Natwest Group (RBS) Q1 2021 Earnings Call Transcript

Natwest Group (NWG -0.14%)
Q1 2021 Earnings Call
Apr 29, 2021, 4:00 a.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Welcome, everyone. Today's presentation will be hosted by CEO, Alison Rose; and CFO, Katie Murray. After the presentation, we will open up for questions. 

Alison Rose -- Chief Executive Officer

Good morning, and thank you for joining us today. As this is a quarterly update, we'll be relatively brief this morning. I'll cover progress on our performance and strategy before handing over to Katie to take you through the financial performance in more detail. We'll then open it up for questions.

So let me begin with the headlines on Slide 3. We delivered a profitable performance in the first quarter as we continue to support our customers to advance our strategy and to accelerate our digital transformation in response to changing customer needs. We are reporting operating profit before impairments of 844 million and have made an impairment release of 102 million during the quarter as defaults continue to remain low with little change in stage migration. Taking this release into account, we delivered an operating profit of 946 million and an attributable profit of 620 million, up from 288 million for the same period last year.

We are seeing the potential for a more rapid recovery taking shape. However, at this point, our economic assumptions remain unchanged, and we will review them at the half year. Net lending grew 2.2 billion, driven mainly by mortgage growth. We reduced costs by 72 million year on year, ahead of our targeted reduction rate.

And we continue to benefit from a strong capital position with a CET1 ratio of 18.2% after a 1.1 billion directed buyback from the government of almost 5% of our share capital, the maximum amount possible in any given year. This capital strength continues to give us flexibility to navigate ongoing uncertainty to consider options for creating shareholder value and to return capital to shareholders. As you know, we intend to maintain a payout ratio of 40% of ordinary shares with distributions of at least 800 million each year up to and including 2023. The purpose-led strategy we set out last year, shown on Slide 4, is designed to drive long-term sustainable shareholder returns by serving customers across their lifetime, powering the organization through innovation and partnerships, simplifying and digitizing the business, and maximizing capital efficiency.

Our purpose is also exemplified by three focus areas: enterprise, financial capability, and climate change, all of which strengthen our ability to drive returns. I'm not proposing to cover these focus areas in detail today, but I do want to mention our EUR 1 billion affordable housing social bond, the first of its kind issued by any U.K. bank. This is the third issuance under our green, social, and sustainability bond framework.

Our first social bond in 2019 has helped to create almost 7,000 jobs to date, and our first green bond issued last year has allocated proceeds to renewable energy projects around the U.K. supporting customers' transition to a low-carbon economy. So let me move on now to how we are serving customers to generate growth on Slide 5. It is too early to comment on the impact of this month's easing of lockdown.

The credit and debit card activity has already been trending toward more normal levels. Spending on debit cards is now above levels in March last year before we saw any impact from COVID-19, while credit card spending is approaching those levels. We're also seeing recovering demand for personal loans and new cards. Across the retail and commercial businesses, net lending grew by 2.2 billion during the quarter, excluding government schemes.

And we continue to see strong deposit growth of 12.1 billion, bringing the total to 415 billion. In the retail bank, gross new mortgage lending was resilient at 9.6 billion with healthy margins as we maintain strong pricing discipline. Commercial banking lending has been more muted as businesses take a cautious approach during ongoing uncertainty and continue to deleverage. Demand for government support schemes continues to taper, and the majority of those who ask for payment holidays have now returned to normal payments in both retail and commercial banking.

Two new government schemes were introduced in early April: Pay As You Grow and the Recovery Loan Scheme. Payer As You Grow enables businesses which have started repaying their Bounce Back Loans, to request an extension of their term from six to 10 years, take a repayment holiday, or pay interest only for six months. We have received around 14,000 applications to date, and the majority of which are to extend the term of the loan. But this number could increase as we have recently contacted over 100,000 customer accounts to advise it is 60 days or less to the first repayment date.

On the Recovery Loan Scheme, we received around 3,000 applications in the first week, although demand has dropped since then to between 100 and 150 applications a day. I want to move on now to talk about how we are using innovation and in particular, digital transformation on Slide 6. The acceleration of digital adoption that we saw last year has continued during the quarter. 61% of our retail customers now use only digital means to interact with us, up from 50% a year ago.

This means people are able to access our services at any time of day from any place they want, making their lives easier and more convenient. In commercial banking, 68% of sales are now via digital channels. And use of our chatbot Cora has grown 58% year on year with over 40% of interactions completed without human intervention. We are also using video banking for an average of 13,000 interactions a week, up from around 7,000 a week in the fourth quarter last year.

This enables us to deliver personalized customer service efficiently despite the pandemic and without the need for customers to travel. These are all good examples of how we are creating a relationship bank for a digital world. We are also actively managing capital to drive returns, which I will cover on Slide 7. As I mentioned earlier, in March, we announced a directed buyback from the government of almost 5% of share capital for GBP 1.1 billion, the maximum amount possible in any given year.

We have also made strategic choices in relation to capital in NatWest Markets and Ulster Bank. In NatWest Markets, we're ahead of plan as we reduce risk-weighted assets, which are now 26.5 billion. And we expect to achieve the majority of the remaining RWA reduction by the end of the year. On Ulster Bank, negotiations are ongoing with AIB about the performing commercial loan book, as well as with other third parties about retail and SME assets, liabilities, and operations.

We will update you in due course when we have anything new to report. In addition, we are actively managing portfolios and using synthetic trades across the business to reduce capital consumption and to manage risk. For example, in commercial banking, active capital management has resulted in a reduction in RWAs of 600 million in the quarter. We also optimize our regulatory capital with ongoing liability management exercises.

And we repurchased 1.6 billion of Tier 1 and Tier 2 securities during the quarter. So before I hand over to Katie, let me update you on Slide 8 on the progress we are making toward the targets we announced in February. We are pleased to report that our progress is on track, but of course, we do not expect this to be linear on a quarterly basis. Net lending of 2.2 billion in the quarter equates to annualized lending growth of 3%.

Costs fell by 72 million, or 4.5%, ahead of our targeted reduction rate of about 4% per annum. And our CET1 ratio of 18.2% is down from 18.5% at the year-end as we move toward our target ratio of 13% to 14% by 2023. Our intention remains to return capital to shareholders or pursue other options that create value as we move toward that target. Though bear in mind we have yet to experience any pro-cyclicality.

And with that, I will hand over to Katie to take you through our performance in more detail. 

Katie Murray -- Chief Financial Officer

Thank you, Alison, and good morning, everyone. I will start with the group income statement, taking the fourth quarter as a comparator. Total income of 2.7 billion pounds was up 4.9% in the fourth quarter. Within this, net interest income was down 2% to 1.9 billion, and noninterest income was up 29% to 728 million.

