Thank you for standing by, and welcome to the National Australia Bank 2021 half-year results presentation. All participants are in a listen-only mode. There'll be a presentation followed by a question-and-answer session. If you wish to ask a question, you will need to press the star key, followed by the number one on your telephone keypad. Please go ahead. Thank you, operator. Good morning, everyone. Thank you for joining us today for NAB's first half 2021 results. I'm Sally Mihell, Head of Investor Relations at NAB. Presenting today will be Ross McEwan, our Group CEO, and Gary Lennon, our Group CFO. We're also joined in the room here in Melbourne by members of NAB's executive team. At the end of the presentation, we'll open up to the Q&A. Just a reminder, you do need to be on the phone line to ask a question. I'd now like to hand over to Ross. Thanks, Sally. Thanks, everyone, for joining us today. I'm pleased to present our financial results for six months to 31st March 2021. Last time I spoke with you, the outlook was still uncertain. Since then, we've seen the economy recover much faster than any of us expected. This is thanks to the decisive actions by government, supported by regulators and businesses. The resilience of all Australians and New Zealanders has been important, both through COVID and more recently, natural disasters, including floods and cyclones. We are pleased to have been able to support them. As you'll see today, the strong increase in our cash earnings for the six months to March reflects the broader economy and its recovery. While there is a cause for optimism, we continue to work closely with a number of our customers who still face challenges. Given the higher risk profile of these customers and the relatively early stage of recovery, it is appropriate that we retain a strong balance sheet. Our refreshed Group Strategy, which I presented 12 months ago, will deliver results over the medium to long term. The execution of this plan is the key priority for me and for my leadership team, and it's pleasing to see momentum building in our core businesses. The investment in our technology foundations in recent years means we can now gradually shift to initiatives which deliver better colleague and customer outcomes at lower cost. As we look forward to 2022, we are well- positioned to drive a business-led recovery, working with our customers in both Australia and New Zealand. Turning to the next slide, you'll probably notice this is a clean set of results with no large notable items to call out this period. At the same time, we are making good progress on our legacy remediation issues that Gary will talk to you shortly about. Our 48% increase in cash earnings this half reflects the improved credit impairment outcome. Cash ROE has increased by over 3% this half to 11.8. As we emerge from the pandemic and support mechanisms are withdrawn, we expect to see a degree of volatility in our impairment charges, which will flow through to cash earnings. Our underlying profit before impairment charges declined 7.6% relative to second half 2020. This primarily reflects a more normalized Markets & Treasury performance relative to second half 2020. The review has also been impacted by low interest rates and subdued asset growth. A more disciplined approach to managing expenses has helped us to partially offset the overall revenue decline, but there is more work to do on costs. I'm particularly pleased to report an increase in our interim dividend to AUD 0.60 per share, which represents 59% of first-half cash earnings. Gary will spend more time on the key drivers of the group performance. The strong economic recovery is forecast to continue in calendar year 2021, with expected GDP growth of 3.7% and unemployment to reduce to 5.1%. There are also signs of recovery across the business sector. NAB's most recent business survey for March 2021 reported record- high business conditions, driven by substantial and broad-based improvements across all leading indicators. However, we can see that some customers have been more impacted by COVID-related restrictions or changes in behavior which were triggered or accelerated by the pandemic. Some of the more heavily impacted customers include those who operate or work in sectors such as accommodation, tourism, and travel, where there is a greater reliance on international tourism. Business customers located in CBDs across Australia also continue to be challenged. These customers face a more uncertain future, and we are working closely with them. Given the ongoing uncertainty for some of our customers, our March 2021 balance sheet settings have been maintained at prudent levels, including a CET1 ratio of 12.37% and total collective provisions to credit risk-weighted assets of 1.5%. A strong balance sheet enables us to keep the bank safe and support customers, including those customers who have opportunities to grow. As we gain greater clarity as to the breadth and sustainability of the recovery, we expect to move towards capital and dividend settings that, while consistent with keeping the bank safe, will reflect a more normal operating environment. This is expected to see us manage our CET1 capital ratio towards a target range of 10.75%-11.25% over time. While it's premature to discuss the precise details of how we will achieve a lower target capital ratio. Our bias is to reduce our share count over time to deliver long-term ROE benefits for shareholders. This is also consistent with our decision to neutralize the impact of the dividend reinvestment plan for our interim dividend. Future dividends will be guided by a sustainable payout ratio range of 65%-75% of cash earnings, noting that dividends will always be set by the board based on all circumstances at the relevant time. Last year, we refreshed our long-term strategy. You've seen this slide before, and it's pretty much unchanged. Customers and colleagues are the twin peaks of our strategy, and as I've outlined last year, there are four key areas that we are focusing on and will be known for. Relationship-led, easy to do business with, safe, and finally, thinking long term. Also, last year, we disclosed four clear measures of success, representing a balanced suite of targets. They are top quartile colleague engagement, strategic Net Promoter Score positive, and number one of the majors. Cash earnings per share growth through safe market share growth in targeted markets, and a disciplined approach to cost and investment, including lower absolute costs relative to FY '20 costs, and finally, double-digit cash ROE. Our performance this half demonstrates the progress we are making towards these balanced set of targets. However, there is more to do. We also recognize our earnings targets need to be delivered on a sustainable basis, looking through any short-term volatility and impairments. Our strategy is not necessarily unique. However, its successful delivery requires we stay disciplined, focus on what matters, and execute well. I know from my previous experience that driving the cultural change needed to achieve the strategic outcomes is always harder than anticipated, and this is where we can differentiate. The implementation of a customer-centric operating model with clear accountabilities was an important early step in our strategic refresh. Also important has been agreeing a small list of our key strategic priorities and making very clear to each of our 100 most senior leaders their key deliverables over the next three years. While it will take time and a relentless focus to ingrain the disciplines and cadence required, we are making progress, and this includes the introduction of a more disciplined framework for governing our discretionary investment, which includes fortnightly check-ins and consistent reporting against specific commitments. It also includes the ongoing rollout of investment in our leadership and training programs for all colleagues, including our unique Career Qualified in Banking program. These will drive