Hello and welcome to Provident Financial Interim Results 2022. My name is Susanna, and I will be your coordinator for today's event. Please note, this call is being recorded, and for the duration of the call, your lines will be on listen only. However, you'll have the opportunity to ask questions. This can be done by pressing star one on your telephone keypad to register your question. If you require assistance at any point, please press star zero and you will be connected to an operator. I will now hand over to your host, Malcolm Le May, Group Chief Executive Officer of Provident Financial, to begin today's conference. Thank you. You all hear me? Thank you very much for joining the presentation for our 2022 Interim Results. As is our normal process, I'll take you through the importance of our strategic repositioning of PFG as a specialist banking group over the last few months, and how that helps us to support our business, our customers through these rather uncertain times. I'll also give you the strategic highlights for the first half of the year. I'll hand over to Neeraj, who'll take you through the financials in more detail. Once he's done that, I'll return to update you on our strategy and outlook before we take questions at the end. Turning, if I may, to slide four. As I said in our preliminaries, 2021 was a year of significant transformational change for PFG. We are now a specialist banking group focused on the provision of credit cards, vehicle finance, and loans to mid-cost and near prime customers. With significant opportunities to grow customer numbers and receivables in what we believe is a GBP 17 billion market. We now have completely left the high cost short-term credit market with the closure of CCD and the finalization of the scheme of arrangement. Growth is a key focus for the group, and in the short term, taking into account both prudently and sensibly. Following the closure of our consumer credit division, the group's risk profile has reduced dramatically, and this is reflected in our half one results and will also be the case, going forward with lower impairment and delinquency trends than we have historically have within the group. Cost is a big area of focus as we implement our new targeted operating model. Equally investment, and here we're investing in our core strengths and efficiency initiatives, which are expected to result in cost reductions from 2023 onwards, consistent with our cost to income target ratio of 40% from the end of 2024. Capital, while the group's capital position and access to low cost funding are a significant competitive advantage for us, it'll not only allow us to support our customers grow prudently, but also underpin our dividend and broader shareholder distribution policy, which I'll come on to later. I'd like to remind you that we are in discussions with the regulators regarding our capital requirements following the closure of CCD, and also the ability for us to use deposits to help fund our growth outside the direct bank. In summary, taking into account the key points I've made, PFG is now uniquely positioned as a specialist banking group with the right products in the right markets, with a strong capital position to deliver sustainable growth and returns for its shareholders. Slide five. Well, the highlights for the first half of 2022. We delivered prudent growth as our key metrics here show, with customer numbers up at over 1.6 million and receivables in excess of GBP 1.7 billion. In terms of impairments, as you can see, the trend improving year-over-year to roughly 4.7% cost to risk. Illustrating my earlier point that the risk profile of the group has now fundamentally changed and reduced. Given our repositioning, we expect impairment trends to remain stable in the second half and to be sustained at lower levels than historically have been associated with the group. We'll talk more about that in their audit section. Costs. Investment is up as we invested in our platform, people and created the new loans offering. The target operating model here we have invested to deliver cost efficiency, competitive advantage and future growth opportunities. Capital. Well, as I've said, we have a very strong capital and liquidity position with a CET1 ratio of 27.3%. We'll keep you updated regarding our discussions with the regulator in regards to our regulatory capital requirements following the closure of CCD. Turning to our dividend. Reflecting the strong growth in the first half and the confidence I have in the future growth prospects of the group, we are declaring an interim dividend of 5 pence per share. Finally, on regulatory matters, our scheme arrangement will be finishing at the end of July with all redress paid and the FCA have now closed their investigation into lending in CCD with no further action to be taken. Now, I've included slide six to show how the exit from the high cost short-term credit market through the closure of CCD has fundamentally changed the risk profile of the group. The graph on the right-hand side shows how since 2019, our average customer credit score has significantly improved. As we focus on providing credit to customers with APRs of 15%-50% only and now serve customers, many of whom are homeowners and who are on national average earnings. This key change, the closure of CCD and the focus on better quality credit customers, has meant our risk-adjusted returns have improved. As I've said, going forward through the improvement of credit cards, vehicle finance and loans, PFG will now only offer APRs going from 15%-50%, as I've said, with the target market in excess of GBP 17 billion. In the light of this decision, following the conclusion of our two