Barclays PLC

Welcome to Barclays Q1 2026 Results Analyst and Investor Conference Call. I will now hand over to CF Venkatar Krishnan, Group Chief Executive, before I hand over to Anna Cross, Group Finance Director.

Good morning, everyone. Thank you for joining Barclays' first quarter 2026 results call. In February, I shared our vision for 2028 and beyond, and this was to deliver a better run, more strongly performing, and higher returning Barclays. And this represented an intensification of the strategy which we put in place in 2024. The first quarter results demonstrate the benefits of the structural improvements that we have been making in the last two years. These improvements allowed us to capture opportunities within each of our five divisions and particularly in the investment bank. The diversification of our income, the strength of our client relationships, the ongoing delivery of operational efficiency all underpin my confidence in achieving each of our 2026 and 2028 targets. We have delivered a group ROTE of 13.5% in the quarter. This demonstrates resilience through a period of elevated volatility and incorporates one-off impairments and charges. We grew the top line by 6% to 8.2 billion pounds, supported by NII growth and strong activity across the investment bank. We improved the cost-income ratio to 56%. RWAs in the investment bank increased modestly versus the fourth quarter to facilitate cyclical activity, with income surpassing £4 billion for the first time. Consistent capital generation and a 14.1% CET1 ratio support our plan to return at least £15 billion to shareholders by 2028, including today's £500 million buyback announcement. While the external environment has changed, we remain true to our purpose, which is to work together with our clients for a better financial future. We remain committed to deploying lending and risk-weighted assets in our UK businesses. We do not currently see any credit weakness in the UK or in our US consumer business, nor in corporate lending. UK household and corporate balance sheets remain robust and clients are behaving rationally. And payment rates across customer cohorts in our U.S. consumer bank remain stable. However, as you would expect, we are vigilant about the inflationary impact of rising energy prices and the consequent potential decline in consumption and growth. This quarter, we have provided additional disclosures on our exposure to private credit and non-bank financial institutions. This is on slides 45 and 46 in the appendix. I am disappointed to recognize a £228 million single-name charge in the first quarter. This was in our securitized products business and relates to a well-publicized sophisticated fraud. This fraud, as with the one in tricolor, indicates to us the importance of strong financial controls at borrowers and the difficulty ex ante of identifying fraud. As such, we are constraining lending to certain structured finance counterparties who operate more vulnerable business models and cannot convince us of the quality and independence of their financial controls. These entities neither represent a material exposure nor a material source of foregone income, but their risk far outweighs any reward. Separately, In view of increased macroeconomic and business uncertainties, we are reducing our exposure to more highly leveraged, non-investment-grade corporates, which we believe could be vulnerable to a weakening economy. All divisions generated double-digit returns, including in ROTE around or above 20% in our UK businesses, and the US Consumer Bank and the Investment Bank delivered 18.8% and 15% ROTE, respectively. We are achieving stronger structural returns by delivering operational improvements and better customer service. In the first quarter, we achieved approximately £150 million of gross efficiency savings towards the £2 billion target over three years. This quarter, we have enabled all corporate banking clients on iPortal, which is our single management platform, and this replaces five previously separate platforms. And in the second quarter, we will launch Premier Wealth Management in Barclays UK app to provide human-led, digitally-enabled planning and advice and support fee growth beyond 2028. The momentum of our progress underpins my confidence in delivering all our financial targets, including an ROTE of greater than 12% in 2026 and more than 14% in 2028. Anna, over to you now to take us through the first quarter financials in more detail.