This increase reflects seasonally higher trading income and higher lending volumes. Operating expenses fell 22% to 1.8 billion pounds, driven by the absence of the annual U.K. bank levy, lower strategic and conduct costs, and, of course, ongoing cost reduction. This means we are reporting an operating profit before impairments of 844 million pounds, up from 194 million in the fourth quarter.

The net impairment release for the first quarter of 102 million pounds represents 11 basis points of gross customer loans and compares to a charge of 130 million or 14 basis points in the fourth quarter. This release reflects improvements in underlying credit metrics. Taking all of this together, we reported an operating profit before tax of 946 million pounds. And attributable profit to ordinary shareholders was 620 million, equivalent to a return on tangible equity of 7.9%.

I'll move on now to net interest income on Slide 11. Banking net interest income for the first quarter was 35 million pounds lower than the fourth, as strong mortgage growth and improved mortgage margins were offset by lower commercial balances and two less days in the quarter. Turning to bank net interest margin. This reduced by two basis points to 164 basis points.

The lower yield curve accounted for a three-basis-point decline due to the structural hedge, which was partially offset by one basis point increase for mix and pricing as a result of stronger mortgage margins. As you can see, liquidity had no impact as our TFSME repayment was offset by an increase in deposits. Turning to the drivers of net interest margin on Slide 12. Asset yields and funding costs were stable in the quarter after a period of decline following base rate cuts in March last year.

On the asset or lending side, gross yield for the group was broadly stable at 184 basis points despite a slight reduction in the retail banking loan yields as a result of lower unsecured balances. On the liability or deposit side, group funding costs were broadly stable at 49 basis points, with a further small reduction in retail deposit costs to eight basis points. There are three main factors to consider in relation to net interest margin for the second quarter. First, ongoing pressure from the structural hedge.

We have increased the hedge by GBP 8 billion in the quarter due to increased deposit growth in line with our policy. If deposits stay broadly stable, we would expect to add a further 15 billion pounds over the next 12 months, taking into account the current yield curve and our expectations for the size of the hedge over 2021. We now expect a reduction of income of around 250 million pounds from our hedge portfolio compared to 2020. This will not be completely linear and equates to around three basis points per quarter.

Second, a change in liquidity, which, as you know, affects average interest-earning assets and therefore NIM. The third factor is mix and pricing. In the first quarter, mortgage margins on the front book increased from 161 to 179 basis points. This is above the back book, which improved 12 basis points to 159.

These improvements include around five basis points from our transition to SONIA from LIBOR at the beginning of the year, which has no impact on group income, but does affect individual product lines. Average application margins in the first quarter were 180 basis points. However, these reduced toward the end of the quarter due to higher swap rates and market pricing. And our March margin was around 165 basis points, slightly above the back book.

Mix is also affected by demand for higher-margin unsecured and corporate lending, which will ultimately depend on the shape of economic recovery. Moving on now to look at the volumes on Slide 13. Gross banking loans were stable in the first quarter at 363 billion pounds. Mortgage growth of 2.7 billion was 1.4%, reflects continued strong demand in the U.K.

post the stamp duty extension. Our mortgage flow share in the first quarter was 13%, above our stock share, which increased from 10.9% to 11%. Gross new lending in the quarter was 9.6 billion pounds. Unsecured balances declined in the first quarter across both personal advances and credit cards.

Demand for government schemes also slowed, but they're still accounted for 600 million pounds of additional lending. However, this was offset by repayments from commercial banking customers, including 300 million pounds of RCF repayments and utilization stable at 22%. Average interest-earning banking assets grew by 7 billion pounds, or 1%, driven by mortgages. I'd like now to turn to noninterest income on Slide 14.

Noninterest income, excluding notable items, was up 15% on the fourth quarter to 742 million. Within this, income from trading activities increased 33% to 162 million. This reflects a stronger performance in fixed income with higher levels of customer activity. Though which is clearly lower than the first quarter of 2020 given the volatility we experienced last year.

Moving now to fees and commissions for the retail and commercial bank, which decreased 4.3% from the fourth quarter to 470 million. This was driven by lower card and lending fees as a result of lockdown. The outlook for fees and commissions is uncertain given the ongoing restrictions due to COVID-19 across Europe. But we expect them to grow as the economy recovers.

So to round off my comments on income. There is no change to our guidance from February. We continue to expect income, excluding notable items, to be slightly lower this year than 2020 due to two main headwinds: the impact of the structural hedge and the lower income in NatWest Markets as we refocus the business to better serve corporate and institutional customers. I will now move on to look at costs on Slide 15.

Other expenses, excluding operating list depreciation and the direct cost base of Ulster, were 1.5 billion for the first quarter. That's 72 million, or 4.5%, lower than the first quarter last year. Naturally, these cost reductions will not be linear, and we continue to expect savings of around 4% for the full year. Strategic costs in Q1 were 160 million and we expect these to be around 800 million for the full year.

Turning now to impairments on Slide 16. We are reporting a net impairment release of 102 million, or 11 basis points, of gross customer loans in the first quarter. This compares to a charge of 14 basis points in the fourth quarter. The release was driven by a continuing low level of defaults in the commercial book and Stage 3 defaults broadly in line with our historical experience in the retail bank, coupled with further positive migration of Stage 2 loans back to Stage 1 following improvements in the underlying credit metrics.

The economic assumptions we presented in February are unchanged and we include these in the side appendix. We will update these in line with our usual practice in Q2. A post-model adjustments for economic uncertainty are also broadly stable over Q4. We have not changed our guidance for repayments for 2021 and we do expect these to be at or below our cycle range of 30 basis points to 40 basis points.

So clearly, if economic outlook continues to be favorable, then we would be below 30 basis points. Turning now to our credit risk profile on Slide 17. There has been some positive migration during the quarter, reflecting improving credit metrics as government support measures continue and customers build healthy cash balances. Eighty percent of our loan book is in Stage 1, up from 77% at year-end, reflecting migration of Stage 2 loans back to Stage 1, in particular, in the retail bank.

Over 98% of loans are in Stage 1 or Stage 2. Stage 3 loans are slightly down to 6.1 billion or 1.6% of gross loans. ECL coverage of 1.6% is down slightly due to write-offs with Stage 3 coverage of 39%. As you know, some of our wholesale loans are in sectors that we pro -- we monitor particularly closely.