successful loan pilot products, we've decided not to continue offering loans at 65% and 80% APR, and will only offer loans at the top end up to 50% APR. Slide seven. Customers in our market have always weathered economic challenges better than those in the prime space. As you can see from the graph on the left-hand side, which shows our credit customer base, how our credit customer base performed during the global financial crisis. Also our move to mid-cost and their prime customers have, in my view, made our customer base even more resilient. Clearly, the uncertain times we are in. The economic times we're in are uncertain. Of course, we will support our customer base through them. I'm confident the group, as a group, that we're prepared for that. Our customers have delevered through COVID. We've seen no evidence of increased delinquencies or default rates, and we expect our impairment trends to remain stable in the second half of the year. We also have a very strong balance sheet with improved provisioning for any potential cost of living impact. In my view, as you can see on page eight, we are, I believe, one of the biggest ESG banking groups around. We offer credit to around 25% of the U.K. adult population that are underserved by the High Street banks. In the past, you've heard me speak often about the group's social purpose, which is to help put people on a better path, on a path to better everyday life. Well, it's in times like this that you need to live it, just like we did during the pandemic. We have, as I said, provisioning in place for the cost of living impact, but helping your customers is clearly more than just provisioning. Now, I believe our customers will actually be impacted, as I've said, less than some of the prime cohorts by the cost of living crisis for the reasons I mentioned earlier. We are still preparing and have many forbearance initiatives ready to go if required, and have increased our customer communications to ensure our customers know what help and advice is available if needed. I'll pause there. Thank you for listening. I'll hand over to you over to Neeraj, who will take us through the numbers. Neeraj. Thank you, Malcolm. Slide 10, if I can turn to that, shows a summary of the group's financial results for H1 2022. The group adjusted profit before tax of GBP 54 million drives a group statutory profit before tax of GBP 37 million for the period. Based on the strength of these results and the group's robust capital, liquidity and balance sheet position, the board has declared a dividend for 2022, as Malcolm mentioned earlier. These results for H1 2022 therefore underline the continued execution of our strategy to move to a lower cost of risk model at net interest margins that are aligned to that risk and produce capital generative businesses, allowing the group to invest in its platforms for improved cost efficiency as well as more attractive customer experience. At the same time, as Malcolm pointed out, we have greatly increased the size and quality of our addressable market to drive sustainability to our business model through the cycle. Moving to slide 11. Slide 11 shows the group financial results in more detail. Full product P&Ls can be found in the appendices at the back of this slide deck. Our credit card businesses generates adjusted PBT of GBP 75.8 million in H1 2022, driven by improved customer spend dynamics, some impairment provision releases and a reduction in costs. Our vehicle finance business also generated good profit growth and delivered an adjusted PBT of GBP 20.2 million for the half year. The second-hand vehicle market has remained buoyant during 2022, and customer demand remained strong, while our LTVs remained stable at around 90%. Profitability in both our credit cards and vehicle finance businesses both improved, notwithstanding the transfer of some of the costs of those businesses to central costs as part of our centralization plans of providing shared services under Project Bolero, as we have mentioned in previous presentations. personal loans have started well with strong demand and are now working to increase receivables from GBP 42 million at the end of H1 2022 to levels that will sustain the business costs and then on to expected profitability in line with our circa 20% return on required equity target. Excluding the impact of the newly launched loans business, the group's adjusted continuing profit before tax is GBP 65 million for H1 2022, compared with GBP 63.4 million for the same period in 2021. Costs in H1 2022, however, include increased investment in centralization and IT platforms that will lead to the improvement in operational cost leverage as well as improved customer experience from the new platforms. Central costs specifically have increased by the consolidation of support functions and the interest costs of the Tier 2 capital bond, which we raised last year, as well as one-off change costs of GBP 10 million, which represents the cost of the group wide investment in shared services support functions. These investments will enable significant improvements in cost efficiency as well as quality through the creation of centers of excellence, driving the group's cost income ratio to 40% by the end of 2024. Our risk-adjusted net interest margin continued to improve year-on-year, reflecting the release of some COVID-19 macroeconomic provisions as well as the increase in management overlays in anticipation of any as yet undetected impact of increased inflation on our customers. The group's net receivables base increased year-on-year to GBP 1.7 billion, reflecting continued improvement in customer spend trends post-COVID. Our balance sheet position remains strong to