Barclays PLC

Good morning everybody. This is my first earnings call as Chief Executive of Barclays. It's a great honor to follow a three century long line of stewards of this company. While I'm new in this job, I have been at Barclays for a number of years. I was part of the management team that developed the strategy we set out in 2016, and I'm delighted now that we are seeing the benefits of that strategy in the results which we are about to discuss. So moving to slide three, it has been a strong full year performance for the group. In 2016, we set out to build a bank capable of delivering double digit returns through the cycle. Last year in 2021, we delivered a group return of tangible, return on tangible equity of 13.4%. This included double digit returns in all three of our major lines of business, Barclays UK, the consumer cards and payments business, and the corporate and investment bank. The group also delivered a record profit before tax in 2021 of 8.4 billion pounds. This profit included record levels of profitability in the CID in our corporate and investment bank, strong cost discipline, a net credit impairment release of around 650 million pounds. And we acknowledge that the economic outlook remains uncertain, but this is reflected in the robust coverage ratios which we retain. We also remain well capitalized with a CET ratio of .1% per year rent. And this performance has enabled us to announce the return of over 2.5 billion pounds of excess capital to shareholders in respect of 2021. This is the equivalent of a total payout of 15 cents per share. The group has demonstrated significant progress since 2015. We delivered a greater than 10% ROTE in 2021. And the objective now is to sustain this performance, delivering double digit returns on a consistent basis. Prashar will say more about this shortly on the factors that give us confidence in achieving this. We continue to focus on managing costs. Our cost income ratio is 66% down from over 80% in 2015. In part, this improvement was driven by lower litigation and conduct charges. And a substantial portion of our material financial crisis related legacy matters are behind us. It's also a result of strong cost control, evidenced by base costs remaining flat year on year at 12 billion pounds. We will continue to emphasize cost discipline, creating efficiency savings, which we will use to invest for growth and to drive higher returns. We have also managed our capital resources prudently, steadily improving our CET one ratio since the end of 2015. Our strong organic capital generation, including over 200 basis points from earnings have enabled us to increase capital distribution to shareholders in 2021. Barclays remains in a strong capital position and distributions to shareholders remain a key priority for management and the board. To that end, we were pleased to be able to announce a further buyback of up to 1 billion pounds with our results today. This is in addition to the 500 million pound buyback, which we announced with our interim results and supplements the sixth sense total dividend for 2021. We recognize that the economic environment remains uncertain. However, Barclays is relatively well positioned against this backdrop. We are materially geared to rising interest rates at both the short end and the long end of the yield curve. This means that we benefit from rises in the base rate as well as the steepening of the yield curve by our structural interest rate hedge. We estimate that each 25 basis point upward parallel shifts the yield curve would add about 500 million pounds to annual net interest income by year three. In addition, consumer spending levels in the UK and US have been improving. And this is a good lead indicator of interest earning unsecured balance growth to come. Our latest spend trends data in the UK shows that debit and credit card spent for January 2022 was up .4% versus January 2020, pre pandemic. In the US, January 2022 purchases were broadly flat as January 2020 compared to January 2020 as the economy has continued to recover. Although inflation is a tailwind to normal GDP, it is a headwind to cost. We have a number of active cost efficiency programs to maintain the impact of inflation to mitigate the impact of inflation, I should say, while continuing to invest for the medium term. At the same time, unemployment in the UK and US remains at low levels. Unsecured lending balances are reducing and the macroeconomic outlook appears to be improving. We expect this to mean that the quarterly run rates of impairment is likely to be below pre pandemic levels. These are positive signs, though we of course recognize that a robust recovery is not assured. Our universal banking model is key to our strategy. We are a large consumer bank managing an excellent credit card franchise as well as the leading corporate bank and one of the largest global investment banks. Each is a successful business in its own right, but together they comprise a resilient and balanced group. For instance, in 2020 and 2021, we had strong profitability in the corporate and investment bank, helping us with standard downturn in our consumer businesses. Now, as the broader economy continues to recover, we expect to see an improved performance in our consumer businesses, while sustaining the robust performance of the corporate and investment bank. In order to grow