Good morning, one and all, and welcome to Paragon's 2025 full year results presentation. We'll shortly run through the financial and operational performance before providing you with our perspective on the outlook, and leaving, of course, plenty of time for your questions.

Before we get into the detail, let me spend a few minutes running through our key highlights. 2025 produced another strong financial and operational performance.

Underlying operating profits stood at £294 million, in line with expectations, with earnings per share up 8.5%, and our return on tangible equity increasing to 17.5%. These outturns were a product of good and disciplined loan book growth, tight cost control, delivering a market-leading cost-to-income ratio, and resilient net interest margin.

There are a couple of aspects in the results, including motor commissions, that will be covered in more detail in Richard's section later. What's clear is the way in which the group's strategic positioning and growing strength of our franchises are delivering strong returns, and providing a genuine platform for further growth and continued development, all of which are a product of the key strategic priorities we have steadfastly pursued for many years.

As a reminder, our strategic priorities are set out in five categories: growth, diversification, digitalization, capital management, and sustainability. It kind of may be a strange thing to say, but growth is easy to achieve if you just want to focus on short-term results, or if you want to ignore the need to apply the disciplined approach needed in running a leveraged institution like a bank for the long term.

However, as we've described before, [coughs] excuse me, when we manage the triangular relationship between growth, risk, and return, we always prioritize risk and return over growth, with growth being an output, not the primary objective. This was as evident in 2025 as it has been consistently over time.

The important criteria in achieving this is to be able to deliver for the long term on a sustainable basis. Importantly, our growth plans reflect our strategy of being a specialist bank, whether that relates to the type of asset we're financing, the customers we are supporting, or the complexity of their requirements, which are delivered through a combination of deep experience embedded in our people, excellent systems supporting this work, and the agility of our execution.

There is, of course, plenty of competition in banking, but the strength of our focus in specialist areas continues to provide a compelling advantage and a key differentiator. Loan book growth increased by 4% in 2025, broadly in line with the 10-year compound growth level.

The strength of the group's franchise can be seen in the extent of the customer relationships we have developed. Over a third of new buy-to-let lending is to existing customers.

82% of maturing fixed-rate buy-to-let customers were retained, and 66% of new development finance loans are to existing customers. On savings, 77% of fixed-rate maturities took additional products, and 50% of deposit customers have been with us for over four years.

The strength of these franchises provides a great platform. However, we continue to innovate and develop our businesses, with numerous additional products having been launched, all which are in process, enhancing our propositions to improve the customer experience across all of our business areas, providing opportunities to deepen existing relationships and attract new pools of customers.

You are aware that we have been running a major series of replatforming programs over recent years aimed at improving customer experience, improving productivity, and improving data quality, and these are making a real difference. 94% of our core systems are cloud-based.

In our SME division, we now receive around 3,000 pieces of customer data with each application, which are digitally collected in seconds to support near-instant decision-making on new lending. A new mortgage origination platform has accelerated speed to market, boosted customer experience, and transformed the underwriting process, and is improving our conversion rates.

Of course, Spring, our outstanding new savings account, which uses advanced technology to deliver a best-in-class product, but I'll cover more about that later. We've also been making extensive use of machine learning AI in a number of our business lines for some time.

Clearly, GenAI is the buzzword of the moment, and we are actively using it in many areas of our business, such as system coding, cybersecurity, complaints handling, bulk documentation analysis, and we've now rolled out Microsoft Copilot to all of our colleagues. While these are naturally exciting, as you would expect from us, we will work carefully to strike the right balance between ensuring appropriate controls and oversight exist, whilst also delivering the benefits as this new technology evolves.

Our replatforming strategy is achieving improved customer experiences as well as benefits to the efficiencies of the business, with our cost-to-income ratio standing at a market-leading 34.8%, and our headcount 10% below where it was two years ago. People naturally assume that when we talk about diversification, it purely relates to our lending activities.

Of course, we are continuing to do that, and the rate of pre-provision profit growth in our commercial division has been twice as fast as mortgages over the last five years, and we expect that performance to continue. Later on, when I cover the outlook in the various business areas, you will also see reference to product innovation where we are seeking to achieve further growth and strengthening of our franchises.

Of course, organic growth is what we do year in, year out, but we will also ensure we are fully prepared to react to M&A opportunities should they arise. Consolidation in the sector has been talked about for some time, but regulatory clarity in certain areas has been needed, and this is now starting to happen, including MREL, where the thresholds have been set higher and will be indexed going forward.

We now have the Financial Policy Committee review of capital, which looks constructive, but the devil, as always, will be in the detail. 2025 has also seen good progress in our liability diversification plans, including non-retail, where we have been historically somewhat underweight.

In March, we launched our first covered bond, a £500 million transaction, which was significantly oversubscribed. We've materially increased market repo lines.

We've made more active use of the Bank of England's ILTR program, whilst building extensive collateral, now totaling £8 billion, which is relatively available to provide additional funding capacity. Obviously Spring, which gives us access to a new source of savings customer with a profile very different to our existing retail deposit base.

Richard will talk later about margins, but the important thing to note here is that liability diversification provides us with optionality, and that gives us greater control over pricing. With only one funding source, the market will dictate your pricing, the more you can diversify, the greater the opportunity that exists to optimize pricing and therefore returns.

Having a disciplined approach to the way we run the business is not just about the way we lend money or control costs, or even the way we optimize the growth NIM risk relationship. We view capital management in a similar way, applying a strict discipline on capital allocation and seeking to optimize the balance sheet and returns for our shareholders.