meet our growth ambitions. Slide 12 shows our key performance indicators. I don't intend to go through each of these one by one, but you'll note that they demonstrate an improving risk position through a strong risk-adjusted net interest margin. In terms of the balance sheet, and as I've pointed out already, our CET1 and total capital ratios are both strong, and we have a CET1 capital surplus of GBP 186 million before any further reductions in capital requirement we may achieve after the SREP process that is scheduled for November of this year. While U.K. base rates have been increasing and are set to continue to increase, we continue to work to reduce our overall cost of funding as seen here. As the more expensive bond funding is repaid on maturity next year, we still expect to see reductions in the cost of funding after taking account of currently expected rate rises. This is also helped by our liquidity coverage ratio continuing to normalize downwards as we reduce the excess liquidity we held during the COVID crisis. The return on required equity is moving towards the expected 20% level, which should also drive the return on tangible equity to a high-teens value in line with our strategy. The cost-income ratio has been affected by increased cost of both the loans business rollout and the investment in our platform and shared services strategy. These investments, as well as the continued growth of our businesses, will drive the cost-income ratio post-2023 towards our targeted 40% level at the end of 2024. Slide 13 shows in more detail how costs are being affected by the investments we are making in our newly formed loans business and our continuing investment in our Gateway platform as well as shared services to drive cost down while improving quality. We have also remained focused on retaining our staff during these inflationary times and have increased pay levels in line with market norms. Slide 14 provides a snapshot of the products we offer across credit cards, vehicle finance, and personal loans. This slide illustrates the increase in average receivables that each business is now experiencing. The risk-adjusted net interest margin in our businesses continued to increase, reflecting the progressive normalization of the impairment charge for our targeted customer base. In our vehicle finance business, average receivables continued to grow during H1 2022, albeit at a slower rate than the performance experienced during the pandemic when there was little competition. Our vehicle finance business also saw an improvement to its risk-adjusted net interest margin, which helped drive an adjusted PBT of GBP 20 million for H1 2022. Finally, the bank's personal loans business is now driving the scale as it moves through the J-curve phase of its development in line with our product strategy and how spend has evolved compared to H1 2019 levels. As we have anticipated for a while, spend on holiday and recreation are now back to a lot above 2019 levels. It's also interesting, if not surprising, to see the relative drop in food and grocery spend compared to the last 12 months, especially considering the cost of inflation in this area. Slide 16 is a useful snapshot of the improving asset quality of the credit cards book. The new bookings are now in score bands five or below, which are helping to drive the average portfolio credit score upwards. We will continue to take a prudent approach to bookings given the inflationary environment in the U.K. at present. The credit score improvement is also driving the expected improvement in delinquency and charge-off levels. Turning to slide 17. This shows the same analysis, but for the vehicle finance business. The introduction of the near-prime categories in January 2021 can be seen here as well as their relative growth during 2022. The improvement in quality from the mix of new business is having the expected impact on delinquency and overall book quality. It is also important to note that average deposit levels in the funding of vehicles is being maintained at circa 10%, which is also stabilizing influence on the book as a whole. Slide 18 on our new loans business is similar to the previous slides, and again shows the nature of the quality of the business being written. Clearly, as a very new business, we continue to monitor the quality of the loans written very closely. Slide 19 illustrates the change in the volume of new cards issued since the tightening of credit in quarter two of 2020. The business now also has a greater focus on retention of good credit quality customers through offering better rates and balance transfer offers. The cards business is focusing on stability and quality, which should also drive an improved cost of operations in time. The vehicle finance business continues to grow as expected, again, with a focus on credit quality. Slide 20 shows the material reduction in impairment during 2021, and particularly during the second half of the year across credit cards and vehicle finance. These levels are now normalizing towards the 10% level over the medium term, in line with our strategy to maintain through the cycle stability of returns. Slide 21 shows that our coverage levels remain robust for both our cards and vehicle finance businesses. Our provision levels remain prudent for the current inflation environment in the U.K., and this has been added by the inclusion of a GBP 10 million management overlay for inflation. Slide 22 shows the group's continued prudent approach to impairment provisions. The coverage ratio is at 27.3%, which considering the improvement in the quality of the books, is very robust. This also includes the GBP 10 million management overlay that I spoke about