the group and to sustain returns above our target, we emphasize three priorities. I will outline these in the next few slides. Our priorities should enable us to take advantage of some of the long-term changes taking place in financial services. Digitization is one of the most important of these trends. Digitization continues to liberate finance. It provides our customers and clients with cheaper and better products and services, a better user experience, and a more seamless and efficient way of interaction. This is typified as a strategy by the awkward trends in the number of customers who want to engage with us digitally. In the UK, our mobile banking customers continue to grow year on year. We now have over 10 million people registered on our app, with around 11,000 more added each week. At the same time, branch visits continue to fall. The pandemic has accelerated this transition. Within wholesale banking, we continue to observe growth in both the public and private global capital markets. And combining the total market capitalization of issued securities around the world, the value of equities and bonds outstanding has grown by over 50% in the last three years. But as these public markets have grown, so too have the private ones. Since 2018, the total assets and the management in the private markets have grown more than 60%, from $6 trillion to $9.8 trillion. The largest private equity and private credit funds dominate these markets, and they are among our biggest clients. Finally, as our third priority, we recognize the scale of opportunity in climate-related financing. It is difficult to be precise about the magnitude of this opportunity, much as it would have been difficult to predict the value of the internet revolution in the mid-1990s. Estimates of the additional investment required to finance the transition are at least $3 to $5 trillion every year for the next 30 years. This could be a new industrial revolution. So let me take each of our strategic priorities in turn. First is the delivery of the next generation digitized consumer financial services. We see the dominant business challenge for this next decade as continuing to transform Barclays to deliver products digitally. Across Barclays UK and our consumer cards and savings businesses, we will continue to invest in our digital capabilities. This is a means of delivering better products and services more efficiently and with higher profitability. Within Barclays UK, we will continue to enable customers to transact and interact globally, digitally. Our aim is to increase digitally enabled customer journeys, products and services that can be completed online from 70% to 80% by the end of this year. We're also observing a steady increase in the use of more flexible and accessible ways to transact outside a branch. For example, the number of smart ATMs we operate in the UK will go from 25 at the end of 2021 to 376 by the end of 2022. However, as we observe these trends, it remains central to our strategy that we adjust our footprint without neglecting the needs of society. We are one of the driving forces behind the current initiatives to share banking infrastructure in order to continue access to cash and access to banking. We will continue to build out more cost effective infrastructure, significantly increasing our utilization of cloud computing. This would have meaningful benefits for our cost base. We will utilize consumer data more effectively. And by doing so, we can better understand customers' needs, build a more competitive offering and simplify our products and services. And we will look to reduce the number of products we offer by around a third over the next four years, targeting gains in service quality, simplicity and efficiency. We also aim to continue to realize value in our payments platform, including the synergies with the banking franchises across our group. We have a significant opportunity to grow our payments business. We have around 360,000 payment service relationships with UK SMEs, but over 1 million business banking customers. So we have the ability to grow this cohort. As Barclays owns its own merchant acquiring operation, we have a much more integrated relationship with corporates in the UK and Europe. This gives us the ability to scale up our e-commerce offering, which is a very fast growing part of the payment complex. Having had a relatively conservative posture during the pandemic, we think now is a good time to build unsecured consumer lending in both the UK and the US. We intend to drive this growth through corporate partnerships, particularly in the US, which is the biggest global credit card market. The prime example of this is our relationship with Gap, which will commence in Q2 of this year. This partnership will not only enable us to diversify our US card offerings into retail from airlines, but will also broaden our product suite with the introduction of white-label store cards. We also have a significant portion of sales finance partnerships in regulated installment lending. This includes our partnerships with recognizable brands like Apple in the UK and Amazon in the UK and Germany, both of which we intend to grow. In the CID, we want to deliver sustainable growth and returns, improving our ability to serve clients across our markets as the capital markets themselves expand. This growth in the private and