Lloyds Banking Group (LSE:LLOY) Q3 2026 Earnings Call

0:00 Thank you for standing by and welcome to the Lloyds Banking Group 2026 Q3 Interim Management Statement call. At this time, all participants are in a listen-only mode. There'll be a presentation from William Chalmers, followed by a question and answer session. If you wish to ask a question, please press star 1 on your phone. Please note this call is scheduled for one hour and is being recorded. I'll now hand over to William Chalmers. Please go ahead.

0:28 Thank you, operator, and good morning, everyone. Thank you for joining our Q3 results call. As usual, I'll run through the group's financial performance before we then open the line for Q&A. Let me start with an overview on slide two. In the third quarter, the group again delivered sustained strength in financial performance. We demonstrated continued income growth, improving operating leverage and strong and stable credit quality. We are on track to meet our 2026 guidance. The Group is continuing its strategic delivery, focusing on supporting UK households and businesses, while laying firm foundations for Accelerate 2030.

1:13 The business is performing well and we are excited to execute on the opportunity ahead. Let me now talk to our financials on slide three. As said, Lloyds Banking Group again demonstrated sustained strength in financial performance during the first nine months of the year. Statutory profit after tax was 4.8 billion. Within this, we delivered net income of 14.8 billion, up 9% on the previous year, driven by broad-based growth across our businesses. Q3 net income was 2% higher than Q2. We remain disciplined on costs. Year-to-date operating costs of £7.2 billion were up 1% year-on-year, supporting a cost-income ratio for the first nine months of 49.3%.

2:10 The cost-income ratio for the third quarter was 47.2%. Credit performance remains strong and stable. The year-to-date impairment charge of £930 million equates to an asset quality ratio of 25 basis points. Together, this delivered underlying profit of 6.6 billion for the first nine months, 2.4 billion in Q3. Our performance year to date has resulted in a return on tangible equity of 17.9%, strong capital generation of 153 basis points, and a CET1 ratio of 13.3%. Let me now turn to slide four to look at developments in our customer franchise.

3:02 We have seen solid growth across both the lending and deposit franchises so far this year. Focusing on the third quarter, Group lending balances of £495.5 billion were up £4 billion, or £5 billion, excluding movements in hedge accounting. We saw growth across all business lines. Within retail, mortgages increased £0.3 billion in Q3. We realised slightly higher mortgage completion margins quarter on quarter at circa 75 basis points, although this remains below maturity margins. The market remains highly competitive. Elsewhere in retail lending, we saw continued growth in each of our cards, loans and motor businesses, as well as European retail, again in competitive markets.

3:53 Commercial lending balances meanwhile were up again in the quarter by 3.3 billion or 3%. As has been the case throughout the year, this reflects strong broad-based growth in CIB across sectors. PCB also continued to grow, with balances increasing 0.2 billion after the impact of government-backed lending repayments. As we look forward across lending businesses, we believe higher rates, if sustained, may start to slow asset growth. As always, our strategy will be to balance volume and returns. Turning to the liability franchise, we saw a solid performance in deposits, up 1.9 billion in the quarter.

4:39 Total retail deposits were broadly stable, with growth of 0.2 billion in UK deposits and a decline of 0.5 billion in Europe. We were pleased to see PCA growth of 0.6 billion in the quarter, again increasing our market share of balances in this core product and helping deepen customer relationships. This more than offset a small decline in UK savings of 0.3 billion. Commercial deposits increased by 2.1 billion, reflecting growth in targeted sectors across both CIB and BCB and continuing recent strength in this area. As called out throughout the year, we have again seen a competitive quarter in the deposit market. For now, these conditions look set to persist.

5:27 and we continue to manage for both franchise enhancement and sustainable value. Let me now turn to net interest income on slide five. Net interest income continues to grow robustly. Year-to-date NII was up 10% year-on-year to 11.1 billion. This included 3% growth in Q3, helped a little by day count. Income growth continues to be supported by positive but slowing momentum in the net interest margin at 325 basis points in Q3, up three basis points on the second quarter. Driving this in Q3, the growing structural hedge contribution continued to more than offset mortgage refinancing and deposit churn headwinds.

6:21 Structural hedge earnings were 1.9 billion, with an average yield of 3%, still well below current market refinancing rates. Within this, the notional of £246 billion and the weighted average life of around 3.75 years were stable in the quarter. We continue to expect hedge income to grow to greater than £7 billion in 2026 and greater than £8 billion in 2027, based on our economic assumptions. NRI strength was also supported by the growth in our franchise, with average interest earning assets of £481 billion in Q3, up over £3 billion on Q2. Based on these developments, we are on track to meet our 2026 NII guidance of greater than 14.9 billion.

7:10 In the current competitive market conditions, we expect to deliver modestly above 14.9 billion. Looking further forward, these same conditions will likely impact 2027 NII growth, partly offsetting benefits from higher volumes and hedge income. While still healthy, the pace of NII growth in 2027 is likely to be lower than in 2026. Let me now turn to other income on slide six. We continue to deliver strong momentum in other income across our franchise. Year to date, other income was 5.0 billion, up 10% in the prior year.

7:55 Q3 OOI is up 8% year-on-year at 1.7 billion. Within this, Q3 was very slightly lower than Q2. This reflects continued strength in transport, current accounts and Lloyds living. These factors were offset by increased subsidence claims within general insurance, lower markets income within commercial banking and the non-repeat of certain second quarter gains as we flagged in July. Excluding weather claims, third quarter underlying OOI growth was over 10% year on year, continuing the strong performance that we've seen in recent periods. Income diversification remains a strategic focus and indeed our base case expectation.

8:43 We continue to see good progress in our strategic initiatives as laid out on the slide. These include strong momentum within Tusker, as well as the successful launch of new propositions, for example Lloyd's Accept within BCB. Such developments and upcoming plans will maintain our forward momentum. Briefly turning to operating lease appreciation. The Q3 charge of 420 million has decreased from Q2, largely due to the non-repeat of the revaluation charge for used car price adversity that we recognised at the half year. This is partly offset by the quarterly run rate, which is increasing in line with fleet growth. Moving to costs on slide seven.

9:33 Cost discipline continues to be an imperative. Operating costs for the first nine months were 7.2 billion, up 1% year on year. Our robust performance reflects business cost growth, inflationary pressures and costs related to Lloyd's wealth, largely offset by continued cost savings and lower investment at this stage of our current strategic cycle. Third quarter costs of 2.4 billion were down 1% versus Q2. As we look forward, Q4 will see higher costs due to the usual seasonal factors, including bank levy as well as investment timing. The remediation charge was £22 million in the quarter, taking the year to date charge to £61 million.

