Q3 2020 Natwest Group PLC Interim Management Statement Call
About each of our priorities in terms starting on Slide Five with supporting our customers.
Inevitably our main focus this year has been on helping customers manage through the pandemic activity levels have increased across both our retail and Commercial businesses and growth Lending Group 31 billion just 371 billion for the first nine months.
In retail banking mortgage activity has grown since July with applications up 91% and new lending up 10% on the second quarter.
Debit and credit card spending has also continued to increase with debit card spending now above pre COVID-19 levels.
The number of customers taking a mortgage repayment holiday has been steadily decreasing and Trends suggest. They actually threw caution at the start of the pandemic rather than lead initial mortgage holidays home line from thirty three point six billion or 22% of the book to six point two billion or 4% of the book in the third quarter.
85% of mortgage holidays have now ended and almost all these customers have returned to normal payments with just a small number in arrears. I would however caution that it is five days in an ongoing pandemic and we continue to monitor this closely.
You can sleep on slide 6 that Commercial Banking activity levels are also starting to normalize revolving credit facility. Utilization is now 26% down give about 40% as Government lending schemes kicked in and customers Access Capital markets. We're also seeing the number of customers on payment holidays decline in Commercial Banking law. They know represents about 8% of the books where the value of around 9.5 billion down from 11% and 12.9 billion in the second quarter.
We continue to support businesses through the government support schemes. They demand just stated from about 48,000 applications on the first day to an average of eight hundred a day in September seven hundred a day in October. We approved lending of 2.8 billion during the quarter taking our total lending to 12.8 billion for the first nine months in line with chef commercial customers.
As you know that have been significant changes to these support schemes announced allowing more time and flexibility in the payments and we are working closely with customers to understand their response to Life Changes.
We remain comfortable with the risk and diversification of our lending books in retail just 7% of our lending is unsecured and Stage migrations. Remain low incomer. You will recall there were several sets as we monitor closely including retail Leisure and transport nine hundred million pounds of loans in these sectors of stage 3, and we are comfortable with our coverage ratio of 52% Our priority has rightly been on helping customers to manage during the pandemic, but you'll see on slide seven that we should focus on meeting involving customer needs in order to generate future growth.
We continue to have capacity to grow across our sizeable franchises in retail commercial and private banking.
For example in retail banking. We have a 16% share of current account, but just 10.6% stock share of overall mortgage lending. This is an attractive area where we offer added resources to support our strong performance. We have also a low share of unsecured lending with a relatively small cards business giving us scope to grow carefully within the limits of our current appetite.
We announced in August that we are bringing our wealth businesses together under Peter Flavel our CEO of private banking by combining the expertise of our Premier and private Bangkok. We can fully leveraged Asset Management expertise to support saving and investment needs for customers across the group.
And Commercial Banking or investment in Innovation and fee-based products continues with our Merchant acquiring platform till and our new payment platform pay it and in that West markets The Reef. Okay business is now better placed to support our strong corporate and Commercial Business with foreign exchange and access to financing. So we see plenty of scope to serve our customers more effectively off by extending the full capabilities within the bank across our business. I'd like to move on now to our next priority on fly dates.
I'll focus on simplification and leveraging our technology and digital investment has been supported by accelerating change in customer behaviour this year. We now have 9.3 million months of digital users and we added almost a quarter of a million nearly active mobile users during the third quarter taking the total to 7.6 million.
Nice about Cora has accelerated with over six million interactions from both retail and business customers and video banking is now available across our entire network box directions up from less than a hundred a week in January. So almost 9000 a week now.
Digital acceleration makes it easier for customers to access our services and for us to serve them cost-efficiently. This one reason we have been able to reduce costs would remain on track to achieve our twenty-twenty cost reduction Target 250 million and continue to expect strategic costs in the region of eight hundred million to billion.
I've touched briefly on some of our Innovations, but we are also continuing to develop Partnerships with others. You recently announced a new agreement with BlackRock. You will support our wealth management activities wage, if that investment management processing this delivers two major benefits for our customers first, we make savings we can pass on to them and secondly our wealth managers can put greater Focus wage asset allocation agreements like this allow us to concentrate on activities where we're able to excel whilst at the same time benefiting from the expertise of others.
It's like nine. I want to talk.
About Capital allocation, which is key to ensuring we maintain discipline on returns. We continue to refocus that with markets to better align it with the needs of our corporate and institutional customer and we are now ahead of our plan on our our reduction Target. Our year-end Target was initially thirty two billion and as a result, it's disciplined execution we have exceeded.
Owh was Thirty billion at the end of the third quarter and we expect to be end the year at around this level and to achieve most of the reduction to our 20 billion medium-term Target both ends of 20 21 with Associated disposal losses of around six hundred million over the two years.
We've been able to do this by continuing to simplify the business in order to focus on fixed-income currencies and capital markets.
So in summary of third-quarter results represent a resilient performance and we continue to execute on our strategic priority. We are taking advantage of our strong franchises to support customer simplifying our business to make it more effective and efficient pairing organization through Innovation and Partnerships and sharpening our Capital allocation to allow us to drive sustainable returns over time with that. I'll hand over to Katie to take you through the results. Thank you Alison and good morning everyone. I will start today with the group income statement reported total income a 2.4 billion parents for the third quarter down 9.5% from the second quarter.
But then this interesting was oh 1% at one point nine billion pounds and non-interest income was down 35% five or ten million pounds.
This decrease reflects a number of notable items including a loss of 324 million pounds on the liability management exercise carried out in September which we have already.
Excluding all notable items in Commerce * 3% on the second quarter mainly driven by the normalization of market conditions in that West Market.
We reduced overall operating costs by 5% in the quarter to one point eight billion pounds.
And we are reporting operating profit before impairment of 609 million pounds down 21% from the second quarter as a result of the North Pole items. I referred to earlier.
Impairment charge for the third quarter was significantly below the second 254 million pounds which represents 28 basis points of gross customer loans.
Making all of this together. We reported an operating profit before tax or 355 million pounds and attributable profit to ordinary shareholders of 61 million pounds. Only one night the net interest income on flight 13
Kryptonite interesting come for the third quarter was 60 million pounds higher than the second.
You look at the column for the second quarter on the left and the third quarter on the right. You can see the bank in that interesting, grew forty-three million pounds or 2%
It's a result of higher volumes and one extra day in the quarter earnings Bank net interest margin.
This decrease two basis points in the third quarter to a hundred and sixty five basis points.
This is the result of three factors first the lower yield curve accounted for three basis points. The majority of which is used to the structural hedge in life with guidance second increase Central Security accounted for a 1 basis-point fall and Third change in mix of lending and pricing competition with the two basis points to the net interest margin.
Moving on now to do to the drivers of net interest margin.
On site 14 we show customer loan and deposit rate to retail and Commercial Banking which together account for around 85% of groups net interesting comes home. We also show overall group growth field and cost of Interest earning banking assets which includes the rest of the balance sheets notably the lower-yielding the credit report and the higher cost also funding.