Over the last 10 years, we have repatriated £1.3 billion to shareholders through dividends and buybacks, and today we've announced a further £50 million buyback program. We have strong levels of regulatory capital significantly above the minimum requirements, and have a demonstrable track record on robust internal capital generation.

The management of capital will remain important going forward, especially as we and the industry navigate Basel 3.1, and whilst we continue to actively engage with the PRA on IRB. These two charts clearly show the successful outcome of our strategic objective of delivering strong underlying and sustainable returns to shareholders, achieving a 10-year compound average growth rate in earnings of 11.6%, and an underlying return on tangible equity comfortably in the middle of our target range and at the higher end of returns achieved by the UK banking sector as a whole.

We've achieved this by delivering low volatility in a high-volatile world, and that requires a disciplined approach to the way we run our business. This approach pervades all aspects of our business and is significantly important in delivering our future strategy and plans.

Let me hand over to Richard, and he will go through the financials in more detail.

Good morning, all. Thank you, Nigel.

My next few slides give more detail on our P&L, together with a capital summary, but this first slide provides a snapshot of the financial results for the year. A combination of better-than-expected margins and continued cost control saw pre-provision profits rising by 5.9% year-on-year to just under £336 million.

Offsetting this, impairment provisions rose to £41.9 million in the year, with £33.6 million of this relating to the portion of our development finance book originated prior to September '22, which I highlighted at the interim. The cost of risk on our other £16.1 billion of loans remained exemplary, which is 5 basis points, and that's unchanged from FY24.

Fair value charges were much reduced year-on-year, driven by the rate environment, and we increased the motor commission provision that we made at the interim to £25.5 million at the full year, following the FCA's consultation paper proposals. Underlying operating profits rose 0.4% from the FY24 level, and earnings per share raised by 8.5%, reflecting the benefits of the ongoing share buyback program.

If we can move on to net interest margins. As noted in the chart, margins were stable in H2, beating our expectations.

We remain focused on effective margin management, with a structural hedge that we put in place of £1.4 billion and greater diversification of our high-quality liquid assets contributing to the outperformance. An element of the benefit reflected timing differences around assumed base rate cuts and the associated deposit beta, but we also saw a different dynamic within our development finance portfolio.

With legacy development schemes taking longer to reach practical completion, average balances and the earnings on those balances were inflated relative to more normal experience. Across the year, we estimate this benefited group NIM by a little over 5 basis points, but this benefit will naturally unwind as scheme profiles and the markets normalize.

As absolute rates have fallen, asset side spreads relative to SONIA have improved, and these are detailed in the table below the text. Note that the asset side mortgage spreads include the benefit of our structural hedge.

The underlying structural effect of higher net growth in our commercial division than mortgages has also contributed to a strong NIM outturn for the year. Our NIM progression reflects both the diversification of the book and the amortization of the legacy buy-to-let portfolio, which operates with tighter spreads than our new business.

In the past, we've estimated this underlying effect to be worth between 5 and 10 basis points a year. The bottom right chart on the screen shows how the top end of this range would have developed over the years, as shown in the red dotted line, with the outperformance in each of '23, '24, and '25 driven by enhanced deposit spreads.

My next slide goes on to look at deposit spreads in a bit more detail. If we jump to the bottom of the chart, we can see how the savings spot position at the year end has tightened relative to its FY23 peak.

Like-for-like impacts would have been greater still had we stuck to our historic fixed-to-variable portfolio mix. However, our ability to flex the mix of our deposit book, together with the capacity we have to add efficient term funding through our covered bond program, has allowed us to mitigate some of the liability spread tightening impacts as rates have fallen.

Our expectations of base rates to continue to fall in FY26, and when we also reflect current market pricing, our expectation is for this trend deposit-side tightening to continue to weigh on overall spreads. Combining this deposit outlook with a lower income contribution from development finance, as its profile normalizes, we're guiding to a NIM range of 290 to 300 basis points for the group in FY26.

On operating costs, we've outperformed both our internal plans and guidance for FY25. Headcounts remain stable, and our tech program deliveries have been made without material software capitalization, thereby protecting future periods from excessive depreciation charges.

The value of capitalized software in the balance sheet grew by less than a million in the year, with the balance now standing at just £8.8 million. Overall costs were little changed year-on-year, but the loan book continued to grow.

After delivering a cost to average asset ratio of 117 basis points in both 2023 and '24, our operating leverage was evidenced as we saw this level improve to 112 basis points in FY25. Absolute costs are expected to grow in FY26 as we continue to deliver our transformation program, not least given the focus on our core mortgage and SME systems over the coming years.

At this stage, we're expecting costs for the coming year to be just under £190 million. On the economics that drive our provisioning, our core assumptions for the coming year are little changed from last year and are summarized in the center bottom chart on the screen.

We still see interest rates settling around 3.5%, and whilst the growth outlook has been trimmed a little, we're also assuming a slightly lower unemployment rate for FY26 given the better starting position. Our severe scenario continues to reflect the Bank of England stress forecasts, with a key driver for us being the forecast for house price declines, and these are summarized in the red dotted line at the bottom of that right-hand chart.

This is the key assumption that drives the circa £24 million delta between the impacts of the severe scenario and the weighted average of all of the others. In arriving at our weightings, we've moved 5% from the severe to the base scenario, reflecting that lower economic volatility that's been demonstrated across the last five years or so.

