikely to change the other income line. I think, your point more broadly on regulatory pressures and are they exerting pressure on the business, for sure. They're there. The business that we have, I think, is a very successful business model that will succeed no matter what, but the regulatory pressures, for sure, they [indiscernible] pressure on the income. António Horta-Osório: Vim, would you like to add something...

Just to -- yes. So I'll add 2 things, I guess. I'll do -- finish the overdraft point and then I'll just talk about switchers. So as William says, we eliminated unarranged overdrafts and returned item fees 2 years ago, so in effect, the change that we've got to make now is different to what most of the industry is having to go through. And therefore, I guess we're not specifically calling that out this time around, and it's all embedded into William's margin guidance. So I think that's probably just worth iterating. And also I think from an ROI perspective it's not in there, so because we've made the change already a couple of years ago. But as we've said in the market as well the -- 90% of customers will be better off, so that will be a headwind, but as I say, that's in the guidance. And then on switchers, I think I tried to allude to this in the presentation as well, that there's a -- really important for us to focus on existing customers as well as new customers. And you've seen the data in terms of existing customers, what we're seeing in terms of growth in balances from those existing customers. We're also seeing, as you've seen, 9% growth over the period of current account customers too. It doesn't have to come through the switching service for us to book new current accounts too. And then when you look at the switching out data and what we can see, what we see in the switching out data, the quality of where the growth is coming in the switching out data is pretty low. And that's why you're not seeing that impact our business in the way you might think it does. António Horta-Osório: Yes.…

Can I -- Guy, before we leave your question. I think there's one aspect that we didn't adequately address, which is on whether you should annualize the Q4 [indiscernible]. So perhaps just to give some response to that. The -- I think I mentioned some points in my speech which ended with you should not annualize the Q4 other income print. Reasons -- so just to give some context and reasoning behind that: When we go through the business lines. We look at Commercial Banking, for example, and there will be a couple of variance in Commercial Banking. One is, for sure, the market dependency. And if you see a market that comes back to life, you'll see a lot more activity in the commercial banking market. Equally, if you don't, the second prong, if you like, second strand, to the Commercial Banking business is around the cash management part. That's been an area of substantial investment for the group over the last couple of years. We now have a platform which is successfully being rolled out and delivered to a number of clients. So that's a strand which is much less market dependent, if you like. It's therefore a more reliable indicator of commercial bank activity and as it will build into the second half of 2020. You look at Insurance. There's a number of areas in Insurance. Again it's not going to repeat the more one-off natures, as I mentioned, in the first half, but you'll see some underlying build in annuities, for example. You see some underlying build in the protection product, for example. There is, as I mentioned, in the second half of 2020 some cost benefits which we're expecting, which will come in through the other income line simply because of the way in which Insurance is accounted in our business. You look in turn at the retail banking business. There's a transitioning customer behavior going on, as you know, in the payments area. And so as they move away from cash and towards cards, we expect better payments revenues off the back of that. And these factors allow us to build into 2020 in the other income line. So what it means, I think, is that we see other income which is going to be gradual, number one. Number two, it's going to be back ended. Number three, to a degree at least, some aspects of it will be market dependent too, but it would be very disappointing to see Q4 annualized. We do not believe that Q4 should be annualized. António Horta-Osório: So we'll finish those two questions. And we'll go to that side, to Raul, James, et cetera.

It's Aman Rakkar from Barclays. I had 2 questions, 1 on the net interest margin. Can I just clarify your comment earlier? You were saying, if basically you kind of updated your net interest margin for a 75 basis point 5-year swap, you'd come in at the lower end of the guidance that you've of 2.75% to 2.80%. And then you mentioned that, that basically captures the fact that you're also not getting a base rate hike. What happens if we actually get a base rate cut? Because when I look at forward curves, it looks like there's an increasing chance of a cut. Is that an incremental risk of you basically coming in at the low 2.75% next year? And I guess part of the answer to that will be dependent on deposit betas. Do you think you can basically absorb the majority of a base rate cut in terms of your customer margin? That's question one. And the second was regarding CET1. So the messaging around capital seems quite positive. I was wondering. Are you able to provide any guidance on Basel IV either in terms of the impacts on your business, when it would come in; and a view as to whether it will be implemented on the 1st of Jan 2022.

