Q3 2020 Standard Chartered PLC Earnings Call
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Welcome to complete school piece country, just standby comfort will begin shortly.
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What kind of stuff that Chuck P.L.C. sick for Ted Twentytwenty with adults.
Today's presentation is being hosted by Bill when to quit chief executive I'm I'll be holes that great chiefly not too long. So what's the opening remarks has finished there will be an opportunity to question synopsis to ask a question over the phone. Please press star one on your telephone keypad people wait during the presentation.
Alternatively P. skews the question books, if I had to put on your webcast page to submit your questions.
At this point I'd like to hand, the call over ticket sale to begin.
Well, thank you very much and good morning. Good afternoon, everybody. Thanks for joining our third quarter call I'm, just going to make a couple comments upfront and it's going to take us through the the whole lot declaration should have accessed by now and then we will both be available for it for today.
My message is pretty simple I feel good about where senator chartered is six months into a global crisis.
Were profitable, we've got a strong capital position and getting stronger I've.
We've got plenty of liquidity and that this is where we would hope to be I, obviously that the contrast to where we were in 2015 when I when I joined the bank or where we might have been in this case had we not taken the really substantial actions that we have over the past several years, what that doesn't bear thinking about yeah, we made very substantial investments to secure our foundations.
Always saying and I'm sure I said that to this story group in fact that that business banking.
Dances are made there or not during the difficult times and I feel like we're coming into this difficult time have come into it and are going through it in very good shape that the objective of this all of course is to tap into the underlying growth that is very very present in our markets I'm speaking to you from Hong Kong.
I've been in Asia for the past three months now and I can report that which many of you already know which is that while there are ongoing.
Constraints in society and in our business that things are getting back to normal and and then the senator chartered operational a fish.
Fishing capability is very much in place helping to promote that every opportunity, but also helping to or along the way benefiting from that so.
So.
Along the way as Weve as Weve tried to fix the place up and and prepare ourselves for ongoing growth weve.
We've made some pretty substantial investments where the most obvious so those have been in the areas of digital technology digital banking like.
As I as I sit here in Hong Kong were a month or so into a after the launch of our.
Virtual bank box, which has gone very well and never declare victory at this stage, but good account opening a good funding levels and the highest rating in the App stores other financial services out at 4.8 on the iOS store for example, this.
This is that this is really encouraging what it says to me is that one we were making the right investments at the right time.
To that when we set our minds to doing something we do it right and can have very good success that can be bodes very well for our ability to take this good strong fundamental starting position and convert that into growth and profitability over the coming period.
I don't have it before I hand over to Andy as just a word of thanks to my 90000 colleagues around the world who has worked pretty tirelessly.
Certainly for the past nine months, or so, but but but clearly much before that to enable us to get to the point, where we can where we can be talking very genuinely about how we're going to grow. This franchise from here and then he will take you through all the raw materials and place the underlying trends in the things that we've been investing in for five years.
Art clearly demonstrating their ability to grow they have grown some have taken a dip during the pandemic others have blown right through it but.
But we've made the investments so that we could capture the growth in our markets. We are determined to do that and have never been more confident that we can.
That 100 to Andy and I look forward to coming back for June a bit later.
Thanks, very much bill and good morning, good afternoon, everybody and so you got the slides in front of you. All you will go straight to slide three the usual financial snapshot.
So I'll cover the competitive called shortly but just a few comments on this page so starting at the top we saw encouraging and we believe in jewelry underlying momentum in some large businesses, but not enough to overcome the considerably cost the interest rate environment, which was the main reason for the 10% like like reduction in income.
We continue to invest called in areas, the differentiators with underlying efficiencies, enabling us to keep costs flat at constant currency.
So later about some of the tangible returns we're seeing on that investment, particularly on the digital side Chris.
Credit impairment was about $17 million higher than it was in the same quarter last year, but it has come down significantly and progressively since Q1 of this year.
Altogether. This led to an underlying profit all $745 million in the quarter, a touch higher than in Q2.
And finally as you can see our capital and liquidity positions remain very strong, giving us the confidence that we can continue to both support our clients and improve our underlying business through the remainder of this crisis as well as get back to funding shareholder returns, which as you know as well as the call we will all work.
The crisis hit.
Did that as soon as possible.
So let's start looking in more detail at our income performance on slide four.
This is the usual view on income, but product, excluding DVD and with currency fluctuations without the highlights the underlying momentum.
Wealth management income was up 16% of performance that was underpinned by a noticeable improvement in sentiment in many of our markets as well as increased utilization of digital channels.
If you exclude the bancassurance bonus that was booked in the quarter to give a clean up like for like comparison compared to last year. When you may recall it was booked in the second quarter income still grew 10% year on year and with the acceleration remember the bonus for the year is now fully recognized.
Financial markets was up 9% lift spectaculars in previous quarters, where conditions were much more volatile, but remember this was from a high base last year we.
We believe this reflects ongoing improvements the team has made to the business in recent years, we should spend them in good stead next year and beyond.
The impact of low interest rates is seen most clearly on this slide in our retail products from transaction banking businesses as well as all into treasury function from reduced returns on its deployed assets and adverse hedging ineffectiveness movements.
And now, let's turn to slide five just spend a bit more time on net interest income and margin.
The five basis point reduction in NIM between the second and third quarters is entirely due to the impact of low interest rates and would it be more pronounced had we not significantly improved pricing and mix of our liabilities in the period.
The two main drivers, but improvement were firstly, taking advantage of abundant liquidity and our markets to wrote off some of our more expensive time deposits.
Then secondly, increasing our store of lower cost and stickier individual current and savings accounts, which as you know has been a strategic focus for a while now.
In terms of where the NIM would go from here I expected to stabilize slightly below the current level over the next couple of quarters.
Our ability to meet or beat that forecast will largely be a function of how well we can maintain those mix and pricing benefits. If we do better than expected. The net interest margin not reduce much further and it may even become a slight tailwind. However, it was double its our walk with liquidity currently we don't expect not to change if competition for that but it doesn't.
Intensified significantly for whatever reason or interest sorry, slide further then that would be a headwind.
In terms of volumes looking foods as more of our larger markets that we operate in coming out of recession, we expect increasing client demand to generate erratic with decent growth over the next 12 months given the greater reliance on bank lending in the Asia region.
If that demand materializes as we anticipate that we will be able to redeploy some of the SaaS will start of high quality liquid assets that we built up during the early stages of the pandemic into client lending that would benefit to the margin given the delta in yield between the two.
Customer those advances increased 2% in the third quarter, bringing growth year to date to 5% overall.
