Q1 2025 Barclays Bank PLC Earnings Call
Welcome to Barclays Q1, 2025 results analyst and Investor Conference call.
I will now hand over to see a spending cut Krishnan group Chief Executive before I hand over to Anna Cross Group Finance director.
Good morning, everyone. Thank.
Speaker Change: Thank you for joining Barclays as first quarter 2025 results call.
Speaker Change: And our progress update 11 weeks ago.
Speaker Change: Outlined expectations for the second deal for three year plan. These work to deliver a better run more strongly performing.
Speaker Change: And hydrogen bookcase.
Speaker Change: I am pleased with our performance and progress to date, including in this the first quarter of 2025.
Speaker Change: While the environment has certainly become more uncertain, we are firmly on track to achieve the objectives of our plan, including.
Speaker Change: Approximately 11% return on tangible equity for 2025.
Speaker Change: Our confidence reflects the inherent diversification of our business.
Speaker Change: The careful and proactive approach, which we adopt managing risk.
Speaker Change: And our ongoing focus and delivery of operational efficiency.
Speaker Change: All of this is supported by a robust balance sheet.
Speaker Change: <unk>, a 13, 9% CET one ratio at the end of the first quarter.
Speaker Change: This is intentionally towards the top of our 13% to 14% target range.
Speaker Change: In addition, we are supported with very strong liquidity.
Speaker Change: In the first quarter Barclays generated a return on tangible equity of 14%.
Speaker Change: This was achieved even as tangible book value grew 11% year on year to 372 times.
Speaker Change: Total income for the first quarter was $7 7 billion pounds, and importantly, the quality and stability of our income continues to improve.
Speaker Change: Looking ahead, we remain confident in our income growth profile and today, we are upgrading 2025.
Speaker Change: Guidance for Barclays, UK, and the group, reflecting favorable deposit volumes and mix.
Speaker Change: And we will amplify our topline growth through positive operating leverage as we did again during the first quarter.
Speaker Change: We had 6% jaws, delivering a 57% cost to income ratio in the quarter.
Speaker Change: Moving on to our Q1 performance.
Speaker Change: We're improving operational performance across the businesses to drive sustainably higher financial returns.
Speaker Change: Last quarter, we released around the $150 million of the circa $500 million gross cost efficiency savings, which we expect during the year.
Speaker Change: Savings structurally improve our cost base and the level and consistency of our returns including beyond 2026.
Speaker Change: We are generating higher returns in two ways.
Speaker Change: First by allocating more capital to the highest returning U K businesses.
Speaker Change: And second.
Speaker Change: By improving returns in the lower returning businesses in the bank, namely the investment bank in the U S consumer bank.
Across the three UK businesses, we continue to grow our risk weighted assets in the quarter and delivered returns at or around the full year 2006 stock levels.
Speaker Change: Returns in the investment bank was supported by ongoing execution of management actions and strong activity in markets and.
Speaker Change: In particular in fixed income and credit, where we monetize activity well.
Speaker Change: And continued a disciplined approach to risk management.
Speaker Change: As you would expect in a period of uncertainty weaker client confidence is delaying investment banking transactions.
Speaker Change: But for US this has been more than offset by the benefits.
Speaker Change: The impact of volatility on trading revenues in markets.
Speaker Change: <unk> in the U S consumer bank failure on year to four 5%.
Speaker Change: Operational performance of the business continues to progress as we expected.
Speaker Change: Finally, we are continuing to simplify our businesses.
Speaker Change: Two weeks ago, we announced a long term partnership with Brookfield to transform our payment acceptance business.
Speaker Change: Looking forward to working closely with our partner.
Speaker Change: Enhance the client experience and drive long term growth and improved financial performance for this activity.
Speaker Change: Earlier in the quarter, we completed the sale of our German consumer finance business.
Speaker Change: So while we remain focused on executing our strategy and achieving our targets.
Speaker Change: We're obviously paying close attention to the recent market volatility and what it may imply for economic growth and business activity.
Speaker Change: And so before I hand, it over to Anna.
Speaker Change: Let me offer some reflections on the current backdrop.
Speaker Change: I want to emphasize that the outset that our strategy has been designed to deliver in the range of economic and financial environment.
Speaker Change: And I reiterate our confidence in achieving the targets, which we have set out financially and operationally for 2025 and 2026.
Speaker Change: Our role as ever.
Speaker Change: Is to help clients navigate the changes in the environment.
Speaker Change: You must do so while prudently managing our own risk.
Speaker Change: We are well positioned to do this.
Speaker Change: We start with the business mix that is diversified geographically across wholesale and retail and byproduct.
Speaker Change: And in fact, all of this is well illustrated by the first quarter results, which we are discussing.
Speaker Change: Last but not least.
Speaker Change: Our customers start from a resilient position in.
Speaker Change: In the U K household balance sheets are robust and spending trends have been stable.
Speaker Change: And our U S consumer businesses, our balances are skewed to prime and Super Prime customers.
Speaker Change: And spending and payment rates across our U S customer cohorts have remained stable, including among lower FICO customers.
Speaker Change: On the wholesale side corporates are cautious about new borrowing and demonstrated desire to maintain liquidity.
Speaker Change: Having said all of that.
Speaker Change: The current environment and.
Speaker Change: And market volatility.
Speaker Change: Undoubtedly require attention and management.
Speaker Change: Looking ahead, we expect net interest income to grow further and for markets revenues to be roughly commensurate with volatility.
Speaker Change: However, transat.
Speaker Change: Transactional and lending income could slow.
Speaker Change: As companies and individuals become more cautious.
Speaker Change: This income mix provides a good measure of structural protection and stability.
Speaker Change: On top of this we have to protect ourselves as we always do with active risk management.
Speaker Change: We have long established programs to transfer and hedge risk.
Speaker Change: And we will continue to do so as warranted by this environment.
Speaker Change: Finally, we continue to provision prudently across all our portfolios.
Speaker Change: In conclusion, while we recognize the risks that are inherent in the current environment we remain.
Speaker Change: Confident in.
Speaker Change: On our income outlook.
Speaker Change: And our positioning ourselves carefully to navigate through.
Speaker Change: Through this current circumstance.
Speaker Change: We remain committed to and confident in delivering our 2025 guidance in 2026 targets, including an approximately 11% our LTE and the progressive capital distributions this year.
Speaker Change: I will now hand over to Anna to take us through the first quarter financials.
Anna Cross: Thank you. Thank you and good morning, everyone.
Anna Cross: Slide four summarizes the financial highlights for the first quarter.
Anna Cross: Before going into the detail I would remind you that we are focused as ever on what we can control.
Anna Cross: Targets, we called out at the Investor update.
Anna Cross: On realistic assumptions about the external environment.
Anna Cross: These are unchanged from the full year results and as shown in the appendix.
Anna Cross: The great diversified business model by income and geography helps support returns in the range of environment delivering a key one racy as 14%.
Anna Cross: This was against the previous year's 12, 3% with much of the improvement reflecting income price across all five divisions, particularly late the investment bank and Barclays UK.
Anna Cross: Operating leverage is a key aspect of the plan to structurally improve.
Anna Cross: Dan.
Anna Cross: Income rose by 11%, while costs rose by 5% delivering 6% positive jaws and driving a 19% increase in profit before tax.
Anna Cross: $2 7 billion.
Anna Cross: This performance was further amplified by the effect of the share buybacks during the past year, leading to a 26% increase in earnings per share.
Anna Cross: I remain focused on four aspects of.
Anna Cross: Performance.
Anna Cross: Income stability with an increased emphasis on price.
Anna Cross: Cost discipline and progress on efficiency savings.
Anna Cross: Performance and a robust capital position.
Anna Cross: These underpin our aim to deliver high returns on a sustainable predictable and consistent basis.
Anna Cross: I will now cover these in more detail starting with income on slide six.
Anna Cross: Income in Q1 increased 700 million to $7 7 billion.
