Barclays Aktie

Welcome to Barclays' Q1 2026 Results, Analysts and Investor Conference Call. I will now hand over to C.S. Venkatakrishnan, Group Chief Executive, before I hand over to Anna Cross, Group Finance Director.

Good morning, everyone. Thank you for joining Barclays' First Quarter 2026 Results Call. In February, I shared our vision for 2028 and beyond, and this was to deliver a better run, more strongly performing and higher returning Barclays. This represented an intensification of the strategy, which we put in place in 2024. The first quarter results demonstrate the benefits of the structural improvements that we have been making in the last 2 years.

These improvements allowed us to capture opportunities within each of our 5 divisions and particularly in the investment bank. The diversification of our income, the strength of our client relationships, the ongoing delivery of operational efficiency all underpins my confidence in achieving each of our 2026 and 2028 targets. We have delivered a group RoTE of 13.5% in the quarter.

This demonstrates resilience through a period of elevated volatility and incorporates one-off impairments and charges. We grew the top line by 6% to GBP 8.2 billion, supported by NII growth and strong activity across the Investment Bank. We improved the cost-to-income ratio to 56%. RWAs in the Investment Bank increased modestly versus the fourth quarter to facilitate cyclical activity with income surpassing GBP 4 billion for the first time.

Consistent capital generation and a 14.1% CET1 ratio supports our plan to return at least GBP 15 billion to shareholders by 2028, including today's GBP 500 million buyback announcement. While the external environment has changed, we remain true to our purpose, which is to work together with our clients for a better financial future. We remain committed to deploying lending and risk-weighted assets in our U.K. businesses.

We do not currently see any credit weakness in the U.K. or in our U.S. consumer business nor in corporate lending. U.K. household and corporate balance sheets remain robust and clients are behaving rationally. And payment rates across customer cohorts in our U.S. consumer bank remains stable. However, as you would expect, we are vigilant about the inflationary impact of rising energy prices and the consequent potential decline in consumption and growth.

This quarter, we have provided additional disclosures on our exposure to private credit and nonbank financial institutions. This is on Slides 45 and 46 in the appendix. I am disappointed to recognize a GBP 228 million single name charge in the first quarter. This was in our securitized products business and relates to a well-publicized sophisticated fraud.

This fraud, as with the one in tricolor indicates to us the importance of strong financial controls at borrowers and the difficulty ex ante of identifying fraud. As such, we are constraining lending to certain structured finance counterparties who operate more vulnerable business models and cannot convince us of the quality and independence of their financial controls.

These entities neither represent material exposure nor a material source of foregone income, but their risk far outweighs any reward. Separately, in view of increased macroeconomic and business uncertainties, we are reducing our exposure to more highly leveraged non-investment grade corporates, which we believe could be vulnerable to a weakening economy.

All divisions generated double-digit returns, including a RoTE around or above 20% in our U.K. businesses, and the U.S. Consumer Bank and the Investment Bank delivered 18.8% and 15% RoTE, respectively. We are achieving stronger structural returns by delivering operational improvements and better customer sets. In the first quarter, we achieved approximately GBP 150 million of gross efficiency savings towards the GBP 2 billion target over 3 years.

This quarter, we have enabled all corporate banking clients on iPortal, which is our single management platform, and this replaces 5 previously separate platforms. And in the second quarter, we will launch Premier Wealth Management in Barclays U.K. app to provide human-led digitally enabled planning and advice and support fee growth beyond 2028. The momentum of our progress underpins my confidence in delivering all our financial targets including a RoTE of greater than 12% in 2026 and more than 14% in 2028.

Anna, over to you now to take us through the first quarter financials in more detail.

Thank you, Venkat, and good morning, everyone. Slide 4 summarizes the financial highlights for the quarter. Before going into the detail, I would remind you that the weaker U.S. dollar versus Q1 '25 reduced our reported income, costs and impairments. Return on tangible equity of 13.5% was lower year-on-year, with stronger absolute earnings offset by 8% growth in tangible equity. Profits before impairment increased 8% as we grew income and delivered positive operating jaws. This was offset by higher impairment charges with profit before tax up 3%.

Earnings per share increased by 8% to 14.1p supported by share count reduction. Operational momentum continues, and we remain focused on execution. Income in Q1 increased 6% year-on-year to GBP 8.2 billion. Stable income streams grew by 7% reflecting 4% growth in the retail and corporate businesses and a 23% increase in financing within markets. Overall investment banking income was up 4%.

This top-line momentum increases our confidence in delivering the circa GBP 31 billion group income target in '26. Group NII, excluding IB and head office, increased for the eighth consecutive quarter and by 12% year-on-year, reflecting 3 factors: First, stable deposits across the group supported structural hedge growth at yields above our planning assumption; second, continued lending momentum; and third, improvements in U.S. consumer banks funding, mix and pricing.

We, therefore, remain confident in delivering full year guidance for group NII of more than GBP 13.5 billion, including GBP 8.1 billion to GBP 8.3 billion in Barclays U.K. As a reminder, the hedge is designed to reduce income volatility and manage interest rate risk. We have now locked in GBP 18.3 billion of gross structural hedge income across '26 to '28, up from GBP 16.8 billion at the end of '25. The hedge notional increased by GBP 6 billion versus Q4, reflecting stability and growth in our deposit franchises and equity.

This improves long-term NII stability but does not materially increase '26 income given the unhedged balances were previously earning base rates. We invested new and maturing hedge assets at around 3.9% in the quarter. This is above the circa 3.5% planning assumption that underpins half of the group income growth that we expect by '28. While persistently higher swap rates would support additional income growth, any benefit would build progressively noting that 95% of '26 hedge income is already locked in.

Moving on to costs. The group cost-to-income ratio improved to 56% from 57% a year earlier. We delivered circa GBP 150 million of gross efficiency savings on track for the circa GBP 2 billion target over 3 years. Investment costs increased by around GBP 100 million year-on-year, consistent with our plan. Q1 costs also included a GBP 105 million motor finance provision. This is booked in head office, given that we exited this business in 2019.

Our GBP 430 million cumulative provision is based on a single scenario aligned to the FCA's revised industry-wide redress scheme. This assumes a greater number of eligible cases versus the previous probability-weighted estimate and a higher cost per claim following increases to the compensatory interest rate. Inclusive of the motor finance provision, we remain well positioned to deliver the high 50s cost-to-income ratio target in '26. Turning to impairments. The Q1 group impairment charge of GBP 823 million equated to a loan loss rate of 74 basis points. This includes the GBP 228 million well-publicized single name charge in the investment bank, which Venkat discussed.

As a result, we now expect a group loan loss rate around the top of the 50 to 60 basis points through the cycle guidance in 2026. U.K. and U.S. consumer and corporate balance sheets are robust with a low and stable delinquencies and rational borrower behavior and the overwhelming majority of the investment bank's wholesale clients are performing as we expected. As an accounting matter, IFRS 9 models are procyclical and sensitive to changes in consensus economic expectations.

In the quarter, we have made 3 post-model adjustments that amount to a net GBP 20 million increase for the group. First, we released the post-model adjustment for U.S. tariff uncertainty from Q1 '25 in the investment bank and U.S. Consumer Bank. Second, we made a post-model adjustment in the investment bank to recognize downside bias due to uncertainty. Third, we adjusted U.K. and U.S. consumer impairment model inputs to reflect a more prudent view of consensus economic forecasts, including 5.3% U.K. unemployment versus 5.2% previously.

The Barclays U.K. loan loss rate was nevertheless in line with the circa 30 bps guidance we gave in Q4. Focusing on the U.S. Consumer Bank where consumer behavior remains resilient, as we show on Slide 42 in the appendix. 30-day and 90-day delinquencies increased modestly to 3.1% and 1.7%, respectively, mainly due to the seasoning of the General Motors portfolio, which will normalize in future quarters.

Looking ahead, we expect the American Airlines portfolio exit in Q2 to increase 30-day and 90-day delinquency rates by circa 30 bps and 20 bps, respectively. The Q1 loan loss rate fell to 491 basis points, reflecting better-than-expected credit quality of the GM portfolio and the net PMA release. As a reminder, we expect a circa 550 basis points loan loss rate in '26.

Turning now to U.K. lending. U.K. lending grew 5% year-on-year, consistent with the '25 exit rate and the more than 5% CAGR we expect from '25 to '28. We remain on track to deploy circa GBP 30 billion of U.K. business growth RWAs by the end of '26 having deployed GBP 22 billion since '24. We grew mortgage lending by GBP 1.7 billion. Completions moderated versus last year's elevated level in the run-up to stamp duty changes in April 25.

Application volumes increased materially as customers sought to lock in rates in a volatile environment, facilitated by broker platform improvements and Kensington. We also added 364,000 new card customers in the quarter and grew balances 8% year-on-year. Core Business Banking grew for a fifth consecutive quarter, while U.K. corporate loans grew for a sixth consecutive quarter and by 15% year-on-year, split evenly between new and existing clients.

Turning to Barclays U.K. in more detail. You can see financial highlights on Slide 13, but I will talk to Slide 14. RoTE increased year-on-year to 19.7%. NII of GBP 2 billion increased 9% year-on-year and fell 1% quarter-on-quarter as guided. This mainly reflected 2 fewer days in Q1 versus Q4 with NIM stable. Lower product margins reflect deposit mix and pricing and part of the circa GBP 100 million headwind that we guided to at full year. We now expect NII to increase quarter-on-quarter from Q2 with year-on-year growth in every quarter.

The Q2 product margin impact will be broadly similar to Q1, and I expect additional structural hedge income following the increase in notional that I referenced earlier. Non-NII increased to GBP 272 million, with the Q2 level expected to be around GBP 250 million following a securitization in April. Cost of GBP 1.2 billion increased 5% year-on-year due to structural cost actions, which we expect to be weighted to half 1 in contrast to last year.

We expect half 2 costs to be below half 1, supporting lower costs in '26 versus '25 and a low 50s cost-to-income ratio. Moving on to the Barclays U.K. balance sheet. Deposit balances were seasonally lower versus Q4. Wage growth supported stable current account balances despite seasonality. We took share in ISAs, pricing selectively in a competitive market, including to attract and deepen premier customer relationships.

Lending grew for the seventh consecutive quarter and by 4% year-on-year. Moving to the U.K. Corporate Bank. Q1 RoTE increased to 19.9%. Income grew by 10% and costs fell 2% and the cost-to-income ratio improved to 48%. NII increased 15%, driven by volume growth and additional structural hedge income with a fall versus Q4 mainly due to day count.

Strong lending momentum continued and supported deposit growth of 3% year-on-year and a loan-to-deposit ratio of 35%, up 4 percentage points versus Q1 '25. As Venkat referenced, all U.K. corporate clients are now enabled on iPortal with full migration expected during 2026. This will improve efficiency over time and broaden product usage, supporting fee growth beyond '28.

Turning to Private Bank and Wealth Management. Q1 RoTE was 25.5%. Income was broadly stable, while costs increased 9% year-on-year as we accelerated investment, which we expect to build quarter-on-quarter through '26. We added GBP 1.5 billion of net new AUM in the quarter. Despite adverse market valuation effects in Q1, AUM increased by 8% year-on-year, and client assets and liabilities grew 5%. We expect new capabilities and products such as the Premier Wealth Management service launch in Q2 to drive growth over time.

Turning now to the Investment Bank. Our strategy in this division is to drive consistent returns through RWA discipline, income stability and operating leverage. That remains unchanged. We have now delivered 8 consecutive quarters of year-on-year income growth, RWA productivity improvements and positive operating jaws. Targeted investments have improved the diversification of our income, which I will return to.

And we are increasing the durability of returns by growing more stable income streams in financing and International Corporate Bank. These structural improvements enable BIB to participate in stronger seasonal and cyclical activity in Q1. We grew RWAs by 3% versus Q4 to support this activity. We did this in a disciplined way with income to average RWAs increasing to 8% and no increase in risk appetite as we show on Slide 38 in the appendix. Investment Bank RoTE was 15% in Q1. Lower returns versus last year reflect the GBP 228 million single name impairment charge and to fair value move in the corporate lending line, GBP 105 million gain on leveraged finance last Q1 versus GBP 40 million of marks this Q1.

Operational performance was as we would have expected given the environment with income growing by 4% year-on-year. We performed well in areas of historic strength with investments supporting growth and diversification as we planned. This includes growth in advisory and ECM with around 3/4 of fees in the quarter earned in the U.S. and equities, which account for 28% of income versus 22% in '23.

In the International Corporate Bank, U.S. dollar deposits grew by 21% year-on-year, and we continue to expect the ICB to become a larger part of the IB by '28, reflecting ongoing investment in transaction banking. Using the U.S. dollar figures, markets income was up 13% year-on-year. Equities and FICC grew 23% and 8%, respectively. We saw particular strength in equity derivatives and prime alongside strong credit and securitized product trading in FICC.

Intermediation activity grew 6% year-on-year, while financing income grew 31% and for the seventh consecutive quarter. This reflected growth in client balances, particularly in prime, including strong growth in Asia. Investment banking fees increased 25%. The strong pipeline we discussed at the full year, and improved deal economics supported 89% advisory fee growth. We took leading positions in 3 of the 4 largest global deals in Q1, and the M&A pipeline remains robust with the share of announced deal volumes due to complete in '26, increasing year-on-year.

ECM fees increased 38%, and we have a solid IPO pipeline for the rest of the year. Turning to the U.S. Consumer Bank. Operational performance is on track, and we expect further progress following portfolio changes in Q2. We grew receivables by 9% year-on-year. Half of this was organic, with the remainder from the addition of GM, rebalancing the mix of assets towards retail.