10:20 Taken together, this resulted in a cost to income ratio of 47.2% in Q3 and 49.3% for the first nine months. Importantly, we remain on track to deliver a full year cost to income ratio below 50% and operating costs of less than £9.9 billion in 2026. Let me turn to credit performance on slide eight. Credit performance remains strong and stable. This reflects our prudent approach to lending and resilient customer base. Arrears and early warning indicators across our portfolios remain benign. The year-to-date impairment charge is 930 million, equivalent to an asset quality ratio of 25 basis points.

11:13 Compared to the prior year, the increased charge is driven by retail model updates, both last year and this year, and a more normalised level of impairment in 2026, as well as lower one-off releases within commercial. The charge of 313 million in the third quarter also represents an asset quality ratio of 25 basis points and reflects stable underlying development alongside model updates. It incorporates a small MES charge of 8 million in the quarter. Our performance year to date means that we are on track to meet our guidance for a full year asset quality ratio of around 25 basis points. Let me now address returns and TNAV on slide nine.

12:01 The group delivered a strong return on tangible equity of 17.9% for the first nine months and 19.5% in Q3. Below the line, the third quarter restructuring charge and volatility and other items were modest. Tangible net assets per share ended the quarter at 55.4p, down by 1.6p per share both year to date and in the quarter. Growth from attributable profits and the reduction in share count from the buyback were offset by shareholder distributions, and in particular, the temporary impact of higher rates on the cash flow hedge reserve. Looking ahead, we continue to expect material TNAV per share growth over the medium term.

12:49 We remain on track to deliver a return on tangible equity of greater than 16% in 2026. Indeed, given our current TNAV, we expect to comfortably exceed this. Turning now to capital generation on slide 10. Our business performance has driven strong capital generation. Within this, total RWAs ended the quarter at 247.4 billion, up 11.9 billion from the year end. This increase reflects strength in lending and market and other movements, partly offset by optimisation activities. Turning to Q3, RWAs increased 5.6 billion, again driven by customer and bank lending growth, but with limited optimisation in the quarter.

13:40 Q4 should be more active in this respect. Looking forward, we continue to expect a six to eight billion positive day one impact from BAL 3.1 on the 1st of January 27. Note that we're also awaiting finalisation of CRD4 secured model weightings. Year to date, strong banking profitability has driven capital generation of 153 basis points. including 45 basis points in the third quarter. We remain on track to deliver our capital generation guidance of more than 200 basis points in 26. The Group CET1 ratio ended the quarter at 13.3%.

14:26 We continue to expect to pay down to a CET1 ratio of 13% by the end of the year. I'll now turn to our updated macroeconomic outlook on slide 11. As usual, we've updated our economic outlook for the performance of the UK economy. We now expect inflation to average 3.1% this year, before peaking in the first quarter of 27. Our bank rate forecast now incorporates a 25 basis point increase in November, although our terminal rate assumption remains unchanged at 3.5%, reaching that level in mid-28. I refer to the potential impact of higher market rates versus our own forecast in my earlier comments.

15:16 We expect GDP growth to be 1.3% this year, falling to 1.1% next. Unemployment is forecast to peak at 5.3% in the middle of 2027 and house price growth to be 0.7% in 2026, rising to 1.7% next year. While these forecasts represent a modest uplift, our diversified and resilient business model remains well placed to withstand various economic outcomes. In this context, the budget yesterday does little to change our views. Stepping back, let me now remind us of our 2026 guidance on slide 12. We remain on track to meet our 2026 guidance.

16:03 We continue to expect net interest income of more than 14.9 billion, a cost to income ratio below 50%, with operating costs below 9.9 billion, and an asset quality ratio of around 25 basis points. Alongside, we expect return on tangible equity of more than 16% and capital generation of more than 200 basis points, paying down to a CET1 ratio of around 13%. As always, we remain committed to a progressive and sustainable ordinary dividend. As we have said many times, delivery of our current strategy and financial commitments lays the foundations for the next stage. Let me briefly turn to this to finish up on slide 13.

16:53 The successful delivery of the current strategy has been all about building new strategic revenue streams, diversifying income growth and continuing our focus on cost and efficiency. These are the foundations for Accelerate 2030. We are now mobilizing the business at all levels. We've established a new business unit to unlock connected growth opportunities across the group. We have allocated over 95% of our 2027 strategic investment spend which is now built into delivery plans. Our core franchise will remain a key contributor to value creation as we deliver new products and build distribution in critical markets. We will innovate to further grow and diversify our revenue streams with many new propositions in the coming months such as Lloyd's Smart Wallet.

17:44 Growth will be led by investment in technology and skills We are continuing to extend our AI use cases across the group and are on track to deliver over 100 million of AI benefits in 2026. We were pleased to see our continued progress was recognized in the latest evident AI report. Our strategic ambitions are underpinned by the robust financial framework that we outlined in July. As you know, the expectation is continued income growth, improving operating leverage, strong sustainable returns, and growing capital generation. Stepping back and as said in my opening comments, the Group is delivering in full on the current strategy. Looking ahead, we are more convinced than ever that the opportunity for the Group is compelling and Accelerate 2030 is the right way to seize it.

18:38 That concludes my comments for this morning. Thank you for listening. We'll now open the line for your questions. Thank you. If you wish to ask a question, please press star 1 on your phone keypad. To withdraw your question, you may do so by pressing star 2 to cancel. There will now be a brief pause while questions are being registered. Thank you. Our first caller is Benjamin Toms from RBC. Your line is now unmuted. Please go ahead.

19:13 Morning William, thanks for taking my questions. The first one's on other income. It was a little bit weak in the quarter, albeit you're still trending up 10% on a year-to-date basis. Is Q3 the right base to model off? It sounds a bit artificially depressed. If it is depressed, how depressed do you think Q3 roughly is? And secondly, on NII, you defined greater than 14.9 as modestly above, and consensus is slightly above 15%. Was the modest comment designed to move expectations down slightly to somewhere between 14.9 and 15? Thank you.

19:46 Thank you, Ben. Both those two questions. Just to answer them in turn, OI, first of all, roughly 1.7 billion, 1.68 billion. The performance in OI is something that actually we're pretty pleased with over the course of the year. There were some points if you like in Q3, one specifically the subsidence event off the back of a dry summer. And the second is a little bit of weakness in markets, in particular in September off the back of the volatile markets that we saw. That's occurring in the commercial banking business, specifically the CIB business. The quarter on quarter comparison, which is down about 19 million over the quarter, is a little bit softer because quarter two was particularly strong.

