Barclays PLC

Welcome to Barclays Half Year 2024 Results, Analysts and Investor Conference Call. I will now hand you over to CS Venkatakrishnan, Group Chief Executive, before I hand over to Anna Cross, Group Finance Director.

Good morning everyone and thank you for joining Barclays' second quarter 2024 Results Call. At our Investor Update in February, we set out a three-year plan to deliver a better run, more strongly performing and higher returning Barclays. We are continuing to execute in a disciplined way against this plan and this is our second progress report. Our second quarter and first half performance keeps pace with our 2024 and 2026 financial targets, which are first, grow returns with a target return on tangible equity of above 12% in 2025. Second, distribute more capital to shareholders with a target of returning at least 10 billion pounds between 2024 and 2026. And third, rebalance the bank with a target to reduce RWAs in the investment bank from 58% of group RWAs at the end of 2023 to around 50% by 2026. Return on tangible equity was .9% in the second quarter and .1% in the first half of the year on track for our target of above 10% in 2024. Total income for the second quarter was 6.3 billion pounds and it was 13.3 billion pounds for the first half. And as you will hear from Anna, we continue to be focused on the quality and stability of our income mix. We are also increasing our net interest income guidance for 2024 from 10.7 billion pounds to approximately 11 billion pounds. We continue to control our costs well and are seeing the benefit of the cost actions, which we took in the fourth quarter of last year. Our cost to income ratio was 63% in the second quarter and 62% in the first half. We continue to manage our credit carefully. Impairment charges have improved in the US consumer bank in line with our expectations and our overall credit performance is strong, particularly in the UK. We remain well capitalized. Our CET1 ratio was .6% comfortably within our 13% to 14% target range. This has enabled us to announce the first installment in our plan to return at least 10 billion pounds to shareholders by 2026. We have a total payout of 1.2 billion pounds for the first half of 2024, including a 2.9 cents dividend per share and a 750 million pound buyback. Across the bank and within each of our five divisions, we are striving for an improved operational and financial performance. You see on this slide, slide four, the returns on tangible equity for each of our divisions and for the group alongside our 2026 target. And I will take you through our financial performance in more detail shortly after I've covered a few divisional highlights. Starting with our three UK focused divisions, Parklays UK, the UK corporate bank and private bank and wealth management. We said in February that we plan to deploy an additional 30 billion pounds of RWAs into these higher returning UK businesses by 2026. Parklays UK's return on tangible equity was .3% for the quarter. We are seeing stability in the balance sheet with interest rates now expected to stay higher for longer. Deposits are stabilizing faster than we anticipated, with savings broadly flat quarter on quarter, given the pricing actions which we took earlier in this year. And we saw positive growth lending across products as we managed the mortgage book well in a competitive environment. The announced acquisition of Tesco's retail banking business is progressing well, and we are on track for completion in November this year. This will represent around eight billion pounds of our WAs out of the 30 billion which we announced earlier. In the UK corporate bank, Matt Hammondstein presented our ambitions for this business in June, the first of our deep dives following the investor update. We have an opportunity to grow our share of lending in the UK corporate market through deepening our client relationships and investing more in the client experience in order to make it easier for them to access more of our products and services. We delivered 18% ROTE in the UK corporate bank in the second quarter and target continued IT returns in this business in 2026. Private banking and work management delivered an ROTE of .8% in the second quarter as client assets and liabilities grew by 14% year on year. With simpler pricing and service improvements, we have seen a meaningful increase in new customers signing on to our smart investor digital program over the first half of this year. In the investment bank, ROTE for the quarter was 9.6%. We remain committed to delivering improved RWA and operational productivity to drive higher returns for this business, and you can see evidence of progress. In markets, fixed performance is relatively stable with European rates improving year on year while we continue to focus on expanding our overall market share. Securitized products continue to perform well. Investment banking fee income was up 45% year on year as the industry wallet grew and we increased our share overall. ECM had a strong quarter driven by our lead role in helping a long-standing corporate broken client, National Grid raised £7 billion in the landmark rights issue. The co-heads of investment banking, Cahill DC and Taylor Wright, will present a deep dive on their business on the 1st of October. Finally, the U.S. Consumer Bank delivered an improved ROTE of .2% for the quarter as we continue to grow and drive operational improvement and while impairment charges normalize. We took proactive actions to reduce credit lines last year and to build reserves early and as a result, our impairment performance in the first half has played out as we expected. Overall, we remain execution focused. One area in particular is cost discipline. We achieved a further £200 million of growth cost savings this quarter taking the total for the first half of the year to £400 million and this is on track for our targeted £1 billion for the quarter. We have made progress with the non-strategic business disposal which we talked about at our investor update. In this quarter, we completed the sale of our performing Italian mortgage portfolio and have announced the sale of our German consumer finance business. Finally, as I said, the £1.2 billion shareholder distribution is the first installment of our greater than £10 billion capital return plan. I will now hand over to Anna to take you through the second quarter financials in greater detail.

