Half Year 2021 Barclays PLC Earnings Call

[music].

Welcome to the Barclays talk to your 2021 results analyst and Investor Conference call I will now hand, you over to gestate acreage Chief Executive and <unk> Group Finance director.

Good morning, everyone I'm, joining you from New York This morning, while 2 stars in London.

I am pleased to report that Barclays has had a strong first half of the year.

Our financial performance has been good robust revenues and profitability.

<unk> had opportunities to grow our business.

Particularly pleased that we have been able to increase distributions to shareholders.

Throughout the Covid crisis, we have demonstrated support for customers and clients at a time when they really needed it.

And mindful, we will need to continue to do that over the coming months.

This pandemic is not over yet.

But.

But we are seeing encouraging signs that the global economy is recovering and this is reflected across Barclays businesses.

We've had a good start to the year with group profit before tax of 5 billion patents. That's quadruples the same period last year.

Earnings per share were $22.2 pence.

For the first half.

For 2 quarters running all 3 of our major lines of business have delivered double digit returns on capital.

Our return on tangible equity for the group was 16, 4%.

And we expect to be able to deliver our target of above 10% royalty.

This year.

We remain in a strong capital position a CET 1 ratio was 15, 1%, which is above our targeted 13% to 14% range.

That strength means we have been able to increase capital distributions.

<unk> provided a half year dividend of <unk> <unk> per share.

We will initiate an additional share buyback of up to 500 million pounds. Following a $700 million buyback we completed earlier this year.

Improved macroeconomic conditions resulted in a net impairment release of 797 million pounds in the second quarter.

We will continue to maintain.

Excluding the impairment coverage ratios over the coming months and we will also be careful to gauge the real economy as government support measures are lifted.

But it's very important to note that even without impairment releases. The group return on capital would have been above 10% in both the first and second quarters.

<unk>.

We're also managing our costs appropriately with a cost to income ratio of 64%.

Our base cost remain stable, but we have taken a number of structural cost actions in the second quarter, most notably reducing our real estate footprint and Canary Wharf London.

Excluding this structural.

Cost actions are cost to income ratio actually for the half year was 61% close to our 60% target.

We will also focus on investing in the right parts of the business to deliver future income growth.

That means investing in talent and technology in the investment bank as a cap.

Capital markets continue to grow.

It means investing in the corporate bank, particularly in Europe.

It means investing in our U S consumer franchise organically and through scaling up our U S card partnership.

And it means continuing to transform our UK payments capabilities with technology.

Most notably in merchant acquiring.

How is this bank.

Our performance continues to benefit from the breadth of our business with our income diversified by type by customer and client and by geography.

I am pleased to see the strong performance of the investment bank continue for another quarter, demonstrating the sustainability of the franchise.

1 of the drivers for this as a continued growth with Apple global capital markets themselves.

2018, there was a 53% increase in the market capitalization of global equities and bonds outstanding and we reflect in our business that increase.

As more and more businesses and institutions use.

The capital markets as a source of funding Barclays is well positioned to continue to get better.

I am encouraged by the improved performance, we have seen in Barclays UK, and our and in our consumer cards and payments business.

Both businesses have benefited from the economic recovery and we have taken actions to improve future.

<unk> revenue growth.

Many of our leading economic indicators improved in this quarter UK debit and credit card spend was up 11% in June versus the same month of 2019 U S card spend is almost recovered to 2019 allowed us it was up 21% in the second quarter compared to this year's.

Sure.

Unsecured lending balances have lagged spend with UK card balances down 300 million pounds in the second quarter.

Covering consumer spending in both the U S and UK is encouraging but it will take time to rebuild interest earning balances.

Mortgage growth over.

It remains robust.

With a portfolio of $3.3 billion pounds in the second quarter and.

And applications continue at elevated.

Good levels and pricing is at attractive margins.

As I've spoken about before we're excited about the development of our payments services, particularly our new.

<unk> Barclays Q platform.

Taken holistically payment activities represents some 8% of total group income as I said in the first quarter. We believe that the 900 million pound income growth opportunity for Barclays in payments over the next 3 years.

In the first half we've already seen evidence of this growth.

Payments income up approximately 15% year on year by around 120 million pounds.

We continue to expand our digital capabilities with merchants and I've worked in collaboration with the CIB to deliver better services.

This quarter, we have successfully integrated a number of solutions into our corporate bank.

The platform takes.

Thank you just 1 example clients can now manage both their merchant servicing accounts and their bank accounts without leaving separate login credentials with processes.

We've also launched a new platform to deliver our franchise FX capabilities E Commerce merchants.

We have established new client.

Current relationships as well as strengthened existing ones.

I'm delighted that in leading U K supermarket has recently decided to consolidate all of those payments processing with Barclays.

Like so many of our partners. They are also leveraging some of the next generation services, we offer through Barclays acute including.

Including things like point of sale finance using data and analytics.

We remain focused on a sustainable impact of our business and on our role in society.

I am extremely proud of what we've been able to do to help people during the pandemic.

To date are 100 million COVID-19 community.

Community aid package has supported over 219 charity partners around the world.

While our colleagues have raised more than 13 million pounds using our matching gift program all of that money has gone to Cherokee is delivering COVID-19 relief.

As we approach cop 20, contemplate fixed meeting in the second.

Second half of the year. We also continued to think deeply about our environmental impact.

Specifically, how we can best support the global economies transition to low carbon.

Impairment Paris agreement sets us on a clear path to make that transition in the world has come together behind it.

Lastly shares.

That commitment.

Why we were 1 of the first banks to set an ambition to be net zero by 2050, not only for our own operation, but across our entire portfolio.

That means we are accelerating this transition through the way, we deploy finance, helping companies of all sizes.

<unk> Global Corporation.

Yeah.

At the smallest scale via Barclays principal investments we.

A sustainable impact capital initiative to invest 175 million pounds and new companies.

This help these new companies get the early stage capital they need to finance the growth and to innovate new technology.

Operational companies like <unk>, and clean Tech company, helping to reduce energy consumption and homes.

So far we've made 7 similar equity investments all over the world and we have a very strong pipeline.

At the evident of the scale, we are using our financial and capital markets expertise to support large company.

So we are helping them raise money through the equity and bond markets and advising on M&A transactions.

Electric vehicles as 1 example, this year, we helped the company called blank, who make charging equipment raised over $200 million through the equity markets.

We also let a $400 million placement.

Such as bus manufacturer called Pro Tara.

Both of these companies are making a significant contribution to scale up low carbon transport networks in the United States.

So let me close by repeating how pleased I am with our first half performance.

Provide a strong platform on which to build in the second half.

For the year and beyond.

Our balance sheet has never been stronger and we will remain focused on returning excess capital to shareholders.

As the global economy continues to emerge from the pandemic Barclays remains fully committed to playing our part.

In order to try to take you through the quarterly numbers in more detail.

For 11.

Thanks, Jess as usual I'll start with a summary of our hedge fund performance.

We again saw the benefit of our diversification of the strength of the CIB continued to offset the effects of the pandemic on our consumer businesses overall.

Overall income decreased 3%, but this reflected the weaker U S dollar.

Constant.

Currency basis income was up around 2%.

Costs increased by 0.6 billion to $7.2 billion, including the structural cost actions, we flagged at Q1, obviously, a <unk> 3 billion.

Also reflected high performance cost accruals due to improved returns.

I'll go into more detail on the other cost drivers shortly.

After a small impairment charge in Q1, we had a large release in Q2, given a net release for the half of $742 million compared to a charge of $3.7 billion for last year.

This resulted in a PBT of $5 billion, a significant increase on H 1 last year.

The EPS was <unk> 22, <unk> general.

Enormity of 16, 4%.

The CET 1 ratio ended the half at 15, 1% well above our target of 13% to 14%.

This has put us in a position to declare a half year dividend of <unk>.

And announce a further share buyback of up to 500 million following on from the 700.

<unk> million dollars buyback completed in April.

Turning now to Q2.

Overall income was up 1% on Q2 last year, but was up around 7% on a constant currency basis.

We saw some increase in the consumer businesses and the CIB performed well against a strong comparator.

Cost increase.

<unk> by 10% or 0.3 billion, reflecting the structural cost reductions principally a charge following the real estate review, we mentioned in Q1.

