Banking on good news

Susannah Streeter: Hello and welcome to Switch Your Money On from Hargreaves Lansdown. I’m Susannah Streeter – Head of Money and Markets.

Sarah Coles: And I’m Sarah Coles – Head of Personal Finance – and it is a pleasure to be back in the studio – especially now the longer daylight hours mean I can travel in the daylight.

Susannah Streeter: Yes – isn’t it lovely? – and spring is definitely on the way. I’ve even ventured out into the garden to tidy it up and shove in a few plants! – and it’s certainly encouraging to see the green shoots appearing – not just in my backyard, but potentially the economy as well.

Sarah Coles – Yes – although you still have to look quite hard, given the frost that descended – and the recession that emerged at the end of last year. But some of the latest data does indicate a slight improvement in conditions.

Susannah Streeter: Signs that inflation is set to fall back further should help improve many people’s personal finances which have taken a bit of a battering – and indications that business activity has had a boost also bodes better for the economy.

But, when it comes to the financial sector, the prospect of interest rate cuts on the horizon bring both headwinds and tailwinds.

Sarah Coles: Meanwhile, it’s not just the fortunes of the UK economy which can determine the state of play for London-listed banks, but also what’s happening in other regions of the world too – not least the elections that are schedule to take place – which could have implications for regulation and changes in economic policy.

Here in the UK, the upcoming general election is likely to have spurred the Government to push forward the NatWest share sale – and we’re gonna be delving into all of this in the latest edition of the podcast which we’re calling ‘Banking on Good News.’

Susannah Streeter: We’ll be speaking to Matt Britzman, who spends quite a lot of time knee-deep in banking reports and results – and he’s been looking into what could be ahead for NatWest – and we’ll talk to Lead Equity Analyst – Sophie Lund Yates – about a couple of other London-listed banks as well.

Susannah Streeter: Plus, we’ll lift the lid on the operations at one of the UK’s best-known building societies – Coventry. We’ll be speaking to the Head of Strategy – Jeremy Cox – to find out what life is like within a building society at the moment.

Jeremy, I imagine this is quite an interesting time for the sector right now.

Jeremy Cox: Hello – yes, it certainly is. There’s never a dull moment in financial services – that’s my experience.

Sarah Coles: We’ll also be hearing from Emma Wall – our Head of Investment Research and Analysis – who’ll take a look from a fund management perspective.

But, first, let’s go into the state of play when it comes to the UK economy – as this has implications for so-called ‘Bread and butter banks’ – which make the majority of their money from traditional banking activities.

Susannah Streeter: Yes – so, on the one hand, banks can make money from rising rates – because they have more wiggle room within higher rates – so they can collect higher interest rates from borrowers while keeping deposit rates lower.

Sarah Coles: However, if there’s a deep downturn, then more commercial, home and personal loans could turn bad – and banks could become more risk averse to lending – while consumers may be less willing to borrow money for things like a new car during uncertain times.

Susannah Streeter: So, the most recent figures from the Bank of England were for the end of 2023, when it found default rates increased for both secured and unsecured loans – and both were expected to rise again in the first three months of this year. And, while defaults on corporate loans were unchanged at the end of the year, they were expected to be rising among small and medium- sized businesses around now.

Sarah Coles: Yes – so there’s a risk that, as businesses and consumers face higher borrowing costs, loan losses could increase – but, if the economy improves, this could be less problematic.

Susannah Streeter: And the good news is that, although the UK did enter recession at the end of last year, the expectation is that it will turn out to be a super-mild one – and even the Bank of England Governor – Andrew Bailey – has indicated he thinks the UK was suffering from a ‘Very small recession,’ and was now showing ‘Distinct signs of recovery.’ Thanks to signs that inflation in the services sector and earnings growth were moderating, rate cuts look probable in the months to come.

Sarah Coles: But it’s not just the impact of higher rates we’re interested in. Banks also invest in bonds – which have been on a losing streak as interest rates have risen and stayed elevated. This is what sparked the sudden failure of regional banks in the United States, as some lenders – like Silicon Valley Bank – were forced to deal with sudden deposit withdrawals and scrambled to sell debt assets, wracking up big losses – leading to their eventual collapse.

Susannah Streeter: Worries about the immediate stability of US regional banks have subsided – although some concerns persist. There are worries about the exposure to commercial real estate portfolios – given continuing low demand for office space, post-pandemic. Fears remain that, if there were to be a significant number of defaults, that could put pressure on lenders who presently hope to avoid being forced to sell such loans at a discount.