On the assets or lending side used across the group have continued to fall reflecting the pass-through of lower interest rates. However, the pace of production has slowed down in the third quarter.
Declined by 13 basis points to 194 basis points versus a 20 basis-point decline in Q2.
On the liability or the positive side cost reduced by a further eight basis points in the third quarter to 67 basis points.
We have no replaced most of our deposits to the floor and I did not expect much further benefit from this going forward.
Looking to the fourth quarter. There are four main factors to consider first ongoing pressure from a lower yield curve through our structural hedge our guidance of around two basis points per quarter is unchanged.
Second changing the credit e, you know affect interesting earning assets and therefore name.
Third mix and pricing mortgage margins on the front boot improves 140 basis points in line with the back booth.
Application margins in a fee average a hundred and sixty basis points close to bank net interest margin of 165 basis points.
As a result mortgage-lending will be less diluted Bank name in the fourth quarter.
Our expectation is that high demand papers current application? Margin may not be sustainable.
Finally on mix and pricing naturally customer Behavior will impact higher-margin unsecured and Commercial balances.
moving on now typically volume
roast banking loans increased by one point five billion pounds in the third quarter driven by mortgages which grew by 2.4 billion pounds of 1.6% reflecting increased demands after the evening of logged out.
A slow share in the third quarter was 11% down from 14% in Q2 reflecting our temporary absence from the eighty 85% loan-to-value segment.
Nevertheless average 14% for the first nine months of twenty-twenty well above our stock share which has further improved to 10.6% off.
Secured personal balance is make up 50% of total customer loans across the bank.
Unsecured balance is an advocate declined in the third quarter. But as you can see we saw some small growth in our credit card groups.
In Commercial Banking demand for government schemes has slowed from the second quarter, but this still accounted for two point nine billion pounds of additional ending.
However, this was countered by the repayment of our CS which nurse at around 26% utilization broadly in line with our pre-approval levels.
Average interest-earning banking assets grew by 10 billion pounds in the quarter as a result of the averaging effect of strong loan growth in the second quarter and faith in the third.
Moving on now because no one interesting. Come on flight 16.
Third-quarter known interesting, excluding notable items was 18% lower than the same period last year and 11% down on the second quarter this year.
There are two different kinds to highlight first fees and commissions.
Reduction from last year mainly reflect changes in retail banking. We maintain our guidance over two hundred million pounds impact on group income for 2020.
Rising three hundred million pounds for twenty twenty-one
in addition customer activity levels have been subdued as a result of COVID-19.
You can see this and I'll see and commission receivables great lines.
we have
Seen a noticeable reduction in payment services and credit and debit card fees year-on-year do to lower spending levels.
I live a relative to the second quarter of this year customer activity levels have increased resulting in growth in these segments as well as lending fees.
Second France highlights is trading income.
Not with Marcus. Is it a strong first nine months of 2020? Although we saw a return more normalized customer activity and volatility levels in the third quarter.
Looking ahead. We expect the ongoing refocus of that with markets and the reduction in our down to our 20 billion medium Target to weigh on trading income for fees and commissions is more uncertain given changing government measures to restrict COVID-19.
However, we would expect used to go as the economy recovers.
moving on now to look at costs on flight 17
other expenses excluding operating needs depreciation or 1.5 billion pounds for the third quarter.
That 78 million pounds lower than the second and 152 million pounds lower than the third quarter of last year.
This brings our total cost reduction to 193 million for the first nine months.
And we are on track to achieve a 250 million pounds Target for the fuel year.
It is worth reminding you that these cost savings our neck of inflation.
In the fourth quarter, we will incur the UK bank Levy which we expect to be around a hundred sixty million pounds.
Strategic cost including fee for 223 million pounds which includes ninety million parents of redundancy costs across the group.
moving on night impairments on slide eighteen
We ported an impairment charge of $254 million pounds for Q3 or 28 basis points on both customer loans. This is substantially lower than the first half as we had no changes to the economic assumptions presented in July and there has been a very limited number of customer defaults or stage migration.
We now expect the impairment charge for full year 20 to be at the lower end of our 3.5 to 4.5 billion pound range.
Expected credit loss Provisions were broadly stable in the quarter reflecting additional stage 1 and stage two Provisions, which were partially offset by the utilization of stage 3.
So let me show you how our loan is performing on flight 19.
It was little change in the quarter reflecting ongoing government support measures and corporates healthy cash balances.
Ninety-seven percent of our Lumberg is in stage 1 and Stage 2 not passed you where customers remain up to date on payments.
Stage 2 past due is 9% of the books down from 1.3% that Q2.
Stage three is 1.8% from 1.9% in Q2 r e c l coverage ratio is stable at 1.7% which stage should be coverage of 41%
I'd like to mention you have a small proportion of wholesale Logan's in sectors that we monitor those face. These are my twenty eight point eight billion pounds in Q3 represent 8% of gross loans.
In these sectors similar to the trend group level stage 3 Gross loans were broadly stable as around nine hundred million pounds and we remain comfortable with coverage at 52% off.
Turning now to look at risk-weighted assets and capital on flight 20.
Risk-weighted assets between 7.6 billion pounds and juicy was reductions across credit counterparty and Market risk.
Find a way to that fits between 3.3 billion pounds. This includes a 1.8 billion pound benefit from the infrastructure and SME factors and an impact from pool 6:30 of 9 billion pounds.
The largest decreased by business was in that market. We reduced our W by 5.1 billion pounds bringing them down to Thirty billion pounds, which is ahead of our full gear reduction Target.
Looking forward we not respect r w e b below a previously guided range of 185 to $195 billion at the end of 2020.
This is due to the acceleration in that West Market and a relatively low level of procyclical inflation.
We ended the quarter with a common Equity Tier 1 ratio of 18.2% or a transitional basis under if it's 9
this is a hundred basis points higher than Q to do to lower or we which added 58 basis points infrastructure an SME factors, which added seven a basis point on if it's nine transitional relief, which added 8 basis points.
We expect the software and tangible benefit to be around twenty basis points in the fourth quarter.
Moving on to my final side which demonstrates the strength of our balance sheet RCT. One ratio is now 422 520 basis points above our Thirty 14% target range.
and more than
our maximum distributable amount
Oh UK leverage ratio, 6.2% is 295 basis points above the bank of England minimum requirement. We have also maintained strong liquidity levels off with a high-quality liquid acid pills and a stable diverse funding base.
Our liquidity coverage ratio decreased in the quarter to 157% as we repaid a further five billion pounds of CFA.
Bedroom above minimum requirement is $62 billion pounds.
So to conclude we have delivered a resilient operating performance in the third quarter with higher net interest income and continued progress on both costs and are wa reductions off.
I speak made limited change to our guy didn't this is summarized in the appendix. And with that I'll hand back the elephant.
Thank you, Casey before we open it up for questions. Let me wrap up with a brief conclusion. Once the economic Outlook remains uncertain our Focus continues to be on supporting our customers off at the same time as protecting the business. We are making good progress on our strategic priorities in particular. I want to highlight the refocusing of that was markets where we are ahead of plan on our our our reduction Target most importantly we have a castle generative business with a strong one ratio of 18.2% Well above our Target ratio of 13 to 14% over the medium-to-long term.
