The macroeconomic environment is facing heightened uncertainty, in particular from protectionist trade policies, creating volatility in both economic forecasts and financial markets and adversely impacting consumer and business sentiment. Supporting our clients through this volatile period is our top priority. The Group is well-positioned to manage the impacts of these challenges through our highquality revenue streams, conservative approach to credit risk and strong deposit franchise.
We continue to target a mid-teens return on average tangible equity (‘RoTE') in each of the three years from 2025 to 2027 excluding notable items, and we continue to expect banking NII of around $42bn in 2025 based on our latest modelling, acknowledging the outlook for interest rates has become more volatile and uncertain
We expect ECL charges as a percentage of average gross loans of between 30bps to 40bps in 2025 (including loans held for sale balances).
Our targeted growth in operating expenses in 2025 compared with 2024 remains approximately 3%, on a target basis. Our cost target includes the impact of simplification-related saves associated with our announced reorganisation, which aims to generate approximately $0.3bn of cost reductions in 2025, with a commitment to an annualised reduction of around $1.5bn in our cost base expected by the end of 2026. To deliver these reductions, we plan to incur severance and other up-front costs of $1.8bn over 2025 and 2026, which will be classified as notable items.
Given current levels of uncertainty and market turmoil, we expect demand for lending to remain muted during 2025. However, over the medium to long term we continue to expect mid-single digit percentage growth for year-on-year customer lending balances. We continue to expect double-digit percentage average annual growth in fee and other income in Wealth over the medium term.
We intend to manage the CET1 capital ratio within our medium-term target range of 14% to 14.5%, with a dividend payout ratio target basis of 50% for 2025, excluding material notable items and related impacts.