Sure. Maybe just to take each of those 3, Aman. The first point, I should clarify, if it wasn't clear enough, our guidance is based upon 75 basis points in-year 5-year swap rate on average through 2020. So that's the basis for our guidance. The market rate for the 5-year swap rate is circa 65, 66 basis points right now, a difference of about 10. If we get that market rate aligned with the absence of a base rate rise in the back end of 2020, the impact of that is a couple of basis points. We see that as being within our 2.75% to 2.80% margin guidance. António Horta-Osório: Right.

It just puts us towards the lower end. So that's the first point. The second point, you said what if there is a cut. I think there's a couple of points to make around that. Clearly, a cut is not what we envision. We think, as António mentioned -- or we anticipate, rather, a significant fiscal stimulus which in turn changes the monetary outlook, and that's the reason why our scenario is as it is, but should we get a cut, there's a couple of points to make there. One is that a base rate change of that type allows a degree of friction, if you like, within the overall product base, which means that you can recoup some of the issues there. The second is in the context of a base rate cut you may very well see a widening gap between the swap rate and the rate at which mortgages are being sold. And so you may see some widening in the margins off the back of that, which is effectively similar to what you're seeing now, frankly. And in that context, we would expect to see some recompense, if you like, or some benefit from a more benign margin pricing environment, which in turn would help us build margin and indeed, to a degree, the volumes of the business. The -- so that's the second one. Sorry. António, do you want to add... António Horta-Osório: In any case, just for you to have clarity on this in terms of our base rate rise expectation to be back ended. So it's does not really impact the NIM of the year. Just free to have that clear, on our plan. Would you go to second point?

Yes. I think, if we go on to your core Tier 1 question, the Basel point. Basel IV is obviously something that we're keeping a close eye on. We are at the moment in a situation of some uncertainty about what the authorities choose to enact in terms of Basel IV, finally enact. We're also in a state of uncertainty about how the PRA might choose to incorporate that or adopt that; and indeed what mitigation might be possible around a Basel IV set of rules, if you like, whatever they might be. And so we've stepped back from giving guidance on Basel IV partly because right now we are simply giving guidance on 2020, full stop, but also because, frankly, the uncertainties around Basel IV are still very considerable. And so we're reluctant, if you like, to start giving guidance which in turn may well be wrong.

Sorry. Just one follow-on then... António Horta-Osório: It's about the height of risk.

Yes, if I'm allowed. So potentially, this time next year, you could end the year with a 13.8% CET1 ratio, pretty decent visibility about Pillar 2A coming down such that 13.5% is the right number for you. So is Basel IV enough of a risk on the horizon such that you wouldn't pay down to 13.5% during the course of 2021 or... António Horta-Osório: I mean, our positioning, that is very simple and is unchanged. So we have an ongoing capital guidance of around 13.5%. And if at the end of the year, when the Board decides, if the Board will decide not to pay down to 13.5%, there will have to be a significant reason which we will have to explain you to, right? So it's exactly as in previous years. That is the policy. We come to the end of the year. The Board decides with information available then. Our guidance is 13.5%. Should we not go to 13.5%, we'd have to explain you why, as we told you this year given what happens with this. But at the end of the year, we have prudently hold already, holding already the 30 basis points that we see this year, which will then come down next year, all right? So the Board has always the same policy. At the end of the year, with information available then, we would decides on dividends and on repatriation of excess capital. And the usual practice is the same. We would distribute down to the target. If we don't, we will have to explain why. Please, Andrew?

