Barclays PLC

Good morning, everyone. My opening comments will be short today, given that it was a pretty straightforward quarter. Today we've announced that Barclays earned 1 billion pounds of attributable profit in the first three months of 2019. We earned 6.3 pence per share. The profit before tax was 1.5 billion pounds, with positive draws driven by a 3% reduction in costs versus a 2% reduction in revenue. Our group cost-to-income ratio was 62%, a modest improvement over last year. And we will continue to target a ratio of 60% or better over time. From a revenue perspective, the UK produced another solid quarter. Within the CIV, investment banking fees were weak. But for the sixth consecutive quarter, we outperformed our U.S. peers on average in the markets business, which, like Q1 last year, generated a double-digit return on tangible equity. Turning to capital, our CT1 ratio was 13%, with group risk-weighted assets broadly flat year-on-year, though we did have a typical seasonal increase in the first quarter versus Q4 of 2018, which is what you'd expect. Within that total, there were actually significant increases in the risk-rated assets allocated to our consumer franchises versus Q1 of 2018, both in Barclays UK and in international cards and payments, while the risk-rated assets allocated to our CIB declined year on year. The positive effect of that change and mix may be seen most clearly in our international cards and payments business. where a 20% increase in capital allocation year-on-year contributed to an increase in profitability of over 20%, while delivering a return on tangible equity of 15.4%. Our tangible net asset value was 266 pence, which represents the fourth quarter in a row where we have grown Barclays' book value. Our total operating expenses in the first quarter were 3.3 billion pounds. In 2016, we took a charge of just under 400 million pounds to allow us to better align variable compensation accruals with the firm's revenues. What you see in the first quarter is Barclays using this discretion around variable compensation to manage our costs and help deliver expected profitability. And I would add, if we have continued weakness in our revenues like we saw in the first quarter in the investment bank's fee income, we will seek to further manage costs. Now let me turn to the leadership changes I announced earlier this month. The reorganization had two goals. First, to put under Ashok Bhatwani oversight of the execution of plans in our global consumer banking and payments businesses. As technology sweeps the financial industry, particularly in payments, we need to harness the unique platform that we have at Barclays. The payment space may be the biggest opportunity and challenge the bank will face over the next decade. It is also great to have Matt Hammerstein, representing Barclays UK, join the executive committee reporting directly to me. The second goal is was to have a more granular execution focus and oversight on the businesses within the corporate and investment banks, and accordingly to bring the CIB closer to me as the group's CEO. So I welcome Alistair Curry, Steve Dayton, and Joe McGrath to the group executive committee. This portfolio of businesses in our transatlantic consumer and wholesale bank gives us the best opportunity to put the recent path of Barclays behind us. and simply execute towards the returns that our shareholders expect. That said, let me be clear. Management is very aware of the execution challenges we must still meet in order to deliver acceptable returns on a consistent basis, particularly in the corporate and investment banks. We are confident, however, that this management team can meet the challenge, given the enormity of what we faced three years ago. Barclays then was without strategic direction. The operational and control issues were acute. The bank was undercapitalized and only occasionally profitable. And we faced enormous litigation and conduct issues, all of which we have addressed. So a 9.6% return on tangible equity in the first quarter of this year is a good step towards our objective of delivering greater than 9% in 2019. Now let me hand it over to Tushar to walk you through the numbers in detail.

