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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Thank you for standing by. And welcome to the National Australia Bank 2023 Half Year Results Presentation.
I would now like to hand the conference over to Ms. Sally Mihell, Head of Investor Relations. Please go ahead.
Thank you, operator. Good morning, everyone, and thank you for joining us today for NAB's half year 2023 results. Before we start, I'd like to acknowledge the Traditional Owners of the land I'm calling in from, the Wurundjeri peoples of the Kulin nation. I'd like to pay respect to their Elders past, present and emerging and to the Elders of the traditional lands in which you are also calling in from.
Presenting today will be Ross McEwan, our Group CEO; and Gary Lennon, our Group CFO. We are also joined in the room by members of NAB's executive team. Ross and Gary will provide an overview of our performance this half. Ross will also provide some comments on the outlook and our priorities for the second half. Following the presentation, there will be an opportunity to ask questions. And please note, you'll need to be on the phone line to ask a question.
I'll now hand to Ross.
Thank you, Sally, and welcome to NAB's half year 2023 results announcement. We have delivered a strong financial performance this half with improved contributions across each of our divisions. This performance reflects a consistent focus on the execution of our long-term strategy, together with the benefits of higher interest rates, which have increased from historic lows over the past 12 months.
The impact of higher rates and inflation are expected to increasingly weigh on household budgets and slow the Australian economy, although the pace and timing of the slowdown remains uncertain. We know this is hurting some customers and businesses and our message to them is that we are here to help. Balance sheet strength has been a key pillar of our long-term strategy and this places us in a great position to support customers who need us and to navigate the uncertain environment.
We are making deliberate choices about where we invest. Over the past six months, we have continued to grow our business in private banking franchise and other target segments. As I indicated at our full year 2022 results, we have taken steps to moderate our growth in home lending given the current market dynamics. We remain focused on executing our long-term strategy to deliver sustainable and safe growth for our shareholders. The first half 2023 revenue grew by 11.2% compared with the second half of 2022, benefiting from primarily the higher margins and volume growth, together with improved markets and treasury income. Total costs were up 2.6% over the half.
Our costs have been impacted by the current high inflation environment, but it's important to continue to invest to deliver better outcomes for our customers and colleagues and drive productivity benefits. Underlying earnings increased by 18.4% and cash earnings rose by 12.3% over the half. Compared to the same period last year, cash earnings are up by 17%.The interim dividend of $0.83 is $0.05 increase and represents 64% of cash earnings. This is slightly below the target range for our dividend payout policy, reflecting a prudent approach in the current environment. These results reflect strong contributions by all of our businesses.
In particular, the 14.8% increase in underlying profit from our largest division, Business and Private Banking, represents more than 40% of the total growth in the group's underlying profit this period. Personal Banking and New Zealand Banking have delivered good results this half with both businesses experiencing a challenging environment. Increased revenue in our markets business has been a key driver of the 20% increase in underlying profit for Corporate and Institutional Banking. Gary will spend time shortly discussing the key drivers of the group's financial performance. Our financial performance this half has delivered a strong increase in cash ROE to 13.7%. We are particularly pleased with the long-term trend evident on this chart, reflects our consistent focus on execution over the past 3.5 years.
I've said from day one that a bank must have a strong balance sheet. The recent volatility in global markets again highlights the importance of balance sheet strength as part of a sustainable growth strategy. Our funding and liquidity positions remain strong with more than 80% of the total loans being funded by customer deposits on our balance sheet. Over the last six months, our CET1 ratio increased by 70 basis points to 12.21% and is now well in excess of the range, our target range of 11% to 11.5%. The increase this half includes 33 basis points of organic capital generation. A disciplined approach to risk has been a key strategic focus for this bank over many years.
The collective provision balance as at 31st of March represents 1.42% of credit risk-weighted assets. This includes $1.4 billion of forward-looking provisions added since September 2019.Our housing portfolio has an average dynamic LVR of 43% and only 1.1% of loans in negative equity or 0.7% with no LMI. 95% of our Australian SME book is fully or partially secured, while a slowdown in household spending is more likely to impact businesses reliant on discretionary spend. Sectors, such as tourism, hospitality, entertainment and retail trade represent less than 20% of the total lending in our SME book. We have significantly reduced our exposure to commercial real estate post the global financial crisis.
In recent years, we've maintained this disciplined approach, which has seen a further reduction in CRE lending as a percentage of total GLAs. While our housing and business lending portfolios are in good shape from an overall perspective, there are some high-risk segments, which Gary will walk through in more detail shortly. Three years ago, we announced our refreshed group strategy. This is a long-term strategy that is a core to the actions we take every day across our business as we consistently focus on delivering better outcomes for our customers and our colleagues regardless of the environment. We will do this by being relationship-led and easy to do business with, while adopting a safe and long-term sustainable approach to managing our businesses. Investing in our colleagues continues to be a key to delivering a better customer experience and overall performance. We are embedding consistent leadership tools and disciplines across the organization, which is helping to support strong leadership scores.
Colleague engagement was broadly stable over the year and is just below our target of top quartile. It's pleasing to see that the actions we've taken in recent years to improve decision-making and accountabilities are being recognized in our colleague surveys. We continue to work on our enterprise agreement after receiving more detailed feedback from colleagues. We see an opportunity to have a simpler, modern agreement that rewards our colleagues and supports their well-being. This remains key to our ability to continue to attract and retain talented professionals. Over the past 12 months, we've consistently ranked number one or number two across the consumer and business customer segments.
But we are not where we want to be yet, and there is more to do to achieve the more positive scores we aspire to. In consumer, our Net Promoter Scores declined this year, but have recently stabilized as we have taken action to address consumer feedback. In business, NAB's score improved by five points over 12 months to plus five, and we continue to be ranked number two overall. We are the market leader for lending to medium businesses and it is pleasing to see we've retained the number one Net Promoter Score in this segment. Our private wealth business is a key differentiator for us and we ranked number one for high net worth customers relative to our major peer banks.
I'll talk more about this business shortly. There's rightly a lot of focus on households and business is feeling the pinch of higher prices for groceries, petrol, insurance and their mortgage. For those who are struggling, we are there to support them. I also want to spend time discussing another area of significant concern for everyone at this bank and our customers, which is the accelerated frauds and scams activity we've seen over the past 12 months. This has been incredibly stressful for the customers impacted and for our colleagues who have had to support them. Defending against this activity is a key priority for us.