Its capital strength gives us the flexibility to navigate an uncertain Outlook to resume dividend payments as soon as this is possible and to consider options that create compelling shareholder value. Thank you very much, and we've now happy to open it up to questions.
Thank you. Ladies and gentlemen. If you would like to ask a question, please press the star key followed by the digit one on your telephone keypad. We will pause for a moment to give everyone an opportunity to signal for walk-ins.
Your first question comes to the line of Rohit Tundra Rajan from Bank of America, please go ahead your line is there you can thank you. Good morning, and I had a couple of questions, please so from income and the first on the net interest margin where the moving parts are a little different this quarter and you talked about the mix and competition impacts for Q4 wage. I was just wondering how you'll see the margin evolving in Q4, please and then the second was just more broadly on revenues. I think consensus has total revenues of just under $10,000 billion for this year and 10.64. Twenty Twenty-One. How does that compare to your expectations? If you if you're willing to comment on that, please?
Thanks very much. Tasty. Can I ask you to pick those up? Yep. Sure. Thanks very much Alison. So if we look at Revenue, so insulting average a current 2020 and guidance.
Just remind you of that includes the two hundred million reduction for rectory events, including the high cost of credit. We expect the disposal losses in the income line in that West Market to be 200 million month. And for the few year twenty-twenty when we looked at him why would you mind job is to do that in terms of three buckets? So there's the quiddity and you know Q4 with insensitive to the movements and and liquidity and that will be very dependent upon them customer activity as well. I'll let you decide if what you think your impact of that might be supposed to yield curve which would be to Beijing decrease in Q4 and from the lower hedge and also in terms of mix we'd say the moment expect that probably be relatively broadly neutral and from from the the mix
When I looked at the the volume as part of that, you know for mortgages we have seen a really big strong surge in volume in part driven by the temporary doctors in the property taxes, you know, and as long as that's deadline nears, which is at the end of q1, we would expect to see some of that that certainly start to fall off. So I think that's that's important to remember, you know, they are getting currently elevated application margins. We were hundred four spaces point for the
For the quarter and in terms of what we completed, but by the end of September, it was up at a hundred sixty basis points and as well, so we'll see a little bit of a benefit of of that but just reminding you the hundred sixty-eight is obviously sitting below the 165 of our name as well in terms of commercial volume, you know, RCS have no normalized which we we mentioned already, but we do expect them to see some growth in the government's job at the cutoff date nears us as well in terms of the 2021 consensus. I think we're all very well aware of those global kind of macro events and dead Lock Downs which are happening very quickly at the moment and particularly in terms of the lockdown scenarios. So at the as a result, it's no even harder to estimate the impact of factors such as what these new lockdowns will do on the wage economy and twenty Twenty-One, but it's probably just worth reminding you of the things that we've already said and for 20 21, we expect the the fuel three hundred million impact of the high cost of birth.
And Associated regulations further four hundred million of the total losses and NatWest markets and the reduction in that with markets income as we reduce the rwas and I'll leave you to think about how long that might impact on income and certainly the lymph Force water impacts will just roll through into the the first quarter as well.
Thanks. Thank you.
Thank you. Your next question comes from the line of Jonathan Pierce from numerous, please go ahead your line is open.
Yeah, good morning both. Actually, I did have just one question. But I mean make it to after the comments on income appreciate this there is considerable uncertainty else that but what I'm taking away from the answer to that last question on income is your may be slightly less confident to teaching 10.6 10.7 billion pound Revenue number next year then maybe you've sounded over the last few months. Is that am I reading that language correctly?
I mean anything is there a great question is basically I mean, I think the thing is is we're not none of us have the clarity but what's coming on what's coming next? So I mean it's really best to roll back to what we know and that's very much around the three hundred million the disposal losses and the network marketing come as we reduce those. Those are these
Okay. All right. Thanks for that on Capitol then. I mean there's we hope to get a bit closer to distributions being allowed on again be good to hear your life to store some the mix of potential distributions and in particular whether you'd be two questions really within this, but I personally whether you'd be prepared to declare a dividend despite what probably be, you know statutory loss for this year. And also whether you'd be prepared to do a buyback in the absence of ukg, I participate need to just some thoughts around the necks of distribution to be good things.
So I said well, let me start by saying it is I'm very happy to have the strong Capital ratios that we do at 18.2% and I've been clear that Thursday is my clearance and to start paying dividends as soon as possible. I think it's too early to make predictions about that and the shaitan and nature of infinity the bank of individual updating their guidance in Q4. And then we would look to evaluate returning Capital to shareholders which remains off at the strategy is something I want to resume as soon as possible we have in the past said that we would look at a number of different options of how we would do that, but we'll evaluate that that the time
Okay. Thank you.
Thank you. Thank you. Sorry thank you. Your next question comes from the line of Martin like from Goldman Sachs, please go ahead your line is open. Yes, sir. Yes, good morning from my side. Just to question, please the first one on on on on the potential for the negative rates obviously giving the various comments over the recent ones and even think The Regulators questions on what the banks are prepared for that. Could you just comment on whether or not this group is ready for negative rate and if you think the market is ready and in a negative way to have to come what for the levers would not waste have to offset that was impact of negative. Great. I think you mentioned in your earlier remarks that on the deposit side. We're pretty dead pretty much day on the on the on the table. You have a lot of space and secondly, I was just wondering if you could shed a bit of light on on how broad the Strategic review is undertaking adults dead.
I think
In your report you state that the current strategy is to grow that business is is that the right strategy at this time in in at this moment in time. Just giving birth how comparatively lower the profitability of larger Banks is in Ireland that are presents and are there any approvals you need to Upstream some of the access cab? You're holding a towel stock in order to to have that available at this level. Thank you.
Great. Thanks for the question. What we're doing I start with option and Katie negative great. So as we sit here today, the strategy for Ulster is unchanged and you've seen Jane and the team doing a good job in terms of continuing to safely grow that business and reduce costs at the at this current time. Our priority is supporting all customers and making sure that we support them during this period but as you would expect I am evaluating the impact of tova's and the challenges on the economy and we would walk all strategy appropriately and responsibly in life of that in the event of any changes being made to our strategy. These would be undertaken with full consideration of any impact on our customers and shareholders. We clearly have restrictions on dividends that are in place at the moment. So we are evaluating our positions, but no decisions have been made, but we are carrying out review page.
You want to pick up the negative brakes question? I know sure absolutely so in terms of of -8, so we are are ready to deal with negative rates as a organization. We're lucky. She said something slightly inverted comments that we've got home negative experience obviously in our our and our older and business. So it's something that we're we're more familiar with and in terms of the leavers, you know, if you look at the kind of cost of of funding this Thursday, we've it's about 13 basis points within and the retail business will see that start to come down a little bit further next year, but you're absolutely right on the on that deposit side your unless you move into the world of the actions, you see our European counterparts taking on negative traits, but there's not a lot of liberals there. So it really becomes a question of making sure that you're absolutely looking after the the core and so I think some of the the bed so we've seen an increase mortgage margins and all kind of help us still obviously come down a bit further and if once you get into a negative rate, we're over there. They're still very kind of helpful and Martin you didn't ask, but I'm sure.