This still sees our scenario weightings positioned conservatively relative to both our own historical profile and that of peers. The impairments from the pre-September '22 development finance cohort on the impairment charge for the year is clearly identified in the bottom right chart.

By way of contrast, the development finance portfolio underwritten after this date, where rates and inflation were already elevated, have performed strongly by comparison and were much more in line with historical averages. The charge took the group's coverage ratio up to 53 basis points at the year end from 48 basis points the previous year.

One quirk of IFRS 9 for the development finance portfolio is the higher margin on these loans results in a material discounting effect on the assumed cash flows that feed into the provisions. Almost 30% of the development finance charge for the year is due to this discounting effect, implying that interest charged in future periods would not drive additional impairment charges, all other things being equal.

On motor commissions, the motor commission CP produced by the FCA extends the impact of the proposed redress scheme well beyond the levels we'd originally anticipated. The construct chosen by the FCA also penalizes those who mainly operated with low-price, low-scale commission DCA models, with the redress calculations partly based on market averages and partly on the basis that DCA alone drives unfairness, rather than being a scheme that links the actual harm suffered by some customers.

By way of reminder, our average commission was 3.9% of balances. This is materially below the 10% level suggested as being high by the FCA in their papers.

Along with other market participants, we'll contribute to the CP response and await the FCA's conclusions and any potential next steps. Whilst the scope of the CP is broader than anticipated, the enhanced disclosures we gave with our FY24 accounts were designed to give stakeholders a view of the maximum balance of motor commissions we ever paid, allowing them to gauge the potential impacts under a number of circumstances.

For the provision at the year end, rather than operate a scenario-based approach, which is the way we did it at the half year and the way peers have provided since, we have taken the CP as the most likely basis for any redress exercise and provided accordingly. A final point to note on motor commissions is that while the operating costs associated with any redress process will be deductible for us, the redress amounts themselves wouldn't be.

This effect contributes to the higher effective tax rate for the group in FY25 of 29.7%. The underlying tax charge was 26.2%.

On the capital movement slide, the chart shows the bridge from our opening to closing capital position. The increase from our underlying retained earnings remained strong, generating 2.6% of CET1 in the year.

2.2% of this was distributed to shareholders via the combination of the share buyback and the dividend. The additional capital to support net lending largely reflects the growth in the development finance portfolio, which is up 8.6% in the year and carries a 150% risk weight.

As noted previously, this should moderate in more normalized markets. Motor commission impairments comprise the bulk of the exceptionals cost.

On group capital, the 13.6% CET1 for September '25 compares to an aggregate Tier 1 requirement for the group of 10.6%, and at 15.3%, our total capital ratio is comfortably above our regulatory requirements. Throughout 2025, we've been engaging with the PRA and the specialist team on the IRB application for the buy-to-let portfolio.

As I've mentioned before, this is a long and painful process, and we are aware of many existing IRB banks who are still having hybrid model challenges with the PRA. As soon as we have any tangible progress to report on IRB, we'll update the market.

In its recent announcements, the PRA confirmed that the interim capital regime was being removed. This would have been a useful tool for us in managing the transition to IRB in the absence of an early accreditation.

However, the Small Domestic Deposit Taker regime, or SDDT, provides a similar benefit to smooth any transition if required. On Basel 3.1, our latest impact assessment is unchanged from the interim at 1% of CET1.

Finally for me on capital management, you'll see that the sustained growth in our underlying earnings is translated through to the dividend, with our dividend per share rising 8.7% year-on-year to 43.9p. In addition to the strong growth from the dividend, our capital management policies have included a share buyback in most years since 2015, and this has reduced the share count by around a third over that period.

Today, we've announced a further buyback of up to £50 million for the coming year as we look to continue to improve the efficiency of the balance sheet. I'll now hand you back to Nigel.

Thank you.

Right. Thank you, Richard.

Far, we've shared with you our strong underlying performance for 2025, and how this reflects favorably against our longer-term strategic priorities. Now turn to the trading environment, and the current performance and outlook.

Despite the continued heightened levels of geopolitical volatility and domestic political uncertainty naturally creating headwinds, UK customers and businesses have shown great resilience. The credit environment remains benign, with the post-global financial crisis world continuing to operate with low levels of risk appetite and extensive deleveraging.

[coughs] Excuse me. We have seen five base rate cuts since August 2024, and more are expected.

The swap curve has fallen, albeit more slowly, and many borrowers on fixed-rate debt have yet to benefit, further improvements to affordability are expected. This is particularly pertinent to property-backed lending, which accounts for about 90% of our loan book.

The regulatory environment has also seen some positive changes, moving in a more proportionate and constructive direction, albeit slowly. Although it probably doesn't need to be said, technology is transforming the way all business is done.

Whilst the economy could benefit from an injection of confidence, households and businesses are certainly resilient, which provides a robust platform on which we continue to build our franchises and support the group's strategic priorities. Earlier, we covered funding and how we are adding new sources to enhance optionality, and one of the most significant events of 2025 was the launch of Spring.

Using advanced technology and utilizing open banking, Spring is seeking to solve a problem that is impacting 55% of the UK adult population. With £660 million of UK consumers' money being left in current accounts or in low-interest-rate accounts, UK consumers leaving an incredible value on the table, in fact some £24 billion in lost interest.

