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.

Hi. Thanks for taking my questions. One question on cost, another on asset quality, please. On costs, I heard you, Anna, saying that you're not going to talk about 2023, and I don't expect you to give a hard number. But if I take your guidance for this year, it looks like operating expenses are annualizing north of $16 billion, considering there's inflation, likely inflation, and consensus is closer to $15 billion, so there's a significant delta. Is there any sort of cost actions or anything I should bear in mind in that number beyond obviously the exchange rate? Any actions you're able to take, or do you feel there's even more flexibility on variable comp than in other times of the cycle? And the second question is around asset quality. You said that you expect a trend towards, through the cycle, loss rates. Obviously, there's been some changes in the mix, increasing sort of retail cards in the U.S. and shrinking the U.K. I don't know if you can update us on what that number looks like now. And related to that, in your downside one scenario, I think you've got accumulated almost 20 percent correction in house prices. What impact would that have on RWAs? Thank you.

Okay, thanks, Alvaro. So let me take costs first. So we've guided this year to $16.7 billion. That has an assumption embedded within it that the fourth quarter dollar rate will be $1.12. As we look forward into next year, here's kind of how I'm thinking about it. We would expect that given we've seen elevated levels of L&C this year, for that to be considerably lower. However, the effects impact that we've seen intensifying through the year, you might expect annualized into next year. So if rates stayed at $112, that would be about 500 million pounds of cost increase into next year. But what we have to remember is that that has a greater impact on the income line. So the equivalent to that 500 in income terms would be a billion. So as you're updating your cost expectations, I would encourage you to think about the effects impact in income as well. As relates to other factors, clearly there is inflation, but you've also got the investment that we've focused on our three strategic priorities. You can see that's not deployed equally throughout the bank. In terms of actions, we could clearly modify that investment plan, but to the extent that we feel that it's driving revenue growth, obviously we'd be thoughtful about doing that. In terms of managing inflation, we do have efficiency programs in place. You can see that particularly in the UK, where you've got strong income growth dropping to the bottom line with minimal cost growth. So I would say consider the impact of efficiency programs there. Obviously also, if we see a drop in CIP revenue, we've got another lever in comp. But overall, I'd just leave you with a message that we're very focused on the rated target and very, very focused on delivering positive draws. In terms of asset quality, it's difficult to give you an adjusted version of that historic number. You're right, we're actively growing balances in US cards. We're seeing them fall away in UK cards. But at the same time, you can see that the level of risk that we're holding in the balance sheet versus pre-pandemic is lower. And to some extent, we're going to have to see how that pans out. So it's lower because LTVs are lower. And actually, if you look at the staging, you can see that the proportion of stage one and two balances is also considerably higher than it was pre-pandemic. And to your final point, we haven't seen Pro C in our RWAs yet. You're right. If there was a substantial decrease in HPI, we would expect that to impact the loss given default in our capital models and would lead to some RWA pressure. And equally remember that within there, there's the probability of default piece as well. And therefore, you should consider the strengths of customer balance sheets as we sit here today. So we'll update on that as we see it happen. But today, no signs.

Thank you very much.

Thank you. Next question, please.

Thank you. Our next question is from Joseph Dickerson from Jeffreys. Joseph, your line is open. Please go ahead.

Hi. Thanks very much. You already answered my question on the FX sensitivity there on revenue versus costs. But I guess just on capital return, you know, Venkat, I think you've spoken earlier this year about the conversion of earnings into buybacks. And you've done you know, you did 500 million at Q2. I guess what what held you back at Q3 given you've got clearly a reasonable capital buffer? Yes, there's some headwinds coming in Q4 from pension and Kensington. But, you know, another 500 million is I don't know what is 14, 15 bits of capital. Is this is this a management decision around being prudent or, you know, are there other regulatory considerations at play here?

Thanks. Yeah, it is. The it's a decision which we will take in Q4. I mean, it's basically that's it. You know, we sort of did it at the year end and the half year this year. And so we will talk about that on our annual learning.

Thanks, Joe. Next question, please.

Our next question is from Jonathan Pierce from Newmouth. Jonathan, your line is open. Please go ahead.