These amounted to GBP 27 billion or 7% of gross loans. Similar to the trend at group, Stage 3 gross loans in these sectors was down slightly at around 700 million. And we remain comfortable with coverage at 47%. Turning now to look at capital and risk-weighted assets on Slide 18.

We ended the quarter with a common equity Tier 1 ratio of 18.2% on a transitional basis under IFRS 9, which is 30 basis points lower than Q4. The 1.1 billion directed buyback and associated pension contributions together accounted for an impact of 72 basis points. And an accrual of 200 million for the 2021 dividend reduced the ratio by a further 11 basis points. This was largely offset by a 48-basis-point benefit due to lower RWAs and a further 31 basis points from the digital profits.

The impairment release had negligible impact on our CET1 ratio as this relates to Stage 1 and Stage 2 expected credit loss that is currently added back to our capital position in line with the IFRS 9 transitional rules. RWAs decreased GBP 5.6 billion in Q1, including a GBP 1.3 billion benefit from currency exchange rates and a GBP 900 million benefit from our annual operational risk recalibration exercise. Credit risk reduction of 4.8 billion was driven by lower commercial and unsecured retail balances, as well as the benefits of GBP 1 billion from procyclicality largely arising in the retail bank. NatWest Markets' RWAs reduced to GBP 26.5 billion.

And as Alison mentioned, we still expect to achieve the majority of our targeted reduction to around 20 billion this year. Our guidance on RWAs remained unchanged and we expect them to be in the range of 185 billion to 195 billion at the end of 2021, including all regulatory impacts effective on January 1, 2022. Where we are in this range will depend on procyclicality and loan growth throughout the balance of this year. Turning to my final slide on our strong balance sheet.

Our CET1 ratio is now between 420 basis points and 520 basis points above our 13% to 14% target range and more than double our maximum distributable amount despite the directed buyback and 2021 dividend accrual. Our U.K. leverage ratio of 6.2% is 295 basis points above the Bank of England's minimum requirements. We have also maintained strong liquidity levels with a high-quality liquid asset pool and a stable diverse funding base.

Our liquidity coverage ratio decreased in the quarter to 158% due to the GBP 5 billion of TFSME repayments. And our headroom above our minimum requirement is now GBP 65 billion. So to conclude, we have delivered a good operating performance with strong lending growth and continued progress on both cost reduction and capital optimization. And with that, I'll hand it back to Alison.

Alison Rose -- Chief Executive Officer

Thank you, Katie. So in summary, we have delivered an operating profit of 844 million in the first quarter with an impairment release of 102 million as default levels remain low while government support schemes are still in place. We are comfortable with our position, but we recognize there may be economic challenges ahead. And against this backdrop, we remain focused on supporting our customers while advancing our strategy and accelerating our digital transformation.

We're making good progress on our targets and have increased net lending by 3% on an annualized basis, reduced costs ahead of our target reduction of about 4% a year and used our capital strength to make a 1.1 billion directed buyback from the government, as well as meet our commitment to distribute a minimum of 800 million in dividends each year for the next three years. Our focus remains on driving improved shareholder returns by growing income, reducing costs, and maximizing capital efficiency. And with disciplined execution in each of these areas, we aim to deliver a return on tangible equity of 9% to 10% by 2023. Thank you very much.

We're now happy to take your questions.

Questions & Answers:

Operator

[Operator instructions] And we will take our first question from Aman Rakkar from Barclays.

Aman Rakkar -- Barclays Investment Bank -- Analyst

Good morning, Katie. Good morning, Alison. A couple of questions actually if I may on -- on income, please. I just want to stitch together your commentary on the net interest margin.

So, you know, you're flagging structural hedge drag, the benefit of mortgage margins in Q1 probably is going to be a bit lower going forward. So rough ballpark, a couple of basis points of NIM each quarter I guess is the first part of the question? And then, you know, in terms of what that implies for the full-year net interest income print. I mean, if -- if that is the case, you should probably be able to offset that with some balance sheet growth in retail and commercial. But the -- you know, can we take Q1's net interest income as a -- as a decent run rate for the full year? Because I think that would imply a number above 2021 consensus.

So -- so sorry for asking a question about the con -- consensus. I know -- I know we do that a lot. And I guess second was just around your expectations for NatWest Markets for the full year. I guess is probably a touch softer than what we were looking for.

Does that -- that guidance -- that you gave us before, 800 to a billion still stand? That'd be really helpful. Thanks.

Alison Rose -- Chief Executive Officer

Great. Thank you. Well, look on NatWest Markets [Inaudible], our guidance for NatWest Markets is unchanged, 800 to a billion. Katie, do you want to take the walk-through the NIM in the next question?

Katie Murray -- Chief Financial Officer

Yeah, no, sure, ab -- absolutely. So in terms of the Q1 performance, it has been all fell by -- by -- by 2 bps, the low yield curve was 3 bps of -- of that decline. And then that was offset by the mix of -- in pricing in terms of a positive 1 basis point, which was largely driven by the higher mortgage margins. You know, in this quarter, central liquidity was flat.

So, as you know, I mean, when we look at the -- the NIM, there's three buckets that we think about. The yield curve, we expect to continue with the 3-basis-point decrease in Q2 through lower hedge income, driven by the higher yields on certain positions due to the roll-off that's happening in 2021. You'll have noted in my comments that we are helped by an improvement in the swap curve in that piece, but it's still going to be around this 3 basis points number. Liquidity, of course, remains sensitive to the movements.

We'll leave you to decide what might happen in terms of liquidity. But when we get to mix and price, I think there's a few things to consider. You know, the positive mor -- mortgage trend that we saw in Q1 is reducing. The average application margin in Q1 was 180 basis points for the quarter.

But this decreased to the 165 basis points kind of for March and primarily due to the higher swap rates, as well as some competition in the market. We know that the commercial loan book will continue to be impacted by lower front book yields. And we do also continue to see a bit of a mix effect in terms of lower unsecured balances. So I think you're -- you're right, it does all kind of come back a little bit to what's the volume story to make sure that we ma -- manage that margin impact, as well as on the -- the volume.

And I think, you know, we've always done well on that in terms of mortgages. And I think we'll then see customer behavior dictate ultimately what happens in terms of volume across at retail and commercial and unsecured and prop -- proper lending as we return back to a post-lockdown world. 

Aman Rakkar -- Barclays Investment Bank -- Analyst

Thanks -- thanks for that. Do you -- do you think then the Q1's net interest income might be an indicator of a full year? Do you think we could annualize that?

Katie Murray -- Chief Financial Officer

So what -- what I would probably do with you there, I would take you back rather than give you in just kind of total income guidance and kind of just refer to the -- the revenue guidance that we gave in February, which I'm -- I'm sure we'll get into more later as other questions kind of go on. But I would -- would go in -- in -- in that basis and we'll come into that I'm sure later.