These are increasingly sophisticated criminals who will not stop trying to steal from our customers or our bank. We need to make it as difficult as we can for the criminals. Actions we've taken include additional resourcing together with investment and our customer awareness and education, 24/7 account monitoring, security alerts and proactive payment prompts. We're also working with the telecommunication providers to help limit NAB-related spoofing calls and messages. This is an important ongoing area of focus as we work with others across government, corporates and the communities to educate customers and implement tools that we can help keep our customers safe. Our core Business and Private Banking franchise is based on a relationship-led business model, which is increasingly being complemented by digital data and analytics capabilities that are adding greater value. Over 12 months to March 2023, we achieved 10.3% growth in business lending in Business and Private Banking.
While we are the largest lender in the SME business in Australia, we have opportunities to grow. This includes small business lending where we have increased our market share from 15.4% in September 2022 to 17.3% in February '23. Our growth strategy is supported by investment in new products. This includes the NAB Agri Green Loan launched last December to support agricultural businesses to invest in eligible practices, which aim to reduce greenhouse gas emissions. We've also recently launched NAB Flex-Flow loans for merchants to deliver fast unsecured borrowing and payments that flex with customer revenue. Growing our share of transaction banking is also an ongoing focus for our business bankers.
And over the past two years, we've achieved 33% growth in new transaction account openings and around 70% of our lending customers now have active transaction accounts with us. Through the execution of our strategy, we are making choices about where we want to invest and grow. High net worth, unsecured lending and UBank were all identified as growth opportunities as part of our strategic refresh. Our private wealth business looks -- works closely with our business bankers in our Business and Private Banking division to deliver an integrated service model for customers. This is delivering growth through an increase in business referrals across business and private banking, which is driving 3.5x systems growth in deposits and 10% growth in funds under management over the past six months. We've been working hard on the integration of the Citi Consumer Banking, including the development of a new unsecured lending platform. While substantive benefits of the transaction will be achieved once this integration is complete in December 2024, we are already seeing the benefits of the combined capabilities with growth in new accounts across NAB, Citi and white label platforms.
The acquisition of 86 400 in May 2021 was part of a strategy to accelerate the growth of UBank and to deliver a leading digital bank, which would attract and retain customers with a focus on under 35-year-olds. UBank added approximately 95,000 new customers in the first half of this year, which is 66% higher than the previous half. We have now combined the 86,400 new bank businesses under the UBank brand and are well progressed on the migration of UBank customer accounts to the 86 400 platform. We expect this to be completed in the next three months. Last November, I noted that the market dynamics in home lending were changing as volumes slowed, interest rates increased and a substantial volume of fixed rate loans approached their expiry. I also said that we would strike a balance between volume and price, while maintaining risk disciplines and that this would likely result in us growing below system.
Over the past six months, we have seen this dynamic play out with returns on home loans falling below the cost of capital. And while home lending remains a core market for us, in this environment, we will continue to make choices which seek to balance returns and volumes. As higher interest rates flow through to higher home loan repayments, we continue to help customers who may be challenged. We also remain focused on enhancing the customer and broker experience through initiatives such as ongoing rollout of simple home loans, simplified products and improved pricing tools for bankers and brokers. Gary, I will now pass over to you to take us through more detail on the results.
Great. Thank you, Ross. Let's start with our usual high level overview of the financials. This is a strong set of results. Once again, there are no large notable items.
Underlying profit rose 18% versus second half '22 with strong revenue growth outpacing cost growth. This has seen our cost-to-income ratio reduce from 45.5% to 42%. The increase in cash earnings of 12% over the same period is less than underlying profit growth reflecting CICs, which, while remaining at low levels have increased from second half '22. Statutory profit growth of 19% is stronger than cash earnings growth over the period. This mainly reflects the non-repeat of customer-related and payroll remediation included in discontinued operations in the prior period combined with a lower net impact from hedging and fair value volatility. A strong revenue performance has been the key driver of growth in underlying profit this period.
Revenue rose 11% versus second half '22 or 9%, excluding Markets and Treasury income. Volumes contributed $148 million and higher margins, ex Markets and Treasury added $587 million. Fees and commissions increased $52 million, mainly relating to lower customer remediation impacts in second half '22 combined with higher merchant and cards income and an additional two months ownership with Citi. Markets and Treasury income rose $289 million. The key driver was trading income, which benefited from improved market conditions this period after a challenging trading environment in second half '22.Now turning to margins, which have been the most significant revenue driver in the half.
NIM increased 10 basis points over the half. Markets and Treasury was a drag of 3 basis points, primarily related to economically hedged positions offsetting other operating income. Excluding Markets and Treasury, underlying NIM rose 13 basis points. The key driver of this increase has been the rising interest rate environment. Deposits rose 17 basis points, reflecting the benefit of higher interest rates in Australia and offshore, partly offset by a 4 basis point drag from mix impact with faster relative growth in term deposits. The benefit of cash rate increases on the unhedged deposit balance was 12 basis points for Australia and a further 5 basis points for offshore balances, including New Zealand.
As foreshadowed at our full year '22 result, we are seeing less upside from the more recent cash rate increases in Australia compared to those earlier in the tightening cycle, including a noticeable pickup in competition in February in Australian savings accounts. The overall impact across deposits and capital from the higher Australian replicating portfolio returns has been approximately 5 basis points this half, with a further 2 basis points relating to New Zealand replicating portfolios. Offsetting these positive impacts, lending margin is down 7 basis points, again, primarily reflecting competitive pressures in the Australian home lending. In first half '23, the key drivers are step-up in back book repricing. Front book pressures were limited to a fairly small impact by our actions to moderate volume growth. Funding costs have been a drag of 1 basis points in the half, with higher volumes and spreads from term funding, mostly offset by lower short-term funding costs. I know there's a lot of focus on the more recent NIM trends so I've included a chart here showing quarterly outcomes.
This shows that margins peaked in first quarter '23 with a decline of 3 basis points on an ex Markets and Treasury basis in second quarter '23, reflecting my earlier comments about recent competitive trends in deposit pricing, together with elevated levels of back book repricing in our home lending book. Looking forward to second half '23, we expect some further upside from higher interest rates, but mostly from our deposit and capital replicating portfolios. This benefit is estimated approximately 4 basis points for our Australian portfolio in second half '23 based on 31 March swap rates. For our unhedged low-rate deposits, first half '23 looks to have been the peak for NIM benefits from RBA cash rate increases and any impacts in second half '23 are likely to be modest. Against these tailwinds, we see the main headwinds being home lending, deposit and deposit competition and deposit mix. The impact of funding cost is more uncertain and likely to be very dependent on what short-term rates do. Turning now to costs, which rose 2.6% over the half.