The improving macroeconomic outlook and lower unsecured bonds resulted in a net impairment release of 0.8 billion compared to a charge of $1.6 billion last year.

The profit before.

Increased by $2.6 billion up from 0.4 billion last year.

In order to the corporate tax increase scheduled for 2023, we have recorded a benefit of about $400 million through the income statement for re measurement of U K deferred tax assets. Although this will largely reverse in the course of next year, if the proposal to reduce.

Tags bank surcharge is enacted.

As a result, the effective tax rate in the quarter is lower than we would expect on a normalized basis.

Of the income statement benefit close to half is offset through reserves.

Attributable profit for the quarter was $2.1 billion generating an EPS of $12.3 tenths.

And the novelty of 18, 1% I want to remind you that all statutory numbers absorbing a litigation and conduct charges of $66 million.

TNF increased from 267% to 281 pence, principally reflecting the 12.3 tenths of EPS and also <unk> from the completion of the April share buyback.

Our capital position strengthened in the quarter with a CET 1 ratio increasing to 15, 1% driven by robust profitability and reduced startup anyways.

Few words on income costs and impairment before moving on to the performance of the businesses.

I've already mentioned and the benefit of diversification, which is visible.

Back to the Q2 income performance.

CIB income was down against a tough Q2 comparator for the investment bank performed strongly versus peers.

Meanwhile, we saw some increase in the UK income, which is up 11% in terms of outlook for CIB remains well positioned despite the currency headwind and some moderation in FIC.

In the case, so far this year.

The income outlook for the consumer businesses became CCP reflects a continuing tailwind in secured lending in the UK with the prospect of a slower recovery in unsecured lending in both the UK and the U S. B.

<unk> U K mortgage business had another strong quarter with $3.3 billion of organic net balance growth.

Activity in unsecured we saw further balance reduction in UK cost plus 0.3 billion to $9.6 billion and although the U S card balances ended the quarter up $21 billion. This.

This increase is weighted towards full pay of balances.

We are now seeing clear signs of recovery in consumer spending in both the UK and the U S.

We flagged at Q1, the building interest, earning balance is expected to take some time to materialize.

And to remind you that the translation of recovery in card balances into income and profits will be affected by the so called J curve as we invest in partner and customer acquisition, adding Todd utilization.

This is expected to dampen returns initially as we.

But absolutely, yes, but over time will lead the consumer business is well placed to generate attractive risk adjusted returns.

We still expect the headwind to NII from the role of the structural hedges given the low rate environment. However, the recovery from the trough in yields since year end plus the extension to our hedged maturities and we currently expect.

The headwind from the role of the hedges to be around $300 million. This year. The low end of the range I referred to at Q1.

Based on the current yield curve any further headwind next year would be materially lower.

This is based on the current sizing of the hedges, we are still considering whether to increase the hedges and have identified 20 to 25.

Billion of additional potential capacity, where we could do this the headwind next year would reduce further.

I would note that most of this potential increase would be in Barclays international rather than the UK.

Looking now at costs, we pay.

And to keep our base costs close to flat this year, that's cost excluding structural cost actions and.

Performance costs in.

In Q2, we implemented the structural cost reductions we mentioned at Q1 results.

The charge was 0.3 billion, resulting in Q2 costs being up 10% year on year at $3.7 billion and a 67% cost income ratio.

Across the first half the cost increase was also 10% and you can see.

See on the right hand chart of this increase reflected those structural cost reductions in Q2, an increase in the performance accrual the bulk of which was reflected in Q1.

The structural cost actions in Q2, primarily related to real estate. Following the review we flagged at Q1, we took the decision to vacate fyfe north coordinate building and can.

By the end of 2022.

This is expected to result in annual cost savings of about $15 million from 2023.

All the structural cost actions will continue through the second half of the year, including the continuing restaurant nation of the B U K cost base. So overall for the total for this year will clearly be higher than the 360.

<unk> 8 million for last year.

Cost actions will continue next year, but I wouldnt expect another real estate charges the size of the Q2 charge.

The next slide shows the key drivers of the basic costs.

Last year's total costs were $13.9 billion, excluding structural cost actions and performance costs.

60 of base costs were around $12 billion, we've shown here the key drivers, which we expect to be broadly offsetting each other this year, assuming the June 30th Sterling dollar rate of $1.3 applies through the second half of the year.

First increasing costs associated with volume related or demand that growth for example, UK and U S.

Generation and taking advantage of the high levels of activity in the primary and secondary markets in the investment bank.

Although these drive higher costs, we would expect to see associated income generation and we believe the start of a new economic cycle is exactly the right time to be leaning into growth.

Secondly, investment spend including the strategic.

Strategic investments, we've talked about previously lacking growing payments our U S partner cost expansion in parts of our global markets and investment banking businesses.

This also includes ongoing investment in technology as we continue the transition to cloud based technology and migration to digital channels across the bank.

Capacity for these investments.

<unk> is created by continuing to improve the way the bank is run driving cost efficiency savings.

These actions include decommissioning applications, the optimization and automation of processes and more selective use of suppliers.

Finally, we also have some specific tailwind this year from the weaker dollar lower bank currently.

And non repeat of the community H package. It gives us greater capacity for gross cost investment at an early point in the cycle.

I'm not going to give forecast for each of these elements, but I would expect them to result in the aggregate based cost for the year being in the region of $12 billion.

Beyond that as the recovery continues we will continue to manage.

The balance of growth and investment spend and cost efficiencies with the aim of delivering positive jaws to achieve our target sub 60, costing sub 60% cost income ratio in the medium term.

Moving to impairment.

There was a net impairment release in each of the businesses with the largest release, Spain and the U K as you.

You can see from the chart on the left.

On the right we show the split of the charge for recent quarters into stage, 1 and 2 impairment kind of stage 3 impairments on loans in default.

You can see there was a significant stage 1 and 2 book ups in Q2 last year or the charges in Q3, and Q4 were principally on stage 3 balances.

In Q1 this year, we have some release of stage, 1 and 2 book ups resulted in a small net charge.

In Q2, we've seen a large net release of stage, 1 and 2 impairment amounting to just over $1 billion with.

With the stage 3 impairment was just $221 million, resulting in net release of 0.8 billion.

The stage, 1 and 2 release was driven by the improved macroeconomic variables of used and the level of unsecured balances, but our coverage ratios remain above pre pandemic levels.

The mix was used for the Q2 modeled impairment as shown in the appetite.

You can see the improvements in the 2021 and 2022.

Forecast wherever there still remains uncertainty as to the level of default will experience a support schemes are wound down despite the improved economic forecast, we want to make sure that as we imply improved Mips, we don't lose sight of this risk. Therefore, we've made refinements to our post model adjustments to focus them more on the cohorts of borrowers we believe.

Leave our most at risk from the tapering of support.

<unk> by way of maintaining a significant economic uncertainty PMA, which has increased slightly to $2.1 billion in the quarter as shown in the table.

As I mentioned is still gives us materially higher coverage ratios than pre pandemic across wholesale and unsecured consumer lending as.

As you can see on the next slide.

Unsecured balances haven't increased materially in Q2, and I'll still down by 28% year on year.

Despite the impairment release coverage was still 10, 2% well above the 8.1% pre pandemic level.

The wholesale coverage ended the quarter at 1.1%.

Also well up on the pre pandemic level.

Coverage on home loans was maintained as the group as a book grew by 12 billion since the start of last year.

With these levels of coverage the lower unsecured balances and improved macroeconomic outlook, we expect the quarterly impairment charges to remain below historical levels in the coming quarters.

Turning now to be U K.

Year on year comparison for Q2 was dominated by the large impairment release compared to the charge taken last year.

Income also improved year on year, but the outlook remains challenging.

Growth overall was 11% primarily non repeat of prior year COVID-19 comfortable.

What actions plus increased mortgage balances and improved margins.

Partially offset by the lower unsecured lending balances.

How do we showed on the earlier slide card balances reduced a further <unk> 3 billion in Q2, 2 for the quarter at 9.6 billion a decline of 26% year on year.

We expect.

So patrice and aggregate card balances in the second half of the year, but the spend recovery will take time to feed through to interest, earning balances that drive net interest income growth.

This contrasts with mortgage balances, which again grew strongly with a net increase of $3.3 billion in Q2.

Mortgage pricing continues to be attract.