Thank you Venkat and good morning everyone. On slide six, we have laid out Barclays financial highlights for Q2 and H1 and you'll see the same throughout the presentation for each business. As before, I won't talk to these slides but have included them for ease of reference. Turning to slide seven, the headline message is that Q2 remained in line with a plan we laid out in February. We delivered a statutory roti of .9% despite a circa 50 basis point headwind year on year from the cash flow hedge reserve. Excluding the loss on sale from the business disposals that Venkat mentioned, Q2 roti was higher than last year at 11.8%. First half statutory roti was .1% and we continue to target above 10% in 2024 or around .5% on an underlying basis ex-disposal. Just like Q1, I was looking for four things in these results. Number one, income stability. Number two, cost discipline and progress on efficiency savings. Number three, credit performance and number four, a robust capital position. Overall, we are where we expect it to be and I will cover these in more detail on subsequent slides. Starting with income on slide eight, total income was up 1% year on year at 6.3 billion and was impacted by the 240 million loss from the disposal. Excluding this, income was up 4%. At our investor update in February, we emphasized the quality and stability of our income and how the more stable revenues that we generate from retail and corporate as well as financing in the investment bank provide ballast to our income profile. Together, these businesses contributed 73% of group income in Q2. Retail and corporate income included the loss on sale from disposal and the underlying business income was broadly flat. Financing income was also stable year on year at 0.8 billion despite the inflation linked tailwinds that we have called out previously. We saw year on year growth in both investment banking fees and intermediation. Turning to net interest income on slide nine, as in Q1, NII, ex-investment bank and head office was broadly stable in Q2 at circa 2.7 billion. Structural hedge tailwinds continue to offset the pressure on NII from deposit migration. We observed more stable deposits in the second quarter than anticipated and we expect this to continue into the second half. We have also updated our UK rate expectations for 2024 and now assume one base rate cut to 5% by the end of the year. Together, these trends mean that we have increased our 2024 guidance for group NII, ex-investment bank and head office to circa 11 billion for the full year, up from 10.7 billion. Within this, NII guidance for Barclays UK increased from 6.1 billion to circa 6.3 billion, excluding the Tesco bank acquisition. A further UK rate cut to .75% towards the end of the year, which is currently assumed in the latest consensus, would not materially change NII this year. Moving on to the structural hedge on slide 10. As a reminder, the structural hedge is designed to reduce volatility in NII and manage interest rate risk. As rates have risen, the hedge has dampened the growth in our NII and in our falling rate environment, we will see the benefit from the protection that it gives us. The expected NII tailwind from the hedge is significant and predictable. 11.7 billion of aggregate growth income is now locked in over the three years to the end of 2026, up from 9.3 billion at Q1. We have around 170 billion of hedges maturing between 24 and 26 at an average yield of 1.5%. As we said in February, reinvesting around three quarters of this, around .5% would compound over the next three years to increase structural hedge income in 2026 by circa 2 billion versus 2023. In response to greater stability in customer and client deposit behaviour, we have slightly increased the average duration. Given the high proportion of balances hedged and the programmatic approach we take, we are relatively insensitive to the short-term impact of potential rate cuts. We have provided a sensitivity table to illustrate this in the appendix on slide 35. Moving on to my second focus area, cost discipline. Total costs in Q2 were up 1% at 4 billion, whilst operating costs were up 2% year on year. We delivered a further 0.2 billion of gross efficiency savings, bringing the total for H1 to 0.4 billion, and we remain on track to deliver 1 billion for the full year. These efficiencies have helped us to offset inflation and created capacity for investment. Our cost to income ratio was 63% in Q2, 62% for H1, and we still expect it to be around 63% for 2024. Turning now to my third focus area, impairment, which continues to trend positively. The impairment charge of 384 million equated to a loan loss rate of 38 basis points for the quarter, the low are through the cycle guidance of 50 to 60. The Barclays UK charge was just 8 million, a loan loss rate of one basis point, which reflected continued benign credit conditions, and an 18 million release of economic uncertainty PMAs. Our UK customers continue to act prudently with little current signs of stress, evidence by continued low and stable delinquencies. Starting from this low base, we expect the Barclays UK loan loss rate to track towards circa 35 basis points over time as we complete the Tesco bank acquisition and grow the balance sheet as outlined in our investor update. In the US consumer bank, the charge increased year on year to 309 million and the loan loss rate to 438 basis points. On slide 13, you can see the mix of reserve bills to write off within the impairment charge for the US consumer bank continue to evolve as we guided. We expected write off to increase during 2024, and as such took proactive action to reduce credit lines and build reserves early. In line with industry trends, there was a fall in delinquencies in Q2 versus Q1, which in part was due to seasonality and higher customer repayments. From here, we would expect future quarters to follow normal seasonality, with delinquencies rising towards the end of the year. We still expect the US consumer bank impairment charge to improve in the second half compared to the first, resulting in a lower full year charge in 2024 versus 2023. And we continue to guide to a loan loss rate trending towards the long-term average of 400 basis points. I will cover my fourth focus area, which is our capital position, after I have walked you through our business performance. As I mentioned, you can see Barclays UK financial highlights and targets on slide 14, but I will talk to slide 15. ROTI was a strong .3% and total income was 1.9 billion. Income was down 74 million on year, driven by deposit and mortgage product dynamics, and the transfer of UK wealth in Q2 2023. NII of 1.6 billion was up 48 million on Q1. NIN increased by 13 basis points to 3.22%, reflecting increased NII, but also lower asset levels, which we do expect to grow over time. As you can see on the chart, continued structural hedge momentum more than offset product margin pressures. Looking to the second half of the year, we expect the positive behaviour to continue to stabilise and share an impact in mortgages to be neutral to marginally positive. As I mentioned earlier, we are now targeting circa 6.3 billion of NII for Barclays UK in 2024, excluding Tesco Bank, which is now expected to complete at the beginning of November. At Q3 results, we will provide more details on the expected financial impacts. Non-NII was 290 million in Q2, and we continue to expect a run rate above 250 million per quarter going forward. Total costs were 1 billion, down 4% year on year due to efficiency savings and the transfer of UK wealth in Q2 last year. The cost to income ratio was 55%, moving on to the Barclays UK customer balance sheet on slide 16. At Q1, we said we expected underlying deposit trends and loans to stabilise in the second half. Deposits have stabilised faster than we anticipated, with balances reducing by only 0.5 billion in the quarter. Whilst net lending remains negative, gross activity has increased across portfolios, reflecting our focus on growth. Gross mortgage lending was just under 20% higher than Q1, however, this was more than offset by a 2.5 billion. Application volumes were strong, with a more balanced high loan to value share, as per our stated ambition. UK card balances were stable at circa 10 billion, acquisition volumes were strong, and we added half a million new Barclay card accounts in half one, in line with our UK growth plan. As we said previously, this will take time to flow into net balance sheet and interest earning lending. Business banking gross lending also increased meaningfully, offset by paid owner of government backed loans. This shape is as we expected, with a stabilisation in net lending in the second half, and then growth from there, over the planned