Manus Costello: Good morning and good afternoon, everyone. Thank you for joining us today. I am here in London and Bill is dialing in from Dubai and will join me for Q&A. I will take you through our Q3 results before we move to questions. Unless otherwise stated, my comparisons will be year-on-year at constant currency, and I will highlight notable items where relevant. We delivered a record Q3 performance, with income increasing 14% and profit before tax growing 29%. Growth was broad-based with Wealth Solutions and Global Markets both delivering double-digit income growth alongside further momentum in Global Banking and Transaction Services. These results are another demonstration of how our strategy is translating into sustainably higher returns. The combination of income growth, operating leverage, and capital return continues to drive strong compounding growth in earnings per share, with year-to-date EPS up 27%.
Manus Costello: Our performance gives us the confidence to upgrade our full-year guidance. We now expect income growth to be above the 5% to 7% range, excluding notable items, and we expect a return on tangible equity of around 14%, up from our previous guidance of over 12%. I will return to our revised 2026 guidance at the end, but first, let me take you through the quarterly results. Operating income was $5.8 billion, up 14%. Net interest income increased by 9% year-on-year, while non-interest income grew 19% and accounted for around half the group income. Expenses were up 9% against a low comparator. With income growth significantly ahead of expense growth, pre-provision operating profit increased by 22% to $2.4 billion. Credit impairment was only $90 million, including a net charge of $34 million from overlays relating to the Middle East conflict.
Manus Costello: Our tangible net asset value per share was up 2% to $17.26. Looking more closely now at the drivers. Net interest income grew 3% quarter-on-quarter to just under $3 billion. NII growth was driven by volumes as we continued to grow customer lending in the quarter. The rates and margin impact was broadly neutral quarter-on-quarter as the early benefit from rate rises was offset by margin pressure on TD. With NII up 6% year to date, we are upgrading our full-year NII growth guidance to around 4%. For the remainder of the year, we expect these trends to continue. Rate benefits will be offset by mix changes as well as further margin compression in TD and the continued headwind from WRB portfolio exits. We also expect volume growth to moderate versus Q3.
Manus Costello: It was another strong quarter for non-interest income, which increased by 19% year-on-year to $2.8 billion. I will discuss the key business drivers in more detail on the segment slides. Turning now to expenses. Operating expenses were approximately $3.4 billion, up 9%. This was against a low comparator in Q3 2025, which was flattered by the phasing of costs in H2 of last year. The Fit for Growth programme remains on track with $128 million of cost to achieve booked this quarter. We continue to expect to close the programme in 2026. We are now moving to a cost-income ratio approach when guiding on costs consistent with our 2028 targets.
Manus Costello: As such, for the full year 2026, we now expect a cost-income ratio excluding notable items of around 60%, a 300 basis point improvement on 2025 and a meaningful step towards our target of around 57% in 2028. Credit quality remained resilient, benefiting from our ongoing de-risking of the balance sheet with impairment of $90 million this quarter. Given the continuing conflict in the Middle East, we took a net charge of $34 million of overlays during the quarter. This included a new $63 million overlay to reflect the impact of an expanded scenario on broader sectors that are impacted by the Middle East conflict and higher oil prices. This was offset by $29 million of releases, mainly in the petrochemical sector and sovereigns due to portfolio moves. Despite these overlays, CIB recorded a net recovery of $24 million, with portfolio upgrades and repayments more than offsetting the additional provisions.
Manus Costello: WRB impairment was $114 million, broadly unchanged quarter on quarter, reflecting continued credit discipline across the portfolio. Our loan loss rate year to date was 20 basis points. As a reminder, our RoTE targets are based on a through-the-cycle loan loss rate of 30 to 35 basis points. Our overall high-risk assets were down $1.2 billion quarter on quarter, driven by reductions across both early alerts and credit grade 12 portfolios from exposure movements and repayments. Moving to the balance sheet. Underlying customer loans and advances increased by 4% during the quarter. In WRB, this reflected higher mortgage demand and strong growth in secured wealth lending, including inflows relating to the FCNR scheme for non-resident Indians, which drove about half of the growth in WRB this quarter. CIB growth came largely from Global Banking as well as trade.
Manus Costello: Underlying customer deposits were broadly flat quarter on quarter and are up 5% year to date. Within WRB, net new money flows were once again supported by growth in TD. This was offset by lower CIB CASA due to outflows towards the end of the quarter, some of which have already reversed. Overall, we continue to grow customer lending where the returns support our financial targets. Turning to capital. Risk-weighted assets increased by $1.8 billion during the quarter to $263 billion. Asset growth and mix was partially offset by a reduction in market risk RWAs and improvement in asset quality. Looking ahead, we now expect Basel 3.1 to lead to an increase in risk-weighted assets on 1 January 2027. Net of management actions, which were underway in Q3 and will continue in Q4.
Manus Costello: This revised expectation of the Basel 3.1 impact reflects the changing shape of our balance sheet and the finalization of rule interpretations. Given these factors, our current expectation is the 1 January 2027 RWA to be around $275 billion, inclusive of the usual operational risk RWA increase in Q4. The Basel 3.1 RWA impact will be spread across both CIB and WRB. Our CET1 ratio was 13.8% at the end of the quarter. Excluding the 38 basis point impact of the $1 billion share buyback announced at Q2, the ratio was broadly unchanged quarter on quarter. We will benefit from a further 30 basis point reduction in our CET1 Pillar 2A requirement from 1 January 2027, which partly reflects Basel 3.1 implementation.
Manus Costello: Together with the 20 basis point reduction we received in Q3 2025, this will lead to a cumulative decrease of around 50 basis points in our minimum CET1 requirement since last year. This will take our CET1 requirement to around 10%. The reduction in regulatory requirements further enhances our capital flexibility while maintaining a prudent capital position. Turning now to the businesses. WRB delivered another excellent quarter, with income increasing 10% to $2.5 billion. Wealth Solutions income grew 26% to $1.1 billion, marking our third consecutive quarter above $1 billion. Investment products and bancassurance income increased 28% and 18%, respectively. Deposits and mortgages income declined by 1%. Credit cards, personal loans, and other unsecured lending income fell by 13%, reflecting continued portfolio optimization. Expenses were up 8%, reflecting ongoing investment in the affluent business.
Manus Costello: We delivered record net new money of $20 billion, including around $5 billion of deposit inflows from the FCNR scheme for non-resident Indians, which has now closed. This brings our year-to-date net new money to $52 billion. Assets under management were broadly stable at $472 billion. This includes the impact of client mandate changes from wealth AUM to assets under custody, which broadly offset the strong net new money performance. We continued to onboard affluent clients at a strong pace, with 76,000 new-to-bank affluent clients during the quarter. Overall, these results demonstrate the continued strength of our affluent proposition and our ability to attract new clients. CIB performance was also strong in the quarter, with income increasing 16% to $3.4 billion.