Thanks, Jeff. I'll begin with the group results and then give some brief comments on each of the businesses. As Jeff mentioned, profit before tax was $1.5 billion compared to the statutory loss of $0.2 billion last year. I'm pleased to note that litigation in conduct was not material in this quarter, but it was $2 billion last year, with the profit excluding this decreased 10%. I will exclude litigation in conduct charges in my commentary as usual. Group ROTE was 9.6%, with a double-digit return in both BUK and BI. Income was down 2%, but we reduced costs by 3%, delivering positive jaws. The income environment has been challenging in Q1, particularly for the CIV. Regardless of conditions, cost control will remain a critical focus throughout the year, as we pursue our 2019 ROTE target of greater than 9%. Impairment was up $116 million year-on-year, were down £195 million on the Q4 impairment figure, which included the specific charge of £150 million to reflect economic uncertainty in the UK. Importantly, delinquencies remain stable. We can't predict macroeconomic changes with precision, but the credit environment remains benign. The effective tax rate was a little under 17%, and attributable profit was £1 billion. Fee now of £266 was up £4 in the quarter, driven by earnings per share of 6.3%, despite currency and pension headwinds, and TNAV is up 15 pence across the last four quarters. The CC1 ratio is in line with our target of around 13%, down slightly on year-end, reflecting the seasonal increase in RWAs. Looking at the businesses in more detail, starting with BUK. BUK reported an ROP of 16.4% to Q1, up slightly from 15.7% on an increased equity allocation. Both income and costs were broadly stable. Overall income was down seasonally on Q4, with NII reflecting Q1's lower day count. Year-on-year growth in deposit balances and mortgages was offset by continued NIM erosion, reflecting both product mix and competitive pressures. We mentioned that in Q4 we had pulled back from some of the more aggressively priced product categories. This affected our completions in Q4 and Q1, with net mortgage additions of $0.6 billion in Q4 and $0.3 billion in Q1. However, mortgage pricing has improved slightly in Q1, and we are having application volumes at significantly higher levels than in Q4. Our increased focus on secured lending continues to have a mixed effect, with a minimum of 318 basis points in Q1, down from 320 in Q4, and I expect slight downward pressure to continue. However, we expect volume growth to contribute to a higher income run rate in the remaining quarters of the year. Costs reflected our continued investment in the digital transformation of the business I mentioned at full year that we expected the 2019 investment spend to be weighted towards the first half of the year, and we would expect negative draws in Q2, but positive draws in the second half, and for the year as a whole. And PEM was just under the 200 million run rate we've referenced in the past, and delinquencies are stable. Turning now to Barclays International. CI delivered an ROT of 10.6% for the quarter on an income of 3.6 billion. The main drivers of the year-on-year decline were a decrease of 6% on income, reflecting the challenging income environment faced by the CID, and an increase of $152 million in impairment due to largely the non-recurrence of favourable macro forecast updates in Q1 last year. Looking now in more detail at CID. Overall, income was down 11%, but we reduced costs by 9% as we cut compensation accruals, reflecting the income environment, and continued to implement cost-efficiency programmes. With the income decline, we saw resilient performance, particularly from the FIC businesses. Markets overall were down 6% in sterling or 12% in dollars, but FIC was up 4%, comparing favorably with U.S. peers through and principally by rates, which delivered significantly improved performance. This reflects previous management changes and investment in technology, and as usual, the FIC performance reflected CDA and EVA, both of which were headwinds year-on-year. Equities was down 21% year-on-year, with weakness in derivatives in common with US peers. Banking decreased 17% year-on-year, with fees down particularly in acquisition financing. However, our market share of global banking fees, based on Geologic data, was up slightly on full year 2018. So the banking franchise remains in good shape, with a strong pipeline, and as we've said in previous quarters, the timing of fees can be lumpy. The corporate income line was down 13%, reflecting steady performance in transaction banking, but a decline in corporate lending income, due to both the reduction in lending in 2018 and a significant negative mark-to-market on hedges in Q1. The underlying corporate lending income for the quarter was around $200 million, which excludes the mark-to-market, but the figure does include the running costs of credit protection. The mark-to-market losses on hedges were high due to our policy of taking a conservative approach to hedging exposure, particularly in leveraged finance, and credit spread tightening and other market moves through Q1. The negative other income line, which included the CID share of the net treasury result in Q4 and in prior quarters, is now allocated out to the other business lines. There was an impairment charge of $52 million compared to a net release of $159 million, with no recurrence of the favourable macroeconomic forecast updates we saw last year. RWAs increased by £5.7 billion from the seasonally lower year-end level, but allocated tangible equity was down slightly year-on-year, with RWAs reduced by more than £4 billion over the same period. The ROT was 9.5%, excluding litigation in conduct, or 9.3% on a statutory basis. Whatever the income environment through this year, we will remain very focused on cost control, and you can see the Q1 number as a statement of intent in this regard. Filling out the consumer cards and payments. We continued to generate attractive returns in CCP while growing the business. ROPE was 15.4% on an increased equity allocation, and income grew 6% driven by U.S. cards. Currency was favorable with a 6% year-on-year sterling dollar move, but we also saw U.S. card receivables