Hello. Hello, sir. Couple of questions, one on the hedge and one on these. Fair value movement, if that's OK. The hedge, there was another 10 billion, I think, added to the notion in Q3. I don't know whether FX has any influence on the size of that hedge. But clearly in the UK bank deposits haven't grown now for three or four quarters, but the hedge is still building. I'm just wondering, are you now fully hedged, do you think? I'm thinking about, excuse me, headwinds in the other direction moving forwards. Are you yet seeing any early signs of the hedged balances, particularly the 0% current accounts, starting to shift into higher rate deposit accounts, either within BAFES or to other institutions? So that's the first question. The second question, the fair value movements through OCI, particularly in regards to the debt portfolio, they were fairly small, actually, in the third quarter versus what we saw in the first half, despite much bigger movement in interest rates. I've always been slightly confused as to what this portfolio is. And I guess the question is, given the extent of the rate moves we're now seeing, can I ask you to give us a bit more detail on why you have this seemingly unhedged debt pool? And can I infer from the relatively limited impact in Q3 that you've reduced the sensitivity to rate movements fairly significantly over the course of the last quarter or two? Thanks a lot.

Thanks, Jonathan. On the hedge, the movement quarter on quarter is not a sterling movement. It actually relates to, because euro rates, central bank rates have gone from negative to positive. It's a change in eligibility, so it doesn't impact the UK sterling part of the hedge at all. So you're right. UK liabilities are broadly stable. We are seeing some take-up of savings products, but actually in a positive way and in a way that's completely in line with our expectations. We've got some good savings rates out there, and so we're seeing customers migrate to those as we expected them to. And all of that within our hedge assumptions and the way that we created a buffer in that hedge. As relates to your fair value through OCI question, I can see why you might have expected a larger impact. If you look at the disclosure in the annual report, that gives an amount for a 25 basis point shot. And I guess your question relates to the fact that the gilt curve has moved by more than that. What's going on here is firstly the disclosure in the annual report actually includes not only the liquidity buffer, but shows the impact on the pension fund assets, because the pensions and surplus, those movements are obviously neutral to capital, so you're not seeing that go through. And then in relation to the liquidity buffer itself, a couple of things. Firstly, the portfolio is diversified. It's not just gilt, so there's a range of products in there. And secondly, we have taken down that risk. We've reduced outright risk as the year has progressed. And it's that really that's giving the smaller result in the third quarter.

Okay, that's really helpful. Thanks a lot.

Okay, thank you. Next question.

Thank you. Our next question is from Rohith Chandra Rajan from Bank of America. Rohith, your line is open. Please go ahead.

Thanks very much. Good morning and congratulations on a record thick performance in the quarter. Just on that, I guess, you discussed, Dana, in your comments, that volatility is particularly heightened at the moment, and you'd expect trading revenues overall to decline over time. So in terms of helping us to think about the offsets to that, you mentioned thick financing. I don't know if you can help us with what sort of proportion of thick revenues that is and how that's grown year on year, or over time, you mentioned a 30% increase in balances and wider margins, but just in terms of the revenue contribution. And then more generally, just how we should think about CIB revenues over the medium term versus very strong revenues for the last few years. So if trading income declines, what are the offsets to that and how should we think about the medium term? And then the second area is just on asset quality. US cards are, particularly, 30 days picked up in the quarter. I don't know if there's anything that you'd want to highlight there in particular. And then back on your downside one scenario, you've already talked about the sort of 20% HPI impact. So if I understand correctly, your current reserves effectively are equivalent to something like a .5% GDP contractions, .5% unemployment, and 18% to 20% HPI. I just wanted to confirm that that's the case. And then also how quickly you think provisions normalize. What would be the drivers for that? Thank you.

OK. I'm sure there's at least two questions in there. It's not a little bit more, but I'll let you get away with that. OK. So we are pleased with FIC. That's our third quarter at over 1.5 billion pounds. There's a few things in there. We've called out, obviously, the financing revenue as to proportions. That will move around a bit, depending on what's going through trading. So we think it's actually a less helpful stat. But we have seen balances grow by over 30% -on-year, and spreads have widened. But more broadly than that, I think even in the flow side of FIC, we are seeing increased share pretty much across markets now. We think that's as a result of our client focus, but also the investment that we have put in the infrastructure and the talent in that business. So you're right. When volatility recedes, we might expect revenues to drop back. But they won't drop back, we believe, to levels pre-pandemic. And we think that's the most important thing. What are the offsets to that? Well, there's clearly banking is having a quieter period right now. That is clearly driven by the same piece. Volatility in the market gives us elevated markets revenue to precious banking. So we'd expect that to come back somewhat. The other piece to remember, because we always all forget, is corporate, and particularly transaction banking. Transaction banking is a stable franchise business, but one that is also benefiting from the investments that we've put behind it. You're seeing balances grow, you're seeing margins somewhat wider, but also through nominal economic activity. You're seeing trade violence, FX, etc. go through there in seed. So whilst individual pieces might drop back, Rohit, we do have, I would say, increased confidence in the whole. Then, Kat, before I go on to UK cards, is there anything you would add? Sorry, US cards.