earlier for the potential effects of inflation. The expectation is for the coverage ratio to fall to somewhere close to 15% as the full effect of the strategy to focus on the higher credit quality customers is driven through with the receivables. In total, the expected credit loss and unexpected credit loss provisions are 56% of the gross loans receivables, which confirms the very high level of prudence we continue to preserve during 2022. Slide 23 shows how the group continues to carefully manage its robust capital position. The PRA have indicated that they will review our current ICAP through a C-SREP process in November of this year. This, of course, includes the current credit risk performance and wholly removes all impacts of CCD and any higher cost lending. As you can see on this slide, we hold significant surpluses of both CET1 and total capital, which cover both the remaining IFRS 9 unwind and the increased regulatory buffers. On slide 24, there is a waterfall that shows the utilization and generation of capital. There is a final IFRS 9 transitional adjustment unwind in January 2023 of GBP 54 million, after which time the group is planned to be net capital generative. Slide 25 shows the diversified mix of funding and the reduction in the excess liquidity buffer held during the COVID-19 pandemic. The group canceled its revolving credit facility in part, reducing its own excess liquidity, as well as averaging down the cost of funding to the group. While we await the final outcome of the waiver application from the PRA, we have lent GBP 70 million from Vanquis Bank to Moneybarn in H1 2022 within the normal large exposure limit. As the group transitions to be predominantly funded by retail deposits, we will look to broaden the savings products available to our customers into ISAs and other shorter notice accounts, rather than just bonds of one to five years duration. It is important, however, to maintain our presence in the debt capital markets to retain maximum flexibility should the need arise. We currently achieve this through our Tier 2 bond. Slide 26 shows the funding duration of the group's remains strong versus the funding maturity profile. All maturing bonds in 2023 can be repaid through non-bank liquidity resources. Impact of rising rates is delayed due to the contractually fixed nature of the current funding and the level of excess liquidity that we hold. On slide 27, the strong regulatory liquidity position of the group is set out, showing excess high-quality liquid assets, GBP 331 million, with a liquidity coverage ratio of 435% against a regulatory minimum of 100%. The net stable funding ratio of 143% represents headroom of GBP 640 million over the regulatory requirement. All surplus funding is deposited in the Bank of England and achieves a base rate return. Slide 28 considers the direction of the group's cost of funding. Cost of funding continues to reduce as non-bank funding as well as TFSME at larger levels of securitization in Moneybarn have been deployed. Excess funding now achieves a base rate return, as I mentioned. Retail deposits in 2023, even though we hold non-bank funding to that amount already. Further changes to retail deposits mix in Vanquis Bank, such as the introduction of ISAs, should continue to drive total cost of funding downwards compared to most peer banks. Turning to my final slide 29, and based on the performance of the group in H1 2022, the financial outlook remains positive as we continue to deliver on our purpose to help people on a path to a better everyday life and execute our strategy. In summary, we have a clear strategy to grow in underserved markets in the U.K. for the societal benefit of working people that would find it difficult to borrow from the large high street banks. We have the capital to allow for significant growth in these clearly defined and large markets or in appropriate M&A. We remain robustly provisioned against impairment of our receivables, which continue to improve in quality. We continue to reduce credit and operational risk. We are controlling costs while investing in the future customer proposition and experience, driving towards a 40% cost income ratio. Strong treasury capabilities continue to drive down the group's cost of funding in a rising rate environment. Thank you, and I'll pass you back to Malcolm. Thank you very much, Neeraj, for that excellent flypast of our financials. To me, it's good to see in such detail how the repositioning has benefited the banking group, and also to see how clearly just how robust our financial position is. Turning, if I may, to slide 31. PFG has a platform for sustainable growth and returns. The slide shows the three key areas that combine to deliver this. Customer insight, new products and services, and an IT customer platform. We have real customer insights built up over a significant period of time and spanning millions of individual data points. I believe one of the group's strongest assets is understanding its customers and being able to safely and effectively underwrite their credit requirements. As we reposition the group's customer base to mid-cost and near prime, we reap the benefit of better quality customers, and as highlighted earlier, default and impairment rates have dropped, giving the group a more sustainable growth from customers who can and want to stay with us for longer. Our customer insights are also key to tailoring new products and services that we offer to our new customer base. They allow us to make changes that help our customers and drive growth, on which I'll give a little more detail later. They also show what new products our customers could benefit from, such as secured lending