Anna Cross: This growth was broad based including from stable income streams in retail corporate and financing activities within market.
Anna Cross: In the investment bank, we captured the benefit of greater market volatility during the quarter supported by our investment across the business.
Anna Cross: Barclays UK strong.
Anna Cross: Back to deposit trends are supporting higher NII as shown on the next slide.
Anna Cross: Net interest income increased 13% year on year to $3 billion.
Anna Cross: In Barclays UK, we now expect more than $7 6 billion of NII during FY 'twenty five.
Anna Cross: From circa seven 4 billion previously.
Anna Cross: Key changes have led to this improvement in our outlook.
Anna Cross: First Q1 seasonal deposit volumes were higher than we expected, particularly in current accounts.
Anna Cross: Consistent with more normalized behavior.
Anna Cross: Second the mix of saving has stabilized faster than we expected.
Anna Cross: This improvement in deposit mix supports our confidence in delivering Tesco Bank post acquisition funding costs.
Anna Cross: These developments on the <unk>.
Anna Cross: <unk> start to the year across other businesses, meaning we now expect greet NII, excluding the IP and head office to be more than $12 5 billion for FY 'twenty five up from circa $12 2 billion previously.
Anna Cross: The continued strength of deposits also supports greater longer term income stability by the structural hedge.
Anna Cross: We have now locked in $10 2 billion of gross structural hedge income over the next two years up from $9 1 billion last quarter and this income will build further as we reinvest maturing hedges.
Anna Cross: We said in February that we expect to reinvest three quarters of maturing hedges at a three 5% yield.
In Q1, we were able to lock in hedges at a higher rate than our assumption with a stable hedge notional.
Anna Cross: Continued deposit strength.
Anna Cross: Means we now expect to reinvest around 90% of maturing hedges during 2025 and 2026.
Anna Cross: 75% previously.
Anna Cross: Given this reinvestment profile on the <unk>.
Anna Cross: Planning assumptions for three 5% swap rate we.
Anna Cross: Expect the contribution from the structural hedge to continue well beyond 2026.
Anna Cross: Moving onto costs.
Anna Cross: Great cost to income ratio was 57% in Q1 <unk>.
Anna Cross: This provides a strong foundation to deliver our guidance of circa 61% in 2025 and the high Fifty's target in 2026 with scope to increase further thereafter.
Anna Cross: Total cost increased by $189 million year on year with around half of this increase related to run rate costs for Tesco Bank.
Anna Cross: Q1 costs also included circa $50 million for the employee share announced our full year results.
Anna Cross: These and other investments in business growth and inflation, partially offset by a range of $150 million of gross efficiency savings as part of the $500 million, we expect in 2025.
Anna Cross: Expenses associated with structural cost actions were modest in Q1 and are likely to be weighted towards the second half of 2025.
Anna Cross: And then the $2 million to $300 million normal annual range.
Anna Cross: Turning now to impairments.
Anna Cross: I know that development in the U S. In particular are a big focus. So we have included some additional color on the positioning of our U S card business in the appendix.
Anna Cross: Customer behavior does not reflect risks the economic outlook and we start from a resilient position, including an ISR.
Anna Cross: <unk> coverage ratio of 10, 4%.
Anna Cross: Or eight 3% on a seasonal basis.
Anna Cross: Both 30, and 90 day delinquencies were stable in the quarter as you can see from the two lines on this page.
Anna Cross: The uscb loss rate of 562 basis point increase versus Q4, reflecting reserves built for higher seasonal balances.
Anna Cross: Post model adjustment.
Anna Cross: I'll discuss this more on the next slide in the context of the group.
Anna Cross: The key one impairment charge of <unk> 6 billion equating to a loan loss rate of 61 basis points modestly above our 50 to 60 basis points through the cycle guidance.
Anna Cross: As a reminder, our impairment charges based on consensus economic forecast prevailing towards the end of the quarter.
Anna Cross: These forecast were largely unchanged from FY 'twenty, four and so do not reflect elevated U S economic uncertainty.
Anna Cross: To address this.
Anna Cross: System with our approach to uncertainty in the past, we increased the probability weighting of downside scenarios.
Speaker Change: <unk> nine calculations for U S portfolios.
Speaker Change: This led to a net post model adjustment of 74 million included within the U S consumer bank.
Speaker Change: And the investment bank.
Speaker Change: The impact for U S costs relate mainly to a change in the weighted average peak U S unemployment rate from four 7% to five 3%, resulting in a $38 million adjustment while in the investment bank a reduction in the weighted average U S GDP growth.
Speaker Change: From one 6% to 8%.
Speaker Change: Led to a net $36 million model adjustment.
Speaker Change: Outside of the U S. The increase in the Barclays UK loan loss charge was mainly driven by the addition of Tesco Bank. This included a circa 30 million charge for the post acquisition stage migration of some Tesco bank balances, which should diminish beyond Q1.
Speaker Change: Aside from Tesco Bank, the loan loss rate for Barclays UK increased modestly but remains low.
Speaker Change: You can see financial highlights for Barclays UK on slide 12, but I will talk to slide 13.
Speaker Change: Rosie was 17, 4% in the quarter in total income raised 14% year on year to $2 1 billion.
Speaker Change: The integration of Tesco Bank is progressing well with the improved deposit mix, providing greater confidence, although lower post acquisition funding costs.
Speaker Change: As a result, we now expect circa $500 million of NII from this business in FY 'twenty five included within the updated NII guidance versus circa $400 million, we expected previously.
Speaker Change: Stronger our structural hedge income also supported greater NII versus Q4, and more than offset product margin headwinds.
Speaker Change: Non NII of $252 million was weaker due to seasonally lower customer spend and we continue to expect our quarterly run rate above $250 million.
Speaker Change: Overall income growth of 14% exceeded cost strengths of 9%, enabling the cost to income ratio to fall to 56% Despite higher investment in run rate cost for Tesco Bank.
Speaker Change: Moving on to the Barclays U K balance sheet.
Speaker Change: Deposits in the quarter was stronger than expected with balance is done on the $1 1 billion consistent with a more normalized behavior.
Speaker Change: The mix of deposits continues to develop favorably with customers choosing to retain liquidity to current accounts and instant access savings account.
Speaker Change: Loan growth also continued in Q1.
Speaker Change: One 9 billion of net lending driven by mortgages, partially offset by lower business banking lending as clients continue to repay COVID-19 era alone.
Speaker Change: Indicators of future lending activity continued to increase as we pursue our strategy to deploy capital into the U K.
Speaker Change: The momentum and breath of UK growth that we saw in the second half of 2020 for continued in the first quarter.
Speaker Change: Great mortgage lending remains strong.
Speaker Change: <unk> among highly levered firsthand buyers supporting net lending of $2 2 billion.
Speaker Change: We acquired 386, new credit card customers.
Speaker Change: Part of our strategy to regain market share in unsecured lending.
Speaker Change: This should support future growth and balances as customers' appetite to borrow normalizes.
Speaker Change: And we saw continued deployment of risk weighted assets in the UK corporate bank supporting one 3 billion loan growth as clients continue to drawdown lending facilities.
Speaker Change: Moving on to slide 17.
Speaker Change: UK corporate bank delivered a Q1 rate of 17, 1%.
Speaker Change: Income growth of 12% exceeded cost rate of 3% leading to an improved cost to income ratio of 53%.
Speaker Change: NII was up 23% year on year, reflecting higher average lending and deposit balances, while non NII fell 10%.
Speaker Change: While this line can be volatile, we expect investments in our digital and lending proposition to drive non NII growth over time.
Speaker Change: Impairments remain low and stable decreasing quarter on quarter with lower single name charges.
Speaker Change: Turning now to private bank and wealth management.
Speaker Change: Q1, <unk> was 34, 5%.
Speaker Change: Client assets and liabilities to reverse in Q4, including net new assets under management of $1 billion.
Speaker Change: And income growth of 12% exceeded cost rate of 9% leading to a cost to income ratio reduction to 68%.