a greater level of professionalism and consistency across our bank, so customers and colleagues know what is expected of them from NAB. As we implement this change, we have moved quickly to quarterly colleague surveys, which provide more regular feedback and help ensure we continually focus on what matters. Our colleague engagement scores have shown an improvement over the past 18 months, but we have more work to do to reach our target of top- quartile engagement. Against a backdrop of strongly improving business confidence and conditions, we are reinvigorating our leading SME franchise, our Business and Private Banking. Together with our customers, driving a business-led recovery in the Australian and New Zealand economies. Across our business, momentum is building. While the improving economic environment has been helpful, it's also clear that the decisions and investments we are making are having a positive impact for our customers and our colleagues. We have more business and private bankers in more places, adding approximately 490 new customer-facing and operations roles this half. New leadership is very focused on embedding greater performance disciplines while getting the basics right. Our pipeline for new business is significantly higher than last year. Our lending volumes have rebounded in March, and we are growing our share of SME business lending. In addition, our new business transaction account openings are up over 16% versus last year. In Personal Banking, we are simplifying and improving the home lending experience for our customers and bankers, and over the past 12 months, we have improved our time to yes by around 30%. The small improvement in the past six months is particularly pleasing, given we have seen a significant 45% lift in volumes of home loan applications processed. Our Simple Home Loans platform is enabling simple lending through our proprietary channels to be originated far more seamlessly with quicker turnaround times. We expect to see ongoing improvements as we expand the types of home lending and channels capable of originating through this platform from about 60% of our proprietary volumes currently. This, together with ongoing simplifications and improvements to our policies and processes, is expected to drive a return to market share growth in second half 2021. In Corporate and Institutional Banking, we have continued to see the benefits of our disciplined growth strategy as we grow our lending in targeted segments such as renewables, infrastructure, and investors. We're also seeing a strong pipeline of distribution deals which generate fee income without balance sheet usage. Despite continued pressures from the low- rate environment, C&IB has held underlying returns broadly stable over the last four half-year periods. BNZ has had a very strong half, with above-system growth driving record volumes in home lending, and at the same time, a disciplined approach to portfolio management has seen a shift in our business lending from more concentrated corporate exposures to SME. The proposed acquisition of 86 400 provides an exciting opportunity for accelerating our strategy for UBank by combining UBank's established customer base and brand with 86 400's experience and leading technology platform. Supported by NAB's balance sheet, the combined business will be well-placed to deliver the next generation of simple, fast, and mobile banking solutions. The ACCC and APRA have now approved the transaction, and subject to receiving approval for the 86 400 scheme of arrangement, we are on track for completion by the end of May. Critical to achieving better outcomes for customers and colleagues is technology. Much of the work undertaken in recent years has been focused on getting the technology foundations right. This is not easy and requires considerable investment and upskilling of technology capability. Today, we are well advanced in building a resilient and flexible technology environment. Our insourcing program is bringing key technology talent and functions back into NAB, giving us greater speed, flexibility, and control with cost- neutral or better outcomes. Our cloud migration is advanced, with 45% of apps now cloud-based, providing more flexibility and up-to-date services at lower cost with greater resilience. While we continue to invest in the core foundations, our efforts can now increasingly shift to customer experience initiatives, which will support both our cost and revenue ambitions. The most recent customer surveys continue to show an improvement in our customer Net Promoter Score, and we are now number one of the major banks. This is a good result, but we can do better. We can see the opportunities to improve and will not lose focus on the need to drive better outcomes for both customers and our colleagues. With that, I'll pass to Gary, who will take you through the results in more detail. Great. Thank you, Ross. Let's start with our usual high-level overview of the result. As Ross mentioned previously, there was no large notable items in this period, and all numbers are on an ex-notables basis. Our performance this period reflect the rebounding conditions, with significantly improved credit impairment charges. This has been the key driver of the strong uplift in both statutory profit and cash earnings compared with second half 20, with the latter up 48%. However, underlying earnings declined 7.6% over the period, largely reflecting the strong performance of Markets & Treasury in second half 20. At a divisional level, underlying profit performance has been mixed. New Zealand Banking is a standout, with 9% growth due to higher margins and mortgage growth. Business & Private Bank and Personal Bank are up 1% and down 1%, respectively, but with improving momentum. C&IB is down 16% half-on-half, but up 13% compared to the first half 2020, largely due to markets volatility. Ex markets, underlying profit was flat half-on-half. Before getting into the detail of the results, I first wanted to touch on our remediation program. We've incurred additional customer-related remediation charges in first half 2021 of AUD 41 million post-tax, split fairly evenly between MLC Wealth in discontinued operations and Banking. In first half 2021, there's been no new significant remediation issues identified, and our focus has been on remediating customers who are part of our existing major programs as quickly as possible. I'm pleased to say we are progressing well. We are finalizing customer payments for advisor service fees to salaried planners and have commenced accelerated payments to customers for the Advice Partnership Fee for No Service program. Total provisions for customer-related remediations now stand at AUD 1.6 billion. This is approximately AUD 300 million lower than the second half 2020, mainly reflecting customer payments. We've also included here an update on our payroll remediation. Turning to revenue, which decreased 5% half-on-half, but is flat versus first half 2020. Markets & Treasury income is the key driver of these differing performances over the two periods, which I'll discuss in more detail shortly. Excluding Markets & Treasury, revenue was flat half-on-half. Net interest income declined due to lower average volumes over the period, albeit, as Ross highlighted, we are seeing good growth emerging in our core businesses as we exit the first half. Lower volumes have been offset by improved margins, with lower funding costs offsetting the impact of the low rate environment and higher fees reflecting improved levels of business activity as the economy recovers. Turning in more detail to Markets & Treasury. Total Markets & Treasury income decreased AUD 442 million compared to the elevated levels of second half '20. This is primarily due to the non-repeat of mark-to-market gains on the high-quality liquids portfolio in second half '20, combined with lower income from rates and FX trading. While Markets & Treasury income is always a volatile item, at AUD 808 million in first half '21, the