While the accounting changes I outlined at the full year explain most of the increase in NIM versus Q4, pricing, asset mix and funding continue to drive improvements. We are pleased with the ongoing pace of retail deposit gathering, where balances increased 8% quarter-on-quarter and 52% since end '23. The improvement in ROCE to 18.8% reflected this operational progress. Returns also benefited from a full quarter of income from the AAA portfolio without the associated marketing costs. In U.S. dollar terms, income grew 21% and costs were broadly flat.

We continue to expect a mid-40s cost-to-income ratio in '26. Given portfolio changes in Q2, let me help with some modeling points. The exit of AA, which we completed on 24th April will increase NIM to more than 13% for FY '26, approaching 14% in half 2. This will more than offset an expected increase in the loan loss rate to circa 550 basis points for '26 as guided last quarter. Total income in Q1 provides a good starting point for the rest of the year with a loss of AA income largely offset by the addition of Best Egg and some business growth.

Income in Q2 will include a circa $300 million gain on sale, less than prior guidance of circa $400 million given lower balances at the point of sale. In addition, we expect incremental monthly costs of circa $45 million from Best Egg, which we expect to complete in early May. All in, we continue to expect a circa 12% RoTE for '26, excluding the AA gain on sale. We ended the quarter with a robust CET1 ratio of 14.1%, consistent with our intention to operate around the top of our 13% to 14% CET1 range.

Strong organic capital generation of 53 basis points was in line with expectations, supporting distributions and balance sheet flexibility to invest in market opportunities. The GBP 500 million share buyback for Q1 and GBP 500 million accrual towards this year's GBP 2 billion dividend are both as planned. RWAs increased GBP 8 billion quarter-on-quarter, including GBP 2.7 billion of growth in the 3 U.K. businesses. Excluding FX, Investment Bank RWAs increased GBP 3.3 billion to support the stronger activity that I referenced earlier.

As usual, a word on our overall liquidity and funding on Slide 29. We have strong and diverse funding, including a 75% LDR and an NSFR of 135%, and we are highly liquid across currencies with an LCR of 165%. These measures reflect purposeful and prudent management of our balance sheet, delivering resilience, thus ensuring we have capacity to support customers in a range of economic environments.

TNAV per share decreased 4p in the quarter but increased 33p year-on-year to 405p. Attributable profit added 14p per share in Q1. This was partially offset by the 6p final dividend paid on 31 March versus April in prior years. Higher interest rates reduced the cash flow hedge reserve, driving an 11p reduction in TNAV versus Q4.

This is a timing matter and will unwind positively through to 2028 or if interest rates revert to lower levels. TNAV per share growth from Q2 will be overwhelmingly driven by earnings, assuming broadly stable long-term interest rates from here. To summarize, operational progress since '23 provides a strong foundation to deliver all group targets in '26 and '28 in a range of environments. Over to you, Venkat, for concluding remarks.

The momentum of operational improvements, which we have delivered during the first 2 years of our plan have continued during the first quarter of 2026. While the environment has become more uncertain, the strength of our businesses and the diversification that they provide allows us to navigate volatility while delivering our plan and targets. I'll now open to questions and answers. [Operator Instructions] Please also introduce yourself as you ask your questions.

[Operator Instructions] The first question goes to Alvaro Serrano of Morgan Stanley.

Alvaro Serrano from Morgan Stanley. Venkat, maybe this one is starting for you on -- you made the comments that you've reduced the risk appetite or pulled back. I can't remember the exact words you used on slightly higher leverage and some structured products. Can you give us a bit of more color of the concrete measures you've taken and maybe speak to Slide 45, and thanks very much for that disclosure in which areas you've pulled back a bit?

And should we think about any impact on revenues from that sort of reduced risk appetite? And the second question is on the U.K. or broadly NII outlook. Obviously, rates are higher now. and you've locked in an extra -- in the outer years, extra sort of hedge income as you've disclosed and spoken to. When you think about the high yield versus potentially slowdown in loan growth and volume growth, do you think there's upside to NII if you were to mark-to-market sort of the current curves, maybe you are more thinking on flexing your NII guidance?

Yes. Alvaro, so let me start with your first question, and I'll hand it over to Anna for the second question. So we said in the statement that the impact is not material, either today or foregone income in the future. And where it would be on Slide 45 is basically in that third box, which says other commercial and consumer. That's where you're likely to see the GBP 17 billion.

That's where you're likely to see lending to business models that are basically themselves asset-backed lenders and who are more vulnerable business models and where we may not find the strength of financial controls we'd like to see them demonstrate. That's really the place where in the structured financing exposure, we would expect to see some limitations. But as I said in the prepared remarks, it's not material now as a source of income nor foregone income in the future. Anna?

Thank you. Thanks, Alvaro, for the question. Given the experience that we've had in Q1, we are more confident now on NII than we were at the full year because the actual experience that we've had in Q1 is either positive or neutral. And I'm very comfortable with consensus for '26, both for the group and for Barclays U.K. As I look a little further out into '27 and '28, that consensus looks light. We said the same at full year. It looks very light in '28. So what we've observed in Q1 is actually a good deposit performance.

So current accounts in BUK have been broadly flat. Ordinarily, we would see a seasonal decline in Q1. We've had a good ISA season where we grew faster than the market. You can see good lending growth across the piece, 5%, pretty much on the target that we've given you. Our USCB NIM is a little higher than we guided to at 12.8%. And of course, as I said, we've topped up the hedge by GBP 6 billion, and we've rolled it in the quarter at around 3.9%. Now this change in rates is really about the future years.

We are still basing the guidance that we're giving you on 3.5%. To the extent that we see rates remaining higher, obviously, that will build through time, and you'll see the impact a little further out. And I'd just remind you that our hedge income for 2026 is 95% locked in already. So our confidence is really coming from the real factors that we see in both deposits and in lending. To your point about slowdown in lending, we have not seen a slowdown in lending.

We see it growing strongly both in BUK across the products, also in corporate. And for the first time, we're seeing some really good signs of growth within business banking. That's driven by our own actions. We're not reliant on the market. So at this point, I wouldn't say that we would adjust our NII guidance for any change in lending. It's more the experience that we've had in Q1 just gives us greater confidence to deliver those consensus numbers.

The next question goes to Perlie Mong of Bank of America.

A couple of more questions on NII, please. So the product margin side of things, can I just dig a little bit deeper in that? So I think previously, you said that the mortgage compression from the COVID era mortgages rolling off would be about GBP 100 million. Is that -- are we -- how far are we in that? Because presumably, as you said, some of the volumes that might be rolling off in Q2 probably got pulled forward in Q1.

And then with swap rates volatility, can you comment on what you're seeing in terms of front-end margins as well? And then on the deposit side, I suppose competition has been maybe a little bit higher than partly reflecting seasonality as well. So when you said that you expect product margin to be similar next quarter, is that more mortgage? Or is it more deposit? If you could just help us understand that a little bit better.

And then on the USCB as well, you commented that margins were quite high this quarter. There's a big improvement. Obviously, there will be some mechanical improvements further from the American Airlines exit. But how much more sort of underlying improvement are we -- can we expect from pricing and from deposit mix, et cetera?

Okay. Thank you, Perlie. I will take both of those. So our product margin impact in Q1 are as we guided and they're in line with our expectations. And I'm going to merge your 2 NII questions, if I may, Perlie, because actually, that product dilution is coming from both mortgages and from deposits. In mortgages, we are seeing the impacts that we called out at the full year, and that's the maturation of the COVID era loans coming through as expected.

Somewhat offsetting that, we're seeing better performance from more recent vintages where we are seeing better retention. So that's a slight positive impact in mortgages and we are seeing the impact of deposit margin compression coming through in there. I expect it to be broadly similar in Q2, Perlie, with all of those factors continuing. And that's simply because of the timing of the maturity of mortgages, but also very importantly, remember, deposit competition in the U.K. tends to be concentrated in Q1 and Q2 because of the ISA season.

Thereafter, we would expect that product margin compression to ease off a little. What's different from when I spoke to you at the full year is we now do expect NII growth in Q2. We expected it to be broadly flat previously. Now we expect growth into Q2 and then to continue growing quarterly thereafter and to grow year-on-year in every single quarter of the year. When I think about what's happening in the mortgage market, we have seen a pull forward of applications, but they have not yet completed.

So March was a very, very large month for applications. And I think that just speaks to the volatility in the rate environment and customers seeking to lock in. To give you an idea, for our June maturity, we've seen roughly double the number of customers lock in by this stage than we would ordinarily do. But that hasn't completed yet. It's going to complete through Q2 and Q3. Margins remain fairly robust. Clearly, rates are moving around, but so are swaps, and they tend to move in alignment with one another.

So that's what's happening in terms of U.K. NII. In terms of USCB, look, the net interest income there is a little higher than we anticipated, but not significantly so, and I wouldn't call out anything in particular. The repricing impacts have worked their way through now, but we will continue to see ongoing beneficial both NIM impact and net risk-adjusted margin impacts from continuing to rebalance the book from just travel and entertainment towards a bit more retail.

So you're obviously going to see a step change over the next quarter, but that will be an ongoing impact. And I'd just call out here also our progress in deposits, really pleased with that. Our retail deposits are now 76% of our overall funding. That's higher than the target that we gave you of 75% by the end of '26, and that has been disproportionately driven by some of the partnerships. So you're going to continue to see mortgage -- sorry, margin accretion. But obviously, it will be more pronounced over the next quarter or so.

The next question goes to Amit Goel of Mediobanca.

So yes, 2 questions for me. One was just back on BUK, but just on the cost piece. So I appreciate there was a slightly different phasing of investment this quarter versus last year. Do you mind just giving a bit more color on like how different was the investment versus last year, just so we can see the kind of the cleaner piece there?

And then secondly, just on the USCB net receivables. I saw after like several quarters of increase, there was a slight reduction. I don't know if that was related to the AA portfolio. But basically, I'm just curious if U.S. players are being a bit more aggressive anticipating reductions in capital demand. And so whether that's a reason why net receivables came down or if actually there is a little bit of a reduction in that market?

Okay. Amit, I will take both of those. So in BUK, I mean, I can see as I look at operating costs, there's a slight miss to consensus. I think that's only timing. And particularly when I look at where that is, it's in BUK. So BUK has got a slightly different profile of investment and actually efficiency delivery this year from previous years. And I'm not going to give you numbers but let me help you think about it.

Probably the structural cost actions will be a little more forward phased than last year, and that's simply because some of the things that we are doing around Tesco as well as the underlying business, whereas the opposite is true of efficiencies. You're going to see them build through the year. So I still believe that BUK costs are going to be down in absolute terms year-on-year.

And clearly, given that they've been up in the first quarter, you should be expecting them to fall in absolute terms towards the second half for the cost-to-income ratio to be in the low 50s. So that's exactly as we expected, and it's just some of the movements around timing and other investments.

On USCB, the change in card levels, I mean, typically, we see a seasonal change in Q1. I don't believe it's any more than that, Amit. And as I look at our performance in terms of purchases and the other factors that we would expect to see as lead indicators, they are no different from the broader peer set but thank you for the question.

The next question goes to Jonathan Pierce of Jefferies.

Sorry, I was going to ask you about share awards, but I nearly fell off my chair when you made a comment on 2028 net interest income. So I'll actually go with that if it's okay. Just to clarify, 2028, you're talking about consensus being very light at the group level, just checking, I heard that properly? And is that comment made in the context of where the yield curve is today or are you saying that consensus was very light even ahead of the move in the yield curve?

And I don't know whether you can give us a bit of color as to where you think we're wrong at a divisional level. Tying into that, just a quick question on the hedge. Are you taking advantage of the fact that the yield curve is markedly higher today? I mean a 1-year forward-starting 7-year is offering you 4.4% today. I'm just wondering if you're pre-hedging maybe a bit more of your future maturities than you might have done in the past.

Okay, Jonathan, I will take both of those. So I made the same comments at the full year, so it doesn't relate to the movement in the yield curve and the guidance that we are giving you is still based on a 3.5% reinvestment rate. We have not changed that number. So -- and it's the group number that I'm referring to as I look at that. So this is no change from what we've said before.

If I can point you to where I think the difference is, I think it arises in 2 areas. The first is U.K. corporate bank. And we see considerable momentum in the U.K. Corporate Bank. We've seen it both consistent quarters now. It has grown its lending in the first quarter by 15%. And it continues to make great progress even before we land the capabilities that we are due to land through this year in iPortal. So that's the first thing I would call out. I just -- I think we don't discuss it a great deal on these calls.

The second thing would be U.S. Consumer Bank, where you've really got 3 things starting to come together here. You've got card balances, which are up 10% year-on-year in the first quarter. We will, in the next few days, complete the purchase of a top-5 unsecured direct-to-consumer loans business in the U.S. and that gives us the opportunity to take that capability directly to our customers and to our corporate clients.

And then the third piece is our deposits, which, as I said, are now at 76%. And a meaningful part of that growth has come from our partnership with AARP. So we are really learning in this business about how we can take the full suite of products to our partner base, and that's what gives us the confidence in that business' ability to grow. Venkat, anything you would add on the USCB in particular?

Yes. So I mean, it's -- you asked about NII, Jonathan, and Anna has given you the various dimensions of it. But in the USCB in addition, what you see is continued improvement in digitization, continued improvement in costs, leading to the higher RoTEs that we've shown this quarter, 18-plus percent.

And what I would say is, broaden the statement that Anna has made, across every part of the business, you are seeing performance in the way we said we would demonstrate it 2.5 years ago and reiterated 3 months ago in terms of top line, in terms of operating efficiency, in terms of jaws, in terms of deposit growth, in terms of lending growth in the corporate bank, in terms of the returns improvement in the U.S. Consumer Bank, returns improvement in the investment bank, et cetera, et cetera, I could go on. And I think that's the picture we would like to emphasize.

