Right, good morning, ladies and gentlemen. I have to say, morning, mainly gentlemen. Not many women in the audience. Just before Stephen and Bruce make their presentation, just let me make a few points. I think, although it's, in some ways, a chastened year, as Stephen says, it's a year of considerable achievement, with our exiting of the APS, full repayment of all the liquidity support, a resumption of pref dividends, loan-to-deposit ratio at 100%, and the Non-Core business down to GBP 57 billion, which is probably -- puts us in the pack of banks in terms of having assets we don't really want to have. These are all fantastic achievements on restructuring the business. So I think we made excellent progress in all of those areas. And I think that we are now coming to the end of the really material changes that the bank needed to make in the wake of the financial crisis. Our objective, as we've said many times and repeating today, is to get the bank into a shape in terms of safety, soundness, profitability and income stream to enable the government to start to sell its shares in a stable business as soon as possible. And if that can be done in 2014, that would be great progress. It is disappointing that, despite all that progress on the balance sheet, in getting the business right, that we do have this very long list this particular time of, I think, what you would mainly call legacy charges. They're not all legacy charges, but I think it's fair to say they are mainly legacy charges. And whilst I think it would be wrong to say that the conduct risk charges there are all behind us, we hope that 2012 will mark the high watermark of those sorts of events. One final thing, if I may. There have been quite a lot of stuff in the newspapers and other places just recently about some of the changes that we're announcing today in relation to the asset intensity of the investment bank and in relation to Citizens, and some questions about ownership of those decisions. Is it regulatory push? Is it a controlling shareholder? Or is it the company? And I mean, obviously, as a bank in particular, we need to comply with all regulatory requirements, but major decisions in public companies have to sit with the board. That's, apart from anything else, a simple Companies Act legal matter. And I can say that the RBS Board has approved all of the steps we're setting out to today, taking into account the interests of all of our shareholders. There's no other compromise that we are making. So with that, I'll hand over to Stephen.

Thank you, Philip, very much. Thank you very much, everyone, for coming and giving us the time. Normal format: I'll go through highlights of results; some of the, if you like, the strategy behind that; and then leave Bruce most of the time to go through the numbers. As Philip has mentioned, we are extremely conscious that the future for this company will be bright only if the people to whom you speak, i.e., investors, want to own our shares. They will only want to do that if we do a good job overall as a company, and so it's very important to us that the things we do have that end result. But before getting in, if you'd like, to conventional presentation of our financial results and our strategy, I do have this slide. I'm sorry I don't have posters around the room to talk about what we're doing culturally, but you -- we can't escape it. The banking industry, in addition to putting right risk and physical mistakes, also needs to put right cultural things. We do, as much as any other bank, more than many other banks. And from the very beginning in 2009 of the restructuring phase of RBS, we have been really clear: We need to rebuild this company as a really good bank. And that actually starts and finishes with serving customers well. That's the lodestar that the best companies in the world consistently reach. We need to consistently reach that, and along with that, to make sure that we're doing it in the right way. You can see, these, if you like, as what we call our purpose, vision and values. It's not where we started, it's not exactly where we are today, it's where we need to get. And to use a…

Thank you, Stephen, and good morning, everyone. I'm going to walk you through our financial highlights, challenges and opportunities. So let me start off with our group performance. Over the recovery plan period, to date, we've delivered a meaningful improvement in our operating results. Since 2008, there's been a GBP 12 billion positive swing in group operating profit, with increasing traction in 2012 as our Non-Core losses shrink. The GBP 12 billion swing is driven by a roughly GBP 9 billion decline in Non-Core losses and a GBP 3 billion increase in our Core profits. Looking into the detail of the 2012 group P&L. 2012 revenues were down GBP 1.9 billion or 7% versus prior year, with Core revenues down 4% and Non-Core declining by almost GBP 1 billion. Offsetting this, however, were lower expenses, which were down by GBP 900 million or 6%; claims, which were down by GBP 0.5 billion or 18%, reflecting tighter underwriting standards and better claims management at Direct Line; and impairments, which were down nearly 30% or GBP 2.2 billion as NPL trends moderate. The net result is that operating profit nearly doubled year-over-year to GBP 3.5 billion. The below-the-line items charge, excluding OCA, was GBP 4.1 billion, a decrease of GBP 400 million on the year, while including OCA, the charge was GBP 8.8 billion. At the pretax line, we reported a loss of GBP 5.3 billion largely due to the OCA charge and a goodwill write-down. Our funded balance sheet declined by 11% or over GBP 100 billion to GBP 870 billion. The asset reduction was driven by Non-Core, Markets and the international bank. Core Tier 1 is robust at 10.3%. That's up 60 basis points this year despite the loss and regulatory uplifts of over GBP 40 billion. Tangible book value…

Thank you, Stephen. Thank you, Bruce. I always think, after such a comprehensive presentation, there can't possibly be any questions, but we know you better. There you go, right in front.

Two separate questions, first on dividends. The 10% target for 2014, is that how we should think about dividends? So the question is, if paying a reasonable payout, say 25%, 30%, gets you below 10%, would you do that? Or it's dissolved to about 10%?