increase by 6% in dollars, adjusting for the LLD portfolio which we sold in Q2 last year. As we highlighted at full year, A share of the BI net treasury result is reflected in the income line. This was a smaller negative than Q4, but still a headwind year-on-year. Again, the airline portfolios, notably JetBlue and American, saw double-digit growth. The balance decline from Q4 was in line with the normal Q1 seasonality. Costs increased as we continued to invest in the growth of the international carbon payments businesses. Impairment was down 59 million, year-on-year at 193 million. and well down on the seasonally high Q4 level of £319 million. Absent significant macroeconomic development, we would expect Q4 to be the seasonally highest quarter for impairment this year, with Q1 the lowest. Turning now to head office. Head office was relatively simple this quarter, with negative income of £95 million reflecting the excess levity funding costs we put through head office. This year we were counting for the after-final dividend in Q1, in line with the dividend declaration date, and this offset the hedge accounting drag that we have flagged in the past, which will continue through the rest of the year. I'd also expect around 100 million negative Treasury items through the head office income line spread across 2019. We've announced that we will call the 14% RCIs at the end of Q2, which will benefit the incoming head office by about 65 million per quarter from Q3. Costs of 52 million, excluding litigation and conduct, were broadly in line with the usual run rates. Below the PDT line, the preference share redemption has reduced the non-controlling interest charge. Group costs were down 3%, $3.3 billion for Q1. We're leaving our cost guidance of $13.6 billion to $13.9 billion for 2019 unchanged. However, I want to stress that should the challenging income environment of the first quarter continue, we expect to reduce 2019 costs below $13.6 billion. Key cost levers we will review throughout the year are further flexibility in compensation costs, particularly in the CIV, depending on the income performance, and prioritisation and adjusting the pace of investment spend. GX has improved cost efficiency, driving operating leverage and enabling capacity to invest, with flexibility in the phasing of this spend. Cost control is important in achieving our return target, but we will balance this with the group's longer-term interests and opportunities. PNAV increased in the quarter by 4 pence to 266. Earnings per share of 6.3 pence were partially offset by net reserve movements, including the dollar currency headwind and pension surplus re-measurement. Q1 showed the usual seasonality in our capital ratio, with the increase in RWAs of 7.8 billion offsetting the 39 basis points contribution from profits. There was also the regular Q1 headwind of 8 basis points from vesting share awards, which we did not neutralise through new share issuance. As a result, the CC1 ratio finished the quarter at 13%. The RWA increase reflected higher activity levels at the end of the quarter in CID and 1.6 billion from the implementation of IFRS 16 for operating leases. We continue to feel confident in our ability to generate capital and remain comfortable with a capital ratio of around 13%. As you know, we paid a dividend of 6.5 pence for 2018 and have indicated some progression in 2019 We remain confident that going forward, our capital generation will fund both our investment plans and increase distribution shareholders. We also have a strong leverage position. At Q1, the average UK leverage ratio was 4.6%, slightly up on 4.5% at Q4, and flat year-on-year. The spot leverage ratio was 4.9%, comfortably above the 4% minimum UK requirement. We monitor leverage daily, but continue to view it as a backstop capital measure strategy. with the risk-based measure being the primary management ratio for the group. Our funding and liquidity position remains strong. Our loan-to-deposit ratio of 80%, down from 83% at year-end, reflected conservatism in light of the Brexit uncertainty at the end of the quarter. We have diverse price funding sources, including roughly two-thirds coming from both consumer and wholesale deposits, which are not directly ratings-dependent. So we aren't overly reliant on wholesale funding markets, either at a group level, or in the respective businesses. We're well on track to meet our future MREL requirements, currently at 27.7%, compared to an expected requirement of around 30%. We issued $2.2 billion in the year-to-date, in line with our current plan to issue around $8 billion in 2019, compared to the $12 billion we issued in 2018. The Q1 issuance included $2 billion of AT1, which we continue to view as a valuable and cost-effective element of our capital stack and funding structure. As most of you will be aware, we issue MREL out of our holdstow in line with the Bank of England's preferred structure, and MREL represents just 8% of our overall funding. The liquidity coverage ratio was 160% at the end of the quarter, with a liquidity pool of £232 billion, which represents just under 20% of our balance sheet, positioning us conservatively in light of the continuing Brexit uncertainties. So to recap, we remain on track in the execution of our strategy. We reported an ROT of 9.6%, excluding litigation and conduct, for 9.2% on a statutory basis, and continue to target ROT of greater than 9% and 10% for 2019 and 2020, respectively, based on a CT1 ratio of around 13%. We remain very focused on cost control and will continue to monitor the income environment closely throughout the year. We reported four consecutive quarters of team now decreasing, and we are at our CT1 target of around 13%. Thank you, and we'll now take your questions. And as usual, I would ask you limit yourself to two per person.

If you wish to ask a question, please press star followed by one on your telephone keypad. If you change your mind and wish to remove the question, please press star followed by two. When preparing to ask your question, please ensure that your phone is unmuted locally. To confirm, press star followed by one to ask your question. First question today comes from Joseph Dickerson of Jefferies. Joseph, your line is now open.