Thank you, Venkat, and good morning, everyone. Slide four summarizes the financial highlights for the quarter. Before going into the detail, I would remind you that the weaker US dollar versus Q1 25 reduced our reported income, costs, and impairments. Return on tangible equity of 13.5% was lower year on year, with stronger absolute earnings offset by 8% growth in tangible equity. Profit before impairment increased 8% as we grew income and delivered positive operating jaws. This was offset by higher impairment charges, with profit before tax up 3%. Earnings per share increased by 8% to 14.1 pence, supported by share count reduction. Operational momentum continues and we remain focused on execution. Income in Q1 increased 6% year-on-year, $8.2 billion. Stable income streams grew by 7%, reflecting 4% growth in the retail and corporate businesses and a 23% increase in financing within markets. Overall investment bank income was up 4%. This top-line momentum increases our confidence in delivering the circa $31 billion group income target in 2026. Group NII, excluding IB and head office, increased for the eighth consecutive quarter and by 12% year-on-year, reflecting three factors. First, stable deposits across the group supported structural hedge growth at yields above our planning assumption. Second, continued lending momentum. And third, improvements in U.S. consumer banks' funding, mix, and pricing. We therefore remain confident in delivering full-year guidance. for Group NII of more than £13.5 billion, including £8.1 to £8.3 billion in Barclays UK. As a reminder, the hedge is designed to reduce income volatility and manage interest rate risk. We have now locked in £18.3 billion of gross structural hedge income across 26 to 28, up from £16.8 billion at the end of 25. The hedge notional increased by $6 billion versus Q4, reflecting stability and growth in our deposit franchises and equity. This improves long-term NII stability, but does not materially increase 26 income, given that unhedged balances were previously earning base rates. We invested new and maturing hedge assets at around 3.9% in the quarter. This is above the circa 3.5% planning assumption that underpins half of the group income growth that we expect by 28. Whilst persistently higher swap rates would support additional income growth, any benefit would build progressively, noting that 95% of 26 hedge income is already locked in. Moving on to cost. The group cost-to-income ratio improved to 56% from 57% a year earlier. We delivered circa 150 million of gross efficiency savings on track for the circa 2 billion target over three years. Investment costs increased by around 100 million year-on-year, consistent with our plan. Q1 costs also included a 105 million motor finance provision, This is booked in head office given that we exited this business in 2019. Our $430 million cumulative provision is based on a single scenario aligned to the SCA's revised industry-wide redress scheme. This assumes a greater number of eligible cases versus the previous probability-weighted estimate and a higher cost per claim following increases to the compensatory interest rate. Inclusive of the motor finance provision, we remain well positioned to deliver the high 50s cost-to-income ratio target in 26. Turning to impairment. The Q1 group impairment charge of $823 million equated to a low loss rate of 74 basis points. This includes the $228 million well-publicized single-name charge in the investment bank which Bencat discussed. As a result, we now expect a group loan loss rate around the top of the 50 to 60 basis point through the cycle guidance in 2026. UK and US consumer and corporate balance sheets are robust, with low and stable delinquencies and rational borrower behaviour. And the overwhelming majority of the investment bank wholesale clients are performing as we expected. As an accounting matter, IFRS 9 models are pro-cyclical and sensitive to changes in consensus economic expectations. In the quarter, we have made three post-model adjustments that amount to a net £20 million increase for the group. First, we released a post-model adjustment for US tariff uncertainty from Q125 in the Investment Bank and US Consumer Bank. Second, we made a post-model adjustment in the Investment Bank to recognise downside bias due to uncertainty. Third, we adjusted UK and US Consumer Impairment Model inputs to reflect a more prudent view of consensus economic forecasts including 5.3% UK unemployment versus 5.2% previously. The Barclays UK loan loss rate was nevertheless in line with the circa 30 bits guidance we gave in Q4. Focusing on the US Consumer Bank, where consumer behaviour remains resilient, as we show on slide 42 in the appendix. 