I would not be at all surprised to see it running at least level next year some of the larger economies in our footprint rebound from the crisis before perhaps settling down in late two years to a lower rate that will still likely be higher than in the rest of the world.
And on the topic of growth as you know our focus on returns in recent years has driven real discipline around capital allocation and efficiency. So we are confident that we can capture those opportunities without driving up the R.W.A. intensity.
Taken together then well look ahead to two instruments you own in this protracted low interest rate environment. We will continue to optimize the drivers of our net interest income and are increasingly focusing on generating more fee based income continuing the good momentum in our financial markets and wealth management businesses. This I'll cover on the next slide.
So turning to slide six then are more capital efficient non funded income now constitutes just over half of our total income having grown 8% year to date.
Income from fees and commissions has recovered from the low print in the second quarter driven by growth in transaction banking and wealth management and that bodes well for next year.
The investments we've made in digital capabilities continue to pay off with our financial markets and wealth management businesses easily able to cope with the considerable lift in contractility through those channels.
This was to some extent prompted by the pandemic of course, but we view that digital conversion very much as a one way street, particularly when our clients see how much better the overall experience is.
I don't think the long term growth potential of our wealth management business can be in much doubt. We noted that business is growing for long periods post double digit compound annual rate and we think sentiment will continue to improve gradually next year.
For other big fee generating engine financial markets I know there is a natural skepticism about the sustainability of income from such businesses, but we believe the improvements made by the team that in recent years and that will continue to be made will underpin healthy long term growth that is much less correlated to volatility done in the past.
Yes.
I already mentioned the reduction in the Treasury non interest income line, which was due to negative movements in hedge ineffectiveness reduced FX swap income and realization gains year on year and as a reminder, the PML gains crystallized from asset sales within the treasury portfolio with substantially higher in the first half of 2020.
Yeah.
Finally, before I move on that for income client demand for risk and wealth management is usually seasonally low up as the year draws to a close and that's the biggest driver of the step down in income in the final quarter of most years.
Plus as I've already mentioned, a few nonrecurring items that will not flow through into Q4 as well as the net interest margin stabilizing slightly up so putting it all together, although that drives a slightly different compared to 2019, we anticipate a similar rate quarter on quarter reduction in income in the fourth quarter.
So I will now move on to costs on slide seven.
We said in July that we expect expenses to come in lower than $10 billion in 2020, excluding the UK Bank Levy and we are well on track for that we have kept a tight lid on cost with expenses broadly flat year on year, partly as a result, the three zero travel, but also lower bonus accruals. This.
He has helped create capacity to invest even harder with investments up 12% quarter on quarter.
As you know expenses, usually highest in the fourth quarter, mainly due to investment facing but I don't expect to see such a large uplift. This year given the unusual circumstances, meaning we should come in comfortably below that 10 below $10 billion for the full year.
Looking further ahead. We also said in July that we are targeting key cost below $10 billion in 2021, as well I'm sticking with that guidance and we will continue to reduce operating expenses wherever possible. So we can maximize our investments in digital capabilities that are becoming a clear differentiator for our franchise.
They knew that expenses overall, excluding the bank levy as usual may rise slightly year on year, but still within the $10 billion in blood.
In other words, we are not sacrificing our investment program to hit those targets.
We may need to incur some restructuring costs to achieve those efficiencies im not in a position to quantify exactly but I don't expect them to be particularly material.
So turning now to credit impairment on slide eight.
We fight it back in July that given the substantial provisions we have taken already at that stage.
I don't conditions did not materially deteriorate that impairment should be lower in the second half of the year now.
Now that we can see the third quarter out that belief is obviously reinforced the $950 million charge taken in the first quarter of this year reduced by about a third in the second quarter to $600 million and as stolen by a third again to $350 million the reductions were across all.
All stages and is encouraging with the stage three portfolio is holding up well folks fall.
Our impairment charges. So far this year include around $800 million in stage, one and two within which the total management overlay charge of $377 million.
With total impairment spending at around $1.9 billion year to date than the current trends would have to deteriorate significantly for the full year outcome to be much above the mid $2 billion Mark part.
But it will be an unusual and severe with an array of complex high for us non multiples to grapple with against what remains an uncertain outlook. So obviously that comment comes with an even larger caveat than usual.
I still don't think it's possible to reliably predict outcome next year precisely given so much uncertainty, but if our markets do recover we expect then that would certainly help asset quality overall.
Obviously, some sectors markets will remain more under pressure than others and a lot will depend on what happens to delinquencies and insolvencies after the various government relief measures they put forth.
Although our experience so far in markets, where retail banking release messages have been lifted is encouraging we think sensible to remain prudent chartering Hong Kong for example came out the more towards earlier and delinquencies are down from the peak in the first quarter, but India, Malaysia and you just ended that generally programs and you can't necessarily predict.
Loss from China, and Hong Kong, where the dynamics are cool very different.
We decided to top up the overlay in Q3, just trying to get ahead of any possible issues as move markets across our footprint our various moratoria schemes.
And now moving on to the asset quality in the bottom half slide as you can see from the chart high risk assets remain elevated given the continued impact of coated while early alerts reduced by around $1 billion in the quarter those abroad. The equivalent increase in the states free assets from the CG 12 exposures.
It is encouraging that retail banking days past due rights, which basically covers the total portfolio that is not the moratorium peaked in may and have been steadily coming down since.
And finally to complete the financial overview risk weighted assets and capital on slide nine.
No real surprises in the out of the print.
I sit in July is that they would increase a bit over the remainder of the year and they rose, 2% or $4 billion in the third quarter.
This was driven by credit migration at FX, mostly with decent client led demand for credit at improved density in quarter, partially offset by revolving credit facility run downs.
We typically end year with Ltvs falling in the fourth quarter, the similar seasonal trends as I mentioned before sites clients, reducing risk into the year end, but this year given the uncertain xsan environments and possibility of credit migration. They may not show a bit further by the end of December.
And last but not sorry, and looking ahead for the sentences about next year as I said earlier, if we do see asset volume growth as the economies in our footprint recover then order variation also increase but as a similar if not lower right, even including the impact of the credit migration.
And finally, we remain very strongly capitalized above the top of our medium term range at 14.4% only eight basis points of which reflects the effect of various cobot related regulatory relief measures.
This is a comfortable place to be over half a year into an unprecedented global prices well above the minimum hurdles that has you know have been repeatedly stress tested bill.
