Barclays PLC

Welcome to the Barclays Third Quarter 2020 Analyst and Investor Conference call. I will now hand you over to Jess Bailey, Group Chief Executive, and Tushar Mazari, Group Finance Director.

Good morning everyone, and thank you for joining us today. First of all, let me say that I hope you and your loved ones have been keeping safe and well. It feels like the last time we did one of these calls was a long time ago and in a very different world. Obviously an event like the COVID-19 pandemic changes priorities and inevitably makes individuals and companies like ours focus on what's really important right now. For us that means running the bank safely and properly, helping our customers and clients through the difficulties they face, supporting the UK economy and the communities where we live and work, and taking care of our colleagues around the world. We've been able to do that because of the underlying strength of our business and the resilience of our diversified model. And I've been especially proud of the way my colleagues across Barclays have listened to the challenges of this extraordinary time. So I want to start today by taking a few minutes to set out how we've been responding to the crisis. Our business touches half the households in the United Kingdom. We know that some of our customers are facing very real and very daunting financial challenges. And this is a worrying time for the vast majority, regardless of their circumstances. We've moved quickly to give them the reassurance and support they need. To give you just a couple of examples, so far we've granted repayment holidays on 94,000 mortgages and on over 57,000 personal loans. We're providing an interest-free buffer on overdrafts for 5.4 million customers. And beyond that, we've reduced and capped charges until at least July. We've waived late payment fees and cash advance fees for 8 million Barclays Card customers and granted some 87,000 payment holidays. 655 branches remain open across the United Kingdom, providing vital banking services while our teams are fielding around 260,000 calls a week. That's 44% higher than the typical volume. And I'm really pleased that we've been able to proactively identify NHS and key workers among our customer base and move them to the front of call queues as their time is especially precious at this moment. Getting businesses through this period intact is crucial to give the best chance of a rapid and sustainable economic recovery. It is also in our shareholders' interest. The UK government has put huge resources into supporting that ambition. And it's a central topic of every conversation I have with ministers. It is an unprecedented effort by them and by the Bank of England. And we're committed to playing our full part to help get that support to the businesses that need it. We have now approved some 3,760 civil loans with a total value of 737 million pounds. And we expect those numbers to increase rapidly in the coming weeks. Behind those numbers are stories of businesses and jobs surviving this crisis. Take the Titanic Brewery in Staffordshire, a local favorite selling three million pints in a normal year through its chain of pubs and beyond. We helped them secure a one million civil loan and put in place a 12-month payment holiday on an existing loan with us. That has allowed the business to keep producing and selling beers online, protecting jobs, and allowing them to pay their furloughed workers full wages. Or the Queensberry Hotel and Olive Tree Restaurant in Bath, which I've been to. This family-run four-star hotel has had to shut its doors due to the coronavirus. But with our help, they were able to get a 450,000 civil loan quickly. That loan means that they can cover running costs, their staff are able to be furloughed rather than laid off, and they'd be able to retain their hard-earned Michelin star, which would have been forfeited on closure. Make no mistake, interventions like these are making the difference between survival and failure for businesses. And we're pleased to be playing our part in keeping them going. We've also been central in helping larger businesses to access the Bank of England and Treasury's CCFF program, arranging billions in commercial paper for UK corporates over the past few weeks. In addition to our backing for those government schemes, we've also been able to provide significant help of our own to our business clients. For example, we've waived everyday banking fees and overdraft interest or charges until June for 650,000 of our small business customers. And we've put in place 12-month capital repayment holidays for most SMEs with loans of over 25,000 pounds. And we're continuing to extend credit to companies, and there are 50 billion pounds of lending limits available to our UK clients. We're not stopping here though, and we'll continue to evolve our approach in offering to clients, big and small, to help them through this crisis. Because it is crucial that we preserve as many businesses and jobs as we can to aid the recovery when it comes. Barfield has deep roots in the communities where we live and work, and I'm proud of everything our colleagues do year-round to support the local areas, and never more so than now. That includes going way above and beyond for our customers to help them in any way we can. Whether that's our colleague, Glenis Wilson, who's in a contact center in Sunderland, helping a customer in dire straits to access charitable support, and making a goodwill payment from us to see that customer through a tight spot. Or our colleague, You Know a Mystery, in Hyde, bringing vulnerable customers to see how they're doing, and then getting an ambulance for a gentleman who is obviously having difficulty breathing. Or our colleague, Caroline Pearson, in the Harrow and Edgeware branch, helping an -year-old customer keep a special promise to her grandson by guiding her through buying on his birthday a pair of trainers online. These are just three small stories in hundreds up and down the country where our people are working beyond their professional obligations to support customers. We are carrying on delivering our core citizenship programs such as Life Skills and Connect with Work, with a particular focus on helping mitigate the impact of COVID-19. But we're trying to do even more. For example, where we can, we're now offering colleagues four weeks paid leave to volunteer to support health and social care work, helping those impacted. And as you saw, we launched a 100 million community aid package, made up of 50 million in grants for charity partners in the UK and our international markets, and 50 million to match colleague donations. That equates to up to 150 million pounds from Barclays and our colleagues deployed to help communities and people hardest hit by the crisis, from providing food to vulnerable families to purchasing protective equipment for NHS staff. We understand that our fortunes are intertwined with those of the communities and economies we serve, and at times like these more than ever, our obligation is to support them. And we're going to continue to do that and prioritize that effort throughout this crisis. In recent weeks, we've also taken a huge step towards ensuring our broader sustainability as we laid out an ambition to be a net zero bank by the middle of the century. That means reaching net zero in terms of direct and indirect emissions by 2030. And for the business activities we finance across the world, we're going to align our entire portfolio to the Paris Agreement, starting with the power and energy sectors. We've also committed to increase our green financing to 100 billion pounds by 2030. This represents a comprehensive and bold package of measures which we are putting forward at the annual general meeting on the 7th of May. Finally, and before I hand over to Tushar to take you through the numbers in detail, I want to briefly set out some overall thoughts on our performance in Q1. The impact of COVID-19 came late in what was until that point a very good quarter. That said, the performance of the business since then has demonstrated clearly the resilience of our universal banking model, rooted in diversification by business line, geography, and currency. So while, as you'd expect, returns were down in Barclays, UK, in any consumer card and payments, the corporate and investment bank performed well, producing an ROTE of 12.1%, in particular via support for clients in a period of extreme volatility in the capital markets, where our FIC revenues in dollars grew 98%. Sustained cost discipline and positive jaws in our CIV delivered a group cost income ratio of 52%. That's better than our target of less than 60% of our time, in our lowest quarterly group cost income ratio since 2011. Overall, the group return on tangible equity for the quarter was 5.1%. Given the uncertainty around the developing economic downturn in the low interest rate environment, 2020 is expected to be challenging for our business. That said, we continue to believe that a sustainable group ROTE above 10% is the right target for Barclays and attainable over time. We've taken in the first quarter a 2.1 billion credit impairment charge, of which 1.4 billion is a result of applying a very challenging forecast through our credit models, but we think this is prudent. Even after this, Barclays generated 913 million pounds profit before tax in the quarter, three and a half pence of earnings per share, an attributable profit of 605 million pounds. The group remains well capitalized with a C-31 ratio of 13.1%, and we will manage our capital position through this crisis in a way which enables us to support customers and clients whilst maintaining an appropriate headroom above our maximum distributable amount, which is currently at 11.5%. As you know, in the sponsor request with the PRA, we canceled the 2019 four-year dividend payment. The board will make a decision about future dividends and capital return policies at the end of 2020, when the full impact of COVID-19 on our bank is clear. So to conclude, in summary, my colleagues and I are today primarily focused on what matters right now, which is supporting our customers and clients, our communities, and the wider economy to navigate the pandemic. The strength of our business and the resilience of our model means we can run this bank safely and properly and provide that support until the crisis passes. And I believe that we will emerge on the other side in a strong position to support the recovery and generate attractive returns for our shareholders. Now I'm gonna hand over to C-Sharp to take you through the performance for the quarter in detail.