public capital market is at the core of our strategy. We are the sixth ranked global investment bank and the top ranked non-US player. This provides us with a strong foundation on which to continue to capitalize on the structural trend and to build a more diverse business. Over the past three years, we have improved our ranking, benefiting from the investments which we have made in our people and technology. At the same time, some of our European peers have been exiting capital markets businesses. We have benefited from the high levels of clients and market activity during the pandemic and while we recognize that the capital market business is cyclical, the franchise is well-positioned to benefit during periods of heightened volatility. We see opportunities therefore to sustain and grow our share of industry peoples, helping to protect earnings during weaker periods in cycle and delivering stronger returns. To that end, we have taken steps to diversify our income across the corporate and investment bank. For example, you have heard us talk previously about investing in talent to grow our equity capital markets business and expanding our banking coverage in sectors like technology. As a result, our global ECM fee share has grown 70 basis points since 2018. Similarly, our global technology fee share has grown 50 basis points since 2018. In global markets, you've heard us talk about the growth in our prime business. In three years, our client balances have grown by some 50%. This is a testament to our focus on strengthening and broadening our client offering and the strategic investments which we have made in our platforms. Reflecting the growth we have seen in key areas of our franchise, I was delighted to see Barclays win two awards last week. First, Risk Magazine named us Prime Broker of the Year and second, IFR named us as the Equity Drivers House of the Year. Overall, financing income at Barclays has grown by approximately 40% since 2018 and this provides more stable annuity tax income, smoothing our income mix across the board. We have also seen a growth across the global market businesses. In the corporate bank, we have been working to improve our returns for several years, focusing on deepening our client relationships and broadening our product capabilities. Here too, we have invested to diversify our income streams. We've had success growing the number of clients we have in Europe and growing key based income in transaction banking. Total 7% year on year to around 600 million pounds. Our third strategic priority is to capture opportunities and help our clients as the world transitions to a low carbon economy. As this fundamental reorganization of the global economy takes place, affecting every business in every sector, Barclays is positioned to benefit from playing a constructive role. This means being the trusted partner for our customers and clients as they transition, advising and supporting them to adapt their business model and in fact their individual lifestyles. It requires us to support our clients from governments and global corporations to SMEs as they adapt to make their businesses more sustainable. We are already using our balance sheet, investment banking and capital markets expertise to help deliver this advice and finance. For example, we have facilitated 62 billion pounds of green finance since 2018 through landmark deals. This includes serving as the joint lead on seven out of eight inaugural green bonds issued by European sovereigns since 2017. However, there is much more we can do to take advantage of the market opportunity. We are continuing to expand our sustainable finance offerings for our specialist teams and we are integrating sustainability across our service offerings. We will continue to innovate to develop banking products that help consumers and small businesses make greener choices. For example, in 2018, Barclays was one of the first major UK banks to launch a green mortgage product. To date, we have completed over one billion pounds in green home mortgages and we have recently launched a green -to-let mortgage product. We also keep investing, we will keep investing our own equity capital in the young companies that are inventing the low-emissions, -carbon-emissions technology of tomorrow. Our focus on climate is an example and a clear demonstration of our purpose and values. These were enshrined over 300 years ago by our Quaker founders and they include integrity, community and stewardship. We've made significant progress against our environmental, social and governance agenda in 2021, underpinned by this purpose. This agenda will continue to be a major focus for Barclays in 2022, including offering shareholders a say on climate at this year's annual general meeting. Finally, let me talk briefly about our philosophy towards capital management. As 2021 has proven, the group is able to generate meaningful organic capital from earnings. Achieving a greater than 10% return on tangible equity consistently would translate to about 150 basis points of annual capital ratio accretion. This capital can then be used to do three things. First, to return an effective amount to shareholders, which I've stressed remains a key priority for me, for our management team and our board. Second, to invest for growth, targeting demand-led and capital-like opportunities to drive higher returns. And