period. Moving on to the corporate bank on slide 18. UK corporate bank delivered Q2 roti of 18%, income was down 6% year on year at 443 million, as increased deposit income from higher interest rates was more than offset by lower liquidity pool income. Loans were flat quarter on quarter, as demand from corporate clients remained muted, whilst there was a seasonal pickup and deposit balances post Q1. As we said at the corporate bank deep dive in June, we expect to generate lending growth within this business. You can see the early signs of this, if not yet in balances, in circa 1 billion of RWA growth year to date, which reflects an increase in client facilities. Total costs increased by 10% year on year to 235 million, reflecting investment spend, which we expect to continue in support of our growth initiatives. Turning now to private banking and wealth management. Roti was 30.8%, supported by strong growth in client assets and liabilities, up around 10 billion on Q1, and around 25 billion versus the prior year. The year on year increase in income was mostly attributable to the transfer of the UK wealth business, which occurred in May last year. Underlying growth from higher balances and higher interest rates was offset by continued, although slowing, deposit migration. Cost increased 37 million year on year, mostly as a result of the transfer, but also due to ongoing investments in growing the business. We expect costs to be slightly higher in the second half versus the first, from our investments to grow our platform, hiring, and efficiency related measures. Turning now to the investment bank on slide 22. Q2 Roti was 9.6%. Total income of 3 billion was up 10% year on year, driven by growth in investment banking and market. Total costs were up 5%, delivering 5% positive cost to income jaws, despite higher structural cost actions linked to headcount actions in the second quarter. This resulted in a cost to income ratio of 63% for Q2, down 3 percentage points year on year. RWA productivity measured by income over average RWAs was 5.9%, 40 basis points better year on year, albeit down seasonally on the Q1 level. As we set out in the investor update, we are focused on improving this key metric from the 2023 level to drive higher investment bank return. RWAs were 3 billion or .4% higher versus Q1 at 203 billion. This is within the bounds of normal client trading activity, driven largely by temporary factors. As you know, we are committed to keeping investment bank RWAs broadly stable at year end 2023 levels, reducing the proportion to 50% of the group by 2026. Now looking at the specific income lines in more detail on slide 23. Using the US dollar figures as usual to help comparisons to our US peers, markets income was up 6% year on year. Equities income was up 24%, again reflecting good performance across equity derivatives, prime and cash. Thick income was down 2% against the prior year quarter that we said included a circa 100 million benefit from inflation linked positions. Excluding this, thick was up 6% and this is the last quarter in which you will see material impact. We continue to make progress in our three focus businesses and markets. Equity derivatives saw strong client activity and the market for securitized products remained favorable in Q2, allowing us to continue to monetize the investments we have made here. European rates improved, but we have more to do as we continue our focus on expanding share in this business. Financing income remained around 800 million despite the positive inflation effect in the prior year, providing the more stable income stream to market that we have emphasized. This reflected strong growth in client balances, offsetting spread compression as we continue to scale the business and deliver on our 0.6 billion financing income growth target by 2026. Investment banking fee income was up 45% year on year with gains across all products. Our year to date banking fee share was 3.6%. We have increased share across most products in a rising industry wallet, but we still have work to sustainably improve this. GCN income was up 55%, again delivering improved performance across both investment grade and leverage finance. ECM was up 76%, benefiting from the large transactions that Venkat mentioned and the market is showing encouraging signs of recovery. Advisory income increased 7% year on year and our pipeline of announced deals looks healthy for the rest of the year. Finally, in the international corporate bank, our US and European deposit balances increased in the quarter, which we see as a lead indicator of future client product take up and fee income growth. These were offset by the impact of the changing rates and inflationary environment on deposits and liquidity pool returns year on year, taking income down by 5%. Turning now to the US consumer bank on slide 25. US CB generated ROTY of .2% as income growth was offset by higher impairment versus the prior year as we expected. Income grew 7% as card balances were up by $1.7 billion year on year to $31.2 billion. From now on, we will report end net receivables on both a managed and a reported basis. Managed balances were $32.3 billion and include the receivables sold to Blackstone in Q1. As a reminder, in the turn, we are paid a fee and also continue to incur the cost of managing these balances. NIM reduced by .4% from .1% at Q1, driven largely by increased amortization of rewards paid to customers, which can be lumpy. We continue to target a NIM for this business of greater than 12% by 2026. The proportion of core deposits in our funding mix was 67% as we target above 75% by 2026. Efficiency savings as a result of last year's structural cost action offset inflation resulting in broadly flat costs and a cost to income ratio of 50%. Cost increased versus Q1 due to higher partner spend and are expected to trend up modestly in half two as we continue to grow our book. We now expect migration to internal rating space or IRB models to be in Q1 2025, reflecting a refined approval and implementation timetable. This is a timing impact only and does not affect our 2026 target. Turning now to head office on slide 26. Head office income was down 207 million year on year, mainly due to the loss on sale of our performing Italian mortgage book. This sale is expected to reduce group statutory ROTE for 2024 by circa 45 basis points that have a broadly neutral capital impact. The announced sale of our German consumer business is not expected to complete until later this year or early next, but has a negligible ROTE impact. On completion, we expect the transaction to reduce head office RWAs by circa £3.4 billion generating around 10 basis points of CET1 capital. Turning now to the balance sheet. Starting with my fourth focus area, our robust capital position on slide 27. The CET1 ratio was .6% at the end of Q2 comfortably within our target range and we generated 35 basis points of capital from profits in the quarter. This supports our announced half year distribution of 1.2 billion comprising a 2.9 pence dividend and a £750 million buyback. We expect to begin the buyback soon, having completed the previous 1 billion buyback earlier this week. The half one dividend in absolute terms is consistent with the prior year, but is 7.4 pence higher per share driven by the share count reduction from the buyback. This year's total capital return is still expected to be broadly in line with the 2023 level of 3 billion consistent with the capital distribution plan we laid out in February. Risk weighted assets were 1.8 billion higher on Q1 at around 351 billion as you can see in more detail on slide 28. Our guidance remains for regulatory driven RWA inflation to be at the lower end of 5 to 10% of December 2023 group RWAs. This includes both expected Basel 3.1 and U.S. Consumer Bank impacts as we said in February. TNAB per share increased 5 pence in the quarter to 340 pence. Attributable profit added 8 pence and the reduced cash flow hedge reserve drag on shareholders' equity added 2 pence. Additionally, share buybacks reduced our share count by 2% over the same period driving TNAB accretion of 3 pence per share. This is partially offset by dividends paid and other reserve movements. Year on year, TNAB is at 49 pence or 17%. Before I conclude, as usual, a brief word on capital and liquidity on slide 30. We continue to maintain a well capitalized and liquid balance sheet with diverse sources of funding and a significant excess of deposits over loans. In summary, we remain focused on disciplined execution. This is the second quarter of progress against the targets we laid out in listening. Moving now to Q&A, as usual, could you keep to a maximum of two questions so we can get around to everyone in good time?