Summing, although we expect some erosion of margins over the coming quarters mortgages should remain a positive factor for net interest income, but will dilute the NIM NIM for the quarter was 255 basis points broadly flat on Q1, our current outlook for full year NIM is now at the top.

And of the 240 to 250 basis points range.

Tien tsin to Q1, but with NIM, reducing in Q3 and Q4 due to the mix effect from continued growth in mortgages and the level of interest earning card balances.

Cost increased 7%, reflecting an investment spend and higher operational and customer service cost in part due to ongoing financial assistance partially.

Actually offset by efficiency savings.

Impairments for the quarter was a release of <unk> 5 billion, reflecting the improved mess low levels of delinquency and reduced unsecured exposures.

Turning now to Barclays International.

<unk> income was down 5% year on year at $3.8 billion.

<unk> was a natural.

We made $171 million compared to a charge of $1 billion, resulting an enormity of 15, 6% I'll.

I'll go into more detail on the businesses in the next 2 slides.

CIB income decreased 10% on Q2 last year to 3 billion, reflecting the headwind from the 13% depreciation in the U S.

Dollar and costs decreased by 4% over 229 million impairment release compared to a charge of close to $600 million last year.

<unk> for the quarter was 14, 8%.

Although global markets income decreased 22% overall in sterling or 13% in dollars.

Okay.

<unk> reported its best ever Q2 up 15% at $777 million with strong performances across all business lines, including further growth in prime balances, which reached a record level.

<unk> decreased 13, 9% against a very strong comparator last year, however, our franchisees proving robust despite the lower.

With market volatility.

Investment banking fees on the other hand reached a record level at $873 million up 19% year on year advisory equity capital markets and debt capital markets, all contributed well to the political performance.

Despite the strong deal flow pipeline increase still further during Q2.

Levels of corporate lending income of $38 million was affected by a single main mark to market write off which goes through the income line rather than impairment for technical reasons.

Without this the income would it be nearer the run rate of close to $200 million, which I referenced in the past.

Transaction banking income was up slightly year on year at 300.

$96 million.

As I flagged that Q1, the increase in the variable compensation accrual, reflecting improved returns is expected to be skewed towards Q1 this year.

Overall costs were down 4% at $1.6 billion, resulting in a cost income ratio of 55%.

Turning now to consumer cards.

Thanks.

The RFP for CCP was 21, 8% compared to a loss last year was the big driver being an impairment release of $42 million against the charge of over $400 million last year.

Incoming CCP increased to $146 million to 0.8 billion, reflecting 2.1 offs.

And paint recurrence of the FERC 100 million visa loss.

And the property disposal and the private bank this year.

U S card income was down slightly year on year, reflecting the weaker dollar.

The reduction in U S card balances year on year was 9%.

Encouragingly quarter end balances were up on Q1 at around.

The $90 billion, but average balances over the quarter were lower.

The increase in payments income reflected the non recurrence of the visa loss, but it was also up year on year adjusting for that and up 17% on Q1 as we show the initial effects of the spending recovery.

Cost increased 18% some of which was accounted for liability.

Around 20 patients and conduct relating to our legacy portfolio in the quarter Brexit.

The rest of the increase reflected investment and higher marketing spend.

We are seeing clear signs of spending recovery, but the timing of recovery in interest, earning balances in unsecured lending remains uncertain.

The recent developments in our partnership portfolios the prospects.

The latest cards business of encouraging but as I mentioned at Q1, it will take time for the new business to generate consistent attractive returns given the J curve on new business and the gradual recovery of interest, earning balances with existing customers.

Turning now to head office.

The main point to highlight in Q2 head office result.

<unk> was the structural cost actions, which include the property charge for the building and Canary Wharf.

The negative income of $27 million was a bit below the 75 million run rate I mentioned that Q1, reflecting small positive 1 offs.

The $266 million property charge, the Q2 costs were $59 million in line with the usual run.

Run rate.

The loss before tax for the quarter was 338 billion, including that charge.

Onto capital.

The CET 1 ratio increased in the quarter from 14, 6% to 15, 1% flat on the end of last year.

We have flagged that Q1 that the reversal of the software benefit might come in Q.

But this is now expected to be implemented at the start of 2022.

Strong profitability in the quarter, but in this bridge, we separated out the effects of the reduction in <unk> 9 relief.

On top of the rates went down more than usual at quarter end, a reduction of about $7 billion compared to March 30.

<unk> 34 basis points to the ratio.

Some elements of the future capital progression on the next slide.

As shown here a number of future headwinds to the ratio further buyback of up to 500 million will reduce the ratio by approximately 17 basis points as a pension deficit reduction contributions scheduled for Q3 with an effect of 11 basis points before tax.

These factors will reduce the 15, 1% ratio by close to 30 basis points.

The balance of the year, we expect some further decline in the ratio as impairment on stage 3 balances phase III to the ratio.

We see some increase in <unk> from the 13th of June level.

However, we would expect to MDA comfortably.

All of our target range of 13% to 14% with the software reversal, which is expected to be circa 40 basis points plus other regulatory capital headwinds, reducing the ratio at the start of 2022.

We are confident that the balance between profitability and these elements will leave us with net capital generation to support attractive distributions.

It'll be about holders over time.

I'd be comfortable within our CET 1 target range. However, we will take into account the residual uncertainty to the extent and pace of recovery from the global pandemic in determining the size and timing of such distributions.

Our spot and average leverage ratios or around 5% and as you know we'll be focusing on.

Sure Hey leverage rules, rather than sciarra following the recent publication of the leverage framework by the regulator.

Finally, a slide about liquidity and funding remained highly liquid and well funded with the liquidity coverage ratio of 162% and our loan to deposit ratio of 70%, reflecting the continued growth in deposits.

So to recap we've generated an 18, 1% statutory <unk> for the quarter.

That reflects a net impairment release of close to $800 million, while maintaining good coverage levels.

We won't see this sort of early every quarter, but we do expect quarterly impairment charge to be below historical levels in the coming quarters.

We are seeing the start of a slow recovery in consumer income on the CIB performance remained strong.

Well the cost in 2021 are expected to be higher than in 2020 cost control remains a critical focus and we expect cost excluding structural costs and performance cost to be around $12 billion. This year.

We expect alright.

For this year to be above our target of 10% and we are focused on delivering this on a sustainable basis in the medium term.

In April we completed a 700 million buyback announced in February and.

And capital at the end of the quarter remained at 15, 1% comfortably above our target range of 13% to 14%.

This has allowed us to declare.

Policy of dividend of 2 pence per share and announced a further share buyback of up to $500 million.

Thank you and we will now take your questions. Its just as in New York and I'm in London, We'll do our best to coordinate our responses and as usual I would ask that you limit yourself to 2 per person. So we get a chance to get around to everyone.

Youre welcome.

If you wish to ask a question. Please press star followed by 1 on your telephone keypad. If you change your mind on which to remove your question. Please press star followed by Chi Wen preparing to ask your questions. Please ensure that youll furnace on muted locally to confirm that star followed by 1 to ask a question.

Your telephone.

Our first question today is from Joseph Dickerson of Jefferies. Your line is now open. Please go ahead.

Hi, good morning, Thanks for taking my questions.

Solid results here.

Just on the liquidity pool, which is now.

I think the 291 billion up about 9% in the first half.

3 quarters of that sitting in cash and deposits with central banks do you see an opportunity to diversify that book a little bit more into the bond side and in other securities to try to get a yield pick up because it must be quite a drag for you.

That's question number 1.

The second question is.

On your cost income ratio aspiration of the 60% over time.

I guess.

How would you define over time I mean, I think consensus is still above that level in 'twenty..2 'twenty 3 so I was just wondering and kind of.

A ballpark.

Range what.

We might expect to achieve that on your plants. Thanks.

Yeah. Thanks, Joe.

Why don't I take.

Thank you both of them and Jeff can add some comments.

Fluids as well.

On the liquidity pool, yes, we do look at this pretty closely I mean.

A lot of the increase in liquidity pool is of course.

Got you.

Our deposit base.

Deposits are about half a trillion pounds Barclays.

It's incredible how much.

Much money has been left with us.

It's very very cheap level of deposits in central bank rates.

Obviously, well above that.

So I wouldn't say, it's a <unk>.

Alright.

We do look at ways of optimizing the performance.