I think that it's -- we can't answer the question yet because the -- if you like, the 2 gating -- 3 gating points are, number one, we've got to produce some profits to pay a dividend out of. Number two, the government has got to find a way to remove the dividend blocker. And number three, the regulator has got to improve the dividend stream. So I hope that, during the course of 2014, we can address all 3 items and at least be in a position to articulate a dividend policy. That dividend policy will be to start paying dividends as soon as we can, but there are a number of things that aren't under our control in that process. And so I think to be more precise than that is impossible at the moment.

So just to confirm, that 10% is excluding the FPC review and the DAC?

Our capital targets of greater than 10% are targets regardless of what lies beneath them. The timing of reaching them is obviously a function of thousands of moving parts, and so -- and what the dividend blocker will cost to remove, I don't know. So there's some fuzziness around it, which is why we're saying dividend policy articulation in 2014. If we have a little window to stick something in as a smidgeon towards the end, obviously, we'll do that if we can. But I don't think we can today be that confident to promise that.

And the second question was on margins. I was a bit surprised to see both asset yields and liability costs trending up in Q4 versus Q3 given the trends that we've seen in the market. I was just wondering how we think about margins from your -- I mean, particularly around mortgage rates. I mean, do your fixed mortgages are around 3% at the moment, even lower from some banks, whereas SVRs are at 4%. I mean, how do we think about that situation? Is there a chance that SVRs come down on the back of that, or we see asset yields coming down on the back of that?

Again, we're calling for broadly stable interest projection next year -- or through this year, I should say. Asset yields, I think, have been reasonably stable. What we're trying to work on is lowering our cost of non-interest-bearing liabilities. That will partly offset continued erosion in the current account hedges. And so I think the dynamic to that, as the year goes by, could be net positive. So the NIM could expand as the year goes by fairly slightly. And I -- what I pointed out is the wildcard is, how much loan growth do we get? Obviously, loans have a better yield than cash that link up on the balance sheet. So we'll have to see how that plays out.

So bottom line, asset yields should be stable, is what you expect?

I think so, yes.

Did you want to add something on dividends, Bruce, or...

No, I think Stephen [Indiscernible].

Do you want to just pass the microphone? Raul Sinha - JP Morgan Chase & Co, Research Division: It's Raul Sinha from JPMorgan. If I can have 2 questions, please. Firstly, Bruce, could you talk about your cost plan? You already exceeded your GBP 2.5 billion cost reduction target by GBP 1.1 billion. Where do you think you could top-out at over the next 2 years in terms of an overall cost number? That would be really helpful. And then secondly, on the Markets' GBP 30 billion incremental reduction that you've guided today, which part of the Markets business is this coming from? And is this coming out of your working capital within the Markets business? Or is this the fixed capital that supports the Markets operations? So we can get some idea about how much impact there would be to the revenue and the cost line.

Okay, again, just the first one was what? Raul Sinha - JP Morgan Chase & Co, Research Division: The first one was on the cost, the GBP 3.6 billion cost savings.

Yes. The costs are going to be affected by a number of things. So again, Direct Line Group will be sold off and deconsolidated. The branch business will ultimately be sold off and deconsolidated. So again, the group continues to shrink both at a top line and then those cost impacts. On the underlying cost basis, we will be taking more cost out of Markets as we work towards that GBP 80 billion plan. We don't have all the details of that, but that's -- your figure, you're taking RWAs down another GBP 25 billion, that's going to have a revenue impact. To get to an ROE that works, you have to take costs down a fairly meaningful amount, so that's part of the challenge that we have to work through. Around the rest of the group, we've been very disciplined on costs, but I do think there's more to squeeze. I mean, in this environment, we have to really be ambitious and keep working on that. So I've said I'm giving myself a little wiggle room, we're going to work through those things and put a number out there at the half year. But again, I'm not satisfied at GBP 3.6 billion. I think we can keep pushing that number higher. Raul Sinha - JP Morgan Chase & Co, Research Division: The second one was on Markets RWA. Is that a particular part of the Markets business? Or is that across the base [ph]?

Again, that's -- I think we have a broad view as to -- that that's a reasonable number where we've maintained our position in our key franchises. But then the details about the best way to do that: are there any product line exits? Are there any geography exits? Obviously, those would have a related impact on our International Banking business and have to be considered carefully together. We've got Peter and Samir and John Owen, a bunch of folks really working hard on this. And again, we'll be having discussions on that with the board probably around the March-April time frame and be able to put all the details of that forth at the half year results.

I think -- look, as I said, I think we have to be honest. This is a business we're putting a lot of pressure on. I think it's true of other businesses like it in the market. And there must be some risk to our returns through this process. I think, when you look at it at a shareholder aspect, even if the returns show some slippage, i.e. we're unable to cut costs as fast as revenues, I think it's possible to make a shareholder case for this based on some of the parts and multipliers and the quality of earnings. And so that's our underpin. But I do think we have some risk in this process. We'll execute it as well as we can. All I can say is I think the business has done a really terrific job in the last 4 years of going through dramatic change and producing profits all the way along for us.