Somebody else read so I'll just also give you the impact of the negative rate when you look at the when you look at the the what would a 25 basis-point fall in the market consensus code of do but we talked about that in December 2019. That was 280 million impact by year. Three. What we would see is if you saw that 25 basis-point fall from the curve as it sits today by year three that we get to about 450 million impact on that and needle that number will obviously evolved a bit by USB depending on what happens on consumer Behavior home.
You understand a few. The one thing I would remind you of though is in our economic so consensus we don't have a negative base rate fall. As our base case. We still see that something today to the downside.
Thanks. Thanks Martin. Thank you. Thank you very much.
Thank you. Your next question comes from line of Andrew Kunz from City, please go ahead your line is open.
Yes, good morning fast. If I could just ask you to read visit your guidance on West Market disposal losses you've obviously talked about the issue is coming down faster than expected. You reiterated the two hundred million for full-year. That's still employed four hundred million the next year. So it just wondering if that could potentially be lower than you previously guided to and then secondly just coming back to this point on more with the pricing. It's a legit key Focus. I appreciate your comments about the stamp Duty and what that might mean for Life fly Beyond also at the demand be on the end of March, but the pricings also function of supplies that actually just talked a bit about what you're seeing in the market there and given their number of lenders page pulled back on the ticket from the higher LTV products given the current uncertainty and whether you think some of those products will come back. Thanks.
Thanks very much. Well what day and I pick up that with Marcus in case you can still keep through the mortgage. We clearly making huge progress on I'm not seeing the network markets plan and we are ahead of schedule on the reduction in terms of the thirty two billion by the end of 2028 at this point to around 30 billion and Our intention is to be around 20 billion by the end of next year. But what I've always said is that we will be careful in a sense of how we reduce the rwas and we refocus that business. We will do that sensibly and carefully we think the guidance we've given you on the six hundred million the 400 next year is appropriate but we will offer you 8 that is he go through clearly. There's more counterparty risk that we're looking at next year. So uncomfortable with the guidance that we are obviously being sensible and careful to ensure that we yep.
Get appropriate Returns on any assets that we reduce. So I think that guy does for me. Okay, did you want to pick up linkage Webster? Absolutely. And so if I I look at it in terms of them because we were so 11% and in terms of completion a little bit lower than you would normally expect to see Andrew, but that's very much as a result of the decision that we choose during July and August should be offering 85% and product we came back into that at the end of August and you can see that coming through as our application levels are back up to 15% by by the end of August. So I think you said there is certainly a lot of demand out there. I think some of it is the kind of reports lockdown Peak coming through and also the the transaction and taxes there is I can see that there is the locks apply to kind of Meet the demand. So when we look at it, we can see that we're benefiting from the strongest basis basis points in terms of the pricing. So for the quarter we were you know a hundred off.
See a basis point go back.
We confront the equally which is is very pleasing to see what was interesting the application volume for the by the end of September was actually getting up to a hundred sixty basis points was slight strengthening of that way. We can see that fencing again as we look to the October numbers up to about kind of 180 basis points, which is you know, it's it's helpful to us and we do think that that level of margin is probably relatively sustainable 4 a.m. And one at that point, I think you'll start to see it move off because I think demand will fall and so therefore you'll see greater than price competition and kind of happening in the market and we've seen a tiny bit of that happening to speak already with one of our peers taking some of their their prices down the way so when you say that level of sustainable you mean the hundred thousand points or the hundred eighty that you had in October
I think if you if you think about the way applications work and around and I know that you're really but this kind of what you're proving 1/4 is what kind of comes in to you the following quarter. If you think they a completion has a kind of like two months due to see what kind of average cycle so we were a hundred sixty in the in Q3 by the end for that to benefit. You'll see coming into view for what we're seeing is that gone up a little bit and then October to about a hundred and eighty some of those will complete that the very tail end of this of this quarter and some of them will move more into completion in mq-1. And then I think you'll start to see it coming through and coming down a little bit after that because I do think the band will fall and so therefore you'll start to see a little bit of Market Dynamic going on on on pricing as well. But for the short term peace, I think that that's awful. So I'm and which is why we kind of say for Q4 broadly kind of flat but you know, some of those better ones that will compete at the tail end of the quarter as well.
They keep full flat key one up to potentially down again.
I'll leave you to draw your own conclusions on q1 and Q2. Cuz obviously there's more other market dynamics that we going on at on that stage as well in terms of customer activity, but we're all right. Thank you very much. Thanks very much.
Thank you. Your next question comes from the line of from KBW, please go ahead your line is open.
And wanting everybody hi. Yeah, could I just ask you about risk-weighted assets and in particular and not really so much focused on on you know this year particularly, but I look at the group longer-term like 21, 22 23 what sort of risk-weighted asset level. Do you think you need to run the business that you envisage I guess is my question because it seems to me that I'm just to give you the context. I mean you're you're looking at what about $165 billion today? I mean, it's 175 less than 10 off for now West Market and I get the procedure calendar to come but by the end of the next year, it could have gone again. So, you know, that's like a short-term thing. I mean, I can't really see where the growth is going to come from on that 165. So is that a set of fair game fair analysis?
So should I go ahead and show you the perfect so so do you do you look at your ABS light will lose ten from that with markets which which will kind of. It's a couple of things that are coming towards is obviously in terms of inflation there. There's the mortgage flaws which come in out 21st, January 20-22. We've always guided you that numbers off of 10.5 billion pounds are Brooks a little bit bigger. We'll probably do a little bit of that in a little bit earlier than that sort will be a number of in of the order but the Shaker move very slightly off more by back to the year-end. You've obviously got Bowl coming in. I think there's lots of opinions as to when it comes and how much it comes but I know that certainly always guided through 5 to 10% and regarded you to the loss 5% so that that peace will all kind of come through. I'm not sure that you'd see people 6:30 come up and disappear by the end of 2021 and I'd like to think that would be the case but wage
I think that would be a bit quick. So do you think you'll see a bit of the poor signal quality kind of continuing into the years after that, but it I don't think it's I don't I'm not saying that out to any twenty-three but it took longer than there but when we are guidance that we have this year of one eighty five to one ninety-five and that we'd expect it to be at the lower end of that. What I I would say we don't respect to be below that for give me a what I would say is we think that that's timing so we do expect and twenty twenty so twenty Twenty-One, so pretty Marble Falls and Prevail, but we will see inflation coming through and so that range is more kind of chrome rather than actually not not their own again. We'll we'll talk to you in February about what our viewers as to where the range might be for the end of twenty Twenty-One, but it's definitely timing delay on Prospect totality rather than anything else about, you know, very helpful. But so just to clarify so where the market thinking around for twenty Twenty-One, you're not hugely uncomfortable with that based on what you know today and I know we've got a strategic review coming home.