If you wish to ask a question, please press star followed by 1 on your telephone keypad now. If you change your mind and wish to remove your question, please press star followed by 2. Our first question today comes from Alvaro Serrano from Morgan Stanley. Please go ahead. Your line is now open.

Thanks for taking my questions. Good morning. One on costs, please. Anna, in the round table, I think it was in May, you mentioned there would be structural costs in Q2. I haven't seen any of them called out. It's been the second quarter now that you've done better than consensus. Just wondering what the underlying sort of run rate costs are and should we be reducing the costs for the full year? That's the first one. Obviously, the UK and investment banking are doing very well. I had a question on the revenue points in US cards. I see the NIA is down. You reiterated that top set margin during your comments. I just wanted to see if you can give us any colour around the path to that top set name over the next few quarters and how much of it is rate dependent. Thank you.

Okay. Thank you, Alvaro. Good morning. I'll take both of those questions. Just starting off with one off costs, we did have a few structural cost actions within the IB, not really that significant. Certainly, over the full year, we don't expect to spend more on SCAs than we have done historically, which we said was a 200 to 300 million run rate. For the full year, the thing that's really important here is the delivery of our gross efficiency savings. We've done another 0.2 in the quarter, taken to 0.4 in the half year. We've got really good line of sight to that 1 billion. That's really what's underpinning the cost results that you're seeing. I'll just reiterate, our cost guidance for the year is circa 63%. The consensus of total cost is there or thereabouts. That's how I'd guide you there. In terms of the US consumer bank, you're right, NIA has fallen off a little bit in the quarter. There's a few things going on in there. Firstly, remember we did the Blackstone deal in the first quarter. You're going to see some switching out of NII and into non-NII. Secondly, I would say seasonally, sometimes a little bit lower in the second quarter than the first, just because of the amount of customer repayments that we have. Thirdly, within that, there is a little bit of monetization. That ultimately is a really good sign, because it means we're growing the book, but the way it can transfer itself to contra revenue can be a bit lumpy. That's all that's happening. We haven't changed our pathway to a 12% NIM. That's really around pricing optimization. It's around increasing our proportion of retail within the book, and also really focus on our funding costs. You'll note that our retail deposits are now 67%. We're really pushing that towards greater than 75% to deliver that 12% NIM. Thank you for the question. Thank you. Can we go to the next one, please? Thank you.

The next question comes from Joseph Dickerson from Jeffries. Please go ahead, Joseph. Your line is now open.

Hi. Good morning. Thank you for taking my question. I guess my two would be, is there any follow through in 2025 and 2026 from this upgraded UK NII? As you mentioned, there's an implied two billion of structural hedge income growth, assuming that you reinvest 75% of the maturity. It seems like your NII upgrade today is based in part on more stable deposits. Would it be unreasonable to assume there's some upside to that two billion based on greater than 75% of the maturities being reinvested? That's number one. Then number two, one of the issues that investors have with your 2026 targets is that the high single digit revenue growth in the CIB is on the flat risk weighted asset base. It looks like in the quarter, you needed three billion of incremental risk weighted assets to grow revenues. I guess how do we square the circle in terms of maintaining the RWA balances relatively flat on 2023? It was nice to see the revenue productivity picked up year on year, but still we've had a few questions on that today. Thanks.