Bill and I and the board has been very clear regarding our intent to return any capital that is not required to maintain a sense, we'll see loan ratio and fund growth. We were clear on that point before the crisis, Andrew we remain unequivocal on that point today.
Obviously, we have to consult with our regulators and then see what the outlook is before we can commit but we are very conscious of how patient our shareholders have been at a clear what return on tangible equity, we ultimately have to deliver and so intense get back to returning capital to shareholders as soon as possible.
So having covered the financial side ill now spend a few minutes summarizing the progress we're making on our strategic priorities.
Starting on slide 11, I'll start with the decision to streamline our organizational structure.
There are a few structural elements of the reorganization that together will help us to sharpen further the focus on our strategic priorities and drive productivity improvements as you can see from this slide.
Firstly, we are combining our two business segments sort of individuals retail and private banking aligning resources will enable us to eliminate any remaining duplication and allow more seamless delivery of our digital and wealth management propositions across the customer segments for mass market to ultra high net.
Sure.
We're also completing the merger of our other two business segments that serve large local and multinational corporate spin institutions. This is part of an ongoing process to simplify the organization reduce complexity and help to serve our clients better including delivering our unique niche.
Network.
And last but not least we're creating a single Pan Asia region that will improve our ability to take advantage of opportunities arising out of increasing intra regional capital and trade flows supply chain reconfiguration to growing affluent segment and the increasing importance of the great Bay area in <unk>.
China crucial.
Crucially. These changes will also enable us to challenge and develop a more diverse group of internal capex.
The next slide number 12 ties into one of many digital initiatives. We are excited about.
Bill has already mentioned marks which you can see various examples of on this chart. It's been designed from the ground up with our partners using state of the art technology, enabling a very personalized experience to a new pool of digitally savvy customers.
There are many encouraging early signs so it's not shop a lot of first of all since the first Standalone Bank. We certainly don't think it will be our loss in fact, we already exploring the possibility of equivalent ventures in some other markets.
Stepping back these initiatives marks our lean heavily on digital banks in Africa, and innovative banking as a service platform in Indonesia that has just signed up that second part that these are all part of the process of preparing to get back profitability into the mass market segment across our footprint.
We are also pursuing multiple digital initiatives on the corporate and institutional side.
To give just one example of the pace of progress.
At the start the 29 team we had just to emphasize application programming interfaces var, which our clients connect with US today, we have about 100 and the list is growing all the time, which I suspect compares well with many of our peers.
So it's an exciting time at standard chartered it really feels like we are on the verge of something different and we will cover both domains in more detail at our full year results.
Moving on to Slide 13, then to cover what it means to us to be purpose led.
Starting with the first two sections from the less given our footprint we have a unique growth play in helping address climate change in the longer term and helping our markets to pursue a green recovery from the pandemic in the near term.
Most banks will talk to you about that sustainable finance explorations in volume terms, but we believe impact is at least as important in other words were at is as important as how much.
Less than 60% the financing needed to achieve the United Nations sustainable development goals in low and middle income countries is being met in Africa. This is as low as 10%.
This is why we are proud that 91% of our $3.9 billion sustainable financing is in emerging markets and 86% is extended so some of the world's least developed nations.
And now onto our people to continue to do a tremendous job as bill has mentioned in difficult circumstances.
Specifically, we are back at close to pre pandemic capacity in our largest region greater China, North Asia, and we are starting to transition back to the office in many of our other Asian markets, while always being mindful of our colleagues physical and mental wellbeing, but.
But it's not just about returning to the office, we are working across the bank to test the boundaries of what it means to work flexibly in the longer term.
Whether working from home all the office, we continue to upscale our people to increase their agility to adapt to more digital and remote working environment.
And finally on the far right column half of the 50 million dollar funds, we launched in April to provide emergency assistance to those affected by the pandemic has now been distributed and we have seen a strong response to our billion dollar commitment to from businesses fighting coated.
We continue to support our individual customers small businesses and corporate clients. This have requested some form the financial relief from the impact of coated.
The aggregate of loans and advances covered by the scheme to reduce by close to $5 billion during the quarter to just under $10 billion or around 3% of total loans and advances.
So on to slide 14 to make some final comments before we open the lines questions. We all making tangible progress on our strategic framework, and we will keep adapting and executing it to create opportunities to improve our returns and grow our business.
I won't repeat Gallagher comments at the top of the slide they are there to be as clear as possible about how we think risk this year and next year might pan out.
The bottom of the slide show his latest IMF forecasts, we are highly geared to the very large economies in Asia that are expected to come out of recession sooner and faster than those in the west which is one of the factors that underpins our belief that we should see increased demand for credit next year.
And so to conclude then we continue to make good progress on the strategic priorities, we laid out in 2019 that when we deliver our full year 2020 results in February Bill and I will provide an update on the progress we're making on those strategic priorities set against the prevailing macroeconomic outlook as well as our shareholder return Rick.
Plantations, so with that I'll hand back to the operator, so bill and I can take your questions.
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Tennessee PC is the question books today, you put on your webcast page to submit your questions.
Two questions.
Please go ahead.
Asked this question comes from the line of Martin Gigabit Goldman Sachs. Please go ahead.
Yes, good morning and.
Congratulations for the results of any constraints in this morning.
Two questions from my side than the first one.
It's on how should we think about the revenue progression from here and I guess, there's really two elements to that so number one.
And I in NIM and it seems like if I read this slide right that you essentially guiding that NIM might see that's a bit lower but.
Given the expectation of all four of loan growth that we should be at or Boston or indoors and inflection how should we think thats correct in terms of other income that the class and then some markets income, which which so much abuse liability. This year would you.
Expect that equally to trend somewhat.
21, compared to 20000 feet the point Im trying to get dish, whether we should we should overall see a slight increase of stabilization of revenues in 2020, one compared to 2020.
Or whether there's any other elements, which which will present that next year.
The second question on on capital return them somewhat softer close in a unique position us.
Alone of senior loans in the middle of a buyback.
When the dividend ban came earlier earlier this year and just given what's happening in in sort of completion of the disposal of Paramount.
The company's position now compared to your target range.
Hello Hello.
How likely is it from your perspective that you should you could do a buyback potentially.
Next year from from from the discussion distillate less buyback and to build a form of capital return something which will.
Depending on outlook in February as possible and would you expect internationally, a capex to be treated differently to UK domestic banks, just given that it seems like the economic impact that the states in Asia. It's it's much milder combat to put away. Thank you.
Okay.
Thanks, Martin, let let me have established answer those questions, but bill will.