figure is below a typical half- yearly amount, with the shortfall mainly due to weaker performance in trading, which includes the impact of limited volatility in our key rates and FX markets over most of the period. net interest margin declined 4 basis points over the half. Markets & Treasury was a drag of 5 basis points, of which 2 basis points come from higher holdings of liquids. Excluding these items, NIM increased 1 basis point. The impact of the low- rate environment on deposits and capital in H1 2021 has been more than offset by lower funding and deposit costs, which have added 4 basis points to NIM. In terms of lending margin, competitive pressures and mix impacts this period have been offset by repricing in the home loan portfolio and continued risk and pricing discipline in C&IB. Looking to second half 2021, we expect a further drag from the low rate environment, estimated at approximately 3 basis points. The drag is expected to moderate into FY 2022 as the returns from our replicating portfolios start to stabilize. Home lending competition and mix are expected to remain headwinds, lower funding costs and deposit mix should again provide a modest offset in second half 2021. Expenses fell 1.8% over the half but rose 3.1% compared to first half 2020. In terms of half on half, productivity of AUD 181 million was achieved. The main drivers have been insourcing and personnel savings relating to restructuring as part of our strategy refresh last year. Expenses also benefited this period from the non-repeat of AUD 141 million in restructuring costs incurred in the second half 2020. The net impact across D&A and investment spend this period is broadly neutral. Lower technology and investment spend in H1 2021 of AUD 41 million reflects us transitioning to less, more focused projects and the timing of some key expenditure. We expect investment spend to pick up in the second half, to circa AUD 700 million to AUD 750 million. Encouragingly, in FY 2021, the mix of investment spend has started to shift more towards customer experience and efficiency as our infrastructure spend has largely peaked and our remediation programs are well progressed. The large increase in the other expense component this half of AUD 238 million relates mainly to the normalization of provisions for performance-based compensation. We continue to expect modest expense growth in FY '21 of approximately 0%-2%. Shifting now to credit impairment charges and provisions. First half '21 impairment of CICs were a write-back of AUD 128 million, representing a significant improvement compared to second half '20 charges of AUD 1.6 billion. The first half '21 write-back includes a write-back for underlying charges of AUD 114 million, reflecting lower delinquencies in the unsecured retail portfolio and a very low level of individual impairments. Forward-looking provision movements in first half '21 were a small write-back of AUD 14 million. This comprises of a release from the economic adjustment of AUD 235 million, given improved economic outlook, largely offset by a top-up to the targeted sector FLAs, mostly for aviation and high-risk mortgages. This has resulted in collective provisions reducing to AUD 5.2 billion. Collective provision coverage as a ratio of credit risk-weighted assets remains strong at 1.5%, down 6 basis points from September. Asset quality outcomes this period have been mixed. We've seen a meaningful uplift in the ratio of 90 days past due and impaired assets to GLAs, driven mainly by missed payments from some customers exiting mortgage deferrals. Watch loans are slightly lower after the large increase in second half 2020, mostly due to the reassessment of deferral customers previously classified as watch. New impaired assets have also declined to low levels. The next slide takes you through our process for determining provisions to cover expected credit losses. I'll focus here on collective provisions which have reduced this period. Starting with the underlying collective provision or the baseline, which captures actual trends currently being experienced. In first half 2021, we released underlying collective provisions of AUD 202 million. Included in this figure is the release of some overlays put in place during COVID for anticipated underlying deterioration, which hasn't occurred to the extent expected. Overall, underlying asset quality trends are stable. Next, we consider the economic adjustment. This is a forward view of additional stress across the portfolio from the baseline, reflecting macroeconomic data. In first half 2021, the probability weighted outcome was lower over the period, prompting a AUD 235 million release of the EA. This reflects an improved economic outlook, partly offset by changes to our scenario weighting, including reducing the upside weighting from 15% to 5%, given that some of the previously assumed upside is now captured in our base case. Finally, we consider target sector FLAs. These capture forward-looking stress incremental to the EA movements and are particular to sectors and geographies. In H1 2021, these increased AUD 221 million, mostly relating to aviation and higher risk parts of our mortgage book. Ross mentioned earlier the uneven nature of how the recovery is unfolding so far, which is illustrated on this slide. For some time now, we've been calling out specific sectors in our business book most at risk from the impacts of COVID-19: retail, trade, tourism, hospitality, entertainment, air travel, and some segments of CRE. Asset quality for these sectors has continued to deteriorate, in contrast to improving trends we see across our total business book. Commercial real estate is the only one of these sectors with a stable performance, albeit the risks facing this sector are more medium-term in nature. The outlook for many customers in these sectors remains challenging, particularly those reliant on international travel and those in CBD locations. Our COVID-19 deferral program has now ended, and a return to repayments is underway for deferral customers. On the housing front, we have approximately AUD 4.9 billion or 10% of deferral balances, which are behind on repayments and being managed by NAB Assist. Of these, AUD 2.4 billion, or roughly half, are more than 90 days in arrears. Of the accounts referred to NAB Assist, approximately AUD 115 million of balances have a dynamic loan-to-value ratio greater than 90% and no LMI. On the business front, there are approximately AUD 2 billion of exposures being managed by SBS. At this stage, only AUD 200 million are more than 90 days in arrears, reflecting customers' strong cash buffers. The key industries being managed by SBS include accommodation, hospitality, transport, and storage, including air travel, and property and business services. Turning now to capital, which has been very strong over the first half of 2021. Our CET1 ratio at March stands at 12.37%, up 90 basis points from September 20, driven mostly by strong organic capital generation. This reflects improved asset quality and CIC outcomes over first half of 2021, along with subdued volume growth. Risk-weighted assets have declined AUD 7.5 billion over the half. The key driver has been the lower credit risk-weighted assets, down AUD 5.8 billion or AUD 3.1 billion, excluding FX. Asset quality-related outcomes have contributed to the reduction in credit risk-weighted assets over the first half of 2021, which includes non-retail upgrades slightly ahead of downgrades and the partial release of our SME overlay for expected rating deterioration, which has not occurred. These asset quality outcomes are better than expected, and if current economic conditions continue, we would not expect material credit risk migration impacts from here. Slide 91 in the pack provides more detail on credit risk-weighted asset drivers over the period. On a pro forma basis, our CET1 ratio is 12.75%. This takes into account the acquisitions and divestments announced recently, the most significant one being the sale of MLC