Okay. Jonathan, let me come back to your second question, which was on hedge yield. So the simple answer, as you know, we roll the hedge systematically, we roll it mechanistically, and it is not our opportunity to speculate or determine what rates might be. We roll it irrespective of that environment. The thing that we are very focused on, however, is deposit behavior.

So the increase in notional reflects observed deposit behavior over a number of quarters. It doesn't relate to just the quarter past or expectations forward. We actually observe what's going on in the hedge and then we will choose to extend it or indeed contract it. So that's all that's going on there. We're not responding to a change in the yield curve.

The next question goes to Guy Stebbings of BNP Paribas.

To start, if I come back to the hedge, just to follow up on Jonathan's question. It was a meaningful uptick, I guess, in Q1 of GBP 6 billion or so in the notional. Just trying to understand where that's landing because it doesn't look like there's a big move in deposits in the U.K. So is that sort of landing outside of the U.K., the IB perhaps?

And just, I guess, a reflection of the stickiness, I suppose, of those deposits and how you see them going forward rather than as you say, taking advantage of the curve in any way? And also just to clarify, in terms of pre-hedging the hedge, you say you don't do any pre-hedging the hedge when you talk about what's locked in from here? So that would be the first question.

And then the second one was just around ECLs, reasonably flat in aggregate on the performing loan book. I just want to understand the move in the management adjustment, which came down from GBP 369 million to GBP 265 million in the quarter, quite a big move. I think that largely just relates to the GM book, which now filters directly into the models rather than needing an overlay? So I'm not sure if that explains the entire move, but any color there would be helpful.

Yes. Thank you, Guy. I will take both of those. So look, the movement in the hedge upwards over time in notional is going to reflect our, as I say, long-term view of deposits. So it's quite difficult for you to tie quarter-on-quarter movements in deposits to sort of changes in the hedge because what we're trying to identify here is rate and sensitive balances. And obviously, we want to observe that for several, several quarters before we make the change. So you're going to see it outside of the U.K. as well as inside.

And obviously, over time, as the equity and the firm continues to rise, you're going to see us hedging more of the equity position as well. So I wouldn't call anything in particular out. If we do any pre-hedging, it's very limited and it's under very strict risk limits and those have not changed over time and certainly would not explain anything near the portion that I've called out today. So that GBP 6 billion is the observation of deposits.

In terms of your second question about post-model adjustments, I appreciate this is quite difficult to tell because we only give you the full disclosure at half year. But -- just for the rest of you, what Guy is referring to is Slide 40 and is basically calling out the fact that the management adjustments have dropped from Q4 into Q1. And just to remind you, guys, we do these post management adjustments for 2 reasons. The first is where we're doing some work on the models, and to anticipate what that model work will show, we very often take a PMA.

And then the other reason that we take a PMA is when we are faced with a degree of economic uncertainty, and we feel like consensus may not be effective. The point that you're talking about here is the former. So actually, what happened is prior to this quarter, the GM, so the General Motors impairment was not modeled. We were essentially using our expectation and our existing portfolios to anticipate what that was going to be, and we put it in as post-model adjustments.

Now what's happened is we've updated the model and so General Motors is a modeled number. So you're not going to see any change in the total number, it just jumps from being in the PMA to being in the modeled number. The real changes in PMAs that we've done and the ones we've spoken to you about really speak to economic uncertainty and relate to U.S. cards, U.K. cards and the IB.

The next question goes to Andrew Coombs of Citigroup.

If I could just pivot the conversation to capital? Just intrigued on 2 things. One, there's been a lot of press coverage about your comments around the leverage ratio potentially exclude unencumbered gilts. Perhaps you could just touch more broadly on where you see the leverage ratio is a binding constraint now? For which product, which divisions do you believe the leverage ratio is a binding constraint for?

And then secondly, I want to ask about Basel endgame, overall a 5% release expected for the CAT1 and the CAT2 banks and the change in the G-SIB methodology, but arguably more important from a competitive standpoint is the output floor has been dropped. And when I look at the risk weight, I think under ERBA at 75% in retail loans and 45% in credit card transactors. So can you just talk about what you think Basel endgame means for the competitive dynamics for the U.S. Consumer Division and for the investment bank?

Okay. Andy, why don't I start on leverage and then I will hand to Venkat on the second part? So yes, we like the sort of broader consultation might suggest there is an ongoing discussion in the U.K. about the leverage ratio and really leverage being a backstop and we would support that.

You're noting that we have published a piece of work that talks about the opportunity in the U.K. really for the treatment of unencumbered gilts, and we do think that that's important. As we make that statement, it's more about the opportunity for U.K. plc and the reduction in costs that, that would have for the government, and we called out around GBP 2.5 billion per annum on an ongoing basis.

We are not leverage-constrained. Clearly, we have considerable leverage usage within our financing business within the investment bank, that's why we are a significant issuer of AT1 in the market. And as we do so, we're clearly mindful of the relative cost between those AT1s and the kind of margins that we get in the financing business. So the 2 things are somewhat unconnected. One is more of an observation on U.K. plc. Venkat.

Yes. So Andrew, on the capital side. We clearly are watching very closely what's happening in the U.S., not just in terms of capital ratios proposed under the Basel endgame, but the way supervision is itself changing and stress testing is changing. You've got to look at all 3 together, and we would advocate very strongly for the U.K. numbers to be relatively consistent.

And for the U.K. approach is also to adopt greater transparency in the way in which add-ons are determined both for banks and for investors. The particular things on the investment bank and credit cards, let me begin with credit cards. So in the credit card space, you're right that if there are no changes, then the U.K. numbers will, at a parent level for us holding company level, add on more capital per unit risk than a U.S. bank would face.

Now what we are doing to adjust our business is obviously running it more efficiently and also diversifying it and the purchase of Best Egg and the direct-to-consumer loan business should be seen as a part of diversifying our cards business into other places which are less penalized in terms of capital. And then on the Investment Bank, the point I would make is we have already, for some time, been chasing U.S. banks, which have been putting more capital and more balance sheet.

And at least the way we have done the analysis, and you should probably replicate it, is if you look at returns per risk-weighted assets, a form of capital efficiency, I think we've done pretty well. And as you know, we've, over the number of years, made structural improvements in the way the Investment Bank is performing. We've had 8 successive quarters of strength in year-on-year income growth on positive cost jaws, on income over RWA, as I said, and we beat consensus for 8 consecutive quarters in the IB.

This is all deeply structural. And what we are trying to do with these structural changes, with the improved -- increase in financing as a portion of our total revenue, et cetera, is finding our own ways to be competitive and to be efficient. Now on top of that, do I want to row against the current of capital disparity between the U.K. and the U.S.? I wouldn't. But we've made our views known, but we will run our -- we will continue to operate the bank in the way we have and shown the progress we've done quarter-over-quarter.

The next question goes to Jason Napier of UBS.

I think I can echo, Venkat, what you were saying about the sort of underlying performance of the business. If you take out the one-offs, it looks like PBT is up 15% year-on-year. But of course, a lot of the conversations are about one-offs and those sorts of matters. So if I could ask 2, one, quite a lot of coverage in the media around potential SRT governance inquiries. If you could talk potentially about that or confirm that there's no change to the capital outlook for the group as a consequence of what may or may not emerge from that?

And then secondly, just to follow up, please, Venkat, on your last answer around relative capital intensity of the businesses in the U.S. in particular. Could you just give us a sense as to which businesses you think are most impacted by the relative changes that are being envisaged? And in those, just some guess as to the cadence of sort of customer churn. How quickly would we know if there was a delta in competitive intensity that actually mattered on the ground?

Thank you, Jason. I'll start on SRTs and then hand to Venkat. So on SRT, I'm not going to comment on regulatory reviews, but only to say that the regulator in the U.K. regularly conduct reviews both individually and thematically across the industry. We have been very transparent around our Colonnade program, and you can see that in the appendix. We've given you the same slides for several quarters now.

That is primarily focused on credit management, as Venkat talked about before. And indeed, it's been in place since 2016. For those of you following along, it's Slide 47. So it's a well-managed, well-embedded, well regarded with investor program that's been around for a long time. Of course, we have to notify the PRA every single time that we do an SRT transaction. So that's something that we've done.

And from our perspective, the most important thing that we are focused on, and I would expect the regulator to be focused on, are the risks associated with running that kind of process, and we believe they are #1, the financing of SRT, so we do not finance our own SRTs. Secondly, the counterparty credit risk. So remember, ours is cash collateralized. So that counterparty credit risk is minimized. And then thirdly, the risk of the market being shut at any point in time.

Now clearly, you mitigate that by having a very long-running, long-standing, high-quality program like ours, but we also restrict the maturities in any particular quarter, so they are less than GBP 2 billion. So that means that we would be able to mitigate that easily even if the market were close to us. So from our perspective, Jason, we're very comfortable with the program that we have. We believe it's very successful and provides the credit mitigation that we seek to do, and we don't envisage any changes in it. Venkat?

Yes. Just to finish off on one point. So all the attributes that Anna spoke about in the -- of the SRT program, they come from having an evergreen program and an evergreen program where people know that they can expect a cadence of issue from us, the quality of issuance from us and it helps us and it helps them.

On your capital question, let me begin by saying, first of all, there's no new news to us here, right? We've been following this for a number of years. It has been clear that there is going to be a disparity between the U.S. and the U.K. It comes, as I say, not just from capital levels, but from forms of stress testing, the total capital stack, including regulatory add-ons. Now -- so there's not going to be a sudden shift.

What you're seeing is an -- because of the way we anticipate it, the way in which we've constructed our business over time, I just spoke about credit cards in the previous answer, where we've had a high-quality credit card portfolio in terms of FICO scores, and now we are diversifying it with the purchase of Best Egg into direct-to-consumer loans.

Second, on the investment banking side, you've seen again from us an emphasis on financing, which is, as I've always said, a very good business, properly risk-managed and has capital benefits because of secured lending and emphasis, so that's becoming a bigger part of our portfolio. We continue to emphasize intermediation. You will see that we manage our risks very well.

If you look at our VaR, the VaR is managed -- and the number of loss days, which was only 1 this quarter. The VaR is managed at a lower level, VaR obviously is a way in which you control risk and that can have an impact on capital. So the way the business has been structured, it is with a view to these disparities, which are not new, right. And we will continue to work with the capital regime we have and operate subject to it in the most efficient way we can.

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

The next question goes to Chris Cant of Autonomous.

If I could come back to this topic around competition from U.S. players. You've spoken to financing, and that's been an area of growth for you for a number of years now. It's obviously not just RWA-based capital relief that U.S. peers are getting, though they are also seeing a sort of leverage biting point dropping away in the background and how are you expecting to see more competition in that financing space as well? That would be question one, please.

And the second small one, I think. But on corporate lending in the IB, that looked quite soft this quarter relative even with the fair value marks adjusted for you, it looked like a soft quarter. What should we be expecting there going forward, please, noting that you're looking to the ICB as an area of growth? And I know transaction banking is doing well, but if you could comment on that, 1Q print for corporate lending, that would be appreciated.

Okay. Chris, why don't I start? So I'll talk about leverage and then I might hand to Venkat, and then I'll pick up on corporate lending. So look, clearly, financing has been an area of growth for both us and for the U.S. banks, and we've seen that over a number of quarters now. We're pleased with our performance, which is up 31% year-on-year in dollar terms.

And we don't see that the U.S. peers have been leverage constrained up to this point. And indeed, it's not just this quarter. If you look back over successive quarters, as Venkat has said, you see increasing levels of balance sheet generally being deployed into the business. But Venkat, you might want to comment on the competitiveness of this product generally.

Yes. Look, the -- first of all, as Anna said, and we've been seeing this for a number of quarters. We've adjusted our business for a number of quarters. Second, especially when you come to things like financing and prime, there is a competitiveness element to it, but there's also a client service and stickiness element to it. Our rankings have been growing consistently because of the services we provide to our clients in equity financing and in fixed income.

We are a top 2 fixed income financier, have been for a long, long time. So it's these capabilities that we bring to bear that make us very competitive and make us attractive to clients. So I would use it on a much more holistic basis. I mean and as Anna has said and I said earlier, over a number of quarters, you've seen the U.S. banks put in both capital and balance sheet much more than we have.

We've been very disciplined on both. Minor fluctuations quarter-to-quarter but keeping it stable. And yet we've continued to show the results in our investment bank that I spoke about in terms of continuous quarters of improvement. And it's coming from building in the foundations to generate repeatable improved performance. Anna?

Yes. Thank you, Venkat. Chris, the corporate lending line, I appreciate it's very difficult to forecast because what you've got there is an underlying level of corporate lending, that's not really changing. We're clearly cycling through this process of reviewing the book. We're sort of a little more than two-thirds of the way through that now. So that number is fairly consistent at around GBP 50-ish million a quarter. So nothing really happening there. You've obviously got the swing in LevFin marks year-on-year.

It was up more than 100 last year. It's down 40 this year. So you've got nearly 150 basis points of RoTE impact on the investment bank just in that line alone from those LevFin marks. And then the other 2 things that flow through there are cost of hedging and cost of SRT. Nothing really notable to call out there. You should imagine in the current environment, we do a little bit more hedging, but there's nothing particular I would call out for you, Chris.

The next question goes to Nicolas Payen of Kepler Cheuvreux.

Yes. Just one actually. I just wanted to go back to discuss your cost of risk guidance which is now at the top of the 50 to 60 basis points range. Just wanted to know what are your assumption regarding especially the Middle East situation? Does your guidance capture any improvements in the geopolitical situation or status quo or maybe at the other end of the spectrum, maybe a potential increase in inflation because of the situation? Yes, anything you can give us regarding this new guidance.