Yes. And in particular, the numbers that we showed today for them, to have a 10% ROE in a period where they've already taken a good whack at RWAs and dropped a whole bunch of people and narrowed the product focus, to still be competitive and show thick results that are in line with peers for the year is quite a testimony to the management team. Raul Sinha - JP Morgan Chase & Co, Research Division: And do you reinvest the capital back into Retail & Commercial?

No. It's reinvested in a higher Basel Core Tier 1 ratio. I wish it were invested in something profitable.

Why don't we just pass it straight behind?

It's Tom Rayner from Exane BNP Paribas. Maybe just sticking on that last point. I mean, Stephen, I don't want to give the wrong impression with this question because I think the restructuring that you guys have done has been pretty amazing in some ways, but if the FPC really needs more contingent capital, surely, raising that rather than agreeing to IPO a U.S. business would make more sense. And on the Markets, I mean, it wasn't that long ago we all sat through that presentation, and I thought it was a very credible sort of presentation of what the optimal size of that business would be and taking all of the revenue and capital into account, and yet we're now talking about another 20% or 30% downsizing. And I guess my question is, if you're a potential institutional shareholder, how can you be sure that the decisions are being made for sort of economic rather than political reasons?

Tom, we tried to -- both the Chairman and I tried to address that upfront. And of course, all companies are subject to a series of pressures and not just ordinary shareholder pressures. We're subject to some particular pressures. We have to have an accommodation with regulators, all banks do. And they're more muscular today than they have been in the past. And the Chancellor, himself a majority shareholder, has described how he is being muscular in the majority shareholder's wishes and you can't run a company ignoring your majority shareholder, that would be stupid. What we believe we are doing, have done and can do, we believe, is steer a sensible path through the needs of our customers, which come first, the other stakeholders we have, and have a company that can be appealing to all shareholders at the end of it. All companies have to pick a path through these things. We have more boulders on that path than many, but we think that we are picking a sensible path through it. And so I think that's the best answer that we can give to you. And, Philip, I don't know if you...

Well, I -- we'd rather be where we're going than where we are. We think it's a better place to be. Again, just pass it to the side, Tom.

It's Michael Helsby from Merrill Lynch. I'd just like to follow up on that just to make a few things clear, if we can. Clearly, the FPC highlighted the 3 things that you put up on your slide, and you mentioned that the Citizens IPO, the reduction in risk-weighted assets, was certainly steered by some of the comments that they've made. Should we read it as being contingent, i.e. to give them more confidence about your capital path and your capital plan? Or should we read it as, the comments that they've made, there's a deficit, i.e. your capital ratios are overstated? Because I think that's what people are really worried about.

No, I understand, it's a -- the first and most important thing is, we can't speak for the FSA and we can't speak for the -- and they can't speak for the FPC. And the FPC will meet in March, and no one can know what they will or won't say about the industry. I don't think they are able to say things about individual banks. And so every bank will have been in close discussion with the FSA, and no banks will know what the FPC will or won't conclude. At no stage have the FSA given us a specific target, i.e. the FSA did not say, "Here is a capital gap. Please fill it." And indeed, the FSA has been just as interested in the risks in our balance sheet, how they're provided. Bruce has indicated, increasing RWA intensity that we've been doing, some extra sort of follow-on the scale and provisioning and so on. So a lot of the dialogue has been to get people comfortable with how our RWAs are reported, how we're provisioning for loans, how we're provisioning for conduct cases, in addition to the naked ratios and the fallback positions regarding this. So we were never given a target. I have no idea, if we give them the target, whether this exceeds the target or it doesn't exceed the target. That hasn't been the nature of the process, but it has been a very thorough process. We think the regulator believes we've engaged constructively and appropriately, but the regulator themselves are not the FPC, and obviously that's still a hurdle for everyone yet to come.

Okay. And I just have a separate question on loan growth, actually, just...

Just on that point. I do think -- we should say it, we did say it, but I think we believe our capital position is more than adequate for the business that we're running. And we believe in our forward projections that we can continue to delever and we can deliver very strong capital ratios, so even without those extra 2 actions on Markets and Citizens. But in the end, we've chosen to take these additional actions.

Okay. And then just finally, you mentioned, I think, 3% loan growth at a group level, that's what you're penciling in. Could you give us a little...

That's x the runoff books, so that would not be including Non-Core or the U.K. commercial, real estate rundown.

Could you give us a little bit more color in terms of where you're seeing that and maybe a bit of color in terms of how you're seeing the trends that's at the real grassroots level? I know the Bank of England credit survey suggested that corporate credit demand felt like it was picking up. So just talk a little bit about what you're seeing.

I'll start, and you finish. So just broadly, a couple of pockets where we expect probably the most loan growth, the mortgage area and U.K. Retail feels like we'll have a good year in terms of growth there. Also in the U.S., in the corporate and commercial space, we've had good loan growth last year, and we think that should continue even though competition has increased around from other banks, but we still think we'll see some growth there. You might want to talk about U.K. Corporate, Stephen?

