Barclays PLC

Welcome to Barclays Q3 2025 Results Analyst and Investor Conference Call. I will now hand over to C.S. Venkata Krishnan, Group Chief Executive, before I hand over to Anna Cross, Group Finance Director.

Good morning, everyone. Thank you for joining Barclays' third quarter 2025 results call. We are well into the second half of the three-year plan, which we shared with you in February 2024. I'm very pleased with the momentum and consistency of progress which we have shown in the last seven quarters. This quarter, our top line income increased by 11% to 7.2 billion pounds from 6.5 billion pounds in the same quarter last year. Our income growth has allowed our tangible net asset value per share, TNAV, to rise to 392 pence compared to 384 pence per share in the previous quarter. And we have delivered a third quarter ROTE of 10.6%, which equates to 12.3% for the year to date 2025. We are therefore upgrading our 2025 ROTE guidance to greater than 11%, and we are reaffirming our 2026 target of more than 12%. Our returns are supported by a stronger outlook for stable income. We now expect group NII for 2025 to be more than 12.6 billion pounds, up from more than 12.5 billion pounds. And this has been supported by UK lending momentum, positive stability and operational progress in the US consumer bank. Further, we are pleased to bring forward a portion of our full year distribution plan with a 500 million pound share buyback. This is the result of a strong capital generation of a CET1 ratio of 14.1% and disciplined execution of our capital priorities. This buyback will commence as soon as the current one is completed. Looking ahead, we plan to announce buybacks quarterly, reflecting the consistency of our capital generation, and this is subject, as usual, to regulatory and board approvals. And we reiterate our guidance to return at least 10 billion pounds of capital over our three-year plan. with a progressive increase in the total payout for 2025 versus 2024. Over the past seven quarters, we have simplified our businesses, rebalanced our footprint, and are generating higher returns. Our progress has raised our expectations, and we see how much more potential there is to be realized in Barclays. Hence, alongside our full year results for 2025, Anna and I aim to share with you new targets for Barclays through to 2028. The group is delivering strong top line momentum, efficiency savings that are earlier than planned, and loan losses within our planning range. We are well positioned to achieve the circa 61% cost income target for 2025, despite an additional provision for motor finance, and this reflects strong delivery of planned efficiency savings. And we are managing credit within our range with a 57 basis point loan loss rate, and this is despite a well-publicized single-name charge in the investment bank. Our plan is delivering operational improvements across each of our divisions and is driving structurally higher and more consistent returns. In the third quarter, we achieved our circa 500 million pounds gross efficiency savings target for 2025, and this was one quarter earlier than planned. And we remain focused on delivering the circa 2 billion pound gross efficiency target by the end of 2026. having achieved £1.5 billion so far. All divisions generated a double-digit ROTE again this quarter. This included a 1.3 percentage point year-on-year improvement in the investment bank's ROTE to 10.1%, and a 2.6 percentage point improvement in the U.S. consumer bank to 13.5%, reflecting continued operational progress in the business. And we are driving stronger and more consistent group returns through active and disciplined capital management. We are rebalancing the group by growing RWAs in the three highest returning UK businesses, where we continue to see good momentum. We are simplifying the group. And in August, we announced the sale of our stake in Intercard to Swedbank. And we are demonstrating our commitment to shareholder distributions with today's buyback announcements. In summary, the momentum of our operational progress has increased our confidence and expectations for the group. Improvements in the consistency of our returns also mean that we are more strongly equipped to help clients navigate the still uncertain environment and to provide a foundation for our plan and targets through to 2028, which we look forward to discussing with you in February. Anna, over to you now to take us through the third quarter financials.

