Barclays PLC

Welcome to the Barclays Q3 2021 Analyst and Investor Conference Call. I will now hand over to Jeff Staley, Group Chief Executive, and Tushar Mazaria, Group Finance Director.

Good morning, everyone. It's been another consistent quarter for Barclays. Tushar will take you through the numbers in more detail in a moment, but at a headline, let me say that I am very pleased with our performance. I return on tangible equity for the group. was 14.9% for the first nine months of this year. We clearly expect now to deliver an ROTE above 10% for 2021. Our profitability remains robust, with year-to-date profit before tax of close to 7 billion pounds. This is our highest pre-tax profit level on record. Earnings per share was 30.8 pence for the nine months. And we remain in a strong capital position with a CT1 ratio of 15.4%, well above our targeted range of 13 to 14%. We were managing our costs appropriately. Our cost-to-income ratio for the first nine months of the year was 64%. And if you exclude structural cost actions, our cost-to-income ratio was, in fact, 61%. Looking at our performance by division, we had another great quarter in the corporate and investment bank. Revenue was driven by the continuing strength of our debt capital markets franchise, as well as strong performance in advisory and equity capital markets. In fact, the third quarter was the best quarter ever in investment banking fees. We continue to evolve the investment bank towards more annuity-like revenue streams, including our important securities financing businesses. Corporate Bank is making good progress on its strategic priorities, including income diversification, growth in higher returning transaction banking, and optimizing the use of loan capital. Its returns are now in double digits. Our consumer businesses, BUK and CCP, have performed well. As we recover from the impact of the global pandemic, both businesses have benefited from positive trends in UK and US consumer spending. While interest earning balances may take time to grow in the UK and US cards, UK mortgage growth remains strong, with mortgages growing by some £2.3 billion in the quarter. We should not forget that in the past years, both Barclays UK and CCP have regularly produced double-digit returns, and they remain very good businesses. Income from payments activity also continues to recover well, up 17% year on year. This is both the result of the pickup in the global economy, as well as early benefits from our strategic initiatives around payments. We're also expanding our unsecured lending in the UK, US, and Europe. We are deepening our engagement with customers through card acquisitions and corporate partnerships, including the exciting collaborations we recently announced with Gap, AARP, and of course, Amazon. We have built our business to be able to deliver double-digit returns through the economic cycle, diversified as we are by income type, by customer and client, and by geography. Our one bank approach, which we call the Power of One Barclays, also allows us to realize synergies across our consumer and wholesale businesses. This means we can target and unlock new growth prospects. Specifically, we are focused on positioning Barclays to capture opportunities from three principal areas. First, as the capital markets grow further to become the dominant financial driver of economic growth, we have built and will maintain our market position of one of the top six global investment banks. Second, as technology transforms consumer financial services, Barclays is building and delivering next generation digital products and services. And finally, we recognize that the transition to low carbon represents a defining opportunity for innovation and growth. We want to be alongside clients as they transition, using our advisory and financial expertise to help them navigate this period of extraordinary change. This week, in fact, I joined a number of our clients at the UK Global Investment Summit in London. The summit could not have come at a better time. Just a month before COP26 conference, And it explored ways that the UK can play a leading role in dealing with the climate challenge. Because we have the last full-service UK investment bank, Barclays can and will play a meaningful role in that aspiration. So Barclays is performing well, while our diversified model and strong balance sheet gives us growth potential for the future. Returning excess capital to shareholders still remains a key priority. We've already returned over 1.5 billion pounds of excess capital so far this year. And our CT1 ratio still stands well above 15%. So we are in a very strong place as we head into the end of the year. Tushar.