Aman Rakkar -- Barclays Investment Bank -- Analyst

OK. Thank you very much.

Operator

Our next question is from Jonathan Pierce from Numis. Please go ahead.

Jonathan Pierce -- Numis Securities Limited -- Analyst

Good morning both. Thanks for the questions. I've got two actually. The main one is on the hedge.

I have to confess that I'm a bit confused about the margin guidance as it relates to the hedge drag. Because if -- if we think 3 basis points in Q1 and we're going to see something similar in Q2, then what happens toward the end of the year. But that applies the interest-earning assets is suggesting that is as if annualized impact each course over the next few quarters of about GBP 150 million, which given you're only rolling, I don't know, GBP 8 billion a quarter or something like that. It's pretty mechanical, right? I -- I -- the delta on the reinvestment rate is -- is huge.

It's -- it's sort of 150 basis points to 200 basis points, and that was before the benefit you're going to get from the scaling up of the hedge that you've just talked about. So I don't know whether I'm missing something here, whether you're being ultra prudent on the drag from the hedge that's coming true, maybe that's trying just abates completely into Q3 and Q4. But what am I missing on the hedge? The 3 basis points, of course, given where swap rates are at the moment is -- is just it's very big. 

Katie Murray -- Chief Financial Officer

Yes, I mean, I think the important thing just to -- to really reiterate there on the hedge is, you know, what we said in the speech. It's around 250 million impact full year on full year. You know, Jonathan, I know you understand our -- our hedge well, but just for the sake of others, it's -- it's all about sort of being very mechanistic and very consistent. You know, we've got the average size of 177 billion in Q1.

So we added 8 billion onto the hedge since year-end. So you're -- you're right by 8 billion a quarter. That's 20 billion since the end of 2020. We work the hedge on a rolling 12-month basis.

So if deposits were to stay stable as they are broadly stable as they are today, we'd expect a further 15 billion to come on over the next nine months, which would take the hedge size to 192 billion. Kind of further growth on that would be more upside. Clearly, some outflows would have a little bit of an impact. But given the rolling 12-month basis, it takes a little bit of time to come through on that.

You know, when we look at the -- the hedge, you know it's a blend of our product hedge with an average -- with our five-year maturity, an average life of two and a half years, an equity hedge with 10-year maturity, an average -- an average life of five years. And together, they have an average of kind of two point -- 2.9 years. We have -- we've given you these sensitivities around what would the 25-basis-point move do. So we know that in Year 1, it only adds about GBP 37 million.

But by Year 2, you see that increasing up to GBP 180 million. You know, when we did our base case budget, I think we would have seen the swap rate down at about 8 basis points. The current five-year is about 47 basis points. So you've got a delta of 39.

You can kind of work out what the math would do in terms of the yield compared with the growing of the -- the growing of the -- of the hedge and within there. So I want to reiterate, we're looking at 250 this -- this year, you know, as -- as long as rates under our expected volumes and stay -- stay the same. Jonathan, you said you had a second question. Sorry, I didn't give you a chance to ask it.

Jonathan Pierce -- Numis Securities Limited -- Analyst

Yeah. Thanks -- thanks for that. Yeah. The second question actually is just -- just much more simple consensus.

The income ex notable items for this year is down 3% on the -- the income last year ex notable items. I -- is that within the bounds of your, you know, slightly lower and consensus is being too optimistic, too pessimistic? I'm thinking in particular of the missing Q1 on -- on NatWest Markets, but if we're talking the rounds on -- on whether you are happy with consensus income this year that'd be helpful.

Katie Murray -- Chief Financial Officer

Yes. I mean, there's no change to our -- our '21 -- 2021 revenue guidance that we gave you in February so that gives you some guidance as well. So just to remind you what we said, we're expecting the 2021 income ex notable items to be slightly down on 2020, driven by the three factors: lending growth across the U.K. RBSI retail and commercial excluding, obviously, government schemes that will be above the market rate, we're comfortable with our performance on that in -- in Q1; the impact of the structural hedge we've just talked about; the reduction of 250 million, and I think Aman asked in the last question around the income reduction in NatWest Markets, so 2.8 to a billion.

If there are any few puts and takes, we, obviously, in February, talked a lot about the fact that we had a rate cut. Clearly, that's no longer there. We've got this soft curve movement. We've talked about a little bit of a longer lockdown but then at the same time, we're quite -- we can see a scenario of positive growth over where we are.

So I think, you know, we're comfortable and kind of in the right. And I think it still works. 

Jonathan Pierce -- Numis Securities Limited -- Analyst

OK. That's helpful, Katie.

Katie Murray -- Chief Financial Officer

Thanks, Jonathan.

Operator

Our next question is from Benjamin Toms from RBC. Please go ahead.

Benjamin Toms -- RBC Capital Markets -- Analyst

Good morning. Thank you for taking my questions. The first one's on the cost of risk. I think your guidance says it's all below through the cycle of 30 to 40 basis points.

I think the cost of risk of 30 basis points for 2021, takes into account the buyback in Q1, implies something like an excess three basis points cost of risk in the remaining three quarters of the year, given that you also need to update your economic assumptions of markets more positive outlook. Can you give us some more color on why you're not happy to get more positive on the cost of risk guidance? And then secondly, on buybacks, you've executed your direct buyback by 5%, and while you're saying that you now have to wait 12 months to do another one. I think that's also technically scoped to a general buyback although it's not favored by investors. Can you update your thoughts on this method of capital return for the rest of '21 versus special dividends? Thank you.

Alison Rose -- Chief Executive Officer

Great, thank you. Well, look, on -- on the cost of risk, I think we expect impairments to be -- to be low, and we will update our economic guidance at the half-year. And you know, I think as I said we are seeing the potential for a more rapid recovery to take place. If you look at the impairments that we've released, the 102 million in this -- in this quarter.

That's really reflective of the low level of defaults that we're seeing and -- and an improvement in the book and things migrating back from stage 2 to stage 1. So we would expect to be below 30 to 40 that would guide it. Katie?

Katie Murray -- Chief Financial Officer

Yeah, no, thanks so much, and good morning, Benjamin. You know when we look at the dreaded buyback, you're absolutely right. It's a rolling 12-month calendar, maximum 4.99%. So we did the transaction on the 19th of March, which means we could do it again until the -- the 19th of March next year.