Yes. Just a small thing on mortgages. I think our first quarter will be soft because one of the things we did in December was take most of our mortgage advisors off the road for retraining pursuant to the new sort of FSA standards. And so I suspect we'll have a soft first quarter, but hopefully a decent and positive year as a whole. On U.K. business loan growth, I mean, I guess the thing to look at, frankly, is GDP. For the averages, if GDP isn't growing, then people don't want to take on more debt. Some companies do and some don't. So last year, we lent something like GBP 60 billion to U.K. businesses, and a similar amount paid us back. So our net lending was pretty close to 0, x the runoff in real estate books that has been talked about. At the moment, Q1, the pattern is the same. If economic strength and confidence grows, then first of all, companies need to see their order books grow. When they see the order books grow, they think, "Okay, let's have a new machine tool or some more inventory," or whatever. And so there's never been an economic cycle where our lending growth did not lag economic recovery and business recovery. And that's the indicators I would look at, if I were you.

Let's broaden our horizons over here. And yes?

It's Cormac Leech from Liberum Capital. Quite interested in your liquidity portfolio, GBP 147 billion at the end of the year, unchanged from the third quarter and that's despite a lot of noise in Basel and, I think, Bank of England and so on, about banks potentially holding too much liquidity. So frankly, I was a bit surprised you didn't run it down a bit. Is that pressure from debt investors? Or what's going on there?

Okay, I've referred to that a bit. So as we delever, we keep getting more cash in the door, the logical thing we'd like to do is put it out the door in more loans, and there's not a lot of loan demand. So then we have to say, "Well, gee, the right side of the balance sheet is stable and the left side of the balance sheet is coming down. What do we drive off in terms of the right side of the balance sheet as that cash comes in the door?" What we have done is driven down short-term wholesale funding. So it started at GBP 300 billion, it's down to GBP 42 billion. Probably, half of that is a rolldown of term debt that's now under a year maturity and there's really not much you can do with that. And then there's other amounts of short-term wholesale funding which are tied to business strategies which make sense. So we're getting down to the nub of short-term wholesale funding. There's probably a bit more we can do. Then you say, okay, we could -- then we have to look at long-term debt in the first quarter. We did, so far this year in January, a small LME, which we retired about GBP 2 billion of long-term debt. The problem is, we're a victim of our own success: As our spreads have come in, the prices on that debt have moved well above par. So if we buy in debt at 120, say, of par, we have a day 1 loss. We make the interest back to over a period of time. As we're trying to manage the capital position, there's a certain appetite that you have for taking day 1 losses that pay back hopefully within the year, which is why we started this one early in January. But again, we don't have an unlimited ability to go out and retire term debt. So then the only other thing to look at is in deposits, and so in some cases, there's deposits that are not a stable, low-cost franchise deposits, they're kind of hot money-type deposits. You try to drive those off next. We were also captive to hitting our loan-to-deposit ratio targets so we didn't want to go too fast and too abruptly on that score either. So those are the tensions and things that we have to balance as the year goes by. We're going to get cash continuing to come in. Non-Core's deleveraging further, Markets is going to shrink further. And then what do we do with the money? We have to go to those buckets, and those buckets are starting to get tougher.

Yes, that's very helpful. In terms of the long-term shape of the business 2 or 3 years out when you get above your 10% Basel III equity Tier 1, so debt investors have nothing to question on the capital side and therefore presumably relax on the liquidity side, what do you see as kind of the normalized run rate, say, percentage of short-term wholesale funding? You're currently at 3.5x versus your own target of 1.5x.

Yes, I think we can bring it down in a maybe 120 to 130, if -- once loan demand picks up and that short-term wholesale funding to maybe be 40 or something like that so you could run it at 3x and still hit all of your other metrics, I mean, it's a crude formula, but we have other metrics that the I -- that the FSA has a series of 3-month metric, 2-week outflow metric, GAP2 metric. But I think you could certainly -- if you got that number down another GBP 30 billion, you'd still be able to comply with those metrics.

Maybe just a final follow-up. I mean, from the outside in, it's quite difficult to understand what the delta on your PBT might be if you did that, right? So simplistically, say it's currently earning, I don't know, a yield of maybe 50 basis points, and you put that money to work in low-LTV mortgages, presumably you can get 2%, 2.5%. So what might the delta be...

Delta might be 2%, I guess, roughly. I would say take 2% of that.

But obviously, it would use more capital because liquidity does -- is low risk-weighted assets. And if you stick it in loans it's higher, so it's not -- that's not a straight ROE add-up.

Still an awful lot of hands going up. Right in -- just moving to the side again.

Peter Toeman from HSBC. And the Citizens IPO, you described as a source of contingent capital. You then referred to the CoCo from HM Treasury, which of course is a source of contingent capital. That might be terminated in 2014, so should we regard those 2 transactions as canceling each other out, or...

No, I think the HSBC [indiscernible] capital is essentially worthless given its trigger point and its maturity. So that's just -- that's not any part of this. The Citizens, as I said, there were 2 reasons for Citizens. Part of it was FPC-type discussions, and part of it is what we think is right for the business and for shareholders in terms of showcasing value in terms of giving liquidity to the asset, and in terms of allowing the asset, if you like, deeper footprint in the United States market. So we see trying to kill more than one bird with the same stone.

It's worthless, worthless to us. [indiscernible] it's expensive.

So you won't have to replace that in any way? Or your thinking is that the FPC won't require you to replace that contingent, that GBP 8 billion of contingent capital?