Thank you, Joe. I'll take both of those. So on the first point, what we've seen and observed over the last quarter is a real stabilization in our deposit position. That's really led us to upgrade our NII today for the UK and for the group to circa 6.3 and to 11 billion. The way we think of that is really an underpin to what we are doing. This is a plan of many parts. We set out really detailed targets and plans in February of this year really to guide you towards what was important to us and allow you to track our progress. So as we continue through the plan, we're pleased to see this progress. But as I said, plan of many parts and we have more things to deliver around our efficiencies and obviously around our capital allocation. So that's the reason really why we're not upgrading 2026 at this point in time. Of course, in isolation, the movement in rates, you would expect to have some impact on that 2 billion number. But we're not going to mark to market our 2026 targets on a quarterly basis. We're just very, very focused internally on disciplined execution against the targets that we've given you already.

Thank you.

Yeah, thank you. On the second one in terms of IDRWA, I mean, there's nothing really to call out here and certainly not any change in intention. What we saw particularly towards the end of the quarter was some increases in RWAs that we would say are largely temporary and certainly not an indication of a change of direction or intent. Our objective here is twofold. Firstly, to hold the RWAs of the IB broadly flat. And again, you can see that, you know, you call that the RWA productivity, we're pleased to see that go up year on year, whilst also growing the other side of the balance sheet. So I would say largely temporary in nature and nothing really to call out specifically. But thank you for the question. Can we go to the next caller, please?

The next question comes from Benjamin Tombs from RBC. Please go ahead, Benjamin. Your line is now open.

Good morning. Thank you for taking my question. The first one is of the ROT. It's tracking slightly ahead of guidance for this year. Hopefully I appreciate your guidance. The extent that you are aware of your plan. I'm thinking about whether you would reconsider your capital distribution plan over the years

or

should we think about it in whatever the P&L is? And then secondly, I think Joan's question is in terms of the point of migration.

I

was hoping you might be able to get the head's notion

to

go by the end of this year. You've been quite observant. We've been messaging you on this metric since your new sheet came out. Is the 3 to 4 billion reduction of course so far this year a good run rate for modelling?

Okay. Thank you very much, Ben. In ROTE terms and in terms of delivery of our plan, we are on track to see where we would expect to be at this stage after two quarters. So we're firmly in line with our plan and therefore it wouldn't cause us to change either our ROTE guidance for this year or the longer term or indeed our capital distribution plans and that's why we've reiterated them today. In terms of deposit trends, you're right, we've seen greater stability or that stability come a little faster than we expected. Perhaps that's how to think about it. We do however expect the structural hedge notional to continue to fall broadly in line with broader deposit trends. Customers continue to seek yield even though they're doing so at a much slower level of migration than before. But we reassess that structural hedge very carefully with each passing month. We regard it as a key way in which we manage the interest rate risk in our income line. So we'll continue to monitor it and update as we go. But at this point I wouldn't change the overall pathway. Okay, thank you Ben. Perhaps we can go to the next question please.

The next question comes from Guy Stebbings from V&P Paribas. Please go ahead Guy, your line is now open.

Hi, morning all. Thanks for taking the question. Just some questions around slide 10 and the hedge. Firstly, could you confirm how much of the notional is attributed to the locked-in component you refer to as 4.0 in 2025 and 3.2 in 2026? I'm presuming it's sort of an order of magnitude of -75% in 2025 and 55% in 26. But any colour there would be very helpful. And in terms of the .5% maturing yield, which I think is consistent with prior disclosure, could you remind us how that breaks down between each year? And just a sort of final one on this slide. Maybe I'm reading too much into dotted lines and putting a rule of current state. But it looks to me like it's near .5% in 2026, the gross yield in that dark blue dotted line. I would have thought given prior disclosure and comments we might be nearer 3%. So can I just check? I'm not reading too much into maybe how that line dots across. Thank you very much.

OK, thanks Guy. On your first question, we'll probably need to come back to you in relation to that. On the second question around the .5% maturing yield. So the way I think about this is that, you know, on average, the sort of tenor that we've got here is between .5% and 3%. But there's actually a range of maturities within there. And that really reflects how we think about the composition of our deposit book and the varying behavioural sort of trends that we see within there. So we haven't guided or given you any clarity about how that actually breaks down between those tenors. But just to say, you know, over the next three years, we expect the maturing yield to be about .5% and it's pretty consistent over that period. And then on the final question, which was around the gross yield. Again, we don't guide to gross yield. We've given you some maths in February, which is really how we expect that structural hedging comes to pan out over time. What I would just say is you can see that it continues to grind higher and I think the slide shows that well. So at Q1, we were at 9.3 billion of locked in income. Now we're at 11.7 billion of locked in income. And obviously in the current year, that is 4.5 locked in already by the half year versus the total we had for last year of 3.6. So that's really how we focus on it. Less about the overall yield and more about how much are we locking in both as a combination of the notional, but also obviously the yield and the hedge itself. So that's how we think about it. But we'll come back to you with a bit more color on the first.

OK, perfect. Thank you.

OK, thank you. Perhaps we can go to the next question, please.