Okay. Thank you, Nicolas. I mean, we have called out that we expect to be around the top end of our 50 to 60 basis points range. That's purely because of the single name that we took in the first quarter, and we do not see any other signs of credit deterioration in the U.K., in the U.S., in corporate or in consumer. And so from our perspective at the moment, if you do the math, then you'll see that we are broadly in the midpoint of the range for the remaining quarters of this year.

I can see that consensus is already at the position that we've guided to today. So I think that's probably what the market was anticipating. At this point, we don't see any significant impact from the situation in the Middle East, other than the revenue impacts, which have been broadly positive, to date. So the rate impact and obviously, our ability to capture the cyclical opportunity in the IB. In terms of credit, we don't see any deterioration at this point.

However, we have taken 3, I would say, relatively modest adjustment in our IFRS 9 modeling as we look at future potential risks. So the first of those relates to U.K. and U.S. cards, where we have been slightly more conservative with the unemployment rates that we have used predominantly. And we're just recognizing those that clearly consensus is moving on over time. And those 2 particular books are highly, highly sensitive to unemployment and the rate of change in unemployment.

The second thing that we've done is, to Venkat's prepared remarks, we're a little bit more mindful of some of the investment bank exposures. And on that basis, we have put a little bit of downside bias into the investment bank calculation, essentially weighting it more heavily to the downside one scenario. That will be very consistent with what we've done in previous periods where we faced uncertainty. So we're not trying to make a prediction here. We're really just recognizing some of the uncertainty around us.

Now clearly, if the situation were to persist, and we started to see real economic effects coming through in terms of higher inflation, then that may have some impact on credit. But there's a few things I would say, hopefully, to reassure. The first would be, we clearly had recent experience of this in 2022, where we saw a sharp inflationary environment and we saw a sharp increase in rates, and we saw very, very resilient consumer and client behavior.

Corporate balance sheets remain strong. Consumers remain in a very robust position. And whilst we've added lending since then, there's been no meaningful change in our risk stance since that point in time. So that gives us confidence. The second thing is that, obviously, we see, I would say, rational changes in behavior from both clients and consumers. So being mindful of the uncertainty and perhaps paying back their credit cards a little faster than they otherwise might.

We think that that's really positive for credit and it's something that we observe. But overall, nothing additional that we've taken so far other than those 3 PMAs. IFRS 9 is highly cyclical -- sorry, highly procyclical. So if we were to see a real deterioration, then clearly, that might lead us to make some changes. But of course, we'll call that out if it occurs. But thank you for the question.

The next question goes to Chris Hallam of Goldman Sachs.

So my first question is just on lending dynamics. Anna, I think you've just covered some of this, but I want to drill down on 1 point. So in the U.K. Corporate Bank, how much of the moves you've seen on loans and on deposits as well actually in the first quarter is potentially attributable to the macro uncertainty?

So the premise being that if you were to start to see scarcity and sort of inflation-driven restocking cycles, companies loading up on inventory at higher prices that will drive demand for working capital lending, while also compressing corporate cash balances. Simplistically, that just maps onto the Q-on-Q evolution in loans and deposits you saw in the U.K. Corporate Bank, but that could just be coincidence.

And then second question on the disclosure on Slide 46 -- 45, sorry. Has the uncertainty over the last few months in the private credit space changed at all, how you think about the growth outlook in those areas? I think there's a sort of consensus building that the credit risk for the banks themselves is pretty low as you called out the absence of losses.

But simplistically, private credit as an industry has been growing pretty quickly. So if you and your internal planning had forecast that stacked bar chart, let's say, for 2028, 6 to 12 months ago, would the composition of our chart look very different today, i.e., has the size of the opportunity set in financing changed in your view?

Okay. Chris, I'll pick up the first of those and then I'll hand to Venkat. Look, you've seen in Q1, 15% lending growth, 3% deposit growth. I don't think that's due to anything like the sort of behavior changes that you talk about. Chris, I think that's probably a coincidence. And in fact, it's very consistent with what we've seen in recent quarters.

About 50% of the lending growth that we are seeing is coming from new clients. And as they come on board, they are also placing their deposits with us, which is why we're seeing that balance. And remember, we are very deposit-heavy within our corporate bank. Our loan-to-deposit ratio, I think, is around 34%. So we would expect to be growing lending faster than deposits. That is our absolute strategic intent. Venkat, over to you for second question.

Yes. So just on the first point, which is that the growth you see in lending in our corporate bank is very largely our own actions. This is what we said we would do in our strategy. We said that we have had a bigger deposit base and we wanted to encourage lending for our clients and grow our client book. It's exactly what we've been doing.

Coming to your question on structured financing exposures. I think look, there's a supply of credit, there's a demand of credit for credit issue. I think what you're seeing in the liquidity dynamics in the private credit market may mean a shrinkage supply of credit coming from the funds themselves. It will take us some time to see. The reason this thing has happened is that obviously, the private credit funds have been giving loans in a niche, which has been fairly well publicized, the banks were regulated out of.

Now things could change in the U.S. and so banks may come back in there. But generally speaking, when you look at the way we are exposed to it, which is in the way shown on the slide, which is working with the fund managers, I would imagine you're absolutely right that I think the growth of this thing is probably going to be leveling off or declining in the next year or so, but we have to give us some more time, but that will be a reasonable assumption.

The next question goes to Robert Noble of Deutsche Bank.

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

Yes. So look, you raised a very good question, Rob. And I think there is a -- there are 2 issues here. There's one of timing, and then there's one of certainty or knowledge. Clearly, inflation risk has increased with what's going on in the Middle East. And you can see it in the U.K. inflation numbers speaking just in the U.K. and over time, there are worries in the U.S. as well.

For a variety of reasons, it's not hit employment. And growth in the U.K. at least until February was strong. So -- and growth in the U.S. remains strong and there are important sectoral reasons for why that is the case, related a lot of course to tech. So -- and we said to you, Anna said that we are not seeing any impact on our retail or corporate credit portfolios in the U.K. or the U.S., especially the smaller companies. So all of that put together explains why credit conditions are generally good. I mean, we said that we expect impairment to be at the higher end of our cyclical range of 50 to 60 basis points.

And we've discussed NII, and we've discussed the interest rate income for the bank. The longer this thing goes on in the Middle East and the more inflation feeds into the economy, then there is a risk of growth or lower growth and then there's a risk potentially of the implications of lower growth, including on credit. But we are not seeing it yet, and I don't think it's fed through to consensus, which is what we follow. That's the reason.

What you're seeing from us is prudent risk management. in the forms of the way we've talked about credit lending, our approach to credit and the way Anna described a slight emphasis to weaker scenarios in calculating IFRS 9 related impairment, so what you're seeing from us is a little more prudent positioning, a little more prudent of waiting of impairment scenarios, but it's not yet played through mainstream consensus numbers or, of course, into what we experienced in the portfolio. Anna?

Yes. Thank you, Venkat. I think the other thing I would call out, Rob, is that our confidence is drawn and relates to the plans that we continue to execute, and that's -- this is another quarter of execution. And of course, we're mindful of the environment, and Venkat's called out a few examples.

But our focus is on executing the plan as it has been over the last few quarters and that's really what's delivering the momentum that you can see today and also the diversification that we have in the book, both geographically and between different types of business allow us to be resilient in quite a range of environments. But we're clearly mindful of the outlook.

The last question goes to Edward Firth of KBW.

I have 2 sort of related questions, and I guess you partly covered it in the answer to Rob's. But I guess it's just -- I guess what we're all struggling with is the contrast between people like the Deputy Governor of the Bank of England saying markets are ignoring risks. There's an awful lot of volatility going on. People are not focusing on it. And the message from you, which is there aren't really any problems.

And so I'm just trying to get a sense -- so the way I'd ask the question is, what has to happen for that to be a problem? You must sensitize your book. Is it that the Middle East continues for much longer than expected? Is it the oil price of $150 is the big question mark because obviously, $100 is not a problem? So where -- what is an environment, which would have you guys thinking this is a problem for our book, and we're going to have to start taking some material numbers? I guess that's the first question.

And then just related to that, I was struck both by the size and the high proportion of write-offs you took on the one-off impairment or the one-off exposure. And I just wondered, could you give us a sense, I mean, is this like a normal exposure to you? Do you have -- would this be like a top 10%? I mean how many of these sorts of size, single name exposure do you have on your book? Would this be a very material one?

And then I guess, secondly, related -- I guess you've been through all of them now. Is it something that -- I mean, can you give us some flavor as to why this was a one-off because it was an extraordinarily big number in itself and a big percentage write-off, if that makes sense?

Okay. Why don't I start Venkat and then I will hand it to you? So Ed, I'll just reiterate, we are very mindful of the environment around us, and that's why we are managing risk and capital very, very carefully. But we go into this kind of environment with a resilience that would not have been there a few years ago. So we are operating with greater proportion of our capital focused on was over returns.

We have higher operating leverage, which gives us greater resilience. And of course, we have much higher levels of absolute capital. So if there is deterioration, then we would face that in a completely different position as a bank. So that's #1. #2 would be, as Venkat said, we continue to manage our risks carefully. He's talked about some changes that we are making around how we approach lending.

I would also call out the way that we've managed the volatility in markets in the first quarter, so you can see both the bar and the single day trading loss that tells you how we are approaching risk in this kind of market. But you're right, to the extent that the situation intensifies, either in terms of inflation, or indeed time, we might see that start to flow through into the real economy. But that's how we are positioning ourselves to manage those things robustly. Venkat?

Yes. So let me just continue on that question for a second, and then I'll come back to the -- to your second question. So what Anna said, we are managing our risks. We take a view to the future, but also look at the structural composition of the business, right? What you've seen in this quarter is anticipation of greater volatility and greater economic weakness.

That has led to volatility in the financial markets themselves, which our trading businesses have been able to do well and because of the help that they're providing to clients and the intermediation as they did. So if you -- the question I always ask is, if on the first day of the quarter, you knew how the quarter would fold out, what results would you expect? And at the last day of the quarter, did you get the results that you thought you would expect, right?

And if you look at our businesses, because of the structural changes which we are doing, a, what you see in each business is what we would have thought; b, the way the businesses interact also gives us protection. So coming back to the question that I think it was Rob who asked it. On the one hand, you're getting an advantage from interest rates. On another hand, you're getting an advantage from trading and trading-related activity.

On yet another hand, you're getting the advantage in the investment bank from people seeking capital markets transactions and IPOs, right? And then credit conditions still remain strong. If that changes, which it could, over time, the longer these things go on, then yes, you would have some issues on impairment, but you may still continue to get benefits from other sides of the portfolio, right?

And then we've not spent some time on this call, but we do have fee businesses, transaction businesses, all of which will be important and relevant as people look to hedge financial exposures. So it's a diversified bank, diversified sources of revenue and it's important to focus on one or the other, but you've got to look at it holistically, and this quarter's results show you the importance of that.

Then coming to the second question. First, I would take you to Page 45, where we've gone through the history of our exposures to these things. And what we've said is, as a credit matter, we've had no losses or negligible losses across all of this. That's the first important thing. When fraud happens, right, and depending on the extent and sophistication of the fraud, the numbers are appreciable. I'll say 2 things. I don't like to lose a single dollar, a single pound to fraud.

On the other hand, this business has been structured, has been performing well over the last number of years. It has been structured in such a way, and we've made fundamental improvements to it that we are able to absorb it. It doesn't mean I like it; it doesn't mean we won't take steps in which we are taking steps to reduce that, likelihood, minimize it and so on, but we can absorb it. In a credit lending business, there's always a chance of that. We look to reduce it and minimize it by good risk management. There are obviously lessons which we have learned from watching these 2 situations and those lessons we've put in. And that's what I would say.

The last thing, I know this is the final question, if I may close on this. The message I'd like to leave all of with is, first of all, thank you for joining us. Thank you for being on this journey with us, thank you for the excellent feedback you give us on this call and between calls, what you're seeing is yet another quarter of the demonstration of the fulfillment of our strategy.

Quarter after quarter after quarter, we've been improving this bank structurally in the ways we said we would and delivering in the ways we said we would across the bank, in the Investment Bank and increase in RoTE now to double digits, it's 15% this quarter. In U.S. cards, an increase in RoTE. When we started this plan, it was 4%. We just printed an 18% quarter. The bank's RoTE itself is at 13.5%. We are reiterating all our targets. Strong capitalization. We're a 14.1% CET1 ratio, which is a little above the high end of the range.

That shows you prudent planning, prudent stewardship of capital and with a view to what might come in the future, which some of the guys you have asked questions about, the growth in NII, the strength of our deposit base, the increase in U.K. corporate lending fulfillment of our RWA's promises in the U.K., increased client engagement in the investment bank and so on and so on and so on. So we've laid out our strategic plan. We've laid out the structural improvements; we look to deliver upon it quarter after quarter and to report to you that way quarter after quarter. That's our aim. Thank you very much for joining us.

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

Thank you. That concludes today's conference call.

Thanks, everyone, for coming to this session with Barclays. Thanks, Venkat, for joining us one more year. Venkat, CEO of Barclays, as you all know. As usual, before kicking off the session, we will ask the polling question.

What would drive relative outperformance of Barclays shares in 2026? Number one, U.K. business is growing loans over 5% CAGR. Number two, its markets business successfully navigating current volatility; number three, cost income on course to reach the low 50s in 2028, cost of risk remaining between 50 and 60 basis points. And number five, capital distribution seem to beat the over GBP 15 billion target '26, 2028.

[Voting]

Capital distribution over GBP 15 billion. I must admit I thought #4, which had obviously embedded private credit in there [indiscernible]. We'll touch on the different themes in any case.

You presented your new 3-year plan last month. You're aiming to -- for over 14% RoTE with quite conservative actually market assumptions and a lot of it is under your control on costs and efficient capital allocation. Since then, of course, there's a lot of volatility in the market. Geopolitics, AI has come up. How are you thinking about the environment now and how you're seeing the business navigating it?