offerings, for example, when regulated, buy now, pay later. Gateway is our new IT platform, and it's a key area of strategic spend and growth. Going forward, it will mean we can combine customer insight and new products and services onto a single IT customer platform. It was created for loans but will over time support all of our lending products going forward. The platform will increase our speed to market for new products and services significantly. Importantly, it will also give us and our customers a holistic view of all their PFG products in one single place. On slide 32, I've highlighted some of the customer insights that we have. I won't call them all out, but it illustrates to me very clearly what our new customer base looks like. Many of them have mortgages or own their own homes. The vast majority work full-time or are self-employed, and they earn around the national average wage of GBP 30,000, with some having savings. Many work in healthcare, manufacturing, and transport, where the labor markets are currently very, very tight. Slide 33 sets out our customer strategy, which is built from our customer insights. As you can see, broadly speaking, our market is divided into five groups, from optimistic credit through to lifeline credit. We aim to have our customers mainly in the optimistic spender and consider spender buckets. We know how these targeted customers run their lives, what financial support they need, and how we can help them with our products and services to build a better financial future. Using our customer strategy built upon our customer insights, combined with our products and services and delivered by a new IT platform, will help us deliver future significant receivables growth. Here, Slide 34 shows our addressable markets split into customers and lending across credit cards, vehicle finance, and personal loans. As you can see, the market is now around GBP 17 billion. As shown in Neeraj's presentation, we have plenty of room to grow in all of our product areas. Looking at the left-hand side of the slide, our old addressable market was around 10.4 million customers. By repositioning the bank into a mid-cost credit and near-prime customer segments, we have increased our addressable market effectively to 13.5 million customers or roughly 25% of the U.K. adult population. We have, in effect, lost about 1 million customers who are too high risk for us now, and we've replaced them by 1 million just prime customers who will also offer attractive risk-adjusted returns. Also, by repositioning the group, we can now serve the new to credit market, which is a sizable opportunity for the group. That is the market context, but how do we plan to grow into these markets? Well, slide 35 sets out what initiatives the product divisions are taking to deliver sustainable receivables growth going forward. Again, I won't call them all out, but clearly you can see it's an important area of focus for us. In credit cards, in the first six months of 2022, we've launched three new price points, which allow customers to stay with us for longer. But also means that we can attract more new cardholders. Secondly, we've launched an improved balance transfer offering, which will also drive customer receivables growth. Thirdly, you know, we're reaching out to old dormant higher quality customers and offering them a near prime credit card from us, which is being very well received. I turn to vehicle finance. We'll continue to seek new business partnerships which have the potential to drive new customer receivables growth. Also, customer retention programs will help growth alongside this. In personal loans, as I said earlier, we'll be writing loans in the APR space of 15%-50%. We're already writing roughly GBP 10 million a month, which I believe is a very good start in a business that we in effect is only going for a year. We'll keep developing the loans proposition, especially in the open market, which will drive an additional new receivables growth. On the penultimate slide 36, we set out the group's capital management framework. The starting point is clearly the group's strong capital position, the diverse range of funding lines, including access to low-cost retail deposits. Our 2022 ICAP application has been accepted by them, which is clearly very important. As we've also mentioned in this presentation, we're waiting pending the approval of our large limit waiver. Our strong capital and funding position will enable us to grow into our new reposition of growing credit cards, vehicle finance, and personal loan markets, aided by the rollout of the group's new IT Gateway customer platform. The group will also continue to optimize our shared services targeted operating model and deliver attractive returns on a sustainable basis. The board and as we previously indicated, intends to move to a payout ratio of 40% of adjusted earnings for the full year 2022 onwards. Today, we've announced a dividend of GBP 0.05 per share as we move towards that 40% payout ratio. The board will also consider any surplus capital retained post-dividend and growth capital allocation to be assessed for further return to shareholders by way of a special dividend or share backs, obviously subject to market conditions. Finally, as we note at the bottom of the slide, our strong position gives us the opportunity to assess potential inorganic activities should they arise. To slide 37. In summary, PFG remains well positioned despite macroeconomic uncertainty in growing markets. The group is underpinned by a very robust balance sheet, has a strong focus on credit and risk management, and has a customer-centric business model supported by leading technology. For the second half of