Manus Costello: Transaction Services income was up 9%, driven by pricing discipline in our payments and liquidity products, as well as volume growth and further mandate wins in securities and prime services. Global Banking income was up 7% against a strong comparator in Q3 2025. This was driven by momentum in lending and financing solutions with resilient origination volumes. Global Markets had a strong quarter, with income up 21%, driven by broad-based growth across products. Flow income increased 21%, reflecting sustained momentum in client activity and cross-selling, and the continued benefit of our investment in electronic platforms. Expenses increased by 8%, significantly below income growth. Including the net recovery mentioned earlier, CIB profit before tax increased 38% to $1.6 billion. Moving to our updated guidance. Performance has been strong year to date, with income growth above our target 5% to 7% range.
Manus Costello: The breadth, quality, and consistency of that performance gives us the confidence to upgrade our full year guidance. We now expect NII growth of around 4% and total income growth above the 5% to 7% range at constant currency and excluding notable items. We expect a cost-income ratio excluding notable items of approximately 60%, representing a significant improvement on 2025 and demonstrating continued positive operating leverage across the business. We remain well on track to deliver a cost-income ratio of around 57% in 2028. We are continuing to balance the investment priorities of the business against the significant revenue opportunities we see in the franchise. We are upgrading our RoTE guidance to around 14%, reflecting continued progress from the 11.9% we achieved in 2025. As you can see, our performance this quarter shouldn't be seen in isolation. It builds on our recent momentum and execution.
Manus Costello: We have shown ongoing improvement in EPS over the last six years, and we are not done yet. We remain confident in delivering our high teens EPS CAGR target for 2028. To conclude, our results demonstrate once again that our strategy is working, and we continue to deliver sustainably higher returns. That momentum gives us confidence not only in our upgraded guidance for 2026, but also in our ability to deliver on our medium-term framework. Looking ahead, we will be hosting a webinar in early December showcasing our Singapore and ASEAN businesses and their contribution to group strategy and performance. Further details will be available on our website in the coming weeks. Thank you. With that, I will hand over to Bill for some remarks before we take your questions.
Bill Winters: That is great, Manus. Thanks very much for the summary. I just want to take a bit of a step back and reflect a little bit on the quarter, but in the context of the past few years and then obviously looking forward to the next few years. Obviously the results are strong and we are very happy with those. More than the numbers themselves, which of course in and of themselves we are quite satisfied with, it is the consistency with which we are delivering the numbers and it is the quality that is coming through pretty much in every line. Each of the client segments, each of the products, each of the regions is generating progress in what to us is a very satisfactory way.
Bill Winters: Probably most encouraged by the fact that with each step forward that we take on the path to this 18% or so RoTE by 2030, our confidence is built based on the success that we generated. We have had a very deliberate investment program over the past several years. You have been indulgent of that investment program because not all of them paid off in the short term, but they are all paying off now. The investments that we made across wealth, both technology and RMs, breadth of products and quality of advice, shifting to an ever more advice driven and client oriented model from a more product sales approach, it is paying off. The breadth and depth of the Global Markets capabilities are paying off. The very long history we have in the full range of Global Banking products, financing and associated products are paying off.
Bill Winters: The investments that we have continued to make in Transaction Services in terms of being at the cutting edge of payments, trades, security services in our markets are paying off. Quality is good. The diversification is good. The balance sheet has remained strong. We are as steadily cracking away at the productivity challenges that we know we have. We talked about compounding back in May, and we think that we have put the basic foundations in place to compound for a consistent period of time from here. Obviously helped by good structural tailwinds in terms of the themes against which we are operating. We talked about those in some detail back in May. All that said, we are keeping a very keen eye on the many challenges that we face as well. Most obvious are the geopolitical challenges. They are real, they are consequential, and they are certainly not resolved as yet.
Bill Winters: We can be hopeful of decent resolution, in particular in the region which I sit right now in the Middle East. But we know that we're all watching this one extremely carefully. We've seen bits and pieces of strain emerging in different financing markets. While this hasn't impacted us, and I don't think they will, they're a sign that there are elements of indigestion in the system, and that indigestion obviously can turn into something a little bit more painful. Very aware of that. Managing those risks extremely carefully. But the combination of things, of course, could impact volumes at some period of time. While we're very reassured that we've demonstrated strong resilience through different crises or challenges in the market, we're acutely aware that the challenges that we face right now are real. No doubt, we can talk about that. So continue to focus on risk management.
Bill Winters: We're not going to screw up a really good set of progress strategically and financially by taking our eye off the ball from a risk perspective. We are going to continue to invest in these core strengths that we have, and that gives us a very strong guidance that we're on the right track. A very strong confidence, I should say, that we're on the right track to deliver our 2028 and 2030 ambitions as we have set them out. So with that, operator, we can take the first question, and take as much time as you like on that.
Operator: Yes, of course. Dear participant, just a quick reminder, if you would like to ask a question, please press star 1 1 on your telephone keypad and wait for a name to be announced. Alternatively, you can submit your questions via the webcast. Now we're going to take our first question on audio line. It comes line of Joseph Dickerson from Jefferies. Your line is open, please ask your question.
Joseph Dickerson: Hi, Bill. Hi, Manus. Thanks for taking my question. Two, if I may. I guess with the cumulative 50 basis points decline in your MDA since Q3 of last year, as you look forward from 2027 and beyond, do you feel that running a 300 to 400 basis points targeted CET1 over your MDA is really the right level? Or could that be ratcheted down, I don't know, 50 bps? Within that, what's the ability and appetite to repatriate down to the low level now that you've got a lot of visibility on capital? Then second, just on the deposit mix. You've seen a decline in the CASA mix in both CIB and WRB. Could you just discuss that move somewhat in terms of the behavior?
Joseph Dickerson: Is this competitive pressure, or is it simply that typically the affluent customer has seen in the Q3 slightly weaker equity markets, certainly weaker in the footprint combined with higher rates, and is parking liquidity in TD? Or is it rates have surpassed a certain level at which the nominal amount the customer receives is meaningful? Or is it a competitive angle? I would really appreciate some color on that, and then what you are seeing as you have mentioned some reversals in Q4, I guess what you are seeing on the ground so far in October. Thanks.
Bill Winters: That is great. Thanks for the questions, Joe. I will just make a couple comments and hand over to Manus for both of those questions. On the Pillar 2A reduction, of course, we are encouraged by that, and the two reductions combined substantially offset the other impact that we think we will see from Basel 3.1. And we got it to where we think we will end up this year, obviously incorporating some business growth as well. I would just I guess remind everybody that we are managing the business. I would say we have the luxury of managing the business for a capital ratio that we think is appropriate for our business mix, risk environment, et cetera. So we are obviously not constrained by the MDA right now, and the further increase in buffer removes that constraint even further away, or moves that constraint further away.