Thank you, Venkat, and good morning, everyone. Slide four summarizes the financial highlights for the third quarter. Before going into detail, I would remind you that the year-on-year performance in Q3 was impacted by a weaker US dollar, which reduced our reported income, costs, and impairments. Return on tangible equity was 10.6%, including double-digit returns in all five divisions. This was lower than last year, reflecting 8% growth in tangible book value and a 235 million motor finance provision, which also reduced our profit before tax and earnings per share. Notwithstanding this provision, I remain focused as ever on the operational performance of the business, which has continued to strengthen, and the signs of momentum that I described to you last quarter are visible across the businesses in today's results. Income in Q3 increased 9% year-on-year to $7.2 billion. This was driven by growth in stable income streams, now accounting for 76% of group income from retail and corporate and financing within markets. Group net interest income increased 16% year-on-year to $3.3 billion. We now expect Group NII, excluding IB and head office, to be more than $12.6 billion for FY25, up from more than 12.5 billion previously, driven by three developments. First, the signs of UK lending momentum that I called out last quarter have continued and in places strengthened. Second, operational progress in the US consumer bank is translating into stronger NII growth of 12% year on year this quarter. And third, Stable deposits for the group have supported full reinvestment of the structural hedge at yields that exceeded our planning assumption. We have now locked in £11.8 billion of gross structural hedge income in 2025 and 2026, up from £11.1 billion last quarter. Whilst our plan assumed that we reinvest 90% of maturing hedges at 3.5%, Q3 was more favourable on both yields and notional hedges. We have locked in hedges at a higher rate than planned at circa 3.8%. The stability of hedgeable customer balances throughout 2025 also underpinned two developments. First, we have fully reinvested in maturing balances for the past four quarters with the notional funding at $233 billion in Q3. We now expect the hedge notional to remain broadly stable. And second, our decision this quarter to increase the average hedge duration from three to three and a half years. This increase reflects the stability of hedgeable balances and further supports the predictability of structural hedge income. As we said previously, the structural hedge is expected to drive multi-year NII growth beyond 2026. For 2027 specifically, The yield on maturing hedges is around 2.1%, which remains significantly below the expected reinvestment rate. Moving on to costs. The group cost-income ratio was 63% in Q3. Total costs increased by around 500 million year-on-year, or 14%, which included a 235 million motor finance provision within head office. Following the SCA's proposal for an industry-wide redress scheme, our charge reflects the increased likelihood of a greater number of cases being eligible for redress. Specifically, the provision has been calculated using a scenario-based approach with probability weightings being applied to them. As Venkat mentioned, we have already delivered circa 500 million of gross efficiency savings in 2025, showing further progress towards the circa 2 billion target by the end of 2026, around half of the increase in investment costs related to the addition of Tesco Bank. The remainder relates to structural cost actions in the quarter, with around 190 million recognised so far this year. Looking ahead, we expect structural cost actions to be around the top of the 2 to 300 million normal annual range during 2025, Inclusive of the motor finance provision, 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 Q3 group impairment charge of £632 million equated to a loan loss rate of 57 basis points. This includes a lower than expected day one charge following the acquisition of General Motors card balances due to lower than forecast delinquency rates on the book. Excluding this effect, the group loan loss rate was 52 basis points. This included the circa 110 million single name charge in the investment bank. More broadly. The UK and US credit picture remains benign, with low and stable delinquencies in our consumer books and wholesale loan loss rates below our through-the-cycle expectations. And 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 are stable, with a seasonal 10 basis point increase in 30-day delinquencies in the quarter to 2.9%. Consumer behavior remains resilient, as can be seen on slide 39 in the appendix. Excluding the day one charge for GM, the loan loss rate of 436 basis points was broadly stable year on year. As a reminder, Q4 impairments tend to be seasonally higher, and we continue to expect a post-acquisition stage migration charge for the GM portfolio of circa 50 million for the next few quarters. Turning now to our UK lending momentum. We have now shown the slide for a few quarters, and I'm pleased to say that momentum continues. Let me call out some highlights rather than