Thanks, Jeff. I'll summarize the results for the first quarter, which as Jeff mentioned, demonstrates the benefits of our diversified business model. We are facing a period of great uncertainty, which make it particularly difficult to give forward-looking guidance. But where possible, I will try to give pointers for the coming quarters. We reported a statutory profit before tax of 0.9 billion, generating 3.5 pence of earnings per share. Litigation and conduct was immaterial this quarter, but as usual, I'll reference the numbers excluding litigation and conduct for consistency with prior periods. Profits were down on last year, reflecting a material increase in the impairment charge, resulting from the estimated effects of the COVID-19 pandemic. But the ROT of .1% is underpinned by a strong income performance, which demonstrates our diversification. However, given the uncertainty around the economic downturn and low interest rate environment, we expect 2020 to be challenging. We continue to believe that above 10% ROTE is the right target for Barclays Overtime, but we need to see how the downturn plays out before giving any medium-term guidance. The grew income 20%, reflecting strong performance in CIB and resilience in BUK and CCP going into the downturn. Costs were stable year on year, delivering strong positive draws. As a result, pre-provision profit increased by 1 billion to 3 billion. However, the impairment charge increased by 1.7 billion to 2.1 billion. This increase comprised 0.4 billion single name charges and 1.35 billion Net of IFRS 9 model-driven increases, reflecting the effect of running a revised COVID-19 scenario as our basic case estimate and an oil price overlay, which I'll come back to later. The forward-looking nature of IFRS 9 requires that we estimate expected credit losses. So we have taken significant additional impairment above that implied by current credit metrics, many of which do not yet reflect the effect of the pandemic. The CET 1 ratio was down from the year-end level of .8% to 13.1. This reflects strong pre-provision profitability and the cancellation of the fully N19 dividend payment, more than offset by higher RWAs as a result of market volatility and increased client activity and the effect of impairment. There's a strong quarter for PNAV, which increased to 284 pence, reflecting 3.5 pence of statutory EPS and net positive reserve movements of 19 pence. Before I go into the performance by business, a few words on income, impairment, and costs overall. The quarter showed the benefit of the diversification of our income across consumer and wholesale businesses. The increase in group income reflected 44% growth in CIB, driven by a particularly strong quarter for markets, which was up 77%. While our consumer businesses showed resilience in Q1, with income declined to just 4% in both CCP and BUK, we expect those businesses to experience further material pressure on income as the effects of the pandemic feed into consumer behavior. On the next slide, I'll go through some of the income headwinds we have seen across these consumer businesses. We have seen interest rate reductions in Q1 in response to the COVID-19 pandemic, which are affecting both BUK and our US consumer businesses. This will result in margin compression and lower contributions from our structural hedges. On spending, as you see on the right-hand chart, we have started to see significant reductions in spend on credit cards and across payments more generally in March. We've seen a continued reduction in interest earning lending in UK cards and now also in US card balances, which will feed into lower income, although this may also be expected to mitigate the risk of increased impairment on extended balances. To support customers in BUK, we have taken specific actions that will reduce income, notably from overdrafts and support for SMEs, as well as starting to feel the effects of the lower spending on customer balances. Looking now at costs. With a 20% increase in income and stable costs, the group delivers strong positive jaws and the cost income ratio reduced from 62% to 52%. Given the income headwinds I've referred to, we don't expect the cost income ratio to remain at this level through the rest of the year. There are also additional costs relating to the crisis, excuse me, including the 100 million community aid package, suspension of future redundancy programs, and incremental operating costs. On the other hand, travel expenses and marketing, for example, will be lower. We have relatively limited short-term flexibility in costs outside the CIB, particularly in the current circumstances. We will be in a position to implement additional cost plans if appropriate, as we get a clearer picture of the length and depth of the downturn. Cost efficiency certainly remains very important to us, whatever the environment, and we continue to target a group CIR of below 60% over time. I've mentioned the significant increase in impairment resulting from implementing the COVID-19 scenario and from single name losses. As you can see, the increase is most pronounced in CIB as a result of the single name corporate losses and estimated effects of a sustained period of low oil prices. And in CCP, where the US unemployment assumptions have a significant effect on the ECL build. I've shown on the next slide a breakdown of how we built up the charge. The model impairment calculated during the quarter prior to running the COVID-19 scenario generated a charge of 0.4 billion. In addition to this, we charge another 0.4 billion in respect to single name wholesale charges in the CIB, some of which have been affected by the onset of the pandemic. The remainder of the increase reflects the 1.2 billion net impact from using the COVID-19 scenario as our base case, reflecting forecast deterioration in macroeconomic variables. We've shown on the slide some of the key UK and US macroeconomic variables used, including peak unemployment rates of 17% for the US and 8% for the UK. We've also included in this net impact the estimated effect of government support and central bank actions in both UK and US. Finally, we included an overlay of 0.3 billion to reflect the increased probability of a sustained period of low oil prices. The 150 million overlay for UK economic uncertainty held at year end is observed within the COVID-19 scenario. The modeling is subject to inherent uncertainty with respect to forecasting incremental credit losses, so there are likely to be further elevated impairment charges in the coming quarters, depending on how the economic downturn translates into cash losses. We'll provide an update at Q2, but it's difficult to give more precise guidance at this stage due to the level of uncertainty. However, I did want to highlight how the increased impairment provisioning has increased our coverage ratios. This slide summarizes the loan books, impairment bill and resulting coverage ratios for the wholesale and consumer portfolios. You can see that the impairment bill in wholesale is largely driven by the effect of the oil price overlay and provision for stage three single name balances. In unsecured consumer lending, however, I would highlight the increased coverage ratios of both stage three and stage two loans. Many of the latter are not yet delinquent, reflecting our conservative risk positioning over recent years. However, we have provided .4% coverage under the COVID-19 scenario, and close to 23% on stage two balances overall. Turning now to the individual businesses. BUK reported an ROT of .8% for Q1, with income down 4%. I mentioned some of the income headwinds BUK's facing earlier. Going into a bit more detail on these. In Q1, we saw further reduction in interest earning lending in UK cards, and we expect the decline in spending to contribute to that trend. In addition, the expected headwind from the change in overdraft pricing will now be amplified by the suspension of certain overdraft charges to support our customers during the pandemic. The recent rate moves in response to the developing downturn also started to affect the latter part of Q1. This is expected to have a negative effect of around 250 million for the full year. I highlighted at Q4 the debt cells in BUK, which were concentrating in the second half of 2019. With a total of over 120 million across the year. We had immaterial debt cells in Q1, and in the current environment, our program of debt cells planned for 2020 may be pushed into 2021. One positive in Q1 was the continuing growth in mortgage balances, up a further 1.8 billion in the quarter, and pricing also improved compared to previous quarters. The downturn is obviously having a significant effect on mortgage applications, although we still have a flow remortgage business. Meanwhile, deposit balances continue to grow maintaining the loan to deposit ratio at 96%. Overall, as I indicated at Q4, NIM was already expected to fall to below 300 basis points and reach 291 basis points for the quarter. We now expect the additional headwinds and further decline in interest earning lending on cards to take our full year NIM into the range of 250 to 260 basis points. Cost in the quarter increased 2%, reflecting higher restructuring spend. While cost efficiency remains important, we have limited flexibility to reduce costs until we have a clearer picture of the nature of the downturn, and also some additional costs coming in as a result of the pandemic, as I mentioned earlier. One of the effects of the current difficulties is to increase digital banking engagement. We remain committed to the digital transformation of the business, but we'll look closely at phasing of investment spend given the income environment. And payment for the quarter more than doubled to 481 million, reflecting the COVID-19 scenario, although arrears rates at 31st of March do not yet reflect the developing economic downturn. The charge going forward will depend on the length and depth of the downturn and the effectiveness of government support schemes. Turning now to Barclays International. The BI businesses delivered an ROT of .5% for the quarter, down year on year as income increased by 1.1 billion, more than offset by an increase of 1.4 billion in impairment. We'll go into more detail on the businesses on the next two slides. CIB delivered an ROT of .1% in Q1 as a strong performance in markets, more than offset the increased impairment provision. Income was up 44% at 3.6 billion, while costs were up 4%, delivering positive draws of 40%. Markets grew income to 2.4 