However – when you look globally at the last assessment – the International Monetary Fund estimates that the global banking system appears broadly resilient – that’s according to the organisation’s stress test of 900 lenders across 29 countries.

Sarah Coles: And there are plenty of stresses to test the system. There are challenges ahead from China – where deep problems within real estate have already been bubbling over into other sectors. A court in Hong Kong has ordered the liquidation of the assets of the huge property company, Evergrande. While there are some expectations that authorities’ actions prioritising homeowners over other creditors would limit the immediate impact on banks, it could still pose wider repercussions for growth prospects. Already, the property downturn has been a big drag on the economy, and there are concerns about the spillover effect on the shadow banking sector – with major financial conglomerates – with significant exposure to the property market – defaulting on loan payments.

Susannah Streeter: London-listed HSBC has not been immune to the challenge of China. Its shares suffered their biggest one-day drop in nearly four years, after the bank recorded an 80% fall in profits linked to a write-down in the value of its stake in a Chinese bank.

There’s also a considerable amount of uncertainty ahead for global economies – given that it’s such a big election year around the world – and new administrations can bring in regulatory, tax and trade changes, which can have a knock-on effect on growth.

Sarah Coles: Here in the UK, speculation is swirling about the date of the UK election – which is forecast to take place in the autumn – and it seems increasingly likely that the Government will want the NatWest share sale to take place before we head to the polls.

This would be the highest-profile public share offer since the Royal Mail IPO more than a decade ago. With confirmation from the UK Government Investments (UKGI) that the sale of NatWest shares could happen as early as June, it’s clear it’s all systems go to get the process off the ground.

Susannah Streeter: Giving retail investors a slice of ownership in NatWest is a welcome move – given that they have been left out of previous sales, which have been reserved for institutional investors.

This is a recurrent theme. Retail investors are rarely offered the full suite of investing opportunities, so this would buck the trend. Further sales would again bring NatWest closer to full public ownership and would bring to a close crisis actions taken during the Great Financial Crisis.

So, this feels like a good time to bring in Matt Britzman.

Matt – there is likely to be a lot of interest in this share sale – reminiscent of the ‘Tell Sid’ campaign of the 1980s, when characters in the government’s ad urged each other to buy British Gas shares. What is your take on Nat West’s recent results?

Matt Britzman: Thanks, Susannah.

NatWest’s been on a bit of a roller coaster since the back end of last year – when it lost both its CEO and Chair – and the valuation’s been under some pressure ever since. But, with some easing headwinds – and strong capital levels – it’s one of our preferred names in the sector.

Looking at recent fourth-quarter results – they were decent enough, but it was always gonna be the outlook for 2024 that grabbed attention. The income guide didn’t get anyone too excited – but, digging under the hood, management used some pretty conservative assumptions in their calculations. It’s my view that there’s more upside to grab if conditions play out as markets expect. Of course, there’s no guarantees.

Susannah Streeter: Thanks, Matt – and what are you seeing more broadly for the banks? It’s been a pretty unloved sector for some time now.

Matt Britzman: Yeah, it has – but I think there’s some reasons to be optimistic. Performance has clearly peaked as interest rates look set to come back down over this year and next – and there’s still some pressure in the mortgage market. But, that said, there are several tailwinds playing out that I think could give some upside to where expectations sit today.

The first focuses on the consumer – and the remarkable resilience we continue to see. Giving out loans is a key source of income for banks, but there’s always the risk of default. Banks build a safety net for these potential losses – and, when they add to it, we see an impairment charge in their financial reports. So, two things to track are impairments and default rates.

Susannah Streeter: What sort of trends would you say that we’re seeing at the minute?

Matt Britzman: The trends look pretty good – all things considered. Impairments have been better than expected and default rates are still low. Add in a return to real wage growth in the UK – so that means wages that are rising faster than inflation – and there’s a real chance default levels can remain low. That would be good news for banks – should that play out – but there’s a lot of factors at play.

A second trend is on the deposit side. One of the key themes of 2023 was people shopping around for the best rates – and moving cash from current accounts to longer-term saving products. While that’s great for consumers, it’s less profitable for banks. What we saw over the fourth quarter was a slow down of that trend. If that continues, it’ll ease some pressure on margins.