Spring links the customer's own current account with our savings account as if it were embedded as part of the same organization, where today our customer can earn over 4% with Spring. Being an account capable of being opened in minutes with instant access, the benefits for our Spring customers are easy to see.

This is Money called Spring a game changer of a product, and it has been a great success since its launch in April. Today, we have balances over £600 million, and 2026 should see continued strong growth, as well as additional product innovations enhancing the Spring proposition further.

Turning now to our lending divisions. Our buy-to-let loan book grew by 3.7% in 2025, although the figure is 7.8% if you strip out the pre-global financial legacy portfolio.

The housing market has been relatively dull, although the buy-to-let sector is showing some more recent signs of life, albeit somewhat tempered by recent speculation ahead of last week's budget. Our buy-to-let lending volumes were flat year-on-year, partly reflecting the softer market, but also as we were embedding our new origination platform, protecting margins whilst supporting existing customers.

We remain optimistic about the outturn for 2026 following the recent improvements in the buy-to-let market, a robust starting pipeline, and there is also clear evidence of our new origination system delivering benefits to the customer and broker experience, and delivering improved conversion levels. We have also introduced a number of customer-centric innovative products and process improvements, and consequently, our guidance for 2026 new business volumes is £1.5 to £1.7 billion.

Our strategy as a specialist lender is focused on supporting professional landlords, typically with multiple property portfolios, frequently with complex property requirements, and sometimes with bespoke borrowing arrangements, and which may require extensive personalization. The professional landlord is in the ascendancy in the private rented sector, and as always, scale will provide benefits in dealing with increased legislation and regulation.

Credit quality in our buy-to-let customer base is outstanding, with good LTVs, strong affordability, modest arrears, and negligible impairments. Whilst much focus always goes on new lending volumes, we've had great success in improving our customer retention levels, with £1.8 billion, some 80% of fixed-rate maturities over the last 12 months, extending their borrowing with us, helping to deepen the relationship and extend the duration of the loan facility.

Housebuilding in the UK has been running at disappointing levels in recent years, affected by the broader economic uncertainties, affordability constraints from higher interest rates, the continuing challenges from the planning system and the regulatory environment. Whilst the government is seeking to improve the levels of UK housebuilding, we are still far from where we need to be.

Despite having these headwinds, we have maintained good levels of new lending, and the pipeline is strong as we enter 2026. Our development finance business is an award-winning market leader in the financing of small and medium-sized housebuilders, with a franchise built on the strength of a relationship-driven model, supported by teams of highly experienced property professionals, and in 2025, over 66% of new facilities were made to existing customers.

Richard covered the impairment charge in detail earlier, but what is clear is that the lending before 2022 was exemplary, the lending after 2022 was exemplary, and is therefore isolated to a narrow cohort of loans of which we have just already described, and the performance of the portfolio is now exactly as we had expected it. Alongside the strength of our core propositions, we're also extending our product range, building a strong capability in build-to-rent, purpose-built student accommodation, and care home development finance, where we expect strong growth for a considerable period ahead.

We expect 2026 to see further benefits to affordability, especially with reductions in interest rates. Housebuilding, as you would expect, has long lead times, the interest rate cuts so far will not be evident yet in the new activity flows.

Of course, we would like more tangible and effective government action on planning and housing regulation to get the industry anywhere close to building the levels required to meet the housing needs of the country. On SME lending, the vast majority of which is asset-backed, has seen strong and consistent growth in recent years, despite the market having to unwind the effects of the COVID lending facilities, where for several years the majority of the UK's SME loan stock was government-backed.

Our success in this area can be attributed to the depth of experience in specialist asset-backed markets, combined with the application of new and advanced technology, delivering an improved customer experience and better productivity. Technology not only allows us to improve our new application process and access significantly more customer data, but as we've said before, we can also access customer cash flow data in real time, enabling us to monitor performance closely and identifying issues at an early stage.

Indeed, arrears in SME lending stand at only 51 basis points, in fact on par with buy-to-let, and also impairments are negligible. In SME, we have also been extending the breadth of the asset classes we finance, including increased activity in the sustainability space, along with additional facilities provided in conjunction with the government Growth Guarantee Scheme.

The motor finance industry could be forgiven for thinking 2025 was a year to forget. However, despite the noise, our motor division continued to deliver robust growth through its specialist asset class focus.

2020 2026 should see a conclusion to the motor commission situation, which will provide much-needed clarity, leading to more stability across the market. Structured lending has been successful in building new facilities and extending these to existing relationships.

Drawn balances have lagged new facilities, reflecting the revolving nature of lending and the more subdued lending environment, but sentiment in this sector is improving, and we expect better lending volumes going forward. Credit quality across both our motor finance and structured lending divisions is exemplary.

For the commercial lending division as a whole, we are therefore guiding to £1.2 to £1.4 billion of new lending in 2026. In conclusion, 2025 has delivered another strong performance against a backdrop of low economic growth and uncertainty.

Results today continue to show a strong delivery, creating long-term, sustainable value for our shareholders, with a low-risk balance sheet and low-volatility earnings profile. We have also continued to build and develop our franchises as a specialist bank, with extensive relationships created sometimes over decades, supported by the depth of experience of our people.

Alongside new product initiatives, we expect to see continued growth going forward. Investment in new technology is delivering enhanced customer experience, better data, and improved productivity, including a best-in-class cost efficiency in the UK banking sector.