billion, up 77%. This quarter included some net benefit from hedging counterparty risk, but the increase was driven by flow trading with increased client activity and the trading businesses capturing a good portion of the widen bid offer spreads as a result of the heightened volatility. Client flows have continued at healthy levels in April. While it's too early to guide for the quarter or indeed comment on the outlook for the rest of the year, our revenue run rate for markets is well above that of the second quarter of last year. First Macron Credit had a strong quarter with FIG income roughly double last year. Equities increased 21% driven by flow derivatives, which benefited from high levels of volatility. Banking increased 12% reflecting improved performance in DCM and advisory despite a lower fee pool. Looking forward, the industry deal flowing banking overall has reduced as the downturn has started to develop, although some areas such as investment grade DCM remain active. I've talked before about the effect of mark to market moves on loan hedges on the corporate income line. This quarter, we have had significant positive marks on hedges, but also significant downward marks taken through the income line on our leverage loan commitments. Overall marks on the leverage commitments were 320 million negative, while marks on the hedges were 275 million positive. Both these elements are likely to be volatile over the coming quarters, so I'll highlight them when material. The increase of 4% in CID costs included an appropriate crawl for performance costs. Impayment increased to 724 million driven by single name charges and the effect of the scenarios modeled, including the low oil price overlay. RWAs increased by 30 billion in the quarter to 202 billion, reflecting a stronger dollar and both increased client activity, including drawdown of loan facilities and the effect of market volatility. I'll come back to that when I talk about capital progression. The result of this, average allocated equity for the quarter increased to 27 billion, which generated significantly improved ROTE. Turning now to consumer cards and payments. While income in CCP was resilient in Q1, down just 4% year on year, the significantly increased impairment charge resulted in a loss for the quarter. US card balances were down 5% in dollar terms. While the effect of the downturn is uncertain, with reduced spending trends emerging in March, it is unlikely that balances will grow over the coming quarters and the income environment is expected to remain challenging. Costs were down 10%, resulting in positive draws and a reduced cost income ratio of 52%. However, if further income weakness develops, there is a limited amount of further cost flex we can implement in the short term. While the REIS rates have not yet responded to recent sharp increases in US unemployment, we have taken a very significant additional impairment provision, up almost 700 million as a result of running the COVID-19 scenarios at base case, including a peak unemployment rate of 17%. I'd also remind you that 84% of our US card balances were above our 660 FICO definition for prime lending. The payments businesses experienced a reduction in income following growth in recent quarters as a result of the reduced spend levels principally in the UK. Turning now to head office. The head office loss before tax of 99 million was down on the Q4 loss of 167 million and down significantly year on year. The negative income reflects the main elements I've referenced before. 30 million of residual legacy funding costs and residual negative treasury items, but hedge accounting this quarter generated significant positive income. This is expected to turn negative again in Q2. Q1 also included some mark to market losses on legacy investments and the final dividend will come into Q2 rather than Q1 this year. Going forward, there'll continue to be quarterly fluctuations but the negative income run rate is likely to be clearly higher than in Q1. Cost of 11 million contrasted with the usual 50 to 60 million run rate, driven by provision release related to the historic sale of a non-core portfolio. Going forward, we'll also be accounting for the 100 million community aid package within the head office cost line, which will take costs above that run rate in certain quarters. TNAV increased in the quarter by 22 pence to 284 pence. This reflected profits of 3.5 pence despite the very significant impairment build plus positive net reserve movements of 19 pence. The strengthening of the dollar contributed to a six pence movement in the currency translation reserve or the combination of lower interest rates but wider credit spreads, the positive effects on the cashflow hedge and pension reserves. The fair value reserve was affected negatively by the fall in the absolute share price and the rand. On capital, we began the quarter at a CT1 ratio of .8% and had guided for a Q1 move towards our previous targeted level of around 13.5 to be driven by the seasonal increase in client activity in the CIV. We closed the quarter at .1% as the expected seasonality was enhanced by the higher than anticipated client activity both in markets and in drawdown of credit facilities and the effects of market volatility under the Basel rules. Impairment took 69 basis points off the capital ratio as transitional relief on the charge for the quarter was limited and the rate of transitional relief on applicable impairment stock reduced from 85% to 70%. The downward pressure on the CT1 ratio was partially offset by the cancellation of the full year dividend which added 35 basis points to the ratio. We expect pro-cyclicality of RWAs to affect us further in Q2 and I'll say a bit more about the way we are looking at our capital requirement in a moment. But first I'll go into more detail on the RWA increase on the next slide. Here we've broken down the elements of the 130 basis points effect from the increase in RWAs. Lending in March, including drawdown on revolving credit facilities added 7.2 billion to RWAs accounting for 33 basis points of the ratio decrease. We've seen immaterial further drawdown so far in April. Counter-party and market risk RWAs each increased by around 8 billion respectively from a combination of normal seasonal pickup and the pro-cyclical effects of the Basel framework plus some currency effect. The overall effects impact on RWAs is broadly matched by the effect on CT1 capital. We expect some further pro-cyclical effects in Q2. Looking at the next slide at our capital requirement and how we are thinking about utilization of buffers through the developing stress. We've shown here our current capital requirement and how it has reduced to reflect the removal of the counter-cyclical buffer by the Bank of England in response to the COVID-19 pandemic. As a result, our MDA has reduced to 11.5%. So our Q1 ratio of .1% represents 160 basis points buffer currently. As I mentioned, we expect some further pro-cyclical increases to RWAs in Q2 as the downturn develops which will take the CT1 ratio to below 13% in Q2. We also expect some further reduction in our MDA hurdle in percentage terms over the stress period through some reduction in our Pillar-2A ratio requirement. With regards to Hedrum, our capital ratio has been strengthened over recent years to put us in a position to absorb precisely the type of stress we are now experiencing. In this environment, we will manage our capital ratio through this stress period to enable us to support customers while maintaining an appropriate buffer above the MDA. We are comfortable operating below our previous CT1 ratio target as the stress evolves and we'll continue to manage capital having regard to the servicing of more senior securities. Our UK leverage ratio at the end of Q1 was .5% on a spot and daily average basis while above our UK leverage requirement which is currently just under 3.8%. I would note that we expect the advanced implementation in Q2 of CRR2 rules on treatment of settlement balances to provide a meaningful benefit to our leverage position which pro forma would have increased our Q1 ratio to 4.7%. Finally, a few words about our liquidity and funding which position us well to withstand the stresses that are developing and to support our customers. Our liquidity metrics are strong and in the quarter with an LCR of 155% close to the year end level with a liquidity pool assets of 237 billion. This represents 16% of the group balance sheet with 66% of the pool held as cash at central banks. Our loan to deposit ratio reduced further to 79% with growth in deposits more than offsetting loan growth. On the loan side of the balance sheet, the main increase was in corporate lending including drawdowns on credit facilities, particularly in March. Deposit base continues to reflect our diversified sources of funding with most of the growth being in wholesale deposits including some deposits by corporates following drawdown on those facilities. Our funding profile remains in good shape with diversified sources and reduced reliance on short term funding. We have issued two billion equivalent of MREL debt in the year to date. Although spreads reflect the current economic environment, we still plan further issuance of roughly five to six billion across the current year subject to market conditions. Our MREL is at .3% close to our expected end requirement. So to recap, despite the initial effects of the COVID-19 pandemic, notably the elevated impairment chart of around two billion reported an ROT of just over 5% for the quarter. The performance from the markets business drove a 20% increase in group income on a stable cost base resulting in strong positive draws. Given the uncertainty around the economic downturn and low interest rate environment, we expect 2020 to be challenging. However, we continue to believe that above 10% ROTE is the right target for Barclays over time. We need to see how the downturn plays out before giving any medium term guidance. Our PT1 ratio of .1% reflected initial effects of the downturn when we expect some further pro cyclical increases in RWAs to reduce the ratio further in Q2. We plan to maintain an appropriate buffer above our MDA as we absorb the stress caused by the pandemic. Our funding and liquidity remains strong and put us in good position to support our customers and clients during this difficult period. Thank you, and we'll now take your questions. And as usual, I would ask that you limit yourself to two per person so we get a chance to get around to everyone.