finally, maintaining a strong capital position, which is the foundation of our 13 to 14% CET1 ratio target range. I will shortly hand over to the co-chair to take you through our numbers. But let me close by saying how pleased I am with our performance this year. Our strategy is delivering, we have set out clear priorities strategically, and I'm excited about the sustainable past approach for Barclays. I'm confident that this positions us to be able to deliver greater than 10% ROTE on a consistent basis. And before I end, I want to express my gratitude on behalf of all my colleagues at the bank, to Tishaar Mourzaria for eight plus years of outstanding service to Barclays as our group finance director. In his first year in the job in 2013, we had reported a PBT of 2.9 billion pounds, an ROTE of 1.2%, and a CET1 ratio of .1% after a six billion pound rights issue. Look how different we are now. This cleaner, leaner, profitable Barclays of today owes much to Tishaar's broad vision and deep execution capabilities. I have personally known Tishaar for over a decade and a half, and have always valued his counsel and friendship. I'm reconciling myself to his wanting a change, but I'm delighted he will stay on at Barclays as chairman of our financial institutions group in the investment bank, and be of value to our clients and to us. It is testament to Tishaar's vision and leadership that he identified and prepared Anna Cross to be his successor. I've worked closely with Anna for six years, and I'm delighted that she is our new group finance director. She's intimately familiar with the strategy of the bank and all aspects of our financials, having been controller of the bank as well as PFO of our retail operations. Anna is molded from the distinguished Scottish tradition in global banking, and she will steward our finances and strategy with prudence, diligence, discipline, and rigor. So thank you, Tishaar, for everything. Welcome, Anna, and congratulations. And over to you, Tishaar, for your valedictory address.

Thanks, Benkatt. While it may be the right time for me to be moving on, I can't think of a better team, in both you and Anna, to be stewarding and driving Barclays forward for many years to come. Moving on to the numbers. As usual, I'll start with a summary of our full year performance, and then go into more detail on Q4. Through the years, the strength of the CID has continued to offset the effects of the pandemic on our consumer businesses, which we are now seeing initial signs of recovery. Overall income was up 1% year on year, despite an 8% weakening from the average US dollar exchange rate. Cost increased by 0.6 billion to 14.4 billion, and I'll say more on the cost of that increase shortly. Following an impairment charge of 4.8 billion in 2020, we had a net release of 0.7 billion for the year. However, we maintained strong coverage ratios in line with or higher than pre-pandemic levels in key portfolios. This resulted in a PDT of 8.4 billion, a significant increase on the 2020 profit of 3.1 billion. The EPS was 37.5 pence, and we generated an ROCE of 13.4%. P now increased by 23 pence over the year to reach 292 pence. Our capital generation has put us in a position to pay a full year dividend of 4 pence per share, making 6 pence in total for the year, and launched a further share buyback of up to 1 billion, following on from the 500 million buyback executed in the second half of 2021. That takes total capital return to 15 pence per share equivalent in relation to 2021. And of course, we also completed a 700 million buyback in April in relation to 2020. We ended the year at a .1% CC1 ratio, or .8% adjusted for the announced buyback. Well above our target range of 13 to 14%. Few words on income, cost, and impairment trends before I look at Q4. We mentioned the benefit of diversification throughout the pandemic, and we again delivered resilient income, group income performance in 2021, up 1% on 2020 despite the US dollar headwind. We reported a 3% increase in B-UK income with growth in mortgages, and non-recurrence of COVID related customer support actions partially offset by lower unsecured lending balances. CCP income was down 3% year on year, reflecting lower average US car balances, increased customer acquisition costs, and the weaker US dollar. But income from payments and the private bank increased year on year. CID income was down just 1% on the very strong 2020 print despite the dollar headwind, with a strength in the fee businesses and equities offsetting weaker fixed performance. We summarized here some of the trends that are driving income across the lending businesses which underpin our confidence in income growth going forward. We have a continuing tailwind in secured lending volumes in the UK, adding almost 10 billion in mortgage balances year on year. On unsecured lending, we have been consistently cautious throughout 2020 and 21, but we are now seeing the first signs of recovery, and are optimistic about the prospects of a return to balance growth. The rising rate environment is a significant positive for us through the effect of higher longer rates on the role of the structural hedge, in addition to the effect on the public margins of recent base rate rises and potential further increases. The table on the right of the slide shows an illustrative example for a 25 basis point parallel shift