Bill Winters: Of course, we keep an eye on what regulators expect. We keep an eye on what rating agencies expect. As you know, we have got multiple legal entities around the group, not least our subsidiaries in Hong Kong and Singapore, that have their own capital ratios, so we have to watch and manage as well. But the capital that we have been running is what we think is consistent with a cautious but very appropriate approach for the business that we are running. Will we take a fresh look at that on the back of a few things? One is the MDA dropping, yeah, of course. But maybe more importantly is steady improvement in the asset quality in our portfolio, steady improvement in the profitability of our business, and steady improvement in the quality of that profitability.
Bill Winters: All of those things are helpful in terms of helping us to manage around our capital ratio. So we will look at all those things. We will come back when we have a more fulsome update at the full year and provide some fresh guidance to what our precise thinking is on capital. But the question that you pose, of course, is very relevant. On deposits, the only comment I will make is, there are two ways to gather CASA or lower cost deposits. One is to offer a better price, and the other is to offer a better service. Of course, there is a trade-off between those two things. But as we become the primary transacting bank or settlement bank for our wealth management clients and for our corporate and financial institution operating accounts, they are more inclined to leave their excess deposits with us.
Bill Winters: Always limited in terms of their own efficiency and willingness, but clearly what we are seeing is as our customer satisfaction improves, our CASA ratio relative to anything else improves, even if the rate environment has the CASA proportion going down. With those two upfront comments, I will hand it to Manus for the correct answer.
Manus Costello: Thanks, Bill, and thanks, Joe. I will build on your already correct answer, Bill, with a bit more detail. On capital, I would just reiterate the fact that we have said, Joe, that we will operate across the range, and that is our intention. We do not manage, as Bill said, to a specific buffer to MDA. Of course, it is helpful to have a bigger buffer, but that is not the way that we think about our capital. I will also just add the more general, perhaps obvious comment that nothing is actually changed in the risk profile that we have got on the balance sheet, either from changes in RWAs or from our Pillar 2A change. As far as we see it, back to Bill's point, the risks that we are taking remain as they were before.
Manus Costello: We will come back to you at the full year, but operating across the range remains the message that we are happy to stick to. On deposits and on the mix. Look, we said at the Q2 already that we were seeing a bit of pressure in TDs in WRB, that competition had stepped up, and we are calling that out in the Q3, and saying that we expect it to continue for the full year. There is no real change in the pace of that or in the messaging that we want to give. I would note, though, if you want to look at our disclosures on slide 22, you will see that in WRB, yes, the TDs are growing, but the CASA is also growing as well. This is a case of us growing both pieces of the deposit franchise.
Manus Costello: That is something which, as Bill said, we would look to continue. I would also note that within the term deposits, there is some impact from the FCNR scheme which came through as well, because that is a global number. Just taking a step back, I think you need to consider the fact that we are happy with the momentum that we saw in the Q3 in our net interest income overall. I am obviously happy enough to upgrade our net interest income guidance for the full year. We are also happy that we have got a balance mix between NII and non-interest income. That is something which is obviously a target of ours and something which continues. I do not think there is anything particular to call out that is different. On the last point you were asking about the Q4 reversal, specifically, we called out in CIB.
Manus Costello: There was just some end of Q3 moves out, which came back again in Q4, largely came back in Q4. So we just wanted to call that out for CIB, specifically, as a slightly odd period end move at the end of Q3.
Bill Winters: Great. Operator, can we take next question, please? Thank you.
Operator: Yes, of course. Now we are going to take our next question. The question comes from the line of Jason Napier from UBS. Your line is open. Please ask your question.
Jason Napier: Good morning. Thanks for taking the questions. First one, just on the cost outlook and the momentum into 2027, please. A huge amount of market feedback this morning on the cost income approach. I guess if you take the $600 million of Fit for Growth plus whatever potential efficiency gains that should deliver, it is plausible that you could have been offering no cost inflation into 2027. That makes positive jaws not a particularly binding constraint or a helpful guide as to what actually happens next. Could you just talk a little bit about the shape, please, of cost income progression or the destination for the cost inflation that appears to be in consensus? Because if you take away the $600 million and put in some gains on that spend, it looks like we are in high single digit investment and underlying cost inflation territory.
Jason Napier: I think the market's very keen to understand what we get in exchange for that, if indeed we are looking at the right kind of shape of cost inflation. Secondly, perhaps for Manus, on the 4% NII guide, I guess we are looking to flat to slightly down NII in Q4. Anything you could say about the various puts and takes into 2027 and how NII might or might not contribute to the 5% to 7% revenue growth 2027? That would be really helpful. Thank you.
Bill Winters: Great. Thanks very much, Jason, for both those questions. Again, I will make a quick comment up front and then hand over to Manus. Maybe take a step back on Fit for Growth for starters. That was, as you know, it was a three-year program, where we said we would invest roughly $1.5 billion. We ended up investing $1.3 billion to generate a similar amount in structural savings with a relatively quick payback. That was a different program than the ordinary productivity programs that we have had every year, certainly since I have been in the bank and no doubt before that, in the sense that it was much more structured with obviously very specific tracking and program management guidelines that we found to be extremely helpful, in terms of reinforcing the core capabilities around finding these productivity opportunities.
Bill Winters: This is everything from automating manual processes to re-engineering end-to-end processes to changing our organization to be fit for purpose against the current set of opportunities and associated items. As we come to the end of that formal program, and obviously along the way, we changed the accounting, so no longer putting things below the line. That is of no consequence one way or the other. As we come to the end of the program, we said, we are not done with our productivity investments. We got a very good return on the first $1.3 billion that we spent, and we want to complete the task of simplifying our processes, automating our processes. Of course, we have got the new introduction of super powerful AI tools where we feel very well equipped to continue to prosecute that agenda going forward.
Bill Winters: The idea that somehow, one, the expense, the productivity program is done, or that the opportunities are not as substantial going forward as they have been over the past three years, we would just like to shift the notion a bit. This is a little bit more of making some very good investments today that will pay off in the years to come. We have also got stepped up investments, of course, in the areas of strength and not least in Wealth, but that is completely consistent with the guidance that we have offered so far. Let me hand back to Manus for more color, but I wanted to put the FFG program into a bit of context that I think might have been missing.
Manus Costello: Thanks, Bill. Thanks, Jason. Look, on the switch to the cost income ratio approach in terms of our guidance, we thought it was the right time to do that, Jason. We have given cost income ratio guidance within the three-year plan, as we talked about. We thought it made sense for us to talk in those terms. That is why we have decided to talk about cost income ratio now. We have given you a cost income ratio target for 2026. You know, obviously, our approach for 2028. We are not saying anything about 2027, despite the questions that you are asking. But we are saying that we will deliver positive jaws each year of the plan, and that is something that we will commit to. We are saying, to follow through from what Bill said, that we will continue to invest in the business.
