Barclays PLC

welcome to barclays half year 2025 results analyst and investor conference call i will now hand over to cs venkata krishnan group chief executive before i hand over to anna cross group finance director good morning everyone thank you for joining barclay the second quarter 2025 results call i am very pleased to announce very strong results for this quarter income grew by 14 year-on-year to 7.2 billion pounds profit before taxes grew by 28% to £2.5 billion, and earnings per share grew by 41% to 11.7 pence. Return on tangible equity was 13.2% in the first half of the year and 12.3% in the quarter. This compares to 11.1% in the first half of 2024 and 9.9% in the second quarter of last year. Cost-income ratio at 59% in the second quarter is a 4.0% percentage point improvement versus last year. This performance drove an eighth consecutive quarter of growth in tangible book value per share, now to 384 pence. And it has driven strong capital generation with a CET1 ratio of 14%. As a result, we are announcing a £1 billion buyback today, up from £750 million in the first half of 2024, and we expect to initiate this in the coming days. And we are also announcing a dividend per share of three-tenths. This total of 1.4 billion pounds of shareholder distributions for the first half of 2025 is up 21% year-on-year. And we expect our distributions to continue to build progressively, supported by increasing capital generation. These strong results marked the midpoint of our three-year plan to deliver a better run, more highly performing and higher returning Barclays. I'm very pleased with the group's operational and financial progress so far. We remain committed to and confident in achieving the full objectives of this plan. And this includes a return on tangible equity of circa 11% in 2025 and more than 12% in 2026. By design, our plan is delivering operational improvements across each of our divisions to drive structurally higher and more consistent group returns in 2026 and beyond. In the second quarter, we achieved a further 200 million pounds of gross efficiency savings, or 350 million for the first half of 2025. This is good progress against our target of 500 million for the year. All of our divisions generated a double-digit ROTE in the second quarter. This includes a 2.6 percentage point year-on-year improvement in the investment bank's ROTE to 12.2%, and a 1% improvement in the U.S. consumer bank ROTE to 10.2%. Before handing over to Anna to take you through the results in more detail, let me share a few reflections on our progress at the midpoint of our plan. I am very pleased with what we have achieved so far. Our three-year plan set out in February 2024 outlined a roadmap to produce higher and more balanced returns. We have seen the value of clearly articulating our targets and capital framework, the value of providing transparency for shareholders, and the value of driving accountability and disciplined execution internally. I would stress that our 2026 targets were never intended to be a resting place. and nor do they represent the extent of our ambition for ROTE capital distributions, nor the proportion of group capital allocated to the investment bank. We are executing against our plan as we said we would, resulting in higher shareholder returns. And the momentum which we are seeing across the group positions us well to deliver our ROTE guidance and targets by continuing to drive income growth, by increasing operating leverage, and with our business exchanges. Since 2023, we have deployed 17 billion pounds of business growth risk-weighted assets into our UK Biz-focused businesses, Barclays UK, the UK Corporate Bank, and Private Bank and Wealth Management. This includes 10 billion pounds from organic growth. This organic progress and the acquisition of Tesco Bank means that we have now deployed more than half of the planned 30 billion pounds by 2026. Within the investment bank, we have intentionally kept RWA stable for three and a half years. This is driving efficiency and productivity. And to ensure that the division is a consistent source of capital generation for the group, I am very pleased with the performance halfway through the plan, with annualized income growth of 9% since 2023, in line with the division's high single-digit growth target. I think about the investment bank's performance through two lenses, structural and cyclical. Structural improvements in the business are driving broader and deeper client relationships, and they are supporting income in a range of environments. A good example of this progress is in our markets franchise, where we now rank top five with 60 of the top 100 clients in the business. This is well on our way to our target of 70 by 2026. up from 49 in 2023. By strengthening our institutional client franchise, we have increased market share in our three focus businesses by more than one percentage point during 2024, and with good momentum since then. And in financing, good momentum of client onboarding and balance growth contributed to a 23% year-on-year increase in income in US dollar terms in the second quarter, with particular strength in prime. So stable income streams now account for 40% of the investment bank's income in the past year, up from 29% in 2021. From this structurally stronger base, the investment bank is also better positioned to monetize cyclical market activity by helping clients to manage volatility, as we demonstrated in the early part of the second quarter of this year. This cyclical activity is included in traditional areas of strength for us, such as credit and macro, and also in new areas of strength, such as equity derivatives and prime. Our work is not finished. With the ongoing execution of our plan, we will continue to produce structurally higher and more consistent returns for our shareholders. And with that, over to Tana to take us through the second quarter.