Thanks, Jess. As usual, I'll start with a summary of our year-to-date performance and then go into more detail on the quarter. The strength of the CIB continues to offset the effects of the pandemic on our consumer businesses, Well, we are seeing initial signs of recovery in terms of spending metrics. Overall income was broadly flat year on year, despite a 9% weakening in the average US dollar exchange rate. Costs increased by 0.6 to 10.7 billion, including structural cost actions of 0.4 billion, principally in Q2. This increase also reflected high performance cost accruals due to improved returns, while base costs were flat, and there's no change in the cost guidance we gave at Q2. After the release of 0.8 billion in Q2, we had a modest impairment charge in Q3, generating a net release for the nine months of 0.6 compared to a charge of 4.3 billion for the same period last year. This resulted in a PBT of 6.9 billion, a significant increase on the same period last year's profit of 2.4 billion. The EPS was 30.8 pence, generating an ROTE of 14.9%. Our capital generation year-to-date puts us in a position to pay a half-year dividend of 2 pence and launch a share buyback of up to 500 million in August, flying on from the 700 million buyback completed in April, and still end Q3 at 15.4% CP1 ratio, well above our target of 13% to 14%. I'll say more on the capital flight path later on. Turning now to Q3. Income was up 5% year-on-year to $5.5 billion despite the weaker US dollar. Within this, we saw growth in CIB and BUK partially offset by lower income in CCP. Costs were broadly flat year-on-year, delivering positive jewels. We had an impairment charge of $0.1 billion compared to a $0.6 billion for Q3 last year. As a result, profit before tax was 2 billion for Q3, up from 1.1 billion last year. The attributable profit for the quarter was 1.4 billion, generating an EPS of 8.5 pence and an ROTE of 11.9%. I would remind you again that these are all statutory numbers and take into account a litigation and conduct charge of 32 million. PNAV increased from 281 to 287 pence in the quarter, principally reflecting the 8.5 pence of EPS. Our capital position strengthened further in the quarter, with the CET1 ratio increasing to 15.4%, driven by profitability. A few words on income costs and impairment before moving on to the performance of the businesses. We've mentioned the benefit of diversification throughout the pandemic, and in Q3, we again delivered resilient group income performance. CIB income was up 8% despite the US dollar headwind, and the investment bank continued to perform strongly. We saw a 6% increase in BUK income, with strong performance in mortgages, while the quarter-on-quarter trend in unskilled lending balances stabilised. CCP income was down year-on-year, reflecting lower average US card balances and the weaker US dollar. Recent recovering spending is encouraging, but like many of our peers, we continue to see elevated payment rates. Income from unified payments and the private bank increased year on year. While unsecured lending remains subdued, the income outlook for the consumer businesses, the UK and CCP, reflects a continuing tailwind in secured lending in the UK, plus portfolio acquisitions in US cards and spending recovery in payments. The UK mortgage business had another strong quarter with $2.3 billion of organic net balance growth to reach $157 billion. In unsecured, we saw some balance recovery in U.S. cards and the quarter-on-quarter decline in U.K. cards stabilized, but the balance trajectory continues to be impacted by higher payment rates. I would remind you that in the U.S., we have added $0.6 billion of balances with the acquisition of the AARP backbook at the end of the quarter. We are seeing clear signs of recovery in consumer spending in both the U.K. and the U.S., but the build-in interest earning balances is expected to take time to materialize. Barclays is well positioned for a rising rate environment through the effect of a steeper yield curve on the role of the structural hedge and the effect of potential bait rate space rate increases on deposit margins. The table on the right of the slide shows an illustrative example for a 25 basis point parallel shift in the current yield curve. We mentioned previously an expectation that the role of the structural hedge would be a further headwind in 2022. However, the expansion of the hedge we mentioned at Q2 and the current yield curve should eliminate this headwind, and an increase in base rates would be a clear positive for income. You will recall that most of the recent increase in the size of the hedge will benefit Barclays International rather than BUK. Looking now at costs. Starting with base costs, as we label costs excluding structural cost actions and performance costs, these base costs were broadly flat year-to-date, in line with our expectation for the fourth year. Overall cost increase as a result of the increase in performance costs, which is largely in Q1, and structural cost actions. Just to remind you of the phasing of the structural cost actions through the year, you can see on this slide that we have charged 392 million year to date, including the Q2 real estate charge. You'll recall that the latter is expected to result in annual cost savings of about 50 million from 2023. We are evaluating planned structural cost actions for Q4, although the precise size is still to be determined. These are likely to include the continuing transformation of the BUK cost base, as you mentioned at Q2. There'll be some structural cost actions into next year, but I wouldn't expect a charge as large as this year. As I indicated at Q2, we aim for full year base costs to be broadly in line with 2020 at around 12 billion. Within this, we continue to make investments And there is underlying cost inflation, but we aim to offset these increases through efficiency savings and are getting a tailwind from the weaker US dollar. Last year's costs were $13.9 billion. Allowing for increases in performance costs and the structural cost actions, I'm broadly comfortable with the current cost consensus of between $14.4 and $14.5 billion. Looking forward, as the recovery strengthens, we'll continue to manage the balance between growth and investment spend and cost efficiencies with the aim of delivering positive tools in order to achieve our target sub-60% cost-income ratio in the medium term. Moving on to impairment. We reported a net charge for the group of £120 million for Q3, with charges in BUK and CCP offset by a net release in CIB. On the right, we've shown the split of the charge for the recent quarters into Stage 1 and 2 impairment and the Stage 3 impairment on loans in default. As you can see, the charge in Q3 is principally on Stage 3 balances after large book-ups last year and a net release in Q2. On the next slide, we've shown the macroeconomic variables and post-model adjustments. The MEVs used for the Q3 modelled impairment are shown in the upper table, and you can see the improvements in the baseline GDP and unemployment forecasts. However, the MEVs used for the downside scenarios broadly offset these improvements in terms of the modelled outputs. In addition, we want to make sure that we don't lose sight of the risks as the wind-down of support schemes feeds through. The result is that we are maintaining a significant economic uncertainty PMA at around 2 billion in the quarter, as shown in the table. This continues to leave us with materially higher unsecured coverage ratios than pre-pandemic, as you can see on the coverage slides we've included in the appendix. With these levels of coverage, the lower unsecured balances and improved macroeconomic outlook we expect the quarterly impairment charge to remain below historical pre-pandemic levels in the coming quarters. Turning to Barclays UK. The UK income increased 6% year-on-year with a continuing strong performance in mortgages and non-recurrence of last year's customer support actions. Costs decreased 6%, generating positive draws of 12% this quarter. As we showed on the earlier slide, Credit card balances were flat at Q2 at 9.6 billion, but still down about 20% year on year. The level of Q3 card balances reflects the high payment rates, and we expect the spend recovery to take time to feed into interest earning balances that drive net interest income growth. Mortgage balances again grew, with a net increase of 2.3 billion in Q3. Margins for the mortgages booked in the quarter were attractive, but the pricing on new mortgages is very competitive, and we do expect the churn margin to turn negative next year. NIM for the quarter was 249 basis points, down on the 255 reported for Q2. Our outlook for full year NIM is now around 250, at the top end of the 240 to 250 range we previously indicated. This still implies a Q4 margin in the low to mid-240s, as a result of the mixed effect from the depressed level of interest earning card balances and the continued growth in mortgages, complying with the moderation in mortgage margins. The decrease of costs of 6% reflected efficiency savings and lower operational costs, which more than offset investment spend. There was an impairment charge for the quarter of 137 million, almost half last year's charge, reflecting the low levels of delinquency and reduced unsecured exposures. Customer deposits increased further by a further 1 billion, and the ROTE for the quarter was 12.7%. Turning now to Barclays International. BI income increased 4% year on year to 3.9 billion, despite the US dollar headwind, while costs were slightly up. Impairment was a net release of 18 million, resulting in an ROTE of 15.9%. I'll go into more detail on the businesses on the next two slides. The momentum in the CIB continued with income up 8% on Q3 last year to 3.1 billion. Cost increased by 2% delivering positive tools. There was 128 million net impairment release compared to a charge of 187 million last year. This generated an ROTE for the quarter of 16.6%. Global markets income decreased 8% overall in sterling or 3% in dollars, but equities reported its best Q3 up 10% at 757 million, with strong performances in derivatives and equity financing, including further growth in prime balances to reach a record level during the quarter. FIC decreased 20% against a strong comparator last year. However, our franchise is proving robust despite the lower levels of market volatility. Investment banking fees, on the other hand, reached a record level at £971 million, up 59% year-on-year. We were pleased with our increase in diversification as advisory, equity capital markets and debt capital markets all contributed strongly to the record performance. Despite the healthy deal flow, the pipeline remained at the high level we referenced at Q2. Sponsor activity continued to be high and our overall fee share of 4% continued the momentum we have achieved over recent quarters. Corporate lending income was 168 million, reflecting lower average balances and higher cost of credit protection. Transaction banking income was up 16% year-on-year, 430 million, and also up on Q2 with an improvement in deposit margins and increased client activity. As I've mentioned before, the increase in variable compensation accrual, reflecting improved returns, was skewed towards Q1 this year. Overall, costs were up 2% at 1.7 billion, resulting in a cost-to-income ratio of 56%. Turning now to consumer cards and payments. Incoming CCP decreased 8% to $0.8 billion, reflecting lower income from U.S. cards, partially offset by growth in unified payments and the private bank. The decrease in U.S. cards income reflected the weaker dollar, the 4% reduction in average card balances year on year, and higher customer acquisition costs. As I mentioned earlier, like our peers, we have experienced high payment rates. However, quarter end balances were up on Q2 at around $21.1 billion. This growth includes $0.6 billion from the AARP acquisition and organic balance growth of $0.4 billion. Another positive trend is that new accounts have increased over the first nine months, and this has contributed to the increased balances, but also means increased customer acquisition costs. Unified payment income was up 24% year-on-year and also up on Q2 as we saw the initial effects of the spending recovery. Private bank income increased 10% year-on-year, and client balances grew. Investment and higher marketing spend was reflected in an increase of 5% in CCP costs. The payment charge was $110 million, and the ROTE was 10.5%. With the recent developments in our partnership portfolios, the prospects for the US cards business are encouraging. I will remind you that the translation of recovery in card balances into income and profits will be affected by the so-called J-curve as we invest in partner and customer acquisition and in card utilization. We're pleased with the recovery of the unified payments income as we pursue our growth ambitions across payments. Turning now to head office. The negative income of 110 million was a bit above the 75 million run rate I mentioned at Q1, reflected some hedge accounting losses driven by interest rate volatility. Costs of 114 million included some costs related to discontinued software assets, while the other net income line was a positive, with another fair value gain on business growth fund. The loss before tax for the quarter was 147 million. Moving on to capital. The CT1 ratio increased in the quarter to 15.4%, well above our target range of 13 to 14%. Profits generated approximately 54 basis points of accretion. Offsetting this, the further buyback of up to 500 million launched in August reduced the ratio by approximately 16 basis points. The Q3 pension contribution had an effect of 11 basis points before tax, and the dividend accrual in the quarter amounted to 8 basis points. RWAs were up slightly in the quarter, reflecting some headwinds from FX moves. We've shown some elements of the future capital progression on the next slide. As we indicated at Q2, we expect to end the year well above our target range of 13% to 14%, and we've shown on this slide the three specific headwinds which will reduce the ratio at the start of 2022. This would reduce the current ratio by around 75 basis points. Going forward, we are confident that the balance between profitability, investment in growth, and remaining capital headwinds will leave us with net capital generation to support attractive distributions to shareholders over time and be comfortably within our CT1 target range. Both spot and average leverage ratios were around 5%. Finally, a slide about our liquidity and funding. We remain highly liquid and well-funded with a liquidity coverage ratio of 161%. and a loan to deposit ratio of 69%, reflecting the continued growth in deposits. So to recap, we have generated an 11.9% statutory ROTE for the quarter and 14.9% for the year to date. Although Q4 is generally the weakest quarter of the year for ROTE, we expect to be clearly above our target of 10% for the full year, and we are focused on delivering this on a sustainable basis. We are seeing some recovery in lead indicators for consumer income and the CIB performance remains strong. Although costs in 2021 are expected to be higher than 2020, cost control remains a critical focus, and we expect costs, excluding structural cost actions and performance costs, to be around 12 billion this year. We reported a modest impairment chart for the quarter, but have a net release of 0.6 billion for the year to date, and we expect the run rate for impairment to be below pre-pandemic levels over the coming quarters. Despite the two buybacks announced earlier in the year, totaling up to 1.2 billion, and the half-year dividend of 2 pence per share, our capital ratio of 15.4% at the end of the quarter remained comfortably above our target range of 13% to 14%. Although there are some capital headwinds to come at the start of 2022, we remain confident of being in a position to make attractive capital returns to shareholders while also investing for future growth. Thank you, and we'll now take your questions. And as usual, I'd 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. While preparing to ask your question, please ensure your phone is unmuted locally. Your first telephone question is from Rohit Chandra Rajan of Bank of America.