I don't -- there hasn't been a focus on the government contingent capital because everyone knows it runs out in '14. And I don't think anyone believes either we have a need or the government has an inclination to extend capital support for RBS. So that has not been a feature of any of the discussions. The FPC, I do think, has some keenness on contingent capital, and that's why Bruce said we remain open on the subject of contingent capital in a sort of conventional sense, in a CoCo sense. And we have to see how that develops and we certainly remain open to that issue. And so I think that's a sort of separate issue. Maybe I used slightly the wrong phrase for Citizens as to how to think about it, but I was just trying to describe it to you.

But the LT2 issuance that I referenced is GBP 4 billion of maturities and we want to build up the buffer a little bit, so we probably have to issue GBP 5 billion, say, over the next 3 years. That's the underlying host instrument. And then the question is, would you put a CoCo feature on that, or not? It depends on market conditions and the price, et cetera, and kind of what kind of pressure you're getting from regulators, et cetera. But those are things for us to consider.

Why don't you move along, Peter?

It's Rohith Chandra-Rajan, Barclays. If I could follow up, actually, just on Citizens. So Core Citizens made a 9% ROE this year. Just wondering where you think that can go to in the current rate environment. Provisions look actually maybe a little bit on the low side versus normalized at the moment. So just wondering what you can do in terms of continued business, changing the business mix or cost efficiency?

Yes, I mean, the -- if you look at the trajectory over the last 4 years, we've come from a loss all the way up to, I guess it was 4%, 6%, 9 -- 7%, 9%. It's going to get harder from here. A lot of that move was, as you're right to point out, on falling cost of credit. So provisioning has been favorable there. And at this point, we might be able to sustain that level through this year but it might actually move up a little bit because, as a percentage of loans and advances, I think it's down about 20 bps which is quite low on a through-the-cycle basis. We are certainly working through organic plans to improve pre-provision profit. One of the things has been to shift the business mix away from just more of a kind of mortgage bank and a -- or the big home equity portfolio to build out the commercial operation. We've seen 21% loan growth over the last 3 years on the corporate side. And so that portfolio, we used to have maybe 1/3 of the assets in corporate space, and that's up to almost 1/2 at this point. And so we think that's going to help. And then we can do more cross-selling of various products and services into those corporate customers. We also are looking to have better profiles of our retail customers and get a bigger share of wallet. So there's things on the revenue side as well as, again, on the expense side. People look at the efficiency ratio at Citizens, and they say it's high. But is it a revenue problem or a cost problem? It's probably more of a revenue problem, I would say, because if you look at the expense base as a percentage of assets or other measures, it looks actually below the median. But having said that, we still will look for opportunities to take more out of expenses. So I think a long-winded way of saying there's some improvement that we can do but it's going to get harder from here because we won't get any more boost from credit. We have to get it on the pre-provision profit line. So can we push 9% up to 10%? Can then we push 10% to 11%? Instead of coming in chunks of 200 basis points, I think it's going to be smaller augments from here.

I think, along with that, from an IPO standpoint, the passage of time not only will help us probably, as Bruce says now, inch out the profit. Clearly, once the U.S. economy starts growing better, there'll be those kind of gains. We're not relying on those, but those will come at one point or another. But also, the efficiency of the rest of what's happening in Citizens we can improve so then the remaining bits of Non-Core within Citizens over the next 2 years can be largely eliminated. We then have some capital management or capital structure issues to work through with the regulator that will allow more of the core ROE to come to the bottom line. And I think, when you put all of that together, you should have a company that will be competitive with some of the other regional banks in terms of where it could trade, whether those trading multiples expand still further will be -- from where they are today, will be, I think, more of a function of the external environment, as we said.

Yes. I mean, the last point I should mention, Stephen jogged my memory though: They've also had a relatively asset-sensitive position on the balance sheet. So higher rates also, when that comes, will be a little turbocharge and boost to the ROE.

Okay, that's great. On -- just on the other area of restructuring. The GBP 80 billion, so the GBP 100-odd billion to GBP 80 billion RWAs in the Markets business, what additional reduction in third-party assets does that relate to?

I would guess it's 25 to 35 maybe, something like that.

But let's be clear. The reduction is actually more than you've just stated because, in the middle, we'll have CRD IV. And so we're having to go from CRD III, GBP 100-something billion, to a CRD IV, GBP 80 billion. So this, as I say, this is not earth-shaking for the company as a whole because Markets is now just 20% of the total, but it's an important and challenging job of work for our Markets business.

Which sort of links to my final, very short question. So thanks very much for the additional Basel III disclosures. Really helpful. Just wondering if you could split it -- the deductions in the RWAs between Core and Non-Core.

I'm sorry, the deductions?

So the additional Basel III disclosure, if you're able to split the impacts on both deductions and RWAs between Core and Non-Core.

I don't have that on the top of my head. You can come back to Richard later in the day.

If you sling it straight behind, that would be great.

It's Manus Costello from Autonomous. I also wanted to follow up on that interesting and useful Basel III slide. Because I just wanted a clarification for how you calculated your 7.7% because if I read the impressively dense footnotes on that slide, it looks to me like you've taken the current capital position, but the RWAs, you've given us a post-management action and assuming that all models are approved. So my question would be, what would the 7.7% be if you didn't have those, what would your old RWA number be? Because most of your peers tend to give it on a spot basis rather than upfront here, or the benefits that you're going to get.