No doubt either into Jay to add to it and so revenue progression, which is clearly I think the really key question. So we saw the net interest margin come down by five basis points between the second quarter in the third quarter, which actually given the size reduction interest.
Right I think that was.
Good evidence that the focus we've had a poor mix of liabilities and on the pricing within liabilities has actually managed to provide some reasonable offset against some of the interest rate pressures.
We've said that we think that there's a little bit further to go on the reduction on the NIM, but hopefully not too much more and that should play out certainly over.
Maximum this or next couple of quarters. So I think that hopefully we'll have a NIM somewhere in the 120 thereabouts of range.
For the majority of next year that will be clearly lower than the average in 29 season, given that we start high in 2019 as lower during the period. So the question into next year, which you alluded to as well, it's really going to be about volume on the interest income so right now.
Now an encouraging thing there is that we have seen from the start of the year about 5% volume increase and the balance sheet and if you look at the projections for countries coming out of recession.
Net numbers that Weve included except for I think is pretty good support to suggest that will over the next few quarters be a progression of improvement across many countries. So our sense is that to be getting that to the right volume growth, maybe a little bit higher than that should not be they offer the impossible as we go through into next year.
Yes.
Then obviously, we've got the non interest income that you also referred to which is being over half are in now is really important and in a low interest rate environment becomes even more important.
Financial markets in wealth management I get to the two quick ones to call out there.
Yes financial market did have a particularly good first half this year with particularly volatile markets, but we really are very confident that that is an overall the the third three quarter numbers collectively are a good run rate for this business something that we absolutely should be aspiring to continue with going forwards.
It is still an opportunity to penetrate more of our base and this is not there for all of our volatility. So we remain very comfortable with the financial markets business and as I said earlier, Mike in my comments the way the team has improved that business over the last several quarters. I think is very commendable wealth management also referred to.
To the track record there is now a pretty long established we.
We have definitely seen confidence in wealth management, particularly northern Asia pick up really quite nicely over the last several weeks and our hope would be that that would sort of spread throughout the country. As we go through next year.
So we feel reasonably comfortable with the non interest related income and hence a stabilization of income next year I think should be there or thereabouts, where we should aspire to be obviously caught a number of months to flow under the bridge, but that is I think directionally, where we should expect to be.
On capital returns.
So stop point, 14.4%, which is good in some senses sort of six months into a huge.
Good crisis slightly surprising I guess, we are actually above the top of our target range.
We have I think evidence clearly that in the past and it continues to be our view, we have no intent on sitting on extra capital over and above what we need to run the business and the fact, we have has returned and buybacks going on simultaneously in the past.
12 months or so is good evidence for the fact that we have no intends to be holding capital was the thing we need to do is just see how the remainder of this year dose pan out and see whether the sort of macro environment as we see it today continues to be a roughly as we see it now second.
Secondly, we will no doubt have discussion with our regulators about where their minds are on this and then in February when we did the update on the full year result, I think hopefully the issue will be how much to return the secondary issue, which Martin you referred to in your question is clearly one of the mechanism for returning it buybacks dividends not.
Have that discussion yet obviously, we fully understand the share price where it is the attraction of buybacks weekly understand a lot.
As investors prefer the dividend route, but I think step one is probably getting agreement is an amount that can be return and that too is going to be agreeing what the best mechanism for that return is.
Hi, Andy.
You hit all the points I would hope to update I guess I don't know that I would.
And the cats, we can't wouldn't comment on what the regulator might be thinking they'll make their statements when they when they choose to.
I would agree with the premise of your of your point Martin which is that is the markets that we operate in are our fast growing recovering quickly.
And we've demonstrated a pretty satisfactory results so far.
In terms of both of credit quality and resumption of income growth anchored in the overall equation, we would hope that that would be considered along with everything else that that our board on our regulators, we consider when it comes to distributions.
Perfect. Thank you. Thank you very much.
Okay.
Thank you. Your next question comes from Ronit Ghose from Citi.
Please go ahead your line is open.
Great. Thank you for taking the questions I had a couple the first one is a follow up.
On Andy's guidance cities.
On this call and the presentation deck I mean, if I sort of just to run those through quickly through a spreadsheet you're coming out of the auto TV of about five 6%.
And obviously the loan losses, the credit impairments is going to be a big delta that.
Hello.
Correct. It's just am I did my math right is five 6% the right ballpark and the follow on question, which is more important is.
That doesnt seem like a good enough return given the footprint you operation until you've talked about the growth options and opportunities how Asia is doing well hire business is doing well that sort of five 6% already just doesn't.
Good now so what are the sort of the Delta is what else can we do get a pop from hope for credit impairments to come down.
To get that RFP up further.
My second question is linked to your confidence and market share gains.
Financial markets and elsewhere are there any numbers you can share with us in terms of just scoping what the relevant market shares are today ballpark versus what you think you can get to it because obviously as you alluded to Andy.
Quite a lot of skepticism about how much of this year's markets revenues holdbacks are inflated by market conditions.
And my final question is still with us and so with Mocksville, having you've talked about.
At the start your presentation, how excited you about boxes sitting in oncology right now, but we've talked before about how much it doesn't really move the needle this year or next year at group level, but if you were to globalize mox, maybe something else could come up and what's what color ambitions you have to try to reinvent your retail bank using box outside Hong Kong.
Thank you.
Okay and things to that let let me pick up the first two parts and then.
So bill can trustmarks et cetera.
So how would you look at royalty so sorry.
5% to 6% not good enough you'd agree with that we want to get to 10% and we still believe that that is something that we should get this bank to it.
It is a level of other banks to achieve and it's been our goal for a period of time to get up there.
If we had not had all the cobot issues of this year and you take and what we printed in the first quarter, we pay them site closer to 10%. Unfortunately, we are now at but coated with was not something that we envisaged and obviously something the whole world has to deal with so.
So I guess overall, you could say that Cofidis, maybe put us back a couple of years, probably on the overall sort of routine ambition trial. It remains clearly absolutely on target, 10%, but it is not where it needs to be yet.
As ever with these things I think it is going to be multiple in terms of how we get there and interest rates. Clearly has has held back there is nothing we can do about that if we were back in the interest rate environment. A couple of years ago, we'd be having a very different discussion state is not where we are at so what we have got to do I think is focus.
Up on multiple fronts. One is what we can do in the interest space as I talked about before to make sure. We are taking our share of the volume gains that arise across the Asian markets, where we have a great reputation. They are markets that are coming out recession first and we see a lot of opportunity.
In there so.
Secondly, we have on the noninterest income got to push the fee side of the business in the wealth management financial market space and.
