Barclays PLC

Good morning, everyone, and thank you for joining us today. I am pleased to report another strong quarter extending the robust operating performance that Barclays has delivered so far this year. In the third quarter, profit before taxes was 2 billion pounds, generating a return on tangible equity of .5% and an earnings per share of 9.4 pence. This leaves us in a good position to deliver a full year statutory return on tangible equity with a target of about 10%. I would like to highlight in particular the strength and consistency of our results as we continue to execute on our business. We see broad-based income momentum across all our three operating businesses, group income growth with 17% in the third quarter year on year, excluding the impact from the versions of securities, a subject to which I will return in a moment. There were several important drivers of this performance that I wish to highlight. First, in the corporate and investment banks, we continue to gain revenue share in our market business, driving the best Q3 income in both markets and fixed income tech in recent years. Notably, our fixed performance was particularly strong and ahead of our US peers, with income up 63% in dollars as we supported our clients in very challenging markets. In Barclays, UK, we positioned ourselves well for rising interest rates with a growing contribution from our structural hedge as we locked in higher yields. Within the consumer cart and payments business, growth in our US cart balance was delivered by recovery in spending and the first quarter of our partnership with Gap, which is starting to show results. Taken together, both balance growth and the management of our sensitivity to higher interest rates contributed to significant growth in the net interest income for the group. And finally, whilst we are a UK domiciled bank, we have a truly global footprint, providing attractive exposure to the US economy with over 40% of our group income generated in US dollars. While our income story paints a compelling picture, we remain, however, cautious about the macroeconomic outlook globally and have been approaching it accordingly over the last year. In fact, we have been prudent in our balance sheet management for many years, in particular since the days following the EU referendum in the UK. We have reviewed our corporate loan portfolios, particularly in more vulnerable sectors, reducing exposure and managing our risk by acquiring significant credit protection. As with many of our peers, we have taken mock downs in some elements of our syndicate loan book, but here too, we have been managing our risk prudently and increasing our hedges. In our UK credit card portfolio, our balances remain some 40% below pre-pandemic levels. And while our US credit card portfolio has grown, credit quality remains very strong and customers continue to repay balances at near record levels. That said, although we feel we are carefully positioned, we remain alert to signs of stress. Our UK debit and credit card spending data give us early insight into how customers are adjusting to prevailing trends. So far, we have not seen emerging signs of stress, although our September data showed a slight fall in consumer confidence. People are being prudent with a reduction in non-essential spending, such as clothing, as they adjust their household expenditure for large increases in utility bills. We are drawing on this insight as well as our data and listening to our customers to understand how best we can support them. We have put in place a range of options to support individuals and businesses who bank with us. This ranges from providing basic information, such as mortgage renewal dates, or how to build a household budget, through to helping these customers with more complex needs. Today, we have over 8,000 colleagues available to engage with our customers in the UK and to discuss their finances. We know the demand for this customer support is growing, and we aim to hire nearly a thousand more people in the coming weeks to boost that capacity. Let me now address the regrettable matter of the over-assurance of securities under our US shelf registration statements. We have resolved the matter with the SEC, and the total financial impact was broadly in line with what we disclosed at the second quarter. I have said it before and I will say it again. This issue was entirely avoidable, and we are taking action to prevent this kind of failure from recurring. The external Council Red review is now complete, and it reinforced the findings of our own extensive internal reviews. We are already using these findings to improve specific controls across the bank and to reinforce more broadly a strong controls culture. I continue to be clear with all my colleagues that we have no higher priority than ensuring that our operations and our risk and control processes are robust and effective at all times. Before I conclude, I want to give you a brief update on one of our strategic priorities, which is capturing opportunities from the transition to a low-carbon economy. Governments continue to play a critical role in this transition, and considering the Inflation Reduction Act in the US and other business factors, in our year-end climate update we expect to bring forward the phase-out date for financing thermal coal power in the US from 2035 to 2030 in line with our approach in the UK and in the EU. And demonstrating Barclays's leadership in the energy transition, we were very honoured and pleased to act as the sole M&A advisor to Cornelistone, based in New York, on the announced $6.8 billion sale of their clean energy business to RWE, based in Germany, earlier this month. This was the largest ever sale of renewable assets globally. So in conclusion, Barclays has had a strong third quarter of financial performance, building on our performance in the first half of the year. This gives us a solid platform as we continue to target a statutory return on tangible equity of up 10% for 2022. Our capital position is robust, with a CET1 ratio of 13.8%, which is comfortably in our target range of 13 to 14%. Our announced total capital return for the last 12 months, comprising both dividends and buyback, is a yield of about .5% on the stock at current share price levels. As I have said consistently, returning excess capital to shareholders remains one of our priorities. And while I'm pleased with the results, I'm very conscious that we live in unusually uncertain times. This drives our conservative approach to managing our balance sheet and provision levels, and our careful stance towards the expected deterioration in the global economy. With that, thank you very much, and with me is our door to Anna.