Wealth, which is expected to add 35 basis points to CET1. Liquidity and funding have remained strong, with significant surpluses above regulatory minimums. Continued strong deposit inflows and ongoing central bank and government stimulus initiatives have supported a strong liquidity position and have allowed for a reduction in our CLF, which is the key driver of the decline in the LCR to 136%, compared with 139% at September. The NSFR has reduced to 122% over the half, again reflecting the reduced CLF. NAB has fully drawn down the TFF initial allowance of AUD 14.3 billion. Still available is additional supplementary allowance of AUD 9.6 billion and an additional allowance of AUD 4.9 billion available to be drawn by 30th of June 2021. Our intention is to utilize in full TFF to support lending and refinancing of wholesale funding maturities. Term wholesale maturities for the second half of FY '21 are AUD 13 billion, compared with the current available supplementary and additional TFF allowances of AUD 14.5 billion. With this, I will now hand back to Ross for some closing comments. Thanks very much, Gary. Look, we are very optimistic about the future. Economic and health outcomes are improving rapidly, and we're making good progress, and momentum is building across our businesses. I'm fully aware of the role that NAB plays in stimulating the economy. Businesses are leading the recovery, and it's our job to fund good businesses and their investments and support our customers. We are getting on with the job. While there's still much to do, we are progressing as planned. We have the building blocks in place, greater discipline, greater clarity on what will make a difference for customers and colleagues, and greater focus on execution. We have simplified our bank. We are now close to a successful exit of MLC Life, and in the half year, we completed the sale of our finance broker aggregation business and announced the sale of BNZ Life, which is expected to complete in the first half of 2022. This enables us to focus all of our efforts and resources on executing our strategy for our core businesses. NAB is becoming a simpler, more accountable business, enabling us to be more consistently getting the basics right, and we want to deliver for our colleagues and customers. Sally, I'll now hand back to you for any questions and answers. Thanks, Ross. Before I pass to the operator to moderate the Q&A, just the usual reminder to please limit your questions to two. Thank you, operator. Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speakerphone, please pick up your handset to ask your question. Your first question comes from Jarrod Martin from Credit Suisse. Please go ahead. Thanks, Ross and Gary, nice to see a clean NAB result, something that hasn't been common over the last couple of decades. Long may it continue. A couple questions around dividend and capital. Thanks for providing the payout ratio guidance of 65%-75%. Can I understand, and I understand that it's a board decision, but is it more important to have a consistent payout ratio or a consistent absolute dividend so that you'd be willing to actually move around within that range to have consistency of dividend, or is it about the actual payout ratio? That's the first question. The second question, core equity tier one range, 10.75%-11.25%. Midpoint of that is 11%. Are we really seeing now that unquestionably strong you want to be at 11, because given what's happened, and guidance through the pandemic, you really don't want to dip below 10.5? Thanks, Jarrod. Thanks for those questions. Let's start probably with the range itself. We've set that range in the medium term, while we bring the organization back into what is a more normal condition. As I've said on many occasions, there are still some impacts of COVID. We've got to see our customers through, and therefore the bank through. We accept that 10.5 is unquestionably strong. We'd like to hold slightly higher than that for this bank so that we can operate well and not have to dip below that number, unless there's really extenuating circumstances. That's why we set out the range. It is a medium-term range. On the dividend, I would rather stay within the range and get consistency within the range rather than fix a number. I think this bank and many others got itself caught chasing after everybody else, holding the dividend payout at a level that was probably a little bit unsustainable, and we constantly ended up diluting our shareholders with more and more shares. That is something that we have the opportunity now to get out of that habit. The first thing is let's use the capital for growth. That's, I think, what our shareholders would want to do. Where we can't find good use for that on an organic basis or an acquisition basis, we're going to give it back. That will be over a period of time, and our preference is to give it back by reducing the share count of the bank. I think you're seeing us cautiously moving towards a lower shareholder account, number count, but we will stay within the range rather than a fixed dividend number. Okay. Thank you. Keep going, Gary. Yeah. I might just add a couple of things. Jarrod, you sort of touched on it at the start. Of course, it's going to be subject to board discretion, and what that's really saying is about the circumstances. We're not using this range as a brick wall aside there. It's a hard range. It's going to depend on the circumstances, and for this dividend payment, we were a bit below the range because of the particular unusual circumstances of a write-back in CICs. There will be that flexibility, but it's really just to give yourselves and the market a view of how we're thinking about what the appropriate range is with that focus on sustainability. On the capital range, look, it is a fair question. The requirement is 10.5. We've set it at this stage, for a period at that 10.75%-11.25%, with a bit of recognition that there's still quite a bit of uncertainty out there. Over time, that could be revisited if we think we could actually sensibly and safely run a slightly tighter buffer. We think for this point in time, that's the appropriate range to work to. Okay. I'd like to bring everyone back that the requirement's 10.5. It's not 11. It's not 11.25. These are just judgments about how much buffer you need. Thank you. Your next question comes from Andrew Triggs from JPMorgan. Please go ahead. Good morning, and thank you. Gary, I just had a question on the drivers of the top-ups in FLAs for aviation and housing. Could you talk a bit more on both of those areas? Why add to provisions in the mortgage book, given what's happening in house prices? What's assumed on the aviation book with respect to the return of international travel? Hence, the sort of the outlook for further top-ups if there's a delay in, I guess, reopening of global borders? Look, thanks for the question. Clearly, on the aviation portfolio, as we continue to progress and the commentary around when borders are going to reopen, all the commentary seems to be that it's going to be later rather than sooner. That no one's in a rush to open the borders in the short term. That has really informed as well as the other degrees of uncertainty around what we're seeing currently on how the virus is spreading around the world, the rates of vaccinations, potential mutations. All of this just adds to that uncertainty, which is of concern for that sector. That is downside risk. We're not saying that that sector can't work its way through it, but clearly, the risk factors are increasing. That's what really drove us for this half. Again, we think the settings are pretty conservative. Of the portfolio to date, we haven't had defaults. They've been able to manage to it. The longer this goes on, the more that you consider that there will be risks that airlines will get themselves in trouble. That was driving the top-up in aviation. Whether there's more required, look, we think that was a prudent and appropriate top-up, so hopefully