Yes. So first of all, thank you very much, Alvaro, for having me. I really enjoy being here at your conference and great credit to you for the crowd you always managed to get the engagement you managed to. That's it. So thank you for having us be part of it.

First of all, I think the context of our plan which we presented 1.5 months ago is important. We presented a plan 2.5 years ago, approximately a little over 2 years ago in February '24, which we saw as the first stage of stabilizing and growing the bank, where we laid out targets of increasing RoTE greater than 12% in '26, increasing capital distributions at that point to greater than GBP 10 billion, again, '24, '25, '26, and rebalancing the bank, including an investment in our U.K. businesses.

We've delivered every quarter under different circumstances, different environments. We delivered every quarter the elements of our plan. And so quite clearly, our shareholders wanted to hear about the future. And of course, we wanted to talk about the future. And so the elements of the future now are continuing that journey, intensifying the journey with greater ambition, accelerating ambition is the words I use. And that is increasing RoTE from greater than 12% in '26 to greater than 14% in '28, increasing the capital return from greater than GBP 10 billion for the 3 years ending '26 to greater than GBP 15 billion for the 3 years ending '28, and I take full note of the polling results.

And then the third thing is to continue the rebalancing of the group, which is investing. We said GBP 30 billion of RWAs in the U.K.-related businesses by '26. We reported greater than GBP 20 billion or about GBP 20 billion, so well on the way there. And to bring the Investment Bank to about 50% of the group's RWAs.

Now -- and alongside this are 3 things. One is accelerating the ambition. Second is investment in core technology, in the ability to do AI for deeply personalized customer service and for deeply personalized product offerings and to do that in an aggressive way. And we've doubled our investment to $2-plus billion, over $1-plus billion over the last couple of years. And then continue the journey on higher ROTE, both from a greater proportionate exposure to our higher returning businesses in the U.K. and from improving the returns in our existing businesses.

And you would have seen that the Investment Bank has continued to perform well. It's in double digits, up a couple of percent from the previous year. Our U.S. cards business, which when we started our plan was 4-odd percent RoTE is, I think, 14% now, 11% now. So it's all increased. So that's what we continue to do.

In the current environment, and I'm sure we'll talk about credit in a minute, the current environment, obviously, there's volatility. I've said many, many times that if you've got a good trading business and a markets business, which we believe we do, volatility is an opportunity to gain revenues by serving your clients as long as you manage your risks well, your trading risks well, which we take great effort to do. We still think that the M&A environment so far has been strong. Let us see if uncertainty continues, how that might be.

And then the consumer exposures start off at a very, very good point at the credit exposures. So initial conditions are important, and they're good. So that's where we feel now. But obviously, you've got to watch the elements of uncertainty in the market. I'm sure we're going to come to them.

Yes. One theme that has definitely come up, as you well know, is private credit. The concerns have resurfaced on the back of MSF -- MFS in the U.K., sorry. My question really is, is MFS a result of Tricolor credit review? How should we think about that sort of case in the context of wider concerns around private credit and MBFI exposure more broadly. There are now a good handful of names in the MBFI space that have defaulted. So there's -- understand the concerns there.

Yes. So I'll come to them. They are all slightly different. First of all, let me just say before I begin that I don't think -- I would not categorize Tricolor and MFS as private credit. It's a different form of lending, securitized lending.

To understand the context for us, and I'll talk about it, first, let's understand our framework. what's our framework. Our framework is in the market environment, which is shifting, first, we've got to monetize our opportunities. And I spoke about the trading environment. And just to remind you, the Investment Bank is about half the bank. 2/3 of the Investment Bank is our markets business. The markets business is about 1/3 of the bank, right? And it's an important source of revenue. And short-term volatility is conducive to the markets business as long as it allows you to serve clients, allows you to intermediate. We take great pride in the financing elements of our markets complex. And all that works as long as you manage risk well, which comes to the second point, manage risk well and trading risk as well as credit risk.

And then the third thing is planning on realistic assumptions, which you spoke about, the conservative assumptions that underlie our plans, both on the size of the wallet in markets in trading and in investment banking, which we've held flat as well as our assumption into the plan that -- on the returns from the structural hedge, which structural hedge drives about 50% of our income growth through 2028. And the interest rate assumptions behind that are relatively conservative.

So now we'll come to Tricolor, MFS and private credit. So the first thing is, as I said, I do not think Tricolor and MFS are the same as private credit. Private credit, and I'll come to that in a second, is lending, our definition, lending from the nonbank financial sector to individual corporates. And it's lending outside of securitized markets and banks, right? So high-yield bonds, regular investment-grade bonds aren't private credit. Lending by banks is not private credit. It's by nonbank players. So we'll come to that in a second.

MFS and Tricolor, obviously, I'm disappointed by the fact that we had anything to do with either of those companies. I take risk management very, very, very seriously, and I don't like to find ourselves in these situations. With -- they are both examples of fairly deep and sophisticated fraud. We don't know how long it's persisted. We'll find that out fully. It's manifested itself in more recent years. In the case of tricolor, we have spoken to you about our exposures. And at that time, I said to you that I think there are 2 important things when you look at these situations. One is what are the financial pressures on the underlying business? And second is what is the quality of financial controls.

I said that in our October earnings and said that we are going to look at cases where we have to worry about one or the other or both. And as you can imagine, we've been doing that. The other thing I will say is risk management is an evergreen exercise. It's like mowing your lawn. You do it over and over and over again. And that is what we are doing, and that is what we have been doing. We have no material credit concerns to report in private credit, which I'll come back to.

On MFS, the publicly number has been GBP 500 million exposure. What I want to tell you is that our anticipated impairment from it is a materially lower amount. Why is it materially lower? It's materially lower because there are multiple facilities in them. Obviously, we risk managed by facility, although we care about the ultimate arrangement of those facilities. And not all of those -- and some of those facilities are better behaved and better performing than others. That's what our expectation is.

It's also a number that is not the kind that would have been material enough for us to report on an intra-quarter basis. So you will get the results in due course. And it is also a number which is in the context of our business in this quarter and other quarters, something that we can bear. Having said all of that, right, on the one hand, I do not expect -- I fully expect that we will meet all our targets for this quarter and this year. On the other hand, as I said, I'm disappointed that we had anything to do with either of these 2. And the risk management exercise has always been strong, will continue to be strong, and that's where we will persist.

On private credit, I've given you the definition. And what I'd say, repeat is that we have no material credit concerns. So what do we do in private credit? You would have heard that after the financial crisis, changes in capital regulations, lending to smaller and lower-rated companies started leaving the banking system and going to nonbank players. So we -- our direct exposure to these kinds of loans tend to be, therefore, what banks normally do or what banks do post crisis, which is higher quality loans and to larger companies. Obviously, we have an SME business and so on, but it's -- that's a different issue.

In private credit, what we do is we lend to managers. And we work with the large, well-proven, long-running managers, top-tier managers. We lend against their portfolios of loans. We take great importance in our rights of collateral. So collateral calls when market values shift. Our transparency into marks and our ability to mark the portfolio because our ability to call collateral depends on our ability to mark the portfolio, prudent LTVs. So we lend with typically 60% or lower LTVs against these facilities. Sector limits, borrowing concentrations and the weighted average EBITDA of the companies we lend to underneath it is greater than $200 million. So they are larger companies, not smaller companies.

So we tend -- we don't rely on third-party valuations. So as I said, collateral valuation, credit management, sector exposure, name exposure, overall facility LTV, client selection, the manager you work with, these are the pillars of risk management in our lending to private credit. So we feel very comfortable with it. And as I said, risk management is evergreen. We'll keep looking and looking and looking, but we have no material credit concerns to report there.

Okay. Very clear. We've touched on this already in the Investment Bank, you're factoring sort of low single-digit revenue growth and within that flat market share in markets, you have grown share in the past. Is now the flat share reflecting your more cautious view on markets more broadly?

Sorry, is it affecting?

No, the -- within your plan, you're assuming flat market share. In the past, you have grown that market share. So is that a reflection of your view on markets more broadly?

So there are a couple of countervailing factors in this. One is, you're absolutely right, we have grown market share, and we aspire to grow market share, right? So let me leave you with no doubt as to our ambitions.

Our ambitions are to be a bigger, better, stronger markets house. The way we've stated that ambition is, obviously, there are financial aspects of the ambition. But we've said that of our top 100 clients, which are the largest clients in the world, we are #6 investment bank and #6 markets business. So with a large number of them, we want to be #5, rank above. That number was in the 40s 2 years ago. It was 62 at the end of last year. Our target is 70 this year, right? So the more you do with each of these clients, the more you do in each of the products that you serve them. That has helped us.

And in fact, the rank is a consequence of both work, the growth in our equities platform and business over the last number of years, especially in prime and financing. The growth -- we've always been very strong in fixed income, as people know in credit, especially. And we've continued to grow that with our trading businesses and securitized products, we are creeping up the ranks. Some would say jumping up the ranks. So all that is good. And we continue to be intensifying that effort and investing in the technology that enables that effort.

At the same time, we've got to be mindful that you are in an economic environment that may favor certain sectors we are not in. We are not in commodities. We are in emerging markets run out of London and New York, not in local emerging markets. And we are going to live through a period of changing capital rules in the U.S., which we'll be hearing imminently, which could change the playing field for a U.K.-domiciled investment bank versus the U.S. one.

When we factor all that together, we feel that it's the right and prudent thing to say that we'll hold our own. Do I hope we do better than that? Yes. Am I trying to do better than that? Yes. Am I pushing the organization to do better than that? Yes. But for our purposes, the assumptions are what we give you.

In the U.K. on the other hand, you're forecasting 5% loan growth CAGR across the U.K. businesses. It's a strong outlook. We've seen evidence of that coming through last year already. So it's more momentum, sort of ongoing momentum. What do you think is driving that? Is it sort of catch-up CapEx after a decade post-Brexit, AI CapEx? Any particular sector you're seeing driving that growth?

The first thing quite simply is bringing it under greater management focus and making it a part of a management objective. That's what we did [ 2 and half ] years ago when we said that we are going to grow our RWAs. Second is catch-up, as you say. There were parts of our corporate bank, parts of personal lending where we were underrepresented. Now we accelerated some of that with the purchase of Tesco and the capabilities it gave us in both unsecured lending in credit cards as well as in personal loans.

We also had laid the groundwork a few years before that with the purchase of a specialty mortgager called Kensington Mortgages, which gave us the ability to do complex and high LTV loans. So the GBP 20 billion growth in RWA has come from all of these things, the GBP 20 billion we've seen so far, and that gives us the confidence to go further. And then in 2 areas of our own control, business banking in the U.K. and corporate banking in the U.K. First, we made the U.K. Corporate Bank a separate segment reporting into me. We've invested a lot in the underlying technology, something we call iPortal, which makes it easier for corporate managers to work with us.

The importance of this to the overall strategy of the bank cannot be underemphasized. About 90% of U.K. investment banking clients are corporate banking clients. That number is much smaller when you leave the U.K. So we're trying to build the capability, not just domestically but globally to give good user-friendly service to our clients. And that investment is also what is driving this growth. So we think we're going to grow just by offering better products, offering better customer service, focusing on this and regaining share that we had frankly ceded over a number of years previously.

The cost outlook in your plan was better than most of us expected. You're aiming for low 50s cost income and in BUK. Specifically, you expect costs to be down each year. Can you walk us through what you're doing differently there? Which areas are you seeing the biggest reduction?

Yes. So obviously, cost-income ratio is cost and income. Let me talk about income first, and then I'll come back to cost. So 2026 will be the fifth consecutive year of NII growth for the bank. It's not just what interest rates themselves do. It is how you do your structural hedge and how you manage interest rate risk. We have said -- I've said many times that I believe that it should be predictable and programmatic. And that's what we do and why we gave you clarity into that.

I believe interest rate positioning is one of the most important things the bank does, and it is not something that -- it's something that you need to be very, very rigid and risk managed and programmatic about. That drives about 50% of the growth of group income growth. We've spoken about the markets and other businesses. Elements of the environment can be favorable, but we've been conservative in the way we've projected it.

So then if you come to cost -- but actually, before I come to cost, just further on income, we are looking to invest in diversifying our income more from interest income into fee income. What we are doing in wealth management is important as a part of that. The acquisition we made in the U.S., Best Egg, which originates to distribute direct-to-consumer loans is an important part of that. Our investment in transaction banking in the corporate bank is an important part of that.

When you come to cost, there are some things which are mechanical and then some things which we are, of course, striving. First of all, the cost element comes down. Costs we've had in the last few years from the acquisition of Tesco and the integration of Tesco fall off. So that's one thing that helps. Second is that if you look at our own performance, we've been delivering positive jaws, including in the Investment Bank. And we are doing this by investment in technology, which we expect to accelerate, and we spoke about this a lot at our Investor Day by a broader and deeper modernization of both our infrastructure and our practices, harmonizing practices, operating consistently across the bank, which in large complex organizations always takes effort.

And then the use of AI. I mean people talk a lot about it. And I think it's important for me to say that it is absolutely tangible, absolutely real, something which we are investing a lot of time and effort in. How and where we will see the productivity, I think it's a little early to say. We are seeing tangible ways in which it is improving the quality of customer service, the quality of product personalization, but we think we are at the tip of the iceberg. But the cost-income ratio is basically driven by the income profile and our expectations of cost to fall for all these reasons. So again, we think it's realistic.

I think you queued me out very well to talk about AI, which is even a bigger theme this year than it was last year. And obviously, it's driven some of the market moves earlier in the year. And one number that caught my attention to the plan is you quote 75% of your workforce in central services. Other banks may or may not be the one that was presented before you was quoting that in the long run, they see 25% of the workforce in central services. How are you thinking about the AI benefits over a longer time period? And also, maybe you can touch on the benefits and also some of the disruptive risks that the market is concerned about.

