Katie Murray: Hey Jonathan, you’ve obviously spent a lot of time with Claire as well, so I mean you as ever have got it exactly right. So look, definitely you’d see that 150 go up. I mean, it’s just the mechanics of reinvestment. I’m rolling off numbers that are falling, so I’m going from a roll-off of about one, rolling off next year 80, rolling off the next year at 50. So I mean, it’s exactly the right question. So look, I do expect to see that that improve as we go into next year. I think on the mortgages, look, there’s a lot of puts and takes and takes going on there. There’s a lot going on. There’s not as much as you suggest. It’s not just as simple as the way what we’re writing on the front curve, because as you see, at any one moment within the banks, you’ve got different end customer behavior going on.
So we’ve got people who are paying more at the time of their refinancing. We’ve probably got a bit more refinancing going on rather than new mortgage. You’re familiar with the fact that the new mortgage market is smaller and then also you have people that are paying, who used to pay more in advance of their new rate coming up and they’re not doing that so much now. They’re waiting till it ends. So there’s a few different things going on within there. I do think that the mortgage headwind will be smaller going forward. But I would say that we’re paying a lot of attention at the moment to that kind of customer behavior and how they behave at the moment of kind of refinance and in the months leading up to it as well. Hopeful that answers —
Jonathan Pierce: That is helpful, but if I can just press on that some a little bit more because it is a huge delta quarter-on-quarter, it’s almost as much as the deposit movement. If you keep writing at the front end at 80 basis points, the book is pretty flat actually in Q3 the mortgage book. If you keep writing at 80 basis points and the stuff that’s coming off next year is, I don’t know, 90, 100 basis points. Where does the math go wrong if we just take 10, 20 basis points on the quarterly churn?
Katie Murray: So I think a couple of things there. So we definitely seek to write the book at around 80 basis points over time. And what I would say and we’ve said a few times that they were probably under a little bit of pressure at the moment because of the movement in the speed of the swap curve and some of the competition in the market. But that’s a timing issue. I do think the same way to continue to think of the book and our aspirations is around that 80 basis points. The book itself this quarter is re-priced from 102 down to 86. And then what we had said was that we’d expect it to kind of more or less fully re-price kind of by the end of this year. So I actually think your roll-off number is a little bit high, but we would expect to see that kind of moving to around 80 basis points.
And I’m sure in Q2, in Q1 next year, you’ll be saying, Katie, why is it a bit lower? Why is it a bit higher? But we’re getting into a much tighter kind of corridor of where those numbers are because of the real high value margin pieces will have substantially rolled off by the end of this year. There are some mortgage income disclosures for the retail bank. And I think you’ll find in the financial supplement. They’ll be able to help you with some of the bits and pieces that are going on as well. So I point you to them as well. And obviously, Jonathan, happy to talk more later. Thanks very much.
Jonathan Pierce: Thanks a lot. It’s good. Thank you.
Operator: Our next question comes from Chris Cant of Autonomous. Chris, if you’d like to unmute and ask your question.
Katie Murray: Hey, Chris.
Chris Cant: Good morning. Thanks for taking my questions both. I wanted to just clarify something you said, Paul, first, around restructuring charges, maybe I wasn’t listening carefully enough, but it seemed a little bit ambiguous as to what you were trying to convey to us there with regards restructuring charges and —
Paul Thwaite: No ambiguity. I can — let me, Chris, no ambiguity. The question was, would there be a restructuring or the potential for restructuring charge? And I said no. So apology, it wasn’t as clear as that.
Chris Cant: And just to confirm as well in terms of the sort of medium-term royalty expectation and the sub 50% cost income ratio for 2025 that that you see as deliverable without sort of ramping, obviously you always have restructuring charges within your kind of that normal cost run rate every year. But there’s no expectation for that to sort of spike up dramatically to deliver that 50% into 2025.
Paul Thwaite: That’s correct. The way I think about it is and we’ve talked in the past about investing £3.5 billion over three years, a lot of that is going towards driving simplification, digitization, productivity. So we’re very much — I guess when I think about where can we pull the cost leader within the organization, it’s that existing investment pot that I’m thinking about. I’ve also been spending a lot of time on making sure the shape of that investment pot is focused on that cost out simplification agenda. So that’s how you should think about it, rather than additional charges beyond the existing investment plan.
Katie Murray: Thanks, Paul. I might just add a little bit more on the kind of to help you a little bit on the royalty point. And Chris, it’s almost this quarter is actually a really good quarter to think about the kind of the royalty piece. So what you’ve got is kind of stable and gently growing and lendings, relatively stable and gently growing kind of deposits. So that kind of gives you some comfort on the quality and the stability of the balance sheet. In this quarter, we delivered 14.7% royalty. That was after kind of a one-off charge in terms of a property charge, which actually was a drag in the quarter of 1.99%. You can see that in the notable items. So that would have put you above some kind of 16% level. The way that I look at we’ve talked a lot about NIM and incomes, I’m not going to say any more on that, but actually it’s a very nice quarter when you look at kind of the normalized cost number, quite a normalized impairment level, there’s a bit of conduct charge within there as well we’ve also had a bit of an increase in kind of the RWAs. So I almost sort of think as you look at this quarter, it’s quite a nice kind of blueprint for what you could see going forward.
I wouldn’t read too much into that and tell you, I’m giving you the exact shape as you go forward. But I do think that 14.7% royalty is a good way to think of us as we go forward as well. Hopefully that’s helpful.
Chris Cant: That is helpful. And it actually sort of was the other question I wanted to ask, I mean, conscious you’re not going to sort of give us the NIM number. It is clearly very possible for people to take the greater than 3% NIM guide and as you put it, run away with the NIM into 2024. If I sort of come at this slightly differently, you’ve talked about the medium-term 14% to 16% royalty, are you expecting to be in that range for 2024 as well?
Katie Murray: And I think let’s talk more about that as we get into — into February. But I do think those comments that I just made around this quarter, I think they’re quite helpful when you look at all the different line shapes and some of the RWA growth. And Chris, I dare say we’ll chew on the fat on that a little bit more when we meet in February.
Chris Cant: Okay. Thank you.