This includes $103 million of salary costs, mainly reflecting annual salary increases of 3% to 5% from 1 January. Volume-related costs of $25 million, mostly related to the full period impact of FY '22 hires in Business and Private Bank to support growth, plus some additional staffing in our call centers and NAB Assist. Technology and investment spend increased $92 million and mainly comprises of additional licensing and support costs along with higher cloud and mainframe usage together with technology resilient spend. Investment spend impacting the P&L was broadly stable over the period, while depreciation and amortization charges rose $19 million. Other costs increased $47 million in the period, which is mostly financial crime-related consistent with Ross' earlier comments about increased activity, particularly in relation to frauds and scams. Offsetting these headwinds have been productivity savings of $142 million, including benefits from simplification, process improvements and property savings.
In addition, remediation costs are lower, reflecting the non-repeat of payroll remediation in second half '22 and lower customer-related remediation charges. Consistent with previous guidance, we continue to expect productivity savings of approximately $400 million and the cost-to-income ratio to be lower in FY '23 than FY '22. While our cost base is being impacted by a number of headwinds currently, we expect some of these to ease over the next two to three years. There are encouraging signs of inflation moderating and labor market pressures easing, EU-related cost of $80 million to $120 million per annum are due to end after FY '24, and Citi costs should run rate below $300 million post the expiry of our transitional service arrangements in December 2024. We still see significant opportunities to generate productivity savings over the next three to five years and we'll continue to invest to achieve these while maintaining our disciplined focus on cost. Now, turning to CICs and asset quality. Credit impairment charges for first half '23 of $393 million have increased from second half '22.
This includes underlying charges of $461 million, reflecting the impact of lower house prices, volume growth and a modest increase in specific charges, although they remain at historical low levels. CICs this half also include a net $68 million release from forward-looking provisions. Asset quality improvement seen over the past several halves now appear to be stabilizing as we would expect. We are now seeing signs of stress emerging albeit off a low base. The ratio of 90 days past due and gross impaired assets was flat at 66 basis points, with improvements in Australian mortgage 90 days past due and Australian business lending impaireds offset by the restructure of a number of customers affected by recent severe weather events in New Zealand. This New Zealand situation has impacted the flow of new impaired assets in first half '23, but excluding this, underlying flow has also increased modestly for the first time in several periods.
Watch loans were again lower over the first half '23, driven by continued improvements in the aviation portfolio, which has offset a modest increase across a number of other industries during the period. Turning now to provisioning, which has been maintained at strong levels. Collective provisions stand at $5.1 billion, up $230 million from September. As Ross noted, this includes $1.5 billion of additional forward-looking provisions when compared to September '19 levels. CP coverage to credit risk-weighted assets is also well above pre-COVID levels at 1.42% and higher over the half even after excluding a 7 basis point benefit from the revised capital framework. Provisions for total expected credit losses increased to $20 million from September to $5.6 billion.
This incorporates slightly weaker economic assumptions in our base case. Scenario weightings remain unchanged from September levels. We have released $91 million in target sector FLAs this period, primarily due to some easing in the outlook for energy prices since September. This lessens the pressure facing manufacturing and transport subsectors, which are both heavy energy users. As expected, the Australian home lending environment has become more challenging as households are faced with higher cost of living and higher interest costs. We've provided here some detail on the impact of cash rate increases on average monthly repayments.
These are now becoming more meaningful with some further increases still to flow through to customers over coming months. Fixed rate expiries are also accelerating. Circa $32 billion of fixed rate lending converted to variable rates over the 12 months to March 2023. And pleasingly, early arrears trends for this cohort are consistent with our broader book. A further $31 billion expires in second half '23 and $26 billion in first half '24. The current environment is impacting customers in an uneven way.
There are continued signs of strength across our customer base, including strong growth in offset balances, which are up 37% since March '20, including $2 billion of growth in first half '23. But at the same time, we are seeing signs of repayment stress emerging with a slight deterioration in early-stage mortgage arrears. While we continue to believe that on average, customers should be able to manage their higher repayments, we know some will face difficulties. We see the most at-risk customers are those who borrowed between August '19 and July '22 when interest rates were very low and serviceability was tested at less than 6%.
These borrowers represent $163 billion of lending as at March 2023. We have considered the impact of a 3.85% cash rate on repayments for these customers and narrowed down the at-risk population to those with repayment buffers of less than 12 months. Of these balances between $3.4 billion to $16.7 billion have a dynamic LVR greater than 80% with no LMI or first home buy guarantee -- government guarantee, which gives a view of balances at risk of potential loss should house prices fall a further 20% from March 2023 levels, which already incorporate a 9% reduction from the peak.
The highest risk cohort is around $3.4 billion of balances with less than three months' worth of repayment buffers and a dynamic LVR of greater than 90%. These figures compare with the range we provided at September '22 of $1 billion to $9.7 billion, with the increase to March '23, primarily driven by lower house prices. In the scheme of our total Australian mortgage book of $333 billion, while still large, this represents a manageable exposure and we'll be working hard to ensure that we support these customers who need help. We are also well provided for this risk and have a $1.4 billion of provisions for housing across the group with Australia accounting for the vast majority of this.
Now, turning to our non-retail lending exposures totaling $615 billion. In an environment of rising interest rates, higher inflation and slower discretionary consumer spending, we are likely to see more asset quality challenges for businesses. We expect the sectors most at risk to be retail trade, tourism and hospitality, construction and certain parts of our credit portfolio.
Exposure to these sectors total $84 billion. Recent asset quality trends for these sectors, while mixed are starting to show some signs of stress versus fairly stable trends across the rest of our non-retail book. We have been closely monitoring these exposures for several months -- several periods and have taken a disciplined approach to growth, which has seen their weighting of our total book reduce since March '20 from 16.7% to 13.7%. The bulk of our target sector FLA provisions are also directed at these sectors. In the case of our Australian SME business lending book, we are starting to see asset quality stabilizing when looking at exposures with probability of default greater than 2%. This is not unexpected in the current environment and follows several periods of improvements despite strong volume growth.