20:32 What I mean by that is that we saw some securitization gains in Q2 and we also saw some outsized LDC gains. And so there's a bit of strength in Q2 that is in turn contributing to the relative Q2 to Q3 performance. Now, as you said, we're up 10% year to date, which is very much consistent. In fact, even a touch ahead of our high single digits expectation for the year. We also added into that Lloyd's wealth. I think, Ben, to answer your question, if you strip that out, the two effects that I mentioned in respect of Q3, subsidence number one, markets number two, are, we think, largely one-off in nature. Subsidence is an event that was particularly acute over the course of the summer. We're now seeing rates hardening, i.e., premium price increases in the general insurance market, which is good to see, and I think it's partly in compensation of that.

21:21 And then secondly, we're also seeing a stronger start to the quarter in the CIB markets area, which is good to see. So I think we expect to see continued growth in OI over the course of the fourth quarter. We do expect to be very consistent with our high single digits plus Lloyd's wealth guidance that we gave at the beginning of the year. And we feel very comfortable about the trajectory of OI in that context. To give you one further data point, Ben, which you might find useful is if you strip out some of the quarter two benefits, I mentioned securitization and Lloyd's development capital as part of that, LDC as part of that. and if you strip out the the one off for want of a better word i.e. the weather and maybe a bit of the CIB weakness in markets number two then actually what you're seeing is more like a five percent quarter on quarter growth rate as opposed to the 19 million reduction that we saw in quarter three. So that gives you some idea of the underlying performance that we're seeing in OI and again expect a decent fourth quarter.

22:22 In respect of NII Ben, the second of your two questions, we have I suppose first wanted to confirm that we will very much meet all of our guidance in full and that of course includes greater than 14.9 billion for NII guidance for the full year. At the same time, we wanted to make sure that people were, if you like, aware of our expectation that we expect to be modestly above 14.9 billion for the year. Now, what is going on there? In quarter four, we expect to see continued growth in NII, which will be driven by similar drivers, frankly, excluding, obviously, the day count benefit that we had in quarter three. We should expect to see a modest increase in the net interest margin. Likewise, AIA growth, which will be flatter, but it will be driven up by, in particular, averaging effects. and that all delivers as modestly in excess of £14.9 billion.

23:19 I won't comment on consensus, Ben, but hopefully you can tell by my answer to your question there what we're aiming at. Thank you. Thank you. Our next caller is Guy Stebbings from BNP Paribas. Your line is now unmuted. Please go ahead.

23:43 Morning, William. Thanks for taking the question. The first one was back on NI, really on the funding side. It's clearly a competitive market out there for funding. And at the same time, you're seeing good lending dynamics, particularly on the corporate side. Given the market's no longer sort of awash with liquidity, be like your own loan deposit ratio has been trending upwards or normalising, just interested in sort of how comfortable you are with lending growth running ahead of deposit growth from here? Or does there come a point where you need to either compete harder for deposits or pull back slightly from lending? Or is that just not really an issue for quite a while? and then the second question which is partly linked to this is on capital I mean the Chancellor yesterday made a push again in terms of the Bank of England ahead of its upcoming capital update to lower sector capital requirements and overlaps if you want to call them that on domestic buffers if we do see that come through which you know could have quite a meaningful impact on your regulatory requirements how do you think you'd use that freed up capital would it as the Chancellor would presumably want go towards incremental lending which would add to funding needs for the sector or might you have other uses for that capital?

24:47 I guess behind the question, certainly welcome any incremental capital being freed up for that. Thank you.

24:53 Yeah, thank you. Thanks for the questions, Guy. I'll answer them in turn. I might pull apart the first one a little bit. First of all, in respect of lending, as you say, healthy lending growth over the course of the year and indeed over the course of the quarter. If you take each of those over the course of the year and you add back in securitizations, which is just shy of 2 billion, you add back in movement in the fair value hedge, you add all of that together, we've seen roughly or just shy of 18 billion lending growth over the course of the year. And that includes just over 5 billion of lending growth in the course of quarter three. So some really healthy lending growth developments there. And they are on both the retail side and indeed the commercial side. Likewise, we've seen very healthy deposit growth too, 6.3 billion over the course of the year, just shy of 2 billion in the course of quarter three.

25:45 That is slightly more skewed towards the corporate banking side, but equally includes growth within the UK deposit book over the course of quarter three of about 2 billion, about 0.2 billion, which most notably and interestingly includes increases in PCA balances of about 600 billion, 600 million, including an increase in share. So I think all of that is good to see, Guy. When we then look at the balance, if you like, as your question highlights, we've seen faster lending growth than we have deposit growth. And that has ticked up the loan deposit ratio a touch. We're now about 99% versus year end, about 97%. To answer your question, we don't see that as a particular constraint. We don't really have a loan deposit ratio target.

26:30 It is relatively easy to reduce it if we were to choose to do so by going out and gathering deposits. We've chosen instead to focus deposit value on those where we have the most valuable customer relationships and to avoid, if you like, gathering deposits in what have sometimes been relatively negative margin fixed term areas. So we don't see the loan deposit ratio as a constraint. We don't see, at the moment at least, any inhibition on our ability to continue lending into the economy, which of course is important to us. And the best testimony to that is, as said, funded lending of around 16 billion and then of course you can add in the securitizations as I did earlier to get to 17.9 billion in total. The capital point then, the capital point is interesting. We see the FPC discussion ongoing and we'll expect to see more in November.

27:24 Now, you know, so far the changes that have been brought about by that review in terms of the leverage ratio have not made a significant difference to us because as you know, we are CET1 constrained as opposed to leverage constrained. Looking forward, the FPC is looking at, as your question pointed out, a couple of topics. One is whether there's overlap in buffers, and two is the question of buffer usability. It'll be interesting to us to see what it is the FPC comes back with off the back of that. At the same time, and again, as your question highlighted, as we land BOL 3.1 on the 1st of January next year, we will see a reduction in our Pillar 2A targets of about 20 basis points. They will go from 1.4% to 1.2%. What that will mean is that at the beginning of next year, we have our CET1 target of 13%, but we will have a capital stack of more like 11.6%.

28:18 And of course, in that context, we look with interest to see what the FPC is going to do on capital buffers that feed into that capital stack. What we will then choose to do beyond that, Guy, at the moment at least, I think is To be determined, depending upon where all that plays out, number one, but recognizing that we have a degree more management flexibility in the way in which we run the business, simply because that management buffer goes from what is currently 120 basis points to what will be 140 basis points. So I think for now, Guy, without wanting to pre-empt future discussions or alternatively second guess what it is the FPC might come out with, we look with interest to how the situation will evolve. We maintain our capital target of 13% buffers.

29:06 That's clearly helpful from the perspective of running the business. Thank you. Thank you. Our next caller is Shil Shah from JP Morgan. Your line is now muted. Please go ahead.