Hi, good morning. I had a good morning. I had a couple please. One is almost where you just finished that she's just to clarify what you're saying on slide 23, particularly the right hand side on capital, particularly the right hand side of the slide. So beyond the start of 2022, the slide looks like organic capital generation is offset by other headwinds, but I think to show you commented that you expected to be net capital generative. So I was just wondering if you could clarify what it is you're saying there and if you're able to put any numbers around those other headwinds. That was the first question. And then the second was just on the CIB and particularly cost income there. So it's obviously a good revenue performance there, keeping up with peers. And the cost income mid-50s for the last few quarters is also pretty much in line with your major peers. Is that a level of efficiency that you think you can maintain even if we get some fade in the revenue environment for the CIB? Thank you.

Thanks, Roy. Why don't I start on both of those questions? Jess may want to add a word or two. On your first one, in terms of the future capital path, I guess sort of beyond this year and into next, I think the gist of your question is are we expected to generate more capital than the various technical headwinds business growth and what have you that we may have. That's certainly our objective. I'd caution you before you get your rulers out and try and sort of, you know, figure out from the slides whether there's any sort of subliminal message there. There isn't. It's what it's been, I guess, over a number of years. We do expect to be net capital generative over most years. And, you know, there will be headwinds from time to time. But, you know, we think we've got a sustainable level of profitability and should more than compensate for that. In terms of CIB efficiency, to be honest, while efficiency metrics are important for us, returns are more important. The way we think about it is we want to keep the CIB above double digits, at least through a cycle, if not most points in the cycle. The way we think about it, it's almost a sort of just a fact that to be above 10%, you're gonna be operating at the kind of efficiency levels that we broadly have today. I mean, it'll go up and down, obviously, depending on where variable pay goes and where income revenues go, but to get to a 10% or so return on these sort of capital levels, you have a reasonably efficient unit, and that's sort of how I think about it.

Just to add, if you take away the structural cost, particularly, the main building here in Canary Wharf that we put the charge on in the second quarter. Our cost-income ratio is 61%. The target is 60%. I think how we get below 60% will be more a function of efficiencies in BUK than in the CIB.

Thank you.

Thanks for your questions, Roy. Can we have the next question, please, operator?

The next question is from Alvaro Serrano of Morgan Stanley. Please go ahead.

Good morning. A couple of questions from me. On the CIB revenues, obviously a very strong performance versus consensus, but looking at your US peers, the mix is different, it seems like. Equities is probably not as strong, and you made up for it in fees. Can you maybe talk us through what you think explains that in particular on equities? And as we look forward, does that have any implications for the outlook or how we should think about the outlook and the pipeline from here? And my second question is on costs. I've seen you, you've given the rate sensitivity, which is obviously very relevant at the moment, but on the costs and in particular the structural costs at $12 billion, I think in the last call you were sort of, Tushar, you alluded to that you would expect roughly the same number, I seem to remember, in 2022. Obviously, inflation picture is picking up and the offset to the rates could be cost. I don't know if you can sort of make any reflections. Are you going to be able to offset cost inflation with cost efficiencies in 2022 as well as I think you alluded to in the previous call? Thank you.

Thanks, Albert. I'll take the first question, and then Tushar will take the second one on cost. On the CIB revenues, first, in terms of market size, or the market side, we were a little bit lighter than the U.S. peers. I'd say it's sort of a function of two things. One, Asia. Asia cash equities for the U.S. firms was quite robust, and as you know, Our strategy for the last six years has been focusing more on the U.S. and in Europe. So that would be one issue. The second one, you obviously had a very robust IPO calendar. I think when you look at Goldman's numbers, their position as being lead left clearly helps those numbers. But we're very happy with our markets business overall. And on a year-to-date basis, the numbers are really strong. And then if you look at IB fees as sort of the primer for your overall investment banking results, there we outdid the US peers. And it was the most profitable or the highest revenue number in advisory, DCM, and ECM fees the bank has ever had. So I think it's a pretty good story, actually, for the quarter and for the year-to-date.