The next question comes from Amit Gold from Mediobanker. Please go ahead. Your line is now open.

Hi, thank you. My two questions, maybe they follow on a little bit, Jo. I'm just wondering how much scope there is to be those levels, I mean, especially in the UK, where rates are better. And, you know, I guess by extending the duration of the hedge, I suppose the points are a bit more sticky. You're talking about stabilization. So the 25% reduction in hedge size, it doesn't, I'm not sure if that does seem a bit too conservative. And then the second question is, again, just on the capital allocation. So I appreciate you commented that some of the RWA increase in the IB has been a bit temporary in the quarter. But, you know, that is where we've seen most of the increase year today and quarter today. So I'm just curious when we'll start to see the allocation trend towards that 50% target, which could be important for seeing further re-rating. Thank you.

OK, thanks, Emma. In terms of the pathway on NII, not only for the UK, but for the other parts of that complex, so corporate banking, international corporate banking, and indeed our private banking and wealth business. I mean, obviously the trends that we're seeing around deposits and indeed rates are helpful, but we do see them as an underpin and hopefully an indication of our confidence in reaching those 26 numbers. And as relates to the hedge, you know, as I said, I'm not going to mark to market that hedge income on a quarterly basis. We gave you some moving parts and just to remind everybody, we've got 170 billion maturing over the three years. We've got a maturing yield of about 1.5%. We expect at high level to roll about 75% of that. And at the time of the investor update when swap rates were around 3.5%, we said that would probably yield around 2 billion. Again, there are some movements in the yield curve that might, in isolation, push that number up a bit, but this is a plan of many, many parts. So we're very focused on delivering the greater than 12% roti in the round. On your second question around capital allocation, I would reiterate we think those RWAs are largely temporary and there's obviously also a natural seasonality to the RWA pass within the IB. I think more fundamentally though, what we're talking about here is the two-part strategy, firstly holding that broadly flat and secondly growing elsewhere. So you're going to see this meaningfully change as a percentage really from the fourth quarter onwards. And that in the first part comes from the completion of Tesco, which we now expect to happen on the 1st of November, but also really the organic progress that we're making in terms of the balance sheet. Now, you can't see that yet coming through in strong balance sheet growth. That is what we expected. You might remember that in February we said that we expected that the UK balance sheet would get smaller before it got bigger, and that indeed is what's happening. But we're seeing good growth momentum. The mortgage market is up. We're taking a greater share of that and we're also taking a good share of -to-value mortgages. Our CARDS balances are up quarter on quarter. And in corporate lending, whilst we haven't seen the balance sheet move yet, you can see the RWAs going up because we've extended balances to clients. So I think it's really sort of from quarter four onwards that you're going to start to see this move meaningfully. But just to reiterate on the RWAs and the IB, our intention is still for this to be broadly flat and really for the work to be done elsewhere in moving that percentage. But thank you for the question. Perhaps we could go to the next one,

please. The next question comes from Edward Furze from Stiffle. Please go ahead, your line is now open. Morning, everybody.

I had two questions, please. The first one was US consumer cards credit quality. I think it's good to see the provision charge has turned. But if I look at your non-performing loans in the quarter, they were up, I think, seven or eight percent. So just trying to get a sense as to where we are in that cycle and how we should expect that to progress from here, if that's okay. That was the first question. And then the second question, I'm just trying to sort of square the -U-K performance with some of your targets and with some of the revenue coming through from the hedge, because you're making around a 20 percent return on equity in the first half. And even if I normalize impairments, when you take your share of the hedge benefit, it's going to go in there. That's probably closer to 25 or even high 20s returns as of today. And yet in your target, I think you said greater than 15 percent return on tangible by 26. And I know, obviously, greater than 15 percent encompasses an awful lot. But I guess mid to high 20s, there's a long way ahead of that. So I'm just trying to think what should we be thinking about in terms of the difference between the greater than 15 and the mid to high 20s? And how do you think about a mid to high 20s return in a sort of we had to listen to the FCA talking about consumer duty yesterday. I mean, should we be expecting some of this $2 billion hedge to actually go to depositors or are you really confident that we can hold the bulk of that? Thanks very much.

OK, thank you, Ed. I'll start on cards and Benkert might want to add something on US quality also. And then we'll go into the UK performance. Then really the US CB impairment pathway is panning out as we expected to. So last year when we saw the macroeconomic variables, particularly around unemployment, start to increase, what we expected was first delinquencies would increase and secondly real, if you like, non-performance and write-offs would follow. And that's exactly what's happening here. And you can see it quite clearly in the charts, which I think is on slide 13. So this time last year we got ahead of this in a couple of ways. The first was by building our reserve proactively. And so you can see that reserve build through the second half of last year. And that was in anticipation of the write-offs and that movement of non-performing loans that you're now seeing. So from here what I expect is consistent with what we thought at the beginning of the year, which is actually we'd expect impairments in the second half to be lower. Now the composition of that is going to still look a bit like what it does in Q2. You're going to have relatively high levels of write-offs and you're going to have lower levels of provisioning. And then overall for Q24 it's going to be lower than Q23. But we did take actions last year in credit lines also in anticipation of this and that certainly helps. And just to remind you, this is a high quality book. Yeah,

I second everything Anna said. And I think the other thing to look at is, you know, in credit cards as you know, one of the most important factors driving performance is employment or unemployment. The Fed statement yesterday pointed, even though they didn't change rates, pointed towards a balance in their concern shifting a little away from inflation into softness and employment. That is speaking to the thing that we put in and anticipated. And we've, as Anna said, tried to risk manage the portfolio in advance of that. And so we hope we're prepared for what could be a softness. But the non-performing piece is exactly as Anna said, it's following upon a provision bill, which was earlier.