Yes. So as I said, it's an important part of this bank, and I imagine any bank's efforts over the next number of years. The central services number, let me just talk to that for a second before I go to the rest of the question. Our 75% number includes not just technology and operations, but just because of the way we are constructed, all of the risk, finance, legal, HR, compliance, businesses, audit. So all that is sitting in this number. So obviously, a range of types of jobs, right? Everything from a serious quant programmer and developer who's going to be helping us use AI and advance its use within the bank to more operational and process-driven people.

The investment in AI takes 3 parts. The first is, as you probably heard, you get the best out of AI if you are on a modernized infrastructure and where your data is stored properly, stored safely and accessible and usable for the sophisticated models. So we said at our earnings that 70-plus percent of our applications are on the cloud. That number is increasing, that we're spending a lot of money on standardizing data platforms and computational platforms, how you access this. Then on top of that comes the AI itself, which is a combination of enabling people across the bank, training them and then placing a few big bets on projects.

This we are doing in a series of efforts, we call it a catalyst program within the bank, focusing on what we think are the big important projects where we need to use AI to make ourselves more efficient. And that's being run by our co-CEOs of the -- COOs of the bank. And the phrase I've used internally is that the business is now revolving around technology. Technology is not revolving around the business. So we are already seeing the benefits of this, greater than 15% developer productivity, automating core accounting platforms within finance and using AI and credit risk systems. We're going to see more of it.

Not all of it will lead to savings in people, but it could lead to tremendous improvement in product delivery, which is why how you use it is important. So I'll give you an example. I've spent some time with people who manage our customer service agents. Typically, somebody calls, there's a phone call, deal with a customer service agent, they service you. At the end, a manager, maybe once every few weeks or a month, sample, listen to a few phone calls to see how the people are doing. Did they answer the call properly? Did they help the customer with the problems? Did they help them quickly and efficiently? Did they ask how else they could help?

Now with AI, what we are doing is sampling the transcripts of 100% of the calls. So that you get a full view of how a customer service agent is helping somebody doesn't necessarily save time, but it actually creates for a better understanding about the quality of your service, a better ability to help individual customer service reps improve the way in which they deal with customers. And hopefully then you offer better customer service because you use it, right? That should be an edge for us ultimately in growth and revenue and market share. It will take time, but that is the intelligent use of AI. So we are going to be seeing it across our businesses, whether it's trading bots, whether it is better settlements, whether it's better customer service, better ways of developing algorithms.

And I think over time, we will get a sense of how much this is going to give us revenue growth because we can address customer needs better, faster? How much of it is going to drive capability because we are building more personalized products? And how much of it is pure efficiency savings?

Maybe a last one on capital, and then I'll open up to the floor for questions. Your plan is based on 14% CET1 and the reality of your range, as you've explained before, is 13% to 14% we have sort of, in theory, Pillar 2A potential reductions once Basel 3.1 is implemented and the FPCs also push banks to run with lower buffers in the U.K. When do you think you'll be in a position to reassess the capital target? It looks like your peers are closer to 13%.

Well, look, first of all, you're right, we are at the high end of our capital range. I think it's important to project a strong capital and to have a strong capital base for the bank. It's taken us some years to get there, but we've been there in the last couple of years, and I think it's a helpful place to be. Second is, there are still uncertainties in the world.

First of all, the U.S. is coming with its Basel regulations. Second, the U.K. is coming out at the start of next year. We have to see what that is. Third, we have to understand on top of all of that, what it is as a management team, we feel that it's prudent for us to maintain in light of both whatever regulation lands up with and what we see in the overall environment. So expect us to continue to run a strong, well-capitalized bank.

And we think, by the way, that at this level, we can run the place efficiently. We can provide capital to our businesses to operate in an efficient way and a high-returning way. And as we've said before, generating generous returns to our shareholders.

Great. I'm going to open it up to questions, although -- yes and today have been a quiet audience, but let's see if there's any questions. I got a few more. There's one, [ Carlos ].

Coming back to the...

Sorry, can you just identify yourself...

[ Carlos Garcia ] from Mutuactivos in Madrid. I wanted to ask about the private credit exposures. I mean I still don't catch what are the economics in terms of capital consumption and profitability of lending to someone that is lending to someone else. I assume you take the same risk for a lower spread? Or is there any benefit in terms of capital consumption? Or is there any equity ledger in these funds that is protecting you?

So if you will forgive me, we will recommend to you a piece of Barclays research from the middle of last year that takes you through how nonbank lending works. But in sum, what you are doing is that you have a lower capital risk because you're lending to a diversified pool of assets and that somebody else is owning the senior risk on. I mean you're owning the senior risk, somebody is owning the junior risk. So you do it to a diversified pool of assets at a 60% LTV and you get the benefits of diversification and you get the benefits of lower risk and you get the benefits of daily collateral calls and margining. So you -- the return per unit risk is more beneficial to do it that way than the traditional way under the capital regime.

The traditional way is the leverage buyout traditional...

The traditional way where a bank would just lend o its own balance sheet.

Yes. There's a question there.

Maybe to follow up, as some players are under stress, would you be happy to take the slack in this private credit lending? Would you increase your exposure?

Unlikely. I mean I think in this environment, risk management is important. And the thing that is moving in the market because of the liquidity concerns is what is the underlying valuation, right? And so you need clarity on valuation before you make that answer, right? So we are happy with our levels of exposure.

Aditya from Brevan Howard. Just one more on that. Do you think what's going on in private credit is at risk of being systemic? And how do you -- and what do you think could be the secondary fallouts on that front?

Look, private credit is still a relatively small part of the overall credit market. So I don't know what the word systemic means, but it can mean many things, but it is still a contained part of the market. And it's dominated by, as we discussed, nonbank financial players. So into the banking system, as long as the exposures remain well controlled and the LTVs are well managed, it feels less likely to come into the banking system. And in fact, that piece of research, I'm sorry, again, talks about that.

The concerns more broadly are obviously what people -- if there are certain sectors that are affected more than others and what happens to lending in those sectors. But that's as much being driven today by the quality of credit as the business model disruption that we are seeing or that we are hypothesizing based on what we think AI will do to businesses. So that's the part that's harder to call out.

By the way, there's a panel tomorrow in private credit, what's next with our credit strategist and U.S. credit strategist with myself and our...

You're running that panel, I saw.

Yes. I'm hosting -- not my knowledge. I'll share my knowledge as well, but we've also...

Tomorrow evening, right?

Tomorrow, closing.

You're closing the session with that.

On a high note.

On a high note.

Any further questions from the audience? There's one there, [ Aransha ].

She does not need to introduce herself.

I'm village, let's call it like that. So just more broadly, I mean you've been quite visionary or first mover in things like SRT and mobilizing the balance sheet, recycling capital. When you look at where most of your takers of SRTs, your counterparties in SRTs are coming from. Do you feel there's too much concentration in general? Do you think the number of counterparties are too narrow? Or actually, there's still enough capacity to grow and mobilize balance sheet at the same pace?

Is that a general question or a question for Barclays?

Sorry, in general, but you've done one of the best -- in general, you've done one of the best deals where you've been very smart recycling assets. So as you grow, how do you see the capacity to continue?

Yes. Thank you. So let me just -- for everybody's sake, talk a little about our SRT program. So this is a risk transfer program, which we use to transfer risk on a name-by-name basis from our loan book. We've done this for over 10 years. What we do is that we essentially sell our exposure or proportions of our exposure on a name, loan-by-loan basis. So this loan we've originated, part of that is sold to very large asset managers around the world. To be very clear, we do it on what we call a fully funded basis. So we receive the money. It's not a derivative.

And second is we do not finance it, okay? So there's no coming back to us. We've operated under those principles for over 10 years. And I joined the bank as Chief Risk Officer over 10 years ago. When I came, this program was in existence, and I thought my, what a good idea because it achieves 2 things. First of all, it actually gets risk off the balance sheet. Second is that it gives you capital benefits because it gets risk off the balance sheet.

The importance of such programs, which we had discovered -- the world had discovered during the financial crisis is you can't just start a program like this when you think the credit markets are bad because people don't know what kinds of loans you originate. People are not familiar with your default history and so on. You'll create it and you'll sell it, but many of your asset managers, you know that a real track record is more important than a synthetic track record. And so we've got a real track record over 10 years. To date, about 40-ish percent, give or take, of our loan exposures are securitized in this manner. That number has crept up, and it's crept up because when spreads rally, you should do more of this, which is what we've been doing. Why? Because it's cheaper to lay off the protection. And in a bull market, people want to buy your stuff, okay?

So I have no doubt, [ Aransha ], that the demand side, if credit conditions worsen, the demand side will soften. What I hope is that it softens less for us than it does for others because the critical part of the risk management is to keep doing it. Keep doing it even when it's painful and you want the NII, you just do it. You get the risk management benefit, you get the capital benefit. And the importance to us of working with the very large players is they're sophisticated buyers, good relationship, and they would have the capacity in good times and bad to stand with you.

Now you're right, it's a narrower group. But I think it's -- I think the strength comes from the length of the program, the performance of the program and people knowing about the program. So you should expect us to continue to see -- to press on with it, right?

Next question, please. Maybe I'll touch on where we started with the polling question in the reply around distribution. Your plan outlines GBP 15 billion total distribution.

Marina tells me to say greater than GBP 15 billion.

Greater than GBP 15 billion, she tells me as well that. Runs a tight ship.

I'm back to eighth grade maths all over again.

That you've explained it builds in some flexibility around if M&A opportunity arises. Can you share with us what kind of asset you would potentially consider? What kind of hurdle rates you have? And presumably, if that doesn't happen, then it will be greater than GBP 15 billion?

Yes. So you're right, that GBP 15 billion -- greater than GBP 15 billion has in it above that number, some capacity to invest in the business and to return capital to shareholders. Investments in the business can be organic and it can be inorganic. Our base plan is organic. There's a lot for us to do in technology. There's a lot for us to do in growing our businesses.

And by the way, what's happening with AI and its effect on business models, and you can see it even in the financial services industry, makes you want to pause and think exactly when you buy a business, what kind of business you're buying, right? And how vulnerable is it to technological disruption. That's why the business we bought in Best Egg, we felt comfortable in it because it's a technology business, right? The thing is completely digital, as in fact, is our entire U.S. consumer bank. We don't have a single branch in the United States, right? It's an entirely digital offering of lending, of banking, credit cards. And of course, there are customer service people who use their fancy AI stuff I told you about, but it's a digital operation. So you've got to look at that when you buy a business.

For us, the answer has always been if something gives us capability and/or scale available at a good price and which we can integrate. To that, I will add now, given what AI is doing, the strength of the business model over time and its ability to deliver that. So if something meets all those criteria and works for us in the way Best Egg has worked for us right now, Tesco and Kensington have worked for us, then we will always look at it.

But I cannot emphasize enough the importance of the business model, right? Tesco, 3 years ago, Kensington, 5 years ago are people-heavy business models. We have modernized them, and we will modernize them. But that kind of a people-heavy business model today, you've got to look at very carefully. That's why Best Egg was so appealing to us.

Anyone has any last questions? Maybe I'll ask a last one to wrap up. Yesterday came up with Lloyds and NatWest around potential sort of policy change in the U.K. Obviously, labor government has been pretty supportive. But if there's potentially changes in leadership in the U.K., how do you think that potentially can affect the policy momentum?

Yes. Look, I read the remarks that my counterparts or the other 2 U.K. banks made yesterday. And I agree with them entirely. I mean I think it will be a bad outcome for this country to increase taxation in the banking system, which is a critical part of the economy, over 10% of the economy, when the banking system is already more heavily taxed than counterparts in the Europe and the U.S. We are a key part of London, being one of the great financial centers of the world.

And the vitality of this industry is tremendous, whether you take the large banks or you take the fintechs. And so I think it's important to continue to support that industry. And we will work with the government as we have, and we are very grateful for this government recognizing the importance of this industry and continuing to act in a very pragmatic way with regards to this industry. We think that's a good thing.

Great. We're approaching the end of the session. So once again, thank you, Venkat. Very interesting session for being with us for one more year.

Thank you.

Welcome to Barclays Full Year 2025 Fixed Income Conference Call. I will now hand over to Anna Cross, Group Finance Director; and Dan Fairclough, Group Treasurer.

Good afternoon, and welcome to the Full Year 2025 Fixed Income Investor Call. I'm joined by Dan Fairclough, our Group Treasurer.

Let me begin with a brief overview of our financial performance in 2025 and key areas of the progress and targets update announced this morning. Barclays achieved all financial targets and guidance in 2025. We generated a return on tangible equity of 11.3%. Top line income grew by 9% year-on-year to GBP 29.1 billion, and we achieved our NII guidance for the group and for Barclays U.K. Our cost/income ratio once again improved year-on-year to 61%. And the group loan loss rate of 52 basis points was comfortably within the 50 to 60 basis points through the cycle guidance. Finally, we remained well capitalized, ending the year at the top of our 13% to 14% target range after accounting for today's buyback. This positions us well to deliver against our '26 targets and provides us solid foundation for future progress.

Taking a step back, since 2021, Barclays has been on a journey to sustainably higher returns. So far, this has been through stabilizing the bank's financial profile and exercising capital discipline, keeping RWAs stable in the Investment Bank and building on its strongest areas whilst prioritizing growth in our highest return in U.K. businesses. Alongside this, we have simplified our processes to drive efficiency and exited nonstrategic businesses. Year-by-year, we are improving the profit signature of the group. And by delivering stronger financial results, we create capacity to invest to secure sustainably higher returns, which extend beyond 2028. We believe that our plan continues to be constructive for fixed income investors, and Slide 5 provides the highlights.

