According to the IMF's World Economic Outlook update in April 2009, the UK economy will contract by 4.1% in 2009. Considering this bleak outlook, we expect overall lending growth to moderate during the year. However this will be partially offset by the firm's efforts to expand in emerging markets. Consequently, although loan growth in traditional markets is expected to be slow, we expect Net Interest Income (NII) to grow robustly over our investment horizon. However, we expect non-interest income to fall as a result of the BGI spin-off. Meanwhile, we expect disruption in credit markets to have an ongoing impact on trading income, while the UK's weak property market and rising unemployment are expected to aggravate non-performing loans and defaults, driving up provisions for loan losses.

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