upwards in the current yield curve. And the movement in the yield curve means that we now expect the role of the structural hedge to be a tailwind in 2022. Just to remind you that the income benefit from a 25 basis point increase in rates is spread across the group, with around two thirds now expected to benefit parties UK. Looking at costs, rate costs, which excludes structural cost actions and performance costs, are flat at 12 billion for 2021 in line with our previous guidance. Overall, costs increased by 0.6 billion to 14.4 billion as a result of the increase of 0.3 billion in structural cost actions and 0.2 billion in performance costs. Looking first at structural costs, the four year total of 0.6 billion included the real estate charge we took in Q2 and 0.3 billion in Q4, largely related to the transformation spend in the UK, which we flag at Q3, and which will start to bring savings from 2023. We will evaluate further structural cost actions for the current year, but I wouldn't expect a charge as large as 2021. We do place some inflation on costs, but we expect only a modest increase in base costs from the level of 12 billion, while continuing to make investments funded from cost efficiencies. To give overall cost guidance, but I'm broadly comfortable with where the cost consensus currently is in the 14.3 to 14.4 billion range. Moving on to impairment, we reported a net release for the group of 0.7 billion for the year, with a charge in CCP more than offset by net releases in VUK and CIV. This compares to the charge of 4.8 billion taken in 2020. On the right, you can see that the 2020 charge comprised roughly half stage three impairment on loans in default, and half stage one and stage two impairment. In 2021, we had a charge of 0.7 billion in stage three impairment, but a release of 1.3 billion on stage one and stage two balances, as macroeconomic forecasts have proved less severe than when the 2020 provision was taken. And there has been a sizable pay down in unsecured balances. We've included in the appendix, an updated slide on the macroeconomic variables and post-model adjustments. And you'll note that we're still holding a 1.5 billion in management adjustments. But I think the best way to think about our current impairment provisioning is by looking at coverage ratios, which is shown on the next slide. Despite the release in 2021, we still have strong coverage ratios. The area I want to focus on is the coverage of the unsecured ones. Here, the overall coverage ratio is still .8% above the pre-candidate level, and coverage on stage two balances, most of which are not past due, is still 30%, compared to the end 2019 level of 18.7%. Within this, coverage ratios for credit cards are still higher than the unsecured average, with 30 and 90 day areas, because are well down year on year. With these levels of coverage and the expected modest organic growth in unsecured balances, we expect the quarterly impairment chart to remain below historical pre-candidate levels in the coming quarters. Turning now to Q4 performance. Income was up 4% year on year to 5.2 billion, with growth in B-UK and -C-B and -I-B income stable. Costs were down 3% year on year, delivering positive sales. We had a small impairment release, compared to a chart of 0.5 billion for Q4 2020. As a result, profit before tax was 1.5 billion for Q4, up from 0.6 billion the previous year. The attributable profit for the quarter was 1.1 billion, generating an EPS of 6.6 pence and an ROTE of 9.3%. I would remind you again that these are all statutory numbers and take into account a litigation and conduct charge of 46 million. TNAP per share increased by 5 pence to 292 pence in the quarter, reflecting the 6.6 pence of EPS. Looking now at the business results for Q4 in more detail, starting with B-UK. Income increased 4% year on year, while the continuing strong, with the continuing strong performance in mortgages. Balances again grew with a net increase of 0.7 billion in Q4, making total mortgage foot growth of almost 10 billion year on year. Mortgage market is always very competitive, although there are some signs of pricing firming up. As we showed on the earlier slide, credit card balances were broadly flat at Q3, at 9.5 billion, still down 15% on the end of 2020 and 40% on 2019. Although only cron-related restrictions down from spending in December and January, we now expect the spend recovery to generate some growth in unsecured lending balances through the rest of the year. NIM for the quarter was 249 basis points, flat on Q3, but we expect improvement in NIM during the current year on the back of rate rises. The extent of this improvement will depend on the timing and number of rate rises and the long end of the curve, as well as product mix and pricing. There are a lot of variables, but at this stage, we're guiding to a NIM for 2022 in the range of 260 to 270 basis points. That's using an assumption that the UK base rate reaches 1% by the end of the year, although you'll note the futures market is currently pricing in higher rates. Increasing non-interest income compared to Q3, of 50 million, reflected higher debt sales. Cost increase twice the cent, reflecting 196 million of structural cost actions designed to deliver efficiency savings over time, a significant increase on Q4 2020. We expect the main savings from these measures to start coming