Thank you, Venkat, and good morning, everyone. Slide five summarizes the financial highlights for the second quarter and first half of 2025. Before going into the detail, I would remind you how our results are affected by FX rates. The year-on-year performance in Q2 was impacted by a weaker US dollar, which decreased our reported income, costs, and impairments. I'll call out these effects where appropriate. The group delivered a QT ROTI of 12.3%, against the previous year's 9.9%. Excluding the effect of last year's business disposal losses, income rose 9%, with growth across all divisions, while our efficiency actions led to another quarter of positive jaws of 4%. Profit before tax increased by 28% year-on-year to $2.5 billion, and our earnings per share grew 41%, supported by the effect of share buybacks. As ever, I am focused on four aspects of performance. Income stability with an emphasis on growth, cost discipline and progress on efficiency savings, credit performance, and a robust capital position. By focusing on these four building blocks, we are now driving higher returns on a sustainable, predictable, and consistent basis. And from this strong foundation, I am now looking for signs of increasing momentum across our businesses, which I'll call out as we go, starting on slide seven. Income in Q2 increased 14% year on year, to 7.2 billion. We grew stable income streams by 13% year on year, supported by sustained retail and corporate NII growth and 15% growth of financing income within markets. Elsewhere in the investment bank, our multi-year investment meant we were well positioned to help clients navigate volatility in April and throughout the quarter. Group net interest income increased 12% year on year in Q2 to 3.1 billion. Stable deposits for the group supported continued reinvestment of the structural hedge alongside lending momentum. Within this, we have consistently taken market share in UK corporate bank deposits and lending since 2023 and year to date. And in Barclays UK, we maintained our share in current accounts and chose to remain disciplined on term deposit pricing in the quarter amid strong competition. The overall stability of deposits will support growth of the structural hedge income as we show on slide 9. Income from the structural hedge is material and predictable and underpins our confidence in delivering NII guidance the Greek and Barclays UK in 2025 and beyond 2026 we currently expect the structural hedge to deliver multi-year NII growth we have now locked in 11.1 billion of gross structural hedge income in 2025 and 2026 up from 10.2 billion last quarter as we said in April our plan assumes that we reinvest 90% of maturing hedges at a 3.5% yield. In each case, the Q2 outcome was more favourable than these assumptions. On rates, we locked in hedges at a higher rate at circa 3.7%, and we kept hedge balances flat, as you can see on slide 35 in the appendix, reflecting the continued stability of hedgeable deposits. Moving on to costs. The group cost-to-income ratio was 59% in Q2, down 4 percentage points year-on-year. Total costs increased by 219 million year-on-year, or 5%, which includes a circa 100 million increase in investment costs, mainly from the acquisition of Tesco Bank and associated integration costs. The effects of business growth, inflation and other investments on the cost base were largely offset by gross efficiency savings. Structural cost actions in the first half were around 100 million, down slightly versus H124. Looking ahead, we expect structural cost actions to be skewed towards the second half of the year and to be towards the top of the 200 to 300 million normal annual range. Inclusive of these costs, we remain well positioned to deliver a circa 61% cost income ratio in 2025 in line with guidance and the high 50s target in 2026. Turning now to impairment. The Q2 group impairment charge of $469 million equated to a loan loss rate of 44 basis points. The UK credit picture remains benign, with low and stable delinquencies in our consumer books and wholesale loan loss rates below our through-the-cycle expectations. The Barclays UK charge was $79 million in Q2, resulting in a loan loss rate of 14 bits. The improvement versus Q1 reflected a release of credit card provisions and diminishing post-acquisition stage migration effects for Tesco bank balances. The US consumer bank impairment charge of 312 million was stable year on year and down 22% versus last quarter. The acquisition of General Motors cars balances is expected to lead to a circa 100 million day one charge in Q3 and a post-acquisition stage migration charge of circa 50 million for the next few quarters from Q4. Including this charge, we continue to expect a group loan loss rate within the through-the-cycle guidance of 50 to 60 basis points for FY 2025. Focusing on the U.S. Consumer Bank, 90-day delinquencies were stable in the quarter, whilst 30-day delinquencies fell 20 basis points to 2.8%, consistent with normal seasonal trends. the loan loss rate of 456 basis points increased by 18 basis points year-on-year, reflecting modestly higher write-offs. Consumer behaviour remains resilient, with payment rates in our book above pre-COVID levels and consistent with Key 1, and a stable mix of new account acquisitions, as can be seen on slide 39 in the appendix. I said I would highlight signs of increasing momentum, which we are seeing. So turning to our UK businesses on slide 13. We are on track to deploy 30 billion of business growth RWAs in the UK by 2026, having achieved 17 billion so far, including 10 billion organically. During 2024, the three UK businesses delivered circa 1.5 billion of organic business RWA growth per quarter on average. This has accelerated to circa 2 billion per quarter in half on 2025. Given the momentum that you can see on the slide, we expect this growth to continue. Mortgage balances