Yeah, I think I would echo what Anna said about confidence in the whole. I think as rates have risen and spreads have widened, fixed income financing, not just balances, but profitability per unit of balance has increased. It's long been part of the DNA of Barclays. We've got a market-leading position in this area. So I think it's part of a broad set of things within the market's business that represents a diversified portfolio of activity. But I think look to this, in this kind of environment, to provide an increasing, I mean, a strong amount of ballast to our returns.

So sorry, just before you move on to the cards, if you don't want to appreciate it, I don't want to give a proportion, but just can you help us scale the contribution from fixed financing?

We wouldn't give that out on a call like this, Rohit. We'll continue to consider our disclosure around fixed and indeed the other parts of markets, and we'll come back to you on that. On US cards, areas have picked up a little. Balances are growing. We're seeing increased economic activity in the US manifesting itself in our cards, but people are spending more. We're seeing organic growth. Given that movement from a very, very low base, we would expect to see some movement in staging and some movement up in delinquencies. So we're not concerned by what we've seen. It looks broadly in line with the industry. It's what we would have expected. It remains quite a long way below pre-pandemic. The fundamentals of the US economy are pretty strong, unemployment at 3.5%, and we're still seeing strong levels of repayment across that book, so no concern now. So let me move on to your final part, which was around the disclosure on downside one. So yes, what we've done is we've shown you what would happen if we weighted 100% the downside one scenario. We've called out for you the main macroeconomic variables that downside one represents, so .5% unemployment in the UK, for example. So you're right, that's the comparison we're drawing. So in other words, if we saw downside one pan out exactly as we show it in that model, then we would expect to cover it with the PMAs. Sometimes the macroeconomic variables don't flow exactly the way we model them to, so that's a specific scenario that we're calling there, but we feel like we're well covered. Finally, on provisions, just remind me of your last, probably your next question.

There were two topics, but the pace of normalization. Yes,

so the pace of normalization. I guess we would expect to trend towards that 50 to 60 as we grow and economic activity recovers. The thing I'd just call out for you is given the nature of IFRS 9, that pathway won't necessarily be linear. We can see some lumpiness. So that's more a go-to position once we see economic volatility settle down a bit.

Okay, thank you very much.

Thank you. Next question, please. Hello, operator. Can we have the next question, please?

Our next question is from Omar Keenan from Credit Suisse. Omar, your line is open. Please go ahead.

Good morning, everybody. Thank you very much for taking the questions. I've also got a follow-up question on the downside scenario and a second question on bank taxation. So firstly, on the downside one scenario, thank you for that helpful disclosure. I think we can more make our kind of assumptions of various downside cases, but GDP down to unemployment at 6% are probably not as bad as you can imagine things, but it's probably a reasonable downside case for now. So if things were to materialize in that direction, could we assume that there would be a smooth allocation of the post-model adjustments towards the modeled provisions kind of somewhat like we have seen this quarter, or do you think there could be, you know, pressures to keep the uncertainty buffer at a high level despite the macroeconomic deterioration? And just related to that, can I ask you how confident you feel in that downside one model scenario? I guess the question is that, you know, with interest rates where they are, you know, could that affect the ability of otherwise performing exposures to pay? So just want to get a feel as to how confident you are in that modeled number given that it is a model. And then the second question on bank taxes, obviously there's a bit of discussion around whether the charge is going to be set. Wonder if you can give us any update there and whether you've had any discussions with the Bank of England on reserve clearing? Thank you.

Okay, thanks Omar. Good question on the impairment. We'll take that quarter by quarter. You can see what we've done this quarter. We've seen a general sort of movement in the MEVs and we've broadly offset that. And the answer is whether or not or where that impairment starts to manifest itself. So for example, in the UK, in the UK retail bank, we are holding a sort of general economic uncertainty PMA, whereas in the wholesale side of things, we are much, much more sector specific. So I would expect it to have some smoothing impact, whether or not it's exactly smooth quarter by quarter will depend where that impairment manifests itself. In relation to downside one, I mean you're right, no model is ever perfect and I'm going to hand to Venkat in a moment because I know he'll have a view. These models were built during periods of low interest rates and so there is clearly an impact on affordability from inflation and from interest rates, which is difficult for those models to represent. But that's why we've been conservative in our stage one and stage two provisioning. So when you look at the stage one and two provisioning across the unsecured books in particular, that's how we're trying to protect ourselves against that.