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 your question, please press star followed by two. When preparing to ask your questions, please ensure your phone is unmuted locally. To confirm, that's star followed by one to ask a question. The first question on the line comes from Alvaro Serrano of Morgan Stanley, please go ahead.

Good morning, thanks for taking my questions. I've got one on provisions and another one on capital. Obviously the provision taking the quarters is a very credible and sizable provision, but I was just asking for some help about how could we think about the next few quarters about the total provisions we might see this year. I don't know from here if you can give us a bit of color of how the payment holidays are evolving and is this a metric we should look at in terms of the leading indicator of what provisions might look like or should we look at unemployment? And also one there on the oil price overlay provision, what oil price are you assuming? And the second question on capital, obviously you've said that you're gonna dip below 13% in Q2. During the quarter we've had quite a lot of exceptions given by the PRA in markets, RWA on wide reaches. There's also the IFRS 9 transitional sort of benefit. Can you help us quantify what the benefit was? And when I think about the RWA is going forward, is there a risk that some of this mitigation comes back? And is 13 and a half still your target? When I think about beyond this year or your discussions you might have at the end of the year around capital distribution, is 13 and a half percent still your, you would want to build, get close as 13 and a half before you distribute capital? Thank you.

Yeah, thanks Alvaro. It's Tushar here. Why don't I take both of those questions? So on provisions, I'll come on to capital. I mean, obviously it's a very uncertain, we're only sort of a month or so into this crisis. So these are difficult to forecast paths. But I think if our assumptions are correct around the economy as you've seen on one of our slides, I think slide 15, if that holds to be true, I think in terms of where we should go from here, first of all, start with our current sort of pre-crisis existing run rate of impairments. And that was running at about 400 to 500 million pounds a quarter. Think of that as sort of cash losses in any one quarter. You know, we've built sort of IFRS 9 provisions, sort of a book up of 1.4 billion. I think that's probably a reasonable proxy of additional cash losses that we would expect to have over the remainder of the year if our forecasts are right. So what does that mean? That means sort of our run rate in provisions would be somewhere, I don't know, 800 to a billion something in that sort of zip code. Now, I'd caveat that quite heavily. One is, you know, none of us know whether we've called the economic forecast correctly. We do have governments here acting to provide all sorts of measures of support. And, you know, we don't know sort of the effect of them and how they'll play out. And of course, there are different programs in the United States and in the UK and across individuals and businesses. So lots and lots of caveats, but you know, if we've miraculously forecast this all correctly, that hopefully gives you a sense of the run rate from this point on. In terms of metrics to look at, I think unemployment is probably the most important metric for us, again, complicated because of the government support and furlough schemes here. Payment holidays are important. And payment holidays in our unsecured books, which is probably where it's most relevant, are about 3% so far. So we'll see where that goes. I would say that actually in our unsecured book, spending of course is down. You see that in the GDP numbers, but alongside that, card balances are actually down. And that trend seems to be quite prevalent in April. Not so great for income, but obviously helpful for impairment. Now that may or may not change as consumer behavior sort of adapts. And the final thing, Varro, you mentioned oil. We've assumed a 50% chance of $20 oil remaining for the rest of the year. And we sort of took that assumption based on where we look at futures contracts in probably around mid-April or something, where the future strip was comfortably above that level. Obviously that'll fluctuate as the quarter goes forward. In terms of capital, yeah, in some ways, we've got to be, we're pleased that our capital ratio was above 13%. Obviously there's a lot that went through our capital ratio. The impairment billed itself was 69 base points, lots of RWA inflation, revolving credit facilities, and so forth. I think, as we said, we will expect to go below 13. I think you have seen the bulk of the prospectuality happen in Q1. There'll be some follow through, but it'd be much more modest. And whether that's the low point in terms of our capital ratio, again, it's somewhat driven by the economic path that we may be following down. But we'll see where we go from there. I think if things go back to normal, then .5% probably feels like the right level again, because on the basis that counter-sixical buffers and so forth are reset back to where they are. There'll be a natural flow back in RWA. I guess if counter-sixical buffers are phased back in, some of the RWA inflation that we've experienced will naturally ebb away as well. So there'll be a sort of a calibrating effect back there. But at all times, I think, we'd remain very appropriate levels, well above our MDA levels. I don't see ourselves going anywhere near that at this stage. But thanks for your questions. Very clear, thank you. Thank you. We have the next question, please, operator.

The next question comes from Jonathan Pierce of Newmouth. Please go ahead.

Good morning. Hello. Two questions as well, and actually they're again on provisions and then risk-weighted assets. On provisions, just wanna understand this transitional relief or absence of transitional relief. In the first quarter, I think, the stock is stage one and two, having fallen below the IFRS 9 add back, meant there was a true up as you went through Q1, and that's why you didn't get any substantive relief. What's the additional true up that's needed before we start seeing any transitional relief coming through, whether to be further stage one and two builds in the coming quarters? So that's question one. Question two, on risk-weighted assets, I guess the equity tier one dropping below 13% in the second quarter is probably pointing to, I don't know, maybe another four to 5% increase in risk-weighted assets over the next three months or so. You sort of alluded to this in an answer to the previous question, but is that the right sort of ballpark we should be thinking about? And maybe you can talk a bit more about the quantum of credit risk pro cyclicality, specifically within that. Thanks very much.