You know at the AGM, last week, we would have sought permission and we'd received permission -- so I was only the speaker, a lot happens in a week. But to get to do an in-market buyback, I think, it's something -- well, you know, when we talk with investors our preference has always been directed. I think what we did at the UN was to be very clear in terms of the guidance that we wanted to return a minimum of GBP 800 million, which should be across a mix of ordinaries and specials in line with our dividend policy and to make sure that we had the capacity to do the directed buyback. We're very pleased that we managed to do that in -- in Q1 and I think let's see how the rest of the year unfolds.

But we've always been very clear, and our preference is to return capital to the shareholders.

Benjamin Toms -- RBC Capital Markets -- Analyst

Thank you.

Katie Murray -- Chief Financial Officer

Thanks, Benjamin.

Operator

The next question is from Alvaro Serrano from Morgan Stanley. Please go ahead.

Alvaro Serrano -- Morgan Stanley -- Analyst

Good morning. I have a -- a question on revenues, which is kind of the follow-up of what you've already touched on and then on -- on provisions. On -- on revenues -- I mean, I -- I duly noted that -- that you -- you stick into your guidance. But with a rate cut now out of the equation as bigger structural heads are steepening the stamp due to extension, you've obviously pulled back some of the sub-debt and -- and you're keeping NatWest Markets guidance.

So what's gone worse for you to keep your -- your overall guidance unchanged? And -- and are you building any buffer for NatWest Markets, given the slow start? I don't know if there's any change in seasonality that gives you more conviction that -- that 800 billion is still -- still valid. And -- and the second question on provisions, can you update us how much your money were -- your stock of -- of provisions relate to the management overlays and where it is? But I haven't seen it and I think it was close to GBP 900 million in -- in Q4. And is there any reason sort of assuming your -- your macro -- macro assumptions aside, any reason why we should -- I mean, you can release those over time? Thank you.

Alison Rose -- Chief Executive Officer

Great, thank you. Well, look, I -- I won't repeat what Katie has given you on the revenue guidance. I mean, as --as  I say, it's relatively early days in terms of, you know, coming out of lockdown. We are, as I said, we see the potential for more rapid recovery to take place and I gave me some information on what we're seeing around debit and credit card spending and activity.

I think we're -- we're seeing more muted recovery at the moment is in the commercial banking side where I think we're seeing our customers be, you know, very cautious. They've deleveraged quite significantly and well prepared for the recovery. And I guess the degree of commercial banking loan growth in 2021 remains uncertain. I think what you will see are three real sorts of dynamics coming through and we'll see more of that over the coming quarter.

Firstly, customer behavior in relation to paying down current government schemes. Secondly, how customers use the Pay As You Grow features as well as the new schemes and I can give you some more information on that if you'd like. And then, the degree and speed of the economy bounce back and that's where we -- we see, you know, more potential for more -- more rapid recovery. We also see an escape for growth within large corporates in areas such as infrastructure, ESG, lending, all of which will recover.

So I think we're -- we're not -- we're not seeing anything bad, we -- we actually see an opportunity there. On the NatWest Markets side, our guidance remains the same we're comfortable with our 803 billion revenue guidance as -- as the business completes its refocus in which is steady-state. And it's making good progress and significant progress on reshaping the business. So I'm very comfortable in Q1 that business has performed well in the areas where we support our customers.

So there's been good, good growth. Clearly, we haven't had the same volatility in the market that we had last year but the business is performing in the way we expect it to. And -- and our guidance remains the same. Katie, do you want to pick up?

Katie Murray -- Chief Financial Officer

Yeah, no, let me -- let me -- I will pick up that -- that PMA question. Our PMA for ons -- for economic uncertainty, it's -- it's unchanged from the year. It's 878 million that we disclosed. You know, we're continuing to hold that at -- at that stage.

When we look at it, we're looking at to -- a lot of conversations turning to what would be the hurdles you -- that would need to cross to trigger that release. So if I look at some things, for example, in retail you would reference factors such, obviously, as unemployment, what's happening in your arrears trends, what's happening in your high-risk sectors. For wholesale, you're looking at variables such as the performance of all of the different wholesale sectors as well as what the government scheme debt performance is -- is doing in terms of take-up of further schemes and deferral of debts. We expect to be continuing to assess this economic adjustment, you know, each quarter over the next  -- the next 12 to 18 months, I would imagine, there's no specific timeline on when we would release it.

I would say, overall, I don't want you to go where you're thinking that it means we're going hold it in perpetuity until that time. I think it will be a number that will start to evolve as we get later on this year, and we start to see the real impacts of what's actually happening in the economy. But at this stage, it feels the appropriate thing is we've literally just left lockdown to continue to hold that.

Alvaro Serrano -- Morgan Stanley -- Analyst

Very clear. Thank you.

Katie Murray -- Chief Financial Officer

Lovely. Thanks, Alvaro.

Operator

The next question is from Andrew Coombs from Citi. Please go ahead.

Andrew Coombs -- Citi -- Analyst

Good morning. I can have -- you both answer my question actually so let me just throw you one, which is on the FCA investigation. Obviously, you have flagged this in your annual report previously. There was news there in March and I think the case is due to be heard on the 26th of May.

In your commentary, you talk about the substantial potential cost for provisions, but my understanding is that this investigation is into a single customer and it's around 365 million that's being investigated. So can you just elaborate on A, if there is any provision that's already been built for this case, and B, what your definition, broadly speaking, of substantial as concise inspired by the wording in the context of what's being investigated? Thank you.

Alison Rose -- Chief Executive Officer

Thanks. Well, look, I -- I think, as I said, we're disappointed by the announcements, obviously, but we have been fully cooperating with -- with that. There's nothing more that we can say at -- at this point. The only other thing I would iterate is how seriously we take our money laundering and financial crime responsibilities, it's an area of a significant investment that we have in the business.

We have over 4,000 people are doing that as they have their full-time job. But beyond that nothing further to add to this point.

Katie Murray -- Chief Financial Officer

The only one thing I would add onto that is that there's a confirmation that we have not taken any provisions and, Andrew, you wouldn't -- I think you expect me to do a definition of what substantial might mean, as it would be quite dangerous of a number -- a number out there as a -- as a point of negotiation. So -- but no provisions at this point and we're -- we're comfortable with all the points Alison made. Thanks very much.

Andrew Coombs -- Citi -- Analyst

Thank you.

Operator

Our next question is from Omar Keenan from Credit Suisse. Please go ahead.

Omar Keenan -- Credit Suisse -- Anlayst

Good morning. Thank you very much for taking the question. I just had a quick question on -- on customer behavior and what you're seeing since the -- the exit from the lockdown. Just on Slide 5, the debit and credit card spending, it's very helpful.