30-day and 90-day delinquencies increase modestly to 3.1% and 1.7% respectively, mainly due to the seasoning of the general motors portfolio, which will normalise in future quarters. Looking ahead, we expect the American Airlines portfolio exit in Q2 to increase 30-day and 90-day delinquency rates by circa 30 bits and 20 bits respectively. The Q1 loan loss rate fell to 491 basis points, reflecting better than expected credit quality of the GM portfolio and the net PMA release. As a reminder, we expect a circa 550 basis point loan loss rate in 26. Turning now to UK lending. UK lending grew 5% year-on-year, consistent with a 25 exit rate and a more than 5% CAGR we expect from 2025 to 2028. We remain on track to deploy circa $30 billion of UK business growth RWA by the end of 2026, having deployed $22 billion since 2024. We grew mortgage lending by $1.7 billion. Completions moderated versus last year's elevated level in the run-up to stamp duty changes in April 25. Application volumes increased materially as customers sought to lock in rates in a volatile environment facilitated by broker platform improvements and Kensington. We also added 364,000 new card customers in the quarter and grew balances 8% year-on-year. Core business banking grew for a fifth consecutive quarter, while UK corporate loans grew for a sixth consecutive quarter and by 15% year-on-year, split evenly between new and existing clients. Turning to Barclays UK in more detail. You can see financial highlights on slide 13, but I will talk to slide 14. ROTI increased year-on-year to 19.7%. NII of 2 billion increased 9% year-on-year and fell 1% quarter-on-quarter as guided. This mainly reflected two fewer days in Q1 versus Q4 with NIM stable. Lower product margins reflect deposit mix and pricing and part of the circa 100 million headwind that we guided to at full year. We now expect NII to increase quarter-on-quarter from Q2, with year-on-year growth in every quarter. The Q2 product margin impact will be broadly similar to Q1, and I expect additional structural hedge income following the increase in notional that I referenced earlier. Non-NII increased to $272 million, with the Q2 level expected to be around $250 million following a securitization in April. Costs of $1.2 billion increased 5% year-on-year due to structural cost actions, which we expect to be weighted to half one in contrast to last year. We expect half two costs to be below half one. supporting lower costs in 26 versus 25 and a low 50s cost-to-income ratio. Moving on to the Barclays UK balance sheet. Deposit balances were seasonally lower versus Q4. Wage growth supported stable current account balances despite seasonality. We took share in ISAs, pricing selectively in a competitive market, including to attract and deepen premier customer relationships. Lending grew for the seventh consecutive quarter and by 4% year-on-year. Moving to the UK corporate bank. Q1 ratio increased to 19.9%. Income grew by 10% and cost fell 2%, and the cost-income ratio improved to 48%. NII increased 15%, driven by volume growth and additional structural hedge income, with a fall versus Q4 mainly due to day count. Strong lending momentum continued and supported deposit growth of 3% year-on-year and a loan-to-deposit ratio of 35%, up 4% points versus Q1-25. As Venkat referenced, All UK corporate clients are now enabled on iPortal with full migration expected during 2026. This will improve efficiency over time and broaden product usage, supporting fee growth beyond 28. Turning to private bank and wealth management. Pew on Roti was 25.5%. Income was broadly stable, while costs increased 9% year-on-year as we accelerated investment, which we expect to build quarter-on-quarter through 26. We added 1.5 billion of net new AUM in the quarter. Despite adverse market valuation effects in Q1, AUM increased by 8% year-on-year and client assets and liabilities increased. grew 5%. We expect new capabilities and products such as the premier wealth management service launch in Q2 to drive growth over time. Turning now to the investment bank. Our strategy in this division is to drive consistent returns through RWA discipline, income stability and operating leverage. That remains unchanged. We have now delivered eight consecutive quarters of year-on-year income growth, RWA productivity improvements, and positive operating jaws. Targeted investments have improved the diversification of our income, which I will return to, and we are increasing the durability of returns by growing more stable income streams in financing and international corporate banks. These structural improvements enabled the IB to participate in stronger seasonal and cyclical activity in Q1. We grew RWAs by 3% versus Q4 to support this activity. We did this in a disciplined way, with income for average RWAs increasing to 8% and no increase in risk appetite, as we show on slide 38 in the appendix. Investment bank ratio was 15% in Q1. Lower returns versus last year reflect the $228 million single name impairment charge and two fair value moves in the corporate lending line, $105 million gain on leverage finance last Q1 versus $40 million of marks this Q1. Operational performance was as we would have expected given the environment. with income growing by 