It's Andrew Coombs from Citi. If I could just stay on capital and the capital stack. You've been very transparent on your thoughts on countercyclical, the 2A offset. And I think the remaining question that hasn't been asked is around the impact from the Bank of England stress test and the implications for your PRA buffer. On the basis that you haven't changed your 1% headroom above the 12.5%, should we assume, when you look at the stress test in coordination with your internal stress tests, the 2B has not changed? And second question only, could you just elaborate now with the benefit of hindsight on the stress tests and a bit times passed why was there such a leg-up in your losses for the consumer book under stress in the Bank of England stress test? António Horta-Osório: Do you take both?

Sure. António Horta-Osório: Thank you, Andrew.

Thanks, Andrew. António Horta-Osório: William will take your questions.

First of all, I -- you wouldn't expect me to and I'm not going to comment on Pillar 2B. It's a matter for the PRA. The second point, in terms of the stress test results. The stress test results are, first of all, characterized by us passing. We, in fact, passed by a higher hurdle to the relevant CET1 requirement than we did the year before. So I think it's important to characterize it in that way before we begin. Why was it a relatively significant drawdown? A couple of reasons. I think one is, given that we're a retail business, as you know, IFRS 9 hits us probably harder than a commercial business or a corporate business. And that's simply because of the perfect foresight that is going on in this stress test bringing losses forward. Two is it's a very U.K.-focused stress. Three, conduct has been a feature, unfortunately, of our results for some time. And it also featured in the stress test. As we roll forward, we very much hope that conduct will come down, and hence our illustrations today of numbers, if you like, if you exclude PPI charges. But that, we hope, will be a lesser issue in stress tests moving forward than it has been historically. And then to your particular point, within the kind of Retail book, what is causing a bit of stress? It's the mortgage portfolio in particular that I mentioned on the slide up there earlier on, which is to say the '06 to '09, call it, the '06 to '08 mortgage portfolio is a mortgage portfolio that incurs higher stress losses. Now as we see it, it is a well-performing book that is well seasoned and we feel very comfortable with it, but when you run it through the stress, particularly the PRA-generated stress, it is generating significant stress losses.

Okay. If I could perhaps come back to the first question, phrase it slightly differently. Your 1% management buffer that you incorporate, is that -- what are the inputs into that 1%? What makes you feel comfortable that 1% is the right number? António Horta-Osório: Andrew, as William says, we can't really comment on the PRA buffer, like any other bank cannot comment on PRA buffer, but I would have -- that's, given that you saw that we kept exactly the same capital guidance, of capital requirements around 12.5% and a management buffer of around 1%, if you do the math, I think that is quite helpful.

Understood. António Horta-Osório: Shall we go to Raul and the other side of the room?

It's Raul Sinha from JPMorgan. I guess the first one is on the comment around the outlook slightly starting to improve for the U.K.... António Horta-Osório: On the -- sorry...

On the outlook improving, the recovery trends. I mean you've probably got the best insight of all the banks given your current account share into what's going on, on the ground. So just to understand a little bit more, what are you seeing? And then secondly, trying to marry that with your flat balance sheet guidance on average assets because I think you also said pricing has improved. So if I take that along with the fact that you're seeing some signs of recovery, why are you not being more positive on the asset growth aspiration for [indiscernible]? And I've got a second one. I don't know if you want me to wait.

Do you want me to start the first one? António Horta-Osório: Why don't you say the second one?

So the second one is on the head office, which is quite big in the context of the group... António Horta-Osório: You mean our building.

