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.

The momentum of operational improvements which we have delivered during the first two years of our plan have continued during the first quarter of 2026. While the environment has become more uncertain, the strength of our businesses and the diversification that they provide allows us to navigate volatility while delivering our plan and targets. I'll now open to questions and answers. As ever, please limit yourself to two questions per person so we can get around as many of you as possible. Please also introduce yourself as you ask your questions.

If you wish to ask a question, please press star followed by 1 on your telephone keypad. If you change your mind and wish to remove your question, please press star followed by 2. The first question goes to Alvaro Serrano of Morgan Stanley. Alvaro, please go ahead.

Good morning. Thanks for taking my questions. Maybe this one's starting for you on you made the comments that you've reduced the risk or pulled back. I can't remember exact words you used on slightly higher leverage and some structured products. Can you give us a bit more color of the concrete measures you've taken and maybe speak to slide 45? And thanks very much for that disclosure. in which areas you've pulled back a bit, and should we think about any impact on revenues from that sort of reduced risk appetite? And the second question is on the UK or broadly NII outlook. Obviously, rates are high now, and you've locked in an extra, in the outer years, extra sort of hedge income, as you've disclosed and spoken to. When you think about the increment, the high yields versus the slowdown in loan growth and volume growth, do you think there's upside to NI if you were to mark the market sort of the current curves? Maybe you're more thinking on flexing your NI guidance.

Thank you. Yeah. Hey, Varun. Good morning. So let me start with your first question, and I'll hand it over to – Anna, for the second question. So we said in the statement that the impact is not material, either today or a foregone income in the future. And where it would be on slide 45 is basically in that third box which says other commercial and consumer. That's where you're likely to see the $17 billion. That's where you're likely to see lending to business models that are basically themselves asset-backed lenders and who are more vulnerable business models and where we may not find the strength of financial controls we'd like to see them demonstrate. That's really the place where in the structured financing exposure we would expect to see some limitations. But as I said in the prepared remarks, it's – Not material now is a source of income, no foregone income in the future. Anna?

Thank you. Thanks, Alvaro, for the question. Given the experience that we've had in Q1, we are more confident now on NII than we were at the full year, because the actual experience that we've had in Q1 is either positive or neutral. And I'm very comfortable with consensus for 26, both for the group and for Barclays UK. As I look a little further out into 27 and 28, that consensus looks light. We said the same at full year. It looks very light in 28. So what we've observed in Q1 is actually a good deposit performance. So current accounts in BUK have been broadly flat. Ordinarily, we would see a seasonal decline in Q1. We've had a good ISA season where we grew faster than the market. You can see good lending growth across the piece, 5% pretty much on the target that we've given you. Our UNCB NIM is a little higher than we guided to at 12.8. And of course, as I said, we've topped up the hedge by 6 billion and we've rolled it in the quarter at around 3.9%. Now this change in rates is really about the future years. We are still basing the guidance that we're giving you on 3.5%. To the extent that we see rates remaining higher, obviously that will build through time and you'll see the impact a little further out. And I just remind you that our hedge income for 2026 is at 95% locked in already. So our confidence is really coming from the real factors that we see in both deposits and in lending. To your point about slowdown in lending, we have not seen a slowdown in lending. We see it growing strongly both in BUK across the product, also in corporate, and for the first time we're seeing some really good signs of growth within business banking. That's driven by our own actions. We're not reliant on the market. So at this point, I wouldn't say that we would adjust our NII guidance for any change in lending. It's more the experience that we've had in Q1 just gives us greater confidence to deliver those consensus numbers. But thank you for the question.

Perhaps we can go to the next question, please. The next question goes to Pearlie Mong of Bank of America. Pearlie, please go ahead. Hello. Good morning. A couple of more questions on NII, please.

So the product margin side of things, can I just dig a little bit deeper in that? So I think previously you said that the mortgage compression from the COVID era mortgages rolling off would be about $100 million. How far are we in that? Because... Presumably, as you said, some of the volumes that might be rolling off in Q2 probably got pulled forward in Q1. And then with swap rates volatility, can you comment on what you're seeing in terms of front-end margins as well? And then on the deposit side, I suppose the competition has been maybe a little bit higher than partly reflecting seasonality as well. So when you said that you expect product margin to be similar next quarter, Is that more mortgage or is it more deposit? If you could just help us understand that a little bit better. And then on the USCB as well, you commented that margins were quite high this quarter. There's a big improvement. Obviously, there will be some mechanical improvements further from the American Airlines exit, but how much more sort of underlying improvement can we expect from pricing and from deposit mix, et cetera? Thank you.