I think it was in the middle of April. Do you have any data, perhaps a -- a little bit later than that? And just on a related question on -- on the corporate side. So from what you've seen so far, what kind of clues have you got on business behavior with respect to the business loan schemes and how much they might pay down? I -- I think you've given a number historically of what the utilization rates wherever of those loans versus what may just be sitting inactively in deposits on the balance sheet. So any color there would be very helpful.

Thank you.

Alison Rose -- Chief Executive Officer

Sure. So I think we -- we've given you some sort of data on activity on debit and credit card spending that -- that is tracking. Let -- let me talk about the -- the government lending schemes and give you a little bit more color. So in terms of -- as you know, our lending under the government schemes is around 14 billion.

In terms of the Bounce Back Loan, around 20% to 30% of the cash that has been borrowed on but that is still sitting in the current accounts of the businesses. On the -- the new schemes that have launched, so the Pay As You Grow scheme that -- that launched on the 6th of April. As -- as yesterday, we've had 14,000 applications coming through the -- the Bounce Back Loan Pay As You Grow portal as we call it. And of that 75% of the applications coming through are asking for an extension where customers can extend from 6 to 10 years.

Now, we -- we expect those volumes to increase quite significantly. We've recently written to 100,000 of our customers to give them 60 days notice that their first payment under the Bounce Back Loan is starting in 60 days and that -- that would be the trigger for the application in the Pay As You Grow. So I think the behavior that we will expect to see is something that you'll start seeing more data on. I think initial -- very, very early days show, you know, a reasonable uptick in requests for taking that extension.

And I think, you know, at this point we -- that's not what -- that -- that's exactly what we would expect if you are a small business. Bear in mind, most of these loans are average size, 37,000 pounds, you know, extending them for 6 to 10 years as you come out of lockdown to give you a bit more breathing space I think is not an unexpected behavior we would expect to see. But I think as the economy in the lockdown sort of releases and businesses come back online, I think, you'll either see them paying down their loan, commencing repayments, or extending through the Pay As You Grow. But that's the early data that we're seeing at the moment.

Omar Keenan -- Credit Suisse -- Anlayst

That's wonderful. Can I -- can I just have a quick follow-up question?

Alison Rose -- Chief Executive Officer

Sure.

Omar Keenan -- Credit Suisse -- Anlayst

So the 20% to 30% of the cash that still for taking in the current accounts with the businesses, how -- how has that changed since a couple of months ago? I think I remember a 50% number but could be mistaken.

Alison Rose -- Chief Executive Officer

No, it hasn't changed significantly. We haven't -- so for example, we haven't really seen the cash burn that we've -- we've talked about of people spending the money. I think as -- as businesses come out of lockdown, the -- the question and the dynamic -- behaviorally you may see is them using that cash for working capital purposes as -- as they ramp up. But -- but broadly that's -- that's stable.

And I think it's really then -- as the trigger point really is the loans start falling due for repayment. So if you think about the history, the -- the bulk of drawdown -- the big rump of drawdown and application of Bounce Back Loan was in May, June, July. And so May, June, July is when those loans will start falling for their first repayments and I think that is the trigger point at which you'll see whether they will repay their loan, whether they'll advance to the Pay As You Grow or -- or use the cash for working capital purposes. So I think we'll get more granular data over the next quarter that we can share with you.

Omar Keenan -- Credit Suisse -- Anlayst

Lovely. Thank you.

Operator

Our next question is from Martin Leitgeb from Goldman Sachs. Please go ahead.

Martin Leitgeb -- Goldman Sachs -- Analyst

Yes, good morning. Could -- could I have three, please? And the first one, I think along with your earlier comments on excess capital and, obviously, the intention to return it to -- to the shareholders. You also mentioned that you -- you might look to pursue other options, which might be accretive to shareholder value. And I was just wondering if you could shed a bit of light what you mean with that.

Are these potentially -- potential deal similar to the mortgage book acquisition last year in -- in terms of size, or could this be potentially bigger items? Secondly, I was just wondering if you could elaborate on your credit card strategy in the U.K. I mean, you've made a tremendous progress in increasing mortgage stock share over the years and where the market share of NatWest compared to the current currency remains markedly below is -- is -- is credit card, in particular. How should we think about progression of particular share gains going forward as the economy recovers? And thirdly, just to come back to the -- to the unchanged revenue guidance on the back of 1 p.m. yesterday, slightly improving the guidance.

So, just wondering what is driving that -- that conservatism if -- if so. Is this essentially a view that mortgage competition could continue and potentially mortgage growth could slow, or other way around? Are you still targeting 13% flow share or is this simply -- could this be driven that NatWest Markets is obviously a range of GBP 800 million to GBP 1 billion? And given the first quarter current that we might end up toward the low end rather than you outlined? Thank you.

Alison Rose -- Chief Executive Officer

Great. Thank you. Well -- well, look, I -- I think we've answered the revenue guidance. I think Katie went through the sort of three buckets of that and -- and we are pretty confident about our position and -- and no update to the guidance.

We've been pretty clear on NatWest Markets as well. So, I -- I don't think there's anything more I can add to that. In terms of capital and our position now, you know, I'm very clear, my clear preference is with -- to return capital to our shareholders. We have a capital generative business and we intend and expect to operate within a CET1 ratio of 13% to 14%.

We have robust capital levels as you can see and we're at an 18.2% now on CET1. And my intention is to distribute capital to shareholders and we're giving you the guidance of the minimum GBP 800 million. In terms of other options, we would look at other options that we would consider would be accretive of value to shareholders. So, the Metro mortgage acquisition that we made is a good example of something that adds value to shareholders, is in line with our strategic priorities and -- and aspirations, and areas of growth.

So, we would always look at those options opportunistically and proactively, but it would be in -- in those sorts of ranges. But clearly, preference is to return capital to shareholders. On the credit card strategy, as you know, that's an area where we have significant capacity to grow and we would look to grow in the unsecured space within, you know, strong risk appetite. And we are starting to see a good uptick in that space, so I think that is an area which David Lindberg is very focused on as an area that he will look to grow and he can probably give you a bit more detail on that when we have the spotlights later in the year.

Martin Leitgeb -- Goldman Sachs -- Analyst

Thank you very much.

Alison Rose -- Chief Executive Officer

Thank you. Thanks, Martin.

Operator

Our next question is from Joseph Dickerson from Jefferies. Please go ahead.

Joe Dickerson -- Jefferies International Ltd. -- Analyst

Oh, hi. Most -- most of my questions have been answered, but I just -- just -- can you describe briefly the philosophy around that? I know it gets -- we ask it like every other quarter, but I suppose just in the -- in the current rate environment, why wouldn't you be more dynamic with -- with the hedge in terms of duration, etc., in addition to, you know, the amount that you're deploying into the hedge? Thanks.