talking through each area in detail. In mortgages, we have grown balances for the past five quarters and Q3 net lending of 3.1 billion was higher than in any quarter since 2021. We are achieving this in two ways. First, by expanding the product range with full utilization of the Kensington brand, increasing the mix of higher LTV lending to levels more in line with the market. Second, we are improving processes. This year, we launched a new platform to more than 26,000 mortgage brokers, which has reduced application processing times from around 45 to around 15 minutes on average. This has significantly improved broker net promoter scores and has increased the capacity and efficiency of the mortgage business. In the UK corporate bank, lending grew for the fourth consecutive quarter and by 17% year-on-year as we continue to increase market share. More than half of this growth came from new clients acquired since 2024, a key strategic focus for the business. And we continue to simplify the borrowing process for new and existing clients. In both cases, we have further to go, supporting our plan to deploy 30 billion of UK business growth RWA by 2026. Turning to Barclays UK in more detail. You can see financial highlights on slide 13, but I will talk to slide 14. R&TE was 21.8% in the quarter. NII of 1.96 billion increased 18% year-on-year and 6% quarter-on-quarter, with NIM up 13 basis points versus Q2. Around half of this increase came from the reinvestment of the structural hedge. Consistent with the guidance we gave you, product margin increased NII by 50 million in the quarter. A large part of this move was due to the phasing of historic swaps income, which, as we called out last quarter, suppressed product margin in half one. We expect a broadly neutral product margin contribution in Q4 and remain confident in our guidance for NII to exceed 7.6 billion in 2025. Non-NII of 292 million rose versus Q2, reflecting seasonally higher holiday spend and some one-off effects, and we would expect this to be lower in Q4. Costs were stable versus Q2, but increased by 19% year-on-year, mainly reflecting Tesco Bank and structural cost actions in Q3. As we told you previously, we expect the cost-to-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. Deposits remain broadly stable versus Q2, though competition for higher rate deposits continued in Q3 and is likely to persist. lending grew for the fifth consecutive quarter and by 7% year-on-year, driven by mortgages. As a broader market trend, mortgage refinance activity remained elevated and we expect this to continue into the middle of next year as five-year fixed-rate mortgages written during the stamp duty holiday in 2020 and 2021 mature. Our retention experience remains strong in the quarter, and the capability improvements that I called out earlier are supporting lending momentum. Moving to the UK Corporate Bank on slide 17. Q3 rating was 22.8%. Income growth of 17%, exceeded cost growth of 5%, leading to an improved cost-to-income ratio of 45%. NII growth of 24% reflected stronger volumes. Lending increased 17% year on year, supporting a 70 basis point increase in market share to 9.3%. Deposit market share of more than 20% also increased and balances grew by 5% year on year. Together, this growth supported a 3 percentage point increase in the loan to deposit ratio to 33%. Turning now to private bank and wealth management. Q3 ROTI was 26.4%. Client assets and liabilities grew 10% year on year, and assets under management grew by 12%, supported by 0.7 billion of net new assets under management in the quarter. Strong client engagement supported deposit growth versus last quarter and last year. with a continued change in mix towards lower margin products as clients rebalance assets. Income grew by 3% year-on-year, though fell modestly versus Q2 as a result of this mix effect, and we expect Q4 income to be broadly stable versus Q3. Costs increased by 10% year-on-year, and the cost-to-income ratio rose to 73%, reflecting investment in the business. We expect to continue this investment to support growth and the high 60s cost to income ratio in 2026. Turning now to the investment bank. Before getting into the detail of the quarter, let me remind you that our focus in the IB is to drive consistently higher and more stable returns. Q3 ROTI of 10.1% increased 1.3% year on year. despite the single-name impairment charge, and year-to-date ROTI was 12.9%. This performance reflects operational improvements in the business, which are evident in the quarter. Stable income streams, financing in markets and international corporate bank in investment banking have accounted for nearly half of the IB's income this quarter. Income over average RWA has improved in every one of the last six quarters as a year-on-year matter and by 60 basis points in Q3. We also remain disciplined on costs with a sixth consecutive quarter of positive jaws. These improvements support the investment bank's income and returns in a wide range of environments. Turning now to look at income by business on slide 22. Using the US dollar figures, markets income was up 6% year on year, whilst