Ad this all together, and you get a scenario where the structural hedge can work its magic.

Susannah Streeter: That scenario does sound great! – but what does that actually mean?

Matt Britzman: Sure – so bank earnings tend to swing when there’s large shifts in interest rates. The hedge acts to smooth earnings over time – and helps reduce some of that volatility.

What that means in practice is that the benefits from recent rate rises haven’t been fully felt. Taking Lloyds as an example – hedge income over 2024 is expected to be £700m higher than the £3.4bn earned last year.

A simple analogy is to think of a bond portfolio. Banks were buying bonds a few years ago in the ultra-low rate environment. As those bonds mature over the next few years, banks can reinvest at the new market rate. Assuming rates don’t return to the ultra-low levels – that we’ve seen in the past – they should be able to earn a better return when they reinvest the hedge.

Susannah Streeter: Okay, Matt – thank you very much.

Now, we can bring in Sophie Lund-Yates, who’s been looking at just how different some banks are – when it comes to their business models. So, Sophie, what have you been looking at first?

Sophie Lund-Yates: As you say, we have so-called ‘Bread and butter banks’ which make the majority of their money from traditional banking activities – like deposits and loans – but then London is also home to some major international banks, which make a lot of their money from alternative activity – like investment banking or wealth management.

One such name is Standard Chartered. Having alternative investment streams helps diversify risk. Standard also has some hefty exposure to Chinese banking, which is leading to some bumps in the road – but, overall, reflects long-term opportunity, in my opinion.

One area of strength is impairment charges. This is money set aside in anticipation of people defaulting on their debt. So, these charges were lower than previously – suggesting stronger consumers – which should act as a tailwind for banks.

Something else worth shouting about is the group’s capital position. This is measured by something called a CET1 ratio. Essentially, this showed us that Standard Chartered’s balance sheet is in rude health, which has enabled it to announce a $1bn buyback and helps support dividend payments as well. Though, of course, no shareholder returns are guaranteed.

Sarah Coles: So, what’s the bad news?

Sophie Lund-Yates: Yes, there’s always another side to the coin! The exposure to such a broad range of economies – including China – while potentially an exciting differentiator, does increase the likelihood of ups and downs – and, overall, does increase risk.

Susannah Streeter: So, what about one of these more traditional banks? You’ve been looking at Lloyds.

Sophie Lund-Yates: Yes, I have – and there’s a reason we chose Lloyds as one of our five shares to watch this year.

Essentially, it’s more traditional position means it’s a direct beneficiary of the higher interest rate environment. Then, if you add in the strong capital position too – and those lower impairments – again, you end up with what is quite a compelling investment case.

Sarah Coles: It’s not a guaranteed home-run though, is it?

Sophie Lund-Yates: No – definitely. We often say, ‘Nothing’s guaranteed’ – and that’s always the case with banks – even the well-run ones. Banks are very sensitive to wider economic conditions – so, when things hit a bump, so too do bank stocks – and that’s something that shouldn’t be forgotten.

Just briefly, I also think it’s worth talking about Lloyds’ attempts to broaden its horizons. It’s spending billions over the next few years to increase its reach in things like wealth management, which is worth keeping in mind.

There has also been a well-publicised investigation from the FCA – and Lloyds has set aside £45m in preparation for fines resulting from the potential mis-selling of motor finance. This doesn’t derail the investment case, but it does increase the likelihood of short-term ups and downs – and it’s not great for sentiment.

Susannah Streeter: Sophie – thank you very much – plenty to keep a watch on in the coming months.

And we should add that investments rise and fall in value – so you could get back less than you invest – and past performance is not a guide to the future.

Sarah Coles: Yes – this is not advice or recommendation to buy, sell, or hold any investment. No view is given on the present or future value – or price of any investment – and investors should form their own view on any proposed investment.

Susannah Streeter: We’ve had a whistlestop tour of some of the big banks – and their business model – so it seems like a good idea to bring back in Jeremy Cox – who’s Head of Strategy at Coventry.

So, Jeremy – I suppose the big difference between you and some of the other household names is the fact that you are a building society. So, what difference does that make in practice?

Jeremy Cox: That’s right – it means we don’t have any ordinary shareholders in the same way that a listed bank does. We’ve got our own Act of Parliament that says that most of our funding has to come from individual savers – and more than 75% of our loans has to be on residential properties. So, that constrains the activities we’re involved with.