29:31 Great. Thanks for taking the question. If I can ask on the asset margin, you spoke about some pressure in the mortgage market, which isn't doing that. That continues. What about some of the other markets like the corporate and the unsecured market? Are you seeing pricing pressure? Are you seeing mixed chains? What's driving this pressure? on the margin basis. And then secondly, just to follow up on the LDR question earlier, how do you think about the balance between raising more deposits in this competitive environment versus wholesale funding considering that LDR ratio is probably going to rise above 100 shortly? Thank you.

30:11 Sure. Thanks, Gilles, for the questions. When we look at the environment, I mean, I think we've been calling out all year that the environment is a relatively competitive one. And of course, there's been a lot of attention paid most recently to the deposit side of that. And indeed, deposit markets are relatively constrained. That is for a host of cyclical and structural reasons. I might just dwell upon that for a moment. So for example, energy prices, increased inflation, higher rates in turn limits disposable income growth. That limits deposit market growth for those cyclical reasons, but at the same time, one or two structural factors. QT is one example. Reduction of TF SME is another example. The fact that we've got a number of non UK lenders in the market taking out deposits from the UK market and not recycling them as UK lending is a third point within those structural drivers. And all of that means, Shiel, is that the deposit market is not growing all that fast. I think it was around 25 billion around the middle of the year from the Bank of England figures. Most of that has gone into fixed term.

31:14 And that fixed term, as you know, is pretty tightly priced. So that's the deposit side. But your question was also on the asset side. And I think, you know, consistent with what we've been saying all year, really, we have seen competitive pressures on the asset side and it's not just mortgages it's kind of across the asset classes too but I think that's what as said we've been calling out in various different conferences and so forth now having said all of that we've seen decent volume growth in these areas you know we are competing hard in what are still economically very attractive areas so cards for example up seven percent year-to-date personal loans likewise up seven percent year-to-date motor up six percent year today These are important areas for us to grow in.

31:59 The CB business or CIB business, just that subcomponent of commercial banking, is up over 10% year-to-date in its balances. All of this lending is healthy, value-added, positive returning lending. We're pleased to see it. But I think it is fair to say that there is a dose of margin pressure going on, again, consistent with what we've been saying through the course of the year. The second question that you posed there, Gilles, in terms of the, I guess, the balance sheet, the loan deposit ratio and the liquidity coverage ratio. I mean, first of all, I think you're right to point out the liquidity coverage ratio. When we look at the balance sheet, as said, loan deposit ratio is not something that we particularly target. We do not feel constrained by the loan deposit ratio as it is.

32:46 It's relatively easy to fix. Thank you very much. that actually it is liquidity coverage ratio that is at least as important, if not more so, versus the loan to deposit ratio. And I suspect for most banks, it is the liquidity coverage ratio that is more likely the earlier biting point. Now we feel very comfortable with our liquidity coverage ratio. It's about 143%, as you'll have seen today. and it is backed up by predominantly retail and therefore very sticky deposits which allow us to operate comfortably at the 143% liquidity coverage ratio and indeed I would stress that that is meaningfully ahead of where we were on a pre-COVID basis so we are holding more liquidity today than we felt necessary on a pre-COVID basis.

33:51 When we look forward I would make those points on the if you like LDR and LCR side I would also add that what's important when you look at lending is at least from our perspective less to be constrained by LDR and LCR more to make sure that whatever lending we do is value added is economically value added to the shareholders we clearly want to present strong customer propositions and as said just shy of 18 billion in total lending so far year to date shows that we're doing that from a customer point of view. We want to make sure that that lending is value added. Thank you. Our next caller is Jonathan Pearce from Jefferies.

34:37 Your line is now unmuted. Please go ahead.

34:42 Morning William. Two questions please. First is on deposit competition. I really just want to get your view on what's going on here because rates on site deposits haven't really changed since the start of the year. The extent to which those at the top end of Best Buy tables are paying above one year swap rates for one year term deposits hasn't changed that much since the start of the year. I mean it's very competitive but not significantly more so than Thank you very much. is being conflated with behavioural changes.

35:42 And you may say the distinction doesn't really matter at the moment, and I would agree, but a behavioural change is transitory, whereas higher competition may be more structural and therefore a bit more concerning. So if you can break down what the real issue here is in terms of the marginal margin, that would be helpful. The second question, pillar 2a. The end result of Basel 3.1 for you looks to be a 20 basis point drop in your Pillar 2A requirements, but your equity tier one ratio going up 40 basis points. So something the market's been worried about for eight years now is effectively the 60 basis point reduction in capital requirements if I read the release as it seems to imply this morning.

36:28 I'm just wondering, is there something else going on here? Does this Pillar 2A movement Thank you very much.

37:03 Yeah, thanks. Thanks for those questions, Jonathan. I'll take them in turn. First of all, on deposits, you know, as said, up 6.3 billion a year today, up just shy of 2 billion over the course of quarter three. So the deposit performance has been in pretty good shape. Within that and relevant to your question, Jonathan, you talked about site deposits there. We've seen strength in both PCAs and also in non-interest bearing current accounts within the BCB area as well in quarter three. So we're pleased to see that on both counts. I mentioned earlier on about 600 million gain in PCAs over the course of the third quarter, a smaller number gain in non-interest bearing current accounts in BCB, but nonetheless going in the right direction. I think that's off the back of strength of propositions.

37:51 It's off the back of our customers choosing to hold sums. It's also noticeable, actually, Jonathan, that even in the context of a rising rate environment, not only have we gained market share in the PCA front, but also the amount, i.e. the number of balances in terms of quantum in excess of £20,000, as an example, has gone up, even in that rising rate environment, which I think is kind of interesting in the context of your question. I'll add a couple of comments and then come back to the behaviour versus competition point that you raised. First of all, we think we have seen a bit of rates increase over the course of the year as a whole. As you know, we've been calling out deposit competition right the way through the year. We started in earnest at Q1, but we've been trying to continue that narrative and amplify it over the course of the remainder of this year.

38:43 I do think at the same time, the curve has clearly shifted higher, especially in Q3 in that context. and your question, therefore, is how much behavioural change is that sponsored? When we look at our book overall, we've seen, I think, a combination of clearly higher rates. You know, we ourselves have been out from time to time where we thought that it's economically value added to offer higher rates. I would say the migration within the book, the migration within the book has been relatively limited so far. Specifically, what do I mean by that? I think it's probably just over a billion switch from instant access into fixed term in the third quarter. That's in the context of an instant access book, which is comfortably over 100 billion. If I track that back over the course of the year, the migration that we've seen over the course of the year, basically from instant access into fixed term, I think over the year as a whole, it's been somewhere between three to four billion in that zone.