And that we are absolutely doing thirdly, we've got to be ruthless on our management of the allocation of capital and make sure that.
What we are investing in is getting as good returns and is therefore generac today the greatest amount we can from the base impairments.
This year is obviously, a higher impairment year, we will see how next year plays out.
Given that the wind we will be on an improving trend next year and then hopefully we will come through the coker as coal.
Costs, we are very very focused pump, but we're trying to get a balance there because the solar rural cost takeouts as the underlying versus the absolute need to invest more in digital capabilities.
So is that more and more call business is that utilize more and more of our customer interactions all digital.
And I think many businesses alone three covert the importance of that so im.
Im sorry, fancier question its multiple but your point is taken we need to get there. We are absolutely focused on getting that interest rates of the sea has caused us to take a step back on that from.
On your market share gains question why.
When we come to result in February we will provide more information on that there is obviously a bit of a sort of lag in terms of publicly available information from competitors, which does make it quite difficult to know exactly.
Exactly what our share is doing.
From what we see the volumes were dealing with we think our position in our markets is remaining very strong and that we have been gaining some share over that period of time.
The hardware evidence of that we'll get a little bit more insight as others report over the coming weeks.
Bill, let me hand over to you on the markets and related questions.
Good thanks, Andy Thanks, Ron It look.
Look I, just add a little bit of color on the R&D side.
I can assure you that year.
Our senses us concerned about 5% to 6% or whatever number your models for that is matched by our own.
Concern, but equally matched by our determination. So when we look at the things that we've been doing over the past three or four or five years, we talk about regularly there still the right things to do and they've been growing steadily improving operating profit and.
And returns and that's growing our network business, focusing on our effort population, becoming ever more productive through digitization and otherwise.
Maintaining strong credit discipline and evolving our asset liability mix are these are these are that thats the recipe to get to 10% plus ROTC. It's working it's now.
Not working as quickly as we'd like because we've had a combination of economic slowdown and now that the lower interest rate effective covert wish we could magic. It all the way we can and does that mean, we should throw the strategy wait no absolutely not why because the strategy is working well, it's EBITDA actually working so one day, the Soc market will realize that and we'll be happy campers.
I would now.
It is kind of on the mortgage business can completely agree let's keep in mind that we do not have a nor are we going to have any time soon a large us capital markets business Thats been the profit driver for a lot of our peers and we wish we had it again I got to magic it up but we don't we're not going to anytime soon but we do have.
It's a really good emerging markets business, especially in local currency.
With a very strong FX business with a in improving rates business, which is strong but can get stronger running weve, we scratched the surface of potential on the rate side in our in our core markets.
With a relatively nascent credit markets business, obviously, we've got a very good credit business overall.
So the the upside for us is quite substantial as we hit full speed on the.
The local markets rates and credit side.
And I think we'll have a reasonably tapping what has been a very interesting FX market and I think we'll continue to be an interesting if FX market for some time.
So I feel very good about the prospects for growth in that.
Market recognizing that it will fluctuate from period to period with market conditions.
And mocks emulator, let's broaden the question now to digital banks or retail digital banking Maxim.
Lots is now our test.
Standalone digital back right, we've got nine in Africa.
We have obviously one in Hong Kong, we have a banking as a service model. That's in the as I just as any I will discuss at the half year is isn't testing right now in Indonesia for launch in the early part of next year.
Got the indigenous Digitization efforts in most of our other markets, including some partnerships and got a partnership with cost and Korea, where we're building a digital back together leveraging what we've learned in our other 10 markets and what we're learning in Indonesia.
Got indigenous efforts in India, Malaysia and elsewhere. So.
The real reason for me to call out marks was to demonstrate that when we when we make investments and again you quite rightly I think our shareholders are asking looking start a lot of money at your digital investments are worse than me.
Where is it showing up in the bottom line and the fact is we are establishing ourselves very very clearly as a leader in many of the technology areas that are critical for the future.
We're establishing ourselves as a very credible partner that will give us access to tens of millions of customers keep in mind that we had 10 million today.
So thats it thats, a quantum leap in terms of access to customers and we.
With that comes a tremendous increase in productivity in all of our businesses and this is very low cost income ratio business and once fully up and running.
Very very accretive that's the reason that the satellite digital banks seem to trade at so much value in private or public market. So.
All in all we feel very well positioned to convert to get the early success Weve had in marks.
Into really profitable business streams, as we're able to layer in our products and services as we're able to roll that out across markets recognizing that the second locks assuming we use it at the same or similar tech SEC will cost a lot less than the first locks and the third locks will cost a fraction of that again.
That's all the game, obviously, so far what you've seen is the expenses.
Trent disease, we've managed to make all these investments without increasing our expenses in five years right. So.
And while improving the compliance operation, while investing heavily in cyber security et cetera, et cetera et cetera. So we feel really good about where we stand right now and and I think that the opportunity for growth in hardcore cash profits bottom line is great from here in the digital share it elsewhere.
Yeah.
Thanks, Andy Thanks, Phil.
Thank you, ladies and gentlemen, as a reminder, if you wish to ask a question via audio. Please press star one on your telephone keypad and wait to see name today announced.
Anthony Please use the question box available on the webcast page to submit your questions.
Your next question comes from Robert Noble from Deutsche Bank. Please go ahead. Your line is open.
Millennial and could you just walk us through the.
The cost pieces. Please.
Yes last year of $1.6 million, so we're taking the workout as.
This year.
Got to increase sales and just maintaining levels. This.
This year.
Because usually the travel and entertainment marketing will increase next year as well so how much is pharmacy say this year regarding license.
You also talked about so much inflation cost bases on Switzerland.
On how much you have to say, hey, should see kind of keeping costs flat.
Next year.
Or or slipped slightly up against when you sign.
Yes, okay.
Let me pick that one up if you go back the last three or four years.
I would say that in reporting a pretty flat cost profile overall, roughly roughly we've taken about half a billion of underlying cost out in order to be able to fund about 250 of inflation and about 250 or increased investment.
Cost, particularly in high Tech and we've done that three or four years running and we will continue to do that again next year. The investment spend will probably be a little bit higher next year, not hugely but in that sort of ballpark.
Very much focused on digital because to the previous point, we really do believe that this important going forwards and all that does is review our need to take underlying cost out of the system.
This year, we'll have two benefits in a warm we will accrue a slightly lower stock bonus, which we have certainly been open about and hopefully that will not be recurring feature. So we will have to find a way next year to take other costs out instead, and secondly, our travel and.