We obviously do consider a range of securities and other sort of high quality collateral.

That we that we operate from time to time, and that's actually been a reasonable story for us.

Our treasury team that manages liquidity pool has done actually a really good job in generating a decent yield.

<unk>.

That money for us.

Your second question on cost income ratio, yes.

First and foremost returns all the most important.

And so we're pleased that.

We can generate.

Decent returns now the cost income ratio.

As much of an output.

Where the income level will be relative to cost as much as an input what I mean by that is.

When I look at the mix of the businesses at the moment, you've got the consumer businesses that have a cost income ratio in the 70 plus percent region Thats, obviously higher than we would expect them to be and thats as much a function of their income lines.

We've talked about so the reduction in unsecured balances and obviously a lower rate environment.

Pretty pretty.

Positive on the consumer outlook coming things do look like they are recovering youll see in our mortgage balances pick up extremely nicely spend levels are back to sort of pre COVID-19 levels.

Yeah.

<unk> seen a pickup in U S card balances not yet interest paying balances yet, but that's all sort of positive indicators. So I think as you see the income levels continue to pick up in the consumer businesses, you'll naturally see.

That cost income ratio their decline and of course in the CIP and our cost controls are very important and you can see we're operating in this sort of the low.

<unk>.

We won't put a time limit on that because there's so many things that go into that but.

I think for us.

The way, we've always thought about it as a 10% return for the group.

We want to do this year, but hopefully we will do every year.

When it settles down.

Post pandemic sort of environment.

Most likely to be accompanied by somewhere around a 60% cost income ratio and thats just given the mix of the businesses.

Jeff you want to add any other comments on that.

I'll just highlight that a lot of the cost initiatives and structural cost charges.

Our direct.

2 consumer businesses as we move to a more digital platform away from taxes et cetera, and as spending recovers.

Tumors recover that youll see the revenue growth.

Our consumer business well outpaced cost.

So.

I think.

As Peter said, we don't want to give an exact date, but I think the consumer business is got it.

A pretty good 1 way to help us get to that cost income ratio that means that what's prudent.

For us to deliver that 10% return on tangible equity.

Thanks Chuck.

Great. Thank you.

I see.

The next question please operator.

The next question is from Mark Haden of Credit Suisse. Your line is now open. Please go ahead.

Good morning, Thank you very much Hello.

Thank you very much for taking my questions I just wanted to ask a.

Follow up on.

Jones cost question.

So.

Youre going to base costs executing.

Performance cost as being around.

12 billion.

There is a cost to income.

Okay.

Going forward.

I Wonder whether you could just help us perhaps.

In Quebec.

About that.

That base.

Cost in absolute terms, perhaps into.

2022.

In particular, I think the Barclays UK.

Restrike structural cost actions.

Perhaps you could give us just a little bit color, a little bit more color as to what the.

Yes.

Annual cost saving potential.

It looks like from next year or 'twenty 'twenty 3.

And my second question is just on the consumer businesses.

Mentioned.

Spending is recovering which is a really good sign.

Interest paying.

Balances not yet.

I was wondering whether you could give us some color around what.

What you're seeing on consumer behavior is it more.

Payment rates to elevate 2 with savings balances. So is it particular types of spending.

Haven't.

Yet recovered.

What might tell you about when those balances should start growing thank you.

Yeah. Thanks, Omar again, why don't we do it the same way.

Ill answer both of them and just without performance after me.

In terms of.

Based costs and where we go from there.

I guess a few things on this.

First and foremost.

Cost discipline is important to us it's important to us because.

We want to grow our topline and we want to create the capacity.

To allow investments to sort of lean in if you like to the beginning of a cycle.

Participating around out as sort of efficiency measures.

And productivity measures are really important.

This morning, we had guided to based cost for this year being in the region of 12 billion pound subject to the usual caveats around currency rates and what have you.

Think for next year.

Well before I go into next year I think also when I look at.

Our concern.

Sensors for this year, our published consensus of around $14.4 billion.

That probably feels about right to me.

When I look at all of the other sort of components that.

We're sort of sitting here in the second half of the year, where I think we may end up on performance costs and the balance of structural cost actions that we'd like to do.

Yeah.

So hopefully that gives you some sense of what this year will shape up in terms of next year.

The base cost I think as we sit here now I think a reasonable planning assumption is a similar level for base costs year on year, So about 12 billion pounds.

I think that will.

Give us the right frame.

<unk> continued to create capacity to continue to invest in some of the more exciting for the growth opportunities that we have in <unk>.

Just talk about payments are really excited about U S cards.

There are sort of part of the investment bank, we are continuing to.

To invest in as well.

The battlefield.

Framework about right to us in terms of the structural cost actions you sort of talked about.

U K bank.

Yes, that's something we're looking at very closely.

See.

Where we have opportunities to accelerate the transformation of.

Of the UK Bank, we will we will.

Essentially take advantage of.

All of them and we'll call them out as we go along.

And the whole objective function there is to absolutely lower our cost base in absolute terms. Subsequently so a good example would be say.

This isn't to do with the UK bank, but the whole idea of the property write off that we took in Q2, it looks like about 50 million pounds.

Annualized run rate from 2023 onwards.

That just gives you a sense of the kind of way, we think about that property tends to have the best payback, Tony because the lease length is quite long, but the numbers can add up over time.

We think about a similar thing for for the UK.

Wanted to switch gears and quickly cover some of the consumer.

Consumer patterns that I will hand over to Jeff.

In terms of.

Spend spend levels are definitely are pretty good at the moment as we see it both in the U S and the UK.

It feels like they're back to pre pandemic levels.

In terms of when the spend levels convert the card balances.

I think in the UK.

You want to see more and more discretionary spending travel and holiday is a big factor.

This year is a little bit unclear as to with various changes too.

Travel restrictions and vacations and what have you, but I will take the lead indicators feels good.

It's just.

It's just very hard to forecast with a degree of precision when you expect the spa.

<unk> levels to convert into.

Into revolving balances, we did see deposits again.

Pick up from on the consumer side in in Q2.

So it's sort of a rational behavior.

As these <unk>.

<unk> levels continue I mean, I think its inevitability that will convert into revolving balances in the U S probably a bit sooner we've got the sort of the vacation season, we've got back to school, we got Thanksgiving, We got Christmas.

Is it typically sort of a good sort of areas for non discretionary spend.

And.

I look at account openings in U S cards.

They are doing real well again the levels are ahead of where we would expect them to be and good news is we're seeing balances reform Theyre just theyre.

For the full tire balances at the moment, but nonetheless, it's a <unk>.

Very good lead indicators I'm, Jeff anything you want to add.

Yes.

Consumer spending.

I.

I looked at it this way I think in the U S side.

The indications that we have.

Lead you to believe as we do that the U S. Consumer is returning to the historic use.

Car and receivables I think you clarified industry does.

Characteristics of interchange fees in the U S as well as the robust reward programs and we're seeing a much more rapid recovery and balances. There and also you may have noted our own initiatives, whether it's the renewal of jetblue or the other work that we've done for.

A couple of major retailers, so I think it's I.

I think you should look forward to the U S card business recovery to historic levels in terms of activity in the UK I think it's a slightly different story.

I think the UK consumer has demonstrated a little bit more focus on balance sheet and preserving an income level.

And the focus of that we.

We do think that there is a degree of a shift from unsecured borrowing to secured borrowing.

Our credit card receivables were off some 3 billion pounds year over year, our mortgage portfolio was up 3 billion pounds just in the second quarter alone.

So that movement from unsecured to secured I.

I think is real and then on top of that I think youll see increased activity in terms of point of sale financing as as <unk> alluded to and the work that we're doing between our merchant acquiring businesses or our small business banking businesses and our consumers in terms of our technology platform I think positions us extremely well to capture.

Point of sale financing that asset growth.

Thanks for your question. Thank you.

Let me ask the next question please operator.

Yes.

The next question is from Rohit Chandra Rajan Bank of America. Your line is now open. Please go ahead.

Hi, good morning.

Couple as well please the first 1 was on capital.

I guess when you think about capital distributions in addition to the dividend.

You indicated the CET 1 ratio above the target level.

For this year.

How comfortable would you be moving into the 13% to 14% target range.

As we hopefully get more clarity on the economic recovery I.

I guess later this year ready next year.

So that's the first 1 and the second 1 I'm, sorry coming back to costs.