Thank you, Venkat, and good morning, everyone. Q3 was another quarter of delivery across our businesses, contributing to a -to-date statutory roti of .9% despite elevated litigation and conduct costs. We delivered a roti of .5% for the quarter, PBT was up 6% -on-year, and EPS was 9.5%. The CET1 ratio ended the quarter at 13.8%, and we remain highly liquid and well-funded, with a liquidity coverage ratio of 151% and a -to-deposit ratio of 72%. As Venkat mentioned, we reached resolution with the SEC on over-issuance. As expected, the net profit effect of the over-issuance in the quarter was immaterial. However, there were offsetting effects on income and costs, and there's a slide giving the details in the appendix. I'm going to exclude those effects in my commentary on the cost and income trends. As in recent quarters, better robust performance is being driven by broad-based income momentum. Income was up 17%, while total costs were up by 18%. However, operating costs, which exclude L&C, were up by 14%, reflecting our focus on positive jaws. Both income and cost numbers are, of course, affected by the stronger US dollar. Impairment was 381 million, up from 120 million last year, and I'll say more about provisioning and our coverage levels shortly. But I'm going to start with income momentum. All three operating businesses delivered income growth. In the investment bank, whilst the market environment for primary issuance remains challenging, that same environment is driving high levels of client activity across based financing and trading in the market businesses. So in the CIB, income grew 5% against a strong comparator, with markets up 22% in US dollars, more than offsetting the reduction in banking. The standout in markets is again thick, up 63% in US dollars. Clearly, the volatility across global markets provides a tailwind to this business, as we help clients manage their risk. However, thick comprises both intermediation and the more stable financing revenue. Fixed income financing balances are up over 30% year on year, and margins have widened, as rates have risen globally. The trends give us confidence in a more sustainable base to thick income, if volatility subsides. Equity's revenues were down 21% in dollars. Whilst derivatives were weaker, the year on year growth in our equity financing income provides a good base for sustainability. Overall, our Q3 share of wallets and markets has increased by over 100 basis points year on year, compared to peers who have reported so far. Investment banking fees were down 54% in US dollars, broadly in line with a reduction in the industry feed pool. However, the deal pipeline is strong. The corporate and consumer businesses are well positioned for the rising rate environment, further boosted by transactional growth and indeed nominal economic activity. Although corporate income overall was down 17%, the strong growth in transactional banking significantly offset the corporate lending income expense. Income in CCP increased 54%, reflecting strong growth across all three constituent businesses, and including the effects of the stronger US dollar. In international cards, income was up 68%. In contrast to the UK, we grew average balances strongly in the US by around 30% or $6 billion year on year, both organically and with the $3.3 billion gap book. In payments, income grew 15%, and the private bank achieved 44% income growth, with a continued build in client assets and liabilities up 14% to $138 billion. Barclays UK grew income by 17%, notably in personal banking where earnings on deposits in the rising rate environment more than offset very competitive mortgage margins. Before I talk about interest rates, it's worth noting that our franchise is a global one, with a little over 40% of income in the US dollars. Clearly, this has an FX translation impact, but more importantly demonstrates our exposure to the US economy and capital markets. Moving on to the effects of interest rates. We have maintained a consistent hedge strategy for a number of years, the aim of which is to smooth the impact of interest rate changes on net interest income. Each month, we currently roll $4-5 billion of the hedge, mainly into 3-5 year rates. The consequence of this is that Barclays has sensitivity not just to base rates, but also to the yield curve. The left hand chart on the slide illustrates this for a 25 basis point parallel shift in the curve. In year one, the majority of the sensitivity comes from product decisions around the pass through of increased base rates to customers. But thereafter, with the cumulative effect of the hedge rolling onto higher rates, the hedge impact becomes more significant and reaches around 2 thirds of the 500 million increased by year three. But of course, this is just illustrative and is not a prediction of what will happen with multiple rate rises. On the right hand chart, we have shown the actual impact in recent quarters. Given the recent move in the yield curve, we were locking in an average five year swap rate of 3.05 percent, for example, in Q3, pulling the average yield on the hedge up to 93 basis points. We have around 50 billion maturing in 2023. Although we