Thanks, Pap. Yeah, I mean exactly right, Hannah. I think what you should see, look at is the combination of the modeled output plus our extra post model adjustment as our view of what we think is appropriate given the current microeconomic conditions and the uncertainty of the model behavior around it. Now if conditions change and we get less uncertainty, we will do what we just did this quarter. But you know, it's sort of, we're also looking at signs of consumer behavior and we will make adjustments to that. But I think you've got to expect all other things being equal that we would look at it the way we did this quarter. And if I can then go to your second question, which is about taxes and you had two parts, one was reserved tiering and the other was surcharge. Look, on the overall taxation matter, it is something for the government and for the, you know, the chancellor to decide. You know, we read the same newspapers as you do and so we wait for the budget statements to know what it is. And on reserved tiering, I think the Bank of England has been fairly clear that they don't believe in reserved tiering as a tool of monetary policy. So, you know, we go with that too.

That's super clear. Thank you very much.

Okay, thank you. Next question, please.

Thank you. Our next question is from Chris Cant from Autonomous. Chris, your line is open. Please go ahead.

Good morning. Thanks for taking my questions. Thanks for the FX color in the slides as well. That's much appreciated. If I could just invite you to talk about your view on returns into next year, please. You've had a very long-standing greater than 10% roti target. I think you originally gave that back in 2017 as a medium-term target. You're expecting to deliver that this year despite obviously the shelf over issuance charges you've taken, which you're not expecting to repeat next year. Your TNAB is dropping because of rates. You've got a meaningful FX tailwind for your earlier comments looking into next year. Should you not be targeting something more punchy on a forward-looking view? And do you expect to be revisiting that 10% figure, please? And then on the structural hedge, obviously you've had years of growth in the structural hedge. It's up very materially since pre-COVID levels. I appreciate your comments about some migration into savings products as an alternative to current accounts. Do you expect your structural hedge notional to shrink in the coming years, please? Do you expect that size to be coming down as the yield is increasing? Thank you.

Okay. So on returns, you're right. We've made good progress towards that target for FY22, and we delivered greater than 10% in FY21. The target is deliberately a flaw. So it's greater than 10%, and you can see that for a few quarters now, that's where we've set our expectations. We won't update, Chris, at this juncture. I'll take your point on TNAB, but given the effect on reserves of some of the macroeconomic volatility that we've seen, that TNAB number is moving around quite a lot. It's probably moved significantly since the quarter end, again, I would think. So we're not going to update at this point, but I would just note it is a flaw to our expectations. Okay. Anything you'd

add? Yeah, look, I think I'll repeat what Anna and echo what Anna has said, which is it is a flaw. You're right that we set it in 2017 as a medium-term target, and I'm glad we've lived up to that medium-term target. And, you know, we'll continue to think about it. Do you want to go to the second

question? Yeah, sure. So when we put the structural hedge together, Chris, you'll note that we've done it over a series of quarters. We've been very thoughtful about how we've built the hedge, and at all stages we've assessed the outflow risk versus the opportunity cost of not putting the hedge on. We've obviously maintained a buffer for conservatism as we put that together. You know, that buffer contains our expectations of product migration. If that proves to be wrong, obviously we are rolling a portion of the hedge month by month as well, so that gives us further flexibility. But to date, the moves that we've seen have been in line with our expectations, and we did build it conservatively, we believe.

So if, I'm just trying to think through everything you just said there, the size of the buffer that you had in scaling the hedge took into account things like large competitors offering 275 Vips on instant access savings and 4% on one-year fixed bonds. That was sort of part of your scaling of the hedge. I guess the move in rates in recent months has been very dramatic. You know, we're talking about UK base rate going to maybe double the levels consensus would have been thinking about even three months ago. But that was part of your scaling of the hedge, you were factoring in that magnitude of rates movement. So

as we scale the hedge, we identify what we believe are rate-sensitive balances. So in part, yes, clearly not the specific rates that you've quoted there, rates are moving all the time. We believe we've got a competitive savings products ourselves, and actually we're seeing little migration, in fact practically no migration out of the bank, and migration within our expectations to those products. So, I mean, that's probably where I'd leave it Chris, we do consider migration when we put the hedge together.