Manus Costello: I think what is really important if you look at the numbers today and you look at the guidance that we are giving, is what it means as it drops through the rest of the P&L. We are talking about a RoTE now of around 14%. If we deliver what we are planning to this year, you will be looking at income to cost jaws of around 500 basis points this year. Of course, we are driving the top line above the top end of the range. So what you are really getting is strong top-line momentum, which is dropping through to improved RoTE and improved outcome overall. Hopefully that gives you some thinking about what our approach is and how we will continue to think about it in future. In terms of net interest income, your maths is what it is for the Q4. You are right.
Manus Costello: If I think about the Q4 impacts that come through, the impact from higher rates, if they come through, as the forward curve suggests, is not actually that significant for us in the quarter. As we say, there is still a bit of impact from TD spread and mix coming through, which will help offset that. Remember also that in the Q4, as for the rest of the year, we have had some headwind from those WRB portfolio runoffs and sales. We will have to see where we come out in 2027. I am not going to get drawn into giving guidance now on that. We said that we would provide updates for that in February next year, and I will stick to that.
Manus Costello: But I will remind you that over the course of the plan, our goal is to grow non-interest income faster than net interest income, as we are at the moment in 2026.
Jason Napier: Thank you.
Bill Winters: Good. Operator, next question, please.
Operator: Yes, of course. Now we are going to take our next question. The question comes from the line of Perlie Mong from Bank of America. Your line is open. Please ask your question.
Perlie Mong: Hello. Can I pick up on NII and deposits again? I think for this quarter, I think you said rates are broadly offsetting some of the deposit margin compression and the quarter-on-quarter growth was reflecting the AIE growth. I suppose, a couple of things here. One is that is probably a little unusual in the context that I think is, some of your peers in other markets as well. We have seen deposit competition and that pressure offsetting some of the volume growth, but we are not really seeing that for you. If I look at Q4 as well, obviously back solving from the guidance.
Perlie Mong: If we were to assume that the rate impact and deposit margin competition, maybe with a little bit of WRB exit, broadly offsetting each other, why should we not expect volume growth to drive more of the NII growth, given that loan demand seems to be pretty strong still for now? Just as a follow-up to that, just deposit competition as well. I guess in the last couple of months, there seems to be a lot of talks about deposit competition across many markets. That hasn't really affected your margins all that much, it feels, despite the fact that there is a bit of CASA TD mix change in the quarter. So can you just help us understand, where are you seeing most deposit competition? Clearly Hong Kong possibly is one area, like one of your peers had said yesterday.
Perlie Mong: But just how are the other markets shaping up in terms of that deposit competition piece?
Bill Winters: We're definitely operating in the same markets as all of our competitors, but there's a lot of detail in your question. I'm going to flip straight to Manus.
Manus Costello: Let me start with the second question first in terms of deposit competition. As I mentioned previously, we've talked about this for a few months now, and it has been something which has been evident across different markets. Hong Kong and Singapore would be two that it's obviously worth calling out. It's not something which we are particularly concerned about. It's not something which we think is intensifying at the moment. But it is baked into the guidance. It was baked into the guidance that we gave you at the Q2 stage, and it's baked into our guidance now. So yeah, we would expect, as rates rise and as competition continues in the Q4, as you rightly call out, some of that competition to mean that any benefit from rate rises is less pronounced.
Manus Costello: On the volume growth, look, we had a very strong Q3 in terms of the balance sheet growth that we saw, and that strength came across a number of different sectors, a number of different areas. Within WRB, remember that half of that volume growth, broadly half of that volume growth was related to the FCNR scheme. The rest came through in a combination of mortgages and wealth lending. That will continue. In CIB, we have seen good growth across our infrastructure, across our commercial real estate, across our project financing pieces as well. So it has been good. All we are really saying as we come into the Q3 is that pace of growth is unlikely to continue. It will probably moderate somewhat.
Manus Costello: That is why we have given an outlook for the full year, which as the maths implies, is no huge change between the Q4 and the Q3 in terms of NII. We will see how the quarter develops, but that is our best look at this point.
Perlie Mong: Okay. Can I just ask a super quick follow-up? Your underlying loan growth is like 10%, but deposit is 5%. Obviously, your loan-to-deposit ratio is still very low, but are you happy to keep on running low lending ahead of deposits?
Manus Costello: Well, as you say, our loan deposit ratio, our AD ratio ticked up a little bit this quarter, but that is after many quarters of decline. We have got abundant liquidity to deploy if we find the right opportunities. Just to be clear, we will only deploy that where we think that we get the right returns, where we think that it drops through to good free capital generation for shareholders. We are not seeking to increase the loan to deposit ratio in any way. We are optimizing our liabilities and deploying capital on the asset side in the best way. So it will do what it will do, and we are very happy for it to rise if that is what generates the best returns for shareholders.
Perlie Mong: Cool. Thank you.
Bill Winters: If I can just add a bit of color, and maybe this is all very obvious, but from a macro perspective, we are in a slightly different environment. We have got central banks that are on the margin are slightly tightening. So liquidity is very gently being withdrawn from the market. Obviously, that leads to competition for deposits. And we have got a CapEx cycle, which is extraordinarily robust and albeit concentrated in the broadly defined AI space. So that, not surprisingly, has the effect of having asset yields be a little bit more attractive and deposit margins being a little bit more competitive. And if we can keep the balance right, i.e., capture the right assets and do that with an appropriate cost of funding. And frankly, we are well ahead of our own curve in terms of having a funding profile that we are very comfortable with today.
Bill Winters: That is going to be supportive for the business. But none of that is prescribed, but the macro trends are somewhat favorable. Can we take the next question, please?
Operator: Yes, of course. Thank you. And now we are going to take our next question, and it comes in line of Guy Stebbings from BNP Paribas. Your line is open. Please ask the question.
Guy Stebbings: Hi. Morning, Bill. Morning, Manus. Thanks for taking questions. The first one was really a high-level question on RoTE. Clearly we are tracking ahead of prior expectations and the gap from this year to the 2028 guide of greater than 15% looks relatively narrow. As we look into next year and beyond, is anything you would caution us against in terms of that better starting position, if you like, as we exit 2026? The second question, which may feed into your answer on the first is, on impairments. Another very reassuring quarter. I appreciate Q3 is not a time to change things like long-term cost of risk assumptions. But we are in an environment of higher rates, higher oil, geopolitical disturbance with model overlay build, and yet still seeing charges below that long run assumption.
Guy Stebbings: Does there come a point where if you keep seeing charges behave very nicely below that guidance, you might revisit? Perhaps are we getting closer to that point? Thank you.
Bill Winters: Great. Guy, thanks for both those questions. Again, I will turn to Manus in just a moment. RoTE tracking ahead of prior expectations, yes. Anything to caution against? I rattled off in my upfront comments a few of the things that we are very focused on, which are exactly the same things that you are focused on. I think the caution comes from the uncertainty in the macro environment rather than lurking demons in our books or in our earnings. Nothing specific to add there. From my perspective, Manus may embellish a bit. The cost of risk, we have tried looking back through the years of our corporate existence, looking at peer groups, and then looking at the current state of our book, to judge whether we should be ratcheting down again or making any other adjustment through the cycle guidance.