We have diversified our funding further this year, providing greater opportunity and flexibility, and although our recent NIM outperformance is expected to revert to trend, we now have more tools at our disposal to optimize our pricing position. Spring is an outstanding product, and there will be so much more to come on this front, and we are highly optimistic for its future.

We are also diversifying further within each of our lending divisions, and we expect to continue to see commercial lending profit growth exceed buy-to-let going forward, which will continue to benefit margins over time. Additionally, we will be ready to react to inorganic opportunities should they emerge.

Clarity within the regulatory environment is important here, but it's clear that steps are being taken by the government and the regulators, including the recent increases in MREL and the Bank of England's capital review, to move things in the right direction. We have consistently delivered strong internal capital generation, supporting good, sustained loan book growth, and a consistent commitment to repatriating capital.

We have now returned £1.3 billion of capital through dividends and buybacks since 2015, and we continue to deliver returns comfortably in the target range of 15% to 20%. Our business is in great shape.

We have a high-quality customer base, a strong balance sheet, excellent franchises across each of the markets in which we trade, a highly efficient operating platform, and our technology changes are extensive and have potentially far-reaching implications. There are, of course, challenges that must be dealt with, but these are also exciting times, and we look forward optimistically to continuing to build on the success of the last 10 years.

Thank you, ladies and gentlemen, for your attention, and we are now happy to take your questions. Right.

I think you know the forum. Tanvi, you go first, and then Ben goes afterwards.

Good morning. Thank you.

Two questions for me, please. First, if you could talk about the sentiment in the buy-to-let sector.

Advances in the year were a bit lower than initially expected, and guidance for FY26 ranges from flat to up mid-low teens. What would be the drivers you're looking for for a recovery towards, say, the upper end of that target range?

Second, on the number of policy updates that we have had recently, budget changes, the Small Domestic Deposit Taker regime, and the capital review yesterday, if you could talk through the impacts of those. Thank you.

Plenty of questions in there you're sucking.

Let me deal with the buy-to-let one first. It was a disruptive year, this last 12 months or so.

Disruptive, the economic backdrop was unhelpful, political uncertainty unhelpful, affordability has been an issue more generally across the housing market, whilst base rates coming down is fine, but actually a lot of the market affordability is driven off of swap rates. You kind of saw a spike up in swap rates during the course of the year.

It's come back and it's kind of below where it first started, but it's kind of the swap market has lagged the base rate movements. Now we think that's kind of underdone, as it were.

I think, if you look at the economic backdrop, it's difficult to kind of reconcile where interest rates are today versus the environment. However, what we see is the continued development of the professionalization of the buy-to-let market.

Whilst the stock of properties in the sector is kind of broadly flat, you're seeing the amateur probably gradually exit. It's not like a race to the exit, but there's a gradual run-off of those.

The professional landlord is taking up the slack, and that's really where we operate, the professional end of the market ranges from an individual who puts his loan through an SPV, I don't really regard that as professional, but it's in that kind of broader category, whereas we tend to operate in the more complex, the multiple property portfolio, more complex property requirements, sometimes quite innovative structures that are involved. The technology is important to kind of do the heavy lifting there, but the depth and experience of our people in ensuring that we can kind of compete, and we are very much right at the heart of that more complex end of the property sector.

I think regulation, in one sense kind of in the category of regulation adds costs, therefore everyone doesn't like it. Not everyone.

Everyone as a landlord would say they don't like it. However, the professional landlord has got the depth of experience and the income base to justify the investment.

You could understand why an amateur landlord, presented with all the latest levels of regulation, all the burdens that go with all of that, just going, "Oh, guys, I'm done." The professional, like anything, including banking, you need a level of scale in order to justify the investment.

We are optimistic about the prospects for the outlook, and the level of lending this year has been kind of in the market dull, I would say, and we think there's upside to 2026. In terms of the budget, I think the kind of thing about that, I'm not going to get anywhere near the politics of it all, but a lot of the initiatives in the budget were back-ended.

A lot of the changes came in, and they were kind of pushed towards the back end. The economic impact for the economy as a whole, it's kind of pretty modest.

There's an increase in property income tax. There, it's 2%.

Do I think that will have a material impact on the market? No, absolutely not.

I think, as we all know, as has been said, tax usually ends up getting passed on in some way as a cost to the business, and therefore need to be passed on in some way. It's a relatively modest sum by comparison to where it was, and I don't think it'll have any material impact on the market as a consequence.

I'm happy to talk about ISAs as well, whilst we're on budgets. Obviously there's a ton of speculation around that, as you would have expected.

We engaged with Treasury quite actively as part of that process, and I suspect it was us and a number of people that they eventually listened to on there, because we were pointing out, I kind of understand the concept of wanting to encourage people to invest in equities where demonstrably there's a better return over an extended period of time. However, there's a demographic that think differently, and that demographic, that older part of the population, are more risk-averse, and more likely to use cash, and my guess is that they wouldn't invest in equities anyway.

So, [coughs] a significant majority of our book is over 65. Our assessment of the impact is it will probably only impact about 1% of our balances.

I would say pretty modest, significantly modest, by where it could have been in some of the earlier statements. Do you want to touch on the SDDT?

Sure. So, [coughs] I mentioned the ICR has been withdrawn.

That was originally put in place when there was a tight timeline to actually get Basel 3.1 done, they wanted to give firms an extra year. When the implementation of 3.1 was put back to 2027, they said, "Well, there's no need for the ICR as well."