No, I don't think that's right. I mean, we looked very carefully at how other people are presenting their numbers, and I think we're doing that on a consistent basis. We have in the models that we assume will be approved upon implementation. I mean, we're way down the track on those things. We were preparing those models for approval, actually, at December 31 of '13, were CRD IV to come into place on January 1 of this year. And so it's just really going through the final stages of having full model approval on those.

But then, no, so in terms of the management actions that you assume, you don't assume the Markets -- the additional Markets reduction that you've announced today, but do you assume the Markets reductions that you announced in January last year?

In getting to the 9% and getting to the 10%, those actions, that's how we're getting there. So not -- it's not in the 7.7%, but in going to 9%, we certainly have further Non-Core deleveraging. We have -- the Markets' shrink of the first program that we announced last January is in those numbers.

I think the kind of management actions that are in are not shrinkage of business, it's adjusting the books for the new calculation of CRD IV. So certain things are managed in one way and will have to be managed in another way, so there are important management actions without which there are unintended consequences. But then on top of that are what I'll call real shrink actions which, as Bruce said, is -- are in the forecast for the increasing capital ratio.

We probably should be moving into the final furlong-ish, so to -- if you bring it -- bring the mic forward just a little bit.

It's Mike Trippitt of Numis Securities. Two questions, just following up on your capital planning, particularly looking forward at the Citizens sort of partial IPO. I just wonder what your thoughts are on the risk of stranded capital in the U.S., particularly when you -- with the Tarullo proposals on creating a intermediate holding company structure. Do you think that there is a risk that you end up with a sort of regulatory turf war between the PRA or whatever they're going to be called now and the U.S. regulators?

There's -- yes, there's a risk. We've got stranded capital there today. And part of the 2-year timetable is to allow us to negotiate an accommodation with the Federal Reserve to make it a sensible capitalization strategy. I think that actually having a quoted stock there will make the U.S. regulators more comfortable because they will perceive it as a second source of capital in emergency, i.e. the public markets rather than just having a foreign parent to call upon. So I hope that we will find that the regulators see it as a positive development in our capital discussions in the same way that, in the fourth quarter of last year, we did the first, since the crisis, Tier 2 issuance out of Citizens in order to -- not because we needed it, but to demonstrate to the U.S. regulators that Citizens has sources of capital which in turn should allow us to have a more sensible. So these are things, you're right, that have to be worked through for us and a lot of banks, but that that's -- we're thinking that it's work-throughable.

On the Tarullo proposal for the holding companies. Obviously, that's in a comment period. The comment period has been extended another month until the end of April. I think, on a relative basis, we're in reasonable position there having Citizens today. And if you combine what we do in the U.S. with Citizens, we're in a reasonable position. I think one of the broader things that the U.S. has to grapple with is, are they going to apply bank standards to broker-dealers? So today, for example, the U.S. -- the foreign broker-dealer is doing business in the U.S. When you do a leverage calculation, they're able to back out the amount of reverse repo they have invested in treasuries from the leverage calculation, it's a very safe asset. The current proposal that Tarullo put out doesn't do that, which would cause potentially a shrinkage of balance sheets for the foreign broker-dealers, which has a second-order consequence of hurting liquidity in the government market. And the last time I checked, the U.S. is still going to borrow a lot of money for a long time, and that's not a good thing. So those are the kind of comments that are going to go back in to say, "Be careful of unintended consequences." If you do things like this, you may just find people shrink and pack up and not provide as much liquidity to that marketplace. I think the other thing is really on the liquidity test for the banks. So that would -- that's why you need a deposit base if they are very strict on the liquidity side. And I think you may see some weakening on the liquidity side, otherwise you might see people like Deutsche Bank and Barclays have to go out and by a thrift just to meet the liquidity standards, right? So I think there's still a lot to play out on that, but I do think there is the potential for some issues to arise, but again having Citizens, we're in reasonably good shape on a relative basis.

Just a quick second question. I just want to clarify the comment about the government finding -- addressing the dividend block. Do you mean the terms of the DAC? Is that what...

Yes. That's what I call the dividend block, otherwise nicely called the Dividend Access Share.

Yes, sure. But isn't that immovable? I mean isn't it in -- you've either got -- either the share's got to trade at a certain level, or you've got to buy back [indiscernible]?

Or we have to reach an accommodation or they have to reach an accommodation with us. We have to reach it with them and the EU has to agree it, which was the working assumption it's some sort of buyback.

Yes. There's a potential to pay them some money to eliminate the DAS and have the B shares convert back into A shares, and then we get back to a nice, clean capital structure. So I think that day is coming down the road when it's closer to when it looks like we can put a dividend in place. And I think there is much an interested party in that because it'll be -- it will reflect positively on share price, which they have a lot of stock to sell. So again that will be an interesting negotiation.

And the payment will reflect the fact that these Bs have been available -- have been part of your capital structure. Is that how -- kind of how it works?

There isn't a formula, so it will be by negotiation.

Yes.