in from 2023. Was an impairment release for the quarter of 59 million compared to the chart of 0.2 billion for Q4 2020. The coverage ratios, particularly in cards, look strong, as I mentioned earlier. Customer deposits increased by further 4 billion in the quarter, and the ROPE was 16.8%. Turning now to Barclays International, the IE income increased 1% year on year to 3.5 billion, while costs were marginally down. Impairment charge was 23 million, resulting in an ROPE of 10.4%. I'll go into more detail on the next two slides, beginning with the CIV. Income was broadly flat, demonstrating the benefit of diversification within the CIV, with a weaker performance in markets, largely offset by growth in investment banking fees. Q4 costs decreased by 7%, delivering positive draws, and a cost-income ratio of 65%. As I mentioned in previous quarters, the increase in the variable compensation accrual was skewed towards Q1 in 2021, in line with performance. There was a 73 million net impairment release compared to a small charge for 2020. Overall, the CIV generated an ROPE with a quarter of 10.2%. Look at the income in a bit more detail, global markets decreased at 23% overall in sterling. Both FIC and equities were down, but equities by just 8% and prime balances continue to grow. Overall, given the performance through the year and the investments made in various areas, we remain positive about the development of our markets franchises. Investment banking fees reached a record level for the fourth quarter at 956 million, up 27% -on-year. We saw strong increases across all three fee lines with equity capital markets, one of the areas we invested in, the standout performer. I'm not going to make any specific comment on January trading, but I would observe that while volatile markets may affect the timing of primary deal flows, they may be favorable for secondary markets businesses. Corporate lending income was down slightly at 176 million, with loan demand remaining muted. Transaction banking, on the other hand, was up 32% at 453 million. Tending now to consumer cards and payments. Income in CTP increased 4% to 0.9 billion, reflecting growth in payments and the private bank, possibly offset by lower income from US cards. US cards saw a continuing recovery in balances, adding $1.1 billion in the quarter to reach $22.2 billion. That's 6% growth -on-year and 5% growth on Q3. However, the income effect is dampened by the J-curve investment in that balance growth, particularly on customer acquisition and in the, particularly on customer acquisition in the growing portfolios like American Airlines and JetBlue. We're still expecting high payment rates in line with the market, but we are confident that we're doing balance and revenue growth in 2022, both organically and with the acquisition of the Gap portfolio, which comes towards the end of Q2, but the bank was currently expected to be around $3.5 billion. Payment income was up 29% -on-year and close to the Q3 level, despite only current related restrictions in December. Private banking has increased 15% -on-year, as client balances continue to grow. Investment and higher marketing spent was reflected in an increase of 13% in CTP costs. The impairment charge was 96 million, well down -on-year, and the ROT was 11.7%. Telling now to head office, the negative income of 49 million was a bit better than the 75 million underlying run rate I've mentioned before. Costs of 155 million were higher than our usual run rate and including some further costs related to discontinued software assets. These are included in our base costs rather than called out as structural cost actions. Lost before tax for the quarter was 198 million. Before I move on to capital, a quick summary of our liquidity and funding on the next slide. Remain highly liquid and well funded with a liquidity coverage ratio of 168% and along with a deposit ratio of 70%. Moving on to capital. The -C-1 ratio ended the year at 15.1%, well above our target range of 13 to 14%. During the quarter, the ratio declined slightly from 15.4%, with profits broadly offset by the expected RWA growth, which we flagged at the Q3 results. However, across the year, the ratio was flat, despite 1 billion of dividends paid in accrued and 1.2 billion for the share buybacks executed during the year. A total of 72 basis points return on capital. Going forward, the organic capital generation from profits in 2021 is a good illustration of our ability to return capital to shareholders and we've announced a further buyback of up to 1 billion to follow these results. We're showing the effects of this proposed buyback and the Q1 regulatory headwinds on the next slide. The announced buyback would reduce the year-end ratio of .1% by about 30 basis points. We've previously identified various regulatory changes coming in this quarter, most notably the reversal of the software amortization benefit of 35 basis points. In total, these are expected to have an effect of 80 basis points, similar to what we showed at Q3. That will take the ratio to around the top end of our target range. With these changes behind us, I wouldn't expect to be calling out further material regulatory headwinds over the next couple of years. Looking further out, we are mindful of the eventual introduction of Basel 3.1. We await more detail on implementation, including timing, but our best