Yeah, thanks, Jonathan. Why don't I take both of them? The transitional relief for IFRS 9, as your probably as familiar as most, Jonathan, this is a devilishly complicated calculation. There's a few things going on here. In some ways, we got very little, as you rightly pointed out, transition relief in Q1. And that's just the way the calculation sort of falls. For us, obviously stage three, as you know, gets no transition relief. And then stage one and two, you had two effects going on there. You had the stock of stage one, two provisions, transitional relief falling from 85 to 70%. And then as you pointed out, there's various thresholds in there. We're not called out sort of how that may play out in Q2 because there's such an interplay between the various stages. And actually it's sort of more than one threshold as you're familiar with. You have DTAs and various other things like that playing around there. So I don't think I can give you sort of just a single number that will be helpful, Jonathan. But I don't think we'll, you know, it sort of depends on the path, but I wouldn't be expecting a whole load of transitional relief going forward if that's of any help. In terms of RWA inflation, again, very, very tricky to glide to this one for the second quarter simply because it's such an uncertain path that we're going through. All I would say though is we will definitely have some pro-six physicality flow through into the second quarter. I would say it will be much more modest than we've experienced thus far. And of course, the other thing that I think we should also point out is our MDA levels are probably likely to go lower as well. Even though our capital ratio is gonna dip below 13, you know, over the course of this year, I think you'd expect to see another step down in our MDA. And that's just, as you've seen in the Bank of England stress testing framework, the MDA levels get recalibrated in times of stress and I'd expect the same again over the course of this year. So I can't give you, unfortunately, Jonathan, a sort of a precise quantification into a Q2, but hopefully it gives you a sense of qualitatively where we should be going.

Yeah, that's helpful. Thanks, Tushar. Sorry, can I just come back on the first question or the answer to it? Are you saying that even if there was a further sizable increase in the stock of stage one to provisioning, maybe, I don't know, a billion plus, let's say, over the course of the rest of the year, I know that's not your assumption, but were that to happen, we wouldn't get any transitional relief of size on that either.

No, I wouldn't go, no, that definitely wouldn't be as black and white as that. It really much depends on the scale for one to provision build, stage one to provision build as well as interplay of various thresholds. So it's not a straight point. If it was a reasonable build, then I do think we would get some transitional relief. If it was a modest build, probably not so much. Okay, great. Thanks a lot, Tushar. Okay, thanks, Jonathan. We'll take the next question, please, operator.

The next question is from Joseph Dickerson of Jess Rees. Your line is now open.

Good morning, it's Joe. Just a quick question on cost. So you're annualizing at 13 billion of cost pre-levy in Q1, I guess. What are the moving parts around that as we go through the rest of the year? Just trying to dimension where we think you could be at the full year. I mean, you've set some limited flexibility outside of variable comp, so just trying to dimension that, but then a very good performance in the card piece. And then just on the regulatory capital ratio, I suppose given the commentary that you plan to dip below 13% in Q2, should we assume that it troughs in Q2, given you've called out in several areas that you expect the maximum pressure economically to occur in Q2?

Yeah, okay, thanks, Joe. Why don't I start with the question on capital, then I'll say a little bit on cost, and I think Jess will have some comment on cost as well. On the capital ratio, Joe, it is difficult to forecast simply because of the uncertainty around the economic path that we may or may not be embarking, and also the way in which impending will play through as well. But anyway, on the assumption that we've called it absolutely correctly, then I think it's a reasonable assumption to assume that once we get to whatever capital ratio we get to in Q2, we should be hovering around about those levels and perhaps even building up again over the rest of the year, but I'll put lots of caveats around that, it really does depend on so many factors. On cost, there's various sort of puts and takes. Look, I think first and foremost, you'd expect us to be as responsible as we can in terms of helping everybody get through very difficult circumstances. So to the extent we were gonna make future redundancies and sort of workforce changes, we will obviously delay that. We would expect ourselves to have lower attrition levels. Actually, some operating costs will increase. I'm sure Jess will talk about this, but you guys will be very familiar with this, but keeping sophisticated financial institution running when virtually everybody's working at home from consumer facing customer outreach to just even capital markets activity when we're trying to do capital markets raises, when virtually sales forces traders and investors all at home. I mean, it's incredibly complicated. So that probably has a degree of cost associated. Now on the flip side, we're not traveling obviously, we're not gonna be marketing as much. So I think there's various puts and takes. So at the moment, look, I don't think there's anything new to sort of say on costs from perhaps where we are, but Jess, is there any more comments you wanna add onto that?

Obviously in the first quarter, we landed a cost income ratio of 52%, so that should underscore a certain degree of prudence well below where we were last year. But I think the one thing I would repeat is we took the decision not to reduce our headcounts even though we had the opportunity to do that. I just don't think at this stage and in this current environment, we should be running down putting people out of work just to drive your costs down. So I think you should look at a roughly flattish number for the year.

Thanks, John. Thank you. We have the next question, please, operator.

We have a question from Rohith Chandra Rajan of Bank of America. Please go ahead.

Hi, good morning. I wondered if I could ask a couple around the cards and payments business, particularly in relation to the travel industry. So I guess firstly, U.S. cards, a lot of the co-branding is with airlines, which you talked about in the past. So I mean, if you could remind us how much of the U.S. cards business balance is with airlines and also a comment on what you're seeing in terms of volumes and the volume outlook and credit quality there. And then the second was really on the acquiring side. So a lot of travel firms and airlines are now, for cancellations, are now offering rebookings or vouchers rather than refunds. And anecdotally, customers are now looking to get chargebacks on their credit cards as a result to recoup the cash rather than taking the voucher. So I was just wondering what you're seeing there in terms of that sort of anecdotal evidence and what the impact is, I guess, particularly from an acquiring perspective.

Yeah, so on the travel side in our U.S. card, you're right, we've got very strong co-brand relationships with American Airlines and JetBlue and Hawaiian Air and whatnot. It's clear you've got the issue of the consumer spending dramatically less money, our receivables going down and we are connected to the airline industry. It does, however, these programs continue to be extremely important for the airline. So on that side, we are as a partner is elevated. Also, you may have seen, it's because of the race for the airline industry that we do a billion dollar equity raise for United last week. Very involved in the Delta financing as well. But you're right to point out, I think the U.S. card is in a struggle. The flip side, because we had that concentration in the airline industry, that gave us probably one of the highest average FICO scores of any credit card company in the U.S. So I think the sort of a balance, I think we will be less hurt on the impairment side. But by more hurt on the revenue side.

Yeah, I just add to that, right, which I guess is spot on, and the FICO scores of the book, we sort of, I think the standard definition of crime in the U.S. is 660. 84% of our book is greater than a 660 FICO. So although it's gonna be of the tough times in the economy, that does come out to us. The other thing I'll say is credit metrics, of course, are evolving all the time as we go through the crisis. And we have seen a tick up in delinquencies, both in UK and U.S. cards. Quite modest, about 10 betas points in UK card delinquencies and 20 betas points in U.S. cards. But towards the back end of April, we've seen that level off. So again, it remains to be seen, but although it's ticked up, it's leveled off already. Again, I don't wanna sort of say that that's what's gonna be the case for the rest of the quarter. We just don't know, but hopefully that's at least some additional color that may be useful. 17

% unemployment rate through three quarters. Can't get much more conservative than that and taking that provision in the first quarter. We shouldn't lose sight of that.

Okay, thank you. And on the, sorry, on the acquiring side, in terms of the risks from chargebacks.

Yeah, on the acquiring side, I don't think there's anything specific I'd call out on chargebacks. There's nothing sort of coming through in our metrics that that stands out as anything particularly unusual. Obviously, acquiring volumes are obviously dramatically down the GDP numbers, sort of give you a good sense of that. But in terms of other risks outside, just lower volumes, there's nothing I'd call out. Okay, thank you. Thanks, Roy. Can we have the next question, please, operator?

Of course, the next question comes from Guy Steadings of Exxon B&B Paribas. Please go ahead.