the year, obviously subject to market conditions, I expect PFG to deliver receivables growth across its product lines, stable impairment trends, and supported by the group's reducing cost of funding, a stable net interest margin. As I mentioned earlier, I expect costs to remain flat in the second half and before reducing in 2023, culminating in a cost income ratio of 40% from the end of 2024. Therefore, I mean, over the medium term, as we execute this strategy, it will deliver sustainable returns and attractive returns to shareholders, including the potential for special capital returns. Thank you for listening. We're happy to take questions, which will be run by our moderator, Susanna. Over to you, Susanna. Thank you. As a reminder, if you'd like to ask a question, please press star one on your telephone keypad. To withdraw your question, please press star two. The first question comes from the line of Gary Greenwood from Shore Capital. Please go ahead. Oh, hi. Thanks for taking my question. I just had the one, and it was around the provisioning level. I think you talked about provision coverage moving down to around about 15% over time, and obviously, you're currently. Yeah. A lot higher than that at the moment. I was just wondering. That's right. Gary, can you hear me? Yeah, I can hear you. Yeah. Yeah. I was just wondering what the sort of profile of that reduction down to the 15% will look like. Does it require sort of new, better quality lending to come on board? Or is it a case that there's a sort of cohort of the existing lending that's very well provided at the moment and potentially some of that provision could come off as well? Just a bit of color around that would be helpful. Thanks. Yeah, no problem, Gary. Thanks for the question. I think that it is both of those things. As our book rolls off the higher risk lending that's been on it in the past, and as you know, we've been tightening credit since 2020, and that has continued. We now continue to focus on not only the new business that we're taking on being of higher quality, but also the fact that we are focusing on retaining higher quality customers, especially in our credit card book, that is where the impact over time will come out. That's kind of the direction of travel. As you know, we stopped writing the lower score bands some time ago, and it's kind of the higher score bands that are providing for this kind of move. In actual fact, you know, the 15% coverage ratio, you know, as you know, compared to other banks is still extremely high. Ultimately, at this stage, that's kind of where our estimate lies. It may well, depending on where that quality ends up, be lower than that. As you know, we take a very prudent approach to how we consider provisioning for the group. That's great. Thank you very much. The next question comes from James Hamilton from Numis. Please go ahead. Two, if I may. Firstly, looking towards the sort of more medium term, and you're sort of guiding to lower funding costs with retail deposits to a lower yield on assets, with the de-risking and similarly lower impairment. Just sort of wondering what we should be looking for in terms of direction of travel, if not actual quantum numbers for both the net interest margin and the risk adjusted margin. The second question is really about the environment. Obviously non-standard securitization market is totally closed. New bank finance is extremely difficult for non-standard finance. Prime bank risk appetite is also diminished. Could you sort of comment on how you see your competitive position evolving? Well, the two are linked. I'll start off with the second one, which is really about the competitive environment. I think you're absolutely 100% right. I think funding, you know, on a 12- to 24-month view for people who don't have the benefit of accessing retail deposits is going to increasingly be a factor. We've also, as we've said in the presentation, moved materially towards a better quality of customer within the subprime space in mid-cost. What we tend to see in other channels are the people that probably suffer and they tend to fall down into our marketplace, so that is quite an attractive opportunity for us. In terms of our competitors, you know, I think if credit markets tighten up, as indeed we've seen, and we've seen in the wholesale banking market ourselves when we still have CCD, how there was a dramatic reduction in appetite to lend. You know, securitization markets do get difficult in these situations. Now, we obviously will always extend credit prudently, and I think that's something that we've demonstrated in this presentation and delivered. We are able to carry on because we do have the competitive advantage of having a banking license. Now, that also then is linked to your first question if I hand over to Neeraj on that one. Clearly we have quite a lot of scope in our NIM. Yeah. I think your NIM question is quite right. Clearly, as the quality improves, the NIM will reduce at the gross level. At a risk adjusted level, we'd expect the NIM to reduce a lot lower in reduction, I mean, which means that the risk adjusted net interest margin, which currently is just under 25%. If it was somewhere in the 20s post the improvement in quality, that would probably be right for the kind of products we have out there with our customers currently. I don't expect the risk adjusted net interest margin to really fall below 20% as part of that. The change in the impairment and the stability in the book, James, is kinda gonna be a very different picture and means that we've got a much more stable earnings profile through the cycle. Thank you. The next question comes from Perlie Mong from KBW. Please go