And this time really I guess on the structural cost. So slide 16 gives an indication of what you expect for the second half of the year.

Wondering how we should think about those structural.

Total costs in terms of the run rate beyond 2021.

Yes.

Why don't I kick off.

Just to add a couple of comments after after me.

Yes.

The target range is 13% to 14, so you would expect at some point for us to be comfortable.

So I'll break it into that target range.

We said for the.

Mind you this year, we would expect to be comfortably above this.

Pretty pretty strong capital position and plenty of capacity to continue distributions.

Part of the reason for that there's probably 2 reasons for that 1 is as you as you know and we've called out there are some sort of technical.

Headwinds that come into next year, you've got software amortization reversals you've got.

Transitional relief on my first 9 U S. ACC also bunch of bits and pieces that you'll be aware of.

And on top of that.

We'll see how the adjustments of the post pandemic economy.

Okay.

Over the next handful of quarters, and you would expect us to be prudent in that but it's a pretty decent capital position and plenty of capacity to continue.

<unk> continued to get capital into shareholders' hands, which is a priority for us.

In terms of structural cost reductions in run rate from this point on I think we'll call. These out as we go along and think of these.

Thats sort of episodic.

Notable items, if you like where we're doing something very specific.

The real estate exit we talked about in Q2, I would say for the rest of the year, probably a skew towards our UK bank.

Look for opportunities to maybe accelerate some of the transformation that we'd like to do that.

We'll definitely yield runway.

Run rate benefit the best guidance I can give you at the moment Rohit. This.

We talked about our base cost of about $12 billion. This year subject to the usual sort of currency right caveats I think that's a good planning assumption for next year.

What insight there that will be as continuing efficiency programs. So if you like or run the bank costs.

Is there going to be lower than that.

Utilize that capacity to continue to lean into some of our growth areas beyond transactional banking bid on.

Mortgage book is growing really nicely, we like payments or loss et cetera.

But I think gives you a sense of what next year's cost shape look like just any other commentary last night.

Just.

The ad.

And the 700 million buyback already executed in April another 500 analysis, so $1.2 billion pounds of buybacks and is rulli and Barclays have been engaged in a buyback program in many many years. So this is a.

New thing.

And I don't think Thats, a 1 off.

And with the level of profitability that we're now generating the capital levels that we have.

We have shareholders that are remain willing to sell stock at such a discount to book value, we are happy to buy it.

Okay.

Very good.

Thanks for your question right.

We have the next question please operator.

The next question is from Jason Napier of UBS. Your line is now open. Please go ahead.

Good morning, Thank you for taking my questions. The first 1.

Guess ties together the net interest margin outlook consumer behavior in the hedge update.

So to read that.

The skew on larger hedge notional was mostly.

Involved with the balances at the U K.

<unk> 50 billion more deposits than it did at the end of 2019.

I just wanted to.

What's your assessment around.

Or was it just that balance is the fact that it is not included in the bigger national does that mean, you're expecting balances to fall.

And is the decline in those deposits prerequisite for competitor behavior on the interest bearing part of the unsecured book there.

And then the second question and then I think as you probably already answered this but I won't have.

Have a crack at it anyway on my numbers at least Barclays is the cheapest stock in earnings.

We cover in Europe.

And I, just wondered how management and the board to see that.

Whether it's an issue whether it is anything about strategy.

In some quarters calls for banks to sell valuable assets.

In particular, they subscribe to that view and myself.

I wonder whether the valuation of the business says anything about the phone becomes a target with a.

You ought to be doing things around mix of business and Sean Thanks very much.

Yeah, Thanks, Jason I'll ask Jess to cover the second question around.

Valuation and I'll just cover the first couple.

In terms of the net interest margin hedge notional that we took last year, we have been increasing the size of our hedges.

Actually over the course of last year and into this year, you will see that Jason from from the disclosures.

It's sort of been steady.

Every.

So rather than sort of a big step up that's actually been mostly in the UK bank those.

Increases.

We haven't actually if you like that marches on the corporate side of the business.

And we've identified actually I mean that 25 billion that we sort of talked about potential capacity is a mix of U K and in core.

Every quarter skewed more towards corporate.

Obviously, what we to do that and still be paused.

Possibly accretive to UK, NIM, but certainly accretive to corporate.

NIM. The other thing is that Youll see from our disclosures in our commentary. This morning, we have slightly lengthened the duration of hedges as well.

Corporate.

So.

That's been a sort of a good thing for us to given given the steepening of the curve that we've seen although it's flattened recently.

As we were limiting the total steepening nicely.

In terms of interest, earning lending balances and.

I think we will.

Necessarily.

<unk>.

Expect that deposits would stop.

Running down if you like.

As a prerequisite for interest, earning balances to increase but nonetheless.

Consumers are in credit.

Credit conditions.

There is no real stress in our books delinquencies continue to tick.

Credit conditions remain pretty benign across corporate and consumer.

So.

<unk>.

It's got a sort of a benefit on the impairment line that we shouldn't ignore run rate impairments, obviously are running much lower than they were pre crisis, but I think the most important thing for.

Our interest, earning lending balances formation is just discretionary.

Down spend.

I think all the lead indicators look okay. There.

It's just that none of us really know for certain.

When they will move into.

So the revolving balances and of course.

That discretionary spend travel is such an important.

Tim.

<unk>.

It's the summer months will be important for that I think.

So I'll hand over to you for valuation.

It's a good question first.

Asleep.

The board and management are keenly focused on our stock price and the market value.

It's important for our shareholders obviously.

According to the board and management I'd, just step back a little bit.

6 years ago, we embarked on.

A pretty extensive restructuring of the bank.

We reduced the head count of Barclays.

A year and a half period by 55000 people things like exiting <unk>.

Its looking from France.

Italy, Spain to getting out of the African footprint that we had to reducing the investment banking footprint much more to the developed markets as opposed to the emerging markets.

Barry.

Extensive restructuring that is behind us and the.

How is the strategy that we set for ourselves in 2016.

And we're going to stick with that and it is now delivering you see it in the profit levels that we are delivering now and the level of capital we've got and now we're beginning to return the excess capital that the bank is beginning to generate we also.

Bank.

We were doing the restructuring has to go through things like PPI charges, which were extensive.

Settlements around capital raises with guitar et cetera, all of that is also.

Behind it so we have the profitability target of a 10% ROIC I think you are right. If you look at the execution of profitability.

Also versus other competitors in Europe.

I think theres a lot of room to move in the stock. It has moved a lot over the last 12 months period.

But we think theres a lot of runway in front of US we keep running the bank as profitably as we are and it will and it will and where it needs to add.

Today.

Thanks, very much the question Jason.

Let me update next question please operator.

The next question is from Chris <unk> of Autonomous Your line is now open. Please go ahead.

Good morning, and thanks for taking my questions.

2 please.

TMA is slide <unk>.

The barrel PMA.

Adjustments and developing those.

The next few quarters.

Learn more about the macro how should we think about that obviously, it's a very big number.

How much conceptually in the PMA is because you don't think the model's working.

In the current environment persists.

She is exclusive to the standard deviation around the macro inputs to the multiples.

Because I guess on the left as we see the index.

In <unk>, we'll know 1 way or the other.

The range of possible outcomes feels like it has to be narrowing as pingpong.

Correct government support comes off of it.

How should we think about that developing we've just sort of interested in any.

Color you can give us that.

On costs, particularly in the CIB.

So if I back that out correctly basically all of the performance topped off in the first half within <unk> I think it was a very modest.

Pinpointing into Q and historically, we've always said that.

Think about recruiting costs in CIB can meet during the year based on your view of where performance is going to be so you don't generally see this kind of.

Seasonality and I think the last 2 times you have big drops in <unk>.

Amounts, but won't keep back into 2016.17, you then have very chunky comfortable key prints.

Is there a risk of that this year has your view on revenues changed meaning that you'll walk Q performance accrual was wrong, how should we think about pack. So I guess I'm trying to get a sense it.

<unk> you are thinking about managing the performance of <unk>.

Accruing the performance cost the cost income ratio of 53% top seems it seems very very low I guess I was trying to.

Think about the sustainability of that.

Thank you.

Thanks, Chris.

Let's do that.

Our CMA and just touch on the cost side for the CIP and just maybe 1 other comment.