no more required, but we'll just have to wait and see on the circumstances. On housing, it's really the story of on average, the economy's doing well. On average, house prices are going up. On average, our housing portfolio is doing quite well. It's about the tails. It's about that there still are parts of the portfolio, as you've seen customers come out of that deferral portfolio. There's been a reasonable number of those customers now flowing to NAB Assist. A reasonable uptick in 90 days past due. We are really focused on the riskier areas of the housing portfolio, and that led us to provide a top-up, particularly with still a degree of uncertainty in the next quarter or two on how the economy's going to play out post-stimulus being released or reduced. That's the first important point on housing. The second, if you do go to, I think it's slide 78 or something around there. There is a slide that just shows you the level of collective provisioning on housing, period on period. When you just step back from just the FLA component to the overall collective provision we have on housing, it's just a modest uptick for the period. From a coverage perspective, it's actually quite stable. If you don't just focus on the FLA component, you focus on overall. Thanks, Gary. Just on capital, obviously, all the banks have very sizable surpluses now. What do you need to see? What are the triggers to announce uses of that capital returns? Do you need both the final APRA rules and also sufficient certainty that the economy has turned? Well, I think certainly we will be looking for consistency in the economy turning. As I said, we've still got some concerns about certain customer groupings in the marketplace. You are seeing situations overseas, with recurring difficulties with the pandemic, which is terrible to see. We're just taking a cautionary approach to this, and as the years go by, if we can't find opportunities to use this capital for growth in the business, we will give it back to our shareholders. That's what we're clearly signaling today, with the levels in the medium term we'll get back down to. Look, it will be dictated by what's going on economically here and with an eye to what's going on overseas as well. I'll add to that a couple of points, Ross. You mentioned best use of capital, and we're seeing it in March, and there's good momentum into April, which I'm sure Ross you'll pick up as well. The best use of that capital is to have a growing business, which we're very focused on, and how do we continue to be focused on that? In terms of the other points, look, every six months as we get better and more clarity on how the economy's really going, how some of these factors are playing out, I think that helps bring forward those type of decisions on when buybacks are appropriate. It really does help when your pro forma starting point is 12.75, but there's a lot of room to move here in terms of making some of these decisions. Given that, I wouldn't be taking away that, oh, we have to wait for the unquestionably strong new capital rules before we can do anything on buybacks. Yeah, no, that's not how we're thinking about it. Obviously, buybacks are all subject to APRA approval, but that's not in our minds a key constraint, really, because we have so much buffer over our target range. Thanks, Gary. Thank you. Your next question comes from Andrew Lyons from Goldman Sachs. Please go ahead. Thanks, good morning. Just two questions, one on asset quality and one on the margin. Just firstly, on asset quality, your delinquency trends, which were up materially in the half, do seem somewhat at odds with what peers have reported, where their delinquencies haven't yet moved. They have seen hardships increase; they're expecting those hardships to leak in delinquencies over the course of the second half. Can you provide any background as to why there may be differences in how that's being reflected? Just the extent to which you expect further leakage from those loans being managed by NAB Assist going into delinquencies. A second question just on the margin. Slide 21 highlights your expectation that lending margin was flat overall in the half. Could you perhaps just break that out in a bit more detail, just between the benefit of repricing versus the drag from the front book, back book, and mix, which is clearly going to continue into the second half? Thanks. Gary, maybe if I take the first one, you take the second. Andrew, just on the asset quality. You'll recall, or you may not recall, but we didn't allow personal customers to go into further deferment after the six-month period of time. We did an assessment of each one of those, which therefore means that we put them back into our normal operating environment, that would roll into a 30, 60, 90-day deferral buckets, and that's what's happened. We're probably, I'd say, three to four months ahead of the rest of the industry because of that approach, because many of the others, I think, let them go have instant deferral rollover. We chose not to do that. That's pretty much the reason why our asset quality is showing through at the moment. We do see that coming down as we deal with each of these customers, that Gary's given you some numbers on what's showing through. I can say that new customers going into those buckets has drastically reduced, it's really around the deferral, the customers that had deferral that have moved in there. As I say, we'll be ahead of the industry on that because of the way we chose to treat those customers. We thought it was better that we actually had that conversation with them after six months of deferral, rather than just automatically rolling them over. Great. Thank you. Gary, do you want to? Yeah, no. On that, clearly that it should be timing, but let's wait and see how it works out with our peers. On the margin question, I can unpack a few of the items there. In terms of the benefit that we actually flagged last half from the previous period home loan repricing, that's benefited us about 3 basis points through lending margin. We probably had another basis point in David's business of repricing coming through C&IB, and the impact of competition mix, et cetera, is about 4 basis points. That's how you end up in your net square zero. On the impact of low rate and the benefits from funding and deposit costs. The impact of low rate for us this period was 6 basis points, and that was really offset by 7 basis points of funding and deposit cost benefits to give that net one. That just gives a bit more flavor of the components of the NIM drivers for the half. Thanks so much. Thank you. Thank you. Your next question comes from Victor German from Macquarie. Please go ahead. Thank you very much. Good morning, Ross and Gary. Two questions from me, one on costs and one on the business lending side. On costs, obviously, completely understood why you've given 0% to 2% cost guidance at the half. I'm just sort of mindful of the fact that we've progressed through the year. There's only five months left. If there's any way, maybe for you, Gary, to kind of outline the reason for keeping that 0% to 2% rather than narrowing it a bit, given you're significantly passed through the year. What are sort of some of the uncertainties that perhaps drive that outcome in costs? The second question on business lending. I noticed on slide 11, you highlight that business lending growth and monthly changes started to pick up again in March. We've seen some early green shoots before, and they didn't quite eventuate. If there is anything that's kind of in there now that gives you a bit more comfort that we will actually see some pickup in business growth. Also, with respect to your new bankers, you've put on 500 new bankers. You're obviously preparing for growth. Just be interested in how long does it generally take for those new bankers to actually sort of break even and become profitable for you? Yeah, thanks. I'll pick up on each of those. On the cost, look, we are maintaining good control over our