Hotel budget for this year as you might imagine has has come in somewhat lower than our normal run rate previous years, and I guess, a reasonable belief set for next year is that it might have been quite close this year, but it probably will be fairly low again next year.
So that will also help so basically the story is taking out roughly profitability online cost in order to be able to from inflation and to be able to fund the increase investment in digital that is what we did this year last year the year before and that's what we need to do next year.
Thank you very much.
Thank you. Your next question comes from Jason Napier from USPI London. Please go ahead. Your line is open.
Good morning, Thank you for taking my questions.
Simple answer please if I could just coming back to marks.
The I think the thesis of sort of digital banking both in markets that your presence in and those that might be contiguous with your footprint like.
Huge amounts of sense I wondered whether you could share some of the experience so far in the kinds of customers that you're attracting.
And whether the sort of.
Mature business plan.
Our return on tangible equity of product sets that these sorts of endeavors this is equivalent or better than.
The sort of performance of the Big Bank in Hong Kong in other words, if there is any kind of churn that and sort of an industry level do these things produce superior returns.
Or is it really about sort of defensive defense against demographic change and so on.
And then secondly, thank you Andy for the the.
The slide on the divisional reorganization I wondered whether you'd add a little bit more color based on.
Whether there are any sort of financial consequences that whether the cost dynamic is important or winter chill about organizational design.
Complexity and the like thanks very much.
Thanks, very much for the question Jason.
I think the credit profile. So far is what we targeted says that we first of all what we launched with was a.
A deposit and entertainment proposition with which is focusing on the quality of Onboarding read the quickest application approval process. So far has been a bit over two minutes, which I think is record setting in the world.
It takes 30 clicks to open an account and a and with that you get a.
Hey, Tim the counter number those cards.
With and a lot of that sort of bill paying type facilities and things of that nature, we will layer in pro.
Products around first credit cards credit cards will come next.
Sort of lending products that overtime will roll out in the wealth products. So the asset we targeted millennials and and that's that's tech savvy millennials isn't entirely a mobile phone based system. So.
That's what we've got the.
The spending pattern so far have been very much linked to add two relatively small value transactions through.
Food and and other consumables.
Exactly what we would expect at this point, obviously as we broaden out the the offering to to involve credit and wealth management products, starting with trading of FX equities.
We would expect to attract both a higher proportion of people savings, but also a.
Wealthier, perhaps more mature demographic.
Along the way, obviously always focusing on making the customer experience at best in class, which is which is what we seem to have done so far.
Long term returns are.
Obviously is impacted by lower interest rate stood at the outset in a deposit gathering platform. The with interest rates have dropped the short term profitability will be lower than we would have expected otherwise.
Equally obviously as we are able to layer in credit and and wealth products.
We're getting back much closer to the sort of profile that we see in the in the main deck.
Mike as you know is is very skewed to 12, which has been a profitable and growing area.
While the Formax is able to compete with that both because of the demographics of the customers and also because of the very well established position to faster turn it back.
But the cost base is also much lower than than Senator back. So I think we can get to the point, where I, where the profitability of the digital back is converging into a into the main bank EBITDA it'll take a while.
Good luck.
So back to Andy.
Yes. So on your regional question, Jay it's not supposed to two dimensions. The regional won't walk wanted to to Asia regions, becoming one and the other is the European Americas region.
Reporting into Simon running the corporate.
Bank business given that almost all the activity there is corporate bank.
There will be some cost opportunity I think in both given that obviously, we got some regional HQ et cetera that we would need to all but I think the bigger benefit is more actually on flow of activity and on sort of focus upon clients and certainly in Asia being more alert changing.
Patents of the supply chain so.
Little bit on the cost side on the income probably slightly more on the income side.
Thanks very much.
Thank you. Your next question comes from Tom Rayner from Numis. Please go ahead. Your line is open.
Hi, good.
Good morning wanted one.
Two questions. Please the first if I could just sort of go back to the marketing I'll start at the beginning on on the revenue.
This is sort of inflection between when the downward pressure from REIT starts to really be a lead more positive growth.
I was not wealth management.
Financial market starts to become the driver.
Your guidance for Q4 seems to be pointing to full year revenue of sort of 14.7 to 14.8.
The full year consensus for 21, currently 15 and that was a sort of steady flat profile against what was originally expected.
The Twentys that my sense is are you still comfortable with around 15 next year that would seem to imply revenue growth of between one and 2%.
Is that consistent with your thoughts on this.
You know the inflection between those two gold revenue drivers that that's the first question.
My second question is.
On the sort of dividends and what happens if the P.L.A. does get sign off the full year I'm really interested in this idea that the investors had to call go that far.
Final 2019 dividend 20 cents is there any thought process that might say well.
We can we start and so the payback that 20 cents as that so the Twentytwenty final and then the real dividend policy as going forward, we'll be getting from Twentytwenty. One on what is that is that in your thought process. So that's interesting.
Your thinking around that thank you.
Yes, Okay, Tottenham so let let's take those in order.
Clearly forecasting with precision 50 month out in the environment. We're in at the moment is not the easiest of things as I said earlier on the interest side of it you've got the stabilization of the NIM button stabilization being lower than the average for 29.
Teen, which we can all work numbers out on.
We have got the fact, the balance sheet has been growing 5% or so this year and arguably more countries will be moving in a better space next year. So it may be that could be a little bit higher.
Financial markets wealth management, we've talked about as well as momentum on both of those good financial markets of this we had a particularly strong first half within engine there is running strong night.
We will get as close as 15 as we can for next year. If we can exceed it fantastic. If it's just a shade below then that won't be a disaster. The slowdowns that momentum as we come out next year is only clearly incompetent the improving trend.
In terms of dividends I suppose you.
The one can look at the return that we could be able to make in terms or is this making up for one that we didnt do previously or is this a new on I think it probably would take the slightly more holistic view or what is the that is surplus and is it sensible to be contemplating returning that.
The regulators be happy with it.
Whether it is a catch up on some in previous or whether its 2020 related number.
I don't know I think is the constant accounts and then the mechanism to the returns so.
We will as I said earlier, we'll have that discussion at the very start next year and it will be good to see the resumption.
Sure.
Okay.
Your next question comes from Monness Costello from Autonomous. Please go ahead. Your line is open.
Hi, everyone I wanted to focus on asset quality. Please I wanted to think.
Think of it more into why Youre, giving such an upbeat message on the output by the hit the balance sheet metrics. Your stage three is up your stage two is up.
Category 12 credit grade 12 loans are up 29% and the coverage is down so.
Why are you feeling comfortable about the outlook from here and I also just to add on to that slide 20.