39:37 You can see the quarter three performance is not particularly different to what we have seen earlier on in the year. And in the context of an instant access book that is comfortably over 100 billion, that's relatively limited. Now, as we look forward, we expect both aspects of competition on the deposit side to persist, as I mentioned in my script a little while ago. And that's partly what's behind, I suppose, some of our outlook comments, some of my outlook comments that I made in my commentary. The other point I would say, just to add on to this discussion, Jonathan, is you know we we've seen through the course of this year not just deposit competition but also asset competition uh consistent with my response to to shield's question just a second ago there's a bit of asset side competition that's been going on over this year uh we don't have well let me put it another way we expect uh competition to continue in those markets over the course of next year um and that's what you know we're basing our outlook comments on we'll give you further guidance at the end of the year but my point is it's both liability side and don't forget the asset side.

40:45 When we look at the... I'll move on, Jonathan, to the second of your questions on Pillar 2A. You know, I don't think there's terribly much going on there above and beyond Pillar 3.1, at least not for us. What I mean by that specifically is that when we look at the adjustments for Pillar 3.1 that move RWAs into Pillar 1, they are things like the SME Scaler, for example, and they are they are one or two other aspects so CVA and operational risk and table these things in turn are leading to pillar 2a relief of 20 basis points and that's what we're calling out in the R&S there is one other modest item that is moving in pillar 2a I don't think technically we're allowed to disclose it as such but there's one other pretty modest item in the pillar 2a piece that is moving that is net helpful to us beneficial but it's a very small part of that overall 20 basis point improvement or reduction in pillar 2a that we see on the 1st of January next year.

41:46 What that all means, Jonathan, is your question is getting to, and please tell me if this isn't fully answering your question, but it means that our capital stack is getting to 11.6% as opposed to where it is today, 11.8%. As mentioned earlier on, in response to, I think it may have been Guy's question or perhaps Shields, That's good. That added 20 basis point of flexibility or management buffer is helpful to us. Over the longer term, as the regulatory situation gets clearer, maybe as some of the macroeconomic risks play out, we'll obviously have a discussion with the board in due course about what does all that mean. But I don't think that's necessarily a discussion for this year. I think it's a discussion based upon the maturity of the debates and the issues I just mentioned. but there's no doubt that in the meantime having 140 basis points of management buffer over 120 just allows us to manage the business with that much more flexibility.

42:42 Okay that's really helpful. It basically sounds like you're saying that this isn't in any way treading on the toes of what may come next month because your ring fence bank has got probably 460 basis points of domestic risk add-ons within it if I assume you know pillar 2a credit concentration risk of Peter Fitzgerald, Peter Fitzgerald

43:25 Thank you. Our next caller is Jason Napier from UBS. Your line is now unmuted. Please go ahead.

43:50 First question, regrettably, is back on the competitive environment. There's no doubt it's the number one issue on investors' minds. And if we did a word cloud of the call so far, competition and competitive is probably going to be the one in the biggest font. And so, in fact, in your own words, you've been seeking to amplify that message this year. So a couple of sort of questions around that. Firstly, are things worse than budget? in the market or in the outlook and then secondly when management sit down and war game various scenarios that may come to pass in the next year or so what are the sort of strategic reactions that you might have to conditions being plausibly weaker than expected and then the second question coming back on slide 7 around costs I think it's clear you're expecting seasonally to spend more money in the next and something around the composition of Thank you very much, Jason.

45:40 We steadfastly refuse to comment on consensus, so I'm not sure we can necessarily comment versus our internal budgets. That seems even more of a transgression. But nonetheless, let me address your point. When we look at the outlook, Jason, you could tell from my comments earlier on that when we're looking at net interest income for 27, we're not trying to give specific guidance. That's very much a job for the Thank you very much. and why is that? First of all we've got this modestly above 14.9 billion for the tail end of this year and obviously what's driving that will to an extent cross over into 27.

46:46 The second is competitive asset and deposit markets as mentioned throughout the course of this call. Your word cloud comment is I'm sure an entirely fair one. Specifically you're saying well to what extent is that worse than we previously thought? You know I think the deposit market is a touch slower than we previously thought. Again I referenced the Bank of England July figures earlier on I think at the same time the fact that that is fixed term or rather most of that money is going to fixed term deposits number two the fact that a lot of it is going to non-UK lending companies or firms number three and therefore not getting recycled back into the economy these things at the edge are probably a touch tougher than we had previously expected for the reasons that I've just outlined and then On assets, I think it's probably more or less tracking to what we'd expected. Maybe there's a bit less interest bearing balances in cards, for example, than we previously thought.

47:39 But, you know, overall, not far off. The final point, as I said, if rates are high next year or as high as they are today, then maybe some asset growth, particularly in areas like mortgages and so forth, might be a touch lower than we previously expected. We'll have to see. I think having said all of that, as said, number one is this NI growth expectation for next year remains healthy. And in that sense, pretty much exactly what we thought it previously was. And related to that, if you think back to the framework that we gave in July, Jason, in respect of the greater than mid-single digits growth in income for 2027, the improvement in operating leverage for 2027 and indeed every year beyond that, and indeed improving returns and capital generation over the course of the Accelerate 2030 plan, we're still going to be meeting all of those commitments.

48:31 We're still going to be meeting our guidance for 2026, to be clear, in full, and we're still going to be meeting every aspect of that framework that we laid out in July. There is no change to any of that. We're simply shading, as said, around the outlook for NI for the reasons just mentioned. You mentioned slide seven on costs there, Jason, just to move on to the second of the two topics. You know, as I mentioned in my script earlier on, cost savings or rather meeting cost targets consistently at an absolute level and on a cost income ratio basis is an absolute imperative within Lloyds Banking Group. It's been an imperative since a long time before Charlie and I came along and I hope it will remain an imperative for a long time to come.

49:16 When we look at the overall cost performance in the course of the year to date, indeed the quarter, we're obviously pleased with how it's gone so far. We're up around 1% over the course of the year to date. We're down a little bit quarter on quarter. But I would stress that that is all in the context of expecting to meet our sub 9.9 billion absolute cost target for this year and expecting to meet our sub 50% cost income ratio for the target for the 2026 period. Again, all consistent with the guidance we set out at the beginning of the year. Your question was around the gross cost savings and what's going into that. I guess two or three things that I'd say in connection with that. The gross cost saves are made up of two or three streams of activity. One is what I've described as strategic investments.