Yeah, and I'll just sort of maybe round that off. Alvaro was saying we all set a record in equities. In fact, for those of you who've been following Barclays for some time, the equities revenues are approaching our fixed income revenues, so the diversification in our markets business is something we're very pleased with. Just moving on to costs. Yeah, I think you're very right to point out inflation. For us, it's principally about... labor costs, that's the real sort of bit of inflation for us rather than sort of other complicated supply chain mechanics. It's something we're used to. We obviously have a lot of our operations actually in India, and we've had that for some year. That's a high inflation country, so we are used to having to deal with, you know, on a percentage basis, sort of meaningful increases in labor costs year for year. We do that by absorbing that through our own efficiency programs. Of course, if that sort of spreads around to all other countries, that puts a bit more pressure I think for now, for planning purposes now, the $12 billion into next year feels about right. But we'll see how we do in terms of ensuring that we have sufficient efficiency programs to more than offset that while continuing to invest in the business. I feel it's a very good time to be investing in the business. But for now, $12 billion feels about right, and we'll certainly keep you posted as we go into the rest of the year. Thank you very much. Thanks for your questions. Next question, please, Operator.

Our next question today comes from Jonathan Pierce of Numa Securities. Jonathan, please go ahead.

Hello, both. Hello there. Two questions. The first on the hedge, there was obviously a huge build in the hedge in the third quarter. I think it was more than the capacity you said you had at the end of the second quarter. So I'm wondering, is there more to go on the hedge? And maybe you could talk to how this hedge was put on in the third quarter is it fully feathered so you know 60th of it will roll off every every month from now over the next five years so first question is on the hedge the second question thanks for your updated rate sensitivity I wonder though if you could just talk to the subset of the 275 that specifically relates to an increase in UK base rate we can kind of triangulate it, pull out the structural hedge, pull out the non-UK part of Barclays International, but maybe you could just tell us how much of the 275 would arise as a result of a 25 basis point move up in the short end in the UK. Thanks very much.

Yeah, thanks Jonathan. Why don't I take both of them. In terms of the hedge capacity, Yeah, I think, if you like, we're fully expressed in terms of the amount of nominal hedge that we want to be running. You're right that we're guided to increasing that hedge nominal at Q2, which is broadly what we've done. Obviously, deposits continue to track up anyway, so that's got an influence in there. But we're sort of, if you like, where we would like to be. In terms of the role profile, yeah, it's kind of, there's nothing unusual. It's the same sort of strip of swaps that we've been used for a number of years. So into next year, if you want to look at it on a sort of 12-month basis, it's in the sort of somewhere between 30 and 40 billion pounds of role that you should expect, and they'll refinance into whatever rates that will be prevailing as we go into next year. And as you know, we sort of express that as a strip of six to seven year maturity swaps, which I guess hopefully is helpful in terms of, I think the point of your question was, can you just tell us how much of the year one net interest income sensitivity comes from just base rate rises and pass-through assumptions versus just hedgerow? I would say in the majority in year one, You would say it's probably more driven by base rate rises and the grinding effect of the hedges sort of come through in two years, two and three. Obviously, all of this will be somewhat dependent on the shape of the curve that we use as a reference point and how steep it is or what have you. But think of it as being, you know, the front end or the first year, mostly a base rate story. And beyond that becomes more the grinding effect of the structural hedges. So I won't throw out a number, but at least gives you a sense of how we think about it.

Okay, that's helpful. But just to clarify, I mean, it looks like probably 50 million of the 275 is the hedge. So let's call it low 200s in terms of deposit revenue specifically. Nearly all of that is UK, UK base rate.

Yeah, that's right. It's mostly predominantly sterling. Don't forget that that is obviously split across our UK bank as well as our international bank. You've got a large corporate business, UK corporate business in there. It is a sterling business. almost entirely a sterling exposure, but sort of 40, 60 across the UK and international.

Brilliant. Thanks for that.

Thanks, Jonathan. Can we have the next question, please?

Our next question comes from Joseph Dickerson of Jefferies. Please go ahead.

Hi. Good morning, guys. Thanks for taking my question. I guess one thing to me is Why are you being so conservative, at least from an external observer's point of view, with the $2 billion of management overlays that you've got sitting in your provisions? When I look at, call it a 15% loan loss reserve on the UK on secured book and nearly 12% on U.S. cards, which would kind of be levels I would have thought about if you had an 8% or 9% unemployment rate as a base case. in each jurisdiction. Why the conservatism? I hear you on things like furlough schemes, etc., but it still seems like a fairly high number, particularly if you go back, the management adjustments at the full year 20 were about 15% of your overall ECL allowance. So I guess just what's driving that there? And then You know, are share buybacks still something you'd like to do with your CET1 ratio at 15.4%? And, yes, lots of moving parts, but hopefully still capital generation in the fourth quarter, or are there, you know, other inorganic opportunities you might look at as well?

Yeah, thanks, Joe. Why don't I take the first one, and I'll ask Jess to talk about capital returns. The £2 billion or so sort of management overlay, it's really there because... you know, as you're aware, when we wrote these models, you know, there's no concept of a pandemic as a scenario. We could have modeled a sort of historical calibration that we could have used. And we don't think these models really can pick up the effect of government support and, more importantly, the removal of government support schemes. So, in some ways, you're right. We're getting towards the back end of that. Now, having said that, the furlough scheme in the UK is just being unwound now. We do have which most people probably don't appreciate as much, but the support schemes in the US are actually still in place and will go on a bit longer. You've got the CARE Act and Social Security payments and extended unemployment benefits and what have you. But as these schemes begin to unwind, we'll see the full effects of that. And either, if you like, the models have underestimated the amount of support distress that may present itself, in which case we'll digest the provision, hopefully, and we won't need any more. Or alternatively, it turns out it's a much more smoother adjustment than we may have thought it could have been, in which case that will be positive for us. The final word on credit, just before I hand over to Jess, is though I would just stress how benign the credit environment kind of is when we look at things like delinquency data, You know, they're as low as we've seen. I think you've got sort of multi-decade lows in the U.S. And if you look at our watch list, which is sort of, you know, names that we would be closely monitoring as a credit risk in our corporate and investment banking names, I mean, that's about as light as I've seen as well. So the credit environment is a good environment, if you like, to be going into the removal of the support scheme. So we'll see how that plays out. Jess?

And on the buybacks, Joseph, that still remains an instrument for us to use as we return excess capital to shareholders, which is clearly our goal. I think returning capital, whether it's through dividends or buybacks, there needs to be a certain cadence to it. We've done $1.2 billion this year, the second buyback of $500 million, that's still in progress now. So we are buying back stock, and that will be something that we will continue to do in the future. In terms of inorganic, you know, we clearly, if we see an opportunity, we'll make investments of our capital. I think probably the best example would be the GAAP transaction where we increased our number of consumers in the US that have a Barclays credit card from 11 million to 22 million in that single transaction. So we will make investments like that that we think will be very valuable in the long run. But we also recognize the economics of the buyback are pretty hard to beat given where our stock is trading. We closed the quarter at a very strong capital print of 15.4%, and we continue as an objective to return excess capital to shareholders.