We see a higher risk me balances are those being with a probability to fall greater than 2%, which are not fully secured. This amounts to $8.8 billion of balances with potential loss or $1.6 billion if we consider just those which are unsecured. The size of these balances is up only marginally since September 2022. And while large, these accounts are also manageable in the context of our $137 billion SME book or our $615 billion total non-retail book. Pleasingly, most customers enter this more challenging period in a strong position. Business profitability trends remain above average.
Gearing remains low with loan facility utilization rates below pre-COVID levels and business and private deposits are up again in the first half '23 and are 30% higher than September 2020 levels. As Ross mentioned earlier, this book is also highly secured with only 5% of loans unsecured even after applying material discounts to market security valuations.
Now turning to capital, which is a strong result this period. Our group CET1 stands at 12.21% at March, up 70 basis points from September and well above our target range of 11% to 11.5%. Included this period is a 47 basis point benefit from the implementation of the revised capital framework from 1 January. This is in addition to 19 basis points of benefits from NAB's early adoption of APRA's standardized approach for operational risk in first half '22, bringing the total benefits from the revised [framework] to 66 basis points.
Most of the benefit this period relates to our non-retail book, particularly undrawn commitments and credit exposures. The impact on housing has been broadly neutral. Strong organic capital generation this half has added 33 basis points or 26 basis points if we exclude noncredit-related risk-weighted asset movements, driven mainly by IRRBB. Credit risk-weighted asset growth accounted for 9 basis points of capital in the period, excluding the impact of FX and the revised capital framework, reflecting volume growth and a modest deterioration in asset quality off a low base, mainly relating to early-stage mortgage delinquencies. Over the half, we completed our previously announced buyback, buying back $600 million of ordinary shares, equating to 13 basis points of capital. As a result of total buybacks done to date, our ROE is now 75 basis points higher. Liquidity and funding have remained strong.
LCR was largely stable over the period at 130%, while NSFR declined 2% to 117%. Both ratios show large buffers to the 100% minimum requirements, ensuring we are able to navigate any ongoing market volatility. NSFR is expected to normalize to pre-COVID levels over the next 12 to 18 months, largely reflecting the removal of the favorable treatment of the TFF collateral. Excluding benefits associated with TFF, our first half '23 NSFR would have been approximately 113%. Despite some volatility in funding markets in first half '23, we issued $23 billion of term wholesale funding during the period.
Consistent with our practice in FY '22, this funding was well in excess of maturities for the period totaling $12 billion, positioning us well for the TFF maturities ahead. And on that note, Ross, I'll hand back to you.
Thank you, Gary. Against the backdrop of ongoing global uncertainty, the Australian economy looks resilient and there are reasons to be cautiously optimistic. Real GDP growth is forecast to slow but remain positive with around 1% growth expected for each of the next two years. Our most recent quarterly business survey to March indicates that business conditions remain resilient with leading indicators also holding up. However, business confidence has softened and is now below the long-term average. While there is still uncertainty in the outlook, it now seems increasingly likely that Australia will avoid a pronounced economic correction, a low inflationary outcomes, particularly wage growth and global pressures remain key to this outlook.
Our priorities in 2023 are largely unchanged. Supporting our customers and colleagues will continue to be our top priority in 2023. We know this environment would be challenging for some customers and we are ready to help when needed. We have a strong balance sheet and prudent risk settings, which position us well for any future volatility in global financial markets. Although, our cost base is being challenged by short-term headwinds, we continue to obtain a disciplined approach to managing our costs with a focus on productivity. We will get right the work we have agreed with AUSTRAC to keep our bank and customers safe.
And finally, we continue to progress the integration of previous acquisitions, including the Citi Consumer Business and 86 400 to ensure we deliver the benefits of these transactions. In executing our long-term strategy, we will continue to make deliberate choices about where we want to invest, where we want to grow and where we will pull back because the returns are not as attractive. I remain very confident in the outlook for NAB and the Australian economy. We are well placed to navigate the challenges and see opportunities ahead. Thanks again for taking the time today. I'll hand now back to you, Sally for Q&A.
Thank you, Ross. We'll now go to the Q&A. To give others an opportunity, please remember to limit yourselves to no more than two questions. Please go ahead, operator.
[Operator Instructions] Your first question comes from Andrew Lyons with Goldman Sachs.
Gary, just a question on your NIM and focusing in on Slide 20, which highlights that your reported NIM was down 4 bps in the second quarter. However, I just wanted to ask around the ex markets and the way that I read your disclosures, your second quarter NIM ex markets was 1.76%. The full half ex markets NIM was 1.8%, which for me would imply that the first quarter ex markets NIM was 1.84% and therefore, the half -- sorry, the quarter-over-quarter movement was down 8 basis points. Now I've thrown a lot of numbers at you there, but is that the right way to be sort of thinking about how the ex markets NIM has trended over the quarter?
Thanks, Andrew, for your question. Look, it's probably not as smooth as that per se, but certainly the second or the starting point of your question is correct. The right way to look at the Q2 NIM is the ex market. So the real decline in that second quarter was the 3 basis points. And certainly, how we feel about the direction in NIM over the half that it did change substantially in February, March.
And that's when two things really happened in February, March. There was a big uptick in competitive pressures around savings accounts, where we started to see and we had to meet market expectations with a 25 basis point cash rate increase were increasing core savings accounts in our case, reward saver was 75 basis points. So that was a major shift really during the half. The other -- the other driver we saw was quite a significant uptick in home mortgage back book repricing. And we've been able to limit some of the front book repricing through the measures that we've been taken. And you'll see on the slide there as well, where overall for the -- and again, just to give you a bit of a sense of some of the drivers that we are down 7 basis points on lending margin.
The vast majority of that relates to Australian housing, 5 basis points, in fact. And if you look at the split of that, which might be interested for -- interesting for everyone, the majority of that split relates to back book repricing rather than the impact of front book to the extent of [2/3, 1/3]. So about 3.5% of that 5 basis points are related to back book repricing, whereas 1.5% was front book. So that's sort of really -- I think that mix really reflects some of the actions we've been taking about the front book, and as Ross discussed, we've been making deliberate choices to push back there. And I think that probably helped us during this period. But it was really those two months, where things competitively wise really started to ramp up in -- from February onwards, and that really impacted our second quarter NIM.