50:01 So things like property optimisation, for example, things like technology savings, new technology, cloud migration, reduction in data centres, this type of thing. Second stream is what I describe as change saves. And what I mean by change saves are effectively the unit costs that we incur, some of which are depreciated in period, some of which are obviously capitalised, that in turn are about delivering change in a more efficient way. And often enough, that is the differences in processes that we employ, the differences in the set up in the organisation, and of course, the differences in the infrastructure that we deploy in order to deliver change. Third strand, perhaps this falls to a degree within strategic investments, automation. automation in terms of processes internally, automation in terms of customer service ambitions and the like and then after a final stream that I'll highlight here is what I describe as BAU really Jason so sorting or rather third-party management, organizational design, divisional initiatives, management of the pension scheme, productivity measures, these types of things and so I think I've characterized our gross cost savings in each of those four buckets ready strategic investments number one, change saves number two, automation at every level of the organization number three and BAU cost saves and together that is what adds up to the gross cost savings as you described it as we describe it over the course of the year today and over the course of the third quarter.

51:31 Now looking forward Jason I would expect every one of those cost saved buckets to be continued into the next stage of the plan as we look forward. but I would also expect to leverage more heavily upon some of the new opportunities for cost saves that we see and some of those of course will be technology enabled AI is a great example of that AI is clearly going to enhance our customer propositions for revenue point of view but it's also going to improve efficiency within the organization and you know as you know we've got a bunch of use cases that are starting to deliver on that fraud is one example process optimization is another example and then a second illustration if you like of new things which we expect to be able to deliver more on are things like our Lloyds Technology Centre in India which has been so far at least focused on very effectively I would say focused on technology development but we see all sorts of opportunities for extending the remit of that going forward.

52:25 So Jason hopefully that gives you some some color if you like some context for why are the gross savings what they are today but also why it is that we look forward to our circa 2 billion of gross cost savings for the next stage of the planning sorry 2030 with quite a lot of confidence uh we think that's going to deliver i think in the past we've described because of the increased investments a shade over three percent cost increase in 27 but then a progressively more controlled picture in the period thereafter as strategic savings come into play based upon some of the initiatives that I just mentioned. Thanks very much. Thanks.

53:04 Thanks, Jason. Thank you. Our next caller is Aman Raka from Barclays. Your line is now muted. Please go ahead.

53:16 Hi, William. Yeah thanks for the presentation and chance to ask questions. Could I just ask you about, just to kind of round out the discussion on deposits, is there any chance you could just tell us again what your mix is of term deposits please? Ideally within your retail business and corporate as a Q3 I think it's potentially quite a useful data point for for us in the market as we think about potential alternatives here for deposit dynamics going forward. And the second question was, I'm just interested about more broadly, I guess we haven't really actually talked about the structural hedge really at all. I think your track at your seven-year swap rate is probably tracking 70 bits higher than I think the level that you assumed at Q2.

54:14 which presumably has some decent rollover effect into next year. I note your macro assumptions at the back of the slide deck. You're actually well below market pricing in terms of your rate expectations, one hike and then kind of back to three and a half as a term rate. So I would just be interested in your take on the potential benefits of higher interest rates. I think we're talking quite a lot. You're showing us and front-loading Thank you so much. I'll take each of those separately.

55:09 On the deposit side, I think we might have said it before, actually, but just give you some rough idea. When we look at the overall fixed book within retail, at least, I think in the past we've said it's somewhere between 25 to 30% of the savings book. So you take UK deposits of, what is that now, 307 billion, you knock out PCAs of about 104, and that leaves the residual of the UK savings book. So UK savings book, therefore, a shade over 200 billion. Peter Fitzgerald but just to give you some idea there the overall commercial deposits book is about 180 billion now, 181 billion I think to be precise and the non-interest bearing part of it which hopefully addresses your question largely at least the non-interest bearing part of it is about 20% and I think again that's consistent with disclosures that we've given before in terms of just helping you understand the non-interest bearing current accounts part of the business so I'm not going to commit to giving you exactly the same update in every single quarter looking ahead. But nonetheless, that gives you a bit of a breakdown.

56:42 The structural hedge point. Yeah, I mean, you know, structural hedge clearly is a significant, very significant tailwind for the group. and that has been the case through 26 it will continue to be the case through 27 and indeed we see continued growth in structural hedge benefits over the course of the accelerated 2030 plans 2030 and potentially beyond and to be clear that is the case based upon modest increases in notional which is what we expect just as you would expect off the back of franchise enhancement but it is also the case even if we don't get any notional increases so just the refinancing and procuring yields itself should deliver growth and structural hedge tailwind if you like over the course of the 27-30 and potentially beyond the period.

57:28 You'll have seen that we're earning 3% yield on the structural hedge right now at a time when and many others. Over the course of next year, based upon our economic assumptions, you can expect that yield to go to around 3.3%, so still plenty of room for growth thereafter. That will continue to build as we look forward. We talked about it a bit in the summer, and obviously rates have developed a little bit since the summer. Now, you asked about, therefore, what are the benefits of rates. They are clearly that they feed through into The income streams of the bank are manifested through the margin of the bank on a look-forward basis. So that isn't going to change, albeit the contribution of the structural hedge will vary from one quarter to the other. So it's, I think, about nine basis points in the course of quarter three. I think it'll be more like seven in the course of quarter four, just to give you some rough idea of how it fluctuates.

58:23 But the overall phenomenon of a strong structural hedge tailwind does not. It's persistently strong. You asked about the benefits of that. Again, clearly at that level, there's a benefit. It's a gross benefit, if you like. I think what needs to be weighed against that is one's outlook for how much of that realistically is going to be competed away in what is, as said, a reasonably competitive market. Now, while it is a competitive market, as I said earlier on, it is still consistent with meeting all of our financial framework that we laid out in July. and indeed our circa 20% ROTE expectation that we expect to deliver by 2030 and are in excess of 18% that we expect to deliver by 28. So it's a competitive market but it's still a pretty high returning market and a big part of that is because the structural hedge is doing what it's doing.

59:13 So it's important that we don't get too kind of carried away if you like with the competitive dynamics in the market in the context of what is still a sustainably strong returning market and indeed for the Lloyds Banking Group business Thank you very much. One final point I'll make there on the question, Aman, is that when we look at the dynamics within the market, the dynamics in the market, such as they are, are ultimately likely to play to the strength of scale providers.

1:00:16 That is what happens in competitive markets. Scale providers succeed. We at Lloyds would certainly consider ourselves to be the scale provider. Thank you.

1:00:30 Thank you very much. Thank you. Our next caller is Chris Kant from Autonomous. Your line is now unmuted. Please go ahead.