Speaker Change: As previously guided you should expect an increase in investment costs in the quarters to come to support advisor growth product development and digital capabilities.
Speaker Change: Turning now to the investment bank.
Speaker Change: Q1 ratio of 16, 2% was supported by income growth across most areas of the IP.
Speaker Change: Total income was up 16% year on year, while tasteful cost rise, 5%, resulting in positive jaws and a cost to income ratio of 54%.
Speaker Change: Capital productivity measured by income over average part of the raise was seven 7% or 120 basis points better year on year.
Speaker Change: More now on income by business on slide 22.
Speaker Change: Using the U S dollar figures as usual to help comparisons to USPS markets income was up 16% year on year.
Speaker Change: Thick rose, 21% with particular strength in macro products across rates and FX and in securitized products.
Speaker Change: Equity income was up 9% or by 27% excluding the prior periods one off gain on visa B shares.
Speaker Change: Financing and equity derivatives were particularly strong.
Speaker Change: Investment banking fee raised 4% off.
Speaker Change: <unk> share was three 5%, including an improvement in ECM and advisory.
Speaker Change: While clients are waiting for a more stable market environment before transacting pipelines remained strong.
Speaker Change: In transaction banking income increased 8% as we continued to implement our treasury coverage model.
Speaker Change: This also contributed to use deposit balance price of around 50% year on year, which we see as a lead indicator of transaction banking income growth.
Speaker Change: And corporate lending income increased strongly year on year, reflecting gains on leverage finance positions.
Speaker Change: The investment bank is on a multiyear journey to generate higher and more consistent returns volatility.
Volatility creates opportunities in markets, where we generate around two thirds of investment bank income.
Speaker Change: Investments, we have made into this business allowed us to monetize these opportunities well during Q1, we did this while prudently managing risk with stable vol and no loss days in our trading book.
Speaker Change: And in banking, we entered into the most recent period of volatility with limited exposure to risk including in less spin.
Speaker Change: We are also making good progress in our management actions, including in our three focus businesses equity derivatives European rates and securitized products.
Speaker Change: All while growing the more stable income streams within the investment bank, including financing.
Speaker Change: Turning now to the U S consumer bank.
Speaker Change: U S consumer bank rate was four 5% in the quarter, including the $38 million post model adjustment I mentioned earlier.
Speaker Change: Total income was up 1% year on year as lower NII was offset by higher non NII.
Speaker Change: NII was down 1% with NIM of 10, 5% driven by a full quarter impact of rate cuts in Q4, 2004, which drives spread compression with deposits taking longer to reprice and asset.
Speaker Change: This interest rate risk is hedged with the offsetting benefit reflected in non NII, which increased 9% year on year.
Speaker Change: We remain confident in achieving NIM of greater than 12% by 2026.
Speaker Change: We expect meaningful progression during 2025 as the impact of our repricing actions take hold in the portfolio.
Speaker Change: Total costs were up 5% due to an increase in partner related expense, which is mostly offset in higher non interest income.
Speaker Change: We continue to make good progress in increasing digital adoption on driving efficiency.
Speaker Change: And net receivables increased 4% year on year to $33 billion on a managed basis all from organic growth.
Speaker Change: We continue to see strong retail deposit growth, including $2 billion quarter on quarter and $4 billion year on year, driven by the th savings products that we launched in Q3 2024.
Speaker Change: The percentage of total funding coming from core deposits now stands at 68% and we expect this to increase going forward in line with our target of greater than 75% in 2026.
Speaker Change: Moving to the main developments impacting head office.
Speaker Change: Earlier this month, we announced a long term partnership with Brookfield.
Speaker Change: Payment acceptance business previously referred to as merchant acquiring.
Speaker Change: This business is strategically important but had become less able to compete in recent years given technology changes in the sector.
Speaker Change: Absent investments financial performance was expected to deteriorate.
Speaker Change: During the partnership Barclays will invest circa $400 million, mostly in the next three years to enhance the range of services and precision efficiency and support growth.
Speaker Change: This will begin in Q2 and has no material impact on our current financial targets or guidance.
Speaker Change: Over time, we expect the partnership to improve the financial performance of the business as part of Barclays Great.
Speaker Change: Is brookfield choose to increase their ownership interest after three years, our investment will be fully recovered and we will retain an interest of around 20%.
Speaker Change: Moving to capital.
Speaker Change: We ended the quarter at the top end of our 13% to 14% target range with a CET one capital ratio of 13, 9%.
Speaker Change: This included 53 bps of capital generation from profits and a 12 that benefits from the sale of German consumer finance.
Partially offset by the 28 that impact of the 1 billion share buyback and then FY 'twenty four result.
Speaker Change: <unk> decreased around <unk> 7 billion from Q4 to $351 billion with FX accounting for circa $3 billion of the news.
Speaker Change: The sale of the German consumer finance business reduced head office at <unk> by $3 3 billion of Barclays UK and the U K corporate bank. So a combined odds of UA increase.
Speaker Change: 8 billion.
Speaker Change: Investment Bank <unk> was 56% of the overall Greek and broadly flat from Q4, excluding FX. Despite the higher income unusual Q1 seasonality.
Speaker Change: As usual a word on our overall liquidity and funding on slide 29.
Speaker Change: We have strong and diverse funding, including a 73% LDR and an <unk> of 136% and we are highly liquid across currencies with an LCR of 175%.
Speaker Change: These measures reflect purposeful and prudent management of our balance sheet and risk delivering resilience and capacity to support customers in a range of economic environments.
Speaker Change: Tina per share increased 15% in the quarter.
Speaker Change: <unk> seven points year on year to 372 tenants.
Speaker Change: Attributable profit added <unk> 12 per share during Q1, and the unwind of the cash flow hedge reserve for peds.
Speaker Change: We expect the majority of the remaining cash flow hedge reserve to unwind by the end of 2026.
Speaker Change: This online combined with earnings growth and bought that give us confidence that <unk> will continue to grow consistently.
Speaker Change: Have done for the last seven quarters and to a greater degree than current consensus expectations.
Speaker Change: So to summarize we are pleased with the strong performance of the bank in Q1, which sets us up well to deliver on all our 2025 guidance as we build towards our 2026 targets.
Speaker Change: Over to you for concluding remarks.
Speaker Change: Thank you Anna <unk>.
Speaker Change: Five quarters into the three year plan, we remain on track to deliver our goods.
Speaker Change: <unk> hard to deliver sustainable operational and financial improvement across our businesses.
Speaker Change: In turn.
Speaker Change: We expect will drive higher group returns and shareholder distributions.
Speaker Change: I will now open the Q&A.
Speaker Change: Ever please limit yourselves to two questions per person so.
Speaker Change: So we can get around as many of you as possible and as always please introduce yourself as you ask questions. Thank you.
Speaker Change: If you wish to ask a question. Please press star followed by one on your telephone keypad. If you change your mind and wish to remove your question. Please press star followed by two.
Speaker Change: Our first question comes from <unk> <unk> from BNP Paribas. Please go ahead. Your line is now open.
Speaker Change: Hi, good morning, everyone. Thanks for taking the questions and a good set of results today I think what I focus on the <unk>, which is what you said gets quite a lot of attention, which is the U S consumer.
Speaker Change: Thanks for the extra disclosure I was just hoping you could help us think about.
Speaker Change: The book and the structure as we look forward so firstly on the impairment charge.
Speaker Change: I guess for the quarter.
Speaker Change: The actual write offs themselves were flattish and that sort of in line with the last four quarters, you've taken the PMA and increase the coverage.
Speaker Change: Could you talk to the drivers of the increase in the reserve build that goes above and beyond the PMA this quarter perhaps.
Speaker Change: And in terms of the growth.
Speaker Change: We look forward the strategy is pretty great.
Speaker Change: Raimo square from business, but I think a lot of people would understand you being a little bit more circumspect as delinquency trends.