Looks as if youve seen higher levels of relief applications in the VIP business. In particular, that's also a single stage to increase so I wonder if you could talk us through in particular that the cost per outlet.
The group overall, thank you.
Okay, let let Lee let me start with us and bill will need to add.
There is a lot of moving parts here and as you've observed we've got some but going out so its a tree caps grew 12, we have bought some come down the early alerts which tend to be a smaller feeder into the former category.
We have built our northern Asia region, where we have got a very considerable stabilization of prices and in fact, the credit impairments that have been going through that region.
Have remained at a low level.
The cover ratio being slightly down is also interesting because what we are finding is that where we have got accounts that could be problematic. We have generally got better security better collateral against Bose as a consequence of some of the tightening that we've done over the last several years, so where we have gotten problem.
Not necessarily the case that the actual likely exposure is going to be as big as it was previously so when you put all of those together, yes, we'll watch growth, yes, we know that some of the stats have gone up a little bit but overall, we're not sitting here thinking gosh, you guys as a huge great lakes and problems sitting under the surface here.
It is obviously going to be stressed by what we are going through but it doesnt seem to us to be a disproportionate problem we have goal.
Relief measures that are coming off in various countries and as I said earlier. So far. This is let me do the retail comps in our commodity question on corporate on the retail front. The earlier countries that have come off we have not seen a.
The significant increase in defaults thereafter, compared with what we'd have expected going in now that may not be a read across to other countries the coming out, but so far the evidence on that.
It does not look too bad.
We are seeing these past few in retail coming down and if the northern Asia markets are an indicator of what is likely to come from Asia market. Then we'll over a period of time, we see that sort of patent coming through so a number of reasons why yes. The numbers gone one way some has gone the other way but okay.
Rule, we don't we don't feel that this is in a worse position than we would have expected.
The the moratorium on the corporate side. The book is interesting. So we've got a level of corporate who have sought some degree of relief.
A portion of the more factories with the commercial bank clients. So this slightly small businesses, which you would expect but nonetheless, we've had quite a lot of work has been drawn has actually big will be deferred has actually now being repaid. So is this sort of stock we've got very slightly rotational but.
But generally the trend on that is not one that is in a direction of travel in a sense that is concerning us. So yes, we're keeping an eye on it we have got near 400 million off balance sheet reserve set up to deal with things that are unexpected or unintended, but that's sort of why we would actually be.
The reasonably comfortable with the quality messaging notwithstanding the data points that you have focused upon.
Yeah, I would only add to that.
This is obviously an area that we've been extremely focused on.
Review the portfolio name by name.
We have been very very robust, but underwriting and ongoing management processes in place over the past five years.
They faced works.
Where we had a problem that we have had a couple over the past three or four years, we call them out very quickly.
Think weve ready.
I'd like to thank at this point that that management has a little bit credibility that when we see a problem, we called out and when we feel relatively comfortable about things. We also call that out.
And what you've heard from Andy in for me is a fair degree of caution simply because there is unknown but.
But we feel like we took an appropriate level of provisions in the first nine months of this year, reflecting everything that we see going on in the world.
And to the sorts of ins and outs the various credit grade categories that that youve reflected manage a medicine that Annie's has commented on.
We are very much in line with with the approach that we've taken differentiating so we feel that yet again the sale overlay that we took in the third quarter is appropriate against the quality of the portfolio.
Got it thank you very much.
Thank you. Your next question comes from linebacker from Barclays. Please go ahead. Your line is open.
Morning, Bill Good morning, Andy.
I had two if I may.
First is on.
Sorry, sorry to come back to this one but on the 2021 income.
Expectations.
I guess.
I guess, we talked about the drivers.
And I just I just wanted to kind of drill into just a tad more detailed essay.
My Best guess, if youre entering my commentary is that it could be down net 5% year on year, given what the NIM is going to do in your expectations for loan growth.
Which is probably the best part of that $400 million headwind to Digest next year.
I totally appreciate that good work thats been done on financial markets, but given the year to date performance.
Year on year.
I do struggle to see that up.
Is it right then in terms of you clawing back that 400 million next.
Next year is it really about what comes through in wealth management.
Which is I guess trending it really encouraging in Q3, but even if I just annualize this level it might be a stretch I. Just I was just interested if you kind of wood frame it that way about it Asia wealth management Thats the Delta.
And the second was just on Eni.
Is there anything additional you guys can do in the funding cost next year.
And I know that you know.
The cash inflow in the quarter was.
Really really strong.
I'm not sure how sustainable that is that is there something additional that country.
Thank you.
Okay, let let me.
See weather.
This is a way to look at things. So if you look at the net interest margin. We've had over the course of this year you could get to about either they have warm dot three sort of average for the year. If next year's Whistler won't talk to average there are about that sort of 6% to 7% down.
We have had volume growth running at about 5% this year to date and therefore the question really is whether we can launch another percentage point or two out or volume. If we can you can get past neutrality. If we also 5% that will be a slight reduction on the net interest income next year on.
On the fee income side of things, we've said that we've been happy with four to the financial markets business. We do understand the first half was a boy Eric externally, but we do think there is still a fair amount of volatility outlets. So certainly our intent is that we will keep the average engine of the first nine months of this year running.
As much as we can to throughout next year and a wealth management as we said momentum is but so you put all that together you know maybe a shade under 15 billion, we could get in great movies to trade on the bat for next year I think as a 15 maximum our forecast in very difficult to forecast environment.
Probably the message you should take it if we can keep stable on income stream 2021, 22 and won't that be great. If we could develop even better but.
Its in that sort of zone.
On the funding cost side of things, we constantly are working on trying to increase the mix.
To get more current count saving account.
The digital bank initiatives will start to help on that front, albeit obviously that takes a bit of time to build up.
We have also got a big focus both rates, we are paying where it isn't account savings account and that is one of the things that has given us an advantage in the third quarter that.
That is obviously subject a little bit more to market forces, but wherever we can do we are working on things like that the legal restructuring that we did a couple of years ago again, not huge neutral scheme of things, but every bit helps but also is holding a little bit on the funding cost. So we are we are absolutely working that side of equation as much as we can do.
And I think the fact that we kept the op margin erosion.
Second quarter to third quarter down five basis points is testimony to the fact that that is a big focus in the business.
Okay. Thank you I guess my first take was the NIM pressure that you regarding forward is probably a bit more like.
10% NIM down.
Given that it's probably more likely to be won 20 next year versus north of 130. This year. It sounds like I'm, probably slightly over analyzing that that kind of guidance.