Thanks for your questions, Joe. Could we have the next question, please, operator?

Certainly. Our next question comes from Omar Keenan of Credit Suisse. Your line is open.

Thank you. Good morning. I just had a follow-up question on rate sensitivity. and one on the capital plan, please. So just on the rate sensitivity, I was wondering perhaps if you could just kind of use your view of the competitive landscape to perhaps tell us or sort of give us a guess of perhaps how long the new upgraded rate sensitivity to 275 million can be maintained as the Bank of England hikes rates and what sort of level of base rate it might be before we get to something that looks like closer to 150 million again. And then just on a point on the rate sensitivity, Is a 275, is that kind of an exit benefit from year one rather than a change to NII over the first year? And then my second question on capital was just a follow-up to Rohit's point. If I think about the 14.7% from the 1st of Jan 22, and I guess if we kind of wanted to super fully load that, And a couple of banks are talking about 5% inflation to risk-weighted assets from the completion of Basel that would take that number to about 14. That would sort of imply that pretty much all of the earnings going forward should be freely available for shareholders, at least for a number of years. Is that broadly right, or are we ignoring something like output flaws And just related to that and the point on the gap portfolio, when you look at the M&A opportunities out there, are there still interesting things available? Thank you.

Thanks, Omar. I'll get Jess to talk about inorganic opportunities and how we think about that. On the rate sensitivity, Think of this as, you know, we're not trying to be too clever here. It's taking the yield curve as you see it, immediately shifting it up by 25 basis points parallel and running that each calendar year. So it's assuming that rates went up instantaneously today and then what would happen in the first year based on our own a sense of where deposit rates would reprice to, in other words, our own pass-through assumptions and the grinding effect that we would see on our stripper swaps and the, you know, grinding into higher fixed receipts. So, in terms of your question about will that sensitivity decrease, I think perhaps what you really sort of may be looking into is do pass rates pass-through assumptions, will they change as base rates continue to increase? You know, that gets quite hypothetical. I think, you know, it's been a long time since we've had a sustained sort of rate rise from such low levels, so I'm sort of loathe to speculate. But generally speaking, you might find that you, you know, and we've got a lot of liquidity and that's really the backdrop of it, you might find you sort of pass through a little bit more as the rate environment gets higher and higher. The other thing I would stress, though, is, you know, we have lots of different sort of liabilities on, you know, we have obviously corporate liabilities. We have everyday savers account. We have current accounts. We obviously have fixed term deposits. We have savings bonds. So it's not a one-size-fits-all, which does make it quite tricky to sort of see from the outside. So the sensitivity we've given you is really just all of that blended in. and how we see it. In terms of capital and the flight path, just before Jess talks about inorganic, you know, Basel IV, I think we'll do a consultation paper by the PRA over the winter months. They'll give us some clarity as to what we may see there. I think many banks that have sort of tried to have a stab at this already go somewhere between 5% and in some cases 10% of RWA inflation. We'll I guess when we get the consultation paper out, we'll be able to give a price sort of a better guidance of what it may mean for us. Timing of this will be important. I know that analysts like to fully load, and I sort of understand that it makes sense, but if this thing's going to be implemented in two, three, whatever years out, then we've had a good track record of adapting to that. Output flaws, again, I wouldn't speculate on that. That field's slightly further out on the horizon. And I wouldn't want to speculate on where that may go until we get sort of clarity from the regulators. But by and large, I think the gist of your question or your sort of almost inferred answer is about right, which is we are net capital generative. And, you know, it's important that we aim to get the bulk of that capital back into shareholders' hands. And that'll lead me on to just talk about inorganic.

Yeah, thanks, Amar. You know... Take the context that six years ago we set the strategy of the bank to be the universal banking model that we've got. And what we've really been striving for is to provide Barclays a level of stability that I think for many years it did not have. Now it leads to the most profitable nine months in the history of the bank. I think we are reaping the rewards now of the stability of our strategy, and that is paramount to the bank. We will engage in transactions that have real structural gains for us. I think the partnership we have with Amazon in Germany and now Amazon in the UK, where every time someone goes on Amazon to make a purchase and they go to the checkout and if it's over a hundred euros in the case of, of Germany, you're getting a number of options to finance that purchase. And that's all Barclays behind that. And so, um, that's an extremely important relationship we have, uh, with, uh, with Amazon. And then there are a number of, um, less visible ventures that, where we are partnering with, uh, with Vintech companies to, advance the digitization of our offering, particularly our consumer banking business. So we will partner with people, and we will have alignments with things like the GAAP and like Amazon. But I think when we are delivering the level of returns that we're delivering now, and we're pretty confident that we can maintain through the cycle a 10% we're better return on tangible equity. It's a strategy that's working and we want to endorse that strategy. Thanks, any questions, Omar?

Thank you.

Could we have the next question, please, operator?

Our next question comes from Guy Stebbins of Exfane BNP Paraguay. Your line is now open.

Hi, Guy. Hi, good morning. Thanks for taking the questions. The first one was on consumer asset quality and I asked just because there was some slightly interesting movements in terms of ECL in the period. So there was a 40% increase in stage two exposures in international retail balances with a 185 million increase in ECLs in this segment, which I presume drove the CCMP impairment chart in the period. But it doesn't look like there was much flow into stage three. You haven't seen a pickup in arrears in your other country, all sounds quite reassuring. So perhaps you could just give a bit more colour as to what drove the increase in stage two retail in the US, which didn't seem to be the case in the UK. Is it just something to do with a model assumption perhaps? I guess we're now in the back end of October, so I presume you've got very good visibility on the mortgage pipeline, completion spreads, et cetera. So can we think about the circa 250 as being pretty much 250 spot, just given where we are at this point in the year, you know, one or two basis points swing on the full year number has quite a big delta on the implied exit rate. So any color there would be useful. Thanks.

Yeah, thanks, Guy. On asset quality, particularly in the U.S., One of the things that may not be obvious to folks is, you know, when we took on the back book for AARP, actually you have to bring on the day one impairment provision through the P&L for that, if you like, as a slightly sort of non-recurring effect in this quarter's charge in CCP. £110 million, I think it was, in CCP. Between 20 or 30 of it was coming from AARP on day one, so that's a non-recurring. You'll actually see the same thing happen again for GAAP when we bring that on probably in the second quarter, so I'll leave it to you whether you want to look through that or how you think about that. So that would be best helpful. I mean, away from that, of course, as I mentioned, credit quality is, you know, it's looking very benign. We're not really seeing any signs of stress at the moment. Mortgage margins or a sort of UK blended net interest margin. I won't give a precise number. I mean, things even though, like you say, there's only sort of, you know, two and a half months of business to go before the calendar year. Things can still move around a little bit. depending obviously on base rate changes, which may or may not come before this side of the year end, and I'm not the kind of guy that wants to speculate on that, but we think we'll be somewhere around the 250 sort of full year NIM, and we'll stick to that guidance rather than give anything too precise for the moment.