Well, these GBP 36 billion of RWAs. And it's makes GBP 800 million of, obviously, profits. LDC is within that. And HSBC yesterday said that they are going to close their principal finance business because of the peak-to-trough losses in the stress tests. And I was wondering if you've got any thoughts about whether or not this is also one of the areas which is causing your volatility in the stress test performance, the head office. How should we think about the outlook for the profitability of that and the RWAs? António Horta-Osório: Thank you, Raul. Look, I mean, you are absolutely right. I mean we are the largest retail and commercial bank in the U.K. and we -- and throughout the country. So I think we have quite important information available as leading indicators. And what we see is actually quite a clear picture, which is coming into December, and we have discussed this in previous presentations, you have seen a resilient household sector built on rising real wages and continued rising employment. And households are the part in consumption which is more than 2/3 of the economy, but you were seeing a decline on business confidence that sooner or later, if continued, would not only damage the investment but the employment and would affect the rest of the economy. So what happens with the election, as I said in my remarks, where you have a clear government with a clear majority? You now have, in our opinion, a much clearer sense of direction. And in line with that, what we are seeing is the following: real wages, we just had the final numbers, the highest in the last few years, if you do the average of the 3 months. So real wages continue to grow at around 2%.…

And maybe if I just add one thing just on the mortgage market. The beauty of our intermediary channel strategy is that it's not fixed. It's a triangle that we're looking at. And if things look better, we'll do more, as we did in the second half. António Horta-Osório: It's okay. James?

The group center question...

Yes... António Horta-Osório: Sorry, sorry, sorry. Yes.

Well, I'll get to your group center in just a second. I'd just simply add one point to the comments there of António and Vim, which is that because of this optimization exercise, if you like, in the commercial business, it's not a static balance sheet. We are getting out of some exposures simply because the relationships are not yielding what we would like to see, but we are going into others. And so don't think of it as just a static set of relationships. It's actually one that's turning and changing all through the year. The -- on your -- on the head office point, the central piece, if you like, is made up of a number of different blocks. The LDC component is one of them. Treasury and gilt sales, for example, is another. I think I mentioned in my comments that we expect to see that down during the course of '20, the gilt sales piece I mean, during the course of 2020. We hope that we will see some improvement actually in LDCs. There will be some offsetting factors there. And then the third element is central, as ever, I suppose, is composed in part of transfer pricing relationships and how we price and set the business up. And that's a picture which is not really dependent upon external market conditions so much. It's dependent upon the internal choices that we make as to how we establish and run the business. António Horta-Osório: James?

It's James Invine here from SocGen. William, you talked about the Pillar 2A coming down with the pension contributions. I was just wondering if you could tell us, please, what the gearing is on that. So for every GBP 100 million that goes in, what happens to the Pillar 2A? The second question, I guess, is just to confirm that within your ongoing 170 to 200 basis point guidance you've included the current existing plan that you've agreed with the trustees. So you're not assuming any renegotiation. And then the third is I was just wondering if you could give us a view on where the deficit stands today versus the GBP 6 billion scheduled payments that you've got.

Sorry, James. I caught, well, 1 of those questions. I may need to come back to you just to clarify on the other 2. On the pensions relationship, the trustee contributions point that you made. We are about to undertake the next revaluation and pensions contribution discussion with the trustees. That will be effectively with a date of the end of 2019. And then the negotiation will proceed during the course of 2020, with the expectation that we'll wrap it up at the back end of 2020, which then establishes our contributions going forward. So the contributions for 2020 will be as planned, if you like. Contributions thereafter will be a function of that discussion that we have with the trustee, which will be subject to the normal inputs, if you like, in that conversation. Now just give me your first and third question again, as I'm not sure I fully...

It was just for the money that goes into the pension fund. What's the gearing? What you get back on your Pillar 2A. António Horta-Osório: So the Pillar 2A contributions. What is the impact of the pension contributions?

Yes, yes. That's probably something which I won't talk about publicly because it's really a matter between us and the PRA, as to the extent to which they see Pillar 2A benefits from pension contributions, save to say that the pillar -- or a component of the Pillar 2A, if you like, is to accommodate a pensions stress. And so logically the amount of capital that you need for that stress should go down as the pension fund gets better funded. So you can see the correlation there. I won't go into the particularities, the exact math of the offset.

Okay. And then just do you have a view on how big the deficit is at the moment?

It's in line with our expectations based upon, obviously, the disclosure as to the accounting and the liability, if you like, less the contributions, as we had anticipated before. António Horta-Osório: Shall we continue here? Chris.