Speaker Change: They were deteriorating. So my question really is sort of how would it all use of growing the book meaningfully as planned and into higher margin slightly higher risk segments.
Speaker Change: And how easy would it be to pause that growth. If you like presume you're sort of still feel good in the long term outlook and dermal to exit partnerships. So trying to understand how you weigh up balancing not strategic outlook with the current uncertainty. Thank you.
Speaker Change: Thank you guys. Thank you for the questions. So I will take the first one and then I'll then I'll pass.
Speaker Change: Second one to Venkat.
Speaker Change: So.
Speaker Change: As we look at our U S consumer business right now we have given you additional disclosure on got that's helpful. That's on page 38, and is a bit more of a holistic.
Speaker Change: <unk> of what's going on in the U S market generally, but also in our book, but really what happens in key one is as it <unk>.
Speaker Change: Mathstar, you've got a slight seasonal elevation in the impairment charge, we normally see that in Q1, and it's just reflective of the high levels of consumer spend that we see in Q4 through the holiday season. Typically what then happens is you start to see that reverse in Q2 and beyond so safe.
Speaker Change: Very straightforward.
Speaker Change: Forward.
Speaker Change: In terms of the PNA, it's worth stepping back and thinking about what we consider when we book impairment and we're looking at two things.
Speaker Change: First is consumer behavior and the second is what we expect to happen in the macroeconomic environment.
Speaker Change: On the first in consumer behavior, we see no change and you can see that clearly on the chart delinquencies are relatively low and stable.
Speaker Change: Actually we see no change on the second so U S. Economic consensus forecast are actually relatively static and thats very similar to where they were at the full year, but we think that's likely a timing issue and therefore, it's reasonable for us.
To assume that they will change in the coming weeks and months and therefore, we're trying to get ahead of that so we're being thoughtful and methodical. So what we've done is essentially skew the downside bias in the impairment charge to accelerate a bit of coverage here, but.
Speaker Change: But just as we step back the performance of the book itself is extremely robust.
Speaker Change: Yes so.
Speaker Change: I think I have said in the past when I look at the book overall, that's about <unk> corporate clients $20 million underlying customers.
Speaker Change: I look at the risk of we look at the risk of this portfolio.
Speaker Change: Four dimensions. The first dimension is who is the partner and what business, we're in and so on the second Dave.
Speaker Change: Related to that what's the industry we've had.
Speaker Change: Towards travel and we are looking to been looking to diversify out of travel.
Speaker Change: Yeah to general Motors, and we chose not to renew American or our share of American the third is the size.
Speaker Change: Renewal rates that we'd like to have a mix that is relatively smaller to the overall portfolio and not a lot of renewals coming in at the same time and the last one is the actual underlying credit card.
Speaker Change: Credit worthiness of the board.
Speaker Change: And through this combination we like to create a business with a stable risk and high risk adjusted return. So when you take all of this together.
Speaker Change: We are continuing to want to grow this business.
Speaker Change: We do think the opportunities are good obviously vivo factor.
Speaker Change: In the consumer environment, when we do the actual risk selection of customers and look to get good risk adjusted returns investments selection of who do you open an account for and how do you manage credit lines.
Speaker Change: But we will continue to see good partners to diversify our book and bring this opportunity.
Speaker Change: Thank you Guy.
Speaker Change: Can we go to next question please.
Speaker Change: Okay.
Speaker Change: Operator could we go to the next question. Please.
Speaker Change: Of course, the next question comes from Benjamin Toms from RBC. Please go ahead. Your line is now open.
Benjamin Toms: Good morning, guys. Thank you.
Speaker Change: My questions.
Speaker Change: Radio around regulations Barclays as being a market leader on SRT transactions and in April the regulator about till we get banks highlighting concerns.
Speaker Change: This area is there any headwinds capsule that we should be considering as a result of implementing any relevant changes that are identified in that letter.
Speaker Change: Secondly, some of your peers Arista as the government asking for softening in the ring fencing regime, how material could a change in regulation fee here for you.
Speaker Change: Outside it feels like you'd be one of the largest beneficiaries of any change here. Thank you.
Speaker Change: Thank you Ben and good morning, again, I'll take the first and then hand to.
Speaker Change: <unk> for the second.
Speaker Change: So on the SRT, the DSA ESI less that we and others received recently.
Speaker Change: Deal with SRT, but it was actually more focused on the financing of SRT and to be really clear, we do not finance our own SRT programs that we're not we're not extending financing to investors who are then ongoing invested in RF sate. So we think thats the focus.
Speaker Change: And from our perspective, we've run our culinary program since 2016, we share the details of each tranche of that with the regulator in order to get capital relief and we manage the reinvestment risk around that very very carefully as we've outlined before so.
Speaker Change: We're comfortable with our position and wouldn't envisage any capital consequences.
Speaker Change: And so.
Speaker Change: So on ring fencing, I think you know that off the mutual UK bank.
Speaker Change: We have been opposed to any change and relaxation in fencing regime.
Speaker Change: I agree.
Speaker Change: With what others see that there is friction in the system those obviously.
Speaker Change: High cost to set up the <unk>, let's call it a sunk cost now.
Speaker Change: And there is a little bit of trapped capital and liquidity.
Speaker Change: And if you release that in the short term it would be good for banks and this argues for some customers, but I think in the long term could reconsider some because it weakens deposit protection I think <unk> is an extremely strong and secure form of deposit protection in the UK and while it might be short term attractive I think in the long term.
Speaker Change: The system that weakens the participants in the system and that includes Barclays. That's why on balance I do not think we should change there in sensors, even I'm a strong supporter of it in its current form.
Speaker Change: Thank you.
Speaker Change: <unk> very much and perhaps we can go to the next question. Please.
Speaker Change: The next question comes from Chris Cant from Autonomous. Please go ahead. Your line is now open.
Chris Cant: Good morning, Thank you for taking my questions I have two please.
Speaker Change: Out of the way.
Speaker Change: How should we think about <unk> development into <unk>, specifically thinking about market risk here given the volatility obviously <unk> was a somewhat unusual quarter where <unk>.
Speaker Change: <unk> were down on a constant FX basis didn't seem to demonstrate the usual seasonality. So any color you could give us on how to think about.
Speaker Change: Q on Q auto developments into two for the IV would be would be helpful. Please.
Speaker Change: Do you think to sort of targets for 2026 targets that you've given us previously.
Speaker Change: In the circa $50 million of auto Poa growth you expected.
Speaker Change: By the end of 2026, when she puzzle III has been delayed.
Speaker Change: <unk> I'll be transition.
Speaker Change: I guess, it's probably going to be a 2017 event I know you said, it's sort of ambiguous, but that's not necessarily going to hit you.
Speaker Change: With fee, we could pillar I guess, that's also going to reduce.
Speaker Change: This call if you have any growth how should we be thinking now about what you expect to land in 2026 folks agree <unk> relative to that previous 50 billion.
Speaker Change: Growth expectation.
Speaker Change: And I also just wanted to ask one on the U S. So thank you again.
Speaker Change: Reconfirming the FX splits group. Unlike the incoming cost setting that's helpful for us in thinking about the weak dollar.
Speaker Change: But in the event that the U S administration applied some section 899, Texas to UK companies for instance, Q2 digital service tax proposals how would we be best thinking about the possible impact of Barclays would it simply be a case of taking fee.
Speaker Change: Country by country disclosures, you can give us multiplying that percentage of PBT by the relevant incremental tax top up or is there something more nuanced we need to do in terms of subsidiary financials and that sort of thing. Thank you.
Speaker Change: Thank you Chris I think there are at least three questions. There. So I will attempt to deal with them in order.
Speaker Change: So on the IP <unk>.
Speaker Change: We remain fairly clear that the business should operate within the third <unk>.
Speaker Change: 200 billion of OWS.
Speaker Change: We've allocated to it and you can see us doing that very very consistently actually since 2003. So we were doing it for some time before we even did the investor update.