1:00:42 Good morning. Thanks for taking the questions. One on capital and one on NII, please. So on NII, the remark about NII growth into 27 being slower year over year than 26. Just to help us understand what's in your spreadsheet when you're commenting in that way could you give us a view on what structural hedge yield churn assumption you're embedding there so conscious you haven't revised the terminal rates assumptions which I presume feed into your swap rate assumptions I suspect this may be something where consensus is a little bit different to what's in your spreadsheet with the management assumptions but just trying to understand you know how much of an impact that should have on 27 consensus which if I think about your greater than 49 modesty above 49 this year it looks to me like consensus probably ends up 1495 this year that will be 1.3 billion up on last year current 27 consensus would be 1.4 billion up on on 26 Thank you very much.

1:02:26 The UK Capital Framework. As you look at things, is there anything that would be on your shopping list, so to speak? So what aspects of the Capital Framework in the UK do you think are particularly penal or uncompetitive relative to what you see internationally? Thank you.

1:02:48 Thank you for that, Chris. To deal with each of those in turn, On the structural hedge, I'm not sure I'll completely answer your question, but hopefully I'll give you a bit of information that will be useful to it. When we look at the structural hedge, as you know, it's a notional right now that has been very stable over the course of the year. So 246 billion, that's been stable over the course of the year. And indeed, we expect it to be stable over the course of the remaining part of this year. Now, when we look into 27, we are expecting continuity pretty much on the notional. So I should not be so guarded we are expecting the notional to be flat during the course of 27 to be clear. What that means is that whatever churn that we might get in the migration I suppose in the deposit book that might be impactful is offset by flows in that we expect over the course of the year so you know I'm not sure that I would necessarily expect our migration pattern to be markedly different next year to what it has been this year, but I would expect some sort of continuation of that migration pattern.

1:03:57 Overall, the net of that combined with the new balances that we attract in, in the context of what we think will be relatively modestly growing deposit markets for reasons that I just mentioned earlier on, that produces a flat notional on the structural hedge for 27.

1:04:16 The second point that I make is that... Apologies, maybe I didn't express that very clearly. I was meaning in terms of your swap rate assumption. So you haven't changed the terminal rate assumption. Presumably when you're guiding on your expectation for 27 NII, that's still there for reflecting a hedge churn yield, the swap rate you're churning into, which is below forward market rates. Yeah, I understand.

1:04:48 We don't disclose our swap rates, particularly. What we do disclose, Chris, is our bank base rate. And obviously, swap rate feeds off the back of that. So when we look at the bank base rate expectation, it's a 4% in quarter four. We remain at 4% for 27. And then we come down to our terminal rate via two cuts in 28 to 3.5%. We don't disclose swap rates that we assume in our plans publicly, but the swap rates more or less track that type of bank-based rate pattern with a bit of a term premium on top. What that means, Chris, is that our swap rate assumptions in our plans right now are clearly below where the market is. So again, that's not giving you a precise answer to your question, but it gives you a direction of travel. There's then a couple of other points that I'd make which are worth attaching to what I've just said. One is, as you would expect in the way that the hedge rolls, we are probably about 90, 91, 92, something like that locked in for 27 right now.

1:05:51 If you took our hedge of 246 billion and looked at it in a completely kind of caterpillar way, you would expect us to be roughly 90% locked in for 27. That's about where we are. We might be a percentage point or so ahead of that, but that's about where we are. What that means is that the upside in the hedge based upon market implied rates is a bit less of a 2027 phenomenon, although it's a little bit there, but it is more of a 28 and beyond phenomenon. The reasons just mentioned. And then secondly, there's a very slight tilt towards year end maturities in the structural hedge. It's not much, but it's perhaps worth mentioning in the context of this discussion. On your second question, Chris, on the capital reforms or potential reforms, I should say, I'll probably just mention two things really above and beyond our previous conversation.

1:06:41 The areas that we are most interested in are the potential buffer overlaps, i.e. the buffers that are addressing the same risk in our capital stack. And for us, of course, that most relevantly applies to domestic concentrations. therefore we look with particular interest to what might be said around the OSI buffer and the CCYB buffer those to us look like and feel like they are addressing much the same UK concentration risk and that's where we would look to see some sort of unlock of potential overlap if indeed the FPC is going to go there I really don't want to second guess what the FPC might do but that's one example of where you might see overlap And then the second point, which I think is less interesting, but nonetheless, we're keeping an eye on it is the buffer usability, by which I mean, you know, banks have rightly been very shy of dipping into regulatory buffers during periods of either opportunity or macroeconomic challenges. for fear that the regulator will then turn around and say right you've got to immediately rebuild those buffers and that then cuts off the continuity of dividends and none of us want to do that and so as a result we have these comfortable management buffers and refuse to dip into regulatory buffers you know I know that everybody on the call and certainly my colleagues and I here who have operated in some of these markets for a while just feel very strongly that that is the right way to manage the business now to the extent that buffer usability is part of the FPC theme and they can talk about something credible Thank you very much.

1:08:30 I suspect that if you were to ask this question of some of our peers who are more active in some of the international wholesale markets, they would probably give you a slightly different set of answers to the ones that I would give you. But where I see the most meaningful opportunities are things like mortgage risk weightings. You know, we've had secured CRD4 rebalancing mortgage risk weightings. We think in excess of what is the required economic capital against those same set of risks. Thank you. Thanks Chris. Thank you. Our next caller is Ben Cavan Roberts from Goldman Sachs.

1:09:27 Your line is now unmuted. Please go ahead.

1:09:31 Thanks very much for the presentation and for taking the questions. Just one for me please on other income actually. So could you just give some comments on where you're most confident in near-term growth? I think you mentioned Q3 being even stronger quarter on quarter if you strip out certain items and Q4 looking good as well so far. So any colour there on where you're confident on near term growth and maybe elements that are different from the longer term build coming through to deliver the sustained high single digit growth in the guidance. Thank you.

1:10:04 Yeah, thanks. Thanks for the question, Ben. Maybe again, I'll just start off with a couple of comments on where we are here today and also where we are in the third quarter. As I said, year-to-date performance, we're pretty pleased with. Five billion so far, up 10%. If you take Lloyd's wealth out of that equation, we're up 7% year-to-date. And that's even after the substance points that I mentioned and the CB points, CIB markets points that I mentioned earlier on. So, you know, a pretty robust pattern of ROI growth, despite, as I said, a couple of headwinds in the context of substance and CIB markets. Now, what's driving that? Peter Fitzgerald, William Leon David Chalmers, Ron van Kemenade, Peter Fitzgerald Some pretty good growth in, as I mentioned earlier, on Lloyd's Wealth.