It's Chris Cant from Autonomous. If I could ask on your ROTE guidance, please. You've cut the guidance for 2020 to 12% to 13%. And I understand you're still adding back the amortization costs within that. In 2019, the amortization add-back was worth about 120 bps on your reported return, but obviously your EPS figures include those costs, as do most peers in their calculations. So if I take your guided range of 12% to 13%, knock off 120 basis points, multiply it through by the 50.8p of TNAV you've just reported, that implies statutory earnings for 2020 of 5.5p to 6p. Am I missing anything in the maths there? And when I look at consensus of 6.5p of earnings for next year, given everything you've said, it does feel like that other income number is going to come down quite a lot if it is the EPS number you're pointing us to given the rest of your guidance on provisions and NIM.

Okay. Thanks for the question, Chris. I'm going to answer that in parts, if you like, because I -- what I don't want to do is to give you guidance on any particular EPS number that you may be arriving at. The first of those 2 parts, the ROTE calculation, you're right. The amortization point is in the ROTE, and that is responsible -- well, I see it more generally as about 100 basis points, but you're absolutely right. It's there. We have thought about that. And I think, to the extent that we've taken into account any adjustments that we'll do, they're more likely to be off the back of GSR4 rather than right now. So the point is we're certainly cognizant of the point, but it's going to be addressed in GSR4, not today. As to your calculations, it may be worth just running with Douglas around the calculations that you have. And he can give you some guidance, but again I'd hesitate before being too precise about confirming any particular EPS outcome that you're coming out with. On the other income point, I think I would come back to the discussion that we had earlier on around what's going on in the other income line. António Horta-Osório: Exactly.

And the strands there, really just to briefly recapitulate, if you like. We are seeing in each of our business lines clearly a degree of pressure but also a degree of opportunity as to each of them. Going through them very briefly: Commercial Banking, I mentioned the 2 strands earlier to a degree about market activity but also to a degree about transaction banking or cash management, I should say. Within Insurance, we see the advancement in annuities, both bulk and individual. We see the advances in protection. We see some cost benefits, which don't get locked in until the second half. And in Retail, as said, as payments practices change, so will payments revenues. So there's then the central item, which as I mentioned earlier on, I think, is going to see less of gilts income; hopefully, a little bit of improved performance off the back of LDC. You add all of that together. I'm not going to give you any other income guidance number, if you like, because we don't, but it is firmly encapsulated within the overall P&L guidance that we've given you, including the ROTE of 12% to 13%.

If I could just follow up briefly in terms of bridging from your guided statutory ROTE target to an EPS number. I appreciate you don't give a figure, but if I ask it slightly differently: the TNAV number of 50.8p for the full year. You're around the level you say you need in terms of CET1. You're going to be doing quarterly dividends during the course of 2020, which will avoid any meaningful build, I guess, in TNAV during the course of the year because you're distributing on a more regular basis. So that does appear to be kind of your base jumping-off point for 12% to 13%. So is there a bigger range of uncertainty around your statutory ROTE guidance, or can we use that in the maths? Because you have given us a 12% to 13%.

No, I don't think so. I'd hesitate before reading too much into your dividend point, though, Chris. I mean the dividend, as you say, may get distributed more often and... António Horta-Osório: That doesn't change the total distribution.

That's true, but on the other hand -- it doesn't change the total distribution, number one. But also, number two, the cash, if you like, sits in the balance sheet and therefore contributes to TNAV for quite a long period. You only actually hit the targets or only make the distribution at the point of distribution. You may accrue for it earlier on, but it's still in the TNAV. António Horta-Osório: And I think, Chris, another point to -- obviously, you have to consider is that, if you look at the TNAV evolution. I think the impact of PPI on TNAV was higher than the dividends distributed. And PPI, as we just said, is about over. So that's another point. It increases TNAV throughout the year, right? Fahed?