Speaker Change: Period is no different really and you can see that nimbleness and <unk> deployment in the first quarter. So if you look at the disclosures you will see that credit risk at <unk> are down market risk <unk> are up and counterparty credit risk or the delays are up.
Speaker Change: So our intention is to manage it nimbly within the framework that we have given them.
Speaker Change: And so that to your second part of the question, which is which is really around the.
Our W. A shape from here.
Speaker Change: I mean, I think the way we think about it Chris is that there is some uncertainty around.
Speaker Change: The timing and quantum of the regulatory impact and we've given you our best view that may happen.
Speaker Change: Beginning of 2007 as opposed to the end of 'twenty six.
Speaker Change: But we don't feel that it undermines the fundamental objective of the plan and the fundamental objective of the plan is to hold our ought to be raised in the IV broadly flat as I've said and to deploy our <unk> growth.
Speaker Change: Into our highest returning UK businesses and that part of the plan, which is if you like is the most strategic path.
Speaker Change: <unk> intact, and I think as the regulatory environment becomes clearer on those timings become clear we can get he set of exact splits and then parts of that.
Speaker Change: And then on the final part.
Speaker Change: Of your question, so what what would a U S tax change mean for Barclays well. There are obviously short term and long term differences. So in the short term what we would say for a rise in U S tax rates for example would be an increase in <unk>.
Speaker Change: Third tax asset so you should see a short term.
Speaker Change: The capital and then obviously you would have a longer term drag from any higher rates.
Speaker Change: A bit too early to give you precise guidance we were expecting.
Speaker Change: Initial U S tax bill in Q T and some of the discussion that's happened around higher rates for non U S. Funds I mean, clearly hasnt been confirmed or firmed up into any kind of regulation yes.
Speaker Change: And I'll just remind you that the IHT is actually a U S firm.
Speaker Change: BV plc branch isn't so there is some nuances you're exactly right within that that we'd have to guide to narrow the time. So I think it's not quite as simple as looking at the country by country reporting Unfortunately.
Speaker Change: Okay.
Perhaps we can go to the next question. Please.
Speaker Change: The next question comes from Amit <unk> from Mediobanca. Please go ahead. Your line is now open.
Amit: Alright, thank you.
Speaker Change: Thanks for the extra disclosure in USD.
Speaker Change: Just wanted to check coming up see the UK NII is being guided up.
Speaker Change: The IV Q1 performance is being has been strong.
Speaker Change: So just just thinking about the 11% royalty guidance for next year.
Speaker Change: <unk>.
Speaker Change: Which has remained the same so I'm just curious is that to reflect.
Speaker Change: Perhaps a bit more.
Speaker Change: Uncertainty in the environment.
Speaker Change: Or is it just a case of just not changing at this point.
Speaker Change: Or a bit more risk on that.
Speaker Change: The FCB part of the business.
Speaker Change: Number one just curious why the 11th Hasnt changed as well.
Speaker Change: And then secondly.
In terms of the hedge benefit beyond 2026, so I think youll continue obviously that it remains quite a strong tailwind. So I just wanted to double check the kind of very low field that you are anticipating saying 27.
Speaker Change: We have about 2.5% just just wanted to check whether it's in the right kind of ballpark or whether you think actually the roll off yield is.
Speaker Change: A bit lower or a bit higher than that thank you.
Speaker Change: Okay. Thanks on that.
Speaker Change: Both of those so.
Speaker Change: <unk>, obviously seen.
Speaker Change: Our strong Q1 enough coming through not only in the income line, but all the way through the P&L. So we've got good operating leverage and we were pleased with our performance.
Speaker Change: But it's only the first quarter of the year.
So always done is we've repeated are circa 11% guidance.
Speaker Change: Im not signaling anything by repeating that guidance.
Speaker Change: Whether that be an income cost certain tenants, so mainly repeating it.
Speaker Change: On the second question around the hedge benefit we have sets today.
Speaker Change: That we expect the hedge momentum to continue beyond 2026, while we set that well if I take you back to deposits and the stability of deposits.
Speaker Change: That means now is that we expect the hedge notional to be broadly stable from here and that actually takes one of the variables off the table.
Speaker Change: So all we're doing now is we are comparing.
Speaker Change: The prevailing swap with the yield on the hedge whether that be the average yield or indeed, the maturing yields we havent given any disclosure on maturing yield beyond 'twenty six.
Speaker Change: Yes.
Speaker Change: I think if you do the simple math, which I know many of you have done.
Speaker Change: And just take a planning assumption of three five and pushed up through.
Speaker Change: The maturing elements of 25, and 26, you will find that the average hedge yield in 2027 is below three 5%. So that's really what we are signaling here.
Speaker Change: Obviously as we get closer we'll talk a bit more about maturing yields, but just a bit too far out for that.
Speaker Change: Okay. That's helpful.
Speaker Change: Okay. Thanks, and can we go to the next question. Please.
Speaker Change: The next question comes from Alvaro Serrano from Morgan Stanley. Please go ahead. Your line is now open.
Speaker Change: Yeah.
Speaker Change: Hello, Good morning, and apologies if you've already touched on this because I.
Speaker Change: Turning to the latest multitasking.
Speaker Change: On U S cards.
Speaker Change: Obviously, you have the 40 billion receivables target you've maintained the 2026.
Speaker Change: Wonder.
Speaker Change: With a broader.
Speaker Change: Broader discussions around the U S side, you, obviously need to sign on new.
Speaker Change: New clients, New JV is on us.
Speaker Change: To get to that is at the right.
Speaker Change: Time, and why do you feel.
Speaker Change: Visibility to take on.
Speaker Change: Significant portfolios.
Speaker Change: To achieve that $40 billion.
Speaker Change: Or would you need to wait.
Speaker Change: Just think about that but that's sort of a medium term target and then.
Speaker Change: Another one on on the IP and on general activity could.
Speaker Change: Could you maybe give us a bit of color on how the investment bank.
Speaker Change: It has done during the quarter or maybe even April or by region.
What I'm trying to get to us.
Speaker Change: Obviously Q1 was very good.
Speaker Change: Fortunately it comes down to we suddenly you're going to see a very quiet sort of.
Speaker Change: Performance and how much of the activity you think how much visibility you have on.
Speaker Change: For the rest of the year.
Speaker Change: A question, but any hand holding off.
Speaker Change: Color would be much appreciated thank you.
Speaker Change: Yes, hi.
Speaker Change: I'll start with cards and recovered a little bit of this but I'll go over it again and then I will talk about in the bank. So on the U S cards portfolio.
Speaker Change: The growth is going to come in <unk> booths from three things one is.
Speaker Change: Organic growth in our existing portfolio.
Speaker Change: Second is how we choose to flex the lever that we have used of risk transfers, we can do more or less and if we do less the receivables out there on that book and then the third thing.
Speaker Change: <unk>.
Speaker Change: Portfolio changes, which is.
Speaker Change: New accounts or accounts slipping.
Speaker Change: No.
Speaker Change: On the first one which is organic group were fairly comfortable that we will continue to see organic growth and we have a very high credit quality portfolio, we're looking to divest pirate amongst certain sectors critical.
Speaker Change: Critically portfolio.
The second one.
Speaker Change: As risk transfer that's always a question at the time of working capital benefit we get whats the price at which we sell it and whether its food service management as you say given that we've chosen not to bid for our portion for a renewal of a portion of American.
Speaker Change: All else equal, we would want to keep things on our balance sheet.
Speaker Change: Third is acquisitions other disposals, we renewed a bunch of our other accounts through 2024, I think we've mentioned that in a pretty good.
Speaker Change: Full year earnings.
Speaker Change: And then we continue to look in this environment <unk> been in this environment, especially in this environment.
Speaker Change: Good quality portfolios that we've been growing our business.
Speaker Change: These things are very long term decisions as typical portfolio takes two to three years to decide to bid and to come to you and then is there with you for roughly seven years. So these are long term decisions and I wouldn't let the short term stuff in the markets.