CIB costs.

The PMA.

The way we think about this is.

As you've seen from our disclosures we have about.

$2 billion in sort.

So the management overlays that are.

Specifically to do with.

The difficulty that the models have incurred in sort of correctly forecast.

How consumers may be impacted by the tapering of various support measures both in the UK and in the U S. I think youre right to point out that the tapering has begun.

Literally.

Various begun and so we will know.

It's always hard to put an exact timeframe on it but.

Probably into the early part of next year.

What this means to.

Corporations and customers our view is that the.

Reason, we are holding on to those overlays is because.

We are going to need them, we think that that will be.

Some elevated levels of default so we would expect.

To happen then we would just digest that PMA and will get released on our P&L neutral basis of course, if it's a more smoother adjustment and now at the moment conditions look pretty benign we don't see.

We think we any stress.

Indicators in our books.

And then as our coverage levels, perhaps get closer to pre pandemic levels. There may be some P&L benefit will come through but it will be a number of quarters I don't think youll see any any sort of 1 period necessarily and you got to remember it's across consumers.

The vulnerable sectors of the court.

I'm not sure as well.

On CIB costs well.

The call from the 1 of the earlier questions Chris.

I think consensus for this year is overall cost it feels about right to me. So that gives you a sense of if you like the total aggregate.

CIB.

Cost.

Costs.

Typically a normal shaping the CIP is.

The performance is stronger in the first part of the year and not as strong in the second part of it though.

Compensation accruals.

Or to be reflective of that will make the decisions on compensation at the end of the year, We've got all the infill.

Information in front of us with the returns.

So the dynamics that go along with that but.

I think I think the $14.4 for the full year across everything we got feels about right.

So I'm not sure it's more color I would give on that but just is there anything you'd want to add.

Yes, maybe just Chris.

1 way to think about it.

The way I think about it is in the consumer businesses.

Your revenues have a lower level of volatility.

An investment bank.

But your cost basis also has a lower level of volatility in any way your costs.

Our more effects there is operating leverage to that.

As we see the U S and UK consumer businesses recover at the end of.

This year and then into next year, I think you'll see a pretty significant improvement in the cost income ratio in the consumer business.

And the wholesale businesses I think your revenues do have higher volatility, but you.

The next line also because of the variable compensation gives you greater variability to your cost line and we have demonstrated over the last number of years and is well digested inside the bank that the accrual of variable compensation at Barclays. We will start with a reflection of the profitability.

<unk>.

The wholesale business overall profitability goes up accrual was about profitability becomes under pressure, we will try to secure profitability by taking down the accrual variable compensation, so I would not straight lines and variable compensation.

We have identified in the first half.

<unk> of this year.

If we see revenues.

Black ops sub youll see accruals Blackhawk.

Thanks for the question Chris Thanks, Sydney, we have the next question. Please operator.

The next question is from Ed Firth of <unk> Your line.

And is now open. Please go ahead.

Yes, good morning, everybody.

Can you hear me okay.

Yeah, 2 questions. The first 1 sorry about cost again, but I guess, you've given us this new disclosure. So we can all get Greg cited forecasting again going forward.

From the tone of what you're saying it sounds to me like.

A good performance for Barclays going forward is to broadly keep your.

12 billion cost flat.

The structural costs.

We're going to be there or thereabouts, where they are this year, because you've got a lot of stuff to do in the U K and the performance stuff is kind of broadly go with revenue is that is that like a sort of a fair way of looking.

Going forward I'd.

That's my first question and then my second question was just coming back on provisions and coverage.

Sure I quite understand how it works because I think you highlighted $1.9 billion management overlap override and your provisioning, but I mean, if I took that out your coverage ratio would be sort of.

In the low Sixty's, which is way below the coverage you had even.

Before the crisis. So how should we think about that as we look just like a normal world should.

Should we be looking at that management override as something that can come out or should we be looking at your coverage ratio, which I think used to be in the sort of mid <unk> is that sort of level that we should be thinking of as a sort of sort of future future level does that does that makes sense sorry.

Before yes.

Okay.

Okay.

On the call.

Yes, I mean, let me just paraphrase I think what you said to make sure the guidance Im giving us.

<unk> was 1 of the things you or shall we say yes.

The $12 million to $12 billion based costs for this year plus.

Plus or minus FX rates and what have you that feels about right to us in a good decent planning assumption into next year don't forget that based costs does include.

A lot of the investment programs that we've got going on so the J curve in the restocking interest earnings.

Balances in the unsecured book and are growing our payments franchise and all those good things. So there'll be efficiency programs that will be on the other side of that to absorb that the structural cost actions for this year. I think you are right to say they'll probably be more skewed towards the.

The UK Bank and we'll tell you precisely what's going on there as we go through the year.

And then performance cost you said revenue I will just be a bit more cautious there I think.

And just where we want to emphasize this is well returns are important to us we sort of anchor them in return.

Maintenance trying to strike the right balance between shareholders and employee rewards.

It's not a straightforward just formulary.

There's a whole bunch of things we look at we look at sort of.

While businesses generated those returns what is the payment for those business as well as the competitive environment in which areas that we're investing in all of those kind of things, but I have to say the starting point will be anchored in return.

On provision and coverage.

So look we think.

We need if you like those those management overlays, we think there'll be digested as the economy adapts to sort of the post pandemic environment and the government schemes are removed.

So we'll see if that.

We will see what is required and what is and I think if you look like for like the books are probably much less.

Riskier.

In some ways than they were pre pandemic why is that.

Well, we've got lower balances for a start so you've got lower unsecured bunches of sort of the riskier part of the book much higher mortgage balances, but there's very low risk and.

Consumers have been deleveraging and you can see that from the.

Deposit growth on the balance sheet, so I think.

If you like on a unit of risk basis.

It's a much riskier book than we had been going into the pandemic, which is don't forget in the backend of a super long consumer credit cycle. So we don't know what complex levels will need to have it obviously will have to wait and see kind of what's your environment for them is around that time, but.

But.

Yes, I wouldn't lose sight of is the different sort of shape book than we had going into the crisis.

Jeff has any other comments you want to make on that knowing as well sure alright.

Can I just come back on the cost.

If I can just come back on.

Because I guess it was a lot of discussion on Q1.

And there's still a lot of discussion if I look at the range of consensus.

Where the cost would go down going forward and that the structural cost is a 1 off.

From what Youre, saying it doesn't sound like that's helping us let's put it that way.

Does that affect the best guidance I can give you is that the base cost the planning a good timing assumption.

Option for next year is roughly flat year on year, the structural cost actions. The way. We think about them is we don't think of them as run rate isn't something we're going to be doing literally for the next umpteen years, otherwise 50 based costs. These are episodic specific in nature with a very specific objective just like we've had in the.

The real estate charge off and so we'll pull them out and explain whats going on there but.

Based costs, which is kind of really what the bank sort of running at.

Let's say a planning assumption is 12 billion into next year.

Great. Okay. Thanks, very much alright. Thanks.

I said, we have the next question. Please operator.

The next question is from Guy <unk> of Exane BNP Paribas. Your line is now open. Please go ahead.

Hi morning.

Second question is which hasn't been announced already.

Firstly on Barclays UK NIM guidance, the top end of the range still look simple math suggests we're ending.

2021, not so even the lives with 245 basis points.

And Thats been tossed outbound comes in Q3 I was wondering if you can give us a bit of context around that.

On basis points, so sorry, maybe perhaps quantify the relative importance importance are the drivers between the hedge headwind mortgage spread compression of mixed effects. Just so we can think about whether there is upside to that number and how that might evolve.

Both into 2022.

And then on consumer thankful to the commentary so I just wanted to circle back on.

<unk> balances and the reduction we saw in Q2 and gross balances.

In terms of any sort of monthly trends most the majority of that coming in in April given spend data subsequently has improved and translate it looks like.

It's improved in May and June.

And in the U S.

I appreciate all the points, you're making around the globe.

It's coming from less interest paying balances is there any reason why.

Absolutely.

Should be slowing versus the growth we saw in Q2.

And then we've got the growth.

And partnerships to come on board as well it just strikes me that 31 billion of balances in CCM Pete could be <unk> 5 billion also higher in 12 months' time, given the underlying growth.

The partnership so am I being a bit too optimistic on timing there. Thank you.