Looking forward, we are confident in delivering group RoTE greater than 12% in '26, building to more than 14% in '28. Stable income streams in the retail and corporate businesses will materially drive income over the next 3 years. This is supported by the structural hedge, which will drive circa 50% of total income growth. We expect modest cost growth supported by planned efficiency savings and normalization of the elevated cost base in '25. This combination will deliver positive jaws in every year of the plan, as we have done in the last 3, yielding a low 50s group cost/income ratio in '28. Meanwhile, the group has operated around the through-the-cycle loan loss range of 50 to 60 basis points for the past decade, and this range remains appropriate going forward.

Our strong risk management position is supported by our risk transfer capabilities, where we executed our first U.K. consumer loan securitization in Q4. We will continue to grow in our home market. So far, we have deployed GBP 20 billion of the GBP 30 billion planned business growth RWAs over the 3 years to '26. We expect this momentum to continue, enabling more than 5% loan growth annually to '28. And we will continue to maintain broadly stable Investment Bank RWAs at around GBP 200 billion. As a result, we expect Investment Bank RWAs as a percentage of the group to fall to circa 50% by 2028. This is later than the initial target of 2026 as it reflects the postponement of previously anticipated regulatory changes.

And finally, a word on our capital priorities. Stronger returns will drive capital generation of more than 230 basis points in 2028, an improvement of more than 30% over the next 3 years, and we continue to exercise disciplined capital allocation. First, by holding a prudent level of regulatory capital, which remains our top priority. As you have seen, we have been operating around the top of the 13% to 14% target range ahead of the expected regulatory developments, which Dan will cover shortly. Second, by distributing capital to shareholders. Third, we will maintain capacity for selective investments to support structurally higher returns beyond 2028. Given the strength of capital generation, this capacity does exceed the level of investments set out in the plan today.

I'll now hand over to Dan for detail on the full year performance.

Thanks, Anna. Let me begin first with capital on Slide 8. We ended the year with a CET1 ratio of 14.3%, generating 173 basis points of capital from profits. Given this strong capital position, we've announced a GBP 1 billion share buyback and an GBP 800 million final dividend equivalent to 5.6p per share. Adjusted for the buyback announcement, the CET1 ratio is 14%.

Looking ahead, we continue to expect between GBP 19 billion and GBP 26 billion of regulatory RWA inflation. Within this, the circa GBP 16 billion effect of IRB migration in the U.S. Consumer Bank remains our best estimate. Around GBP 5 billion of this will now happen with the implementation of Basel 3.1 on the 1st of January 2027, with the remainder anticipated later that year.

In addition, we continue to expect a Basel 3.1 day 1 impact of GBP 3 billion to GBP 10 billion of RWAs. We expect to provide further guidance later in the year as we work through the final rules. We are likely to use the option available to implement some elements of FRTB later, on the 1st of January 2028, which may defer a small amount of this impact.

We expect a reduction in the group Pillar 2A requirement following each of these changes. We have been operating around the top of our 13% to 14% CET1 range with the returns and distributions in the plan announced today based on this level. Post implementation, we will consider where we operate across the range.

On the broader regulatory landscape, in the U.K., we welcome the constructive tone in the recent FPC review around bank capital requirements and the considerations of other major jurisdictions. However, it's important to emphasize that the FPC's reduced system-wide benchmark for Tier 1 capital does not affect the industry's current capital requirements or operating levels in itself. Instead, the review represents the start of a process of engagement.

We will continue to work closely with the Bank of England with a view to promoting international alignment and the competitiveness of our business and of the U.K. financial services sector.

Moving up the capital stack, on Slide 10, we show our Tier 1 and total capital requirements as a proportion of RWAs. We continue to target a prudent buffer against each of these requirements, which helps us manage any RWA and FX movements as well as our issuance and redemption profiles. Our Tier 1 ratio is 17.9%, maintaining a healthy headroom above our 14.6% regulatory requirement. Within this ratio, we had an AT1 component of 3.6%. Looking ahead, we expect to maintain robust ratios across all tiers and have a light capital redemption profile this year, including no AT1 calls.

Turning now to Slide 11. We issued GBP 16 billion of MREL in 2025, with an MREL ratio of 35.8%. In 2026, we expect to issue GBP 10 billion, with a skew towards Senior, reflecting more limited requirements for AT1 and Tier 2. This target is lower than last year given prefunding in 2025 and the maturity profile throughout 2026. We have continued to see currency diversification where it makes sense. We've also extended our weighted average life at historically tight spreads. This included a non-call 10 euro AT1 and a non-call 20 dollar Senior, with both seeing strong investor demand. This can be helpful in reducing sensitivity to credit spreads and our go-forward annual issuance requirements.

Onto the next slide on liquidity. Our average LCR of 170% represents GBP 131 billion in excess of our regulatory requirements. Our average net stable funding ratio was 135% and the loan-to-deposit ratio was 73%, both demonstrating a continued robust liquidity position.

On Slide 13, you can see that our deposit base increased by GBP 25 billion across customer segments. We saw strong corporate growth, driven by the development of our U.S. dollar offering in the International Corporate Bank and an improved market share in the U.K. Corporate Bank. Retail deposits also grew, both across our U.K. businesses, as well as in the U.S. Consumer Bank, reflecting the ambition to build core deposits as a percentage of total funding. Our deposit base continues to demonstrate a high level of diversification between customer segments, geographies and currencies. A significant proportion also benefits from long-standing operational relationships and deposit insurance, reflecting its stability as a source of funding.

Stable deposits across the group led to the full reinvestment of maturing structural hedges throughout 2025 compared to our prior planning assumption of 90%. We also reinvested these hedges at interest rates of circa 3.8%, higher than the 3.5% assumption. As a result, gross structural hedge income increased GBP 1.2 billion to GBP 5.9 billion, contributing 46% of 2025 group NII, excluding the Investment Bank and head office.

Looking forward, we've already locked in GBP 6.4 billion of gross structural hedge income in 2026 and GBP 17 billion over the next 3 years. This income will build materially and predictably as we fully reinvest maturing hedges at higher yields. The increase in the average hedge duration to 3.5 years reduced the quantum of maturing hedges to circa GBP 35 billion per year from around GBP 50 billion in recent years. This slows the pace of structural hedge income growth, but therefore, prolongs the expected positive effect until at least 2029.

Turning to Slide 15. Another area of focus in recent months has been digital assets, which are gaining significant traction within traditional financial services and present an exciting opportunity for Barclays.

Venkat talked this morning about our ambition to leverage digital technology to better serve our clients. We are playing a leading role in the U.K. industry innovation and are well placed to bridge developments in the technology space between the U.S. and the U.K. We are developing the tokenization of our own deposits, which will lead to quicker and more straightforward transactions for our clients. Over time, we expect this to enable the tokenization of other assets, in particular, across our capital markets businesses.

In this space, we are participating in the Sterling Tokenized Deposits or GBTD pilot phase. This is focused on connecting traditional and tokenized deposits in the U.K., and overlaying new functionality such as programmability. GBTD will allow us to test both retail use cases, such as remortgages, and wholesale use cases such as corporate bond issuance and investment.

We are also exploring our role in the stablecoin value chain and use cases for clients. Here, Barclays is working with other leading G-SIBs to investigate potential benefits and implications of jointly issuing a 1:1 reserve-backed form of digital money.

We are actively engaged with authorities in core jurisdictions to foster innovation while ensuring key risks are mitigated. Digital assets present the opportunities to significantly transform key activities within the financial services industry for our clients and we are excited to drive this transformation.

Finally, a quick word on credit ratings. Our target remains for Barclays PLC Senior to qualify a single A composite across all indices. This would require an upgrade from either Moody's or S&P. We believe the outcomes of our strategic plan and the targets announced this morning support this objective in terms of increased profitability, greater capital generation and a continued rebalancing of the group. We will continue to engage with all credit rating agencies on this topic.

With that, I'll hand back to Anna.

Thank you, Dan. To summarize, these targets represent a realistic ambition of what we expect to achieve in the next 3 years and is underpinned by our robust capital and liquidity positions.

We will now open the call for questions. Operator, please go ahead.

[Operator Instructions] Our first question comes from Lee Street from Citigroup.

I have 3 questions, please. Firstly, obviously, Barclays has been linked in the press with various inorganic growth opportunities that are being acquired also by the banks. And you've just highlighted the selective investments to support high returns and you're operating at the higher end of your CET1. So I guess the question is, what is your appetite for inorganic growth? It kind of sounds like you're hinting that something is quite likely to happen. So that would be my first question, please.

Secondly, you highlighted the large contribution of the structural hedge. So my question is how easily can you add to structural hedge balances given the higher reinvestment rates and the fact you're going that long along the curve?

And my third question is what's the constraint on the amount of SRTs that you'd actually be willing to write? Is it your own risk appetite? Is it the regulator? Is it leverage? And we get some idea of the benefits of CET1, but is there a way of better understanding the benefit to asset quality and how that shapes and impacts be it Stage 2 or Stage 3 loans, just to understand the real sort of benefit there? That would be my 3 questions.

Thanks very much, Lee. Thanks for joining us. I'll take the first of those 2 questions, then I'm going to hand to Dan. So in terms of inorganic, we've done sort of 3 recent transactions, and they all have a number of things in common. And I'm really talking here about Kensington, about Tesco and Best Egg. So the first is that we want them to be clearly sitting within the strategy, furthering that strategy. So with Kensington, it gave us a risk capability we didn't have. With Tesco, it gave us some significant bulk, if you like, in unsecured, which is one of the areas where we really wanted to expand as part of this plan. And then thirdly, in Best Egg, really it's helping us tilt the USCB towards more capital-light revenue, but also broadening out the product set that we can give -- that we can sort of supply to our partners, if you like, making it more of a consumer bank than has been a cards business, which has been in the past. So they're either going to fit within our strategy and deliver volume or capability.

The second really important thing for us is price. And we're clearly looking at absolute ROCE or absolute ROIC depending on what kind of investment we're looking at. We're also thinking about whether or not this can drive the EPS of the firm. That's very important to us. But also, we are looking at the relative return versus a buyback. That's extremely important to us because of the strict capital hierarchy that we have that you might remember as first, regulatory; second, shareholders; third, investment in the business.

And the third one that's really essential here as well is that we don't want to embed ourselves with a very, very complicated integration that might distract the business from executing the plan. So that's a critical part.

So as we look at things, we're looking at those 3 lenses. If we've done things, it's because they've -- we've been able to tick each one of those boxes. If we haven't, then it's because one of those boxes remains unticked.

In terms of your point around operating towards the top end of the capital range, that's really because of the Pillar 2 comments that I made sort of earlier in the year. With IRB not yet implemented, we are carrying higher levels of Pillar 2 than we otherwise would. We're also expecting some changes in Pillar 2 that might come off the back of Basel. We do expect that to be the case. But we don't know what they are yet. And what we don't want to do is set either our capital levels or indeed our distributions on top of a regulatory quantum and timing that is not clear to us.

We don't want to be sort of moved around by those things if they were to change. So we do think that the capital -- that the right capital level for Barclays in the longer run is between 13% and 14%. But until we have that regulatory clarity and the MDA drops again, then you should expect to see us towards the top end. So that's why we're operating at that end rather than any expectation that you should link that to an inorganic move. Sort of beyond that, what we did say today, though, was given the capital generation of the group, we are holding back some investment capability here. Now if we're unable to use that sensibly with all of the criteria that I set out before, then we will return that to shareholders. We're not going to sit on excess levels of capital.

Yes. Thanks, Lee. So on structural hedge, we're really pleased that we're now rolling 100% of those balances. So we're already doing quite a lot to protect the hedgeable balances. Obviously, a lot of those balances, deposits come from really core markets for us, and we put a lot of effort into protecting that through the client proposition through technology. The MRD book, obviously, is a component of the hedgeable balance. Every time we make a pricing decision there, we're really balancing commercial outcomes versus protecting the balance. So quite a lot goes into that, although most of the hedgeable balances are from mature markets, I'd probably call out the International Corporate Bank. That's clearly an area where we have ambition to grow, and we've been quite successful in growing balances. We tend to start with those client propositions with nonoperating balances. But look, over time, we've definitely got ambition to transition that to operating balances. And obviously, they would be hedgeable. So it's a real focus for us.

You asked questions about SRT as well. Look, we really do think about SRT as a risk management tool. So the hedge ratios that we want to run across the portfolio is a key factor that goes into how much we do. As we've said before, our biggest program here is Colonnade, which you should view as sort of being broadly at scale. It's very mature.

The thing that we focus on there, in particular, is the RWA amortization per quarter. So this is the amount the protection decreases per quarter. And obviously, to the extent we want to refinance those clients, then that could create an RWA drag for us. So that's why we think it's sort of broadly at scale. Elsewhere, it's probably much more of a targeted risk management tool. So in the U.K. business, for example, we've done a number of mortgage transactions, and we did a consumer loan transaction as well. But it's more about areas where we're growing, where we think the risk is higher, and we want to manage that.

And then I'd probably put Best Egg in a slightly separate category. Obviously, that's more of the business model point where we've got an originate to distribute model. But in the grand scheme of things, activity there will be relatively modest. Hope that's helpful.

Yes. And just a quick one. In terms of understanding the impact or benefit to Stage 2 or Stage 3 or is that just not a lens you look through '26 purely RWA?

Yes. We don't disclose that, but it is a real benefit for us. On the corporate loan book, lower down our watch list grades, there will be good coverage of SRTs as well. So we clearly do benefit from that as we migrate. And sometimes, we will look at that very directly in terms of the more surgical transaction. So in mortgages, we've done a transaction that is specifically targeted Stage 2, Stage 3, for example. But we don't disclose the benefit, but it's clearly a factor here in the SRT trades.