One of the laws of results presentations is, as time passes, the importance of the questions has to increase. So who's going to go next?

No pressure, then. Yes, just 2 questions, and not -- or to ask the umpteenth question on capital and risk-weighted assets. The -- Sandy Chen from Cenkos Securities. The -- looking at the risk-weighted asset movement from 2012, there were about GBP 37 billion of market movements. I assume that, that was spreads coming back in and bringing down the level of RWAs. And then GBP 44 billion of model-related uplift in terms of RWAs and another forecast, GBP 10 billion to GBP 12 billion under fully loaded Basel III. So a long-winded way of saying that, how do you get from the 7.7% of fully loaded Basel III Core Tier 1 end of 2012 to, say, an expected 9% Core Tier 1 given your...

Sure. It's across a number of dimensions. Clearly, the gross RWA number is going to come down as Non-Core shrinks and Markets shrinks, so there's an element of that. I think, as we work off legacy credit assets, the gap between our EL and our provision, that number will come down as well. There are some other things -- and counterparty credit other things that we'll be mitigating over the course of the year that also will contribute. So it's really across the balance sheet. We're not projecting to make a huge amount of profit next year, so we really have to work the balance sheet to go from the 7.7% up to the 9%. Once we get to 2014, we'd expect to start making money again. A lot of that ride from 9% to 10% would come on the back of profit and then using up DTAs. So one of the things people look at the 7.7% and say, "Oh, that's a little light," but you have to recognize, we think there's 2 important elements of that. We are in a work in process, so we are running down Non-Core and we're not done. So that, note that, a. And then, b, some of the deductions, the EL, we think we're on a conservative footing. Maybe we can take less conservatism down the road, we'll have to see. But we certainly have a shrinking portfolio of legacy assets that should help that number in an absolute sense. And other thing is DTAs. So DTAs are deducted, but they're actually a store value. I mean, we won't be paying those cash taxes down the road, and so something that deducts from that ratio actually helps us in 2 ways. It will eliminate, and therefore the ratio will go up naturally, but then we'll also have better after-tax cash flow because we won't be paying taxes.

Okay. And then the follow-up question, I mean, related to pulling the Citizens ripcord at some point, if necessary. To be I guess, cheeky, and not to -- well, I mean, Cenkos is far too small to be pitching for the business, but has a share demerger of U.K. Retail & Commercial banking been considered?

Well, I tell you what. When you see a good market, you'll probably be able to see us sell our branch business, you'll be able to see Lloyds sell their branch business, you'll be able to see Santander do a floatation, then you'll know there's a great market for these things. Right now, I haven't seen that great market. But what we are doing, first and foremost, is not financial engineering, it's trying to build a really good business. I hope we'll be alive to financial engineering whenever that adds value. But in my experience, most of the time, what adds value is just making a business better.

Yes. Let's come over here.

It's Andrew Coombs from Citigroup. I have 2 questions, please. Just firstly, I wanted to return to the Markets business and, in particular, Greenwich Capital. It's clearly a high-return business, it's still almost $180 billion of assets, nearly $70 billion of RWAs and seemingly has less interconnectivity with the rest of your group compared to, perhaps, the rest of the Markets business. So I guess my question is, has Greenwich Capital come up in discussion with the FPC or with your largest shareholder? And what do you see as the future for that business?

I think this is the wrong -- there is no investment banking business that I know of that doesn't technically have a broker-dealer in the U.S. because you have to, for U.S. regulation. But that doesn't mean -- we also have broker-dealers in Hong Kong and we are doing -- and Japan. We have -- there are all sorts of different regulatory legal structures. The businesses run blind to those. We don't have a business called Greenwich Capital. We have a legal entity that's a broker-dealer and we also have -- operate out of the branch in the United States. So I think it's wrong to think of these things as separate chunks. And once upon a time, there was. There isn't today. But we are, of course, alive to all the dimensions of our business. I don't really think of it in legal entity terms. And we think about all of the ways to create value. But what I do know is that, if you want to be in the rates business, to tell your customers, "Oh, we can do your sterling business and we can't do anything in euros and dollars," would be a pretty short conversation and our corporate business would end up looking like Lloyds and Santander, not like the one that we have today. And so these are interrelated, although we have to balance the issues and release capital in the way we talked about.

Just a second question. I wanted to address the number of media reports lately discussing potential resurrection of the government policy to offer a share handout to the general public. I'm just wondering what you think is the likely reality of that emerging and any logistical obstacles to that.

I think the logistical obstacles are colossal, clearly. I think some wag wrote an article about the AGM being held in The 02 or Wembley Stadium or something and transmitted to all the other football stadiums all over the country. If the government were to decide on this plan, we would have to probably fall into line and help them to deliver it. But I suspect they won't, it's my guess. Stephen, I don't know if you've got anything?

I mean, I don't have a view. The sooner we're privatized, the better for the tax payer and the better for us. So the method is less important than the goal, I think.

It's Jason Napier from Deutsche. Just 2, please, if I might. This week, one of your U.S. competitors put a number to the impact of regulatory change on Markets' revenues and it works out at 10%, 11% of FIC, and rates is the most affected business, losing about 1/5 of the sort of top line. I appreciate you're not ready to share the detail on the risk-weighted asset reduction and the new plan for Markets. But I just wonder, on a business-as-was basis, whether you had a sense as to what proportion of the top line end markets was at risk from post-rate clearing and transparency of that sort of nature.