Bill Winters: I will remind people that it is a through the cycle measure, and we have not had a downturn in the credit cycle yet. We can say that there are lots of bad things happening in the world that should have caused a downturn in the credit cycle, but they have not for us and not for anybody else. With a couple of exceptions, in particular around real estate in Hong Kong and China, where thankfully we are relatively underexposed, or not exposed in the case of Hong Kong. Look at keeping at reducing our expected through the cycle cost, I think it is a little bit premature to do that, hence we are not changing the guidance. Of course, like everything else, we will take a look at that when we update our guidance more holistically. Manus?
Manus Costello: Thanks, Bill. Thanks, Guy. Look on the RoTE, I would remind you that our guidance is for an over 15% RoTE in 2028. As you point out, we made a very good start to that, and we are very confident in making progress. As Bill said, the impairment run rate so far this year is below the guidance on which we have predicated our RoTE. We are running at about 20 basis point loan loss rate at the moment so far year to date, which would obviously have an impact as it flows through into 2027 and 2028 back to normalization levels. But we have clearly made a good start. Bear in mind, we are looking at over 200 basis points of RoTE improvement year on year, which is a really great performance if we are able to deliver against it this year.
Manus Costello: In the longer run, thinking about your question about loan loss assumptions, I think I would tack back to what Bill highlighted. We do remain in quite a volatile macro environment, and yet it is one where there has not been a significant turn in the credit cycle, which has impacted the sector or us. We are pretty confident that we come into that from a CIB perspective, well, across the bank, but I am talking CIB here in good shape. You will see that the proportion of investment-grade corporate exposures we have got has gone up from 75% to 77% this quarter.
Manus Costello: So we are continuing to see better quality on our balance sheet. For the bank overall, we have got about half a billion of overlays in total in our ECL, of which about $270 million relates to the Middle East. So we think we are well provided, and we have got good overlays going forward.
Manus Costello: But of course, events could turn out differently in future. The one area I would point your attention to, though, is something that we talked about a bit in May, which is the de-risking of the WRB portfolio. We said there that we have been deliberately, structurally reducing the proportion of unsecured lending that we do in WRB, and that has continued. You can see the impact of that in our income. You can see it in our credit card and personal lending income this quarter, in fact, which was down 13%. As we run off those portfolios or sell some of those businesses, of course, that has an impact on income, but it also drops through, I think, to a structurally better outcome in our WRB.
Manus Costello: I think it generates a better quality of business for shareholders going forward, and a better return on tangible equity for people going forward as well. But that is one area where I would highlight that there is a structural change in what we are doing.
Guy Stebbings: Thank you.
Bill Winters: Okay.
Operator: Thank you.
Bill Winters: Thanks. Operator, please.
Operator: Thank you so much. Now we are going to take our next question, and it comes line of Ed Firth from KBW. Your line is open. Please ask the question.
Ed Firth: Good morning, everybody. Thanks for the questions. I've just got two. The first one is on costs. This is an uncertainty, but broadly speaking, it looks like your cost guidance is around, I don't know, 200 or 300 million higher than we had before. I'm just trying to ask you a little bit, maybe talk about where that's going, because I guess some of it's income, but income's been beating all year and you haven't raised your cost guidance before, and it does look like quite a big cost number for Q4. Can you talk a little bit about where those additional costs are going and how we should think about that into 2027? Is Q4 a step off of 2027, or was it more a catch up for cost during 2026? That's my first question.
Bill Winters: Hey, Ed. If I could just interrupt. It's very difficult to hear you. I think you've got a bad connection or something. What I heard, and then Manus will correct, was kind of a Q4 cost challenge.
Ed Firth: Sure
Bill Winters: and then into 2027. That, I think, was the first question. But if there's any way for you to
Ed Firth: That's it. Thanks.
Bill Winters: I don't know, maybe you're just far away from the speaker or something, but it was hard to hear.
Ed Firth: Okay. My second question was, you often give us some sort of idea about how the quarter is shaping up in terms of revenue. We're sort of almost a month in, so any thoughts about how we're seeing performance in Q4 in terms of revenue? Thanks.
Bill Winters: Good. Thanks. That was much clearer on question two. I'll let Manus work through the cost.
Manus Costello: Why don't I take question one, and then I'll leave question two to you, Bill. Ed, the cost income ratio that we're guiding to today, in fact, is the same as what we were saying effectively at Q2. It's just we expressed it slightly differently. We'd always pegged our absolute cost guidance to an income guidance as well, and the mathematical outcome ends up being the same. Where it's going is, as Bill said, investing into the business. Investing into ensuring that this strong performance that we're seeing in the top line is going to continue. Building new RMs, wealth centers, powering that wealth business going forward, investing into our different platforms across our transaction bank, across our markets business, and building out our capabilities in banking and coverage. So it really is investment into the business.
Manus Costello: The cost income ratio guidance, if you were to imply it back at what we said at Q2, is actually unchanged.
Ed Firth: Great. Thank you so much.
Bill Winters: Ed, Q4 is shaping up fine, so the underlying trends in Wealth Solutions, Global Markets, Global Banking are unchanged. I think we can obviously have the normal seasonal effects that we see always in Q4. We have a very keen eye to market disruption. So we have had some weaker equity markets and some periods of volatility, particularly weak equity markets in Asia, which while not affecting us directly, it does affect sentiment. That all said, the underlying trends are in line with what we have produced over the course of the year, and the structural features that have been benefiting our business for some time now are still very much in place.
Ed Firth: Fantastic. Thanks so much.
Operator: Thank you. Now we are going to take our next question. The question comes line of Nick Lord from Morgan Stanley. Your line is open. Please ask the question.
Nick Lord: Okay. Thank you very much. Good morning, Bill and Manus. Couple of questions from me. First, just a little bit of more detail on the Wealth Solutions business. I just wonder if you could talk a little bit about that move from AUM to AUC. Is that just a general move we see, or is there something specific that drove it in the quarter? Then if I look at your investment products income as a percentage of your invested AUM, it seems to be reasonably stable. Actually gone up a little bit Q-on-Q. Obviously at Q2, you were suggesting that we may see a little bit less activity in the quarter.
Nick Lord: It does not seem to have come through, so I just wonder if you could talk a little bit about how clients have been behaving in a quarter where obviously the macro environment has not been as good. Then just any comment you might make on bancassurance profit share in the quarter as well, and what the impact of that might be if it drops out in Q4. Then the second question is just on your, I am just trying to understand the trajectory of the unsecured lending line. It seems to be under pressure. Is that purely driven by an interest rate thing? Is it a run off a book? I am just trying to understand what is happening to drive that down.
