First, I’m not giving guidance for 2024. The only guidance within ’24 is the mid teens ROTE. We will be giving more details at the year end. But if you want some indicators of how to think about it, first think about it as we will continue facing the usual headwinds of margin compression, but that probably is easing now, having seen most of that compression in Q2 and Q3. We will continue to see pressure on deposits, migration may continue. We’ve seen the pace of 1% per month in Hong Kong, kind of steady for the last nine months that is likely to continue. And then as you — so these would be the main headwinds. So the tailwinds would be one, the additional rate upside in Hong Kong from HIBOR, probably no further rate upside in the major other currencies.
The tailwinds will be reinvestments of maturing structural hedges that have been put at lower rates and as they mature, we invest in higher rates and that will give us additional tailwinds. And then the main tailwind, which we anticipate at some stage in ’24 but not yet, at least not for the next couple of quarters but at some stage in ’24 is volume growth. When we start seeing volume growth, we will see the support for the NII in the medium term as we’ve always indicated mid single digit percentage point growth for balance sheet is our midterm aspiration. And as and when this starts after the next couple of quarters of transition, this will give us the additional tailwinds. I suppose that’s probably as much as we can say at this stage, Raul.
Thank you for your question.
Operator: Our next question today comes from Perlie Mong from KBW. Please accept the prompt to unmute your line and ask your question.
Perlie Mong: Hello. Thank you for taking my questions. I guess just a couple of follow ups. The first one is on your hedge strategy, because I guess you have basically in the disposal losses, you’ve essentially I guess brought forward some of the rolling of the hedge, which I guess we haven’t really seen so much especially in UK banks. They tend to sort of use it as a sort of pure smoothing mechanism as it were to just let the lower rates run off and then reinvest in, but you seem to have brought forward that. So I guess the question is, does that suggest that you’re not just using the hedge as smoothing mechanism, but is to sort of more actively sort of trade it as it were. Is that fair? I guess it’s the first question. And the second question I guess it’s for Noel.
I just saw on Bloomberg that you made a comment that we feel like the China CRE situation has bottomed out. Acknowledging that the Chinese government has taken steps to support the sector, but the news flow still seems to be pretty negative. And to the extent that there have been actions taken, they’re probably not as large as maybe some of the market would have expected or hopeful a few months ago. So it’s probably around tailoring and the positive [ph] requirement in some of the Tier 1 cities. So I guess just what gives you the confidence that we have bottomed out?
Georges Elhedery: Perfect. Thank you, Perlie. I’ll take the first question and I’ll invite Noel, obviously, to comment on your second one. So the hedge strategy, first, we have a number of tools at our disposal. We will use them as effectively and as opportunistically [ph] as we can to achieve what we want to achieve, which is, number one, reducing the downside sensitivity of our balance sheet to a reduction in rates. And number two, extending that reduction of downside as far out in time as possible. This strategy that we’ve used, which is disposing of existing low earning positions is one of these measures. So number one, to remind you, it does not have a CET1 impact, at least the loss does not have a CET1 impact because the loss has been taken capital mostly in 2022 already.