Just just broadly speaking.
I mean broadly speaking. I mean, I think it would depend on timing and Custer Behavior, but I'm not I'm not hugely uncomfortable with it and we'll talk more about it in there when we get together in February.
Right. Thanks very much. Thank you. Your next question comes to the line of guys seven exam, please. Go ahead. Your line is open Monday morning. Thanks to like questions. More question was just all on average interesting assets and just pull sixty-eight billion on average for the course, but presumably ended the quarter some way above that level. In fact talking to a healthy mortgage Williams into into Q4 even into q1 next year. So I just want to check it is reasonable to assume that you'll be entering 20-21 with the probably something north of 408 conscious consensus is is somewhere below that that level such my check. I'm not missing anything on that line and and then secondly home so I can the second phone costs. I'm seeing a very good performance in Q3 and if we step back and look at the total savings a little recent years. I mean, it's quite a staggering amount that that's come out the business.
I guess it's on this week we tend to to like to see that but if I just play Devil's Advocate I presume there must be some negatives that come along side that in terms of pressure Priscilla business.
Especially in the current environment staff and Route things like that, or was it really not have any negative connotation having taken out that that cost. Thanks.
Okay, thanks for waiting. I just hope the cost question and in case you can pick up the first one, we're we're we're pleased with the progress on on course hundred ninety-three million though for the first nine months. And well we have been doing is continuing I talked about in the business kid costs and bad costs. So we're continue to invest in the business and then very much as wage are chasing the business around customer Behavior you serve on new technology that will that will change the experience for customers and colleagues actually, if you look at what the impact of that is on a colleague's which was you know, the the the sort of second part of your question. We've just completed a our usual annual survey with staff and we've been talking to them on a regular basis. Engagement schools to the highest. They've ever been in most cases where above the Global Financial Norm in terms of of Staff engagement. We're investing also a huge amount in our colleagues dead.
In the same way that our customers are learning about new technology and their behavior. We're also investing in our colleagues. We have something that we call the net West Academy that I launched earlier this year, which is investing in people training re-skilling development so that they can evolve their roles as well. So I think the the cost that is coming out is largely to customer journey through improving the experience took place. This is get better as our customers benefit from using more digital tools. Actually our colleagues experienced gets better as well because there's much more automation allowing them to spend time on more as a value-add aspects as well. So actually we've seen engagement and go up from that perspective. It seems to interest earning assets. I mean guy it really does depend on you know, it's positive flows it goes through until it courtesy buffer or sometimes a little bit only the amount blending but it happens in the next quarter as well. And I think I'll leave it kind of up to you to think about what this except for Thursday.
It kind of the critical activity of the market might be or on on it and have that develops over the next the next quarter. Thanks guys. Okay. Okay. Thanks. Can I just put you on back on the on the interesting assets and you took Bank to talking to you expectations for healthy Flo's on the deposit side in Turkey for so, it doesn't feel like that side of it should should reverse enormously obviously it's hard to to call out to twenty Twenty-One, but
it still feels like you're in a good shape into next year versus expectations. We we few we don't need a very good shape and credit, you know hundred fifty-seven percent coverage 10.1 billion of Florida wage worker. I would say that that that was probably I mean that was Stronger Than I think than we would expect and I think you know, what we we've got to think about was just the level of credence in the system what you'll actually start to see while I think you have to individual customer flows. Actually, they're going to Florida in the system until the until that QE starts to reverse. So we're not it's not it would be aligning my views of those and other Banks.
Okay. Thanks very much.
Thank you. Your next question comes from the line of Chris Conte from a not autonomous apologies tears. Go ahead your line is open.
Good morning. Thank you for taking my questions to please if I could just come back on Jonathan's question on 2021 consensus revenues and I I I also I also feel like you've sort of softened your commentary in terms of your level of comfort with where consensus there. So I if I park that West Market disposal losses to one side give them that that's a bit choppy. I understand consensus has in three hundred thirty-five million of disposal losses for next year's so clean of that the markets expecting just shy of eleven billion of a sort of income. I suppose x x the disposal losses. If I look at your three key X all of the notable items you call out an analyze it I get ten point nine and if I think about your regulatory change guidance, I'm guessing we don't have quite the full to hug.
Again, dragging the three key run right so I should probably be knocking a hundred hundred fifty off that to get to your 300 full impact by Twenty. Twenty-One wage would take you down to you know, sub 10.8 before we get into the debates around how volumes play off against structural hedge drag and and all of that good stuff. It does seem like there's a little bit of a disconnect there. So could I again invite you to comment? I mean, it feels like that there is a risk to the downside unless you have very odd big mortgage volume support going into next year and and on the mortgages you've previously talked about eighty to a hundred bits front book spreads being a mid-teens return even factoring in pending mortgage risk late floor changes. What do you think? You are always on the business you're writing right now are I guess the view on wage?
Long-term cost of risk cost allocations the tax broadly unchanged which would suggest a very meaningful Improvement to maybe something more like thirty to forty percent. So if you click on that, that would be appreciated. Just trying to understand how sustainable this pricing environment. Maybe. Thank you.
Thanks for detailed question earlier. And I think what I would say it confirms to me that we have given you the building blocks that you need to kind of work out the the twenty Twenty-One amps of income. So I mean the 3.5 million coming in I would say that probably most of that 200 is in the QC run rate in terms of what their four hundred million that waste disposal losses. I think it's important to think about what the projections doing some that with markets income as well. So just make sure that you have a look at that. I think the the name factors that we talked about for for twenty twenty or are very much. I mean there's I think they you know, they need a customer behavior that we have and what kind of happening in terms of government support it, you know, it feels that we're all kind of a little bit in the right ballpark. I would maybe suggest your your number that you've allowed your customer Behavior to kind of build in in terms of that but you it you've definitely got the building blocks in in there for you to be at your own conclusions on what kind of happened.
and if I just go into mortgages, yes, you know mean we talked about kind of a hundred basis points and you'll remember that that was in relation to the the kind of new mortgage is this, you know, and that would be learning only kind of
Looking you can do the math as I can in terms of the arteries that we're running on the I do think we need to think about it a little bit about the risk adjusting or of of that but we have gone in very cautiously. In fact, you just opening up our 85% Just in August in terms of to make sure that we are managing the risk appropriately, but they returned they would be forced to the bottom of your range for still very good quality returning products in in terms of the are your mortgages and really helped by this significant increase that we're seeing in the in the the Blended rate of the sort of a hundred sixties that were ending in into feet and going little bit from there.
Okay. Thank you very much. Thank you. Your next question comes from the line of Robert Naval from Deutsche Bank, please go ahead your line is open.