Bill Winters: On your second question, it is the exits. We have sold portfolios and we have exited business outright, all of which we have talked about. So there is nothing else going on there. Just quickly on wealth, Manus will take you through the mechanics of AUM to AUC, but you will recall that we had a big shift the other way a year and a bit back, where we had a client with a large position held in custody with us that said, "We are going to actively manage that." That is it. It is a reasonably precise set of criteria that go into the designation of AUM versus AUC. We have seen a partial reversal of that. But again, Manus can elaborate. Investment product is a broad category, and there are more defensive and less defensive elements of our investment product universe.
Bill Winters: While the overall proportion hasn't changed much, we have seen clients drift into slightly less risk-inclined, i.e., less equity, more fixed income, less high-yield credit, more high-grade credit type product, which is fine, expectable, and we are very happy that we have got the diversity of product offering that allows us to capture and retain a client's flows, whatever the risk appetite is and as those evolve. bancassurance has just been a very strong performer for us consistently. It is a relatively defensive product. We accrued our full-year bonus in Q3 as we did last year, which means by definition, we are not going to accrue the full-year bonus in Q4, but that is fine. The reason it is in Q3 is that it is bigger than it would otherwise have been.
Bill Winters: That relationship with Prudential, which is a big one obviously, and our other bancassurance relationships are in a very good place. Manus, anything on any of those?
Manus Costello: On the AUC to AUM, this is actually something which happens all the time in the business. We had to call it out in Q4 2024, I think it was, because there were some particularly large moves in that quarter which obviously impacted the moves in AUM. We are calling it out again this quarter because again, there have been some moves which impact the AUM when you move forward. As Bill said, it is normal course of business in terms of the way that we are serving certain customers. It does not have a huge impact on the revenues that we are generating across the piece either. So it does, I appreciate, make modeling it a little bit more tricky. Sorry for that, but that is the way things move.
Manus Costello: The impact that it will then have on the RoTE or margin or however you want to think about it on the Wealth Solutions product, is something that you will need to factor in. When you think about that RoTE, remember that we nearly always see a drop in that in Q4, because Q4 activity typically tends to be somewhat lower. As I said, in H1, activity in particular in H1, was really strong. So we were above the kind of 1.1% to 1.3% range that we have talked about in the past. Just bear that in mind. It will seasonally drop as expected in Q4. This year has been unusual in terms of the level of activity.
Nick Lord: Okay. One of the things I am just trying to understand, if the product you are selling, the lower risk product versus the high risk product, I mean, is there a different margin on that, or should we read from a performance in Q3 that actually you are able to manage that wealth income reasonably successfully through different market environments?
Bill Winters: Well, there are different margins on different products. Probably the biggest margin differential is a function more of liquidity than level of defensiveness. Less liquid product is typically higher margin, obviously has lower velocity as well by its nature. But, if the market went from an entirely sort of actively managed equity funds into money market funds, there would be a very substantial margin impact, but that is not what is happening. We are seeing shades of differentiation on the spectrum.
Nick Lord: Okay, brilliant. Thank you.
Operator: Thank you. Now we are going to take our next question. The question comes line of Jiahui Kendra Yan from CICC. Your line is open. Please ask your question.
Jiahui Kendra Yan: Thanks. It is really great to see such strong results. My question is about the 30% RoTE guidance for 2030. Bill has touched on this a little earlier, but would you mind sharing more color on this? This target was first laid out back in May this year, and since then, actually a lot has changed, most notably rising interest rates. So I would like to understand what core macro assumptions the 2030 guidance is built on. Conversely, what material shifts in the macro environment would lead you to revisit the target? Turning to bank's operational side, we have already seen solid progress in cost management and growing market share in Wealth and CIB business. I was wondering what differentiated product innovations or strategies have helped you gain that market share. Thanks.
Bill Winters: Great. Kendra, thanks very much for the questions. I know you meant 18% RoTE guidance for 2030, not 30%, but I just want to make sure that everybody else on the call is aware that is not in fact our guidance. I mean, 30% would be great. I said in Hong Kong that when we get to 18%, we are not going to be doing high fives because we think we can keep on moving. At 30%, we would be doing high fives just to be perfectly clear. That said, I certainly understand your question. We have not guided specifically to the 2028 number, because we just gave an RoTE target. We did not break it out into the different components.
Bill Winters: When we look at the underlying business, and we guide to 5% to 7% income growth, while we have not guided to 2029 and 2030, the underlying drivers of that growth, so the structural trends in terms of wealth accumulation, the geopolitical fragmentation, et cetera, the things that we talked about in detail in May. There is nothing that suggests to us that those are going to disappear at the end of our three-year guidance period in 2028. We think that they would likely carry on. We do assume when we give this sort of guidance, that we do not have a major disruption in terms of a macroeconomic impact or some fundamental geopolitical rupture that deprives us of some business flow or earning strength. I think that kind of would go with any guidance, I think, in any context.
Bill Winters: I would say that given our improving quality, improving level of diversification, and the very high quality of our assets book, and the solidity of our funding base, all those things make us much more resilient to a macro change than would otherwise be the case. Not to say that we are unimpacted by anything, that would be ridiculous. Of course, we are impacted. We would be impacted. But we see the structural drivers that could lead us to continuous improvement in returns up to 18%, and then ideally, as we move forward, well beyond that. Why do not I turn back to Manus for that and the cost question?
Manus Costello: Yeah, I think it was a fairly broad question.
Bill Winters: Yeah
Manus Costello: about our differentiated products, which I could run out the call on discussing. Maybe Kendra, we should pick up on it in more detail later. There is a whole range of different investments that we are making. I am glad you called out taking market share, because I think it has been an important point, particularly if you look at our Global Markets business and that strong growth that Global Markets has been delivering, 21% growth in flow this quarter. We told you back in 2019, when we looked at the nature of that Global Markets business, that we were looking to get deeper wallet share, indeed across the whole of CIB. For Global Markets specifically, we told you that 14 of our top 100 clients paid us over $5 million a year. This year, we expect all of the top 100 to pay us over $5 million a year.
Manus Costello: That is a question of us taking market share by offering better products, better service, and deepening the relationships with customers. I can pick up with you later with many more examples across the franchise, but I wanted to mention that one specifically.
Jiahui Kendra Yan: Thanks.
Operator: Thank you.
Jiahui Kendra Yan: And sorry for that number, 18%. Thank you.
Manus Costello: No problem.
Operator: Thank you so much. Now we are going to take our next question. The question comes line of James Invine from Rothschild & Co Redburn. Your line is open. Please ask your question.
James Invine: Hi. Good morning, Bill. Good morning, Manus. I have two, please. The first, I just wanted to pick up, Manus, on what you were saying about the flow income within Global Markets. Really strong performance. You have just given us a little bit of flavor, but I was wondering, is there any kind of geographic color you can give either by region or by corridor? Then the second question is on the tax rate. I know it bounces around a bit quarter to quarter, but if I look at the past four quarters together, it comes out about 25%, just below, but consensus is looking for a 27% tax rate for next year. I was just wondering if you could comment on that, please.