Okay,

thanks.

Okay, thank you. Next question.

Thank you. Our next question is from Martin Leitgib from Goldman Sachs. Martin, your line is open, please go ahead.

Yes, good morning and also thank you for taking my question. I was just going to ask a broader question with regards to the outlook for your UK business and just specifically with regards to mortgage rates. Mortgage rates in the UK have risen from around 2% at the turn of the year to around 6% most recently. And I was just wondering, how do you see this impacting your business? One, in terms of affordability, has there been an underwriting done at such a level that essentially the bulk of your mortgage borrowers can essentially afford this higher rate without cutting spending too much? And secondly, in terms of what this higher mortgage rate means in terms of the outlook for growth in terms of balance as both on the loan side, so mortgage growth, credit card growth, but also in terms of deposit balance, could this higher mortgage rate essentially be an incentive for customers using some of their deposits to more aggressively pay down mortgages and to make a meaningful change in terms of their outlook? Thank you.

Martin, thank you. Let me try to take the first crack at it and I'll ask Anna to join in. Good questions all. First of all, on mortgages, we've got a very large mature book. Our average LTB is around 50%. The way the UK market is with a combination of three-year and five-year fixed, about 30% of our mortgage book will refinance over the next year, let's say by the end of 2023. And so a little bit of that in 2022 and about a quarter of it in 2023. And so what that does, and part of your other question is, obviously when we do issue mortgages, we do stretch them with a fairly big shock in interest rates in terms of affordability. So the combination of that and the fact that it's about 25 to 30%, I think, mutes its impact on its portfolio. And I think also what we are seeing in the UK is a little bit of monthly overpayments. It represents 20 basis points of our total balances. It's a very small fraction, but you are seeing it, which is good from a credit quality point of view, but it's also prudent financial management, as you might expect. So I think broadly the behavior is as you would expect it in an environment like this. Anna?

Yeah, thanks, Benka. I'd agree with all of that. The other thing I'd say is that given house price inflation we've seen over the last few years, the LTV of the customers coming to refinance now will be lower than it was when they took out their mortgages. And that might be part of the incentive that's behind the overpayment trends that we see right now, the opportunity to move yourself down an LTV bracket. From here in, in terms of sort of loans growth, I would say this feels like a remortgage market rather than a house price market. That will necessarily lead to lower net growth, I would think. So I'd expect to see strong remortgage demand, but a large part of that will be churned in the market. In terms of sort of the rest of loans growth, I mean you can see from repayment rates that we've sort of talked about in cards, IEL growth, so interest earning lending growth in cards, will probably be a bit sluggish as well. But given where we are on the credit cycle, I think we're okay with that. So probably a little bit more muted on loans growth and similar in deposits, you know, in comparison to what we saw during the COVID period. We've already seen that slow down a bit, seeing a bit of migration, but within our expectations and customers putting that money to work, whether that be in savings or indeed through mortgages.

Thank you. Could I just follow up on the outlook for card growth in the UK, which obviously started the year with a very strong trend. Would you expect that to slow down as a consequence?

Card growth in the UK. I would say, so let me distinguish two things. I think headline growth or headline balances may grow, but that's in part our strategy. You know, we are trying to pivot the book towards spend rather than lend. Our new AVIUS product is doing pretty well in terms of take up. I wouldn't expect that to translate through to significant increases in interest earning lending. Customers are being very cautious in the current environment and the repayment rates that we are seeing remain very elevated.

Thank you very much.

Okay, thank you. Next question, please.

Thank you. Our next question is from Edward Firth from KBW. Edward, your line is open. Please go ahead.

Good morning, everybody. Thanks. Thanks very much for the question. I just had a couple of questions with you both around credit. What I'm trying to do in my mind is I'm just trying to square your comments at the beginning about the outlook for the UK and the demanding and uncertain environment. And I guess that's sort of consistent with what consensus is viewing the UK with your comments that you expect provisions to normalize because it seems to me those two are inconsistent. Either that means your normal provisions is not a normal provision. It's actually a peak provision and we should be thinking about Barclays through the cycle provisions being much lower than perhaps we have done in the past or potentially we could see provisions go somewhere above normal because the environment is not normal. I guess that's I suppose that would be my first question just really to understand how you're talking about normalized and the economic outlook. And I guess I guess related to that in terms of your PMAs, just to get this clear, if you hadn't released the 300 million PMA sort of override, your charge of this quarter would have been about 70 basis points. I just checked that my understanding is correct on that. And then finally, could you tell us something about what's happening at the front line in terms of just in the last month? I know it's not really part of the quarter, but I'm thinking, you know, we saw this big uptick in mortgage costs really just over the last month. And I just wondered if you could give us some insight in terms of what is happening in terms of volumes of new business in October. Are you seeing an uptick in rejection rates? Are you finding that people are not meeting your affordability criteria anymore or just something that's very specifically in the last month really since the results end rather than during the quarter, if that would be OK. Thanks so much.