OK, then on your second point, Ed, just around Buk performance, you know, we take confidence from the quality and the stability of the balance sheet. But that balance sheet is going to change from here. We are anticipating asset growth. So, you know, obviously we expect NMAI to grow over time. But I'm also expecting that the RWAs here are going to grow over time. And clearly we haven't seen growth in assets in Buk for a couple of years now. So that will moderate it. And it's just a reflection of really, if you like, the emphasis moving from profit being in liabilities to really trying to grow the asset books for when the curve turns. So that's really what we're thinking about here. Think of it as an increase in equity rather than a reduction in returns. And that's really what's led to our ROTE thought process. Venkat, anything to add about that? Yeah, I

completely agree. You know, you have to look at this business, as Anna said, over a cycle. And the composition of the revenues shifts from liabilities to assets over that period. And as asset revenues increase, so does your equity. And that will have the effect of moderating the ROTE. And then impairment. And you know, impairment has remained fairly low. And the UK, we'll see what the Bank of England does later today. But the UK employment picture has remained strong. I mean, there's really only one way this thing can go. And so you've got to be careful about where impairments go in the long run. And that will be the other moderating influence.

Yeah, and I think you sort of called that out in your remarks. So we're still expecting the sort of longer-term trends here. To your specific point on the SCA and consumer duty, there is nothing specific in our ROTE guidance that relates to that at all. You know, we feel we have the right ranges both across savings and indeed elsewhere. And they're in compliance with it. So there's nothing there that would mitigate or moderate that ROTE.

Yeah, and look, this is an important protection measure for consumers. We fully support it. And I think it's important for the large financial institutions, all financial institutions, to be fully in conformance with the requirements of those practices. And they're good practices.

Great.

Thanks

so much. Great. Thank you. Can we go to the next question, please?

The next question comes from Chris Cantz from Autonomous. Please go ahead, Chris. Your line is now open.

Good morning. Thank you for taking my questions. I have one on the UK and one on consumer, please, your consumer. So on the UK, in your remarks, you referenced the stabilisation in deposit books coming off the back of pricing actions that you'd taken earlier in the year. I mean, you don't give us much disclosure around your deposit costs. But if I look at the interest expense you're disclosing in the UK financials, I think that's down half on half, i.e. lower overall interest expenses in the first half versus the second half of last year. So I just wanted to understand a little bit more what pricing actions you've taken and if there is any colour you could give us around the level of your average deposit rates, which some of your domestic peers do provide, that would be very welcome. And on consumer, obviously income down, you've spoken to that in terms of the amortisation and various other things, bits of lumpiness, I guess. How should we think about the progression of income for that segment from here? Should we be expecting growth to be coming through in the second half or is more of the progression you're expecting to that 12% NIM back-end loaded within the plan? Thank you.

OK, thanks, Chris. So we don't disclose our deposit costs. Obviously, within the interest costs in the P&L, there are more things going on than savings within there. However, what I would say is we've made good progress around not only our range of savings, it's much broader than it was, but you can also see, and I think it's probably on slide 16, the continued progression that the customer has towards yield. So fixed-term deposits continue to grow, albeit at a slower pace. We have a lower proportion of fixed-term deposits than the industry more broadly, which is what you would expect, but still a significant change there. I would just say, really, it's about range, it's about pricing consistently. It feels like we've performed well in the first quarter and, sorry, in the first and second quarter. The savings market overall has grown. We initially lost share last year, but I would say that's very much stabilized this year as we've seen those benefits come through. Current account share has actually been flat throughout, so it feels like we've managed that well. In terms of consumer in the US, there is a bit of seasonality to US cards. Typically, you see slightly higher income and slightly higher impairment in the fourth quarter, so we'd expect those trends to be the same this year. It's a bit the converse of what you see in the current quarter. There's a seasonal down in Q2, and you tend to see that go up again for holiday spend in Q4. So that's the seasonal element of it. More broadly than that, obviously, we do expect to grow. Cards growth takes a while, so you're going to see this happen over time. There are also some headwinds to NIM and income that we called out, so specifically around late fees, although that appears to be delayed at this point in time. We'd expect to take some actions in response to that in terms of our optimization. We're continuing to build our deposits in the US, so I'd expect these to manifest themselves gradually over time, the implementation of that, Chris. But you're going to see some lumpiness from, for example, the implementation of that late fees whenever it comes.

Thank you. On the UK deposit piece, I know you don't disclose, you don't give us a specific number. I guess the reason for the question is when I look at data we do get for 2023, which we can at least see on an annual basis, Barclays in the UK was paying meaningfully lower rates than large incumbent peer banks in the UK. I guess off the back of that we saw deposit volumes compress for Barclays to a far greater degree than for those peers. So customers moved elsewhere because you weren't keeping up, I guess, with even the large incumbent banks. We've seen that stabilize in the first half. Is it just that the customers who were going to move have now moved and actually you've retained a meaningful pricing differential to large peers, or do you feel like you've substantially caught up with large peers in terms of your rates?

So as I said, we've seen that market share trend really stabilize in the second quarter. What that tells me is that two things are going on. Firstly, our range and pricing performance is better. Secondly, there is some moderation there more broadly across the market. So I think it's both, Chris, actually.

OK, thank you.

Thank you, Chris. Perhaps we could go to the next question, please.