cost base. There are a number of increases that automatically come through this year. For example, if we have a good year, we do want to resume bonus payments back into our senior teams, which we took out for a very senior team with zero last year. That's just not sustainable long-term. If the business performs as it is today, we will be wanting to make payments across the board to all those who are eligible. That's what we have to put in where it wasn't there last year. It's quite a large number that flows on through. We are looking at good control over our costs. We also have investment slate this year that so far this year, we've only spent about AUD 500 odd million. Gary, I think we've got about another AUD 700 to AUD 750 that will flow through on our key projects that we are funding. I think that's actually a good sign for this business, and the fact that we've had control over what's gone in to get the result out of those projects that we run. That will kick up in second half. Between those two numbers, you will see us in that 0%-2% range, but good control over it. On the business lending, you're seeing our results in the pack here. March was good, but it was building to March. I will say that April is better than March. We are seeing the momentum building in the Business and Private Banking, but also in our Personal Banking as well. I am optimistic, if the economy stays in good shape, that we will be a major beneficiary of that because we are the largest business bank in Australia, and we're out there very active. We're not distracted. We have 490 more bankers and associates, and operations team working with customers. Takes about 12 months odd to get a banker right up to speed. They usually come through from our business associates, into a banking role. It's not as though they're starting from scratch. We have momentum. It is certainly the friend of NAB right now, and I expect that to continue across the business. As I said, April, it wasn't just one month, March. April was a good month volume wise for us as well. Thank you. Can I just, sorry, just push my luck with this cost. I completely understood everything you said. It makes a lot of sense for us. I'm just trying to get a sense for the difference between 0 and 2% is about AUD 150 million. Is the key kind of moving part there is those bonus payments that you're referring to, or is it some of the cost save timings that you're not kind of certain about, that those will happen in the next five months, and if they don't happen in the next five months, they will happen in the next period, and therefore that cost reduction will come through in H1 2022? Yeah, look, we said the investment of about AUD 700 to AUD 750 coming through in the second half actually gives us benefits coming through over the following three years. That's why we're putting the money in. That's certainly one of the big ones that wasn't in the first half. We have an increased investment spend coming in second half. Yeah, we have put more provision in for our bonus structure, because the bank is performing. I'll pay if it performs, and I won't if it doesn't. We are getting performance out of the bank across the broad spectrum. That bonus pool was much smaller last year, based on the results. Those are two items. The investment flows through into what the business starts to look like in 2022 and 2023. The 19 programs we are funding are future value- creating for this bank. As I've said to you before, those are the ones I'm focused on a fortnightly basis. They're the ones that deliver for the bank long-term. Victor, just one final point. It's a quality problem to have. We're hoping off the back of the momentum we've seen in recent months that could drive some volume- related expense uptick as well. Somewhat difficult to forecast. If we do have volume levels continue at what we've seen the last couple of months, which would be fantastic, there will be some pressure in the back office that maintaining our processing times might require a bit of additional support and cost in there. Certainly, Gary. It's a good point. We're certainly seeing that coming through with volumes up 45% in Personal and well and truly up in our Business Bank. We need to maintain the service levels. Thank you very much. Thank you. Your next question comes from Brendan Sproules from Citi. Please go ahead. Hi, good morning. I just have a couple of questions. Just firstly, on the Corporate and Institutional Banking, you've sort of just explained the growth that you've been able to get in your Business and Private Banking. I was wondering what is the outlook for growing, particularly risk-weighted assets in that business that therefore drives revenue. Then my second question is just on the home loan momentum that you've developed pretty much over the six months, as you show us on slide 12. I guess with investor applications looking like that, they've started to improve. Is there any reason why you can't grow at system or above in the second half, given your improvement in turnaround times, but also the fact that your pricing seems relatively competitive with other players in the market? Well, firstly, let's start on the home lending, Gary, you can probably cut in on the Corporate and Institutional. I'll make a comment and then feed over to you. Just on home lending, we do believe we'll get back onto system or slightly above in the next six months. It has been a long, solid build to get back into that position. You're seeing from the charts here, we're getting there. I did make a call with the team around what was happening 12 months ago, and we backed out of a lot of the enormous cash back that was being paid in the marketplace. Others jumped into the space and grabbed the market share at that time. It's quite interesting to see what it's done to them. We're actually now able to claw our way back. It's really through the service delivery that we're offering, and our service proposition is getting better and better. We're not finished by any stretch of the imagination. I think we'll be back on system. Question is whether we can grow greater than system. The big thing for me is holding pricing discipline, and that's what the team, well, they're under Rachel and Andy Kerr, are doing very well. We're getting a reputation of being better on the service delivery, which we'll build. Consistency is what you need in home lending, and we're building that. We've got a lot of complexity in our home lending process that we're working through over the next two, three years to make it much simpler. Therefore, cost will come down. We believe volume's up. In a good path and momentum again is our friend in this area, but it's consistency that helps. On the Corporate Institutional Bank, we are doing more work off- balance sheet, and I think that's going to be important. I don't see any real movement in the risk weightings allocated to our Corporate Institutional Bank. We believe they can grow with services that do take some of the assets of customers off the balance sheet, and we get the fee income, which serves customers well and will serve ourselves at the same time. I think around this current levels, we're reasonably comfortable. The business is going well. They step right into the issues of COVID, and we have, I think, created a very good service reputation in the marketplace, which will stand us in good stead and pleased with the performance of it in a pretty competitive marketplace. Ross, on that, on C&IB. Absolutely. It's had a good, strong track record for quite a number of periods now on focusing on having a high-quality relationship model. Reminding everyone that the strategy for C&IB is disciplined growth. It's not outright growth because we all know that some of the ROEs and margins in the top end of the business can be challenged. We've built up some real muscle over many, many halves now of having that disciplined growth. Growth in itself is not the goal. It's making sure it's quality growth. David and the C&IB team would absolutely