Thanks for taking my questions. The first one was just on Barclays UK and the new NIM guidance. You've obviously given a lot of color on the different headwinds to get there, but could you give us a sense of the phasing? I mean, it sounds like quite a lot will come in Q2, given the actions taken to support consumers and obviously the timing of the base rate move rather than sort of a steady decline. Is that fair? And I don't know if you could give us a sense of how much that decline is coming from those consumer actions, which hopefully should reverse next year perhaps. So that was the first questions. And then secondly, I just wanted to ask on the COVID business interruption scheme and some of the economics in particular, the sort of risk rates on average you might have against those loans on either the 80% guaranteed or the 100% guaranteed loan scheme. And from a leverage standpoint, presumably you have to recognize all the exposure, but if you could just clarify that would be great. Thanks.

Yeah, thanks. Thanks guys. Yeah, in the UK, I would say you'll still, you'll start seeing the full effect of all sort of, I guess, three, possibly four components of revenue headwinds come through in the second quarter. We've got obviously the impact of rates coming through. So what happens there is our assets reprice pretty much immediately, the deposits won't reprice until I think from memory July, just the standard protocols we have in the UK of writing to customers to giving them advanced notice. So in actual fact, you'll probably see NIM dip most in Q2 and then recover again in Q3 and Q4, everything else being equal. So we are spending, if you like, discretionary amounts for ourselves just to help customers through difficult periods. We think that's about 100 million pounds for this year and then over and above that, as along with many other banks, waiving various fees and charges, we think that's about another 150 million pounds. I think in terms of next year, again, it remains to be seen, this is a sort of a brave call on how the world will look next year, which is a quite hard thing to forecast only a month into this one. But there is, I guess, a view you could take, which is the temporary suspension of fees and charges not to apply next year, as well as some of the more discretionary things that we'll do. But in terms of just for your own models, I hope it came through my scripted comments, but just in case not, we would expect NIM in Q2 probably to dip again quite sharply simply because of the rate actions and then to recover again over Q3 and Q4, probably for a blended average over the full year. And then rate of something like 250 to 260 is probably about the level to be thinking about. On C-bills, I'll hand over to Jeff.

On the COVID-19, whether it's the 80% guaranteed program or 100% guaranteed program, there's a lot of discussion going back and forth and I must say that the British government, I think, is really trying, they are doing virtually everything they can to make these two programs successful, as are we. But I think everyone realizes that that guarantee is real and therefore the calculation of risk against that component of these loans that are extended, the PRA is looking at that, but I think you should consider that it'll have a very, very low risk-weighted asset to it. You think?

Thanks, big question. Could you clarify from a leverage point of view, if you don't mind following up, would you still have an offset for leverage?

Yeah, I mean, the numbers here are quite modest, guys. So if you think about how much we've extended through the C-bills program, I think Jeff will probably have literally the real time number, but it's something like 737 million. There you go, so 737 million. So it's pretty modest in terms of scale on the balance sheet. I mean, these are obviously relatively small individual loans. I think it's like 4,000 SMEs that these have gone out to. And for the larger corporates, where numbers can get much bigger, we've been very active in getting people to the commercial paper program run by both the UK and the US government. And I don't think we're allowed to give precise stats, but we're comfortably the largest participant in that program. And I don't know what the latest government published stats are, but we're gonna be the largest.

And the thing I think we

were very

active in opening the investment-grade capital markets from the $19 billion bond issue for the -Mobile-Sprint merger to $8 billion for the World Bank, et cetera, et cetera. And all these big capital market trades are also decreasing because it's much cheaper borrowing than going to your revolvers. So one of the issues that you'd wanna look at in terms of our leverage, et cetera, is how much are our revolvers being used? And with the opening of the capital markets as robustly, we saw last month some of the most highest levels of issuance that we've seen in decades, if not ever. That's taken a lot of pressure off the draw on our revolvers, which has pretty much been flatlined. And so that will also take pressure off our risk-related assets.

Okay, very helpful, thank you.

Thanks, but can we have the next question, please, off right now?

Your next question comes from Edward Firth of KBW. Your line is now open.

Yeah, morning, everybody. I just had two questions. The first one was just bringing you back to the CIB performance, and in particular, the FIC revenue. And I guess, just trying to compare and contrast the revenue and the cost performance. And I know you said in the call that you felt you'd adequately accrued compensation related to that revenue, but the revenue was absolutely startling. I mean, even if you compare it against peers, nobody's produced anything like that in terms of revenue performance. So I just wondered if you could talk a little bit more about what was driving that, and perhaps, you know, are there some one-offs in there? Is there a reason that you don't have to pay the people who delivered this revenue? And perhaps how we can imagine that might be going forward. And then I had a second question. Should I go straight ahead with that?

Yeah, do you wanna ask both of them, and we'll answer them together?

Just back on the C-bill question, not just both programs and the micro one. If I compare what's happening in the UK with, say, well, particularly the US, but also in Europe, the take-up has just been incredibly low and incredibly slow. And I can't imagine it's because our small businesses or our business community's finding life any easier, say, than the US or anywhere else. And obviously, you guys have been taking a bit of, not you personally, but the SEC has been taking a little bit of incoming about delayed approvals and being difficult. What's your steer on how that's going now? And perhaps, you know, the 330 billion total is the sort of top-line number. I mean, are you imagining that over time we will get to something like that? Or are we really talking about something, a scheme that's gonna be 10 billion at most for the sector, or we can broadly ignore

it?

Yeah,

thanks, Ed. Why don't I quickly say something on C-Builds, and then I think Jess can add some more comments on that and talk about fit performance. And I think we'll have to correct your statement about we don't intend to pay the people that were generating that performance, but I'll let Jess do that. On C-Builds, the only comment I'd make is, you know, first and foremost, I'd say, you know, the banks, I speak for ourselves, I'm sure I'm speaking for all the banks, though, are 100% committed to make these programs work. We are doing everything we can to extend credit, even in advance of sort of sometimes going through, you know, the full plethora of checks and balances and consumer credit act provisions and CONC, and, you know, these are very complicated programs to administer, and it's also a lot of pressure on the government to once we've approved an application for them to turn it around as well. So, first of all, I'd really stress that we are over 100% committed. We have people processing these things nonstop talking to clients, and remember, you know, we're not in our headquarter building anymore. Everybody's doing this in a distributed way in different parts of the country, with compliance officers removed away from bankers that are doing the underwriting, from risk managers that are approving the lines, et cetera, et cetera, et cetera. No doubt there's been, you know, some glitches in the operational efficiency of getting these done, but I think you're seeing the pace of a program really pick up, and it's getting quicker and quicker and quicker. Final thing I'll say, then I'll hand over to Jess, is the 330 billion sort of headline number, I don't think it's just, as I understand it, just C-bills, I mean, it's a full sort of suite of whether it's the commercial paper programs, C-bills, and, you know, furlough schemes and various other things like that. And, you know, one thing that we're very instrumental is in terms of making those payments on behalf of HMT for furloughed workers and all that. Actually, that spark is, we're the bank for HMT on that, so that's actually working remarkably well in terms of administering those payments. But why don't I hand over to Jess to finish that and talk about FIG?

Yeah, there's a tremendous amount of dialogue, you know, between myself and the Chancellor and the head of the Bank of England, et cetera, going through how do we evolve these programs to make them more and more effective and more and more efficient, and this is a very new frontier, so it takes us a while to get there. 330 billion, that was like a first stated and indicative number, but I think it's pretty clear if you read what the British government's up to, they're willing to go well beyond that. So, but Tushar's right, you know, we're all in this, all of us together, and we shouldn't underestimate the economic commitment that the government is making, and we need to partner with that. These would be-

So just to clarify then on the CBO, so in the context of the UK economy, you would expect those sort of three guarantee programs to end up being material in the context of the total UK economy?