Speaker Change: Affect that decision making.
Alvaro Serrano: Thanks Alvaro.
Speaker Change: Although the only thing I'd add to that is that the achieving.
Speaker Change: Achieving the plan and the returns that we won in <unk> is not just in the fully in either we're working very hard on margins.
Speaker Change: We're working very hard on costs and Digitization of the business and also the capital efficiency as Venkat said so.
Speaker Change: Our plan of many parts.
Speaker Change: Let me talk about the IP sort of generally in the quarter and then I'll pass across to Venkat.
Speaker Change: At.
Speaker Change: And.
Speaker Change: If you think about what should have happened to our IP in the quarter given the volatility that we've seen we should say strong markets revenues in a more subdued.
Speaker Change: And king environment, and that's exactly the shape of our results very much in line with the market more broadly.
Speaker Change: Yes.
Speaker Change: <unk>.
Speaker Change: As I look at Q1 in particular.
Speaker Change: We've been investing in this business for some time and investing to create a franchise that allows us in orders.
Speaker Change: As us to perform in a range of environments and you see that so the FIC results very strong and I think that reflects our investment in securitized products. It reflects our investments in our rates businesses and equities is strong actually youll recall that was a one off last year.
Speaker Change: But alright.
Speaker Change: <unk> position has been very much driven by the investments that we've made in the equity derivatives. So we feel like we're facing the market with a much more complete franchise and of course, our financing business, our stability and its probably less impacted by volatility, but you can see good growth in that that's obviously also underpinning.
Speaker Change: FIC and equities.
Speaker Change: All said, we would've expected the IV to be a bit softer and of course.
Speaker Change: Our investment banking to be a bit softer in Q1 and of course. It has been we feel thats in line with the street and in fact, we've seen share gains across advisory ECM DCM and for the complex overall, albeit in a smaller market and I'll, just remind you that but our planning assumption was.
Speaker Change: For this market to be 10% down year on year, and that's broadly what we see in Q1.
Speaker Change: And all of this has been underpinned by us being a bit more nimble in order to be raised in the IP as I've said, but we're really focused all the way through the P&L on the performance of <unk>. So you see good cost control and Youll also see very very good risk control, we've disclosed today for the firm.
Speaker Change: First.
Time consistently and base of our progression and indeed, our lost days and you can see we're not taking outsize.
Speaker Change: Risk.
Speaker Change: I should have actually mentioned also a very good performance within the ICB International Corporate Bank, but then within banking financing on the ICB are both less so this impacted by volatility.
Speaker Change: Do you want to comment.
Speaker Change: Reemphasize with Msos at the beginning which is that if you see the first quarter results you will see the performance you would expect to see in the places you would expect to see them.
Speaker Change: Obviously, we can't talk about the second quarter, we don't hear about a month into it but again reemphasize, what Dennis said on the market side.
Speaker Change: Windows volatility.
Speaker Change: To put our clients first and to do intermediation and risk management for our clients.
Speaker Change: This is what we strive to do and it can be profitable as long as you and your own risks well, which is what we've tried to do and then I'll give you the data on the first quarter results of that so that's what we strive to do every day and on banking activity.
Speaker Change: <unk> reached full clarity until the resume it could happen sooner than we think.
Speaker Change: But the overall business is pretty well diversified whether you look at the investment Bank and you look at deposit growth in the international Corporate Bank you look at the business and international corporate Brian If you look at markets.
Speaker Change: Or even the whole bank Barclays.
Speaker Change: Okay.
Speaker Change: Thanks.
Speaker Change: Thank you.
Speaker Change: Perhaps we could go to the next question. Please.
Speaker Change: The next question comes from Chris Allen from Goldman Sachs. Please go ahead. Your line is now open.
Good morning, everybody. Thanks for taking my questions two quick ones.
Speaker Change: So given the conservative banking well, it's already embedded in your planning assumptions, which I guess you just referenced.
Speaker Change: Are there any initiatives either on the cost side or the investment side that you would need to undertake or delay.
Speaker Change: 2025 could have indeed pay out of Brazil.
Speaker Change: Well its assumptions and the first question.
Speaker Change: Then second you mentioned the substantial increase in transaction banking deposits in the U S.
Speaker Change: How has that trended post quarter end. So there's companies that may be building liquidity delaying some investment spend are you seeing that show up in your deposit volume. Thank you.
Speaker Change: Okay. Thanks, Thanks, Chris Thanks for the questions I'll take the first one and then I'll hand across to <unk>.
Speaker Change: And as I said that was our assumption for banking.
Speaker Change: And actually what we're seeing here is the diversification of income working really well across the base in terms of.
Speaker Change: More than offset by market activity and also the strengths.
Speaker Change: That we're seeing coming through in the UK and the UK complex more generally across deposits that's underpinned our upgrade today so.
Speaker Change: The revenue line appears to be very robust and we have confidence in it.
That said that does not undermine our focus on cost.
Speaker Change: And it's what we're doing every day, it's a key part.
Speaker Change: All of the strategy you can see that all the way through.
Speaker Change: The P&L today income up by 11% profits up by 19%. The plan is to create operating leverage not just at the group across every single business.
Speaker Change: When the Greek.
Speaker Change: Overall, I still expect well I expected at year end, which is for incremental investments to underpin the longer term growth of the pond.
Speaker Change: <unk> I'm, sorry inflation to outweigh.
Speaker Change: Gross efficiencies for the year and for us to see an uptick in costs.
Speaker Change: All of that is contained within the most important metric, which is cost income ratio of 61% that is the number that we are most focused on it's likely that we'll see some movement in the absolute cost I'm happy with consensus currently stopped but it is FX sensitive and his performance and volume sensitive.
Speaker Change: And therefore, I really urge you to focus on the cost income ratio target that we've that we've given we feel like 57% in Q1 is a good time payment against that and should show you. How focused we are on operating leverage.
Speaker Change: Yes, so on transaction banking has been an area of emphasis for us in the last few years, we spoke about lawsuits spoken about it at all.
Year end earnings.
Speaker Change: People choose us and.
Speaker Change: Quanta quantum of deposits is based on two factors one is the growth in our global transaction banking business or relationships generally.
Speaker Change: People's choice.
Speaker Change: Counterparty, which is increasing and then ultimately their needs for cash.
Speaker Change: The use of cash in this period.
Speaker Change: We continue to see heavily people choosing us as a counterparty newly and Thats, good and Thats, improving again, and then I think on cash what Youre seeing is growth in deposits in park.
Speaker Change: You would expect when people are.
Speaker Change: Being cautious on the deployment of cash for transactions. So you seem deposit Brooklyn as individuals or institutions. It's all what you would normally expect in this environment.
Speaker Change: Okay. Thank you.
Chris Cant: Thanks, Chris can we go to the next question. Please.
Speaker Change: The next question today comes from <unk> from Bank of America. Please go ahead. Your line is now open.
Speaker Change: Hello, Hi, Anna.
Speaker Change: So just a couple of questions one just quickly touching on.
Speaker Change: The U S cause margin. So obviously, that's been down but you've talked about some of the drivers.
Some of the time lags between deposit pricing and asset pricing.
Speaker Change: Just.
Speaker Change: I know you've mentioned that the interest rate risk is already hedged.
Speaker Change: I guess the market is pricing in fostering more rate cuts and on the on the U S side for the rest of the year, maybe three or four rate cuts. So if that.
Speaker Change: What happened I guess is that already in your planning assumption and if that were to happen.
Speaker Change: What do you still.
Speaker Change: Expect the meaningful.
Speaker Change:
Speaker Change: Progression during 2025 F. After you've just talked about so I guess, that's number one number two I guess more broadly on the full year 'twenty six greater than 12% returns target. So consensus is just got to about 12% taken a year to get that I guess operating environment is arguably a little bit more time.
Speaker Change: Certainly impairment looks like is it possible that it will go up given them.
Speaker Change: Economic indicators coming down maybe a little bit.
