Investor Presentaiton
24
Asset quality metrics
Asset quality metrics reflect the solid performance of core loans to date
Balance sheet ECL provisions (£'mn)
158
150
200
Gross core loans by Stage (£'mn)
as % of
5.8%
5.1%
10.4%
7.1%
3.2%
3.3%
2.8%
2.1%
gross
core
loans
1.5%
2.2%
1.9%
1.7%
subject to
ECL
Of which
Ongoing
1400
107
101
100
67
108
Stage 3
1200
■Stage 2
1000
50
31
42
35
■Stage 1
27
800
37
27
32
14
0
600
FY 2019
FY 2020
FY 2021
FY 2022
ECL coverage ratio
FY 2019
FY 2020
FY 2021
FY 2022
400
576 576
Stage 1
Stage 2
Stage 3
of which Ongoing Stage 3
0.20%
0.40%
0.26%
0.25%
200
4.7%
5.4%
3.4%
3.5%
0
33.9%
23.5%
28.2%
24.9%
30.4%
23.0%
26.8%
1,242
992
Stage 2
319
379 332
291
Stage 3
16.7%
The management ECL overlay totals £16.8 million at 31 March 2022 (£16 million at 31 March 2021; £21
million at 30 September 2021). This is a £4.2 million release since 30 September 2021 to reflect the
increased modelled ECL given greater downside weighting as well as the reducing impact that the COVID-
19 pandemic has on management's underlying assumptions offset by the increasing impact of greater
global uncertainty with respect to the Russian invasion of Ukraine, as well as wider supply chain issues.
The management ECL overlay seeks to capture the significant level of judgement required in the
application of the macro-economic scenarios as well as the ongoing uncertainty in the UK and global
operating environment that is not currently captured completely by modelled outputs.
Notwithstanding the partial release in management ECL overlay during the second half of the year, the
overall coverage for Stage 1 and Stage 2 remains elevated at 31 March 2022, reflecting the ongoing
uncertainty and deterioration of forward-looking macro-economic scenarios, particularly with respect to
inflation.
■FY19 FY20 FY21 FY22
Overall asset quality improved in FY2022:
Stage 2 exposures reduced to £992 million or 7.1% as a proportion of gross core loans
subject to ECL at 31 March 2022 (31 March 2021: 10.4%), but still remain elevated relative
to pre-pandemic levels reflecting the continued uncertainty in the macro-economic
environment, particularly with respect to inflation. The decrease in Stage 2 loans was
predominantly driven by the transfer of loans back to Stage 1 resulting from the updated
forward-looking macro-economic scenarios
Stage 3 exposures reduced to £291 million at 31 March 2022 or 2.1% of gross core loans
subject to ECL (31 March 2021: 2.8%) due to a number of successful exits from existing
Stage 3 positions offset by limited new defaults. These exposures are adequately
provisioned. Stage 3 coverage reduced due to certain exits (and requisite write-offs) of
previously provided for exposures.View entire presentation