It's Fahed from Redburn. Just a couple of questions. The first one is on restructuring charges. So I think going forward you're looking at a restructuring charge in excess of the GBP 471 million that you booked for this year in 2020. A lot of the U.K. banks and other banks have come out with restructuring charges that have been higher than expected. So I've got the kind of sense from the presentation that there's more to come on the cost base. Should we expect kind of permanently higher restructuring charges on the back of that as well, if we are to assume that costs keep coming down? That's question one. And question two is on capital distribution. So I think we can order the maths that you have excess capital in 2020. You're trading at 1.1x price-to-book. Your P&L is -- or your revenue line is going backwards. You -- any growth you've had in the last couple of years has come from inorganic acquisitions, on NII, MBNA and Tesco's. Would you consider more organic acquisitions? And how do you think -- or inorganic purchases? And how do you think about into buying loan books versus buying stuff to help your wealth business, your Insurance business and that's struggling line? António Horta-Osório: Just to start with your final question, and then William can elaborate and ask -- answer the first one as well. I mean our strategy is exactly the same. Within our positioning, if there are loan books that fit our positioning with our type of customers, we would consider them. We are not considering anything significant at the time, as we speak, but we will continue with the policy that we have followed in the past. If there are loan books like Tesco or like others that fit within our positioning and have interesting customer segments at attractive returns for our shareholders, you should expect us to look at all of those. And potentially, we could acquire some, but I mean this is completely the repetition of the policy because, as I said, we don't have anything at the moment that we are looking at.

Can I ask one follow-up question there? Is there a regulatory kind of burden on how much you can increase that loan book buy because of your size in the U.K.? And would that incentivize you to look outside of your loan book, to other parts of your business? António Horta-Osório: No, I don't think so. I don't think so. We have a particular attention to our market share in terms of current accounts, where as we showed you our current account market share in terms of balance is around 22%, but in terms of loan books, we are below that. So we don't think there is any special cause to enter. It will be a matter of target segments, the right customers, attractive economics for shareholders, as I think the past transactions are showing.

You had a question on restructuring charge as well, Fahed, which perhaps I'll answer. The restructuring charge, as I mentioned, for 2020, we expect to be somewhat higher than it was in 2019. 2019 saw the runoff of a couple of programs, ring-fencing and MBA among them. 2020 is going to see 1 or 2, if you like, factors going the other way. I mentioned increased severance. I mentioned property, portfolio rationalization. I mentioned response to regulatory change, in particular IBOR. Those are features. There are other bits and pieces, if you like, in that overall restructurings picture, but those are 3 significant ones that are important to point out. Your question was is that going to be a kind of an ongoing feature, if you like, of the business. The -- it's an interesting question in a way because the restructuring line is a response to what is going on in the world around us. And so in a sense the question has through -- has to depend upon a point of view as to regulatory change. How often are we going to see IBOR-type shifts, for example? It's a question that relates to how is technology going to change. How often are we going to see movements from -- to cloud, if you like, off the back of legacy systems? And it's a function of those types of issues. And if you have a view, if you like, that regulatory change is, hopefully, going to be slightly less prevalent, looking forward, than it has been in the past, then in turn we should see our restructuring charge benefit off of that as we go forward. Having said that, as you know, we're in an environment of rapid technology change right now and restructuring charge is in part a response to that. I don't expect that to slow down anytime soon. António Horta-Osório: Please. You already have the mic.

It's Fahad Changazi from Mediobanca now. A couple quick questions. Firstly, just a real quick one on Solvency II. You got 170% pre-divvy Solvency II. Can I just confirm that you're happy with this level? You're happy with the leverage after repayment of loan last year and consequently GBP 500 million of divvies. Second question: You accelerated the bulks in H2. There is some seasonality in that, but I remember in Q3 you mentioned the sourcing of assets and the yield on those assets. And Vim mentioned that now you're going to LTMs. So I was wondering. Could we expect at least GBP 2 billion of bulks each year? And where that's going. And can I just confirm, William, that you did say we can expect 0 longevity releases in 2020? And just very finally, the longevity swap you did with a pension, the GBP 10 billion, will that have any tangible impact on the P2A? António Horta-Osório: Yes, good question.