Speaker Change: And I suppose the general U S. Dollar weakening is probably not super helpful. Either so.
Speaker Change: Where do you see a gap between your planning assumption and and why consensus is because.
Speaker Change: Raise your guidance so presumably that you see you see maybe some positive to where consensus is currently notwithstanding maybe a little bit of a worsening credit quality and maybe some some FX impact as well so it.
Speaker Change: It would be helpful to understand why you think people might be too pessimistic.
Speaker Change: Yes.
Speaker Change: Okay. Thank you poorly so let me deal with the U S cause margin.
Speaker Change: And we've given we've given you a macro economic variable assumptions.
Speaker Change: They are on slide 35.
Speaker Change:
Speaker Change: So you can have a look there's obviously we are expecting further downward pressure on fed rates, you can see that from from that well.
Speaker Change: I would just remind you though is that that matter is hedged. So we got fliting rea assets, we've got largely fixed rate deposit. So you can see that we would have a timing difference in a downward rate environment.
Speaker Change: And we do hedge the interest rate risk, but the nature of those hedges is different from the ones that we have in the U K and therefore, the accounting geography is different so you do see an income offset but it manifests itself on non interest income.
Speaker Change: If you look year on year, you're going to see noninterest income so im not concerned about it.
Speaker Change: The income overall, but you might see a bit of a split geography between the margin compression in the hedge benefit, which obviously you wouldn't see in the U K and then if I step back and look at FY 'twenty, six, but we've reiterated and reaffirmed our targets today.
Speaker Change: We feel like we've got momentum in the business and we are delivering our plan. What you should expect us to do is execute the operational plan and deliver the numbers with no surprises and no difference in the current environment than it is.
Speaker Change: Last year or an or indeed, the year before so we're 100% focused on that.
Speaker Change: We've clearly got good income growth that comes from the diversification of the business, there's clearly a bit of a weak start in investment banking, but markets. This bank has been three benefits from periods of volatility and very importantly, we are seeing a strong underpin here from.
Speaker Change: The upgrade of NII that we've given you not just the U K, but for the group as a whole and that is coming from the strength of deposits in the U K. Our costs are well controlled again you can see we're focused on operating leverage amongst us more uncertainty in the impairment line Harley I would not see.
Speaker Change: The uncertainty taking us out with the 50 to 60.
Speaker Change: Basis point range that we've given you for loan loss rate.
Speaker Change: So we are confident in the delivery of our circa 11 this year.
Speaker Change: And also the targets that we've given you for next year.
Speaker Change: The case for the financial targets on the distribution targets.
Speaker Change: Okay, perhaps we can go to the next question. Please.
Speaker Change: The next question comes from Andrew Coombs from Citigroup. Please go ahead. Your line is now open.
Andrew Coombs: Morning, and thanks for clarifying a couple of follow ons spectrum fixed income is now.
Speaker Change: Very strong relative to peers.
Speaker Change: Any reason why they might be episodic revenues in that or any additional seasonality compared to <unk>.
And if you could help us think about the breakdown between credit securitized products and FX any color you can share would be helpful.
Speaker Change: And then second question just on the mortgage balances in the UK obviously.
Speaker Change: Rob you mentioned a very good result, this quarter up 3 billion Q on Q.
Speaker Change: How sustainable do you think that is and how much is that just a pull forward of activity and market stamp duty changes. Thank you.
Speaker Change: Okay Andy.
Andy: Ill start may want to add on on FIC, I mean, nothing much more than I would call out from before just strong performance across the board reflects our investment in the business space and into mediation under in financing I called out rates or called out securitized products. There are no one.
Speaker Change: Often.
Speaker Change: And so.
Speaker Change: Where we take.
Speaker Change: Remarks on less than positions. They are not in fact, they are on our corporate lending line and we've called that out separately, so I wouldn't call out any one offs.
Speaker Change: Good performance.
Speaker Change: On mortgages the mortgage market was robust in Q1 as a market masa.
Speaker Change: Both were up by 15%, notably within not house purchases up by 20%.
Speaker Change: And that's not just us.
Speaker Change: Hi purchased that firsthand pauses, while we think both of those two are really good lead indicators sorry, My voice is getting them to take a drink of water.
Speaker Change: They're good indicators for the health of the mortgage market overall.
Speaker Change: If you step back you.
Speaker Change: <unk> got rates are broadly on the downward trends you've got.
Speaker Change: Robust and stable highest price inflation and you've got real wage growth. So there may be a bit of pull forward in Q1, but honestly the market as a whole is performing well.
Speaker Change: Okay, perhaps we can go to the next question. Please.
Edward Firth: The next question today comes from Edward Firth from <unk>. Please go ahead. Your line is now open.
Edward Firth: Hi, good morning, everybody, thanks very much.
Edward Firth: I just have two questions are number one.
Edward Firth: UK fees look very weak they are down about 9% year on year.
Edward Firth: And then suddenly annualizing at no more than about $1 billion I guess.
Speaker Change: And that's in the U K business. So could you tell us a little bit about what's going on that how we should expect that going forward. As this is the sort of $2 50 like the run rate, we should be thinking about what was something that we that was in that that means it might pick up into the rest of the year progresses. So I guess that's my first question. The second question is just coming back to risk weighted assets because you.
Edward Firth: You talked about how.
Edward Firth: It'd be with poorly performing as you might expect in terms of trends in the first quarter and I would agree with that completely except for <unk>, which have always been up very strongly this quarter with all the volatility you would have expected them to be up even more I guess Todd.
Speaker Change: And yes, they were down a touch down quite quite honestly.
Edward Firth: Breathing strickle life out there.
The down so.
Speaker Change: Could you just tell us a little bit more about.
Edward Firth: Why that was.
Edward Firth: Is the potential to further reduce that going forward.
Edward Firth: <unk>.
Edward Firth: Can I ask you would've told us he saw apologize if I missed it but I think you told US one of the backside you said you've done $57 billion I think of risk Trump first full year 24 could you update us where we are and where that number is that.
Edward Firth: Despite increasingly transfers et cetera.
Edward Firth: How that might progress thanks very much.
Speaker Change: Okay, and there was a law and not so let's try and answer I'll start and then I'll hand Sea Hunter.
Edward Firth: Thanks.
Edward Firth: So on UK non NII, we've given you guidance.
Edward Firth: Previously for greater than $50 million.
Edward Firth: Just to repeat that guidance. This number can be a bit lumpy. There is no story within the key one beyond the fact that Q1 can sometimes be a bit light just because of lower transactional activity and honestly there is nothing more than that to read into so.
Edward Firth: Stick to the guidance of greater than <unk> 50.
Edward Firth: I'll now ask of you as you're right as the best.
Edward Firth: FX in there thats, taking it downwards, we have an elevated the SRT, we said before that culminated program, which is the one that impacts the AIP is mature and we do not expect to extend that.
Speaker Change: Zane cuts you want to comment.
Speaker Change: Look I think.
Speaker Change: We've targeted a level of stability in the investment bank.
Speaker Change: You've got to expect quarter on quarter, and I've said this before but there'll be some volatility right. A couple of billion up does not mean that.
Speaker Change: Listening to a couple of billion done does not mean, we are tightening it up right. There is a natural client activity there is volatility in that activity.
Speaker Change: Physicians will get taken off their positions that get added or don't get added as you might imagine in this environment.
Speaker Change: The marginal benefit of the marginal allocation is more in markets and banking based on activity.
Speaker Change: And that's what you saw in the first quarter.
Speaker Change: Right, because they're trying to solve.
Speaker Change: As a follow on for that.
Speaker Change: Tier ones that $13 nine.
Speaker Change: You've obviously got.
Speaker Change: The top end of your range Youre going to generate more capital I guess in the next quarter.
Speaker Change: There is no reason why you shouldnt be doing buybacks bigger than you've done in the policy. So just just to clarify that.
Speaker Change: So.
Speaker Change: Our.
Speaker Change: Capital is at $13 towards the top end of our range, we did indicate at the.