The Small Domestic Deposit Taker regime has pretty much the same entry criteria, and that would be your fallback to manage, if you like, an IRB or an IRB-stroke-Basel 3.1 to current standardized transition. It's helpful that that's been put in place.

They've got a lot of work to do. The PRA has got to reassess the Pillar 2 requirements for every institution this year.

They can have a pretty full plate, I think, in terms of getting that analysis done.

Did we cover all of your questions? Just on the capital review as well.

The capital review, yeah. Obviously it's 24 hours old, and we were kind of fairly busy on results prep yesterday.

However, our initial assessment is it's a positive message coming from the Bank of England. The direction of travel is encouraging.

There's lots of consultations to be done, lots of details that will then emerge. The interaction of Pillar 2A is going to be a fairly significant one.

At the moment, we don't have anything really in Pillar 2A, therefore you kind of think, well, there's not much benefit to come through. Obviously we hope we will get IRB.

IRB is likely to generate a Pillar 2A charge. It's multifaceted, multidimensional, and obviously a lot more details to come.

Positive, high-level response would be the case, alongside broader level of government and Bank of England actions that have taken place, and I think more will come. There's a lot of detail to work through on that.

[coughs]

Morning. Ben Toms from RBC, thanks for the questions.

First one's on NIM, please. Guidance of 290 to 300 basis points.

Last year, you guided lower, and then beat. Can you just bridge for us getting down from the 310 to your guidance range?

I think you said there's 5 basis points coming from the development finance, and then is it fair to say that the other 10 basis points then is roughly the deposit spread that's tightening? Any other moving parts to think about?

Then the NIM build, which you flag in the later slides into 2027, [clears throat] is that just driven by mix shift? Is that the right way to think about it?

Then secondly, on motor finance, you're in a kind of an enviable position that the size of the provision isn't that big and you're well-provisioned versus peers. As you pointed out, there are a number of pieces to the puzzle that don't quite look right at the moment.

I'm presuming you don't have any appetite yourselves to take this to judicial review given the cost that that would probably incur relative to the benefit for you. Is it broadening?

Is it possible that banks could get together and bring a joint application for a judicial review? Are you talking about that with other banks?

Thank you. You

deal with the NIM, I'll deal with the motor commission.

Cool. This day last year, we were coming off a 316 NIM for 2024, and we were guiding to 3%, because we saw rates falling, the deposit spread compression coming through, and to your point, we've outperformed.

If in part, base rate reductions haven't happened in '25, and now they're in '26, the deposit beta will be happening a year later rather than a year earlier. Nigel mentioned some of the things that we've looked at.

As rates fall. We're predicting the same.

This time last year, we were saying 316 to 3. This year, we're saying 313 to 290 to 3, 5 basis points of the 313 that we had this year is come from the development finance portfolio that I mentioned as well.

If you split that out, you're looking at a 308 to the same sort of direction that we were looking at previous years. I think our outlook and approach has been extremely consistent actually between now and then, but there's been a beat on the current-year performance.

That underlying position that we have on the structural NIM improvement is still there. The growth of the commercial business, that's all predicated on, if you like, call it a constant liability margin.

The asset side is there with the new book on buy-to-let delivers probably 15% to 20% higher spread than the old book, and then in terms of the commercial-to-mortgage spread, you're looking at 3x in terms of the difference. As long as we maintain the progress that we see that's implied with the volume outputs, that will underpin that further growth, and that further benefit from the structural NIM.

The thing that we've seen the last two or three years is that we've had a couple of periods where the deposit side has outperformed, and what we're seeing is that reversing back to, if you like, a more normal trend. Go back 10 years, NIM was about 2%, and now it's kind of about 3%, a product that we were in a higher-interest-rate environment than we were 10 years ago, and you've also got a different mix shift, and that mix shift is continuing.

You kind of saw margins doing that. Oh sorry, I'll do it that way for you.

Margins doing that, it's kind of done that, but we expect a longer, more lasting upward trend in NIM due to the change in mix of the business over time, but that happens over time.

Motor commissions, clearly a thorny subject for the sector as a whole. You're right, we took a chunky extra provision relative to what we've taken in the past, but we've reflected the whole of the CP there.

If the FCA do moderate the CP in some way, there could be some write-backs next year, but we'll see. For us, it's just simple way of doing it.

It's not a big part. It's not a repeating number, it just felt much cleaner way of doing it.

Because we've taken a provision, do I think the CP is right? No.

No. I don't think the CP reflects correct customer harm, correct customer detriment, and therefore we will be participating in a response to the FCA.

Just give you a kind of a couple of things: the Supreme Court, very interesting approach that they took, in order for there to be an unfair relationship, it had to be A plus B plus C, whereas the FCA approach was A or B or C. You kind of think was a very different approach that's been taken, we disagree with that.

Separately, our average commission is 3.9%, and the FCA's kind of direction of unfairness was at 10. Yet it's because you kind of trip over a kind of commission structure that you end up getting all of it regarded as unfair.

Now that's kind of also a bit. That's kind of a flavor why we've taken the provision, but we don't agree with the approach.

However, I don't know whether the banks will or won't go judicial review, there's certainly a lot of opposition within the industry about the position, but that's for a wider group to consider. We've got our own particular aspects to think about, and so we'll leave it at that.

Sorry, I'll come back in a second, but that hand was up there first. It's

Elise Chew from KBW, thank you for taking my questions. I've got two, please.