Morning, I just have to ask for the decision to pull out of the 85% LTV market and then what change your mind to go back into it? Is it is it purely the prices in the market or is it wrong to change that between July and need to put it back in and it is in the commercial commercial loans is now dead on T. And what's the duration of the pet is not guaranteed and should expect the non-guaranteed stuff to start declining when all of this when it gets the year-end when we took it down to use assuming that I can spend thank you. Well in terms of the the government guarantee scheme, we have a 13 billion of lending that is out on the guarantee scheme. We've had two point nine billion increase this year this year. This course is
Sorry, say the balance bike lanes are a hundred percent guaranteed and the C bills loans are 80% guaranteed. And obviously there are some changes that have been in today's schemes at the moment in terms of how customers can interact on on those going forward. So I think that's that's the nature of those kids. Obviously the customers are a hundred thousand but liable for those loans, those are loans that our customers pay that the guarantee of Assisi sits against our site.
Only mortgage question in terms of our decisions around the 85% clearly at the outcome of the crisis and the pandemic we took a very clear decision around how we will both supporting customers, but also protecting their business as well. We felt it was appropriate to tighten our risk appetite in in certain areas and that was really dead the decision we made at that time to make sure we were taking a very balanced risk process. We felt comfortable going back into that but we will always evaluate every decision we make our mortgages with Iraq has really looking at affordability. We were comfortable going back into that market we felt there was more certainty in terms of the Outlook, but we were maintaining Arthur's risk appetite standards and approach to doing that. So that gives you a sense of you know, the decision-making which is always been very rich place.
Thank you very much.
Thank you. We will now take a question from the webcast.
Thank you very much question comes home of JP Morgan as to this question. The first part asks, could you discuss the retail banking which is down 4% in Q3 versus wage. It looks like it's driven by lower-income on deposits. Could you discuss the moving Parts here and four question to income from UK mortgage has improved 4% in court of 3 vs. 52. Does this fully capture the improved pricing and volume Trends in the market or should be expect further acceleration from here.
Thank you. So the main impact on retail and in the lower yield curve on deposits looking forward a bit of help from slightly lower the funding Wait full quarter of overdraft and no repeaters big fool on deposits into treatment and little precious answer to the second part of that question. In terms of the UK mortgage is improving 4% know that doesn't really capture the improve pricing. So you think about it as you approve a mortgage two to three months before I get down to the boot. So therefore you a lot of what would you be coming on in the beginning of Q2? And so is it going to be things have been approved in in in to 2. So we basically 140 basis points coming on a application volumes at the end of the quarter are up there at 160 basis points. So you should see more of that coming through in in 224 and then it will just you know, depend where we actually land on on Club.
and from there
Thanks for head.
Thank you. Your next question comes from the line of John Cronin from good body, please go ahead your line is open.
Hey there, and thanks for taking my questions and coming back to Chris's question on mortgage pricing sustainability. You've talked to a bit about the potential impact of demand reduction in early twenties on and and just touched on Supply. I guess I don't I'm just a bit more interested from a supply perspective and how you think about that in the in in the context of your own product rotis currently off your own floats around missions are structured Ambitions over the medium-term and whether or not you think spreads could end up back to where they were pretty good pretty quickly given wider said the tops of adequacy strength. So any any comments on that would be helpful and then secondly look just had another go on the other Shore Bank one and what degree of right-sizing home to see in terms of the cops of Base to deliver a return the village I guess support retention in the context of the Strategic review and in the event you don't be drawn on particular number.
I mean how big of factories out in the decision-making process? Thank you.
Very much. We look I'll get Katie to pick up the mortgage question on on the Ulster. I mean CT one ratio and all to do is telling you 28.5% you clearly we've been working very hard with that that business and and as you know, my strategy is very much focused around ensuring. We apply strong Talent or discipline in terms of we're allocating our Capital to make sure so that we're driving the right balance of returns to shareholders overall as well as supporting customers with the Outlook of cobras and the economic uncertainty is you would expect I am considering and evaluating the impact of that on the business and we're reviewing our strategy appropriately and also responsibly right now. The most important thing is we are focusing on supporting our customer in Ireland. These are very challenging times clearly and any changes that I make I'm going to with a very full consideration of all of our stakeholders. Yep.
Probably gives you a sense of how we're looking at that business. No decisions have been made retiring out to review and we'll obviously if you felt with all stakeholders and people sure thank God. So if as we locate mortgages than the sustainability, you know, if it feels that these places they said will be kind of sustainable for the the next couple of quarters. Just given the choice in the demand, you know, we're continuing to to grow the boot. We're 14% kind of application volume of the year that we saw that and that's cool down by our decision to come out of the LT June 10th, which we've talked about already. You know, we're at 15% by the end of the of the quarter so comfortable that will still see em growth our structure has grown in the year from 10.1 to 10.6% off fifty basis points doesn't feel like a big number but that's a lot of mortgages in the given the size of the market. So we've seen good growth. We'd expect at 15% kind of application volumes that you continue to see who growth the thing in terms of spreads going down.
Thank you, where where they were critical of it. I think the really important thing about people obviously join is that that was wait for still at 75 basis points in terms of the bank base rates, you know, and actually what happened is that they came and we didn't pass that through I think given where the the base rate is it would be highly unlikely that we would go into pricing that would take us back down to those levels of friends have given the challenges that we have elsewhere. So we took a few if it went back down to a kind of front to back group being equal then that that feels them, you know more appropriate. So that's that's that kind of hundred forty basis points, but I'm probably going to not try hard prediction cuz it's going to be so much customer Dynamics market dynamics that will happen between there, but it certainly doesn't feel that will go back to pre corporate levels.
Okay. Thank you.
Thank you. Your next question comes from the line of Dickinson from Jefferies, please go ahead your line is open.
Hi, good morning.
Good morning. Just a couple of questions. I don't need the crystal ball on consensus. But some more I guess longer range strategic questions, which is you know, you've got this huge amount of excess capital and you're generating more and we all know you want to return it. But I suppose the one thing 20/20 is done is make us all think differently and adapt and and look forward in different ways. So in that contact, you know how to things like figure into your thought process for the future. I'm not talking something in a transformation, but generally speaking you have a lot of capital you could do a lot of interesting things and you have a fair amount of operational expertise following the various restructurings you've done and the coughing. So any thoughts there would be useful. Secondly one of your competitors said yesterday, there were Nations signals of a structural shift in in mortgage demand in addition to age.
What, you know you're seeing in terms of the demand related to the stamp Duty changes. It sounds like you're not quite seeing those Nations signals. If you could just comment on that, that would be helpful to. Thank you.