Okay, and just to clarify, I assume that 250 doesn't assume any benefit from a base rate hike this side of the year?

No, no, no, we don't try and believe we've got the crystal ball on that, no. Thanks, Guy. Could we have the next question, please, operator?

Certainly. Our next question comes from Chris Kant of Autonomous. Your line is now open. Please proceed with your question.

Good morning. Thank you for taking my questions. If I could just clarify your rate sensitivity comments, please. On the currency split, if I look at your annual report, that shows an FX split with a bit under 50% coming from sterling. Has the balance sheet changed? What on the balance sheet has changed over the nine months such that the vast majority of the sensitivity is now to sterling? And as a further point of detail, what deposit each are you assuming in the 275 million, please? My understanding was the previous disclosure you gave in the slides assumed about 50%. So you've increased the sensitivity by 80% since what you included in the two slides. What are you now assuming in terms of deposit ? And then if I look at the CIB, obviously you've had another very strong period in the nine months. If I look at the nine months as a whole and I compare against the equivalent period in 2019, so pre-COVID, ignoring 2020 had very elevated provision charges in that division. Revenues are up 23% on the nine months 19 and costs are only up 1%. and this is nine months that we're looking through the levy. I know you referenced a variable remuneration top-up, which you took in one queue of this year, but looking at those numbers in the round, it's not obvious that you've had much of a comp reaction to the dramatically high revenues. If revenues reverse going forwards, should we actually expect costs to flex lower, or does a revenue decline just fall through to the bottom line? Because it looks like the revenue step up has largely fallen through to the bottom line in this period.

Thank you.

Thanks, Chris. I'll answer both of them, and Jess may want to add some more comments on investment banking sort of compensation. In terms of the rate sensitivity, I think you're trying to compare an annual report disclosure to what we had on our slides, but there is a a difference in sort of prep, if you like, basis of prep. The previous sensitivities, we just took a sort of hypothetical 50% sort of path through everywhere, whereas this time around is, I guess, the likelihood of changes in interest rates becomes more real. We'll see if that ever happens or not, but at least that's what conventional thinking is. We've tried to give more of an indicative of what may really happen rather than just a hypothetical 50%. I think if you want to go through the basis of prep, which sounds like you may want to do, I'd suggest I get someone in IR to give you a call after this and they can take you through it just so you've got the various moving parts. In terms of the CID and compensation relative to income improvements. I guess the way, again, it all gets a little bit complicated with the accounting. The accounting sort of compensation component as compared to the actual size of the bonus pool, and you probably see this in previous disclosures, aren't unfortunately the same thing, just given the way deferrals and everything works through. I would say, though, if you look at a year like 2021, you know, we are accrued a meaningful increase in the bonus pool, as you'd expect us to do, where returns performance is. It's not just really an income story for us. We do try and look at returns holistically. We would obviously flex that down, of course, if performance is not as strong as it is this year, as it was next year. That will see through, but again, under eye for us too. You do get the slight timing mismatches between feel like economic awards and the way they're accounted for. And again, you're probably pretty good at that already, I imagine, Chris, but maybe worth somebody and I are just to maybe take you through some of the sort of bigger moving parts just in case.

We do want to obviously pay competitive with the market, and we are constantly tracking what, you know, how the industry is accruing and what information we can glean about the direction of compensation. As Tushar said, we are accruing at a pretty robust level variable compensation this year and feel very comfortable that we will remain competitive with the U.S. firms in terms of banker pay.

In terms of the 2019 comparison and the deferred compensation, I know that was an issue for you historically. I thought that had largely worked through by 2019 in terms of the changes that you made a few years back on the accruals. So basically, it's just a function of what your competitors are paying. So if revenues come down at an industry level and comp does not flex down elsewhere, then we would expect to see the same thing for Barclays. So the cost line is really going to be a function of what we see elsewhere.

Well, look, we won't label this point, but you've hopefully seen us move compensation over the years up and down based on performance. In 2019, actually we flexed compensation down, which was actually on the back of an up year for the investment bank because we're trying to get the right balance between shareholders and employees. So I don't want to label the point, but Obviously, all things matter, your relative position, your own performance, particular areas of investment. All things matter, I guess, Chris.

Okay, thanks.

Thanks for your questions. Can we have the next question, please, operator?

Of course. Our next question comes from Robert Noble of Deutsche Bank. You may begin with your question.

Morning all, can I ask on the US card business how much of the drag on income comes from acquisition incentive costs from cards and what is it normally? What's the additional spend that you're putting through the top line to require customers at the moment and should I expect that to increase or stay at the current levels that it is? And then secondly, thanks Hugh for the interest rate sensitivity disclosure. If I look at market interest rate expectations now, which are way higher than 25 basis points over the next three years, do you expect that you will actually see a net benefit on the entire balance sheet from interest rates following the path that's implied by the market at the moment? Or would you lose the same amount in asset spread compression or less? Thanks.

Yeah, thanks, Robert. In terms of acquisition costs, sort of contra income as well as, I guess, on the cost line, you know, we believe this is to be a growth business. We want to be opening new accounts continuously. Hopefully, we'll be adding portfolios, might be a gap thing in the future as well. So, I wouldn't guide to acquisition costs, you know, sort of a kickstart and then it sort of ebbs away. What you're really seeing is, of course, a kickstart from, very little activity last year and the income to come through later on. And you've got to remember, I think, for us, we think about this thing as sort of a three-stage thing. First of all, people need to be attractive to your card, and so that comes with new account openings and various rewards programs that encourage new account openings. That's a continuum. Secondly, once you have the card, you've got to be incented to utilize that card and be top of the wallet. So that's just not new accounts, but your existing customers. And that requires marketing spend and branding, mostly for our partners' behalf. But that's important. That's a continuum. Then, of course, if you see these activity levels, new account openings, and spend levels, which are actually better than pre-pandemic levels balances so I think guy the way I think about is well we won't quote a number out to you think of these either sort of recurring perpetual if you're like costs in a growth sector in terms of IR sensitivity as rates go up higher and higher and higher. You know, we've given it as a sort of a blunt parallel shift of 25 basements. I get the point that people would want to have all sorts of scenarios that we would run for them, different yield curve shapes and everything. I mean, we'd be doing that every single day. I remember six months ago, we were talking about negative rates and now we're talking about, so who knows what the future will be. We don't try and be too clever on that. So we'll try and refrain from, you know, running sort of multiple scenarios. I do think that one thing that you are sort of, I think, raising is, How linear is the sensitivity? Obviously, for long rates, it's completely linear. It's just a sort of mechanical effect of swaps grinding into high fixed receipts. In terms of the base rate effects, the pass-through assumptions probably will change as you go up the base rate increase spectrum. And generally speaking, again, it's hard to be precise on this because we haven't really experienced this historically from such a low level. probably end up proportionally passing through more as you get into higher rate levels. Somewhat driven because we've got so much liquidity in the banking system at the moment, and if we're about to change our higher interest rates, I guess you may pass on through more. But that becomes pretty hypothetical at the moment, Guy. It's hard to be precise on it. Sorry, Rob. Answering the previous question, wasn't I? But hopefully that answers your questions, Rob.