have grown for the past four quarters, and strong purchase activity continues to support resilient demand. This includes stronger demand for higher LTV products, including through Kensington, where application margins are around four times higher than comparable Barclays-branded mainstream mortgages. In credit cards, the organic acquisition of 1.6 million customers in the past 18 months has supported consistent balance growth. and we expect this to lead to higher interest earning lending from half to 2025 as promotional balances mature. Core business banking lending has started to inflect, with a headwind from COVID-era loan repayments diminishing. This growth has been supported by 1.6 billion of loans provided to UK business banking customers in half one, up 50% year on year. and UK corporate bank lending has grown for the past three quarters as clients continue to draw down lending facilities. Given the momentum across these products, we remain confident in achieving the $30 billion target in 2026. This implies a little over $2 billion of growth per quarter, modestly above the recent run rate. Turning now to Barclays UK in more detail. You can see financial highlights on slide 14, but I will talk to slide 15. ROSI was 19.7% in the quarter. NII of 1.9 billion increased 16% year-on-year and 2% quarter-on-quarter with NIM stable versus Q1. We remain confident in our guidance for NII to exceed 7.6 billion in 2025. which in turn means more than $3.9 billion in the second half of the year. Reinvestment of the structural hedge will continue to support material and predictable NII growth alongside sustained lending momentum. In addition, we expect a neutral or positive contribution from the product margin in Q3 and Q4. This partly reflects the benefit of promotional card balances translating into higher interest earning lending in half two. In addition, as an accounting matter, the phasing of some historic swap maturities suppressed product margin in half one. This was known when we upgraded our guidance for NII last quarter and will not repeat in future as these swaps expire. We would therefore encourage you to look at H2 2025 as a reasonable baseline for NII dynamics beyond 2025, noting that NII is expected to build in Q3 and Q4. Non-NII of 264 million rose modestly versus Q1, and we continue to expect a quarterly run rate above 250 million. Cost growth of 14% reflected the acquisition and subsequent ongoing integration of Tesco Bank. As a reminder, we expect the cost-income ratio for Barclays UK to increase this year from 52% in 2024 before falling to circa 50% in 2026. Moving on to the Barclays UK balance sheet. Deposit balances fell by 1.8 billion in the quarter, as customers took advantage of favourable term deposit rates around the new ISA season. We were disciplined around pricing for term deposits, which was competitive in the first half of the quarter. This dynamic moderated later in the quarter, and our market share in current counts has remained stable. Lending once again grew by 1.6 billion quarter-on-quarter, driven by mortgages and credit cards. Mortgage redemptions will increase in half two versus H1, but our recent retention experience and the momentum that we are seeing underpin our confidence in sustained loan growth. Moving on to UK Corporate Bank on slide 18. Q2 Roti with 16.6% inclusive of a 39 million litigation and conduct charge. This charge was in relation to an historic issue and drove a 19% year-on-year increase in costs in this business. Excluding this, costs increased by 2%, while income grew 17%. NII was up 21% year-on-year, reflecting deposit and lending growth and the benefit from structural hedge reinvestment. Operationally, investments into our digital and lending propositions have helped to attract around 330 new clients during H1 2025 and circa 880 new clients in the first half of the three-year plan. Turning now to private bank and wealth management. Q2 Roti was 31.9%. Net new assets under management of 0.9 billion helped support 8% year-on-year growth in client assets and liabilities despite a weaker US dollar. An annualized growth of 11% since 2023 is in line with our double-digit growth target. Within the quarter, growth of assets under supervision offset a reduction in short-term deposits held at the end of Q1. Income growth of 9% matched cost growth of 9%, resulting in a broadly stable cost-to-income ratio. As previously guided, we are continuing to invest in this business underpinning sustained growth and a high 60s cost to income ratio in 2026. Turning now to the investment bank. ROSI was 12.2% in Q2 and 14.2% in half one. Total income was up 10% year on year, which coupled with broadly stable RWAs now for three and a half years, drove an 80 basis point improvement in income over average RWAs to 6.7%. We continue to be similarly disciplined on costs, which rose 2%, resulting in another quarter of positive jaws and a cost-to-income ratio of 59%. Using the US dollar figures to help comparisons to US tiers, market income was up 34% year-on-year. As Benkatt mentioned, the growing breadth and depth of our client relationships are supporting structurally higher income while better positioning the investment bank to monetize cyclical activity. Our performance in Q2 helps to demonstrate this. In April, for instance, we monetized cyclical market activity by supporting clients through the period of volatility. But in May and June, structural improvements in the business enabled a higher daily income run rate in markets versus last year, despite more normalized volatility. This was supported by momentum of more stable financing income, which grew 23% year-on-year in US dollar terms. This occurred across financing products, with particular strength in prime, supported by growth in balances and wider spreads. We also delivered this performance whilst managing risk well, maintaining