First is on lending sensitivities. In the background, what we're seeing the pipeline coming right now, how sensitive is your FY26 lending plan to changes in rate assumptions, particularly in environment where rate cuts are slower than expected?

With that sensitivity, change your lending strategy in terms of volume or margin mix? Like you said earlier, Nigel, I think that's easy to grow volume simply, but there are other considerations to focus in the long term.

The second is on Spring. I think it's such a good product, very sleek design in the app, and easy access, user friendly, and the rates probably second to none in the easy access market.

If I had to point at one thing, I guess I still think that not enough people know about Spring just yet compared to other digital banks on the street. I guess my question really is what's your marketing strategy in this specific area to broaden that customer base?

Thank you.

Okay. Let me deal with that one first.

Thank you for the feedback. It's very much appreciate.

Drop a little line on Trustpilot if you want. Be very welcome.

Spring is a great product. It's changed the way I do my banking as well.

My name's Nigel. I was a lazy saver.

I used to leave too much in current accounts, and now payday comes, I move the money across, and the credit card bill comes in, I move some money back, and things like that. It's brilliant.

It's absolutely brilliant. I know it's ours, but we absolutely think it's kind of one of the most exciting products we've ever done.

We only launched it in April, and so therefore going from 0 to £600 million worth of balances, we're kind of pretty pleased with that. It's better than we had expected.

When we launched, we were 30th in the lead table. You said price better than most, or I can't remember the exact words.

We're currently about 25th in the lead table. This isn't a price-led proposition, and the reason for it is it's got really attractive functionality, and you should get, with a £660 billion of balances, being the lazy savers like I was, then there's so much to then go for.

There is a reasonable amount of digital marketing going on. You see us in various social media outlets.

More will come for that over time, but equally, these are very early days, and there is a lot to do, a lot of product initiatives still to come on that. Again, thank you very much for your feedback, and tell all your friends.

We will have other initiatives what you might like in the new year on that front. Anyway, sales pitch over.

In terms of the pipeline, interest rates are really significant sensitivity to the economy as a whole, and therefore, particularly when you've got asset-backed lending, such as property, where you imagine you're a geared buy-to-let landlord or a geared housebuilder, interest rates are a significant component of your cost base. Therefore, it's naturally that it drives sentiment, and therefore the economics.

When you look at the effects of interest rates on GDP, if you look at when interest rates were relatively low going back like pre-COVID, kind of the level of system-wide loan growth was running at around 4%. Then interest rates then shot up in that period, in the kind of '22-'23 period, and system-wide loan growth went to zero.

Clearly, the consequences of Bank of England moving rates up is loan growth demand falls. Likewise, interest rates have started to ease, and you've started to see system-wide loan growth start to improve.

It's not where it needs to be, but it's starting to improve. What we don't want to do is overspeculate how much benefit will come through.

Things like housebuilding is very rate-sensitive, and it's got very long lead times. Base rates get cut, a housebuilder doesn't just run out and go, "Right, there you go, I'm going to build some houses now."

There's a huge planning process that they have to get through, it will have a lag to that timescale. I think it's constructive and positive, but it's not kind of the correlation is not timed almost as close as we'd love to it to be, but it's not.

It will come through. It's just not yet.

I think we covered those questions.

Hi, it's Gary Greenwood at Shore Capital. I've got two areas that I wanted to explore.

The first was on the professionalization of the buy-to-let market. I was just trying to get an understanding as to what you think the current split of the market is between professional and amateur, and how that's been changing and how you expect it to continue to change.

Then also what your market share is of that professional segment. Then the second question was just around M&A.

I know it's something you've been talking about for a little while now, but obviously you've not recently executed anything. Is that because there aren't the opportunities there, or because the price expectations of the vendors are still too high?

Okay.

I can't give you very clear stats, I'm afraid, Gary, on the professionalization of the buy-to-let market, just because there is no neat, clear definition of it. It's got even worse in that sense, because small landlords might have acquired or converted a property.

We see some of that going on, people switching from direct ownership to ownership through an SPV, and it gets classified as corporate, sometimes gets used in the professional category. If it's got one or two properties, it's not how we would describe it.

It's unhelpful for you, but the general trend is I would say that going back maybe sort of pre-financial crisis, the big surge in amateur landlords came then, and you've then found with a combination of, I'm afraid they've all got a bit older, their facilities have got a bit more mature, as in they're coming up to maturity, they've kind of been there, done that, and now the regulation is higher, it's tougher, they have to follow more rules, and kind of the incentives for them as individuals are not quite what they were back in the pre-financial crisis period. What we see now, and I think in some ways, it's taking it too far to describe this, but regulation causes more focus on professional landlords, because you have to get better at doing your job.

We've now got a new bill and act that's come in, the Renters' Rights Act. Implementation is May next year.

I think it's just the professional landlord is just going to end up getting better at planning and preparing for it. I don't think it's going to kind of cause the market to massively disrupt.

You're going to require greater levels of investment. I can't help you with the maths on it, but it's becoming an increasing share of the whole.

On M&A, we've made it very clear in these presentations and others, that M&A is a part of the strategy that if we can find the right opportunities, then we'd love to be able to do it. We were quite active in our engagement with the Bank of England on MREL, and we got that shifted, not just the limits have been shifted, but they are now indexed.

You should see that increasing in line with nominal GDP, going forward. We're not going to buy something because the MREL rules have changed.