Yeah, I mean, we we sort of said we think it will reduce slightly from where we were in Q3, we hope it won't be too much.
And.
Direction ethics, what percentage, okay, too or are there or thereabouts. Okay. Thank you.
Thank you. Your next question comes from Joseph Dickerson from Jefferies. Please go ahead your line is.
Hi, Good morning, guys. Just a quick one must have been addressed but just on the Q4.
Guidance for revenue in particular.
We would see something of the magnitude that we saw last year in Q4 on Q3, well I guess since you've since you put that out there I guess why is that why do you see that is the case I mean, we've got a huge IP all going on in Hong Kong in the U.S. selection and coal that 2.0, I mean, certainly I would have thought these would have.
Created very interesting.
Opportunities in the financial markets business. So.
Just wondering what the what the driver is there.
Typically given that and the likes of financial markets.
You've discussed how your investments and capabilities have been bearing fruit, so why wouldn't that be the case.
In Q4, this year relative to till last year. Thanks.
Yeah, I mean, if you look at the patent over the last several years the fourth quarter has tended to date a bit compared with the third quarter.
You are right clearly U.S. elections happen in the middle of it may may help a little bit but.
But in the overall scheme of things that plus Warner IPO is not the change on numbers massively of itself in the one quarter.
I said earlier that in the wealth management space the bancassurance bonus that we get for the full year, because we're confident of getting that you. We have places book that by the end of the third quarter.
So you don't get not as a benefit in the fourth quarter.
Potentially lost two or three weeks of the year, you just get less activity from corporate to us.
It's going down to the ended the year. So yes, there will be some things to your question that will be helpful. Maybe some things which are.
I'm not going to defy gravity based upon recent history of corporate slowing down.
To the T. in that period of time, and that's why we said, let's just be aware the fourth quarter typically is a bit lower and it probably will be the case again this year.
Yes, maybe just to just touch a color on when we look at the things that have characterized the first part of this year, but.
What we're talking about volatility that is a big source of volatility was the structural drop and U.S. and then and then global interest rates and that's not going to happen again, most likely that obviously, if we went into negative rates in the us that there'd be a whole different discussion yet.
And second is was a structural realignment of the dollar first up on the back of crisis, and then down in the back of economic performance and corporate and other concerns.
Secondly, I'd like I'm, certainly, hoping for Cobra 2.0 to produce it the the kind of volatility that you suggest it might be.
If it does and that translates through to currency markets.
In some way.
That could be that could present opportunities that did it but the underlying trend for us in the financial markets business is our our clients' propensity to hedge and our clients propensity to enter capital markets and obviously from our perspective, the capital markets, where we operate is most helpful for us.
And that that is typically more seasonal as any suggests it and I think that there's there's no reason sitting here right now that we should expect a different type of seasonality that we've seen in the past.
I guess, then why the need to call. It out given the consensus was I think calling for down 4% quarter on quarter, why although that's that seems to be more or less in line with prior patterns. So why did you feel the need to call it out.
Well I remember, we're kind of like consensus and everything so why bother to have a call at all.
Okay fair enough.
Thank you. Your last question comes from site well. Some bad then please go ahead. Your line is open.
Hi, Hi, Andy I thought thanks, taking the question I think one general question sorry to go back on revenues.
Yes, if you remember two q. I think we talked about 15.2 billion better and better about it looks like we're heading into a number more like fortinet 14 monetize against the disruption.
What I will do that kind of feel about the number we're heading towards.
From the peer as we said that into Q Harbor, Washington has been pretty flat national marketing very good it's very hard for you and for us to forecast. These revenues and so what has changed in your understanding of revenues. That's led to kind of thinking there about 15 point twos now they're in there about kind of Fourteeneight 40 markets quite big dogs Onep, yes.
This is your point of view when you gave that kind of those thoughts into Q are now considering very on Threeq you guys talk what's changed for you into backlog exchange. Thanks.
So just a few thoughts.
I don't think 15.2 was our number.
That was interpretation of what we said Oh, what I'd say probably.
What we did say when the interest rates were good.
Going through such a significant change was that we saw the balance of year income pro.
Probably initially we said being impacted about 600 million negatively and the half year, we said actually having seen the forward curves, it's probably more 800 million.
If I were to look at the first quarter, where we printed I think 3.81st quarter, which was essentially pre interest rate reductions.
And you still have tons up by four is the sort of proxy for the full year.
If you normalize that for volume growth actually where consensus is for the current year, there or thereabouts is not a million miles away from 0.8 down. So I just think it's just been an unusual period when you get such significant interest rate corrections. It is never going to be easy to precisely workout the impact on them.
And when you've got the backdrop with something called co visits going on as well.
It's it's just difficult to be very precise.
I didn't think we were too far off the mark with what we said the.
The term others, others, who formed that view.
So I think we are where we are and we talked about where we think margins will be talked about why you think volumes will be with financial markets and wealth management and we'll we'll see just on next year. So the quite how things panned out.
Some of that will be about how effective government action has been outcomes have gotten top because it will not as the case may be which obviously unfortunately is not within our cross to influence.
Thanks.
That's fair enough I guess is it fair to say, there and thereabouts is plus or minus the 400 million.
Why is it that is that is it scale up for core stability that wise when you think about kind of guidance looking out.
We should be.
What kind of skeptical on the ability to understand out did that kind of range that feels that the difference we knew the $800 million up to Q1, we talked about there they're about 16.2 billion euros lower somewhere shy of quantum of the revenue downgraded then it becomes a box those downgrades because then.
That board.
Yes, there and thereabouts is that the kind of the range, we're thinking about three $400 million.
Yes, I I.
I'd say this if you've got a business that whatever 14.7 14.8 billion dollar income on a full year basis.
So this year as I said earlier, if we could hold to that level next year I think that will be a reasonable outcomes, we divested its great.
Your your sort of plus or minus 400 million eight towards the 2.5% sort of delta.
On that number 15 months now.
I would love to think we'd be somewhere in that regard.
And let's let's hope that we are so directionally, yes, I would be comfortable with that but external events could either for the positive also negative could impact that.
Yes, and I guess, the plus or minus 10% delta on it yet.
Okay. Okay. Thank you very much guys.
Okay. Thank you.
Right I think we have come to the end of the questions.
So thank you all for joining the call today.
Hopefully that answers most of your questions. If you got more than no doubt you will call into talking the IR team and we can handle so his.
Offline. Thank you all very much indeed.
Thanks, everybody.
That concludes the presentation for today. Thank you also participating you may now disconnect.
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