It means that – generally, over time – we offer slightly better rates – better service – than the banks because we don’t have to pay dividends to shareholders – but it also means we have to probably operate at lower risk – because, if things do go wrong, we haven’t got shareholders to fall back on in quite the same way.

Sarah Coles: Presumably, everyone’s always interested in the alchemy that goes on when you’re working out savings and mortgage rates. Can you tell us something about some of the things you take into consideration?

Jeremy Cox: Yeah – so we have to adjust rates almost continuously. We’ve made over four complete pricing rotations in January alone – but all we’re reflecting is our cost of funds over time, liquidity risks, and then a margin to cover our cost operations – a cost of risk – and then making sure we have sufficient profits to enable growth and investment in new technology and other parts of our proposition over time.

Sarah Coles: And, when you’re looking at things like demand – because we’ve seen from some of the Bank of England’s figures that mortgage demand has gone terribly – and then, suddenly, has seen a little bit of a pick-up at the beginning of the year. Does demand play a big role as well?

Jeremy Cox: It does – absolutely. There’s been quite a lot of volatility in markets – as purchasers have become concerned about rising interest rates – and now missing an opportunity to buy as interest rates are falling. There’s only so many mortgages that we can process in a period of time – and, therefore, we often have to re-price just to avoid being flooded with applications.

Susannah Streeter: So, you talk about all of that volatility – what d’you think the challenges for the industry will be over the coming years?

Jeremy Cox: Interest rates have obviously risen very, very sharply – and there’s now an expectation they’re going to fall. So, markets, at the moment, believe that perhaps there’ll be two or three cuts this year – and perhaps five cuts by the end of 2024 – taking interest rates back to 4%. That obviously impacts the margin that we can pay – and also the behaviour of customers. So, people may be more reluctant to take on a long-term fixed-rate mortgage if they think rates are gonna come down in the future – and, likewise, our savers will be worried about falling return on their savings.

We’re obviously concerned about political and geopolitical events – the ongoing wars and disruption in Ukraine and the Middle East is impacting global trade and activity. We’re also worried about just the sheer cost of buying a property now.

So, when I bought my first home – back in the 1990s – the deposit I had to raise was around half of an average salary at the time – it’s now nearly one-and-a-half times. So, ‘How is that gonna impact people – and how is paying off their loans over a longer and longer period of time going to impact behaviour and performance of this industry?’

Susannah Streeter: One of the other aspects that, of course, organisations have to deal with are defaults. How has the way that organisations have dealt with these changed in recent years? D’you think you need to be more understanding – given the current climate?

Jeremy Cox: I think we are being more understanding – particularly with the pandemic and the additional mortgage charter measures that were introduced at that time – but I actually believe that the industry is in a lot better place than it was. There was an awful lot of reviews that happened after the credit crisis – specifically the Mortgage Market Review in 2010 – that really caused all of us to make sure we were treating customers fairly. That has obviously been increased in the last 12 months with the Consumer Duty rules.

In particular, I think we all acknowledge that, not paying your mortgage – and getting into arears on a mortgage loan – is a pretty serious situation – and it often means that you are vulnerable as a customer. You’ve probably lost your job – suffering in ill health – perhaps had a relationship breakdown. So, these customers do need us to really understand their situation – and work with them to try and find the best outcome for them.

Sarah Coles: But it seems like we are dwelling on the negative. Let’s look ahead at some of the positives – where d’you think the opportunities lie for the business?

Jeremy Cox: There are always opportunities. We’re focusing on purposeful lending – particularly to first-time buyers – so prices are down in real terms. They’ve only gone down by perhaps 3% - according to Nationwide – from the peak – but, hopefully, the salary increases people are getting will enable them to look at buying property – and made them more affordable than they were 18 months ago.

We’re looking at green finance – and how we support the transition to NetZero. And then, on the savings side – I think there will be opportunities created by open finance – and just making the case for cash savings as part of your portfolio – and that can include things like HL’s Only Active Savings Service – or new types of embedded finance that might emerge as a result of open banking.

Susannah Streeter: Do you have high hopes for the FCA’s campaign to get us to move our savings? D’you think people can be prised away from their usual bank – or is this sector, as a whole, gonna have to pedal a lot harder?

Jeremy Cox: It’s really challenging – and we talked about how efficient the mortgage market is with people looking around for the best rates. There’s still an awful lot of people who treat either large balances in their current account – or in poor-yield instant access savings account – and don’t do anything about it.