Thanks. Thanks, Ed. So let me deal with the simple one first. So your articulation of the impact of the PMAs is exactly correct. However, what I would say is that that's exactly why we established the PMAs in the first place, because we felt that the economic environment was extremely uncertain and that the consensus that we were using for the model did not adequately capture the risk that was out there. So that's what we expected to happen. That is what happened. And therefore, that's why we released the PMAs. In relation to your credit question, I think I followed it. So let me have a go. So there's a bit of a dichotomy here between what we see now on the ground, no visible stress, and the macroeconomic forecast and indeed beyond those macroeconomic forecasts into some of the economic commentary. So there's a number of different views that we are dealing with here. But to a certain extent, it points to the conversation we had before, which is we would expect a trend towards a through the cycle cost of risk. But if we are to see macroeconomic shocks in terms of expected environment in one direction or another, I would expect that to be lumpy. That's just the nature of IFRS 9 and a little bit of what you've seen in the current quarter.

Let me take the other question about what's going on in the front line, especially since the end of September. Well, obviously the end of September came in the middle of the peak of this guilt volatility. And outside of the capital markets, there was a bit of a rush for people to adjust their mortgages, fearing even higher rates. And what we were doing was we were processing the applications and we saw a little bit of an uptick on that. On the consumer, on the credit side, what I would say is initial conditions coming into this have been very strong. So high consumer balance sheet, high amount of support that people have experienced in COVID, low unemployment, which continues, all of these things continue. And then obviously higher energy prices, but increased government support to manage those energy prices. So with all of that and with the rising cost of living and then at the end, higher mortgage rates, we're seeing a little bit of decline in consumer confidence in our own private polling of it. So how people feel about their finances. We see people being more careful in their spending and, you know, diminishment in certain non-essential types of spending, but we are not seeing credit stress. You know, about 1% of our customers are in financial assistance, which is a fairly low number. So we're not seeing it. Obviously, we have to be cautious because we don't know how much deeper some of these things can get. We are in the middle of a rate rising cycle, which just generally tends not to be good for growth. Growth in the UK has been low anyway. So we've got to be cautious looking ahead. But as sort of a live indication right now, you know, people are managing their finances carefully.

Great. OK, thanks very much.

OK, thank you. Next question, please.

Thank you. Our next question is from Guy Stubbings from BNP Paribas Exxon. Guy, your line is open. Please go ahead.

Hi, morning, everyone. Thanks for taking the questions. The first one was just on the appetite to lend to UK right now. I guess you've given a bit of a flavor around why you're happy to see sluggish growth given the backdrop. But how does that play into the spreads you'd like to get on new lending? Obviously, there's a lot of policies, your mortgage rates, given where swap rates have moved. The interesting way you'd expect things to settle if we see some stability in swap rates, I mean, should we expect slightly larger spreads than what we might have seen in recent history, given just to account for high risk of credit losses, RWA migration, et cetera. So that's the first question. The second was on ECL coverage. Intrigued, there's been very little change in the quarter. And I know you've reduced the weighting for downside scenarios in the RFS-9 walls. You might expect the opposite, although appreciate downside due scenarios is very severe. But in coverage terms, I think most would say things have got worse, not better than last three months for, say, mortgage debt service ratios, et cetera. Is it just the case that it's just not bad enough to really move the needle on the ECLs that you would look to hold? And just a quick follow-up on that as well. Thanks for the color and downside scenarios and so forth. Can you just remind me how you account for negative stage migration into, say, Wholesale Stage 3, for instance, when you come out with those ECL numbers? Thank you.