Katie Murray -- Chief Financial Officer

And thanks, Joe, and good -- good morning. I think the -- the thing for us is we're not looking to take punts on where rates are and -- and where they're going. This is about being consistent and mechanistic in our approach. It's an approach that served us incredibly well over the -- the last number of years rather than taking actions in one quarter that you could regret in quarters to come.

So, we're -- we're very comfortable in the way that we -- that we manage this, and it's growing nicely in terms of the size of it. And I -- as I said, we expect to get another GBP 15 billion on -- over the next nine months and -- and that will -- will benefit us. And if the rates continue to improve, well, we will -- we will take the upside as it comes through. But very comfortable with the approach, rather than taking erred punts on what might be happening on the interest rates at any one time.

Joe Dickerson -- Jefferies International Ltd. -- Analyst

Thanks.

Katie Murray -- Chief Financial Officer

Thanks, Joe.

Operator

And our next question is from Ed Firth from KBW. Please go ahead.

Ed Firth -- KBW -- Analyst

Good morning, everybody.

Alison Rose -- Chief Executive Officer

Good morning.

Katie Murray -- Chief Financial Officer

Morning.

Ed Firth -- KBW -- Analyst

I -- I just have two questions. Hi. The first question was the fixed income business in NatWest Markets. I -- I just wondered if you could help us understand a little bit what's going on there.

Because my recollection was that the reason you were restricting the size of that business or -- or making it smaller with the focus on customers and produce a more stable income stream. And yet, I'm looking at the quarterly numbers in your financial supplement and, I mean, it's like a random walk. It's anything between minus GBP 12 million and plus GBP 230 million a quarter. So, I'm just going to get a sense of what, you know, what -- what drives that business? And -- and can we -- can you give some sort of idea if -- is it going to stabilize soon or was it something one-off in last year that was sort of throwing it around.

And -- and if so, can you, you know, roughly what sort of level might it stabilize at. So, I guess that's -- that's my first question.

Alison Rose -- Chief Executive Officer

Yep.

Ed Firth -- KBW -- Analyst

And then the second one question with on -- on surplus capital. You -- you talk a lot about group surplus capital, but I guess we can all see the SPAC of it. It's -- for example in someone like [Inaudible]. So, I'm just trying to get a sense what -- what -- actually, you must know the numbers.

So, I guess could you -- could you just tell us or -- or give us some indication of how much surplus is actually at group and distributable today, I guess, is -- is the easiest way I could ask that question.

Alison Rose -- Chief Executive Officer

OK. Thank you. Well, look, on NatWest Markets, what I would as -- as you know, we -- we're strategically refocusing that business and the team are making good progress in -- in Q1 so that the FX and capital markets income was in line with our expectations. And rates income was lower due to reduced activity levels across the markets.

And also, our rates income was also impacted by a one-off in the quarter from a -- an LME exercise. But -- but in terms of having that business focus around the areas that we wanted to in supporting our customers, it's doing exactly what we wanted to do. So -- and -- and --

Ed Firth -- KBW -- Analyst

That one-off -- what -- what -- sorry, could you give us sort of roughly what -- I mean, so, orders of magnitude so we can sort of -- get some sort of idea of what a run rate might be?

Katie Murray -- Chief Financial Officer

I think, Ed, my mind's got a little blank to see [Technical difficulty] was about GBP 50 million in terms of the number and that was -- that was in -- in that piece. Look, if -- if I look at how I -- I would look at the numbers. So, we've said GBP 800 million to GBP 1 billion. What we've also said is currencies are going to be relatively stable.

You know, capital markets, that's where our -- our co-work is that's working with our -- with our numbers. You can then see the revenue share, the revenue share doesn't impact rates. The revenue share are not given if capital intensity is not there. And then that kind of gets you to our -- well, the rates is kind of the -- the balancing number of what might goes -- go on.

You know and you're being a little bit naughty saying looking at the -- the numbers over the last number of quarters, we made very specific decisions because we didn't like the volatile -- volatility of this business in -- in -- in history. So, I think what we will get to is a kind of a steady-state number where the business is -- is balancing as it should be in that GBP 800 to GBP 1 billion number in -- in terms of -- of that place. And in terms of cash, we're sitting with at the holding company just not -- I mean, happy to share that with you. It's about GBP 4 billion is what's sitting there today.

So, I mean, we're -- there's no -- there's no issue at all around our capital commitments. We've got the cash in the right place to be able to meet that. So, there's -- there's no -- there's nothing hidden in -- in terms of the numbers -- the numbers there. And --

Ed Firth -- KBW -- Analyst

No. No. That's great.

Katie Murray -- Chief Financial Officer

In terms of the -- all of the capital commitments that we've made over -- over the years.

Ed Firth -- KBW -- Analyst

The GBP 4 billion and that's -- that's above your MDA is that effectively --

Katie Murray -- Chief Financial Officer

Comfortably. I mean, where there's --

Alison Rose -- Chief Executive Officer

Very -- very, very comfortably.

Katie Murray -- Chief Financial Officer

It just possibly not -- not an issue in terms of -- and clearly, that number will move as dividends flow up and within the group as well. So, if you ask me in a few weeks, we will give a different number again. But I wouldn't look for ghosts in terms of the capital distribution around where capital's sitting. There are -- there are none.

Ed Firth -- KBW -- Analyst

No. No, that's perfect. Great. Thanks very much.

Alison Rose -- Chief Executive Officer

Thanks.

Katie Murray -- Chief Financial Officer

Thanks, Ed.

Operator

Our next question is from Chris Cant from Autonomous. Please go ahead.

Chris Cant -- Autonomous Research -- Analyst

Good morning. Thank you for taking my question. I just wanted to come back on the -- the hedge again, I'm afraid. And I -- I understand you -- you don't want to take some -- some -- the -- on the rates market as you put it.

But I guess do you -- do you worry that you're leaving money on the table at the moment? And again, thinking about some commentary from your nearest domestic peer yesterday, they have improved their guidance on the track from GBP 400 million to GBP 300 million. And I -- I don't think previously they were assuming a rate cut this year and you -- you were previously assuming the rate cut this year. You've come from a more modest improvement in that -- that guidance, and obviously are not being as -- as proactive in the hedge. So, I just wanted to -- to get your view on whether that's something you might revisit in the future.