Bill Winters: Go ahead, Manus.
Manus Costello: Why don't I take the tax rate, Bill, and maybe you can comment on the flow. So we would expect a tax rate of around 26% this year. In the first nine months of the year, there have been a few things that have helped us positively, as you say, stay slightly below that, including the Korea write-back in Q2. And we typically have a higher tax rate in Q4. But 26% will be guidance for this year. And we will see you going forward. As you know, we are hoping to drive our tax rate down over time. But obviously today, in the UK, is a relevant day when people are going to talk about tax loss, and we will have to see at the full year results what we are going to think about for 2027 and beyond. But 26% is the guidance for this year.
Bill Winters: On the flow income, looking for a bit of color. First, we will repeat this over and over again. We are really very happy with the progression of our FM business and the bulk of the growth, virtually all of it, is coming in really transaction-related flow business. Transaction-related meaning it is not people who are punting around in markets. It is people who have hedges or who have payment settlements or trade-related flows, et cetera. So geographic color, it is very broad-based. It has been all year. As we have called out many times, we have a particular strength in all things China, and that has continued to perform for us. That obviously reflects the very strong trade growth and the shifting supply chains in China. So a lot of the Chinese trade has grown significantly. The profile has changed even more significantly.
Bill Winters: Less trade with the US, more trade with Asia, with the Middle East, and Africa. You recognize those geographies in terms of the rest of our footprint. So that has been strong. We have obviously got a core strength in emerging markets within our markets, Asia, Middle East, and Africa. Very interesting dynamic in emerging markets. It is getting a little bit less attention these days given how much drama there is in the developed markets. But the emerging markets have been extremely resilient. And South Asia, ASEAN, Sub-Saharan Africa, and North Africa have been very resilient to energy and food price shocks and the various strains and stresses in capital markets. That has led to meaningful currency volatility and a lot of hedging activity. So I would just call out those two as particular.
Bill Winters: But Manus mentioned earlier, actually in his script, that we have been investing pretty heavily in electronic and algorithmic trading. That is really paying off for us. We were a little bit behind the curve. I think we are squarely on the curve. We can compete with best in class in those areas, and it is profitable. That is flow. That is just customers coming in and hitting our screens all day long in dramatically increasing volumes, and we are capturing. Obviously, the margins are very small, but we are capturing those margins. That has been a big contributor to flow that is not geographic specific.
James Invine: Perfect. Thank you very much.
Operator: Thank you. Now we are going to take our next question. Just give us a moment. The question comes line of Alastair Warr from Autonomous Research. Your line is open. Please ask your question.
Alastair Warr: Morning, Bill, and morning, Manus. A question on Wealth Solutions and jaws, if I may. You have got jaws not as strong in WRB as in CIB at the moment, but you are still getting the jaws, and you would think that Wealth Solutions should be contributing to that just because of the sheer level of revenue growth you have got at the moment. But if we push that further out and just stay with Wealth Solutions specifically as a revenue line and look towards that 57% cost income target you are giving for the back end of our models, can Wealth Solutions specifically keep contributing to jaws for the group as a whole out to the medium term on that sort of timeframe?
Bill Winters: Manus?
Manus Costello: Yeah. In any given quarter, Al, the precise allocation both between quarters and between businesses can create some noise on jaws in the quarters. I would not read too much into an individual quarter. But I know you were asking the broader point about whether or not we can continue to get operating leverage from the Wealth Solutions business, and the answer is yes, absolutely. Some of the investments that we are putting in to make our RMs more productive are obviously paying off. We are putting in quite big capital investments to build out new physical infrastructure, wealth centers like the lovely one you visited in Hong Kong when you came over in May. And those will continue to mature and show a good yield.
Manus Costello: And this is a business which, as we have discussed in the past, because of the nature of the customer base that we are serving, we think has got real scalability. So absolutely, the plan is for our affluent franchise to help us get down towards that 57% cost-income ratio. Just do not over-index to any individual quarter on it.
Bill Winters: Yeah. The only color I would add is this is sort of all before we get the full effect of AI. And in this case, the AI is customer satisfaction and revenue productivity as opposed to cost savings. There will also be efficiency gains to be had with AI and wealth. But its number 1 use case for us in terms of our AI build-out is to be able to offer a much higher level of quality and consistency. And we feel extremely good with the tools that we have in place right now, and we are continuing to invest in those very substantially. Can we take the next question, please?
Operator: Yes, of course. Thank you. Now we are going to take our next question. And the question comes line of Rob Noble from Deutsche Bank. Your line is open. Please ask your question.
Rob Noble: Morning, both. Just to follow up on cost, please. The 57% cost-income ratio guidance in 2028. What scenario would you go lower than that number in 2028? Should we be thinking about any efficiency gains or better revenues? Do they get absorbed by the cost-income ratio, or is there a scenario where that is actually lower? Thanks.
Bill Winters: Manus?
Manus Costello: The set of metrics that we set out, including the 57%, come together as a package, right? We talked about 5% to 7% CAGR and income growth. We talked about 57% cost-income ratio. We talked about through the cycle loan losses, and we talked about the RoTE that that comes out. So our 57% is predicated on us being within those revenue parameters, and we would have to see in either direction what that would do, but that is what comes together, Rob.
Rob Noble: Okay, thanks.
Manus Costello: I would also. Sorry, just to build on that. Of course, as we get productivity elsewhere in the business, we will continue to invest to make sure that we are able to drive the top line in the business. I know we have banged this drum earlier in the call, but we will keep banging the drum. There are things that we are investing in and very happy to invest in because they are building the long-term franchise and building the long-term growth of the bank beyond 2028. We will continue to do so.
Rob Noble: Thank you.
Operator: Thank you so much. Now we are going to take our next question. The question comes line of Aman Rakkar from Barclays. Your line is open. Please ask your question.
Aman Rakkar: Hi, Bill. Hi, Manus. Just two questions. One of them, I hate to return back to costs. I think your cost outlook, it is ultimately a really positive message, right, because it is reflective of a stronger revenue outturn. That is positive, and it clearly improves the operating leverage and the return on tangible equity in the business. But I think we are in a little bit of danger of slightly. It is becoming a bit of a frustrating discussion because you are ultimately guiding for a very substantial increase in costs, in Q4 and in the outer years. I know we are talking about investing back into the business, but I think it would be really, really helpful to have a clearer sense of the payback on this investment in future years.
Aman Rakkar: But I guess in terms of an actual question, could you help me understand what your approach would be when you have got a revenue windfall or gain over and above your expectations. How do you decide whether to let that drop to the bottom line versus reinvesting that in the business. So very specifically, if it is a rates-driven net interest income outperformance next year, are you inclined to reinvest that into your business, or is there scope for that to kind of hit the bottom line and be the benefit of shareholders. It would be really interesting to understand what your algorithm and approach is to that. Then stepping back more broadly, I was interested in just your broader take. I guess, really helpful net interest income guidance for Q4. I totally understand the moving parts around deposit mix and cost.