OK. Let me try those, and I'm sure Venkat will add. So in terms of, I guess, lending demand, lending supply, and how that plays into margins, specifically in relation to mortgages, I mean, the mortgage market is competitive. It's always competitive. We've seen it move in line with the yield curve, and we'd expect it to do that. As I said before, you know, pricing will be keen, not least because if this is a remortgage market, that tends to be very competitive. Customers are remortgaging early. They will be looking for the best possible value. So we'd expect margins to be quite keen, not only on the front book, but that will create some churn pressure, I would expect, also. As relates to sort of credit expectations and how that plays into pricing, I mean, I would expect that market participants price for a -the-cycle view of risk. So, you know, increased sort of credit concerns, sort of per se, I wouldn't expect it to impact pricing significantly. In terms of your sort of coverage point, I think we believe that our coverage is appropriate. You know, you've obviously seen it go up from Q1, sorry, from Q2 to Q3 in terms of our early stage coverage in unsecured in particular. So we feel like we're appropriately covered there. Venkat, anything you want to add? Yeah,

I agree with Anna. Look, we're dealing with an environment that has been choppy. We are dealing with models that tend to be pro-cyclical and which have been built on a period, as Anna mentioned earlier, of generally falling rates and unemployment. So we have to recognize the weaknesses in the models we've used, and that's what we've tried to do. And I think, you know, we put forward our best estimates, and I think using the combination of the two, try to manage it in a predictable way related to the environment that's outside. So we feel reasonably comfortable with the way we are flexing both of these

two things. Yeah, I think if you look at the balance sheet on aggregate, Guy, what you can see is that we've got 6.4 billion of provisions, 2.4 billion of that relates to defaulted stock. So 4 billion is against non-defaulted stock. And that's in an environment where, as you can see from the chart that we showed in the presentation, we strongly feel that the quality of the book that we have in terms of the risk on it or its shape is lower than it was. And indeed, in wholesale, we've increased the level of first loss protection. So, you know, it's actually a number of things coming together and looking at individual sort of scenarios I don't think quite captures the extent of our comfort. Could you just repeat your third question, please?

Yeah, sure. And thanks for the color so far. The third question or sort of follow-up was just around how stage migration is embedded into the ECL disclosure you give for downside scenarios, just to sort of gauge the relative conservatism of the ECL that come out and sort of comments around you could switch the PMAs to absorb a downside one scenario.

I'm sorry, I still don't understand your question, Guy. We might need to take it out of the room. We'll come back to you. Probably need to talk that through. Can we have the next question, please?

Thank you. Our next question is from Adam Terrellac from Media Banker. Adam, your line is open. Please go ahead.

Morning. Thank you for the questions. I have a couple around capital management in the CID. I know you've had the roll-off of the ETN hedging, but RWA generally just looked quite light for the quarter. You've got loans up kind of double-digit -on-queue, but risk weights are up much less than that. So I was just wondering what's going on behind the scenes there in terms of balance sheet management into quarter end. I know you mentioned kind of that you were adding credit hedges on the wholesale portfolio, whether that's had an impact. And then as a follow-on for that, clearly you guys are involved in a big leverage finance deal. Headlines suggest that might end up on your balance sheet. Rather than commenting specifically on the deal, can you just maybe anecdotally talk about how you'd be managing that risk in reference to what you've already done in the third quarter? Thank you.

Okay. In relation to capital management in CRB, we're just very disciplined. There's nothing in particular going into that quarter end. It doesn't relate to a quarter end rapid increase in that coverage at all. I would say through the quarter, we've been helping facilitate client business in terms of what we've been holding on our own balance sheet is actually being handled extremely conservatively. So I don't think there's anything untoward there other than RWA efficiency.

Yeah. So as far as the leverage finance business goes, we've always run a fairly systematic approach to managing the risk in the leverage finance book. I can't comment on the particular transaction, but let me say generally that that risk management has two parts to it. One part of it is to buy protection against extreme movements in markets. And the most recent time that that really protected us quite well was during COVID when you had obviously fairly rapid movements within the month of March 2020 and then back in April. The second way is occasionally for what might be large exposures, trying to see if there's a way again to protect ourselves against extreme moves in that. So you should expect us to employ both, the first one systematically, the second one opportunistically, to try to manage the risk in our leverage finance book. But that's something we look at closely all the time.

Thank you for that. Just on the loan book, why is that double digit key on key? .I.B. loan book.

.I.B. loan book. Are you looking at total assets?

No, total loans. Well,

there'll be an RWA impact in there, sorry, an FX impact in there. So there's some FX inflation. In terms of corporate lending, by the time you strip out the FX, it's not significant particularly. And the increase in wholesale lending that we've seen has been largely to sort of investment grade businesses, existing clients, nothing of concern.

