Katie Murray: Yes. Sure, absolutely. So I’ve already talked kind of quite at length income. So I won’t repeat that other than to say that I do kind of urge you that not to annualize the Q4 number. If we look at costs full-year guidance for the year £7.6 billion and we’re comfortable we’re going to hit that. I’d remind you that includes £300 million for Ulster direct costs, which we do expect to reduce material in 2024. We do recognize that we’ve got headwinds of higher inflation and we’re working hard to ensure that our investment program delivers savings to help mitigate this as you have seen us do, Guy, for many years now. Impairments, clearly we’re better on impairments than expected to-date. We know we’re talking about being below 20 basis points in 2023.
We’ve then as you know, got through the cycle guidance of 20 basis points to 30 basis points. I think when we meet in February; we’ll give some views as to where we think we’re heading for — and 2024. I would remind you that we’ve got £0.5 billion of PMAs on the balance sheet and our cautious approach to the release of these. So that also gives you a little bit of protection as you go through. If you then look at the capital piece, we will within a range of 13% to 14% CET1 and you’ve seen this year our comfort to toggle up and down within that range. So I’d expect that to continue. While we do expect the RWA to trend higher and through to 2025, I think the other thing you’ve got to also bear in mind is that we’ve demonstrated very strong commitment to distributing excess capital as and when it becomes available and that’s also an important point when you think of that kind of average denominator number as you do your calculations.
And Guy, you also asked a little bit on the RWA assumptions as we go into next year and where the changes might be. So what we’ve guided you to is, including the CRD IV changes and the Basel 3.1, my kind of best planning assumption at the moment would be to encourage you to use that £200 billion. What we’ve been talking about, and we’ve been quite vocal about is the kind of the business factor in terms of the small lending and then also what treatments they’re using on some of the infrastructure lending. We were heartened by the comments that we heard from the PRA over this last week and I think we’ll wait and see what comes through. As you know, we’re getting some of the rules in January and then we’re getting credit and output floors only coming through in July.
So what I’ve tried to do today is to give you a kind of a good estimate, the thinking of those factors to kind of help you with your modeling. We do think at the end of this year, when we talk about that £3 billion uplift that I would add that on just to where we’ve ended this year at £182 million. Paul’s already talked about the fact that and we do expect market risk and timing just to come back in. So that’s a kind of that gets you a kind of £185 million sort of number by the end of this year. And I’ll leave you to have a think about how you might want to roll in those differences over the two years that follow. I’d probably be pretty linear about it myself, but you’ll take your own views as to how best to do that.
Guy Stebbings: Okay That’s very helpful. Thank you.
Katie Murray: Okay. Thanks, Guy.
Paul Thwaite: Thanks, Guy.
Operator: We’re going to retry with Joseph Dickerson of Jefferies. If you’d like to unmute and ask a question.
Joseph Dickerson: Hi, can you hear me now?
Paul Thwaite: Yes, we got you.
Katie Murray: Perfectly. Thanks, Joe.
Joseph Dickerson: Hi, sorry about that. I just had a question just on the RWA guide as well. Is the £200 billion pre or post mitigation, firstly? And then, secondly, I think you’d been guiding more towards in prior quarters, guiding more towards the lower end of the 5% to 10% inflation range. So I’m just wondering what’s changed to get you to the higher end of that given, if anything, it seems like some of the commentary from the PRA is a little bit more friendly on the RWA front. And I think if I look at where our estimates are and where I think consensus is, I think we’re about £10 billion that number is coming about £10 billion higher, which is fairly material in CET1 terms. So I’m just trying to get to the bottom of the moving parts here, if you don’t mind.
Katie Murray: Yes. No, sure. I’m happy to spend a bit time on it. So always post-mitigation in terms of the numbers that we work with, I mean, we clearly put a lot of emphasis into the business about managing our capital and making sure that we get the very best return kind of we’ve talked a lot in the past about our pleasing kind of results around the lower kind of risk weighted assets density. So that mitigation is something that we really try to build into the DNA of the organization. Joe, I probably correct you a little bit. In the past, I’ve been very careful not to guide you to the bottom or the top end. I’m sorry if you’ve taken away that I haven’t completely managed that on the 5% to 10%. But I think one of the things that really has probably changed pleased with the positivity we’ve heard from the PRA, I do think and you’ve heard other banks talk about it in terms of that CRD IV pressure that that is seeing a kind of increase in the kind of underlying models as we’re going through.
Our first piece is in relation to mortgages as it is for others, and we’ll continue to kind of work through that. But at this point today, it does feel the £200 billion feels the right number to kind of be thinking about by the time you get to end 2025 and historically, I’ve always been, I think, quite good at kind of when I know more, I’ll share it with you. And as the rules develop, we’ll continue to make sure that we maintain that transparency with you in terms of the developments and the numbers.
Paul Thwaite: What I would add, Joe is you can be sure that we’re going to have a very tight and disciplined approach to managing capital, given that regulatory backdrop. So it’s a big focus for me because to me it’s one of the obvious operational levers we can influence. So a big focus over the course of the next two years.
Joseph Dickerson: Thank you.
Operator: Our next question comes from Benjamin Toms of RBC. Benjamin, if you’d like to unmute and ask your question.
Benjamin Toms: Good morning, both, and thank you for taking —
Katie Murray: Hi, Ben.
Paul Thwaite: Hi.
Benjamin Toms: Taking my questions. Paul, you note that you’ve been very focused on costs since you started your role. I mean, consensus has costs for 2024 at about £7.6 billion. Are you comfortable with that number without the bank having to take any additional material restructuring costs, which would have implications for capital? And then, secondly, your mortgage stock was resilient in the quarter. In half one, NatWest issued a much higher proportion of peers of greater than 90% mortgage flow. Can you comment on that dynamic and has that trend continued into Q3? Thank you.