don't know exactly where swap rates will go, the likely up lift on the current hedge yield is clear, even if the rate cycle is shorter or shallower than current expectations. And of course, that is locked in with each passing month. Looking now at costs. The Q3 figure was 3.6 billion, but this is net of a reduction in over issuance costs of 0.5 billion. Excluding that, costs would have been 4.1 billion, up from last year's equivalent of 3.5 billion. This increase was partly attributable to the other litigation and conduct charges of 164 billion. Operating costs, which exclude L&C, increased 14 percent against income growth of 17 percent. This increase of 0.5 billion included FX movements and inflation, plus investment spend focused on our three strategic priorities. Around 30 percent of our costs are in US dollars, so the 14 percent change in the US dollar rate year on year has a significant translation effect. The currency effects have been more pronounced quarter on quarter, with a 6 percent strengthening in the US dollar. Assuming an average dollar rate of 112 for Q4, we expect total operating expenses for 2022 to be in line with our previous guidance at around 16.7 billion, with a tailwind from the net L&C credit of 0.3 billion in Q3 being broadly offset by the stronger dollar and other cost inflation. I'm not going to give absolute cost guidance for 2023 at this stage, but we will continue to manage the trade-off between cost efficiency and investment. Of course, a strong dollar will affect the sterling cost figure, but with over 40 percent of our income in US dollars, this is positive for the cost-income ratio. We manage our statutory costs, which include litigation and conduct charges, and our very focused on generating positive draws on a statutory basis. Moving on to impairment. The current macroeconomic outlook informs our approach to provisioning. But before I look at how this affects impairment, I want to summarize briefly the evolution of key portfolios in recent years. The Buk mortgage book has grown by 13 percent since December 2019, but the average loan to value has declined, and only 2.3 percent of the book has an LTV over 85 percent. Our UK card book has reduced by around 40 percent over that period. We continue to see high levels of repayment across the credit spectrum, and the REAS rates remain stable at low levels. By choice, we have a different dynamic in US cards. Whilst repayment rates have also been high, we are growing balances, including through the launch of the GAP partnership. However, the quality of the book, as measured by average FICO scores, has improved, and REAS rates are still below the pre-pandemic level. Wholesale balances have increased recently, but the majority of the growth has been in debt securities, collateralized lending to financial institutions, and the lower risk areas of corporate lending. In addition, we have increased our first loss credit protection over the corporate loan book, thereby reducing our exposure to loan losses. 35 percent of this book is now covered by some form of protection, up from 26 percent pre-pandemic. Across our portfolios, we feel confident that we are well positioned. As you can see on the next slide, our total impairment allowance was 6.4 billion, an increase in the quarter from 6 billion, and this includes 0.7 billion of post-model adjustments or PMAs for economic uncertainty. The forecast macroeconomic variables, or NEDs, we have used at Q3 for models and impairments are shown in the appendix. These show some deterioration compared to Q2. For example, modeling baseline UK unemployment of 4.4 percent in 2023, up from 4.1, and US unemployment of 4 percent, up from 3.5. Applying these NEDs to the Q3 balance sheet had an effect of around 300 million, but we created the PMA for economic uncertainty to capture this type of deterioration. So in the quarter, we have released around 300 million of the PMA balance. Therefore, the model's allowance plus the economic uncertainty PMA is roughly flat quarter on quarter at 5.2 billion and covers the further model increase we would see if we were to use our downside one scenario. We still don't see significant signs of deterioration in credit metrics. Although coverage ratios overall are slightly down on pre-pandemic, we have increased coverage for stage one and stage two credit cards, as you can see in the appendix slides. The chart on the right shows the overall loan loss rate over recent years. Ignoring the volatility during the pandemic, you can see that it has been around 50 to 60 basis points. Although this is sensitive to the portfolio mix, we think it's a reasonable range to be considering for our through the cycle loan loss rate. In Q3, this was 36 bits and the charge was 381 million, and we expect this to rise modestly over the coming quarters as we grow. This is obviously subject to further potential deterioration in the macroeconomic outlook. Beyond that, which could be offset by the uncertainty PMA balance of 0.7 billion. A quick summary now on our results by business. In CIV, income grew 5% against a strong comparator. I focused on the key drivers earlier, but wanted to go into a bit more detail here