investment banking fee income was up 11%. Let me highlight some areas of strength and some areas where we need to do better. First, on strengths. Financing income has now grown year on year for five consecutive quarters, including by 21% in Q3. In prime, we ranked joint fifth globally and client balances have grown circa 30% year-on-year. In the International Corporate Bank, stable income growth has been supported by the rollout of the Treasury coverage model now to 1,500 top clients versus 800 at the end of 2024. This has also helped to drive circa 20% year-to-date growth in U.S. deposits and strong growth in corporate FX and risk solutions revenues in the investment bank. And we have made good progress in M&A with sponsors, a key focus area where our year-to-date market share increased by circa 140 basis points year-on-year. In other areas, we need to do better. This includes corporate M&A, where we were less able to capture stronger activity in the quarter and in equity derivatives, where our performance was impacted by lower volatility. We also have more to do to sustainably increase market share in ECM, where we did not participate in some larger deals and others were pushed into Q4. Turning now to the U.S. Consumer Bank. Before I get into the numbers, let me first cover operational performance of USCB, starting with volumes. End net receivables grew by 10% year-on-year, of which around half related to GM coming on board at the end of August. As a reminder, we expect this acquisition to enhance RATI from Q4. NIST continued to progress towards the greater than 12% target by 2026, rising circa 110 basis points year-on-year to 11.5%, driven by three actions. First, Repricing that we undertook in 2024 continued to support margins as customers repay and rebuild balances on new terms and conditions. This accounted for around half of the year-on-year increase in NIM and Q3. Second, we continued to optimize the lending book mix. Following the acquisition of GM card balances at the end of August, retail partners account for 19% of end net receivables versus the circa 20% target by 2026, up from circa 15% at the start of the plan. Third, we continue to see strong core retail deposit growth, though, as expected, the increase in wholesale funding to support GM temporarily reduced core deposit funding to 68% of the total. These improvements in the income profile were complemented by ongoing progress to improve efficiency, supporting a 43% cost-income ratio in the quarter on track for the mid-40s target. All of these actions have contributed to the strong financial performance in the quarter, which you can see on the next slide. ROTI was 13.5%, up 2.6% year-on-year, and 9.4% year-to-date. Using the US dollar figures, income was up 21% year-on-year and costs up 6%. Stronger non-interest income accounted for around half of the income growth year-on-year, reflecting higher interchange and account fees. NII, which grew by 14% year-on-year and 12% quarter-on-quarter, was supported by stronger volumes and margins. The broad range of factors supporting higher returns in the US consumer banks reflect the operational progress that I outlined, underpinning our confidence in the sustainability of this progress. We ended the quarter with a CET1 capital ratio of 14.1%. This included circa 40 basis points of capital generation from profits. Given the consistency of our capital generation, a CET1 ratio of 14.1% and disciplined execution of our capital priorities, we have announced a 500 million share buyback. This brings forward our full year distribution plans rather than increasing total distributions for the year. The CET1 ratio pro forma for this buyback is 13.9%. RWA's increased 4.3 billion quarter and quarter driven largely by FX and the acquisition of the GM portfolio. Excluding FX, Investment bank RWAs remain broadly stable and accounted for 56% of the group RWAs. As usual, a word on our overall liquidity on funding on slide 28. We have strong and diverse funding, including a 74% LDR and an NSFR of 135%, and we are highly liquid across currencies with an LCR of 175%. These measures reflect purposeful and prudent management of our balance sheet, delivering resilience and capacity to support customers in a range of economic environments. TNAV per share increased 8 pence in the quarter and 41 pence year-on-year to 392 pence. Attributable profit added 10 pence per share during Q3, partially offset by dividends paid in the quarter and movements in the cash flow hedge reserve. The cash flow hedge reserve is expected to unwind by the end of 2026, adding to TNAV for share as it has in recent quarters. The more significant effects of earnings growth and buybacks give us confidence that TNAV will continue to grow consistently as it has done for the last nine consecutive quarters. So to summarise, we are pleased with the group's strong performance in Q3. This positions us well to deliver on all our 2025 guidance, and 2026 targets and provides a strong foundation to build from as we look to update the market on the second leg of our transformation journey. Over to you, Venkat, for concluding remarks.