Well in terms of of capital clearly and very comfortable with the the strong Capital that we have in the business and the business that continues to generate capital and I think that gives us the flexibility both to navigate the uncertain Outlook as I said, but also, you know, my priority is to resume dividend payments as soon as possible. We will consider other options that offer compelling shareholder value you've seen in the past, for example, we've made an acquisition such as free agent which offers free accounting services and in addition to our business and Commercial customers, which has been very successful. We're also increasingly looking at Innovation and Partnerships things such as till which was our life so much and acquiring was done in partnership with Innovative infintech Partners, as was as met with Israeli companies, and we recently announced a new age
With black work to support the changes we've made so we will we will look at all options that we think will add shareholder value at this point. I think having the flexibility to navigate in such an environment, but my clear intent is to return to paying dividends as soon as possible and we giving you an indication of our targets of 13 to 14,000 over time. So we will consider that on on your point on on mortgages and Katie's covered that in quite a lot of detail this continues to be a very attractive area for us and we have capacity to grow in this spaces as you aware in relation to our stock share and our mortgage flows share as average wage to sense the last nine months. We definitely think the change in stamp Duty has acted as a stimulus to demand but we think that that market continues to remain attractive.
the one that we were going
And they're going well and they continue to increase the moment. I think really is a result of that stimulus and challenge is you know, the nascent things they can take a bath kind of actually work through to the old days, but nothing really bad.
Thank you for thank you.
Thank you. Thank you. Your next question comes from the line of Jason Napier UBS, please go ahead your line is open.
Good morning. Thank you for taking my question. I I really only have one and I appreciate that. It's an area of of huge uncertainty and that's really around learn losses consensus for next year. I'm running it nearly ten times what you've just printed in the third quarter and you know clearly stage 2 and stage 3 balances in pound terms were actually down sort of choice running late, but you're not the only one in the industry to showing that that sort of performance at present. I wonder whether you could talk a little bit about the sort of stress testing and intelligence that the board took it stinks about the Outlook from a credit quality standpoint, you know, you know, we all understand it the uncertainties around vaccines and brexit and what have you but there must be a vast amount of material that you're considering when you think about how the business might Fair going forward and and that'll obviously feed through to you know, dividend and buyback questions as well. So I wonder what color you could provide on on how you think
Think about the potential range of outcomes on our 12 to 18-month you thanks.
You know ejected 000. I'll give you a little bit of color and then you know Alison I will give you I think more kind of views on it when we get together in February which will be benefiting from four or five months more of activity that has as well. But because we kind of look at it. We use Bank of always kind of talked about this 30 to 40 basis points as a kind of through the cycle em kind of coverage know you need to take your own in terms of where we are in that cycle, but we still think that that guidance is is quite valid in terms of trying to work at how we how we kind of work our way through that. We do think that practicality will come in you're the kind of be familiar with the standard as well. It's meant to be forward-looking. So see we we've we've got a lot of that internet release what we're waiting for is the actual defaults to move so that you can see the stage tujha kasie migration kind of coming through and I think the government protection has been a lot to sort of delay that piece, you know, one of the things we get asked a lot of our is in terms of how to be compared to some of the stress testing and the comments
The bank of England have have done and have a look at some of their Bank of England desktop exercises. I think what we find multiple in the areas that that didn't visit envisioned to descale or the impact of the government's money that we've seen so far and that's where we're all really in quite Uncharted Territory, you know, but I think what gives us Comfort is the level of deposits that we can see happening with you see people coming off even holidays. Those are all really important activities while we do see, you know moves in our in our in our kind of heightened monitoring. It's not it's not significant enough to drive anything down in the small amount of the point nine billion. Of course, that is healthy. We saw in akin to 3, so there's a lot of data there but what's actually happening on the on the ground and in the numbers is risks are not my own nothing. So I think we're kind of waiting for that. But I was kind of cool you today 30 to 40 basis points through the cycle and you know, we'll we could all debate privately but where we think they recycle might be, you know, probably not going to be drawn on my own views on Thursday.
what we think is anything more sad, where what was that application?
I think it's good guidance.
In terms of work through what what's I need 21 and 22 might be like, thanks Jason. But since you can just as a follow-up to that that point given the intelligence you have around, you know, all of the commercial system is that you have is it your sense that you know, they're in a period of drawing down on the credit. He's is is their health deteriorating over time and it's really bad. How long can you you know sort of tread water bath at the high-level status of course balance sheets within the banking sector just keep getting stronger. The quality keeps growing risk keep saving away. So I just wonder whether you can you know, share any sense as to whether the customers are off. All right, so the part or whether you know, things are getting weaker and the underlying basis given all the conversations you'll be having with those customers and we we spend a lot of time talking to a customer is Katie said when you look at the level of support that's been put in place. It is really providing, you know, a strong buffer for particularly businesses and customers to navigate through this page.
And they will say pivoting their own business model. So, you know, we you know, my my team and and I myself spend a lot of time talking to customers up and down the country. It is clear that in fact, you know, some of the initial measures where people took payment holidays they were doing throughout of constraints and I I covered a few of my presentation of the shift where people are are normalizing a I think an interesting element on particular revolving credit facility utilization that peaked at 40% that's now down at 26% that's precluded levels. So I think businesses are well Capital we have a lot of deposits on our balance sheets, but it is a very uncertain environment and I would say when when we talked to Commercial and SME customers walk out on sets and see is is very stressful and very difficult some of the research and some of the conversations that we've had just to share with you 71% of smaller business off.
Have reported as often demands during this period and 30% of s think David will impact their business for more than six months. So and and the uncertain Outlook is off is definitely Weighing on them. And I think the reality is in in these economic circumstances, not all companies Will Survive. There's been a lot of support measures been put in place. You will see over the coming months that have been met around a million bounce back loan customers are due to start repaying their lungs and I think then you'll get some degree of indication as of the underlying issues are but but right now I I would echo my comments. I made that at the moment. We're seeing a lot of resilience that ongoing uncertainty be something I would sound an ocean of caution on for businesses as they try and navigate through this.
Explain much.
Thank you. Thank you. Your next question comes from the line of Amon-Ra car from Barclays, please go ahead your line is open morning Allison morning Thursday morning. Just two questions actually. So I see on on on that interesting. So the the outperformance in the quarter versus expectations down to have been driven by Central and from your earlier comments from it. Looks like that is probably driven by excess liquidity. I was just kind of took probably won't for Katie. Is this a is this a run rate for Central while you do have this elevated liquidity position or or is there something kind of volatile on one off in that that that we should call out the second was on cost? Can you just help me understand the kind of you know, they were clearly really strong in Q3 that you stuck with a
Garden sfoglia, so I know that the bank Levy is going to be at.
How are you on you but I think you still basically guiding for a hundred million step up in in costs in Q4. So can you just help us understand exactly why it was so low in Q3. I was coming back into the cost base. Thank you for thank you. So let me let me pick up the the question. So you'll recall at the half-year. I said, I would see rephrasing or costs and they would be largely back Ended as we responded to UK visit and obviously we were spending more money in terms of things like sending out the the government schemes to bounce back loan schemes for example, and necessarily as we pivoted the business to make sure that we could respond to support customers know what you seen in Q3 and it's a strong performance in terms of across delivery costs a hundred ninety-three million lowest of the first nine months of 2019 and our plans have not changed. So yep.