Thanks, Fahad, for those questions. They're all important ones. Solvency II, yes, we're happy with where we are on Solvency II. There are, as you know, a number of kind of counterbalancing factors that go on into that. At the moment, we're in a low interest rate environment. Low interest rate environments are not especially helpful from an insurance capital point of view. They increase the SCR. They increase the risk margin, but so far we are managing with that, and we expect to manage with that during the course of 2020. So we feel good about the capital position. And we feel good about the dividends during the course of 2020 coming off the back of the insurance company. Second question, bulks. You're right. It's been an area of increased focus and attention from us. It is an area that it's not only us, if you like, that are competing in that field. And so there's a relatively competitive landscape, if you like, in terms of sourcing assets. To a degree, we should be able to source some assets from within the banking business that we run that in turn afford proprietary opportunities, if you like. Now we need to be very mindful of, a, the arm's-length nature of those transactions and, b, concentration risks. But subject to those caveats, it is, if you like, one of the benefits of being a combined group. So I think the asset picture is, as a whole, a competitive picture, for sure. We should enjoy some competitive advantage there. The yield point, you're right. I would say the bigger challenge to the pricing, if you like, around bulks right now is more actually subject to the low interest rate pressures that we see rather than necessarily the competitive environment, the challenge being…

It's Claire Kane from Crédit Suisse. A couple of questions, please. The RWA optimization, how much of that strategy is driven by trying to improve stress test performance? Because I know you said you had an improved stress test performance last year in terms of the hurdle rates, but you're now going to the next 100 basis points lower and effectively wiping out all of that hurdle. So you mentioned you should have an improvement from runoff of the legacy mortgage book, hopefully, lower conduct, but how reliant are you on decreasing risk in mid and Global Corporates to help with that? And can you just comment on the differential on margin between that business and new mortgage business? Because I guess that's where the new growth is coming from. And then my second question is on the capital generation guidance, 170 to 200. Can you tell us how much you've penciled in there for the GBP 800 million of pension contributions? Because clearly that's gross 40 bps, but you have visibility on which schemes are in surplus, so perhaps it's not quite as large as 40 bps. And then on the Insurance dividend, you said you feel good about the outlook there, so are you assuming you have an increased Insurance dividend for capital generation purposes next year? António Horta-Osório: Sure. Thank you, Claire. William will take your questions.

Sure. Thanks, Claire. RWA optimization. First of all, it's not inspired by the stress test. The RWA optimization is about improving the returns of our commercial business. If you look at the returns within our business and the capital allocation against them, it has been the case that Retail has been a relatively positive return. And the commercial has been positive, but it's been less positive, if you like, versus the Retail business. And we would like to correct that balance over time. The testimony to that, in a sense, is the fact that much of the Retail -- sorry, much of the commercial optimization exercise is actually going on at the better end of the credit spectrum. So it is not involving the relationships that would typically contribute to stress losses if you were to have an adverse macroeconomic environment. That's where we see some of the weaker returns. And that's where we see the optimization opportunity, if you like, being better for the group. And the third of your questions, around the Insurance dividend. The Insurance dividend typically contributes around 13-ish basis points of capital to the group. We have 2 ways of looking at it. We have a run rate dividend, if you like, that comes off of the Insurance business based upon the performance of the Insurance business and obviously subject to the Insurance Board's okay on that. And then we have -- to the extent capital management activity is undertaken within the Insurance business for any given issue, for example, we put an equity hedge on it during the course of 2019, then that in turn reduces the requirement of the for equity -- or for capital, I should say, in the Insurance business, which then generates an additional opportunity for capital repatriation point, for a better word, from the Insurance company to the group. And so we see the dividend, if you like, in 2 pieces in that respect: the ongoing business and the capital actions piece. 2020. We have in our pro forma numbers actually -- for end of 2019, we have included the business-as-usual dividend. And over the course of 2020, we'll obviously see how the progress of the business matches up to see what the dividends will be at that time. António Horta-Osório: Okay. I think we can take one further question...