Yeah, that's great. Thanks very much.

Thanks. Can we have the next question, please, operator?

Thank you. Our next question comes from Fahad Kanwar of Redburn. Please proceed with your question.

Hi, morning. Morning, both. Thanks for taking the question. I just had one question, actually, on CCNP. If I look at 3Q21, the run rate right now, I think it's like 3.2 billion, and I appreciate your points around the J curve and the gap balance is coming on, but There's a kind of 16% growth implied in consensus. It feels very strong. Could I get a sense of a kind of scale of how you see that JCO progressing when we think about CCMP revenues at 2022? Thank you. Yeah, thanks, Vahad.

Yeah, look, I'll refrain from giving a precise number because, as I say, we're revolving balances. We do expect to increase next year. But it's very hard to be precise just given we don't have any historical sort of levels to calibrate on. I wouldn't, of course, annualize what you've currently got. We would expect income to be up next year. Obviously, if we see revolving balances increase sort of sooner in the year, that increase will be higher and you've got the gap portfolio coming in in the second quarter. So I'll refrain from giving precise guidance, but we are optimistic as we go into next year. Account openings are running really strong. Activity levels are running really strong. Credit conditions remain benign. We've seen a very strong payment recovery already this year. That's included in that segment that we expect hopefully will continue to bounce higher into next year. So we are optimistic in where that business is going. And in some ways, it's probably... You know, we were probably a little bit more cautious about the pace of revolving balance increase, and for once we may have been right in our caution. It does seem to be more playing out to how we expected, and perhaps some other optimism out there. But that's okay. We're optimistic into next year.

As Tushar said, the leading indicators are account openings and consumer spend and payments. And that, you know, we were back to pre-pandemic our level so that that that should forecast well in terms of balances recovering as well okay thank you it's very helpful thank you cheers cheers um can we have the next question please operator our next question comes from robin down of hsbc kindly begin with your question uh good morning thanks for taking the questions um just a couple of quick ones uh really just kind of

reinterpreting some of the earlier questions. If I could start with the NRI sensitivity, you've obviously, the sort of structural hedge element of that hasn't really kind of changed other than volume growth since you last gave the sensitivity, which kind of suggests the non-structural hedge element has kind of roughly doubled. I think previously you were talking about a 50% pass-through of the first 25 basis points of rate increase. And it still feels like you're not quite at zero pass-through with these numbers. It doesn't quite square with that kind of going from roughly 100 million sensitivity up to kind of just over 200 million. One of your competitors, though, is, I think, assuming zero pass-through. So I just wonder if ballpark, you could say, well, look, yes, you're assuming zero pass-through on kind of retail and commercial deposit customers, or whether you're still being kind of a bit conservative here. And the second question, on the capital, can I put it a slightly different way to the way, perhaps, that Joseph put it earlier on? Is there any particular reason, as we run through the early part of next year, why you should be running comfortably above the 13% to 14% target range that you set? Is there any particular reason why you feel the need to retain extra capital above that, or could we realistically expect everything above that range to be handed back to shareholders fairly early on. Thanks.

Thanks, Robin. Why don't I start on both of them, and Jess may want to add some words on capital. On interest income sensitivity, I won't speculate on other competitors' pass-through assumptions or pricing or what have you. That wouldn't be appropriate. I think for us, we're We used to use a sort of a blunt, if you like, just 50% only as a hypothetical, arbitrary number. I guess, as I said before, I guess most people are expecting rates more likely to move than not at the moment. Who knows if that's the case? And so we've tried to be a bit more helpful in terms of what our passer assumptions could be in reality. Of course, there's so many different products out there. I don't think it's that sensible just to give a single number, because obviously corporate deposits are different to current accounts, different to consumer savings accounts, different to private bank accounts, different to fixed-term deposits, you name it. But it's at least our sense of indicatively what may happen. And so I'd probably leave it there, really. Robin, I'm not sure there's much more I can say other than that. You're sort of, I think, really trying to get to are we being unnecessarily conservative? We don't think so, but others will be the judge of that, I guess, and we'll see when that happens. In terms of capital returns, so in the 14%, look, I think what you'd expect from, I think, you know, most institutions is that you'd expect us to be predictable, reliable, consistent in terms of how we get capital back to shareholders' hands. So we did a buyback at the full year results, we did another one at the interim, basically announcing them alongside our dividends for the full year and the interims. The 13 to 14% stated target is our target. You know, there are some headwinds that we've called out. There'll be more information around sort of Basel IV and things like that. But, you know, I would expect us to be a reliable, consistent returner of capital back to shareholders at appropriate levels. And really, it's probably more something that we discuss more at sort of the full-year results rather than an off-quarter like this. But, Jeff, is there anything else you want to add?

At the interim, you know, the statement we made was that We have a progressive plan for our dividends, so we'd like to see a predictable increase in our dividends over the cycle and want to sort of clearly put behind this 2020. So you should expect that. And as I said, there'll be a cadence to returning additional excess capital. So, yeah, we continue with our target of 13 to 14%, and as we come out of this pandemic in a more normalized environment, our flexibility just increases.

Thank you. Thanks for your questions, Robin. Could we have the next question, please, operator?

Certainly. Next question comes from Martin Leitlieb of Goldman Sachs. Your line is open. Please proceed with your question.

Yes, good morning. Just a question related in a way to interest rates. I was just wondering if you could comment on the outlook for fixed revenues just in light of prospect of higher rates both in the UK and in the US. Do you see this as potentially constructive for the industry's revenue outlook from here, just given, you know, volatility steepness of the curve, or could you also see some headwinds in terms of some of the valuation impacts? And for the UK specifically, I'm just wondering, we have seen an increase of around 40, 50 basis points in the two and five year swap rates. Would you expect banks to increasingly pass on this increase to mortgage rates, or do you think competition could be such, just given excess deposits, that there might be a limited pass-through? Thank you.