Aman Rakkar: But could you help us just think about the moving parts into next year? You do not necessarily have to quantify them, but are you expecting a positive benefit from interest rates from here, net of any rise in funding costs from here? And presumably, the momentum in the balance sheet from lending is quite meaningful into next year. It would be really helpful for any color you can give us there, please. Thank you so much.
Bill Winters: Let me take a stab at the first set of cost questions, and then you can see if there is any space between me and Manus. I do not think so. Good. We have made some good progress. I take the point that it is a good trend overall. But are we getting a good investment, and how do we think about flow-through for any period of outperformance through to profits versus reinvesting in the business? We are investing at a pretty full pace right now. I have said this for several years that we are not capacity constrained. I mean, we are not at the limit in terms of what we could possibly invest. But we feel that we are fully investing in the opportunities that we see in the business. And a period of outperformance would not change that realization.
Bill Winters: What we have not done, and we will not do, is just frivolously spend something that was not in the original plan or whatever. Certainly not if it was coming from something as indirect as interest rates. No, we would expect it to drop virtually entirely to the bottom line. And that was the case when we had the first increase in interest rates, right? You did not see a big pickup in the comp line, for example, because we did not take that money and distribute it to employees rather than distributing it to shareholders. We put that into buybacks at the time. You see the return on investments in a few areas that we called out very specifically. The first obvious one is Fit for Growth. $1.3 in, $1.3 of structural gains. Obviously a very good return with a very short-term payback.
Bill Winters: And you have seen the particular $1.5 billion that we set out multi-year for investment in Wealth, which is not the only reason that we are generating the strong Wealth results, but it is certainly contributing to those. So there is kind of no question that the returns on those two big chunks of investment, totaling $2.8 billion over 3 or 4 years, are generating very good returns. There is a big chunk of the rest of the investment portfolio, which is much more fixed. So when we talk about core banking systems and major data center projects, investments in cybersecurity, upgrading financial crime compliance, a complete revamp of our payments platform. Much more difficult to identify what the specific economic return is on that. Some of that is hygiene. We have no choice.
Bill Winters: Some of that is efficiency that we know we are generating the benefits in terms of customer satisfaction or stability or regulatory allowances, et cetera. So we beg a bit of indulgence on that to say we are investing wisely. That said, we cannot turn those projects up materially or down materially. I mean, we could always cancel them. But it is not like we have a windfall or we have excess and we are going to throw it into a bunch of our core projects. If we have a windfall, we are going to ask whether it is structural and something into which we should be investing, like Wealth. And we will. But we have already got very robust expectations for our Wealth business. And we are investing commensurate with those expectations. So I will not beat around that one any longer. Manus.
Manus Costello: I would question the characterization of our results here to date as being a windfall as well. I think you are seeing really strong performance, but I do not think what you are seeing is a windfall that is coming through this year. As I mentioned before, we should be delivering 500 basis points of positive jaws this year and investing into the business to keep that top-line growth going while promising to deliver positive jaws each year across the plan. So hopefully the color from Bill on how we are thinking about investment and the numbers that I have laid out will give you some comfort that it is something which we think through very carefully, and we are confident that we can get the balance right.
Manus Costello: On your question on NII, Aman, the rate outlook, as you will see from our weighted average curve, is a bit higher than it was before.
Manus Costello: About 25 basis points higher in 2027 than it was when we last spoke to you. So a bit, but not much. We will see where that comes out after the FOMC later today. But there is not a huge impact from that change you would have seen. We will give 2027 guidance in terms of what we expect from rates, from volumes, from margins in February next year. So I think we will defer that till then.
Aman Rakkar: Okay. Thank you very so much.
Operator: Thank you. Now we are going to take our next question. The question comes line of Katherine Lei from J.P. Morgan. Your line is open. Please ask the question.
Katherine Lei: Thank you. I have one question, then I have two follow questions to the replies by management just now. The one question is on the FVOCI portfolio, basically on the bond portfolio. I think previously when there was a rise in the long bond yield, there were some nervousness in the markets on the MTM losses. How do we manage this portfolio? Can you give us some color on, say, duration or a hedging position and things like that? The second one I want to follow up is that just now management talked about the LDR, that you are not aiming to increase the LDR. But are you aiming to reduce it? Are you happy with the current deposit market shares or loans to deposit ratios? Are you looking to further gain deposit market share? Also another follow-up is on the return to AUM.
Katherine Lei: Just now, I think Manus mentioned about there is seasonal volatility to the return to AUM. But if say, should we benchmark to a 4Q25? Is that a good reference point when we are modeling for 4Q this year? Thank you.
Bill Winters: Manus, I will let you take all those questions. I maybe need some clarity on the third question.
Manus Costello: Yeah. I will do the first two. I did not quite hear the last one. On the fair value through FVOCI, we keep our book pretty short tenor, which is why you will see that there has not been that much of a move. If you look on the capital slide that we show, we disclose that there is about a 9 basis point move on our CET1 ratio quarter on quarter. Yes, of course we have fair value through FVOCI securities for liquidity purposes, but it has had minimal impact on our CET1 ratio this quarter, despite the moves. On the question on loans deposit ratio, I would come back to the point that it is an output, not an input.
Manus Costello: We are very happy at certain times to grow deposits faster than loans if we think that is where the best returns will come from, and we are also happy to grow loans faster than deposits in other periods. There is no binding constraint on us in either direction. All we are trying to do is generate the best economic value for our shareholders. Katherine, sorry, the final question I did not quite hear.
Katherine Lei: Oh, it is on wealth income. You have a very strong wealth income and also that you reflect that in Q4. There will be a decline on the return to AUM. If we just look at the wealth income divided by the AUM, there will be some decline in return to AUM in Q4 due to seasonality as a reason. Should we benchmark to 4Q25 when we are modeling for 2026?
Manus Costello: I see. Thank you for saying that. No, it is a full year number that we talk about when we are thinking about how things go forward. The reason I mentioned the Q4 is that it is always seasonally lower, and I would not expect this year would be any different. That then obviously impacts the margin as you are thinking about it as a run rate. So you should think about the full year run rate. As I mentioned in a previous answer, the very strong H1 of this year meant that we were somewhat above what we would expect for the longer term range, certainly in the H1 of this year. We will see where we come out for the rest of the year.
Katherine Lei: Thank you.
Operator: Thank you so much. The speakers have no further questions for today. I would now like to hand the conference over to a speaker, Bill Winters, for any closing remarks.
Bill Winters: Great. Thank you again, everyone, for joining us. I know it's a very, very busy day and you've got tons to do. Thanks for the great questions and thanks for sticking close to the themes that we set out for all of you back in May, and tracking our progress against those outlays. We feel very good about the business and see good times ahead. With that, we'll get back to the rest of the day and look forward to an even more fulsome discussion in February.
Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