ahead. Hello. Good morning. Thank you for taking my question. Got a couple, and the first one is on credit again. Just noticed that stage three loans is up about 10.9%-10% in the half, which isn't quite what we would expect given the improvement in the quality of the book that you've talked about. Any more details around what's driving that? Because it's not a model number. As the quality of the book improve, would you start expect that to start coming down? That's number one. Yeah. Number two is on cost. You've guided to half to flattish to half one, which means on the underlying basis, we are talking about maybe a 15% year-over-year increase in cost. Now, obviously, I know that it would include investments like in personal loan and the GBP 10 billion in central that you just talked about. It would be really helpful to have a bit more color on exactly what are the efficiency initiatives to get costs down next year. Just very quickly, you mentioned inorganic acquisition. Just maybe what are you thinking of in terms of, you know, KPIs or magnitude? Well, I'll take the last one. Firstly, I think when there's dislocation in markets, inorganic opportunities present themselves. When you're considering inorganic opportunities, you have to be able to absorb them. I think the journey the group's been on over the last four years has been such that its focus has been sorting out other things. I think as we've said through this presentation, we've got an extremely strong capital position. We have got arguably more bandwidth now that we've closed down CCD. Should opportunities present themselves, we will look at them, I think. It's not appropriate for me to go into too much detail here, obviously. We're just open-minded to opportunities as they present themselves. Thank you for your questions. On the first point that you raised around stage three receivables, the issue there is the fact that the residual non-performing loans that we have, especially in Moneybarn, we have not been in the market selling those loans in the past six to eight months, purely because that market hasn't really been that attractive for the purchase of those non-performing loans. Therefore, they remain in our stage three receivables currently, obviously fully provided. Now, as we go into H2, I understand from Moneybarn that those purchases of loans are coming back into the market, and therefore we expect to move those loans out of stage three to do that. On the cost side of the equation that you asked about, I think the cost, interesting situation. We have a number of things happening. Firstly, we did say last year we did complete our Tier 2 bond issuance. The Tier 2 bond issuance obviously drives an increased interest cost, which is held centrally as it did, and is in those central costs. The majority of those will come this year. That's kind of where part of it is. The other thing, of course, is the investment that we talk about in our centralization and creating the shared services centers for our enabling functions, and that's roughly GBP 10 million of that. I think the rest of it really is the core provisioning of central overhead that we have. I think that also includes the transformation costs that we are incurring centrally to move to the lower cost models that we require for our new businesses effectively in our new customer cohorts. As we move from where we were two years ago, and as we move towards the customers that we now talk about, the addressable market that we're facing, we're now moving the investment towards being able to deliver the right operational costs for that business rather than our old business. That clearly requires some investment. That investment is being funded by the reduction in our impairments mainly, and therefore the consensus profits that we have in the marketplace haven't moved for any of these movements in cost internally and the investments that we're making. Yeah. I think that that's a very important thing to note, that we are self-sufficient on that investment. Yeah. Okay. Makes sense. Thank you. Final question comes from Justin Bates from Canaccord. Please go ahead. Thank you very much. Good morning, gents. Apologies if you've answered any of these questions. The line was dropping out, so it's not on a couple of occasions. Please tell me if you have. Firstly, can I just draw your attention to slide seven, if we can rewind back to that. I was just keen to understand what you think the performance would look like over the next two, three years relative to the industry. I'm conscious that two things have really happened versus 2008, 2009 through to 2011 and 2012. Back then, one, Vanquis was growing very strongly from a lower base. Secondly, you have that you were talking about that repositioning now. Wondering what your views are over the next two to three years relative to the industry performance for Vanquis. Maybe we'll start with that. Okay. It is a very different customer profile that we are lending to now. If you go back to last time, significant percentage of the book were what we would call score band 6 and 7. These were cards running at APRs of 59%, 69% APR. The profile of those customers, typically, they come in, they build up balances. Back in those days, a lot of the revenues came in also from a product themselves. That customer base has gone, and we're not lending to them now. The customer base that we are getting in now are a better quality customer, and therefore their impairment is going to, by definition, be lower than perhaps historically was the case. The other important thing is to think about the profile of these customers. I mean, typically, they are. I mean, average is always dangerous to talk about, but