Okay, thank you, Pearlie. I will take both of those. So our product margin impacts in Q1 are as we guided, and they're in line with our expectations. And I'm going to merge your two NII questions, if I may, Pearlie, because actually that product dilution is coming from both mortgages and from deposits. In mortgages, we are seeing the impact that we called out as a full year, and that's the maturation of the COVID-era loans coming through as expected. Somewhat offsetting that, we're seeing better performance from more recent vintages where we are seeing better retention. So that's a slight positive impact in mortgages. And we are seeing the impact of deposit margin compression coming through in there. I expect it to be broadly similar in Q2, Pearlie, with all of those factors continuing. And that's simply because of the timing of the maturity of mortgages. But also, very importantly, remember, deposit competition in the UK tends to be concentrated in Q1 and Q2 because of the ISA season. Thereafter, we would expect that product margin compression to ease off a little bit. What's different from when I spoke to you at the full year is we now do expect NII growth in Q2. We expected it to be broadly flat previously. Now we expect growth into Q2 and then to continue growing quarterly thereafter and to grow year on year and every single quarter of the year. When I think about what's happening in the mortgage market, we have seen a pull forward of applications. but they have not yet completed. So March was a very, very large month for applications. And I think that just speaks to the volatility in the rate environment and customers seeking to lock in. To give you an idea, for our June maturity, we've seen roughly double the number of customers lock in by this stage than we would ordinarily do. But that hasn't completed yet. It's going to complete through Q2 and Q3. You know, margins remain fairly robust. Clearly, rates are moving around, but so are swaps, and they tend to move in alignment with one another. So that's what's happening in terms of UK NII. In terms of USCB, look, the net interest income there is a little higher than we anticipated, but not significantly so, and I wouldn't call out anything in particular. The repricing impact has worked their way through now, but we will continue to see ongoing beneficial both NIM impact and net risk adjusted margin impact from continuing to rebalance the book from just travel and entertainment towards a bit more retail. So you're obviously going to see a step change over the next quarter, but that will be an ongoing impact And I just call out here also our progress in deposits. Really pleased with that. Our retail deposits are now 76% of our overall funding. That's higher than the target that we gave you of 75 by the end of 26. And that has been disproportionately driven by some of the partnerships. So you're going to continue to see margin accretion, but obviously... It will be more pronounced over the next quarter or so. Thank you for the question.

Can we go to the next question, please? The next question goes to Amit Birwal of Mediobanker. Amit, please, go ahead.

Hi, thank you. So, yeah, two questions for me. One was just, I can't be UK, but just on the cost piece. So, I appreciate there's a slightly different phasing of investment this quarter versus past year. Do you mind just giving a bit more colour on how different was the investment versus last year, just so we can see the cleaner piece there. And then secondly, just on the USCB net receivables, I saw after several quarters of increase, there was a slight reduction. I don't know if that was related to the AA portfolio, but But basically, I'm just curious if U.S. players are being a bit more aggressive, you know, anticipating reductions in capital demand. And so whether that's a reason why net receivables came down or if actually there is a little bit of a reduction in that market. Thank you.

Okay, I will take both of those. So in BUK, I mean, I can see as I look at operating costs, there's a slight miss to consensus. I think that's only timing. And particularly when I look at where that is, it's in BUK. So BUK's got a slightly different profile of investment and actually efficiency delivery this year from previous years. And I'm not going to give you numbers, but let me help you think about it. probably the structural cost actions will be a little more forward-phased than last year, and that's simply because some of the things that we're doing around Tesco as well as the underlying business, whereas the opposite is true of efficiencies. You're going to see them build through the year. So I still believe that BUK costs are going to be down in absolute terms year-on-year, And clearly, given that they've been up in the first quarter, you should be expecting them to fall in absolute terms towards the second half. And for the cost income ratio to be in the low 50s. So that's exactly as we expected. And it's just some of the movements around timing and other investments. On USCB, the change in card levels, I mean, typically we see a seasonal change. I don't believe it's any more than that. And as I look at our performance in terms of purchases and, you know, the other factors that we would expect to see as lead indicators, they are no different from the broader peer set. But thank you for the question. Okay. Thank you. Thank you. Can we go to the next question for you?

The next question goes to Jonathan Pierce of Jefferies. Jonathan, please go ahead.

Hello, good morning. So I was going to ask you about share awards, but I nearly fell off my chair when you made a comment on 2028. Ventures income, so I'll actually go with that if it's okay. Just to clarify, 2028, you're talking about consensus being very light at the group level, just checking I thought that properly. And is that comment made in the context of where the yield curve is today, or are you saying that consensus was very likely even ahead of the move in the yield curve? And I don't know whether you can give us a bit of colour as to where you think we're wrong at a divisional level. Tying into that, just a quick question on the hedge. Are you taking advantage of the fact that the yield curve is markedly higher today? I mean, a one-year forward starting seven-year is offering you 4.4% today. I'm just wondering if you're pre-hedging maybe a bit more of your future maturities than you might have done in the past.