So, I think any intervention’s working by the FCA – but I think all of us have gotta work harder to persuade people that you really can make quite a lot of money as a household by seeking out better rates – or perhaps putting some of your savings into fixed-rate or restricted-access savings to get a better yield and better return on your savings.

We’re putting an awful lot of money into paying better savings rates – and we keep calling out how many people have still got lots of money in their current account at the end of each month. We’d really encourage them to actively look and see if they could get a better deal.

Susannah Streeter: Okay, Jeremy – many thanks for sharing your thoughts.

Jeremy Cox: My pleasure – thanks.

Susannah Streeter: So, with all of that in mind, it’s a good time to bring in Emma Wall – our Head of Investment Analysis and Research – who’s been speaking to Alex Wright from Fidelity.

Emma Wall: Hi, Alex.

Alex Wright: Hi, Emma – thanks very much for having me.

Emma Wall: We’re here today to talk about UK banks. The last five years – we’ve had a series of once-in-a-lifetime events – all of which have impacted the financial sector.

If I cast back to the pandemic – can we start with the policy where banks suddenly were told, ‘You can no longer pay dividends?’

Alex Wright: There was obviously a view that the pandemic was gonna be very negative for banks – and the banks were asked not to pay dividends ‘cause there was an expectation that there was gonna be a massive requirement from the banks to lend into the economy. That, very much, was the case – but what made a lot of sense is that governments would backstop that. So, banks did not need to cancel their dividends in the pandemic – and what that resulted in was a build-up of really significant excess capital. So, in retrospect, it was a great time to be buying into the banking sector – as it was to buy into other parts of the stock market as a whole – and particularly the UK market – and we did take advantage of that in the summer of 2020.

Emma Wall: And then, from one global phenomenon to another – in the form of inflation. Not unlinked – some of the pandemic contributed to global inflation – but inflation then meant Central Bank policy reaction – in the form of rising rates. What then happened to UK banks as the result of rising interest rates?

Alex Wright: The thing that had been really negative for the banks – since the global financial crisis – was that interest rates were an unusually low level – the sub 1%. At that level, it’s incredibly difficult for banks to make any money – because banks are essentially a spread-business. They get deposits in at a certain rate – and then they lend it at higher rate – but it’s incredibly difficult to charge people to hold deposits. So, clearly, when the interest rate is so low, it’s incredibly difficult to make any money on the deposits of your balance sheet. And so, that part of the bank’s business model was rendered defunct for about a 10-year period. We’ve subsequently seen inflation coming back into the system. Inflation is natural – we normally have some level of inflation – and that’s allowed positive interest rates – so above a 1% level – which has allowed banks to get back to the normal state of the world – effectively, making money on both their deposits and their loans.

What’s interesting is – some people seem to think that’s an unusual profitability picture – they sort of think banks are earning too much money at the moment. Actually, if you look – compared to history – banks aren’t earning that much money at all in terms of their margins – it’s pretty normal. It’s just that you’ve had an unusually long period – just preceding this – for about 10 years – where banks earned an unusually low level of profitability.

Emma Wall: The thing about those interest rates is they don’t exist without people who have to pay them. The reason why I bring in this context is because – although higher interest rates tend to be positive for banks – and their balance sheets – the cost of living crisis has had somewhat of a headwind on the outlook – because, if people aren’t able to honour that debt, that is negative for the bank, isn’t it?

Alex Wright: It would be – if people were struggling to honour that debt – but, throughout the entire system, there’s almost no sign that that is the case. And the reason for that is the banks have obviously been lending extremely prudently over the last 15 years.

So, effectively, the only people that have been able to borrow from mainstream banks have been those with very good credit – at very affordable rates – and at very low loan-to-values. The kind of behaviour that you often see towards the end of an economic cycle – where banks lend aggressively – at high loan-to-values – to less credit-worthy borrowers – a lot of which the banks were doing through 2004, 2005, 2006, 2007 – that just hasn’t been the case for a very long time. So, the credit quality of all the mainstream banks has been exemplary much lower loan losses than you’ve seen at any point through history.

Emma Wall: I’m gonna ask you get out your proverbial crystal ball – where are interest rates going next – and how much of that outlook impacts how you analyse UK banks – and, indeed, your conviction in UK banks as investable stocks?