Okay, thank you.

Okay. Thank you. Next question, please.

Thank you. Our next question is from Rob Noble from Deutsche Bank. Rob, your line is open. Please go ahead.

Good morning. Thank you for taking my questions. Can you give us some idea of the composition of your mortgage books split by loan to income multiples rather than by loan to value? And what proportion of your mortgage is on your credit card book in the UK to lower household income desks? So you can get an idea of how cost of living impacts the book that way around. And then secondly, in Barclays, UK, you're still seeing decent growth in non-interest income. So if I see a decline in real household spending, will that number come down or will the inflation and the nominal growth still see growth in non-interest income for UK retail businesses?

Okay. Rob, let me take this one by one. So we don't give a loan to income split. However, like all banks in the UK, we have some regulatory limits on higher loan to income. So loan to income above four and a half times is significantly reduced. In terms of cards, again, we wouldn't disclose that in particular. What I can tell you is that repayment rates across the risk decile are all elevated. So even in what we would describe as lower decile the risk, repayment rates are significantly in excess of the monthly contractual payments and significantly in excess of what they were pre-COVID. And of course, balances are also lower. So we are identifying clearly customers who we believe are under more financial pressure using our data. But we believe that their behavior is managing their risk down. In terms of non-interest income, I mean that is geared in part to card fees and also interchange fees. So it's linked to card usage. So to the extent that customers continue to use their cards but pay them off, we might expect those trends to continue. If we were to see customers spending full shock, then obviously that number would go down.

Thank you very much.

Okay. Thank you. Next question, please.

Thank you. Our next question is from Farhad Kunwar from Redburn. Farhad, please go ahead. Your line is open.

Hi. Thanks for taking my questions both. Just a couple. One on the hedge and one on your UK NIM guidance. Maybe I'll start with NIM guidance. The swap curve has gone up about 200 bits since you gave your 280, 290 NIM guidance. I'm just wondering why you haven't upgraded that guidance given the size of your hedge. And then the second question, we're just going back to Chris's question on the hedge. Do you see something structurally different in the way consumers save and corporate save? The reason I ask that is when rates, when time deposits are this high, time deposits are around 50% of all savings pre-financial crisis. They're now a lot lower than that. At that point your hedge is probably running more like 100 billion rather than the 260 billion it is at the moment. So is there a reason why the hedge and ultimately the level of interest free balance is structurally higher right now than there were pre-global financial crisis? Thank you.

Okay. So on the NIM guidance, we have guided towards the top end of the range that we gave you of 280 to 290. And that reflects two things. First, the NIM year to date, but obviously that hedge pick up. And the reason that we have split out the two impacts that we've shown you there, so the hedge movement and then the product impact, is we've said for some time that we expect that the product dynamics as rates started to rise would become less beneficial for NIM. And we see that coming in two ways. It's not just about pass through of any rate rises from here. It's actually about the dynamic that your second question points to, which is customers moving their savings. And secondly, the compression and the competitiveness that we see in the mortgage market. So we feel at the moment like those product dynamics are going to bear more heavily than perhaps they have done to date. That's the reason for our caution. And that's the reason that we've split out the structural hedge impact so that you can think about those two things separately. In terms of your second question as to why things might be structurally different, I think there's one macro piece and then there's one probably more bank structure piece. The first is that total deposits are higher. We've seen sustained QE. There is a lot of liquidity in the system. And I would also say that banks, retail and corporate banks in particular, are in a materially different position liquidity-wise versus where they were pre-GFC. So there you had loan to deposit ratios of well over 100%, banks relying on term deposits as a source of funding. I think here what you're seeing is term deposits as a franchise offering. That's a different mechanic. So we'll see how this pans out. But I would say there are structural differences to the macro and also the way banks are constructed versus 2005, 6, 7 and beyond. Hopefully that was helpful. Okay. Sorry. You are the last. Sorry, do you have anything more? I just

wanted to follow up with one thing. Does that imply you'd let your loan to deposit ratio tick up because you wouldn't need time deposits? You'd structurally price a lot lower than your peers because you wouldn't need those time deposits.

I think most UK banks are in a similar position. The loan to deposit ratios are lower than they were. I wouldn't comment on competitive pricing on this call. I think it's more of a structural piece across the industry.

Great. Thank you.

So thank you. Thank you everybody for the last question. Looking forward to seeing...