Thanks. Okay, Jonathan, I will take both of those. So I made the same comments at the full year. So it doesn't relate to the movement in the yield curve. And the guidance that we are giving you is still based on a 3.5% reinvestment rate. We have not changed that number. And it's the group number that I'm referring to as I look at that. So this is no change from what we've said before. If I can point you to where I think the difference is, I think it arises in two areas. The first is UK corporate bank. And, you know, we see considerable momentum in UK corporate bank. We've seen it for consistent quarters now. It has grown its lending in the first quarter by 15% and it continues to make great progress even before we land the capabilities that we are due to land through this year in high quarters. So that's the first thing I would call out. I think we don't discuss it a great deal on these calls. The second thing would be US Consumer Bank. Where you've really got Three things starting to come together here. You've got card balances which are up 10% year on year in the first quarter. We will, in the next few days, complete the purchase of a top five unsecured direct-to-consumer loans business in the US. And that gives us the opportunity to take that capability directly to our customers and to our corporate clients. And then the third piece is our deposits, which, as I said, are now at 76%. And a meaningful part of that growth has come from our partnership with AARP. So we are really learning in this business about how we can take the full suite of products to our partner base, and that's what gives us the confidence in that business's ability to grow. Venkat, anything you would add on USC in particular?

Yeah, so, I mean, you asked about NII, Jonathan, and Anna, you know, giving you the various dimensions of it. But in the USCB, in addition, what you see is continued improvement in digitization, continued improvement in cost, leading to the higher ROTEs that we've shown this quarter, 18 plus percent. And what I would say is broaden the statement that Anna has made across every part of the business. You're seeing performance in the way we said we would demonstrate it two and a half years ago and reiterated three months ago in terms of top line in terms of operating efficiency, in terms of jobs, in terms of deposit growth, in terms of lending growth in the corporate bank, in terms of the returns improvement in the U.S. consumer bank, returns improvement in the investment bank, et cetera, et cetera. I could go on. And I think that's the picture we would like to emphasize.

Okay. Jonathan, let me come back to your second question, which was on hedge yield. So the simple answer is no. We roll the hedge systematically. We roll it mechanistically. And it is not our opportunity to speculate or determine what rates might be. We roll it irrespective of that environment. The thing that we are very focused on, however, is deposit behavior. So the increase in notional reflects observed deposit behavior over a number of quarters. It doesn't relate to just the quarter past or expectations forward. We actually observe what's going on in the hedge and then we will choose to extend it or indeed contract it. So that's all that's going on there. We're not responding to a change in the yield curve.

Okay.

Thank you. Can I go to the next question, please? The next question goes to Guy Sebbings of B&P Paribas. Guy, please go ahead.

Hi, good morning. To start there, should I come back to the hedge just to follow up on Jonathan's question? It was a meaningful uptick, I guess, in Q1 in the notional. Just trying to understand where that's landing because it doesn't look like there's a big move in deposits in the UK. So is that sort of landing outside of the UK, the IB perhaps? And just to be, I guess, a reflection of the stickiness, I suppose, of those deposits and how you see them going forward rather than, as you say, taking advantage of the curve in any way. And also just to clarify, you In terms of pre-hedging the hedge, you say you don't do any pre-hedging the hedge when you talk about what's locked in from here. So that was really the first question. And then the second one was just around ECLs. Reasonably flat in aggregate on the performing loan book. I just want to understand the move in the management adjustment, which came down from 369 to 265 in the course. It's quite a big move. I think that largely just relates to the GM book, which now filters directly into the models rather than needing an overlay. So I'm not sure if that explains the entire move, but any color there would be helpful. Thank you.

Yeah, thank you, Guy. I will take both of those. So, look, the movement in the hedge upwards over time in notional is going to reflect our, as I say, a long-term view of deposits. So, you know, it's quite difficult for you to tie quarter-on-quarter movements in deposits to sort of changes in the hedge, because what we're trying to identify here is rate and sensitive balances, and obviously we want to observe that but several, several quarters before we make a change. So you're going to see it outside of the UK as well as inside. And obviously over time, as the equity in the firm continues to rise, you're going to see us hedging more of the equity position as well. So I wouldn't call anything in particular out. If we do any pre-hedging, it's very limited and it's under very strict risk limits. And those have not changed over time and certainly would not explain anything near the portion that I've called out today. So that $6 billion is the observation of deposits. In terms of your second question about post-model adjustments, I appreciate this is quite difficult to tell because we only give you the full disclosure at half year, but Just for the rest of you, what Guy is referring to is slide 40, and he's basically calling out the fact that the management adjustments have dropped from Q4 into Q1. And just to remind you, Guy, we do these post-management adjustments for two reasons. The first is where we're doing some work on the models, and to anticipate what that model work will show, we very often take a PMA. And then the other reason that we take a PMA is when we are faced with a degree of economic uncertainty and we feel like consensus may not be effective. The point that you're talking about here is the former. So actually what's happened is prior to this quarter, the GM, so the General Motors impairment was not modeled. We were essentially using our expectation and our existing portfolios to anticipate what that was going to be, and we put it in as a post-model adjustment. Now what's happened is we've updated the model, and so General Motors is a modelled number, so you're not going to see any change in the total number, it just jumps from being in the PMA to being in the modelled number. The real changes in PMAs that we've done, and the ones we've spoken to you about, really speak to economic uncertainty and relate to US cards, UK cards and the IB. Okay.

That's clear. Thank you.

Thank you.

Perhaps we can go to the next question, please. The next question goes to Andrew Coombs of Citigroup. Andrew, please go ahead.