No, we don't have a number. But you're absolutely right, the investment banking business, the trading business, not ours, but as an industry, is under ROE pressure. And that pressure has got some years left to unfold and everyone is trying to figure out how to deal with it.

If you look at it another way, you're taking more than 20% of RWAs out of the business. They're saying 10% of top line goes away. You clearly don't want people thinking this is an additives story, so at least part of what you're doing is in reaction to regulatory change. That's a reasonable…

Yes, I mean, it's very clear, we strategically felt that our company would be more valuable if it had a different business balance. And that was a top-down view, but it was also a bottom-up view. And the investment banking business everywhere has been hit by regulatory change and by market trends. No one's paying commissions or anything like that in them. In the U.K., there is special pressure coming up around ring-fencing, and so that's why it is both something that our majority shareholder wanted but it is something that, in all shareholders' interest, we think, was right to reshape the company from a shareholder value standpoint because, in a ring-fence world, the scale of investment bank that we had before would not be viable, in my opinion. And if it was viable, it wouldn't be the best shareholder outcome. Now obviously, every different bank has got to deal with their own situations, but we are hopeful that we can have an investment bank that is strong, vibrant, serves our customers well but within the context of the group that we have a group that has the best shareholder value balance and coherent to its type and geography of business, and that's what we're aiming at. Of course, the regulatory sands shift and the market sands shift and so that's why the precision of landing point, I've said for some years now, is not yet visible. But when Markets activities were 60% of the capital employed of this company, it would be a drama what the result of those uncertainties was. When you're talking about 20% of the capital of the company, then you could afford to have some -- if you like, some uncertainties without it being ruinous from a shareholder value. And that's why I think that, at the moment, there's all sorts of noise of restructuring and so on around us and everyone else. But when people concentrate on business mixes and business models in calmer, different times, that we will find that our change in business mix is something that allows the sum to be worth something that's attractive to shareholders.

And the other point I would add is we need to achieve stability. We've had an awful lot of change in our business, dramatic change. We don't want to come back to you in a year or 2 years' time and say it's going to be different again. So this should be it. Okay, well, one more question...

Can I just follow up with one more? And I'm sorry, if this -- if I'm being unusually dense here, but in -- I appreciate that we don't know what the FPC will say until they've met and decided what to say. But in your prepared comments where you said that RBS had reached an accommodation with authorities, and there are steps that are coming out of that, that look like Citizens and Markets and so on. Does -- is that to imply that -- having been through the process of looking at the 3 issues, that the IPO and the Markets reduction has effectively the blessing of the FSA this month or the FPC -- to the FPC, once it becomes the PRA. Well, when you say, "you're reaching accommodation," what does that actually mean? In practice.

Well, I -- it really is not my place to speak for the FSA and I think -- I don't want to get into hot water for doing so. As I said, I don't think anyone can speak for the FPC. We have worked very closely with the regulator on the regulator's concerns. We believe that we -- our plans address the regulator's concerns, we believe we're not being irresponsible in saying that, but do we have a certificate of evidence? No.

Good. Okay, one more question. Why don't we go over there?

I'll be quick. Is that working?

It is working, yes.

Yes, it's Ed Firth from Macquarie. I just want to square your comments with the fact that you say you want to stimulate loan demand, but you expect asset pricing to remain static this year. I mean, surely traditionally, the way to stimulate loan demand is to reduce asset pricing.

Well, here's -- let me explain this to you a little bit because, actually, the Funding for Lending Scheme, which is out there and which we're an enthusiastic and a prominent participant, is an experiment. And we'll see how it goes because the Funding for Lending Scheme, in essence, reduces loan pricing. So our loan pricing has come down as a result of that, everyone's has, but the cost of funds came down which is why the margin was overall manageable. Although the Funding for Lending Scheme, I think, is an important tool, so far, our observation is that it has brought forward refinancing, as opposed to strong incremental loan demand. And the simple way of thinking about this is most businesses have internal rate of return hurdles for new capital product -- projects of double digits somewhere, 10%, 15%, 20%. Our average interest rate to small businesses is under 4%, and to business as a whole is a lot lower. So the price elasticity of demand, for business lending anyway, is very low when interest rates are this low. And the much more important factor in demand for lending is confidence and use of the money and confidence that people can pay it back and so on and so forth. There is a bit more price sensitivity in the mortgage market because people think much more in terms of mortgage payments as a percent of take-home pay. Although even there, the FSA requires us in making any mortgage lending to assume interest rates will pop back up to higher levels and so -- in who we can lend to, there are limits to what we can do. But that's why we are a bit more optimistic about mortgage demand than we are about business demand in the immediate term, because there's a bit more price elasticity there. But either way, what we need, if you like, is growth, and that needs competitiveness and so on and so forth. And it is never in economic cycles that loan growth front-runs the recovery of economic confidence and other growth, and you've seen that in the U.S. and other markets.

Okay. Thank you all very much. And Stephen and I will now go back to a day with the media talking about bonuses. Thank you.