The next question comes from Robin Down from HSBC. Please go ahead, Robin. Your line is now open.

Good morning. Thanks for taking the questions. Just a couple on the businesses being disposed of. With the German business, you've called out the revenue contribution that that's making. But I don't think we've seen the cost and the impairment contribution. Is that business a break-even business? I assume most of the impairments in the head office relate to the German consumer finance business. So is the gap there just costs for around $30-40 million a quarter? Is that how we should be thinking about that? The second question, I guess, is probably more for Venkat. I think you're quoted on Bloomberg this morning saying that the sales and merchant acquiring unit is underway. I was just wondering if you could give us any kind of updates on that disposal. Thank you.

Thank you, Robin. So on German cards, you're broadly in the right ballpark. It's not a significant PBT contributor to the bank. And therefore, on sale, the meaningful difference that you're going to see in the P&L or balance sheet is actually the release of their RWAs. And that's really what drives that 10 basis points of CET1 accretion that will happen either in Q4 or Q1 is our expectation. So you're in the right ballpark. Venkat?

Yeah. So I think, Robin, what I said earlier on a media call is that we had three acquisitions and three disposals and one acquisition stated for this year. The acquisition was death goal, of course. The disposals were German cards and Italian mortgages, which have one been announced, German cards, Italian mortgages announced and completed. And then the last one was merchant acquiring. And on merchant acquiring, what I had said is in a way of all the things, it is the most complex one because of the technology involved, because of the kind of financial arrangements we would want and the client service we'd want. So that process is still ongoing. And what I said also on the call is that we have nothing to say about it now. When we do, we'll tell you. But it is the most complex of that list of four.

OK, great. Thank you.

Thank you. Perhaps we can go to our next question, please.

Our final question we have time for today comes from Andrew Humes from Citigroup. Please go ahead, Andrew. Your line is now open.

Morning. Thank you for taking my questions. A couple of strategic ones, please. Firstly, on U.S. consumer, I've noted the delay in the IRB inflation until Q1. But we're now in an environment whereby it looks like for the U.S. banks, the delay in Basel 3.1 could potentially be much longer. I know when you gave your investor day, you talked about the risk weight density go from 100 to 160 and then through mitigation back to 145. And you thought that would be comparable to the U.S. banks post Basel 3. But in an environment where Basel 3 doesn't get introduced in the U.S. or Basel 3.1, sorry, in the U.S., how do you feel about the competitive positioning of that business? If a co-brand deal comes up for renewal, do you think you can still price competitively versus the U.S. peers given a higher risk weight density? And then second question, similar theme strategy, but investment bank given, and you said the IRB RWA increases temporary this quarter. But if somebody comes to you and says, I'd like an extra 100 million of RWAs, I think I can generate more than 12% ROTE on that from your investment bank. You've always said your North Star is the ROTE. Did you say, yeah, fine, please go ahead? Or is it a case of reducing the RWAs from 63 down to 50% a group in the investment bank by holding them stable? It's more of a priority. Thank you.

Okay. Thank you, Andy. I'll start and then I'll hand over to Ben Kirk. So on consumer, you're right, these regulatory models are complex to implement. We've just seen a movement over the quarter-end really that takes us from Q4 to Q1. That has always been an acceleration of the Basel requirements draft, and we talked about that in February, so we always expected there to be a gap. Obviously, we'll have to see what happens to the US rules, and it's very, very difficult for us to comment on that until we see both that and indeed the final UK rules. In the meantime, we're focused on the things that we can control. So we're focused on the commercial actions that we said we would take, which are really around improving the capital efficiency of the business through doing trades like the one that we've already done with Blackstone. We continue to work on the NIM, as I alluded to before, through pricing, through deposits, et cetera. We've got a big program here of efficiency and digitization. All of those things will improve the returns of the business. So we're really sort of focusing on execution of the piece here that we can control and which we have line of sight to.

Yeah, I'll just add to what Anna is saying, which is that we will control what we can control, and we try to do that in a very efficient way, and we're doing things in capital management which try to alleviate what could be the impact of these changes. More broadly speaking, of course, we have the view, which we've shared publicly, that we think the changes in the UK and the US ideally should be similar and should happen at roughly the same time. That would be our wish. And then if I come to your point on the RWA and the increases, what I would say to you is the strategic ambition or goal of this bank is to keep IB-RWA's roughly flat, absorbing some of the capital impacts we've spoken about, and then growing RWAs outside of the IB, and therefore shrinking the relative proportion of the IB. Now, if somebody comes with an interesting high ROTE trade, we would of course consider it. It would have to be shorter term, right? It's not something that can affect the broader strategy. So the broader strategy is that relative reduction, and if there are shorter term opportunities that we can take, you know, of course we would consider them, but at the secondary part of the broader strategy. All right.

And just to remind you, Andy, you know, that the areas that we want to grow our RWAs in, so that's 30 billion, they are in the areas of the bank where the returns are meaningfully higher than the group average. So across the UK, across the corporate bank, and indeed across private banking and wealth, they are at least high teens, if not into the 20s. So that's the trade-off that we are really thinking about here as we consider the capital allocation for the firm. Okay. So I think that was our final question. Thank you very much for joining us today. Thank you for your continued interest in Barclays. You know, we're pleased to give you the results today. We look forward very much to seeing some of you on the road over the next few weeks, or indeed if you've got a holiday, we'll see you in September. But thank you very much and see you soon.

Thank you.

Thank you. That concludes today's conference call.