If I could just pivot the conversation to capital, I'm just intrigued on two things. One, there's been a lot of press coverage about your comments around the leverage ratio, proposal to essentially exclude unencumbered gilts. Perhaps you could just touch more broadly on where you see the leverage ratio as a binding constraint now. Which product, which divisions do you believe the leverage ratio is a binding constraint for? And then secondly, I'll talk about bar the rain gain. Overall, a 5% release expected for the Cat 1 and 2 banks on the change in the GCEV methodology. But arguably more important from a competitive standpoint is the output floor has been dropped. And when I look at the risk rate, I think under ERBA, it's 75% on retail low. So can you just talk about what you think Barzoenga means to the competitive dynamics for the US consumer division and the investment bank? Thank you.

Okay, Andy, why don't I start on leverage and then I will hand to Venkat on the second part. So, yes, we, you know, like the sort of broader consultation might suggest, there is an ongoing discussion in the UK about the leverage ratio and really leverage being a backstop, and we would support that. You're noting that we have published a piece of work that talks about the opportunity in the UK really for – the treatment of unencumbered gilts, and we do think that that's important. As we make that statement, it's more about the opportunity for UK PLC and the reduction in costs that that would have for the government, and we called out around 2.5 billion per annum on an ongoing basis. We are not leverage constrained. Clearly, we have... considerable leverage usage within our financing business, within the investment bank. That's why we are a significant issuer of AT1s in the market. And as we do so, we're clearly mindful of the relative cost between those AT1s and the kind of margin that we get in the financing business. So the two things are somewhat unconnected. One is more of an observation on UK PRC. Benka?

Yeah. So, Andrew, on the capital side, we clearly are watching very closely what's happening in the U.S., not just in terms of capital ratios proposed under the Basel Endgame, but the way supervision is itself changing and stress testing is changing. You've got to look at all three together. And we would advocate very strongly for the UK numbers to be relatively consistent and for the UK approaches also to adopt a greater transparency in the way in which add-ons are determined both for banks and for investors. The particular things on the investment bank and credit cards, let me begin with credit cards. So in the credit card space, you're right that if If there are no changes, then the U.K. numbers will, at a parent level for us, holding company level, add on more capital per unit risk than a U.S. bank would take. Now, what we're doing to adjust our business is obviously running it more efficiently and also diversifying it. And the purchase of Best Egg and the direct-to-consumer loan business should be seen as a part of diversifying our cards business into other places which are less penalized in terms of capital. And then on the investment bank, the point I would make is we have already for some time been facing U.S. banks which have been putting more capital and more balance sheets. And, you know, at least the way we have done the analysis, and you should probably replicate it, is if you look at returns per risk-related assets, a form of capital efficiency, I think we've done pretty well. And as you know, we've, over the number of years, made structural improvements in the way the investment bank is performing. We've had eight successive quarters of strength in year-on-year income growth, on positive cost jobs, on income over RWA, as I said. And we beat consensus for eight consecutive quarters in the IB. This is all deeply structural. And what we're trying to do with these structural changes, with the improved increase in Financing is a portion of our total revenue, et cetera. It's finding our own ways to be competitive and to be efficient. Now, on top of that, do I want to row against the current of capital disparity between the U.K. and the U.S.? I wouldn't, but, you know, we've made our views known, but we will run our, you know, we will continue to operate the bank in the way we have and show the progress we've done quarter over quarter.

Thank you. Thank you, Venkat. Could we go to the next question, please?

The next question goes to Jason Napier of UBS. Jason, please go ahead.

Good morning. Thank you for taking my questions. And I think I can echo, Venkat, what you were saying about the sort of underlying performance of the business. If you take out the one-offs, it looks like PVTs are 15% year on year. But, of course, a lot of the conversations are about one-offs and PVTs. and those sorts of matters. So if I could ask two. One, quite a lot of coverage in the media around potential SRT governance inquiries. If you could talk potentially about that or confirm that there's no change to the capital outlook for the group as a consequence of what may or may not emerge from that. And then secondly, just to follow up, please, on Ben Cap, your last answer. around relative capital intensity of the businesses, you know, in the U.S. in particular. Could you just give us a sense as to which businesses you think are most impacted by the relative changes that are being envisaged? And in those, just some guess as to the cadence of sort of customer, you know, churn. How quickly would we know if there was a delta in competitive intensity that actually mattered on the ground? Thanks very much.