on the corporate income. Transaction banking was up 57%, reflecting strong NII growth, and we would expect further growth in Q4. The corporate lending income expense reflected both fair value losses on leverage finance lending of 190 million, net to market gains on related hedges, and also higher costs of hedging and credit protection. The underlying corporate lending income remained stable. Operating costs, which exclude L&C, increased by 17%, reflecting the 14% appreciation in the US dollar, an investment in talent systems and technology to support income growth initiatives, plus the impact of inflation. The cost income ratio was 62%, excluding the effect of over-issuance. Overall, the CIV generated a statutory roti for the quarter of 11.9%. We're pleased with the sustainability of the business through the pandemic and current geopolitical disruptions. The franchise is developing well, and over half of the income is dollar-based, reflecting the strength of our position in the largest global capital market. Moving on to CCP. Income increased 54%, reflecting growth across international cards, payments, and the private bank, as I mentioned earlier. Total costs were 835 million, which included 102 million of litigation and conduct, mainly in respect of our review of legacy loan portfolios. Excluding this, the increase in operating costs was 30%, principally investment in the growth of partner brands in US cards and the dollar strength, but still delivering positive jaws. The impairment charge was 249 million compared to 110 million last year. This reflected growth in US card balances back to pre-pandemic levels, with some normalization of economic activity. As balances grow, we do expect some stage migration, but risk metrics remain below pre-pandemic levels. The roti was .5% despite the L&C charge. Turning now to BUK. Income grew 17%, while costs were up 2%, delivering strong positive jaws and reducing the cost-income ratio by 8 percentage points to 56%. The NIM for the quarter was 301 basis points, up 30 basis points on Q2, as we saw benefits from rate riders, and we shone a bridge on this slide analyzing that. We're continuing to guide for the full year to a range of 280 to 290 basis points, and expect to be in the upper part of that range. The cost phase that we flagged previously provides significant offset to cost inflation, and we're keeping a tight control over credit risk. There's a slide in the appendix on the head office result. Turning now to capital. The CET1 ratio ended the quarter at 13.8%, an increase from .6% up a half year, uncomfortably within our target range. Our capital generation from profits was strong, contributing 43 basis points. We completed the half year buyback, returning capital to shareholders, and further reducing the share count to 15.9 billion, that down a billion in the last 12 months. Combined with a dividend paid in accrued, this was a return to shareholders of 22 basis points. Over time, increases in interest rates are a tailwind to profitability, but the effects on reserves from market movements caused a headwind of 12 basis points in the quarter, principally through the fair value effect on bond holdings. The completion of the rescission offer and termination of related hedges released RWA, increasing the ratio by 17 basis points. FX had little net effect given our policy of hedging the ratio, with an increase in RWA, but also a positive effect on the currency translation reserve in the numerator. Our NDA hurdle is 10.9%, so we have comfortable hedgerows. We remain confident in the organic capital generation, and our target range remains 13 to 14%. A quick comment on the move in equity. TNAB decreased 11 pence in the quarter to 286 pence per share, reflecting the effect of increased interest rates, partially offset by earnings and the benefit of stronger dollar on reserves. Finally, on leverage, our spot leverage ratio was 5%, and the average leverage ratio was 4.8%. So, to summarize on targets and outlooks, we reported statutory earnings of 9.4 pence per share for Q3, and generated a .5% ratey against our target of over 10%. We continue to target a cost income ratio of below 60%, and our capital ratio remains strong at 13.8%. We have confidence in the continued revenue momentum across all of our businesses. We continue to focus on the cost trajectory given inflationary pressures, and have maintained our cost guidance for the year of 16.7 billion. We are well-provisioned in readiness for potential deterioration in the macroeconomic environment, but expect a modest increase in quarterly impairment charges over coming quarters as we grow. Overall, the business performance is robust, and we remain focused on delivering our targets of double-digit ratey this year, and on a sustainable basis going forward. We are confident of being able to invest for future growth, and delivering attractive capital returns to shareholders. Thank you, and we will now take your questions. And as usual, I would ask that you limit yourself to two per person, so we get a chance to get around to everyone.

Our first question is from Alvaro Serrano from Morgan Stanley. Alvaro, your line is open. Please go ahead.