Yes, Thanks, Scott why don't I handle both of them.

In terms.

UK NIM of our assumptions.

<unk>.

We expect to see mortgage growth, but at.

Slightly tighter margins than we've had in the first half it's been a really robust.

First 6 months of mortgages a record production for us.

Our flow has been above our stock of market share so.

Slightly wider margins than we anticipated so so that's very good.

We're still pretty optimistic on the growth in mortgages, but expect the margins to be a bit tighter than we saw in the first half so.

We may be correct, there we may not be.

Unsecured.

Secure unsecured balances were not expecting any interest earning balance growth.

If we do see growth I hope, we do but we're not forecasting it if we do that will actually be quite accretive to NIM.

And the first thing on sort of hedge.

We talked about the 25.

5 billion also a capacity that we have is skewed towards the corporate business, but to the extent, we utilize that it'll be.

Partially accretive to in the U K bank as well will be mostly skewed towards the corporate banking of course.

No.

Dynamics of the yield curve as well.

And the.

Slight extension of duration that we put on the hedges as well so.

Hopefully that gives you the building blocks to take your own view of whether wed.

Think about our assumptions on UK mortgages on unsecured lending and sort.

So the hedge notional duration, but.

And sort of our view no unsecured growth continued mortgage growth but.

Tighter margins.

Those sort of forecast changes in hedge notional lower or yield curve dynamics, we think we'd be at the top end of names per our guidance, but you can form your own view with those building blocks hopefully in terms of unsecured balances.

We've made a comment you probably.

We haven't got to yet because it's sort of within our results announcement I am sure you sort of get to read over the next few days, but you will notice in our commentary that says it sort of stabilized. So yes. If you like the reductions were in the earlier part of the quarter or any sort of stabilized as the quarter went further on.

It starts with our help to you guys.

Maybe just 1 other thing to add on on on the U S card side.

Yes.

The mix of that business, which we like a lot which is our business is driven by our corporate partnerships, which.

Which we are adding to and you're right to identify that we're going to be growing that portfolio.

Both organically, but also bye bye.

Agreed to new partnerships in the U S. What that does is it levers.

The corporate investment banking relationships that we have in the U S and connected to our ability to manage we think effectively consumer credit.

And manage the reward programs for these large partnership card. So it's got a nice synergy.

And corporations definitely look at both our wholesale relationships and those that would provide something like a co brand card and therefore, it fits very well within our portfolio and our market share in the partnership business.

Our co brand business in the U S is.

We think gives us the scale to be quite competitive.

Yes.

Thanks for your question. Thank.

Thank you.

We have the next question please operator.

The next question is from Edward or lack of Mediobanca. Your line is now.

Please go ahead.

Good morning.

Hello, Hong Kong and then 1 on CCP.

On the cost side, sorry to labor the point, but in the $12 billion ongoing I mean could you give us a sense of what the gross moving parts in terms of savings against reinvestment.

I mean, you talk.

Talk quite.

Holistically about.

Great opportunities I mean, why not spend more money.

Upsides to revenues out of that.

And then on the CCP.

So I'll speak just be the gain in the private bank could you size that for us.

And then digging into the NII clearly.

Down 8% Q on Q or you mentioned interest earning assets.

Average interest, earning assets being down but is that some of the J code defense spend hidden the NII fees I, just want understand kind of the moving parts in terms of the revenue mix in our <unk> this quarter.

Yes, Thanks Adam.

But.

Take them.

Yes.

Sort of growth if you like term capacity generation and investment spend I haven't sort of.

Given guidance on that so I wouldn't call it out.

But it is meaningful to the cost.

Efficiency saves that we're putting back into the.

If you look back into investing back into the company.

In terms of why don't we spend more.

<unk>.

Look I think with all of these things we keep it under review we have a high conviction in the income environment in the outer years, that's why we're spending if you like.

More in some ways on a constant currency basis this year.

Last year, that's a statement of our conviction that now is the time to invest we want to add new partnerships to our cards business shall come onto we want to do the infill stuff on our investment banking business, whether it's prime business. So its equity capital markets.

Our new sector coverage.

Securitized products without the payments.

The business a lot, we like transactional banking, particularly in Europe.

Lots of things that we are investing in because of the conviction. We have on revenues on a constant currency basis. We are spending more this year than we did last year, but we think that balance is about right going into next year, but we'll keep it under review.

On sort of how the <unk>.

<unk> environment.

That's for US in terms of your specific questions on the consumer cards and payments.

The private bank gain that you see.

So the year on year.

You may have heard in my scripted comments that was a property sale so that accounted for part of that.

In terms of NIM the average assets.

Although they were down in the.

Quarter.

They did end up.

The period end so I.

What that tells you is that.

Car balancing the use of stabilized and hopefully beginning to grow.

American retirees partnership coming online in the back end of the third quarter. So we should expect to see a little bit of growth into the sort of the spending season. If you like in the fourth quarter with Thanksgiving and Christmas and what have you.

And we've got.

Mt openings that are.

Actually it's been really really.

At the moment so.

We hope to see bands formation in the <unk>.

Latter part of this year that'll be that'll be accretive, but we'll see where we go from there.

Hopefully that answers your questions Adam.

But in fact, maybe if I can ask.

Sorry go ahead.

I'll go ahead, and then I'll add a comment.

Well I was asking whether there is any kind of cost associated with the marketing and ramping up close.

Card balances in terms of the Jay pipe revenue Contra wherever that is.

Material within the quarter.

Yes, there is actually its actually.

You've got the J code.

It affects some of it as contra revenue some of it didn't cost and of course as we as we opened new cough and people have aligned.

There'll be an impairment and a slight capital tick up so the Jacobs kind of across all lines of the P&L.

Yes, there is an income component as well.

If you want to get into the sort of split.

Specifics of the accounting geography.

Probably not 1 for this quality.

Scott Investor Relations joining me.

Just wanted to get the exact geography royalty model somewhat and Christopher <unk> could probably help you went up.

Understood. Thanks, guys good morning I.

And I guess, what I would add to it is 1 way to think about this is.

2015, 2016, 2017, we executed the restructuring that we've talked about in 2018, we sort of set forth a profitability target for the back of 10% or above 10% and we spent the last couple of years asking or being asked questions by this community and others.

How do you get to that 10% <unk>.

That question seems US then move the size in part because we have invested in driving revenues and as we said we were quite confident that we'll deliver that 10% rote this year in <unk>.

Have the strategy and the cost controls in place too.

To consistently return to that level.

Profitability.

Thanks for your question. Thank.

Thank you.

The next question please operator.

The next question is from Jonathan Pierce of Numis Securities. Your line is now open. Please go ahead.

Hello.

Yeah.

2 questions 1 on these problems. They cope redeemed in June I think they were issued out of Barclays Bank plc, but is there any benefit to.

The U K bank because its there is again the margin guidance for the second half looks.

It looks slightly old, but maybe you can.

Tell us what are the benefits of those bond redemptions, because obviously you had some pretty big coupons, where the benefits of that saw coming across the divisions.

The second question is it is a broader question on distributions because.

The buybacks this year, along with a lot of that let's call. It 6 pence dividend.

Well, yeah, you would've distributed.

About 2 billion pounds.

And in 'twenty 1.

Is there any reason to believe that that level of distribution.

Not sustainable or possibly could even move up was like in 2022 because.

Everything you're telling us here.

It's a software guy Who's obviously, you could come out but the pension contributions drops next year the gap between the fully loaded in the transitional equity tier 1 ratio is only about 40 basis points now.

So we've taken a lot more on somebody way, probably cyclicality than the other banks. So 1 would hope there isn't too much more to come.

Hum.

Sculpsure increased distributions nexia themes seems very much that would you disagree with that and Jim.

To finish up my question, if you can give us a sense as to how the shape of these distributions will look maybe pause because the dividend you're pointing to for this year is a very low proportion of Ah.

The earnings with that.

They expect it to step up next year. Thank you.

Yes, thanks, Jonathan.

Just to talk a bit more about the distributions what on a couple of the other.

<unk> quickly.

The bond redemptions that you're referring to the Barclays Bank.

So that's where most of the impact will be.

So I think I spoke with just a quick question on the spreads are pretty tight and.

Many of the spreads as you'll see helpful for us as a tailwind going into.

Well for next year and beyond.

Distributions.