Yeah, but I don't ignore the commercial paper program as well, which will be sizable, and you know, they've asked not to give that number out, but that'll be a sizable number. Okay. Yeah, I think this will make a material impact on the economy and should run for good be the time. But as Tushar said, don't underestimate the economic impact of the furlough program, the economic impact of giving money to local municipalities to deal with the leisure sector, and the, so, you know, as I said in the press call this morning, what we're seeing is two tsunamis hitting themselves at one time. You've got the tsunami of the extraordinary economic contraction with the tsunami of an extraordinary government response. Okay, thanks. And then -a-vis FIC, we've talked about that a lot this morning. I'll be very pleased with how the team did. Our numbers are not a function of going in with one position or not. It is very much driven by how we stayed very much engaged across all the asset classes with all of our clients. Obviously, you know, what happened for a period of time around liquidity and what that did with the most liquid markets from US rates to currencies was extraordinary to then the liquidity response from the governments and how that led to the buy side rebalancing their portfolios, which then led to an opening in the capital markets. And as I said, you had some historically high numbers. And we've said also that the first three weeks of April, we've continued quite a strong trend versus last year. But I also say, everyone here is committed to making sure that this bank is a firewall as we go through this economic crisis and that we'll look back in time and be very proud of what we've done. And, you know, the bank, you know, bankers do things not just for compensation. So, and we'll deal with that issue at the end of the year.

Thank you. Thanks, Norge.

Appreciate your question.

Can we have the next question, please, operator?

The next question is from Chris Kant of Autonomous. Please go ahead.

Good morning, both. Thank you for taking my questions, too, please. If I could just round out the discussion on the Barclays UK piece, just crunching through some numbers very simplistically here, your 250 to 216 M guidance for the full year, if I apply that to your 1Q average interest earning assets in the UK, that points to an NII number of about 5 billion, which is obviously down very material last year. Can I just confirm that's the number that you're looking for there? And trying to round things out, you've given us these numbers in terms of the different impacts from regulatory change and rates and things like this. I guess some of that is in the theme line. How much revenue pressure do you expect to see in other incomes specifically in the UK, please? I'm just trying to get a sense of how much further at 6.9 billion consensus revenue number needs to come down. And then if I could follow up the previous brief discussion on leverage, please. You've talked about being comfortable to run below your previous CD1 target. And in the past two, you've talked about expecting to run with something like a 5% UK leverage ratio, I think, at some of the analyst meetings. So you just printed 4.5%. Are you concerned or are you content for that to fall further and how low are you willing to go there, please?

Thank you. Yes, thanks Chris. Why don't I take both of those questions? In some ways, I'd let you sort of, and everybody else do the masses, however your models are set up in terms of projecting just the split between NII and other Cs. I'll give you the building blocks for that, which hopefully you call in the script, but just in case others may not have. I think you're probably a little bit low in the way you're doing that arithmetic. I think NII would be a little higher than 5 billion, but let me give you the building blocks. It's probably more direct.

The

way we think about it is for the rest of this year, assuming the rate curve is where it is, we'd expect about another 250 million of headwind on the top line just coming from rates. We'd expect about another 150 million headwind coming from, if you like, the temporary suspension of overdraft fees, charges, business banking fees, penalties for taking out cash from fixed deposit, all that kind of stuff. And then probably another 100 million pounds coming from other discretionary things that we're doing for our customers. So I think in terms of the NIM shape, as I mentioned, you'll see probably at the low point in NIM probably in the second quarter, and recovering again in Q3 and Q4 as deposit three price. Hopefully that's helpful, but I think the way you get to 5 billion is probably a bit lower than I would guide you to, probably a bit slightly above that. Just in terms of

5 billion, I'm just taking your 195 billion of average customer assets for three months and applying your 255 or 250 to 260 NIM guidance. Am I misunderstanding something there in terms of how you calculate your NIM?

Yeah, Chris, I won't go through the arithmetic in how you're doing it, but hopefully by giving you all the individual components of I think the income headwinds and letting you know that I think NII itself will be a little above 5 billion is of enough help there. On leverage, Chris, your other question, yeah, you're right. I think in, if you like, in normal circumstances, somewhere around a 5% UK leverage ratio sort of felt right to me, approximating to, sorry, accompanied with a 13 and a half or so CT1 ratio. As you pointed out, we're running at about 4.5 now on a daily average basis, same as we were in Q4. So our leverage ratio actually is, on a daily average UK basis has been pretty stable, both Q4 and Q1. Obviously our CT1 ratio has gone backwards. I think you don't suffer, as you're more than familiar with, you don't suffer the level of pro-cyclicality as you do in CT1, as you do in leverage. Obviously our balance sheet has got larger, but a lot of that's just a function of things like low rates rather than sort of asset inflation in a more traditional sense. So I think somewhere around 4.5, 4.5 probably is the level that we'll continue to run. Again, I've put huge caveats on that. We are living in a difficult to forecast sort of path, so it may bounce around there. You're probably also familiar that there is probably an accelerated change coming through the UK leverage ratio with respect to settlement balances that will improve the ratio marginally on a -for-like basis in Q1 and will be helpful for us in Q2. Okay, thank you. Thanks, Chris. Could we have the next question, please, operator?

Of course. The next question comes from Andrew Coombs of Citi. Your line is now open.

Good morning. Two questions, please. The first, in your opening remarks on payment holidays, I think you said 94,000 for mortgages, 57,000 on personal loans. Could you just give us an idea of what proportion of the book that is and also to what extent those customers were up to date with payments prior to taking the holiday? I'd assume it's the vast majority, but if you could just confirm. And then second, a broader question on strategy. You've always talked about the benefits of business diversification, different parts of the bank performing differently in different parts of the cycle. So do you think the current quarter vindicates your argument, and do you remain happy with the size and shape of the respective divisions? Thank you.

Yeah, thanks, Andy. Why don't I cover payment holidays and ask Jeff to talk about the diversification and whether the current quarter's a vindication, as you put it, on the strategy. Just in direct response to your first one, for mortgages, payment holidays represents about 10%. The vast majority of those were paying customers. So I think you've just seen a big rush forward for people just to take a three-month holiday. We're not overly concerned on that one yet. I don't wanna be too sanguine about these things, but that one I don't feel so nervous about. On cards, which is perhaps a slightly more sensitive one, it's about 3% on cards, which may be helpful. I mean, the reason why I'm sort of a little bit more sanguine on mortgages is of course the amount of sort of overcollateral in our mortgage book is very substantial. So we'll see where house prices go, but any forecast that we're seeing at the moment will be substantially overcollateralized on our mortgage book. Cards obviously are slightly different. Jeff, do you wanna talk about diversification?

I think having many of us have lived through a number of economic cycles, at least what we've witnessed before is that there is a certain kind of typicality between a consumer business and a wholesale business. And we talked about that in March of 2016 when we rolled out the universal banking model that we wanted Barclays to pursue, and we've been a defender of that ever since. What you're sort of seeing here is you're seeing a radical economic cycle happening in about a month. But who knows? I mean, there's a lot in front of us. But yeah, I think we very much are happy that we have this diversification, and do believe that the wholesale business will continue to offset to a certain degree, but we're probably gonna face in our consumer business for the

rest of the year. Yeah, I think Jeff is right. And I just remind people, we pressed this question earlier, there are definitely income headwinds on the consumer businesses that I called out. And on the sales and trading top line at least, we think, or we stated in our formal outlook that April's running at a level much better than Q2 last year. So I think we're seeing sort of the offsetting effects going on there, at least for the moment. Thanks for your question, Andy. Could we have the next question, please, operator? Yeah.

Your next question comes from Robin Downe of HSBC. Please go ahead.