And just a related question, Gary. It would appear as if like as you said, a lot of those headwinds and the delta really came through towards not just the back end of the half, but the back end of the quarter. So is it fair to say that, that sort of 3 bps to 4 bps per quarter trajectory on the NIM appears to have continued into the second half. I realize you've given some considerations for us to consider, but just sort of stepping back and from a top-down perspective, it would appear as if the trajectory in that second quarter has probably would appear to have continued?
Look, I think that's a fair assumption. Whilst there's -- and again, as you've stated, there's a whole bunch of factors you got to take into account. We will continue to see benefits from our replicating portfolio. As I said, that's 4 basis points for the next six months for Australia, another basis point for New Zealand. There could be some modest benefit still from unhedged deposits.
But again, minimal in the context of what we've been achieving say in the latter part of last year in the first quarter, so that will moderate. So it's really this home lending pressure that is -- that's going to be the big factor driving second half NIM and the extent to that continues at this current run rate.
Your next question comes from Andrew Triggs with JPMorgan.
Gary, just to follow up on that question from Andrew. Just on the retention pricing pressures and BOQ called out only 1/3 of their customers having access to deposit -- sorry, an interest rate or discount that reflects current market pricing on interest rates. Can you talk to -- do you have a similar number for your customers? And what trajectory do you expect from here in terms of timing on those retention pricing pressures?
Yes. And there's, again, a lot of uncertainty in that. But a few things are taken into account. We -- even at 3.85%, we think there'll be about 20% of the book that won't be impacted in terms of repricing because they're well ahead of schedule and have enough capacity, a bit similar to the Bank of Queensland. The Reserve Bank did call out this trend as well and said that looks like some of this back book repricing is about 1/3 of the way through.
And we probably -- and I think Bank of Queensland, as you said suggested something similar. Look, we see something similar around about that. The big question is how much that continues into the second half. It doesn't necessarily it's going to go to 70%, 80%. But it's -- clearly, I'd say that will be an additional headwind that we're seeing in the second half, and it's not quite a trend. But what we're seeing in April is pleasingly might be a bit strong, but we're seeing a drop off in some of that back book repricing in April from what we saw in February, March.
So an encouraging sort of slowdown in that back book repricing, one month is not really a trend. So we'll have to wait and see whether that does continue, but there might be early signs of a bit of a slowdown in that trajectory.
And just on funding, so that the net stable funding ratio fell to 117% on a pro forma basis post TFF, it's like 113%. How low are you willing to run that ratio? I mean 100% is the minimum, but most banks would want to be well above 110% I would have thought?
Look, we were 113% pre-COVID. So how I look at this, there were some tailwinds in that ratio that came with CLF and TFF. So that was quite handy. But they were, in some respects, artificially boosting those ratios for a period, and it was always going to correct when those initiatives came off. So we were very comfortable pre-COVID at an NSFR of 113%, and we're very comfortable if it settles back to 113% again.
So I think that's the right way to think about it. And the other important point around NSFR, it's a -- different from some of the other metrics. It's pretty insensitive to small movements. You need quite significant movements. So just to get a -- give you a sensitivity to move that ratio 10 points would be equivalent of doing [$50 billion] worth of term funding. So that just gives -- so whilst we're 13 basis points above 100%, there's actually quite a lot of headroom in that.
So we feel very comfortable, where our ratio is currently at.
Your next question comes from Victor German with Macquarie.
I was just -- and I appreciate you don't like talking about sort of exit margins and things like that, but share price is down [7.5%]. I think it'd be worthwhile just making sure that everyone is on the same page. If I look at your first quarter disclosure, ex markets, you disclosed the number was 1.82% for margins. Is that right?
For -- sorry, for which period, Victor?
So first quarter margin in your trading update, it says that your margin ex markets was 1.82%, and now you're saying its 1.76%. It doesn't imply 6 basis point decline? Or am I getting something wrong?
Yes. There is a bit of complication when you're comparing ex markets numbers period-on-period. And that's why I think the best way to look at it is to get everyone on the same page, is that 3 basis points decline that we've called out. That is a good reflection and probably our best reflection of what's happening, as we're exiting the quarter and going into the second half. So that's where I -- you can -- because a bit of it was towards the end of the month, you could potentially extrapolate.
There could be a little bit of acceleration of that trend. But broadly, I think it's fairly representative.
Right. Because I think as people are sort of looking at 1.82% versus 1.76%, it kind of implies that you're exiting this quarter or exiting the half at a margin, which is close to 1.70%, which sort of implies quite a sizable downgrade to consensus. It sounds like you're saying that, that's probably a little bit too aggressive to look at it like that?
Yes. I think that's a -- that's a bit too pessimistic a way to view it. And clearly, as you look for factors going forward, as we talked about, where housing market competition goes is a critical factor, and things can change quickly, as we saw in February. So we -- if we were talking in January, we had a very different view of the trajectory, but things really moved in February.
And so yes, so the question I had was capital position looks very strong. You've obviously been talking about, given you don't have a lot of franking credits to ongoing buybacks. Why not announce the buyback now given how strong your capital position is looking versus your target?
We just wanted to pause. We've come out of the last buyback and our view was pause and to see what the conditions in the market place too, and we'll reconsider it over the next quarter. So I think it's just a pausing, being pretty prudent and what's happening in the market. No other reason than that.
We are in a very strong capital position, as you've seen at $202 billion, quite a way above the range that we'd like to be running in. But it's sort of -- was a good time to pause.
Because I think you hear the message it is just -- it's a pause and reflect, but we're certainly not ruling out any further potential buybacks.
Your next question comes from Jonathan Mott with Barrenjoey.
I just got a question, Ross. The whole issue around cash backs is coming through, and I don't know you said you don't want to compete in below the cost of capital and a few of your peers have said during the comment. But how do we wean the market offset, in that we're now in a situation, where the banks have outsourced distribution to third parties, you are involved in that as well. We're now giving cash backs. And so two questions.
Where do you think this goes to over a period of time? And probably for Gary, how has this impacted the average life of the loan? What's it down to over the last [while]? And given we're seeing this continue, why won't we continue to see the churn through the industry continuing.
Yes. Jonathan, I think I've been on record way before we said we were going to be cautious about what we wrote in the last -- the next 12 months of being not very happy with cash backs. And we -- if you have a look at the core red star, we're probably the lowest in the marketplace. I think even a little UBank has pulled back dramatically on that as well. So -- but it -- look, it is a competitive marketplace, people -- some of the businesses are feeling like they have to have it to get the business.