And in terms of the -- the longer-term outlook for the hedge, could I invite you to comment on what you expect the drag to be into 2022 and 2023? Again, thinking about some of the commentary from your nearest competitor, they do not expect a drag in 2022 at all, for example, year over year. And then on the -- on the NatWest Markets and to the previous question, could -- could I just confirm, is that -- is that GBP 50 million negative one-off in the rates business which you have not put as a notable item in terms of how you presented the numbers this morning. I just wanted to make sure. It seems like a notable item, but -- yeah, could I just confirm that I heard that correctly? Thank you.

Katie Murray -- Chief Financial Officer

Thank you. So, and Chris, let me deal with that last point first. Obviously, the -- the -- it's an LME, it was an -- an internal LME. So, actually it sorts itself out for the groups, so, therefore, the result is -- is not a notable item.

But on that line within their NatWest markets results, it -- it is obviously of interest in that line, so it is not a notable item for the group. If -- if I look at the -- the hedge, you know, and because I -- you -- you understand the hedge balance, I won't go through the whole kind of long question. But what we know is the kind of 25 basis points kind of uplift is GBP 37 million in Year 1, 180 million in Year 2. So, clearly, given the spread where it is today, that will be a -- a kind of -- a further benefit into -- into Year 2 as well.

And that will -- will grow a little bit given the -- that we're putting a bit more on in -- in terms of -- of -- of volume. But it's not something that we're looking to change our approach on. You know, it's -- we spend a lot of time looking at it, talking about it. But ultimately, when you look at it on a multi-year basis, we're very comfortable that we're doing the right -- a right approach.

You know, and we're very comfortable that we provide the clarity and visibility for you so that you're able to see what -- what we're doing in -- in that -- in that space. Thanks for the question, Chris.

Chris Cant -- Autonomous Research -- Analyst

Could -- could I just ask the -- the -- where's the other side of that LME just in terms of our understanding of the divisional numbers. I -- I presume there's a --

Katie Murray -- Chief Financial Officer

It -- it -- it will -- it will -- I mean, it will come through the center. That -- it will -- it will disappear on -- on consolidation.

Chris Cant -- Autonomous Research -- Analyst

OK. All right. Thanks.

Katie Murray -- Chief Financial Officer

To end it, the center as you know is always a mishmash of many things. The number -- the number -- that number is not big enough to -- to color anywhere, particularly. Thanks, Chris.

Chris Cant -- Autonomous Research -- Analyst

Thank you.

Operator

Our final question for today is from Guy Stebbings from Exane BNP. Please go ahead.

Guy Stebbings -- Exane BNP Paribas -- Analyst

Morning, Alison. Morning, Katie.

Alison Rose -- Chief Executive Officer

Morning.

Guy Stebbings -- Exane BNP Paribas -- Analyst

I'm afraid to ask you another question that you've answered. So, can I just come to RWA surplus? So -- and in fact, it's GBP 165 billion today even pro forma for some of the volume growth. The regulatory change at the start of next year. And some credit migration to the 2022 guidance, those look quite conservative.

I think you said, Katie, the -- the extent of where you sit in that range will depend on -- on the extent of credit migration. But is it not possible if credit migration is quite modest, you could even below that range? Am I being too optimistic there? And then the second question, just on -- on India. So, I think you got quite a sizable middle back-office operations in India. So, I just wondered whether the current situation there is having any impact on -- on how you operate.

Any associated costs with that? Thank you.

Alison Rose -- Chief Executive Officer

Thank you. Well, in -- in terms of -- in terms of -- let me -- let me take India. So, we do have back-office operations. In India, we're working very closely with our team.

There are no operational impacts from what's happening. Clearly, we're very concerned on behalf of our colleagues in India with the situation. We're putting a lot of support in there and -- and have, you know, relieved some of the pressure just in -- in order to help the -- the human side of the equation for our colleagues there who are doing a great job. But -- but no -- no business impact.

And as -- as you know, we have no direct customer call centers or service centers in -- in India, although we do have some web chat services. But no -- no disruption to business in all of our instant management operational side. And -- and our main focus is really on supporting our colleagues at the moment in what's a, you know, pretty tough situation. On -- on RWA, look -- look, I think we've -- we've given you the guidance.

I would say we've been surprised by the resilience of the credit environment and I think the ongoing government support measures have clearly -- they've lasted longer than we anticipated, and -- and the tapering off of that I think is really -- you will start to see price cyclicality if it's going to come in later in the year. But yes, absolutely, it is possible that we will come in below that guidance if the price cyclicality doesn't come through. I think the dynamic we're all -- all -- all managing is clearly the support measures have been extended which we think is very helpful. The economy is opening up, the lockdown is ending, so as I said, I -- we're seeing potential for a more rapid recovery to take place and -- and the opportunity for businesses to get going again and recover faster means that that price cyclicality is either deferred or may not come in as much.

So, it is possible and that's something we're obviously keeping a very close eye on.

Guy Stebbings -- Exane BNP Paribas -- Analyst

OK. Very helpful. Thank you.

Katie Murray -- Chief Financial Officer

Thanks, Guy.

Alison Rose -- Chief Executive Officer

Great. Well --

Operator

There are no more questions at --

Alison Rose -- Chief Executive Officer

Thank you. Well, look, thank you very much for your questions. As always, Katie and I really appreciate you taking the time to join us. As I said, we -- we're happy with the performance this quarter.

We're on track and delivering on all the guidance that we gave you, a -- a strong, good operating performance in our core franchises. I think, as you will see, we are taking an appropriate and conservative approach to impairments and we'll update our guidance at the half year. But we are seeing potential for a more rapid recovery to take place, so we are cautiously optimistic. I'd like also just to remind you later on in the year, we have our "Meet the Exco" Spotlight.

So, we'll be putting a spotlight on the commercial bank in NatWest Markets. That's on May 20, which will give you a chance to talk to our team more directly there. So, I hope you'll be able to join us for that. But thank you very much.

Duration: 67 minutes

Call participants:

Alison Rose -- Chief Executive Officer

Katie Murray -- Chief Financial Officer

Aman Rakkar -- Barclays Investment Bank -- Analyst

Jonathan Pierce -- Numis Securities Limited -- Analyst

Benjamin Toms -- RBC Capital Markets -- Analyst

Alvaro Serrano -- Morgan Stanley -- Analyst

Andrew Coombs -- Citi -- Analyst

Omar Keenan -- Credit Suisse -- Anlayst

Martin Leitgeb -- Goldman Sachs -- Analyst

Joe Dickerson -- Jefferies International Ltd. -- Analyst

Ed Firth -- KBW -- Analyst

Chris Cant -- Autonomous Research -- Analyst

Guy Stebbings -- Exane BNP Paribas -- Analyst

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