In terms of capacity.

This is a slightly unusual here because.

<unk>.

EPS.

Got it.

A component of it which of these provision releases, which off necessarily.

This stage capital generative.

May be in subsequent periods as you'll be very familiar with.

I think though.

Could we.

Repeat sort of these levels of distributions into subsequent years the way we think about it is.

Capital return to shareholders is really important for us as a board and a management team.

It is important we do that in a measured and appropriate way and I think the quantum of distribution.

Distributions that you're seeing from us over the course of this year is a good example of our ability to do that on a sustainable basis.

And that's why we're doing it in a prudent measured way, but just any any other comments you want to make on that.

And maybe just ask 1 very good question.

Youre right. So we are we are.

Directing towards the 6 pence dividend for the year.

Our that is both a function of the profitability of the bank, but also.

Attention to get back on a path of manner.

Managing a progressive dividend.

And for our shareholders.

And we know.

That income flow, particularly for our retail investors is very important.

LSI when youre trading at 50% to 60% of book value.

The economics, just pushes you towards a buyback, which we which we are executing.

So I'll just sort of add those 2 commentary.

No.

Alright, guys, thanks, very much Jonathan.

Alright, Thanks, Jonathan.

Can we have the next question please operator.

The next question is from Robin down HSBC. Your line is now open. Please go ahead.

Good morning, Thanks for taking the questions.

<unk> been off but can I just come back to.

Firstly can I say, thank you for the extra disclosure on the structural hedges.

Giving the figure of 2 million Robyn. So there was <unk> 1.1 billion is quite helpful.

But obviously looking at that that suggests that.

There wasn't much by way of structural hedge pressure.

Most anticipated in the second half.

Kind of brings me background kind of Jonathan's question. The question of the area.

Barclays UK margin.

I hear you in terms of the mix change towards mortgages.

Otherwise from consumer credit, but I think what we're all going to find when we when we do the basic modeling is what we call.

910 basis points of margin decline.

In the second half just from from doing that.

So I guess a couple of questions. Firstly are you assuming anything in there on the <unk>.

The portfolio I think that's kind of slightly flat to declining slightly flashes of margins then.

Perhaps certainly in.

GAAP unprofitable that in Q2.

We've been kind of comfortable bounce back and values.

And I guess the second question on <unk>.

Just more broadly.

When you say you're going to be at the top of 240 to 350 basis point range.

$2.51 to 52.

Q1 would that be sort of you know.

Within your also description of being at the top end because.

I'm struggling I think a lot of people on this call are struggling to see how you get to to just $2.50, having them call. It $2.54 to 55 and in the first half.

Any other color would be just quite an appreciated.

Sure.

Yes.

Robyn let me have a correct.

Indirect.

So the question about extra and we don't make it any.

Any of you have assumptions around that that's got a degree of variability to it and we don't try and go too clever and try and forecast that it.

It will bump around a bit but not.

More cost that sort of driving 1 way or the other.

In terms of NIM.

For the remainder of the year, let's say the building blocks for us is.

Mortgages continue to grow well.

But at tighter margins we.

We don't see unsecured balances are growing.

We haven't included.

Nothing of any expansion of hedge or so does.

Yield curve dynamics or anything else into that I think if you're if you're wondering what would make them better.

I guess.

Better mortgage margin will be 1.1 thing.

The mix being slightly different.

Mortgages grow, but unsecured balances grow as well with definitely make a difference.

If we were to do something.

Different on the size of the hedge notional does that change the sort of a more of a grinding effect that doesn't happen.

Can you speak to the yield curve dynamic.

That could feed through over the next sort of couple.

Photos.

When we say top of the top of the range Im not trying not to give a precise number really because there were all these sort of moving parts and I think youre doing the right thing Robin which is.

So the building blocks are in you'll have your own view as to.

Whether we are being optimistic.

Take a cautious in our outlook, but.

I'd, rather not guide you to the nearest quite this point no drug just give you. The building blocks gives you a sense of what we think of those building blocks and then answer your Formula Road.

Our own views around.

Sort of optimism more cautious approach to it.

So much more to add them that I think robyn.

I think it just strikes me and I suspect it strikes a number of other cohorts of thing.

Quite cautious.

The estimate at this point.

I'll leave at that.

Fair enough fair enough.

Fair enough alright, thanks Robyn.

Looking at <unk> on the cloud could we have 1 more question operator.

I think we'll wrap the call up.

And our last question. Please operator.

Your final question, we have time for today is from Martin Light gap of Goldman Sachs. Your line is now open. Please go ahead.

Yes, good morning, and thank you. Thank.

You for taking my questions just 2 brief ones from my side, 1 on U K.

And 1 on the investment bank and <unk>.

Cause just looking at the data it seems like Barclays lost a little bit of market share in the second quarter. I mean, I think today that we have from the bank of England is broadly stable is a familiar.

Slight decline for Barclays UK, maybe maybe I'm reading too.

Too much into enter into new ones. This year, but I was just wondering.

Comments at the turn of the year, where that you're ready to lean into the recovery, which could be rent that's rethinking some of the market share in the UK.

Just take time to manifest itself or maybe you could just talk a little bit what you're doing and how quickly we should expect.

Maybe this ramp up in the UK.

Could come in.

And secondly on the investment Bank I was just wondering if you put it.

Comment a bit more on the outlook for investment banking revenues.

I think some of the comments earlier were that the pipeline fill on the banking side, it's even stronger now.

You're calling out share gains in the second quarter.

Heska outlook potentially for share gains again improved over the last few months.

How should we think about that.

Though the trajectory thank you.

Yeah. Thanks Martin.

The cost of that and I'll ask Jeff to talk about.

The IP outlook.

Yes.

We'd like to stay with the law.

And we do want to lead into UK risks, so youre seeing us express that quite markedly in mortgages at the moment, where our market share.

It is well above our <unk> shares.

<unk> stock.

UK cards wed like for that as well it does take time.

Should anyone to look at sort of the short term.

Surveys and data that.

There's also some sort of all things that go on the zero balance transfer stuff, you've got transacted that he could build balances to be done on interest on that.

So I'll just maybe look at it on a rolling basis Youre right. There Martin we have ceded market share so the leading up to the pandemic.

And that was.

Well aware of vessel at a more cautious stance on the back of Brexit and some of the disruption we expected that.

We are keen on.

On growing that.

Business and we expect to do so over time definitely chest.

Yes, you want to touch on IP.

Just echo what you said about UK cards I think appropriately.

Going into our outlook.

The other dynamic we did take a conservative approach around unsecured credit and I think you see it.

And the inherent leverage that are that are happening now.

And out of the recovery I think seems to be well on its way we are.

Much more comfortable and leaning into as to sharp said.

U S U.

UK, both secured and unsecured credit in terms of the investment banking outlook on revenue side.

You're right.

The banking pipeline E M&A ECM and DCM continues to be quite strong and building for us that's encouraging we did see some market share gains.

But we wanted to do the right business with the right clients with the right reasons, we feel comfortable about about our position.

In investment banking space and then as I said in my in my remarks, I think to certain extent, what what what goes less appreciated as possible.

This volatility in markets revenue driven by volatility in the markets themselves underlying the markets.

Capital.

We are growing at a very fast clip.

So at 53% over the last couple of over the last number of years and that is because in our view the regulatory framework.

But of the large financial systems today are to rely on financing left on bank balance sheets.

On the capital markets and the growth of that type of market is going to feed into our trading securities and derivatives around that market and so we expect with some volatility the trajectory will continue to be growth.

Thanks for the question.

Very clear thank you.

Thank you.

We'll wrap the call up there.

So everybody joining us and hopefully we will get a chance to speak to many others.

As we do calls and what have you thereafter, but with that I'll close the call. Thanks very much everyone.

Thank.

That concludes today's conference call.

<unk> has now ended.

[music].

Patients has now ended.

[music].

Person.

[music].

Yeah.

[music].

This presentation has now ended.

[music].

This presentation has now ended.

[music].

[music].

[music].

<unk>.

[music].

And it.

[music].

Now it.

[music].

[music].

Presentation has now ended.

[music].

Innovation has now ended.

[music].

This person.

[music].

[music].

This presentation has now ended.

[music].

This presentation has now ended.

[music].

[music].

[music].

Has now ended.

[music].

Now ended.

[music].

[music].