Sorry. I did ask about how much the pension contribution would take a hit. Because GBP 800 million gross is not going to be fully come off the CET1 given some of the schemes are in -- not all in surplus. So the pension contribution, what do you factor in? Is it not 40 bps? Is it less than 40 bps...

Claire, would you mind -- can I -- can we take that one separately with the IR team? Simply because it's perhaps a question that would be better answered by them. I will say that most of the schemes -- 1 or 2 of them are close to the edge, for sure, but most of the schemes are in surplus. And those that are not in surplus are only just. So there's not really -- there's not too much of an issue that you're describing, but again, maybe we'll get the question answered in more detail by the IR team. António Horta-Osório: Right. We'll take one final question, okay? We are a bit over time.

We need a mic... António Horta-Osório: We have one here. So we'll take one. Take it fast to them. It's Martin. Why don't you start?

Yes. Martin Leitgeb from Goldman Sachs. Could I ask on competition in mortgages? I was just wondering if you could comment how you have seen competition in mortgages evolving through the year. And a couple, a number of your years have essentially indicated they would like to grow above the current stock share going forward. I was just wondering... António Horta-Osório: I know that is your favorite question.

And the second question, just on the TFS. So obviously there's the first meaningful maturities coming toward the end of the year. I was just wondering how you think it will impact deposit pricing here and whether you think there will be any spillover in terms of asset pricing given obviously a reduced amount of funding being available. António Horta-Osório: Okay. We broadly think that the mortgage environment will stay as you have seen it over the last few months. It is true what you says. On the other hand, as Vim also says and given where the swaps are, the margins have improved for the market as a whole. The market is growing more as well. As I just told you, we are seeing early important indicators of additional house sales, house prices and mortgage business as a consequence. And the mortgages at the moment of new business are above the mortgages -- the mortgage margins of new business are higher than the ones of a maturing business. So we are anticipating these trends to continue but on the back of a stronger market given we see -- what we see on the economy, what we see on house prices, what we see on volumes of transactions and of mortgages requests. And as you can imagine, we already saw January numbers, okay? In terms of TFS, I think you're right. There are still additional redemptions to be made. We are very comfortable with our liquidity position because, as you know, savings prices coming generally in the markets been going down. And savings continue to be quite easy to attract. And you look at our current account balances, which are the most -- the high-quality ones. They continue to grow significantly above the market, so I would not expect those TFS redemptions that you mentioned, which will be a fact to modify the behavior because they have been also happening last year. Please, last question.

Jenny Cook. If I can ask one very, very quick question. I'm just trying to square your guidance on average interest-earning assets because you're going from GBP 437 billion at the end of Q4 -- well, the Q4 average, to GBP 435 billion as an average for FY '20. And simple averaging suggests that you might be exiting FY '20 with around GBP 433 billion to get me to that average. I just want to understand, one, if I was correct in that kind of line of thinking. And two, if I -- expectations for FY 2020, '21, they're off at GBP 441 billion. So quite a big gap versus a potential Q4 exit rate. Do you see yourselves as kind of achieving the volume growth necessary to close that gap? António Horta-Osório: I think I'll allow William to answer that.

I'll give a very brief answer, and then perhaps we can just sort of follow up as appropriate. Which is simply to say, over the course of the year, there are periods of the year where the asset base is going down, particularly in relation to certain product areas, and then follows up off the back of that. So what you're seeing is an average interest rate -- or sorry, an average interest-earning asset picture which in turn reflects that in-year, if you like, change in pattern of the overall assets. So you won't necessarily see the numbers work out in quite the way to be expected based upon end-of-period numbers. So that's a brief answer to the question, and we can discuss it further. António Horta-Osório: Yes. We can follow up with you later. Look, thank you very much, everyone, for joining us and for your questions. We really appreciate it. Thank you.