love to continue to grow for the right business and for the right returns for that business. That's been a continued focus on that. We'll see how that plays out. That's how in more recent periods you've seen that really stable return to risk-weighted asset measure, which just demonstrates constant focus on making sure that we're dealing to the right customers, we're getting the right margins, we're getting the right returns, and not just chasing balance sheet growth at the expense of low ROE or because of low ROE business. Thank you. Your next question comes from Richard Wiles from Morgan Stanley. Please go ahead. Good morning, Ross. Good morning, Gary. I have a couple of questions. One is on the medium-term cost targets, and the other is another one on mortgages. I'll start with the medium-term cost target, the less than AUD 7.7 billion by 2023 to 2025. Can you tell us what cost savings are factored into that? Why the target isn't more ambitious? Is it because you achieved AUD 1 billion of cost savings under the three-year plan you finished last year, further cost savings are harder to get? The second question. The second question on mortgages. You talk about improving momentum. I think the whole system is improving. I'm not sure that we're seeing a lot of it at NAB that gives us confidence you'll get back to system. Slide 64 shows the real problem is in the investor space. It was down 7% year-on-year and 3% half-on-half. Can you explain, please, Ross, why you're struggling in investor and why you're confident that you'll get back to system? Is it because you think you'll turn investor around? Well, certainly, first off, on that one, there's been less on investor. The investor applications have dropped from 34% to about 29% of applications coming in. First-time buyers have moved up despite everyone saying it's hard to get a first-time buyer into the marketplace. They're now 16% of the applications we're taking of the owner-occupiers. It's a pretty strong push in the owner-occupiers, while investors have sort of been less prevalent in the marketplace. There's some changes there. We know that investors will come back in as they see the conditions right, and as where they see they can make some money out of it. Ross, in the last. Richard, you can have a chat to us in six months' time as to whether we've built some momentum. Our stats are certainly showing that we are, and I'm confident that the team are doing the right things to build that momentum. I don't want to see us do this boom and bust carry on. We've got to build a machine here that actually works well consistently and isn't forced on pricing all the time. That's what Rachel and Andy Kerr, and the team are building, with one mortgage factory rather than four of them that we had. That's why I'm confident we'll get there. It's got to be consistency, and if I see small growth, I'll be very happy. If I see large growth, I wonder what we're doing again. It's going to be consistency. Let's have another chat six months' time. See how it's going on. I see the numbers on a weekly basis and confident we're building in the right direction and quietly getting there. It is during COVID, Richard, we did change some of our risk settings, and our pricing was probably off where the market was. That got corrected in the most recent quarter. We feel like we're back in market on investor now, not paying over the top, but you've got to be back in market, and that will take a little while to flow through. There's some early positive signs. While we've been doing well on owner occ, there's some early positive signs on investors now starting to come through, which hopefully will develop through on the second half. Yep. Richard, we'll have another chat in six months' time and see how we're going. It's certainly a focus for the bank, but I want consistency. I don't want great leaps up and down in this space. That's what we're building. On the medium-term cost, look, we have said less than AUD 7.7 billion, and that's the target we're going for. There is a balance here that I'm putting in place of getting the business moving again and building momentum. That's as important as reducing the cost. It's not as much as just saying, there's 300 or 400 to take out. There's costs going into our business all of the time through some wage inflation, some supply costs, technology costs of fraud, scams, cost of anti-money laundering. This is not a business that is defined by a cost structure from five years ago. There are new costs coming in that we have to bring into the organization. At the same time, reducing ourselves back to that 7.7 is a pretty big ask. That's what we're concentrating on. I think it's a good balance. Yeah, there's many costs coming into a banking sector in a very highly regulated market. Quite rightly, we've got to get this bank, along with all the banks, safe and secure for customers. You just need to look at what's going on in the scams, fraud- type area, and cyberspace. These are hundreds of millions of spend going on in these areas, and we need to take those into account as well. I'm pretty comfortable with, we'll get ourselves to below the 7.7. It'll be hard work, but we're onto it with a good program of work. Thank you. Your next question comes from Brian Johnson from Jefferies. Please go ahead. Congratulations on a very clean result. Just two questions, and I apologize. I think Jarrod asked a great question on basically the dividend. Today, you've actually expressed the view that there will be volatility in the loan loss charge, and you've committed to a dividend payout ratio. Ross, I just want to feel, would that mean that it would be quite acceptable to have a decline in the dividend should the loan loss charge rise? Well, first off, I think we're starting in a very good position, Brian, not starting at the top of the range for a kickoff and giving ourselves room to, if the conditions are right, to build into that range. There will always be volatility within that range, given other factors that impact on us and the industry. Today, we're giving you the range. We're telling you we've got good levels of capital. We're saying that one of the ways we'd quite like to give it back if we can't find growth opportunities is through buying back our own shares. I think we've given pretty good indications of we're a dividend-paying organization, and we need to get back to it. What I'd add as well is that if you take our preference, will be, we put the dividend out there at AUD 0.60. It would be nice to see that modestly progress over the period of time. That would be a nice trajectory for our dividend, and we've retained a lot of flexibility to be able to achieve that. That includes some future thinking around what more normalized loan losses may look like in this environment. We've considered that as part of our modeling. If those loan losses are significantly higher than what we're modeling as more normalized, then us and the board would have to step back and reassess whether that does mean in conjunction with how much capital we have, where we're at, does that mean we have to then step back from the bonus to stay within our guidance range or form some other conclusion. The whole point is it's going to be dependent on the circumstances. There's not going to be any formulaic approach to it. Quite feasible what you've said, we'd have to consider all the factors. Yeah, can I have a go at translating that into analyst speak? You're saying a 60%-65% payout, as whatever the payout ratio is, modest growth in the dividend, and any surplus capital that you generate would be applied on some kind of share buyback on a regular basis. Is that what you're saying? That would certainly broadly be the direction that we're traveling. Now, you missed one important piece, which is best deployment of our capital is to grow. We'd like to go there first, but if we feel like there is excess over growth that we have to provide capital for, then yeah, what you've said is reasonably accurate. Yeah. Great. The