estimate currently is that this could add five to 10% to group RWAs at the point of implementation based on the 2021 level. We'll be monitoring closely to what extent the effects will be partially mitigated by changes in Pelletier-Way requirements as flagged by the Bank of England. We will factor Basel changes into our usage of capital as we get closer to the implementation, but think this is very manageable. I'm not gonna forecast a precise plot path of the capital ratio from quarter to quarter, but going forward, we are confident that the balance between profitability and investment and growth will leave us with net capital generation to support attractive distributions to shareholders over time and be comfortably within our CT1 target range. As I said before, the Board considers capital distributions regularly through the year. It isn't just a matter for an annual discussion, as you saw in 2021. That target range gives us appropriate headroom above our MBA hurdle, which is currently 11.1%. The chart shows how the MBA hurdle is expected to evolve for the count of cyclical buffer increases indicated by the Bank of England to reach .6% by year end and potentially .1% in Q2 2023. As we've obviously taken this into account, we have obviously taken this into account in setting our target range. Finally on leverage, our year end spot leverage ratio was 5.3%, similar to the end of 2020, and the average UK leverage was 4.9%. Before concluding, I just wanna say a few words about the flight path for our ROTE. We're delighted to have hit our ROTE target of over 10% in 2021, but we are conscious that the .4% benefits from a net impairment release. So it's understandable that the market wants to assess how sustainable a double digit ROTE is. I'm not gonna give an ROTE forecast for 2022, but I wanted to talk through some of the factors that give us confidence this is achievable as we pursue the strategic priorities of NCAT reference. On the left-hand side, we've adjusted the reported return to eliminate some of the effect of low impairment. You can do this in a number of ways, but this illustration reverses out the macroeconomic release on modeled impairment. Together with removing the effect of the 2021 deferred tax data remeasurement in the UK, this would move the ROTE to around 10%. Looking forward over the next couple of years, we have some identifiable tailwinds and headwinds. On the income front, we expect a significant tailwind from rate rises plus some recovery and unsecured balances and growth in payments income, including transaction banking. Among headwinds, I've called out some further increase in impairment as balances recover. As I mentioned, we expect the charge to remain below pre-pandemic levels for some time. On the tax front, there will be a negative from the UK DTA remeasurement in Q1, reflecting the reduction in the bank tax surcharge from 2023. Longer term, there's a slight increase in the UK tax rates for banks from 2023, but the position on potential increases in US tax rates is now less clear. Other factors to consider are the cost trajectory and the direction of CID income and performance costs. We can influence the cost trajectory according to the environment and our priorities, particularly the extent to which cost efficiencies are invested in growth initiatives and the level of any further structural cost spend. Investment bank performance is hard to forecast. The market consensus is for some reduction in income wallet this year. However, there are positive structural trends from the size of capital markets, and we have made progress in strengthening our franchise in a number of areas, such as equity prime and secure price products. So overall, we feel we are well positioned to achieve double digit returns on a sustainable basis. To recap, we reported statutory earnings per share of 37.5 pence for 2021 and generated a .4% ROTE. And we're focused on delivering our target of double digit ROTE on a sustainable basis going forward. We're seeing some recovery in lead indicators for consumer income and believe our diversified income streams position us well to benefit from the economic recovery and rising interest rates. Reported an impairment release of 0.7 billion that maintains strong coverage ratios, and we expect the run rate for impairment to be below the pre pandemic levels over the coming quarters. We've delivered costs in line with guidance for 2021, although base costs for 2022 are expected to be modestly higher as a result of inflationary pressure. Plus remain a critical focus, and we will be disciplined on performance costs and on the extent of further structural cost actions. We executed two buybacks, totaling 1.2 billion during 2021, have announced a further buyback of up to 1 billion with these results. In addition to the total dividend of six pence per share. Our capital ratio is strong and remain confident of delivering attractive capital returns to shareholders while also investing for future growth. Thank you. And we'll now take your questions. And as usual, I'll ask that you link yourself to the 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 question, please ensure that your phone is unmuted locally. To confirm that star followed by one to ask a question. Your first telephone question today is from Omar Keenan from Credit Suisse. Omar, please go ahead, your line is now open.