Speaker Change: Full year that we did expect to operate towards the top half and that was simply because we did expect an increase in the MDA, which is which has now come through that said why are we with that because the strategy is working and we're seeing very good capital generation from the business that is the strategy.
Speaker Change: And if we keep executing this strategy as we keep executing the strategy, it's not inconceivable that we might go through the top end of that range.
Speaker Change: But that's that's a good thing.
Speaker Change: We've given you guidance that we would expect distributions to be progressive.
Speaker Change: This year.
Speaker Change: We haven't changed our guidance the distributions will be at least $10 billion over the period of the plan.
Speaker Change: Okay. Thanks, so much.
Speaker Change: Thanks.
Speaker Change: Thank you, perhaps we can go to the next question. Please.
Speaker Change: The next question today comes from Jonathan Pryce from Jefferies. Please go ahead. Your line is now open.
Jonathan Pryce: Hello, Good morning, both.
Jonathan Pryce: Couple of questions. The first is a follow up on <unk> question on capital.
Jonathan Pryce: You came into this year at 13, 6% equity tier one ratio of 13.3.
Jonathan Pryce: Adjusting for the buyback.
Does sound increasingly like Q1 to operate close to the 14 moving forward can you just confirm that.
Jonathan Pryce: That is how we should be thinking about so I'm just wondering whether there is an element of this related to the fact that U K arguably way growth.
Jonathan Pryce: Target for end of next day looks looks increasingly stretching or may be thinking about some sort of organic inorganic.
Jonathan Pryce: Nick a bolt on which obviously we can see some.
Jonathan Pryce: Some capital then it won't all sensor.
Jonathan Pryce: So that's the first question. The second question is on.
Jonathan Pryce: Sensitivity again, particularly in the U S card book, if I look at your full year.
Jonathan Pryce: Down side scenario is even on downside too which has got GDP falling.
Jonathan Pryce: Over one percentage point this year and next year.
Jonathan Pryce: Unemployment moving to above 7%.
Jonathan Pryce: The models are telling you that youll required stage, one and two ECL build would only be about 177 million.
Jonathan Pryce: Pounds, which.
Jonathan Pryce: Feels very low given that.
Jonathan Pryce: The sets of macroeconomic assumptions.
Jonathan Pryce: I guess the models.
Jonathan Pryce: Turning is what the models as hunting is but how robust do you think the multiples all I guess I'd tell you that on a first name was quite news that went behind years with 7% is in now.
Jonathan Pryce: So mostly applies across the group as well because of the sensitivity to the downside one and two scenarios.
Jonathan Pryce: Very limited given the severity of those so comment that might be useful. Thanks.
Jonathan Pryce: Okay. Thanks.
Jonathan Pryce: Thanks, Jonathan Okay. So let me start with capital Bank May want to comment on less also.
Speaker Change: You are right, we are generating a lot of capital, but as I've said previously that is an outcome of the plan and it is intentional is deliberate.
Jonathan Pryce: And.
Jonathan Pryce: What you should expect.
Jonathan Pryce: Going forward, we did indicate.
Jonathan Pryce: The full year that you should expect us to operate towards the top half.
Jonathan Pryce: Just reiterate that as our formal guidance, but just reflecting on the fact that we are generating a lot of capital and just on the utilization of that capital.
Jonathan Pryce: We're very focused on deploying $30 billion in the U K that plan is intact.
Jonathan Pryce: As I look at where we are now.
Jonathan Pryce: <unk> deployed 14 billion of the recognizing of course that a large part of that.
Jonathan Pryce: <unk> has come from Tesco, but you can see good loan growth in the quarter by some B U K and from the U K corporate bank.
Jonathan Pryce: If I look at the specifics of lending.
Jonathan Pryce: The consumer preference at the moment is for secured versus unsecured lending that's very clear okay.
Jonathan Pryce: And then as I look at the lending is it developing in the corporate banking private banking and wealth management actually at very high quality.
Jonathan Pryce: And that's reflective of our portfolios. So key one if I look at that in isolation. The lendings happening maybe the odds of you a weighting as it is a little light, but over the period of the plan that plan is intact and are particularly point you to the momentum that we've got both around mortgages and car.
Jonathan Pryce: And on the leading indicators on slide 15, we're going to see that J curve in cards, you're going to see interest, earning lending in our WNS growing cards from the back end of 'twenty five with all of that maturing three.
Speaker Change: Do you want to comment more on <unk>.
Jonathan Pryce: Look I think I have covered as well.
Speaker Change: Also remind you that environment that we are.
Speaker Change: You would expect us to be on the generous side is prudent and our capsules, yes, absolutely and then on the second point.
Speaker Change: I would it take.
Take and the disclosures on <unk> nine is a sensitivity there not predictive.
Speaker Change: And they essentially say what happens if I take my current static balance sheet.
Speaker Change: I pushed through a different set of macroeconomic variables, but it doesn't take into account.
Speaker Change: It is clearly the kind of stage migration that you would see into stage three it doesn't take into account any.
Speaker Change: Ah.
Speaker Change: Increases of exposure at default. So the fact that customers may draw down as they become more financially pressed but also the other thing that it doesn't take into account as credit actions that we might take in order to manage that position. So I wouldn't think of it as a scenario I would think of that.
Speaker Change: As a sensitivity.
Speaker Change: Quite.
Speaker Change: It's quite straightforward sensitivity I don't think its intended to be predicted the same is true of the PMA that we've taken that that's really just a downside bias at this stage.
Speaker Change: Hey, guys. Thanks, a lot.
Speaker Change: Helpful. Okay. Thank you next question please.
Speaker Change: Our final question today comes from Robin down from HSBC. Please go ahead. Your line is now open.
Robin: Hi, good morning, Thanks for taking the questions.
Speaker Change: A couple of quickie for me.
Robin: You kind of touched on this a little bit.
Robin: Your last answer but.
Speaker Change: Barclaycard consumer UK revenue line.
Robin: Oh really seem to have made great progress.
Robin: Over the last 12 months, despite the kind of the big pickup in.
Robin: Cause acquisition numbers.
Robin: What kind of lead lag effect as it kind of take 12 months.
Robin: From a revenue come through.
Robin: Some of it coming from them.
Robin: What you might expect.
Robin: Corporate revenue growth.
Robin: Your line.
And then the second question is more clarification I think.
Robin: As far as I talked about.
Robin: Reinvestment rate on the structural hedge I think you mentioned earlier that you expect from the structural hedge to be stable.
Robin: But stable.
Robin: Stable or is that just kind of a very broad definition of stable.
Robin: All right.
Robin: How should we read that.
Robin: Sure.
Robin: Okay. Thanks, Thank you Robin let me deal with those.
Robin: So on the Barclaycard line, we step back into the credit card market in 2023. So all you are seeing here really is is a production line kind of.
Robin: Those caused acquisitions, then maturing into interest earning lending.
Robin: <unk>.
Robin: Actually if you think about the structure of the market it tends to be slightly longer dated than 12 months, so you're going to see some pickup in interest, earning lending towards the backend of 2025, but the bulk of that is actually going to be in in 2026. So it is a lead lag effect as you suggest and then on the on that.
Robin: The second question.
Robin: Giving you a planning assumption of circa 90%, but you can see given where deposits have been in the first quarter. The notional has been stable and we would expect it to be broadly stable, but just.
Robin: Are you planning.
Robin: That's why we said circa 90.
Robin: No correct nothing more to read into that.
Robin: Okay. So I think that brings us to the end of questions for today and I'd like to thank you for those questions. Thank.
Speaker Change: Thank you for your continued interest in Barclays and what I know is a very busy day and we will see you either on the road or at the analyst breakfast in a couple of weeks.
Robin: Thank you everybody. Thank you.
Robin: Thank you.
Robin: That concludes today's conference call you may now disconnect.
Robin: Uh huh.
Robin: [music].
Robin: Oh.
Robin: [music].