Thank you, Jason. I'll start on SRTs and then hand to Venkat. So, on SRT, I'm not going to comment on, you know, regulatory reviews, but only to say that the regulator in the UK regularly conducts reviews both individually and thematically across the industry. We have been very transparent around our colon aid program. And you can see that in the appendix. We've given you the same slides for several quarters now. That is primarily our focus on credit management, as Venkat talked about before. And indeed, it's been in place since 2016. For those of you following along, it's slide 47. So it's a well-managed, well-embedded, well regarded with investor program that's been around for a long time. Of course, we have to notify the PRA every single time that we do an SRT transaction. So that's something that we've done. And from our perspective, the most important things that we are focused on, and I would expect the regulator to be focused on, are the risks associated with running that kind of process. And we believe they are, number one, the financing of SRTs, so we do not finance our own SRTs. Secondly, the counterparty credit risks. So remember, ours is cash collateralised, so that counterparty credit risk is minimised. And then thirdly, the risk of the market being shut. at any point in time. Now, clearly, you mitigate that by having a very long-running, long-standing, high-quality programme like ours. But we also restrict the maturities in any particular quarter, so they are less than £2 billion. So that means that we would be able to mitigate that easily, even if the market were close to us. So from our perspective, Jason, we're very comfortable with the program that we have. We believe it's very successful and provides the credit mitigation that we seek to do, and we don't envisage any changes in it. Venkat?

Yeah, just to finish off on one point. You know, all the attributes that Anna spoke about of the SRT program, they come from having an evergreen program, and an evergreen program where people know that they can expect a cadence of issue from us, the quality of issuance from us, and it helps us and it helps them. On your capital question, let me begin by saying, first of all, there's no new news to us here, right? We've been following this for a number of years. It has been clear that there is going to be disparity between the U.S. and the U.K. It comes, as I say, not just from capital levels, but from forms of stress testing, the total capital stack including regulatory add-ons. Now, so there's not going to be a sudden shift. What you're seeing is because of the way we anticipated, the way in which we've constructed our business over time. I just spoke about credit cards in the previous answer, where we've had a high-quality credit card portfolio in terms of cycle stores, and now we're diversifying it with the purchase of best-seller direct-to-consumer loans. Second, on the investment banking side, you've seen again from us an emphasis on financing, which is, as I've always said, a very good business, properly risk-managed, and has capital benefits because it's secured lending. So that's becoming a bigger part of our portfolio. We continue to emphasize intermediation. You will see that we manage our risks very well if you look at our VAR. You know, the VAR is managed, and the number of losses, which has only won this quarter, the VAR is managed at a low level. VAR, obviously, is a way in which you control risk, and that can have an impact on capital. So the way the business has been structured, it is with a view to these disparities, which are not new, right? And we will continue to, you know, work with the capital regime we have and operate subject to it in the most efficient way we can.

Thank you, Venkat. The only other thing I would add, Jason, is just our ongoing focus on the International Corporate Bank. Clearly, that's another source of relatively capital-like revenue for us in an area where we think we have real opportunities to grow. You talked about that a lot at the year end, and you can see it again in our dollar deposit growth in the quarter. But thank you for the question. Can we go to the next question, please?

The next question goes to Chris Kant of Autonomous. Chris, please, go ahead.

Good morning. Thanks for taking the questions. If I could come back to this topic around competition from US players. You've spoken to financing, and that's been an area of growth for you for a number of years now. It's obviously not just RWA-based capital relief that US peers are getting, though. They are also seeing a sort of leverage biting point dropping away in the background. And are you expecting to see more competition in that financing space as well? That would be question one, please. And the second... Small one, I think, but on corporate lending in the IB, that looked quite soft this quarter relative, even with the fair value marks adjusted for you. It looked like a soft quarter. What should we be expecting there going forward? Please noting that you're looking to the ICB as an area of growth. And I know transaction banking is doing well, but if you could comment on that once you print for corporate lending, that would be appreciated. Thank you.

Okay, Chris, why don't I start? So I'll talk about leverage and then I might hand to Venkat and then I'll pick up on corporate lending. So look, clearly financing has been an area of growth for both us and for the US banks and we've seen that over a number of quarters now. We're pleased with our performance, which is up 31% year on year in dollar terms. And you know, we don't see that the US peers have been leveraged constrained up to this point. And indeed, it's not just this quarter. If you look back over successive quarters, as Venkat has said, you know, you see increasing levels of balance sheet generally being deployed into the business. But Venkat, you might want to comment on the competitiveness of this product generally.

Yeah, look, the... First of all, as Anna said, and we've been seeing this for a number of quarters. We were just at our business for a number of quarters. Second, especially when you come to things like financing and prime, there is a competitiveness element to it, but there's also a client service and stickiness element to it. You know, our rankings have been growing consistently because of the services we provide to our clients in equity financing and in fixed income. We're a top two fixed income financier. have been for a long, long time. So it's these capabilities that we bring to bear that make us very competitive and make us attractive to clients. So I would view it on a much more holistic basis. I mean, and as Anna has said and I said earlier, over a number of quarters, you've seen the U.S. banks put in both capital and balance sheets, much more than we have. We've been very disciplined on both. minor fluctuations quarter to quarter but keeping it stable. And yet we've continued to show the results in our investment bank that I spoke about in terms of continuous quarters of improvement. And it's coming from building in the foundations to generate repeatable improved performance. Anna?