Continuing to execute on our cost plans. I naturally had to rephrase them to to deal with the cave in situation. But we remain on track for the 250 million cost outs that I can assist you in February this year. So I think I'm uncomfortable with that guidance and you seen the stronger performance in Casey Jones picked up, you know, absolutely and and I mean and I am on site thirteen that kind of eighty million that's there in in the central piece of it's not a continuing Trend. It really is a question of timing in terms of the as the rates were following and the timing of which we adjust our internal transfer funding it meant that we ended up with a greater benefit in the center that will resolve itself and you'll see the central go back to back to its usual level as as a move forward from there. I wouldn't get distracted by it and particularly.
okay, so just just on the one quick follow-up then you're able to give us a sense of what the temporary COVID-19 it costs that you're currently incurring in the cost basis and months today tell you able to quantify that it might just help us understand what my naturally slip out the cost basis next year if things normalize
I mean we amount I could give you a number for that by going to be slightly on helpful and notes. I mean, the reason for that is because we've got some additional cost of of coverage and I think one of my personal favorites taxes, we've delivered 11,000 change across the country and redone desktop set ups and all sorts of things like that. But there's also other costs that we haven't incurred in terms of obviously. We normally have a relatively significant travel budget that's completely gone away this year that something that would kind of come back up. So I think it's important not to get too distracted cuz actually those sorts of things all kind of sort themselves out in the round in in terms of of where we are with what we have said at the beginning of years are posted yet would be more back ended and that's what that's the very much what we're we're seeing just now and and we're kind of comfort with the guidance. We're giving you for the for the year. Okay. Thank you.
Thank you.
Thank you. Your next question comes from the line of fire hot, from Red Burn, please go ahead your line is so you can
good morning morning. Thanks. I can be questioned. I just want to really quick follow-up. Actually just I'm being with fix. All right on the retail review. How much is incrementally left now of a three hundred million going forward to and 4:51 from this is one building block question in a couple of just strategic questions Allison, you mentioned looking at things in organically everything you mentioned seems to be a non interesting comes off on Merchant Services and kind of accounting services as well. If you were to look as you look at potential m&a is there a cap on how big you would look and is there is there anything and would you like an interesting, as well as more interesting kind of always the focus security my interest income that was question one. And the question to you was on the loan guarantee scheme you talk about a bounce-back learned being paid back in May and took off like how does it actually work? So do you if they people don't pay back? Uh, do you don't incur the loss and go to the government and also money back? Um, how does that transfer work with the government and wage?
Those bounce back and see the loan when if when you start incurring losses on those. Thank you.
Great. Thank you. Right. So let me take the first question in terms of inorganic growth. And and what I would say to is actually we have more potential to grow organically our business Samsung remains my first priority and particularly. I think there are opportunities where we can grow a business you can see in our retail business with our share of mortgages and I'll stop share that we have capacity to grow in that remains attractive. We have very strong franchises in in retail commercial and private so leveraging those relationships May remain a significant Community forums in particular, you know, you know that we have a very low share in unsecured I think at the appropriate time that is an airbag. It remains attractive in Commercial Banking things like chill and pets are more fee based businesses. So I think that allows us to grow those businesses and benefit from The Innovation that we've made and bringing to Thursday.
The premier and private which I announced in August under Peter Flavel and the strength we have in our asset management of lost business and extending that across the group I think is an area of life. And then we focus of NatWest markets allows us to unlock just transferred or FX and financing business more to areas of the business. So I would say in terms of as we stroll business and the opportunity to grow revenues and fees those exist within our existing business are focuses on making sure that we remain safe and secure than my priority is to return a capital to shareholders as soon as possible and as appropriate. So I think that would be where I would address that on the government schemes. Obviously there have been a number of changes that have been announced and we're we're talking to our customers for that. But essentially the way that the scheme Works under the bounce-back loan scheme is a a mentioned just earlier of which we home.
At T3 7.9 billion in in bounce back tones that benefits from a hundred percent guarantee.
In when customers start repaying that loan they have an extended period to repay if they are unable to pay and then go into default. We would like to work with the customer to collect back from them in terms of seeing where they are. And in the event that they are unable to pay them we go to the government and claim on the guarantees for the guarantee. As you know, is is that the bank on the bounce back loans? It's four hundred percent on the C bills loan. It is for 80% So that is how those schemes were clearly we're working very closely to make sure that we work in a sympathetic and supportive way with our customers to help them navigate through this. Casey. Did you want to pick up the first question absolutely find it. So so basically if you look at the third quarter, the the two hundred million is in essence in there cuz dead.
Activities of kind of come through so you've got an extra hundred further that will come into next year. You know, I think that the third-party market dynamics are going to be important in terms of customer activity, but what we've had in terms of that third-quarter this year's is a pretty good run rate of the 200 Old all been through and then if you just consider an additional hundred and two next year
Thanks.
Thank you. All final question today comes from the webcast.
Thank you very much. The question comes from Robin down of HSBC. It says thank you for the comments on mortgage pricing. But can I ask some additional detail? There's three parts this question. The First Choice NatWest has pushed mortgage pricing up in recent weeks. Could you give us an indication of front of books spread on applications in October second part you talk about back books spread of 150 basis points, but presumably this indicates a relatively stable svr component would a more reasonable estimate of customers who are transferring internally on to new fixed-rate mortgages be close to a hundred ten thousand and twenty basis points and for the final part. Can you give us any indication of how quickly the book is rolling over gross sending internal transfers. The industry average is 6.5 to 4 years. Is that a reasonable estimate from that we're screwed. Thank you.
Hi morning, Ruben. I'll I'll let me take the shuttle just in order of your questions the front and back room is closed. So that's a hundred and fifty basis point. And so and then what I've said to you in terms of you indication on your front mortgage spreads in October. We talked about being around a hundred eighty at that point, but I am Improvement again on that on the application. And remember that will that will then complete a little bit later in terms of the estimate of the length of the boot, you know, we get about 54% of 2 year, but 46% 5 year. And in this last quarter those numbers kind of move around a bit. They basically bought that get from the group three pricing every three years in in terms of of that of the repricing of the distribute.
I just want to be clear on your second Point obviously read in your case. Then where you say with the more reasonable estimate of customers who are transferring and totally on to a new fixed rate mortgage resources. 210 220 basis. I'd work with the Atlanta great. That's that number. So in the field a bit low, so what kind of blending it they kind of hundred hundred forty-four the quarter and you'll see that improve a little bit as you get to the application rate that helps holding. Thanks very much.
I would not like to have the code back to Addison for any closing comments.
Thank you very much. Well, thank you very much for your time and your questions. Hopefully what you've seen today is an underlying very resilient performance. I think these results demonstrate the banks resilient performance in the face of Life significant and ongoing uncertainty. We've been working very hard not just to support our customers and to help them navigate through this crisis, but the bank remains in a safe and secure position, comfortable with the risk diversification on our book and also confident that we have capacity to grow with the Investments that we have made in the business. We continue to benefit from sex change Capital strengths and our strategy Remains the right one as we continue to deliver against our promise and ensure that we're driving to sustainable returns, but importantly wage reporting customers and protecting the business during these times. Thank you very much.
Ladies and gentlemen that will concludes today's call. Thank you for the participation. You may now disconnect.
Thursday Thursday