I'd rather be competing on a service delivery. But at the moment, it's there. Let's see where the market goes. So very competitive. We've made our mark as to where we want to put our liquidity and capital more tilted towards other parts of the business, but I like the mortgage market.
Yes, I hope you can chat to all the other banks on the same point.
[indiscernible].
Sorry, Gary, you have -- what was the other question, Jon.
[indiscernible].
Yes. Let's look, it had been coming in during the COVID period, but we're actually seeing a different trend now and that's the early signs of lengthening again. And so you can -- I think there will be a bit of -- that's driving some of that is going to get harder to move, particularly for that cohort I talked about between August '19 and July '22 that I think there's going to be more and more customers going to find it harder to move back. So we are starting to see and expect to continue to see actually a bit of a lengthening of the tenor on our home mortgage book. which I know is different from what Bank of Queensland suggested.
We're seeing something different.
So is it trying to get cohort of customers to the mortgage business, and I know, a market trend, but I use it anyway, these people partner within they have got credit issues or potential credit issues, and then, you're getting a cohort of customers still are in good financial position are financially incentivized and the broker is also financially incentivized to rotate quickly?
Yes. Just to be careful with how many customers are having real difficulty, it's a very, very small number in the marketplace. So I think we've got to be careful and that hasn't changed much at all over the last probably -- way before 2019. That's what we're showing in the book here or in the pack today. So the profile hasn't changed. What we are just watching is the group that took out a loan in the last 2 years, 2.5 years, and at this stage, show -- saying to the media today, we've rung -- made contact with 7,000 of these customers, who were in a grouping that we thought would be a little bit more vulnerable than others.
And I think it was only 17 of them actually wanted some help from us. So yes, I think the book is in pretty good shape and customers are doing okay. But the length of the loan for us has probably stayed reasonably static. We'll -- let's see what happens. It's a very competitive marketplace.
Your next question comes from Ed Henning with CLSA.
The first one, just on the 3% serviceability buffer, would you like to see that remove to allow mortgage business to switch banks and banks make their own credit decisions. And if that was removed, is that another headwind for margins because that cohort is likely on a high [markdowns].
Yes. Again, I think we've got to be very careful with this thing called mortgage prisoners. I know it's a term people love chucking around, but we've got 1.1% of our entire book that is over 100% LTV, loan to value. So it's a pretty small number. And the 3% serviceability was put there for a very good reason.
I will leave it to the regulators to work through whether they want to review it. But as we get to the very top -- the top of the interest rate increasing cycle, I think it is -- it would be a time to do it then to make sure that customers can look around. But it's -- remember, it was only been the last 12 months that people have been pushing up against us or finding this a difficulty. Prior to that, it wasn't a concern. It was pretty flat and didn't make much difference to the churn rates. But I think in the next probably three months, six months, I think the regulators probably have to have a look at it, was there for a good reason of making sure there was a buffer, and that's certainly been needed over the last 12 months.
That's interesting. But in thinking about that, there'd be more than 1.1% of people that can't move right not -- you'll have some people that can't move at 80% LVRs or 90% LVRs because of that 3% buffer. How big of cohort of that is on your loan book?
[Technical Difficulty] Gary.
So You're spot on. There are -- rather bunch and Ross was referring to those ones with negative equity. But particularly for that cohort, August '19 through to July or June '22, that's when the assessment interest rates were at their lowest. And for that cohort, we think it is that percentage quite large, could be even be circa 40% in that cohort. But across the broader book, and it sort of depends on what you include and what you don't include, but it's something in 15% to 20%, we think could be in that category, where they'll find it difficult to move to meet the higher serviceability requirements that would be essential to meet -- to move banks.
So your broad premise is correct along that direction, yes.
Your next question comes from Richard Wiles with Morgan Stanley.
Gary, you mentioned the pickup in deposit competition in February and specifically referred to your reward savers. I also note that in March, you increased your three-month term deposit rate by a 4 percentage point, and I assume that hasn't hit the margin yet. So this deposit competition leads me to a couple of questions relating to Slide 72. It shows that there's about $150 billion in savings accounts and about $150 billion in term deposits. Could you tell us what proportion of that $150 billion in savings accounts are in the reward saver, which pays 4.5% and how much are in the i saver, which only pays 1.85%.
Could you also tell us what proportion of the term deposits are in three-month TDs and are therefore likely to move to much higher rates in the next few months?
So on the first one on reward savers, so I haven't got the exact numbers with me on the split, and we haven't disclosed those. But it is a meaningful product. So it's one of our flagship product. So you can estimate a reasonably chunky proportion. And on the -- and again, on the TDs less than three months, but your point on TDs, your general point on TDs is correct that as we continue to see some intense competition on TDs and TD pricing increasing, that will continue to have an impact, an increasing impact, as it rolls through the book over the next six months to 12 months. So that -- where you're going with the direction of that quick question is correct.
And then on capital, there's a bit of debate at the moment about what a pause actually means. So can you perhaps give us a bit more -- a bit more insight into how you're thinking about the potential for another buyback? Would it be reasonable to assume that you won't do a another buyback until you got a pretty high level of confidence, as to how the economy has weathered the higher rates and whether we are going to see the recession that you think will avoid and whether we're going to see an increase in -- a material increase in credit costs. What does the pause actually mean, Ross?
Well, you have a go and then I will.
Okay. It's a good question, Richard. And it's -- and some of the language we use, I think, would be too strong, a high level of confidence. Look, what we're looking for is just some more data as we're now seeing some of those early signs of stress and seeing how that does start to translate through over the next three months? Is the trajectory at level -- and we expect it to be manageable.
So it's really just testing that, that's the hypothesis. That's our view of the analysis we've done to-date that whilst stress will increase across the book will be pretty manageable. And we really just want to wait and see that the data that starts flowing through, so over the next three months, supports that proposition. But it's -- but it doesn't look like there's a rapid deterioration. I don't think we're waiting for -- and obviously, in the end of the day, it's Ross and the Board will decide this. But I don't think we're waiting for a level of conservatism around.
Absolutely, we know that there's going to be pretty minimal credit deterioration. But I think we just like a bit more information that we've currently got, given the delays in the mechanisms from rate increases to actually hitting consumers. And this whilst -- it is starting to hit now, there's still quite a number that either haven't hit or it's due to hit a bit more in the next few months. So Ross, anything you want to add.