4% year-on-year. We performed well in areas of historic strength, with investments supporting growth and diversification as we planned. This includes growth in advisory and ECM, with around three-quarters of fees in the quarter earned in the US, and equities, which account for 28% of income versus 22% in 2023. In the International Corporate Bank, US dollar deposits grew by 21% year-on-year, and we continue to expect the ICB to become a larger part of the IB by 28, reflecting ongoing investment in transaction banking. Using the US dollar figures, markets income was up 13% year-on-year. Equities and FIC grew 23%, and 8% respectively. We saw particular strength in equity derivatives and prime, alongside strong credit and securitized product trading in FIC. Intermediation activity grew 6% year-on-year, while financing income grew 31% and for the seventh consecutive quarter. This reflected growth in client balances, particularly in prime, including strong growth in Asia. Investment banking fees increased 25%. The strong pipeline we discussed at the full year and improved deal economics supported 89% advisory fee growth. We took leading positions in three of the four largest global deals in Q1, and the M&A pipeline remains robust, with a share of announced deal volumes due to complete in 26, increasing year on year. ECM fees increased 38%, and we have a solid IPO pipeline for the rest of the year. Turning to the US Consumer Bank. Operational performance is on track, and we expect further progress following portfolio changes in Q2. We grew receivables by 9% year-on-year. Half of this was organic, with a remainder from the addition of GMs. rebalancing the mix of assets towards retail. While the accounting changes I outlined at the full year explain most of the increase in NIM versus Q4, pricing, asset mix and funding continue to drive improvements. We are pleased with the ongoing pace of retail deposit gathering where balances increased 8% quarter on quarter and 52% since end 23. The improvement in ROCE to 18.8% reflected this operational progress. Returns also benefited from a full quarter of income from the AA portfolio without the associated marketing costs. In US dollar terms, income grew 21% and costs were broadly flat. We continue to expect a mid-40s cost-to-income ratio in 26. Given portfolio changes in Q2, let me help with some modelling points. The exit of AA, which we completed on 24th April, will increase NIN to more than 13% for FY26, approaching 14% in half two. This will more than offset an expected increase in the loan loss rate to circa 550 basis points for 26th as guided last quarter. Temporal income in Q1 provides a good starting point for the rest of the year, with a loss of AA income largely offset by the addition of best egg and some business growth. Income in Q2 will include a circa $300 million gain on sale, less than prior guidance of circa $400 million gain, given lower balances at the point of sale. In addition, we expect incremental monthly costs of circa $45 million from Best Egg, which we expect to complete in early May. All in, we continue to expect a circa 12% rate for 26, excluding the AA gain on sale. We ended the quarter with a robust CET1 ratio of 14.1%, consistent with our intention to operate around the top of our 13% to 14% CET1 range. Strong organic capital generation of 53 basis points was in line with expectations, supporting distributions and balance sheet flexibility to invest in market opportunities. The £500 million share buyback for Q1 and £500 million accrual towards this year's £2 billion dividend are both as planned. RWA's increased £8 billion quarter-on-quarter, including £2.7 billion of growth in the three UK businesses. Excluding FX, investment bank RWA's increased £3.3 billion to support the stronger activity that I referenced earlier. As usual, a word on our overall liquidity and funding on slide 29. We have strong and diverse funding, including a 75% LDR and an NSFR of 135%, and we are highly liquid across currencies with an LCR of 165%. These measures reflect purposeful and prudent management of our balance sheets delivering resilience, thus ensuring we have capacity to support customers in a range of economic environments. TNAV per share decreased 4 pence in the quarter, but increased 33 pence year-on-year to 405 pence. Attributable profit added 14 pence per share in Q1. This was partially offset by the six pence final dividend paid on 31 March versus April in prior years. Higher interest rates reduce the cash flow hedge reserve, driving an 11 pence reduction in TNA versus Q4. This is a timing matter and will unwind positively through to 2028 or if interest rates revert to lower levels. TNAF for share growth from Q2 will be overwhelmingly driven by earnings, assuming broadly stable long-term interest rates from here. To summarise, operational progress since 23 provides a strong foundation to deliver all group targets in 26 and 28 in a range of environments. Over to you, Venkat, for concluding remarks.