Yeah, thanks, Martin. Why don't I take that? I think, you know, as long as, you know, asset prices are still well-supported and, you know, financial markets, you know, are still orderly, There's a functioning economy. Generally speaking, higher rates are positive in both wholesale and consumer business. In regard to FIC, I think in a higher rate environment, you might see wider financing spreads, might see wider bid-offer spreads, really just as a function of higher rates. markets move around that tends to increase implied volatility levels which tends to be better for them for pricing tends to encourage volume so that tends to be good so generally speaking yeah the price asset markets that move around and sort of drift higher including interest rates is generally a positive and i think definitely true for the the fixed complex the financing business not one we've talked about much we've talked a lot about inequities um financing spreads in thicker almost at all-time lows um So if they widen, that'll be very positive for our business. In the UK mortgage market, I think you sort of summed it up well. There's this sort of tension between you've got higher wholesale sort of swap rates and a lot of liquidity. Our loan to deposit ratio, I think, is even below 70 now at the group level. That's how long liquid we are. So I think you'll see that tension. I think you're seeing... participants in general probably beginning to increase customer rates. I think you've seen a few lenders do that last week. I thought it makes sense in a way just because of the compression that, as you point out, has come through from the two to five year swap rate. And I think most lenders will be looking very closely at making sure that they're still able to meet their hurdle rates. You know, that might provide some sort of pricing support, but it's hard to be sort of too precise as we go further out. There is a lot of liquidity in the banking system, as you're aware. Thanks for your question, Martin. Could we have the next question, please, operator?

Our next question comes from Benjamin Toms of RBC. Please proceed.

Morning. Thank you for taking my question. Just one for me, please. Can you just talk a little bit about your ambitions to enter the buy now, pay later space?

Thank you. Yeah, go ahead. We are actually in the buy now, pay later business today, but in a regulated way. What we're not going to do is get into the unregulated buy now, pay later space, which we think may not be long unregulated. But I think the customer care efforts of the bank I think ultimately will accrue very much to our favor. So offering consumers different ways to finance purchases I think is an important activity of the bank. We do it very actively in the UK. We do it very actively in the US and in Germany. But the non-regulated space, we're not going to get involved. Thank you.

Thanks for your question, Benjamin. Will we have the next question, please, operator?

Our next question comes from Adam Terrelak of Mediobanker. Please begin with your question, Adam.

Morning. Thank you for the questions. I just wanted to ask about the structure of the buyback. Clearly, at the minute, you're announcing a half year and full year. But that means that there are kind of periods of the year where you're not able to be in the market. So the current 500 million will be done well before you report 40 results. Now, given the capital strength, given you're clearly looking to return more, would it not make sense to be announcing buybacks and top ups to the accrual for that buyback on a more regular basis? And then secondly, I want to do a bit more detail on UK NII for the quarter. You're flagging some difficult, well, some headwinds from the interest earning assets in the consumer business. Can we have some numbers around that, just to kind of size that so we can build it into the model, and just a bit of discussion as to how the client acquisition on balance transfers and things is looking, how much of a headwind that is, and how that might develop over the next few quarters would be great. Thank you.

Yeah, thanks Adam. On the timing of share repurchases, share buybacks, It's been a long time since Barclays as an institution has done a share buyback. We announced one at the full year results. We announced another one at the interim. I think that's probably the kind of cadence that you should expect from us. I think for banks, we don't try and have the crystal ball on share prices or interest rates or anything. We just want to be consistent, predictable, and a regular cadence, and that's what you should expect. managing our interest rate sensitivity or what have you. It's more that than trying to be too clever and in and out and trying to time things or what have you. So that's what we're about and that's what you should expect from us. In terms of sort of acquisition costs with regards to net interest income, yeah, I think a previous questioner asked for, you know, can we size these, which we haven't done in these disclosures, so I won't sort of put it out on a call like this. But I would say that, you know, These are sort of continuums, so think about these as costs that we would expect, assuming we're growing our businesses, which we expect to for the foreseeable future, be incurring for some time. And I think as soon as you see revolving balances increase, you'll be able to see what sort of net interest income that generates. In some ways, I mean, it's It's not that complicated for you guys to do. You probably know what we charge on these cards, and you know what a billion of balances will give you in terms of net NII, less funding costs. So you probably can go back and get a pretty good sense for yourself. But think of these costs as not sort of one-off in those other level ways, but in permanent nature.

And maybe just as a cap, we spent the last decade sort of rebuilding the bank's capital base. which we've now completed. And again, we're over our target. And this year, 2021, was really the first year that we began to return in meaningful amounts excess capital to shareholders. We'll just see how the program evolves as we go into 2022. Thanks. Great questions, Adam. Thanks very much.

I think we've got time for one more. Could we have one more question, please, operator?

Certainly. Our final question this morning comes from Andrew Coombs of Citi. Andrew, please begin.

Thanks for taking my question. I just wanted to ask a big picture one to finish with. One for GS, which is on the capital markets outlook. It's clearly a very strong year. If you look at the industry as a whole, it looks like we're going to have the best revenue profile since 2009. Obviously, post-2009, we've been poor. we then saw quite a substantial decline in industry revenues. So you talked a bit about fixed income, the implication of higher rates, what that might mean for bid-ask volatility, but we'd love a few thoughts on where you see the capital markets revenue profile from here, and then specific to Barclays, when you look at the improvement in your own revenue profile, how much do you think is beta versus how much do you think is alpha? So market share gains that are sustainable and you can hold on to. Thank you.

Yeah, no, thanks, Andrew. As I said, I think there is a fundamental tailwind in the capital markets to the degree that regulators have structured the financial system such that the capital markets are a more attractive place to finance economic growth than bank balance sheets. And I think that will continue, and you see that in the overall level of both the debt and the equity markets, as well as the derivative markets, which allow people to manage their risk. You need to look at you know, volumes in the capital markets, you need to look at spreads in the capital markets, and then you need to look, as you said, at market share. One of the exercises that sort of led to us being optimistic about our position in the investment bank is we are running, and like you used, you know, going back to 2009, or go back to 2009, 2007, we have twice the level of capital that we had back then. And back in 2007, if you put a AAA security on your balance sheet, the risk-weighted asset of that was zero. And obviously, when we turn the lights on in the morning, we get risk-weighted assets. If you took the current profitability of Barclays Investment Bank and applied the capital level of 2007 and the calibration of risk of 2007, we're at 16% return on capital A, you would more than double that. And that, to a certain extent, is one way to look at the underlying growth that we've seen in that capital markets in the last decade. And I don't think that is going to reverse. In terms of beta versus alpha, we have gained market share both in the markets business as well as in the primary side. If that's part of the output, I think that's an important part of our improved profitability. I think capacity from the European banks has withdrawn, and I think that has accrued to our business. And then maybe another point that I'll leave you with as part of the beta. Prime brokerage is obviously a very important component of an investment bank. There's a very recurring revenue theme in prime brokerage. We have gone in the last three years from being the 10th largest prime broker in the system, we're now fourth globally. And that's business that we have been awarded. I think we have a terrific team in prime brokerage. And that underpins, I think, the beta side of our investment bank, if that helps you.

Thanks very much, Andy. I think that's it for questions. So thanks for joining us this morning. I'm sure we'll get a chance to speak to some of you on the road in the next few days. But otherwise, take care and see you all next time.