stable VAR and incurring two trading book loss days, one in April and one in May, in line with the average since 2019. Looking at our income by product, SICK rose 35%, reflecting growth across the credit and macro franchises and in financing. The mix of our macro business, weighted towards rate and FX, was well suited to activity in the quarter. Equity's income was up 34%, driven by strengths in cash, prime and equity derivatives. In banking, the environment was quiet in April, but improved in May and June, and our half-won market share was stable at 3.4%. Banking income fell 10% in the quarter, reflecting the year-on-year effect of a large ECM transaction in Q2 2024. Looking through this effect, ECM activity gained momentum towards the end of Q2, with Barclays acting as bookrunner on seven of the top 12 US IPOs in the quarter. In DCM, we grew market share in all products and activity picked up as the quarter progressed, particularly in investment grade, and the pipeline to leverage finance is encouraging. And whilst advisory activity has been subdued, our announced volumes are up nearly 40% year-on-year, which we expect to support stronger completed market share in the future. In transaction banking, increased 4%, whilst corporate lending income was impacted by fair value losses on lending positions. Turning now to the US Consumer Bank. ROTI was 10.2% in the quarter, up from 9.2% in Q2 2024. The business performed as we expected it to in the quarter, with operational improvements supporting our confidence in delivering a ROTI of greater than 12%, in 2026. Total income increased 7% year-on-year in US dollar terms, reflecting end net receivables growth of 5% to $33.9 billion on a managed basis. NIM expanded to 10.8% and we expect continued momentum towards our greater than 12% target in 2026, reflecting three effects. Asset repricing actions taken last year are supporting margins and will continue to feed through in the coming quarters. Second, we are growing higher margin retail balances as a percentage of net receivables from around 15% currently to circa 20% by 2026. Third, we are improving our funding mix with retail deposits growing by $0.7 billion quarter on quarter or 27% year-on-year, increasing the share of funding from core deposits to 73%. The acquisition of General Motors cars receivables is also expected to enhance ROCE from Q4 2025, despite the $50 million stage migration charge in the quarter that I mentioned earlier. We continue to complement income growth with efficiency, driving a two percentage point improvement in the cost to income ratio to 48% on track for our mid 40s target by 2026. Moving to capital. We ended the quarter in the upper half of the 13 to 14% target range with a CET1 ratio of 14%. This is a deliberate consequence of the strategy which was designed to drive higher and more consistent returns, improved capital generation and higher shareholder distributions. We generated around 100 basis points of capital from attributable profits in H1 and expect around 170 basis points this year aligned to our circa 11% ROTI target. This enabled us to increase distributions by 21% year-on-year and half-one, to $1.4 billion in line with our guidance to deliver a progressive increase in total distributions in 2025 versus 2024. This included an announced $1 billion share buyback, which will reduce the reported ratio by circa 30 bps to 13.7%. RWAs were broadly flat at $353 billion net of a 5.8 billion reduction due to FX. Barclays UK and the UK Corporate Bank saw a combined RWA increase of 2.2 billion. Given our continued discipline, investment bank RWAs remained broadly in line with the Q1 level and represented 56% of the overall group RWAs. Looking ahead, We note that some European banks have recently provided detail on the effect of output flaws, which for Barclays are not expected to be binding at any point. This reflects our business mix and applies at both the group and the ring fence level. As usual, a word on our overall liquidity and funding on slide 28. We have strong and diverse funding. including a 74% loan to deposit ratio and a net stable funding ratio of 136%. And we are highly liquid across currencies with an average LCR of 178%, incorporating the initial effect of methodology changes introduced in June. Although these changes will utilise some of the group's 135 billion surplus funding position, we expect the LCR to remain broadly within levels reported in recent years. These measures reflect purposeful and prudent management of our balance sheet and risk, delivering resilience and capacity to support customers in a range of economic environments. Clean-up per share increased 12 pence in the quarter and 44 pence year-on-year to 384 pence. Attributable profit added 10 pence per share during Q2 and the unwind of the cash flow hedge reserve added 9 pence. We expect the majority of the remaining cash flow hedge reserve to unwind by the end of 2026. This unwind, combined with earnings growth and buybacks, give us confidence that TNAV will continue to grow consistently as it has done for the last eight quarters. So, to summarise, we are pleased with the strong performance of the bank in the first half of the year, which sets us up well to deliver on all our 2025 guidance and 2026 targets. Over to you then, Kat, for concluding remarks.

Thank you, Anna. So halfway into the three year plan, as you can see, we remain firmly on track to deliver our goals. We are working hard to deliver sustainable operational and financial improvements across our businesses. And this in turn will drive higher group returns and shareholder distributions. And as we have said, 2026 is a point in time for us and we have ambition beyond it. By making structural improvements, we are improving the profit signature of the bank to drive higher returns in the years to follow. I will now open for questions and answers.