next one, Gary, is just when I have a look at the slide on the replicating portfolio, which I think is slide 21, you've got AUD 274 billion of deposits in a very small font on the right-hand side that you say are at or near zero, but you've only got AUD 57 billion basically hedged. You've become progressively more and more unhedged. Is that correct? And what does that mean? Tactically, what opportunities does that give you going forward? Yeah, it very much depends on the type of deposits as to which ones you hedge and which ones you don't hedge. That's the higher quality, stable deposits. It is a particularly relevant issue in the current time, as we've been giving such an influx of call account deposits about what's the appropriate liquidity status to provide for those, how long are they going to stay around for. Once you've formed that conclusion, we have expanded our hedging to cover what we think is quite a prudent level of increased sustainable deposits. That's where it's coming from rather than any changing policy decision. It's really about this unusual inflow of significant levels deposits and trying to work out degrees of stickiness of those deposits. Gary, does this give you the opportunity to move from cash into five-year bond rates, which are now a more attractive yield, which lessens that replicating portfolio drag going forward? These are the sorts of things that we're considering different options on, yes. Fantastic. Thank you. Thank you. Thank you. Your next question comes from Ed Henning from CLSA. Please go ahead. Thank you for taking my question. Just on the SME business, you've touched a lot on the growth outlook. Can you just talk about the NIM outlook, with elevated competition out there? Also, on the growth on slide 37, agriculture was really strong. Can you just talk about that? Is that just a change in peer appetite, and is the growth you're seeing through SME largely in agriculture at the moment? Thank you. First off, thanks for the question. I'll do the SME piece, Gary, then maybe you can pick up on the NIM piece. The agricultural sector is very strong. Both the export prices across a broad range of commodities is very strong. Then the weather conditions have been great for growing. The farmers are having a good year after many bad years, and you're seeing that reflected through into farm prices and what they're spending. What happens in the agriculture sector, as you and I know, in good years, they pay back loans. They do development on the farm, and in bad years, they draw down on their loans. Right now, we're seeing a lot of loan growth, but at the same time, big pay-downs as well from many farmers who are doing very well. The book we don't see will grow that dramatically, but we're seeing a lot of activity, and that's what you see often. But you're also seeing regional Australia growing very strongly. I think COVID has meant that some people have moved out of the cities and gone to regional areas, and they're growing. People are holidaying in regional Australia. We're seeing the region of Australia, and the agricultural areas are very strong. Which works towards our strengths, because we're big in those areas. It's also you're seeing growth across all of the SME sectors. People are back to business. Confidence is very high. Some of the highest levels in confidence we've seen since the surveys are running, which usually means people borrow money to develop their business. We're seeing it across the board; it's building. Gary, do you want to talk about NIM? There is pressure. I mean, it's a very competitive market in that particular area. You want to talk about the factors that are influencing what's happening in NIM in that area? Yeah. Absolutely. Look, the few components to give you some thoughts how to think about going forward, and that's why we've put out the 3 basis points from the low rate environment as the estimate for that impact in the second half. I mentioned previously the first half benefit we've achieved through lower deposit and funding costs. Look, we're pretty confident there is going to be further benefits flowing through in the second half. 7 basis points for the first half was more than what we thought, and I suspect the second half won't be as strong as that, but it won't be zero either. It's going to be somewhere in between those numbers. Hopefully, enough to at least cover the low- rate environment. That's what we'll need to work through. The more regular housing front book challenges around competition, mix issues. They will all continue. That we'll try to manage as best we can with disciplined pricing. It will be a headwind. We'll try to mitigate as much of that and then look for opportunities where they exist across our business portfolio for sensible repricing, particularly where it's a low-margin business. Thank you. Your next question comes from Matt Ingram from Bloomberg Intelligence. Please go ahead. Hi there. Thanks all for the great insights over the call. I just wondered if we could drill down a bit into the housing loan growth. We've talked a couple of times about system growth, perhaps in the second half, but I just wondered, you've got a pretty competitive three-year fixed out there. I just wondered if you could give us your thoughts on what you think the cost of capital might be now and whether you're still comfortably above that, lending at that three-year fixed, given your marginal cost of funding. Well, certainly, we believe we are well above the cost of capital, otherwise I wouldn't be writing the business. It does come back to making sure you are in the market pricing wise and have a cost structure yourself that can sustain it. Across all of our book, we still believe we are making money across all fixed and variable rate margins. Gary can talk to you about the funding costs on that. It's a competitive market. Our view is just be on the pricing, and we came off pricing 12 months ago. We know what happened. We're back on the pricing points at the moment, and our service levels are pretty good, and we're rebuilding. Gary, if you want to have a chat about just the funding costs. At this point, we don't plan to write any business that doesn't make us a reasonable return on our capital. Yeah. We're still very comfortable that's good business to be writing, and the premise of the question is right. It's when you look at what's occurred with our marginal funding and deposit costs, the ability to reprice that down, that has been a very favorable tailwind that's supporting some of this pricing. You include that, the nearly AUD 15 billion of TFF that we're going to have available, that will be higher cost pre-COVID issuance that will be maturing for a TFF at 10 basis points, around about AUD 15 billion. There's quite a decent number of tailwinds overall. Once you add that to our funding costs applied against that category, it's still comfortably above cost of capital. There are no more questions. Over to you, Sally. Thank you. I'll just pass back to Ross for a couple of closing remarks. Look, thanks very much for joining us for this investor call. Look, I'm personally pleased with the efforts my colleagues have made over this period and the momentum that this business is building. We need to stay focused on executing our strategy. We said it 12 months ago, we're executing against it, and we're quietly seeing the results coming through. You've seen our build in momentum, and I'll say again that April was a very good month on momentum for us and across our books. I think we're doing the right things. We need to be here helping Australia recover from COVID, and we're the biggest business bank, and we're certainly going to play our part in it. We just need to keep getting the basics right so that we keep giving you nice, clean results. Look forward to catching up sometime. A big thanks to my colleagues for the work they're doing on getting this bank in pretty good shape. Thanks, Sally, for organizing the session as well. Well done. Thank you very much.