Good morning, I think it's still good morning. Two questions, please. Can I come back to the RWA question? I think you said there's more post-siccality in Q2. But I guess just looking further out to the second half, I assume that we're not anticipating a great deal of loan growth and loan books might even shrink. And I assume that the market volatility would presumably ease in the second half of the year. So are you kind of anticipating that RWA assets might peak in Q2 for this year? That we could sort of finish at a lower level at the end of the year? And the second question, just, I apologize if I missed this somewhere in the statement, but I couldn't obviously see it. From the oil perspective, if I think back to your disclosures in your ESG reports, you have a sort of relatively modest drawn exposure for the fairly substantial undrawn exposure to oil. And clearly you've had some quite big drawdowns at the end of March. So I just wondered if you could give us a kind of updated picture as to what the actual drawn oil exposure was at the end of the quarter. And if I could be cheeky and sneak in the third one. Likewise, the leverage loan positions. I think you said you took a 320 million sort of mark there. Could you just give us the size of the leverage loan positions?

Yeah, so why don't I answer those ones, Robin? In terms of the productivity of RWA, yeah, we will see some follow through into Q2. Many of the models are sort of based on a rolling average. So as much as you'll see some follow through from Q1 into Q2, rather than have to sort of reverse back very quickly as well, it will very much depend on where markets go in the second half of the year. So I don't think I would sort of say there'll be an immediate sort of deflation of RWAs in the back half of the year. But I don't think you'll also see, if you like, in inverted commas, the excessive pro-siccicality that we've picked up in Q1. I think it'd be much, much more modest into Q1. And we'll see what we go into back half of the year. But I don't expect to see anything quite like that. The balances

might start to shrink rather than pro-siccicality on them.

Yeah, look, it's very hard to guide on that, Robin. I know the temptation is to think everything will go back to normal and the averaging will sort of start unwinding. It's quite hard to guide just so far away from that because there's so many different components to this and the averaging sometimes is actually not just on a sort of rolling three months. Some of these are 12-month averages and what have you. So it's quite hard to guide on that. But what I would say is that the amount of pro-siccicality we've seen in Q1, I can't, I'd be surprised if we see anything like that coming through, certainly not in Q2, I'm not expecting, or even beyond that. So I think we've seen the bulk of it. Does it flow back? Maybe, but I think it's a bit too early to guide to that. The one thing I would say though, actually, we've seen it on our bridge. Revolving credit facilities did build up quite rapidly, about 33 basis points. If anything, we're seeing sort of negative revolving credit. We've seen marginal paydowns actually in April. So I think that gives you some comfort that at least that component won't be there. In terms of oil, we actually have something in the appendix. We have a slide on our drawn and undrawn oil exposures. We're three billion drawn. And we've got some commentary as to where that's coming from. Most of that's with oil majors, investment grade, and of course some of the, in fact a decent amount of the drawn exposure is also secured against various assets as well. And of course we've taken an overlay in our IFRS 9 provisions assuming a likelihood of a $20 oil price. So we feel reasonably well provided there. Leveraged loans, we haven't given a slide on that. But you're right that we took 300 odd million of marks almost entirely offset by hedges that performed well. So again, if anything, when I look at April, and Jesse may want to comment on this, the leveraged loan market has probably calmed down quite a bit and capital markets are certainly much more functional than they were when we were closing the books at the end of March. So I'd say the risks are probably subsiding rather than increasing there and our book's well contained.

And you see the high yield market has reopened quite comfortably and the equity markets have reopened. And so I think the risk of levered loan markets that we may have seen about a month ago has definitely subsided and we feel very comfortable with the book that we have.

Yeah, the next question please, Alfredo.

The next question on the line comes from Martin Leitgeb of Goldman Sachs, please go ahead.

Yes, good morning. I was just wondering, one broader question, if you could comment how severe a credit cycle you would expect to unfold from here, just looking at your assumptions in terms of the COVID overlay of GDP contraction, this seems more severe compared to prior cycles we had. On the other hand, the recovery seems to be faster and equally there's government guaranteed schemes in place and support schemes in place. If you take all of this into consideration, how severe a credit cycle would you expect?

Martin, that's such a difficult one to answer. We've tried to give you our, what we've used for our own forecast in terms of GDP and unemployment and what have you. That's what we've assumed, it's out there on one of our slides. Whether that's what it turns out to be, it's only one month into this, so we'll see. I would say that reason why it's so hard to really accurately forecast this is, as Jess mentioned, you've seen an enormous amount of government action stepping in to do everything they can to backstop what they can. We'll see how successful they are. I think you've got to believe that if there's a will, there's a way when governments are involved. We'll see if that plays out. There's not much more I think we can add other than show you the data that we're basing our assumptions off. Thanks for the question, Martin. Operator, can we take one more question and I think we'll wrap up the call then. The final question, please, operator.

The last question we have time for today comes from Farhad Kumwa of Redburn. Please go ahead.

Hi, Tushar, hi, Jess. Thanks for taking the question. Just a couple of points of clarification on this one question. On clarification, Tushar, you said you're looking at kind of 800 to a billion run rate for impairments going forward and I know how extremely hard that is to forecast. So is that kind of, on that number, a five billion impairment number based on all the uncertainties that are around right now? Is that how to read that? And the second question of clarification was on cost. I think, Jess, you made a point saying costs were flat. Is that flat on the Q1 run rate or flat on 90s? So I think 19, 13.60 and extra levy. Is that a kind of number we should be thinking about or was it more the Q1 run rate? I think it's kind of lower 13s. And then the question I had was on the US credit card. I think everything you've said is on the US so far. On the UK credit card facility, are they being used substantially? And should we be quite optimistic that all these facilities on the corporate side and the credit card books aren't being used that much? I thought we would use a lot more or it is too early to be particularly optimistic on this because of the level of government support we have right now. Thank you.

Just on the cost number, what I'd say is I would look, I would speak into a slattish more towards 19, but make sure you take the FX adjustment to it.

What is the FX adjustment? It's out of interest, sorry.

Well,

yeah, I can only answer that. You know, in your middle, just sort of re-translate on a constant currency basis that brought in users the last year. We'll update guidance as we go along. It's still early on. We'll see how this plays out. We'll keep you posted. On the impairment, yeah, look, I mean, it's so hard to forecast, but I think if you add on the two billion plus what I guided to, you're getting into that sort of five billion ZIP code. We'll keep you posted, but that arithmetic sort of works. And in UK cards, yeah, it's the same thing. We have seen a meaningful drop-off in spend. I mean, that's no real big secret there. You've seen it in payment data, our own payment data, but also in sort of GDP type revisions. What's more interesting is we have seen a drop-off in card balances that is adding sort of down and down. You know, bad for income, good for impairment, and that's sort of somewhat in the income guidance that I gave earlier, but it's obviously better for impairment. Does that rebound? In some ways, we sort of hope it does rebound, but we hope it does rebound as the economy recovers, because then it sort of gets back to more of a normal environment. But I think it's very early to forecast that. We haven't even come out of this particular lockdown and how consumers behave, and how everybody gets back to work, I think is very unclear at the moment. Yeah, that's fair enough.

So it's kind of a good quality rebound, a bad quality rebound, so to speak. That makes sense.

Yeah, and we'll know more. I think we'll know a lot more in the future, obviously. Okay. Thank you very much. Thanks for everybody for joining us. Appreciate it. I know there's a lot going on, and although we won't be able to get to meet in person over the next few days and weeks, hopefully we'll get a chance to speak again. But I'll close the call now. Thanks again.

Ladies and gentlemen, this does conclude today's call. Thank you for joining. You may now disconnect your lines. This presentation has now ended. ["The