vm outlook....12 Apr 2018 21:19
Outlook
Our central planning scenario for 2018 assumes a continuation of relatively benign economic conditions, modest economic growth and heightened competition as the market readjusts to a rising interest rate environment and regulatory changes. The macro and political environment, including the impact of the UK leaving the European Union, remains uncertain which adds a degree of caution to our outlook.
The Bank of England increased interest rates for the first time in a decade in November 2017 and has indicated that the pace of interest rate increases is expected to be gradual.
Our natural long term share of the UK mortgage market remains at 3 to 3.5 per cent. In 2018 we expect to grow our mortgage and cards lending at a single digit percentage rate with banking NIM towards the lower end of a 165 to 170 basis points range. Cost discipline will continue as we invest in our strategic developments and we expect the 2018 cost:income ratio to be no higher than 50 per cent.
Our lending discipline will support asset quality and, including the impact of IFRS 9, we expect our cost of risk to be no higher than 20 basis points and to maintain a CET1 ratio towards 13 per cent at the end of 2018.
We expect to maintain a solid double-digit return on tangible equity in 2018.
We will continue to make progress with our SME roll-out and the development of our digital bank over the course of 2018.
Over time, these initiatives will significantly increase the breadth of our proposition, drive new sources of income and reduce operating costs. A broader proposition, lower cost to serve and new sources of funding will drive enhanced returns and support sustainable value creation for shareholders over the longer term.
Jayne-Anne Gadhia CBE
Chief Executive
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