Yeah, thank you Venkat. Chris, the corporate lending line I appreciate is very difficult to forecast because what you've got there is an underlying level of corporate lending. That's not really changing. We're clearly cycling through this process of reviewing the book. We're sort of a little more than two-thirds of the way through that now. So that number is fairly consistent at around 50-ish million a quarter. So nothing really happening there. you've obviously got this swing in lead thin marks year on year. It was up more than 100 last year. It's down 40 this year. So you've got nearly 150 basis points of roti impact on the investment bank just in that line alone from those lead thin marks. And then the other two things that flow through there are cost of hedging and cost of SRT. Nothing really notable to call out there. You should imagine in the current environment, we do a little bit more hedging, but there's nothing particular I would call out for you, Chris. Okay. Thank you.

Can we go to the next question, please? The next question goes to Nicholas Payen of Kepler Shavu. Nicholas, please go ahead.

Yes, good morning. Thanks for taking my question. Just one, actually. I just wanted to go back to discuss your cost-office guidance, which is now at the top of the 50 to 60 basis point range. I just wanted to know what are your assumptions regarding especially the Middle East situation? Does your guidance capture any improvement in the geopolitical situation or status quo or maybe at the other end of the spectrum, maybe a potential increase in inflation because of the situation? Yeah, anything you can give us regarding this new guidance. Thank you.

Okay. Thank you, Nicolas. I mean, we have called out that we expect to be around the top end of our 50 to 60 basis point range That's purely because of the single name that we took in the first quarter. And we do not see any other signs of credit deterioration in the UK, in the US, in corporate or in consumer. And so from our perspective at the moment, if you do the math, then you'll see that we are broadly in the midpoint of the range for the remaining quarters of this year. I can see that consensus is already at the position that we've guided to today, so I think that's probably what the market was anticipating. At this point, we don't see any significant impact from the situation in the Middle East, other than the revenue impact, which have been broadly positive to date, so the rate impact and obviously our ability to capture the cyclical opportunity in the IB. In terms of credit, we don't see any deterioration at this point. However, we have taken three, I would say, relatively modest adjustments in our IFRS 9 modeling as we look at future potential risks. So the first of those relates to UK and US cards. where we have been slightly more conservative with the unemployment rates that we have used predominantly. And we're just recognizing those that clearly consensus is moving on over time. And those two particular books are highly, highly sensitive to unemployment and the rate of change in unemployment. The second thing that we've done is, you know, to Venkat's prepared remarks, We're a little bit more mindful of some of the investment bank exposures. And on that basis, we have put a little bit of downside bias into the investment bank calculation, essentially weighting it more heavily to the downside one scenario. That was very consistent with what we've done in previous periods where we faced uncertainty. So we're not trying to make a prediction here. We're really just recognising some of the uncertainty around us. Now, clearly, if the situation were to persist and we started to see real economic effects coming through in terms of higher inflation, then that may have some impact on credit. But there's a few things I would say, hopefully to reassure. The first would be We clearly had recent experience of this in 2022, where we saw a sharp inflationary environment and we saw a sharp increase in rates. And we saw very, very resilient consumer and client behavior. Corporate balance sheets remain strong. You know, consumers remain in a very robust position. And whilst we've added lending since then, there's been no meaningful change in our risk since that point in time. So that gives us confidence. The second thing is that obviously, you know, we see, I would say, rational changes in behaviour from both clients and consumers. So being mindful of, you know, the uncertainty and perhaps paying back their credit cards a little faster than they otherwise might. We think that that's really positive for credit and, you know, it's something that we observe. But overall, nothing additional that we've taken so far other than those three PMAs. IFRS 9 is highly cyclical, sorry, highly pro-cyclical. So if we were to see a real deterioration, then clearly that might lead us to make some changes. But of course, we'll call that out if it occurs. Thank you for the question. Thank you.

Could we go to the next question, please? The next question goes to Chris Hallam of Goldman Sachs. Chris, please go ahead.

Yeah. Morning, everybody. So my first question is just on lending dynamics. And Anna, I think you've just covered some of this, but I want to drill down on one point. So in the UK corporate bank, how much of the moves you've seen on loans and on deposits as well, actually, in the first quarter is potentially attributable to the macro uncertainty? The premise being that if you were to start to see scarcity and sort of inflation-driven restocking cycles, you know, companies loading up on inventory at higher prices. That will drive demand for working capital lending while also compressing corporate cash balances. Simplistically, that just maps onto the Q&Q evolution in loans and deposits you saw in the UK corporate bank, but that could just be a coincidence. And then second question on the disclosure on slide 46, 45, sorry. Has the uncertainty over the last few months in the private credit space changed at all how you think about the growth outlook in those areas? I think there's a sort of consensus building that the credit risk for the banks themselves is pretty low. You call that the absence of losses. But simplistically, private credit as an industry has been growing pretty quickly. So if you and your internal planning had forecast that stacked bar chart, let's say for 2028, six to 12 months ago, would the composition of that bar chart look very different today, i.e. has the size of the opportunity set in financing changed in your view? Thank you.