Alex Wright: I think it’s important to be diversified within the banks – ‘cause I think, having a cool on where interest rates are gonna go – particularly with any kind of accuracy – is incredibly hard – and is not something we attempt to do at Fidelity.

I look at where interest rates have, on average, been over a 100-year period – and I think about what is ‘Normal.’ In fact, today’s interest rates of around 5% is actually a fairly normal level. The consensus is that interest rates are likely to fall – potentially – to something more like 4% in 12 months’ time. Clearly, while we think about the range of banks earnings in different scenarios – we don’t try and put too much weight on any particular one. I think what you do need to have confidence in though – to want to invest in the mainstream banks – is that interest rates don’t fall below 1% - because, at that point, it becomes very difficult to make profits.

Now, that is a possible scenario – but I think it unlikely everywhere – and that’s part of the reason we’re quite diversified in our fund. So, what we do – where, unlike to NatWest – which plays to the UK market – actually, our biggest position is Allied Irish Bank – which is playing to Ireland. We have Standard Chartered, which is a play on Asia. We have Barclays, which is an investment bank – and then we have a couple of emerging market banks – Kaspi and Bank TBC.

It’s very unlikely that interest rates go to below 1% in all of those markets at the same time – and, therefore, overall, I think banks are a very attractive prospect.

Emma Wall: So, as well as their geographical diversification – so where clients are based – what about sectors? Is that something you’re looking for – a mix of Retail Investment – Wealth Insurance?

Alex Wright: We do have insurance as well – Direct Line, Lancashire, Conduit, Aviva – in insurance – but, within banks, it’s more the geographic diversity. I would say we have most exposure to retail banks – but there’s different flavours of retail banks – in terms of what you do. NatWest would be more Corporate-focused – whereas a Lloyds would actually be more Retail-focused. And then, also – particularly in emerging markets – you can do other things besides banking. So, the nice thing is – actually, Kaspi would not only be a bank, but it would also be the Amazon – the eBay – the PayPal of that market. Similarly, in Georgia, TBC owns the Rightmove and the Autotrader of those markets. So, there’s quite a lot of interesting diversity – even within the Retail banking model – in each of these different markets.

Emma Wall: Alex – thank you very much.

Alex Wright: Thank you.

Sarah Coles: That was Emma Wall talking to Alex Wright – and please do bear in mind that these are the views of the Fund Manager and are not induvial stock recommendations.

Susannah Streeter: You’re listening to Switch Your Money On from Hargreaves Lansdown – and before we go, there is time for a quick stat of the week.

We were talking about NatWest earlier – and, for those of us of a certain vintage, as soon as there’s mention of that particular brand, we immediately think of the free piggy banks given away between 1982 and 1988. They still inspire real nostalgia. There was the baby ‘Woody’ – who you received when you opened the account – then, as you hit savings milestones, you received the rest of the family – Gerald, Maxwell, Annabel, Lady Hilary, and Sir Nathaniel.

Did you have one of these, Sarah?

Sarah Coles: No. My parents chose to teach me an early lesson about marketing gimmicks – and persuaded me to open an account with a better interest rate.

Susannah Streeter: It was a bit of a phenomenon at the time – but my question is – if you saved enough for Sir Nataniel, how much could you expect to sell it for today?

Sarah Coles: I have no idea. They inspire loads of nostalgia – people do really love them – but there were so many of them around at the time – so they can’t really fetch that much. I’d say about a tenner.

Susannah Streeter: You’re right – that having so many available keeps the price down. But I think you are slightly underestimating the power of nostalgia. They’re selling for between around £30 and £40 – at the moment.

Sarah Coles: That’s all from us this time – but, before we go, we do need to remind you that this was recorded on 4^th March 2024, and all information was correct at the time of recording.

Susannah Streeter: Nothing in this podcast is personal advice, and you should seek advice if you’re not sure what’s right for you. This hasn’t been prepared in accordance with legal requirements designed to promote the independence of investment research – and is considered a marketing communication.

Sarah Coles: Non-independent research is not subject to FCA rules prohibiting dealing ahead of research. However, HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing.

Susannah Streeter: And you can see our full non-independent research disclosure on our website for more information. So, all that’s left is for us to thank our guests: Jeremy, Matt, Sophie, Alex, Emma, and our Producer, Elizabeth Hotson.

Thank you very much for listening – we’ll be back again soon. Goodbye!