You just used the term next three months twice, does that mean we shouldn't rule out the possibility that you'll reassess this at the quarterly trading update in August?
I don't think you should rule it out or rule it in. I think we've just paused, and we'll quietly assess. But look, we're also cognizant of the fact we're sitting well above our stated range, Richard, and we're building capital every month goes by. So as Gary said, it's under review, and what we've done is pause.
Your next question comes from John Storey with UBS.
Thanks very much for chance to ask a few questions. Just my first question, Ross, is for you. Just on the mortgage market. Obviously, there's a lot of headline risk or a lot of headlines around uneconomic pricing of mortgages. I'd be interested to get your view on how you think the mortgage market eventually recalibrates and how long is NAV bulling to wait and sit it out in mortgages?
Yes. I've seen a few of these cycles, John, and competition plays its way out over time and people take their position and look what's sensible for one may not be sensible for another. And right now, we've sort of stepped back a little bit and put our money somewhere else and others are in. So I've seen a few of these. It will recalibrate is my view because a big chunk of capital is tied up in mortgages in Australia.
But who knows, when -- how long it will take and what other banks are wanting to do. We're still in this market. You've seen our book has grown. I think we've grown about [$5 billion] over the last six months. And so we are still in the market, but it's -- we've indicated we've got other areas that we can certainly make a bit more money in at the moment. But I think this is about the third cycle I've seen.
We'll see what happens. I'm not going to tell other people how to -- how they run their businesses or whatever. We've got a very clear path for ours. But it's an important part of the market. It's important to us, serving customers.
But right now, there's some other areas that we're probably focused more on.
I was -- just got a question. I mean it certainly feels like the tone of the call this morning, maybe revenue outlook for the banks maybe a little bit weaker than the market expected. Just in the context of that, I'd be interested to get a better sense of what the cost flex that NAV has particularly around some of the investment spend, how quickly could they slow this down? And what is the cost flex for NAV ultimately look like?
Yes. Maybe I pick that one, Gary, first, and then you can have a play with it after. On the cost flex, we've got a number of programs that we want to continue to invest into and that are giving us some pretty good results in our productivity play, but also how we're positioned in the marketplace. And we some -- see -- still see some pretty good -- really good opportunities out there. So I don't want to hold back our investment spend in the bank.
I think that would be a poor decision on a long-term basis. I think we've probably got six-odd months of an economy that's going to be a bit slower. But after that, I think we are probably in for an economy that's going to do reasonably well given the indicators we're seeing of immigration, well over probably now 300,000 people coming into the country. We've got sectors going very well, which are giving good earnings into this economy. And it's going to be a bit more difficult over the next, say, let's say, six months to 12 months, but we're investing for a hell of a lot longer period than that for this bank. Now there'll be some areas that we might back off, but other areas that we're seeing some strong growth. We still need to put a lot of money into our technology, into the digital paths.
We have our data. automating processes. So I wouldn't -- whilst we can flex, it's not something that I'd be recommending to our Board that we make massive change and it's going quite well. So careful with that one. Yes, we could.
Right now, we're focused on the next two years to three years, not the next six months.
Your next question comes from Carlos Cacho with Jarden.
Thanks for the chance to ask a few questions. Firstly, just on the back book discounts that you've been discussing. Can you give us any color around the average size of those discounts? We know at the system level, the spread looks to be about 50 bps at the moment. And also whether you're offering on -- any cash backs or retention alongside those?
Throw that one to Rachel. How would that be, Gary? Stages of unprecedented. Do you want to -- Rachel will come and have a chat on that one? The question was about cash backs on holding on to business.
What's happening in that part of the market?
Yes. I think it's an interesting question given the dynamic we've talked about in the market. We give our retention bankers. So we've got dedicated retention bankers, but all of our lenders, number of levers at their disposal when they're talking to a customer about their future banking. Sometimes, there are cash backs at play.
Sometimes it's a reprice. It really depends on the customer. So it's certainly not an in-market promotion for a cash back, but bankers have that at their discretion on occasion.
And in terms of that, the average discount that the back book competition is driving, would it be broadly in line with the system figures we get from the RBA of around 50 bps or larger or smaller?
Yes. We don't specifically disclose what that is for ourselves, but it's -- I wouldn't call out anything that would make us unusually or significantly different from what the RBA was saying.
Your next question comes from Brendan Sproules with Citi.
I just have a couple of questions on the cost side of your business. Firstly, just looking at your productivity benefits of the half of sort of $142 million, which is still targeting $400 million for the full year. Can you maybe talk to why you had a slightly slower run rate in the half and why you're sort of confident that you can catch that up in the next six months?
Yes. So it's quite common actually. We do have a slightly slower runway. If you look back to last year, I think we are in a very similar situation. And there is a bit of a trick in terms of how it works.
So that $142 million means based on what we've done to-date, there's already $280 million baked in. So we just need to find a gap of $120 million additional productivity for the second half. So that's the best way to think about it. And yes, there's a bit of a bias towards second half delivery. But again, that's pretty common with a lot of programs sort of kicked off early in the year and the benefits start to deliver in the second half.
But we're feeling confident that we're on track to get that $400 million.
Brendan, it also relates back to the earlier question on investment, this is why we're reluctant to pull investment lever, reduction heavily because these investments, there's a portion of that do give us pretty good returns through the productivity lever.
Just my second question, just on the enterprise agreement that you've been obviously trying to negotiate with the union and with your staff, obviously, you haven't yet found an agreement. But as you show on Slide 11, from January, you did push through pay increases of 3% to 5%. Now my understanding is that the proposal that you put through wasn't agreed at those levels. So in order for you to find an agreement, is there going to have to be some kind of catch-up here and a higher level of wage inflation coming for NAV in the future?
Look, we're in the middle of a conversation with the union on our enterprise agreement for this year now. I had committed that we wanted to look after our colleagues, who like everybody are struggling with increased costs, and that's why we pushed through the increases we said we would. We're back into discussions at the moment. My understanding is they're very constructive on both sides because we would like to get an agreement, but we want something that works for both the organization and our colleagues. And the thing for us is the agreement is a pretty old one. It's an old instrument.
They would like to see some refreshed [30% plus] of our colleagues and our technology people when the agreement was set up 30-odd years ago was -- didn't look anything like that. So look, it's very constructive and part of that is money, part of that is also things like workload. So there's a number of factors in it. As we did the review with our colleagues after the last one didn't get up. It was actually much, much more complex than just money.