they're on sort of a national average salary around GBP 30,000. They are typically employed. They are operating in parts of the economy, which at the moment has got an acute shortage of labor. We've seen that they are also people that certainly in the first six months of this year have been benefiting from the large pay rises that we've been seeing around the market. That is, I think, one of the reasons why we haven't actually seen much stress coming into the cards portfolio. How that will pan out in the future, it is difficult to say. I think they are probably going to, it's very dangerous to make this call, but proportionately do better than the historic customer base who would have been more at risk, particularly because they're more, by definition, more highly geared, particularly, if one starts to see some areas of the economy experiencing stagnation, and then of course, with stagnation, unemployment. At the moment we're seeing obviously absolutely zero sign of that. As we've said several times during this presentation, you know, were that economic scenario to manifest itself, we are extremely well provided and extremely capital strong. Welcome. Secondly, could you outline what your RAM target is? You mentioned risk-adjusted returns a couple times during the presentation. Again, going forward the next two, three years, what the RAM target is given the repositioning. Which target, Justin? The ROE target? No. Sorry, RAM or risk-adjusted margin target. Oh, risk-adjusted margin. Yes. Sorry. Yeah. I think, ultimately, I mean, obviously, it depends on how well the risk performs, but it will certainly be within the range it is currently between 25% and 20% will be where the current product set will take us. Okay, thank you. On costs, some activity there to reduce those. Could you give us some sort of feel as to what the split will look like between fixed and variable, of that variable? How much is advertising and marketing, please? All right. Well, you know, we don't really split that. We don't split the marketing out, and I don't really talk about whether it's fixed or variable. I think what we talk about is that cost-income ratio. But also I think what we're saying is that ultimately, if you get the consensus over the next three years, the three-year consensus is kind of providing for the kind of cost profile that we are looking to deliver, Justin, in total. Also, just to go with bank models generally, the costs are generally not that variable, you find. Yeah. You know, they are structural. That's why I think the investment requirement is. I mean, when anyone talks about cost reductions in banking, if they're not investing in something that's gonna drive that cost reduction, you know, I would generally not believe it. You generally do need to structurally change something to get the cost reduction, which is what we're doing. In our case, that goes hand in hand with the change in customer cohort, which requires a very different service to our previous cohort. Understood. Thank you. Just, sorry, very quickly, Neeraj, on this is unusual for me. M&A, what markets and products should we be thinking of? Is it outside of credit cards and Moneybarn or the- Well, I think. The scale to that. It's very difficult in these sort of situations to be precise, but I think about it. You know, PFG is a consumer finance business at the moment. A lot of its customers actually are probably SME, small SMEs. So they might have a different product requirement. And they may have a different capital weighting if you do things differently. Equally, one's always got to be mindful about how new technology is coming into the space. You know, I mentioned in my speech that clearly I mean, I've been very vociferous about some of the concerns about buy now pay later market. If it's proper channels to customers is something that we'd be open-minded about. To an earlier question which you might have missed. When you get dislocations in markets as indeed I think we are going to be seeing, opportunities present themselves that you wouldn't necessarily have thought about. We've got to be open-minded about it. I'm sorry if that sounds a bit nebulous, but it's always wrong, we're too specific on these sort of questions. No, that's helpful. Thanks very much. That's helpful. Thank you. Sorry, just one thing I would say is the sort of any diversification we would do would stick with the theme of making sure that we are serving either underserved customers or underserved marketplaces. That's our mindset. Okay. Thank you. 'Cause there's no point for us to hunt in markets which are so competitive that the margins get squeezed to nothing. Yeah. Thank you. Anyway. There are no further questions. I'll hand back to your host, Malcolm Le May, to conclude today's conference. Well, look, guys, thank you all very much for joining the call. I know it's been a busy morning for a number of you. We're obviously here happy to take follow-up calls and meetings. I appreciate we're going into what used to be called the holiday season. I hope you all have a nice break over the summer, but we're looking forward to the second half optimistically but cautiously. You know, we have materially repositioned this group now. It's very sad what's happened to the high cost short-term credit market, but that's not part of our canvas anymore. We think that the mid-cost near prime space is very underbanked. It's very large and presents lots of opportunities. We've got, you know, a very strong capital position and a lot of historic capability, which stand us in very good stead for the next few months and beyond. I look forward to speaking to you all again at the next update. Thanks very much for joining.