There's also been much greater need for clarity over the regulatory environment, and by that, I mean not just capital, because that's been moving around all over the place, and more changes yesterday, but also in terms of conduct risk, trying to understand what the risk is and what the cost of it is. I said before, to here and to others, if I can't understand what the risk is through conduct risk, I can't price for it.

If I can't price for it, I have no idea whether I'm buying something with good value or bad value. I think they've moved a long way.

We're still waiting for the FOS rules to come out. That will be important to understand what those are.

Motor finance clarity, don't like the CP that's come out, but at least you will end up with clarity on things like that. There's been a number of barriers in the way that stopped us doing things, because we don't want to do an acquisition for the sake of it.

We want to do one because it will enhance the value of our business to our shareholders. Jonathan here.

Pierce.

Good morning. Jonathan Pierce from Jefferies.

I've got a few questions on the margin again, please. You managed to hold NIM broadly steady over the last 12 months despite what was a pretty big drop in that savings margin from what was it, 35 basis points down to 8 basis points.

What's in the plan for 2026 on that 8 basis points? What have you assumed that moves to by the end of '26 within your group NIM guidance of 290 to 300 basis points, please?

Also interested in how you think the trajectory of the NIM comes through in 2026. Do we end the year towards the lower end of that 290, or is there a reasonably rapid step down, and then we stabilize?

Sorry, one final one. You put in place a number of offsetting actions through 2025 to help the NIM.

I'm just wondering if there's not more levers you can pull there on things like the ILTR, you're still only about 1% of industry usage. On that, your investment securities are still only 20%, 25% of the liquidity pool.

Are there things you can do to help that NIM through the course of next year? Thank you.

The latter part is very much included, it's part of the answer to the first. There are a number of levers that we'd be looking to pull.

The success of those will depend on where we are in that range, and also depending on which levers you pull, and the degree to which you then need to focus on different parts of the deposit market will depend on how much of that 8 basis points gets lower. The reason we give a range is that we see a sort of a midpoint that would be slightly below 3, but it would be a mug's game to try to predict NIM to within 5 basis points, with the volatility we see on swap rates and base rates, and the timing of deposit betas.

We're not suggesting that you get to 290 for the whole year as a base case. That's just part of our, if you like, sensible range of, if you like, degrees of freedom around a base case.

It's hard to give the exact answer, because actually there's a whole range of things you look at, like using ILTR, potentially other covered bonds and the like.

The optionality that that gives, I know it's my kind of my favorite word, but, but, with Spring is at 4.11%, currently 11 over 11 over the, over, base rates, but, but it's, but that kind of variable pricing has been a bit volatile. You've had some of the people in there at like 50 over at times.

It's kind of like, "Wow, that's a that's just buying buying space." We know treasury and liquidity management, I think, is, and I think we've been really smart at being able to do that, and we'll continue to do that, whilst building all the structural options that we that we can to make sure that we're as diversified as possible.

Thank you, that's helpful. I guess the concern today, just to come back on this, is that if we're starting around three 3.13%, whatever the number was in H2 of last year, and we end up for the full year '26 around about, I don't know, let's call it 2.95%, the middle part of the range, are we seeing an H2 number that is closer to 2.90%, or would you encourage us not to think about it that way?

Backing something into a range, I think, is the challenge. Again, if we go back to where we were this time last year, started at 3.16%, we were guiding for 3%, that would have implied 2.90% as the exit.

I think that range of where your NIM is somewhere between, that's it, that 2.90% and 3%, plus or minus a couple of basis points, as I say, it's very, very difficult with a £16 billion, £17 billion balance sheet to be predicting a couple of basis points a year out. We don't guide beyond one year forward, but if we did, it wouldn't be below 2.90%.

I think the support there comes from that structural NIM piece on the asset side. It may well be that you saw deposit-side compression, but that underlying position for the asset side continues.

It's probably also worth noting again back to the comment on the asset-side spreads, as rates come down, the value of that net free reserve hedge supports the margin on mortgages as well. Do we have any more questions from the room?

Anything online? We've had a few things online, but they've all effectively been dealt with, apart from one final question on savings, which is a three-parter.

Any cannibalization in savings balances from Spring? Do you envisage any impact on consumer behavior in response to the increase in the FSCS limit?

Finally, would you consider launching a current account? The answer to the last one is no.

Certainly. Okay.

Currently no. I don't have any plans for it.

It's in the unlikely category. Never say never, right?

It's certainly not on any of the plans. In terms of cannibalization, I'd say the opposite, actually.

One thing that we didn't necessarily expect, and we wanted to kind of observe it, was the degree to which did Paragon customers switch from their accounts directly with us [coughs] over to Spring. We have seen a number of Paragon customers open accounts with Spring, but they kept their balances with Paragon.

It's been incremental benefits, not cannibalization. We haven't made any assumptions or expectations around that.

That's kind of a positive upside. Equally, in terms of the FSCS limit, it came into effect couple of days ago.

There's been absolutely zero impact that we have observed to date. There is clearly now the potential.

We do have some customers, you can see a little concentration around the £85,000 limit. The question is will they move that up to £120,000?

Maybe, but it's not a big part of the business. If there is a bit, it won't have a material impact on the funding as a whole.

All done there? Okay.

Thank you very much for your attention this morning, and your questions. Richard's around today and tomorrow.

Some of you already got calls booked up with him, but please, he's here to help. We will obviously welcome any further engagement that you may have.

Tell your friends about Spring. It's a great product, and we look forward to catching back up with you in six months' time.

Thank you very much.