And that's what we've been working on. So let's see how we go this year.
Your next question comes from Matt Dunger with Bank of America.
If I could just ask on the housing expected credit loss provisions rising in the half. Are you able to talk to some of the drivers behind this, given you've called out improvement in Australian home loan arrears?
Yes. Matt, the key driver and essentially how the collective provisions models work, they are sensitive to what's happening in house prices. So the decline in house prices that we've seen is being the primary driver of increases in collective provisions. That's a secondary driver, but also a driver of those early stage arrears I called out as well. So they are two of the main factors that have led to the additional CP.
But again -- but even with that, it's still well within expected levels and not something we are particularly concerned about. And depending on your view of where house prices are going to go in the medium term, then some of that might unwind over the periods ahead.
And just if I could ask a second question on the contribution from risk management in treasury and markets, how sustainable is treasury and markets income? And is the excess liquidity in the system still a drag? How does this unwind?
Yes. So it's -- we did, Matt, as you say, we had a good half on markets and treasury this period. And as we all would have seen, there was quite a bit of volatility in the treasury and markets guys were on the right side of that more often than not. What -- and if you just take the numbers for the half, we are back at levels consistent with pre-COVID. What I've consistently said on this and fairly obviously the inherent nature of trading revenue are difficult to predict. But we would expect that over time, then the markets and treasury income will start to average back towards the levels at the pre-COVID levels, in line with liquidity getting withdrawn from the system.
Whilst liquidity has been withdrawn from the system, there is still a lot of excess liquidity in the system. So I think this has still got a way to go. And when we sort of look at this migration back to normalization will take a couple of years from here. So that's probably the best way to think about it. And then in any particular half, then it's really just going to depend on the environment in that half, and it can be a bit volatile from half to half.
Your next question comes from Azib Khan with E&P.
A couple of questions. Firstly, on margins. Secondly, on New Zealand credit quality. On margins, if I just go back to the NIM waterfall chart and the 12 basis point tailwind from Australian unhedged deposit balances. Gary, can you please tell us how much of that 12 basis point was -- how much of the breakup of that by savings and term deposits, say how much of the 12 basis point was from savings, how much was it from term deposits?
And just thinking about that 12 basis point in aggregate, is it fair to expect that [indiscernible] will be close to zero in second half '23 and likely to become a headwind in first half '24?
So are you -- you were, let's say, talking about the unhedged or you're talking about the hedged because there's different numbers for...
Yes. Unhedged.
So the unhedged. Yes. So the journey on the unhedged is if you go right back when we first put numbers out there, we thought [Technical Difficulty] basis points to be about 2%. As we went through the first half, and as we flagged, we thought as tightening continues, the benefit from every rate increase will start to decrease, we said it would be below 2% in the first half '23. It ended up around about 1%. And as we're now exiting the first half '23, and looking out to the second half, that's where my comment about we think the benefits from that Australian portfolio will be pretty modest going forward.
And so there might be some benefit. I don't think it's possible to become a headwind, but I think it would still -- at this stage, we're still -- our view will just be a modest tailwind and potentially disappear over time. So that's on the Australian unhedged. What was the New Zealand.
Savings
Sorry, that is not TD impact, that's saving unhedged deposits.
Yes. That's the savings account. So on TDs, a bit like the earlier question that Richard asked that we are seeing -- well, there's a few things on TD, so I think are relevant, where we've seen our -- the migration to TDs continue during the half. We were at about 26% in the last year. We're up to 30% pre-COVID, that number was 35%.
So we sort of view that as good as any in terms of a bit of a marker that -- that's the shape of the book and the proportion of TD should settle around about that 35% level.So based on that, we think that, that -- and we're seeing signs with savings accounts increasing that the migration out of savings into TDs is starting to slow. So somewhere in that region of 35%. I think it's a decent assumption on the mix side. And then off the back of Richard's comment earlier, it does take a while, though, for the actual margin impact of TD increases to flow through, as the TDs roll. So as we continue to have three months, six months rolling in the second half, that will be an expected headwind for the second half.
And on New Zealand asset quality, the cohort of New Zealand customers impacted by severe weather events, are they largely agri borrowers? And what are you seeing in New Zealand credit quality more broadly?
Yes. On the first bit of that question, yes, there was -- it was businesses in those regions, and there were a bunch of agri businesses, but not only agri businesses. So that's the biggest driver there. Look, we do expect many of them with the support the BNZ surprising -- providing, we'll be able to get back on their feet. But we've restructured those loans.
There's interest rate holidays that we have provided them. And we'll see whether that -- they end up being not only restructured loans, but impaireds over time. I think they are cautiously optimistic they'll be able to get these communities and these businesses back on their feet. There was a small portion of the New Zealand numbers that related to households in those regions as well. And then you look at the broader New Zealand book adjusting for those impacted by the weather event, it's still pretty benign. So a little bit similar to Australia, but probably earlier in the process.
They're seeing early signs of uptick in credit stress, but nothing -- probably less, to be honest, than what we thought would be the case at this stage, especially given the number of interest rate increases and the size of the increases in New Zealand. It's been remarkably resilient and robust economy to-date in terms of credit stress, but there are definitely signs that of creaking in the New Zealand economy.
That concludes the question-and-answer session. I'll now hand back to Mr. McEwan for any closing remarks.
Thank you. Thank you very much for coming on to the call team, and also thank you for the questions. We knew there'd be a fair bit about NIM and you haven't disappointed us. It's a big issue. So thank you.Look, before we close today, I'd be remiss of me not to acknowledge that this is Gary Lennon's 15th and final presentation of NAV results.
Gary has been and still is an outstanding CFO and been that for seven years, and he's been very instrumental on the execution of our strategy, which has supported the results that we've delivered today. He's also been a wonderful executive committee member and a constant challenger within the business. Gary, as we've announced is working with the incoming CFO, Nathan Goonan, on a very smooth transition, and Gary has agreed to stay on with me until the 1st of October, which I am personally delighted about. Now some of you will know Gary is a cricket tragic, and so in cricket parlance, he is declaring his innings and he's had a great innings at it. So a big thanks, Gary. We'll certainly miss your wise counsel when you retire, but just thought we should acknowledge that as 15 of these Gary's.
I'm sure you'll miss them.
Enjoyed every one of them.
Thank you very much, team. Thank you, Gary. Cheers.