1:11:11 I'll come back to that in a second. Set against this GI substance issue. And IP&I, despite that GI substance issue, is up around 13% year to date. Commercial has been a little bit more weak, but that's been predominantly because of the trading point that I mentioned. And of course, when markets are volatile, the financing opportunities are a little bit tougher to come across in that context. So commercial has been a bit down over the course of the year. But then again, our fourth income stream, LBGI, our equity investments, LDC, Lloyds Living, these types of things, the earning streams from those businesses are up just shy of 30% year on year when we look at the quarter three year to date performance. So some really good performance in terms of that diversified set of earning streams within OI. What's really going to come back? I mentioned rates hardening in the context of GI earlier on, partly in response to that substance event earlier on.

1:12:06 Wealth is up something like 12% year-on-year income. It is also up about 9% year-on-year assets, and that's a combination of new flows and also markets-based growth. So a couple of examples in that area. And then I think ongoing strength in the context of our retail streams, again, I'd highlight Transport Tasker, which is a A very successful salary sacrifice, very resilient and very growth oriented for the business, which is good to see. And then we get ongoing strands of growth in some of the long term ambitions. LDC has done particularly well so far this year. I think Lloyd's Living is really coming through now. So I think putting all that together, Ben, where do we expect to be? I think we're very confident in OI as we go into the remainder of this year.

1:12:53 Market volatility notwithstanding. Let's see what happens in markets. Thank you very much. Thank you. As you know this call is scheduled for one hour and we've now reached the end of the allotted time but please do contact the IR team if you have outstanding queries. With that our final caller is Pearlie Mong from Bank of America. Your line is now unmuted. Please go ahead.

1:13:30 Hello, thank you for taking my question at the end of this presentation. I think we've talked enough about deposits, so just a very quick clarification maybe. So it does sound like Q4 is going to be a little bit tougher in the deposit market. So I suppose to what extent is it a choice? Are you taking some actions to attract more deposits? Because if I look at Q3, I think you're trying to deliver different versus some of your peers that you've grown PCAs, but seen some outflows in savings. I think it's slightly different to some of the peers we have seen. So is that partly because in Q4 you are stepping a bit more into the market? And I've noticed that you've got this, I thought, very interesting scheme where you pay and one year term deposit interest upfront. So is that a choice to do that? Or when you say deposit competition is persistent, is that deteriorating Q4? Or is it partly to do with choice?

1:14:23 Because I suppose, you know, one of the things the market might do is annualising Q4 into next year right so if it's choice then maybe we shouldn't be annualising into next year so I would just appreciate some thoughts there and then just very quickly mortgage completion margin I think you said 75 basis point which is a bit of an improvement versus where we were before is that sustainable I think the market you said is still very competitive and I think we might see a little bit of makeshift towards remortgages so just how does that 75 basis point look going forward?

1:14:57 Thank you for those questions. To take them in turn, on the deposit side, just a couple of points on Q3 performance first of all. Q3 performance up just shy of 2 billion year to date. That is a performance which has seen strength in commercial banking, up 2.1 million. It has also seen positive movement in UK deposits, to be clear. So UK deposits up 0.2 billion in the course of quarter three. That is consisting of about 600 million gains in PCA, i.e. up, and then a little bit of modest deterioration, i.e. down, in UK savings of about 200 million. So pretty modest move within UK savings, offset, more than offset in fact, by PCA positive movements.

1:15:46 We've then seen a little bit of weakness in European deposits of about 0.5 billion and that is what, if you like, results in the round picture for the deposits movement. Up just shy of 2 billion with the pattern that I've just described. Now, that's kind of point one. Q3 performance, as said, up in UK deposits, combining PCAs and savings, which is what is important to us, alongside that particular PCA point. Secondly when we look at the deposit strategy that is very much a strategy that we are very deliberate about and it is therefore to use your words early a strategy of our own choosing and what is going on there overall is said very positive deposit performance over the course of the year uh 6.3 billion up now what we've chosen if you look at the year as a whole when we saw q1 activity within in particular the isa market We saw quite a lot of negative margin development during that time and therefore chose to focus upon retention and delivering value to our relationship customers.

1:16:47 That's where we've chosen to stay more or less through the course of the year but occasionally coming into markets where we've seen value-added opportunities. In that context, if non-relationship money that is on a negative margin doesn't come to the group, we're okay with that. What we want to make sure of is that relationship money on a sustained basis, where we see good customer value, where it makes sense for the groups, stays with us in the strategy as described. Now, as we look forward, what does that mean? For both the cyclical reasons that I mentioned a second ago, as well as the structural reasons, we do see this deposit market competition continuing over time. We will seek to continue to build value with our most important customer relationships and to make sure that we enter the deposit markets when it is value added both for customers and for shareholders. You should expect us to continue that strategy going forward alongside that being sufficient if you like to deliver healthy lending growth in turn translating into average interest earning asset growth.

1:17:50 So that's the strategy. I think, therefore, it is fair to say on the asset and liability side, some of what you see in the context of modestly about 14.9 billion expectations, what that implies for Q4, you know, you should expect to see a little bit of that continue into 2027, as described. Your second question, purely on mortgages, we've seen about 75 basis points spread within mortgages. that is probably a touch better than where we were at Q2 it's probably a touch better than where we were at Q1 which is good to see but a couple of points in that context you know one is that in an environment of significant swaps volatility it is quite difficult to tell what the equilibrium set of prices is we think it is nudging up off the back of some of the trends that we've discussed before but it is hard to be too precise on the point nonetheless 75 basis points is a modestly positive direction of travel I would say Now, in the mortgage market, again, we run the business so that we can continue to build the franchise. If you add back in securitizations, we're up about 4 billion in mortgages this year, which keeps us comfortably above the 17% market share.

1:19:00 I think so far year to date, we're about 17.6% market share in completions. In the context of Q3, we're about 17.1% market share of completions. So that's all pretty good. And we're pretty happy to stay within that zone. What I would say is that we are constantly looking for opportunities to enhance the margin performance of mortgages by making them part of our holistic customer dialogue. So a couple of examples on that. If you are a mortgage customer, sorry, if you are a Lloyds Premier customer, you are going to get a discount on your mortgage product. That's a basis on which we can enhance the overall margin. We have a good understanding of the customer's risk and we encourage a stickiness, if you like, of the Lloyds Premier relationship. Another example, Pernie, we've talked a lot about how we've managed to get to 20% penetration of protection products in our mortgage product.

1:19:50 As an illustration within that, which I think is kind of interesting, we're now at the point where 42%, 42% of our first time buyers take a protection product. Great, thank you very much. Thank you, Charlie. I think we are at the end of the call so I'd just like to say thank you to everybody for joining the call this morning and thank you very much indeed for all the questions.

1:20:40 Appreciate your interest in the company and the stock and look forward to our continuing engagement. Thanks very much indeed. Thank you. This now concludes today's call. There'll be a replay of the call and webcast available on the Lloyds Banking Group website. Thank you all for participating. You may now disconnect your line.