Okay, Chris, I'll pick up the first of those and then I'll hand to Venkat. Look, you've seen in Q1 15% lending growth, 3% deposit growth. I don't think that's due to anything like the sort of behaviour changes that you talk about, Chris. I think that's probably a coincidence. And, in fact, it's very consistent with what we've seen in recent quarters, about 50% of the lending growth that we are seeing is coming from new clients. And as they come on board, they are also placing their deposits with us, which is why we're seeing, you know, that balance. And remember, we are very deposit heavy within our corporate bank. Our loan to deposit ratio, I think, is around 34%. So we would expect to be growing lending faster than deposits. That is our absolute strategic intent. Venkat, over to you, second question.

Yeah, so just on the first point, which is that the growth you see in lending in our corporate bank is very largely our own actions. This is what we said we would do in our strategy. We said that we have had a bigger deposit base and we wanted to encourage lending for our clients and grow our client book. It's exactly what we've been doing. Coming to your question on structured financing exposures, I think, look, there's a supply of credit, there's a demand of credit for credit issue. I think what you're seeing in the liquidity dynamics in the private credit market may mean a shrinkage supply of credit coming from the funds themselves. It will take us some time to see. The reason this thing has happened is that obviously the private credit funds have been giving loans in a niche which has been fairly well publicized. You know, the banks were regulated out of. Now things could change in the U.S. and so banks may come back in there. But generally speaking, when you look at the way we are exposed to it, which is in the way shown on the slide, which is working with the fund managers, I would imagine you're absolutely right that I think the growth of this thing is probably going to be leveling off or declining in the next year or so. But we have to give it some more time, but that would be a reasonable assumption.

Thank you.

Okay. Thank you, Chris, for the questions.

Can we go to the next question, please? The next question goes to Robert Noble of Glacier Bank. Rob, please go ahead.

Morning. Thanks for taking my questions. You sound very, very bullish on the outlook, but only kind of a small PMA taken and the implied rate benefit to the top line and calling out consensus even on lower rates being too low. Is it not a bit perverse that an energy price shock that causes higher interest rates and lower economic growth outlook is actually a positive for bank earnings. So I guess what's the, is there any negative risk in there from growth? Which parts of the book from a growth perspective would you be most worried about in this type of environment?

Yeah. So it is a very good question, Rob, and I think there is a There are two issues here. There's one of timing, and then there's one of certainty or knowledge. Clearly, inflation risk has increased with what's going on in the Middle East. And you can see it in the UK inflation numbers, speaking just in the UK. And over time, there are worries in the US as well. For a variety of reasons, it's not hit employment. And growth in the UK at least until February was strong. So, and growth in the U.S. remains strong, and there are important sectoral reasons for why that is the case, you know, related a lot, of course, to tech. So, and we said to you, Anna said that we are not seeing any impact on our retail or corporate credit portfolios in the U.K. or the U.S., especially the smaller companies. So, all of that put together explains why You know, credit conditions are generally good. I mean, we said that we expect impairment to be at the higher end of our cyclical range of 50, 60 basis points. And we've discussed NII and we've discussed the interest rate income of the bank. The longer this thing goes on in the Middle East and the more inflation feeds into the economy, then there is a risk of growth or lower growth. And then there's a risk potentially of of the implications of lower growth, including on credit. But we're not seeing it yet, and I don't think it's fed through the consensus, which is what we follow. That's the reason. What you're seeing from us is prudence of management in the forms of the way we've talked about credit lending, our approach to credit, and the way Anna described a slight emphasis to weaker scenarios in calculating IFRS 9 related impairment. So what you're seeing from us is a little more prudent positioning, a little more prudent ban of waiting of impairment scenarios, but it's not yet played through mainstream consensus numbers or, of course, into what we experience in the portfolio.

Anna? Yes, thank you, Venkat. I think the other thing I would call out, Rob, is that our confidence is drawn from and relates to the plans that we continue to execute. And that's, you know, this is another quarter of execution. And of course, we're mindful of the environment and Venkat's called out a few examples. But, you know, our focus is on executing the plan as it has been over the last few quarters. And that's really what's delivering the momentum that you can see today. And Also, the diversification that we have in the book, both geographically and between different types of business, allow us to be resilient in quite a range of environments. But we're clearly mindful of the outlook. Okay. Thank you, Rob. Perhaps we could go to the next question, which I believe is the last question. Thank you.

The last question goes to Edward Firth of KBW. Edward, please go ahead.

Thanks very much. Yeah, I had two sort of related questions, and I guess you partly covered it in the answer to Rob's. But I guess what we're all struggling with is the contrast between people like the Deputy Governor of the Bank of England saying markets are ignoring risks, there's an awful lot of volatility going on, people are not focusing on it, and the message from you, which is there aren't really any problems. And so I'm just trying to get – so the way I'd ask the question is, what has to happen for there to be a problem? You know, you must sensitize your book. Is it that the Middle East continues for much longer than expected? Is it the oil price of 150 is the big question mark? Because obviously 100 is not a problem. So what is an environment which would have you guys thinking, this is a problem for our book and we're going to have to start taking some material numbers? I guess that's the first question. And then just related to that, I was struck both by the size and the high proportion of write-offs you took on the one-off impairment or the one-off exposure. And I just wondered, could you give us a sense? I mean, is this like a normal exposure to you? Do you have, would this be like a top 10%? I mean, how many of these sort of size single name exposure do you have on your book? Would this be a very material one? And then I guess secondly, I guess you've been through all of them now. Is this something that, I mean, can you give us some flavor to why this was a one-off? Because it was an extraordinarily big number in itself and a big percentage write-off, if that makes sense. Thanks very much.

Okay, why don't I start, Venkat, and then I will hand to you. So, Ed, I'll just reiterate, we are very mindful of the environment around us, and that's why we are managing risk and capital very, very carefully. But we go into this kind of environment with a resilience that would not have been there. a few years ago. So, you know, we are operating with greater proportion of our capital focused on more stable returns. We have higher operating leverage, which gives us greater resilience. And, of course, we have much higher levels of absolute capital. So if there is a deterioration, then we would face that in a completely different position as a bank. So that's number one.

Mm-hmm.

Number two would be, as Venkat has said, we continue to manage our risks carefully. He's talked about some changes that we are making around how we approach lending. I would also call out the way that we've managed the volatility in markets in the first quarter. So you can see both the bar and the single day trading loss. That tells you how we are approaching risk in this kind of market. But you know, you're right to the extent that the situation intensifies either in terms of inflation or indeed, you know, time. We might see that start to flow through into the real economy. But that's how we are positioning ourselves to manage those things robustly. Venkat?

Yeah, so let me just continue on that question for a second and then I'll come back to your second question. So what Anna said, we're managing our risks, we take a view to the future, but also look at the structural composition of the business, right? What you've seen in this quarter is an anticipation of greater volatility and greater economic weakness. That has led to volatility in the financial markets themselves, which our trading businesses have been able to you know, do well in because of the help that they're providing to clients and the intermediation help they did. So, if you, the question I always ask is if on the first day of the quarter you knew how the quarter would fold out, what results would you expect? And at the last day of the quarter, did you get the results that you thought you would expect? Right? And if you look at our businesses, because of the structural changes which we are doing, A, What you see in each business is what you would have thought. B, the way the businesses interact also gives us protections. So coming back to the question that I think it was Rob who asked it, on the one hand, you're getting an advantage from interest rates. On another hand, you're getting an advantage from trading and trading-related activity. On yet another hand, you're getting the advantage in the investment bank from people seeking benefits capital markets transactions, and IPOs, right? And then credit conditions still remain strong. If that changes, which it could over time the longer these things go on, then, yes, you would have some issues or impairment, but you may still continue to get benefits from other sides of the portfolio, right? And then we've not spent some time on this call, but, you know, we do have fee businesses, transaction businesses, all of which will be important and relevant as people look to hedge financial exposures. So it's a diversified bank, diversified sources of revenue, and it's important to focus on one or the other, but you've got to look at it holistically. And this quarter's results show you the importance of that. Then coming to the second question, first I would take you to page 45, where we've gone through the the history of our exposures to these things. And what we've said is, as a credit matter, we've had no losses or negligible losses across all of this. That's the first important thing. When fraud happens, right, and depending on the extent and specification of the fraud, the numbers are appreciable. I'll say two things. I don't like to lose a single dollar or a single pound to fraud. On the other hand, This business has been structured, has been performing well over the last number of years. It has been structured in such a way, and we've made fundamental improvements to it that we are able to absorb it. Doesn't mean I like it. Doesn't mean we won't take steps in which we are taking steps to reduce that likelihood, minimize it, and so on. But we can absorb it. In a credit lending business, there's always a chance of that. We look to reduce it and minimize it by good risk management. There are obviously lessons which we have learned from watching these two situations and those lessons we've put in. And that's what I would say. The last thing, I know this is a final question, if I may close on this. You know, the message I'd like to leave all of you with, first of all, thank you for joining us. Thank you for being on this journey with us. Thank you for the excellent feedback you give us. on this call and between calls. What you're seeing is yet another quarter of the demonstration of the fulfillment of our strategy. Quarter after quarter after quarter, we've been improving this bank structurally in the ways we said we would and delivering in the ways we said we would across the bank. In the investment bank, an increase in ROTE now to double digits of 15% this quarter. In U.S. cards, an increase in ROTE When we started this plan, it was 4%. We've just printed an 18% quarter. The bank's ROTE itself is at 13.5%. We are reiterating all our targets. Strong capitalization. We're at a 14.1 CET1 ratio, which is a little above the high end of the range. That shows you prudent planning, prudent stewardship of capital, and with a view to what might come in the future, which some of the guys here have asked questions about. The growth in NII. the strength of our deposit base, the increase in UK corporate lending, fulfillment of our RWAs promises in the UK, increased client engagement in the investment bank, and so on and so on and so on. So we've laid out our strategic plan. We've laid out the structural improvements. We look to deliver upon it quarter after quarter and to report to you that way quarter after quarter. That's our aim. Thank you very much for joining us.

Thank you, everybody. We look forward to seeing you on the road. And, of course, we'll see some of you at the LLS breakfast. But thank you for your questions.

Thank you. That concludes today's conference call.