Sorry. The only other thing I would add is it's not just sort of in the day-to-day, but we also get benefit and stress from the Colonnade program. So that is also important to us. Thank you, Lee.

Our next question comes from Paul Fenner-Leitao from Societe Generale.

Congratulations on the results. I've got -- well, Lee stole my third question. So I've got just a little bit of an add-on, but the other 2 are still live. First on supply. Thank you for clarifying that you intend to do less overall. You do make the comment that you're very well positioned in AT1 and Tier 2. Would it be wrong to think that given spreads are tight and you've got Tier 2 call coming up that you're still quite likely to do a Tier 2. Is that fair, notwithstanding the comments on, I think, it's Slide 10. So some clarity around that? Or is there no intention to do capital, that would also be quite helpful. That's question number one.

Question number two, in terms of ratings, thank you for the slide discussing your ambition to be single A at senior level. I guess my question -- I mean that's very helpful, and it suggests that you care about ratings. But given spreads are so tight, what real benefits does it bring you or why am I being too myopic about thinking that it might just bring you a couple of basis points in Senior or is that enough to make you want to get upgraded?

And together with that is what's your sense around how close you might be? It's been 3 years since you were upgraded, I think, by S&P or Moody's. Who do you think is the closest. I mean, officially, the outlooks are stable. It would be great to get a sense of timing.

And then just an add-on to these SRTs, I think did you say that you don't disclose how much sort of benefit you've got from the SRTs you've done to date? So in terms of basis points of RWAs, can you give us that number? And what you think -- and if you can, then what you think the maximum benefit, capital benefit from SRTs is fair to expect of a group the size of Barclays? Is it 150 basis points? Is it 75 basis points? Yes, that would -- it would be great to get a sense.

Okay. I'll start with those, and I'm sure we'll add in. Yes, look, in terms of the issuance, so we got GBP 2.4 billion of Tier 2, GBP 900 million of that is a call, GBP 1.5 billion is a bullet. That bullet will have largely amortized down in terms of capital treatment. So it will be just over GBP 1 billion in terms of Tier 2 that's coming off. So we should expect us to do something but not lots. You wouldn't expect it to rule out issuing AT1, but hopefully, you've got the steer there that we're going to be limited or small in our activity given the no call in 2026.

Next question, I think, was on ratings, right? Look, I think -- I'm an optimist, so I'd love to think that if we got a ratings upgrade, our credit spreads would continue to tighten and would compress with others. We view that it's overdue, and we view that the credit profile has materially improved, and it would be good to get the ratings to go along with that. But obviously, the market will determine where our spreads trade.

We're in very active dialog with the rating agencies, as you would expect, including talking to them about the targets to 2028. If you read the reports and you read the things that they're focused on, including profitability, sustainability and the rebalance, we think everything that we're doing is absolutely on the right track. But clearly, the rating agencies will make their own decisions. I think it's 2 years since we got upgrade rather than 3, just to nitpick. We'd agree with you, it would be good to get an upgrade.

In terms of SRT, we don't disclose the RWA amount, but we have put out this GBP 54 billion of total notional. You could probably drill through and get a reasonably good estimate of the RWA benefit. As I said, Colonnade program is kind of at scale. You shouldn't expect it to grow, but you should expect us to do things sort of ad hoc in the U.K., but we're not looking to kind of take that up to a big, big size and Best Egg will be reasonably small. So not -- you shouldn't expect major, major changes in the SRT volume that we're going to do in the near term.

The next question comes from Daniel David from Autonomous.

Congrats on the results. I've got a couple of questions. First one, kind of relates to leverage and the second one on capital. I think in the call this morning, you talked about how you deploy leverage balance sheet you could into some parts of your business, one being IB financing. I guess one way of improving or increasing that ability is by issuing more AT1. So I guess my question is, do you have like a ceiling on the amount of AT1 you want outstanding that you could use to deploy in lucrative businesses around the group? And then linked to that, I guess, the FSR that came out before Christmas was a bit disappointing in terms of the regulatory easing that we saw. But there was mentioned that potentially a review of the leverage framework. So do you think it's warranted that the leverage framework is revisited? And do you think there might be some relaxation there?

And then the final one was kind of picking up on some of your comments earlier. I think that operating at the higher end of the CET1 range is a very powerful message at the moment. I guess what makes us nervous is that you could become more aggressive like some of your peers. So I just wanted to understand, are there certain things that could happen, which would make you become more aggressive? So I guess you mentioned the [ 2A ] reduction and a few other bits. But is it right to assume that it will be at 14% out to '28? Or are there certain things that could happen that can see you maybe push to the lower end of that boundary in the interim?

Okay. Thank you, Daniel. I'll let Dan take the leverage part of that and then I'll follow up with your capital question.

Yes. Thanks, Dan. Look, from our perspective, we think that the AT1 quantum is at about the right level. So you shouldn't expect us to change that materially. Obviously, there is a cap on AT1 in the leverage ratio. And obviously, we focus on that through stress. So it's broadly in the right spot.

In terms of the FPC, I mean, you're absolutely right, leverage is one of the things that they have focused on, and they're interested in that as a dialog topic. We would agree with the comments that they have made that leverage across the U.K. banking sector has moved more towards being a frontstop measure, and that's as a result of the reduced levels of risk in the U.K. banks. And although for us, CET1 is still constraining, we would support that as well. So we'll have to see where we go. But I think it's encouraging that they've made that a focus of the review. You want to take the third one, Anna?

Yes. Thank you. Thanks, Dan. So just reflecting on the 14%, look, we are comfortable operating at that level, as you say, perhaps reflective of the environment, but for us, very much this sort of anticipation of reg change it's not impinging on our ability to either deliver returns or indeed distribution.

So given the momentum we have in the business, we're really waiting for 2027. So what will happen on the implementation of Basel 3.1 at the beginning of 2027? And then we do expect the IRB implementation during 2027. So that's the cards advanced model. So we'd expect a further Pillar 2 update at that point in time. And it's only really when we have those that we will be able to make a decision out where we want to run within the range.

I wouldn't conflate that with any sort of movement to a change in discipline at that point in time. We are very, very clear that we are capital generative, but at the same time, that capital hierarchy remains in place, we hold it very, very carefully. So firstly, reg; number two, shareholders; number three, investment in the business.

And we do feel like we put considerable investment into the business in this plan. We're doubling the organic, if you like, run rate of investment. And we do think that there's only a certain amount of change that the organization can take on at any one point in time. So we're going to remain disciplined. All we're calling out here is that we're waiting for reg change. It's nothing more than that.

The next question comes from Robert Smalley from MacKay Shields.

Really follow-up on 1 or 2. When -- I think, Anna, you talked earlier -- in the earlier call about RWA rationalization. Equity derivatives are RWA-intensive. TB can be. Now we're in the cycle -- M&A cycle that's in full swing that will need more financing.

So when we look at your IB balance sheet, what's the best use of balance sheet as a competitive advantage here? And what's the optimal mix for your balance sheet in this environment. Can you give us an idea of where you see that breakdown and where it stands today? And if you could quantify a little bit of that, that would be great.

And then secondly, just -- and this is an ongoing topic, just exposure with respect to private credit sponsor business and exposure to BDCs.

Okay. Thanks very much, Rob. I will take that. So just on the first one, I think it might be useful just to have a look at Slide 64 of the presentation we did this morning because what that does is it gives you the split, and this is the only level at which we do give a split of IB RWAs.

And what you'll see is that over the last 3 years, we've reduced the level of IB RWAs deployed into banking. And the reason that we've done that is what we set out at the very beginning of the plan, which was we felt like the loan book had a very heavy level of capital within it, within banking, that wasn't necessarily generating the kind of returns that we thought they should.

So what -- over the last 2 years, what you've seen is us get through about 2/3 of that loan book, and we're making tough decisions with those clients around whether or not we extend those loans again, fundamentally looking for better returns from those clients. And that's what's leading to that reduction in RWAs in banking. And you can see that much of that has been deployed into the markets business, which certainly over the last couple of years, has had the opportunity to deploy it very, very effectively.

But here, we've obviously got another year's worth of that loan book review. So I'm expecting more efficiency to come from there. And that's really important for their story because fundamentally, we will then have the opportunity to deploy that -- those RWAs that come free, if you like, into the IB as a whole.

Now what the optimal mix is, changes our time. And that's really how we think about the IB. We think about it as a single business. So what you're going to see over time in different quarters or different years is we will be deploying more into some businesses depending on what we think the market opportunity is. And certainly, given this trajectory so far, it's not holding us back in DCM, which is probably the most capital-intensive part of investment banking. In that particular part of the business, we have been growing share over the last year. We've just been much, much more disciplined with capital, and that's really what's happening. So we don't feel like it's holding us back.

In terms of the second part of your question, which was really sort of about private credit sponsors, let me say from the outset, sponsors are an important part of our business. We do feel like the debt part of our sponsors business is pretty mature. I'm just remembering back to our original presentation, and I'm sure Jordan and the guys can find that for you, where we showed that our share of sponsors in DCM was actually very similar to that of our U.S. peers. What was different was we weren't getting as much M&A and ECM business from them, which is inherently capital-light.

So if I were to look at our sponsor strategy, it's leaning more into those sort of capital-light fee areas of ECM and M&A, and we have made some progress there.

In terms of your private credit question, I'd encourage you to look at Slide 100. Sorry, there are so many slides, but I think it's nearly the last one in the pack. And that sets out our private credit exposure. It is what's committed, so it includes drawn and undrawn. And we really set out on that slide how we feel about it, the fact that we are really focused on the top managers that we really are focused on ensuring that we have valuation rights. We are focused on businesses that are generally relatively larger in this market, and we're very focused on LTV. So we manage that with real discipline.

Obviously, we have risk concentration limits. So across any particular part of the industry or any particular counterparty, you would expect us to deploy those with real discipline. So we've got no immediate concerns. And really, the private credit story is as much as it has been over the last sort of 3 to 6 months. Hopefully, that's helpful. We'll get you that other slide.

Thank you for all of the detail on that. I'm now looking at Slide 100. So I appreciate that. And I appreciate all the work that's gone into these decks.

Okay. Thank you, Rob. I think we've got one more question in the queue. Perhaps we can go to that, please?

Our final question today comes from Gildas Surry from Credit Agricole.

Can you hear me?

Yes, we can.

I just wanted to follow up on [ Richard's ] question about private credit. Back in 2024 around April, there was a partnership maybe announcement made with private credit or alternative credit platform, AGL Credit Management. Just wanted to know if you have partnerships in place where you would share maybe some economics on the pipeline or on the financing. So if you look back 2 years from this announcement, whether you see those partnerships as successes now and achieving what they -- what you expected them to achieve? That's my first question.

Second question as well is a follow-up on SRTs. It's difficult to triangulate between the notional amount that you hedged through Colonnade and the Pillar 3 disclosure in the SEC 1 table. So we have to make assumptions. And would it be fair maybe to assume a range of RWA density, about 60% to 70% maybe for your risk transfer activity?

Second question and my last question is on liquidity. Your liquidity coverage ratio back in December, the threshold for the FSCS guarantee has been increased to GBP 120,000. I would expect the change of category between the stable deposits and the less stable deposits to the denominator of the LCR ratio, the weighting for the outflow rates from 5% to 50%. And so can you just guide us whether this increase of the deposit limits has actually led to a change of categories for the retail deposits between stable and less stable deposits?

Okay. Thank you for that. You were a little bit faint at times, but I think we got your 3 questions. The first was on our private credit joint venture. So I'll answer that, and then I'm going to pass to Dan in terms of the last 2.

So you're right, back in '24, we announced joint venture. I mean it's successful, but I would say not particularly material in the context of our business. So nothing that we would separately call out or give metrics on. I just again guide you back to Page 100, which tells you more broadly how we feel about private credit. It's no different to any other credit decision that we make. So we're very focused on choosing the right counterparties, getting the right visibility and then managing the credit when it's on our balance sheet. So that's probably the message I would leave you with on that one. Dan, SRT?

Yes. Look, the Pillar 3 disclosures on securitization will include a broad range of securitization, so not just SRT. We can probably have Investor Relations team follow up with you. But I think probably a more accurate way to kind of approach this question is to kind of look at the RWA density in the books, and we can help you kind of walk through those RWA densities. And that's probably an easier way of getting at it rather than the 3 because there'll be other things in there as well.

In terms of the point on the guarantees, this was a relatively minor change for us. It's about GBP 1 billion of liquidity value. So it was not a material moving impact in the LCR. Obviously, as we said in the prepared remarks, the LCR is very strong. So yes, no material impact and comfortable with the liquidity.

Okay. I think that brings us to the end of our fixed income conference call today. I can see no more questions in the queue. So I'd just like to thank you all for your continued interest in Barclays and for joining us this afternoon. And no doubt, we will see many of you on the road over the coming few weeks. So thank you so much. Have a great rest of the day.

Thank you.

Thank you for joining, everyone. That concludes today's conference call. You may now disconnect your lines.

Good morning. Thank you for joining us today. So thank you.

We have today the Barclays Full year 2025 results, our progress and our target update. Today, we will outline targets for the next 3 years to deliver an even better run more strongly performing and a higher returning Barclays. This builds on the improvements which we have delivered in the last 2 years of our plan and which we shared with you in February of 2024.

But first, let us take stock of the progress so far, starting with our 2025 results. There will be an opportunity for those in the room to ask questions at the very end of our presentation.

So turning now to Slide 4. Barclays achieved all financial targets and guidance in 2025. We generated a return on tangible equity of 11.3%. Our top line grew by 9% year-on-year to GBP 29.1 billion, and we achieved our NII guidance for the group and for Barclays U.K. Our cost/income ratio once again improved year-on-year to 61%. And the group loan loss rate of 52 basis points was comfortably within the 50 basis points to 60 basis points through the cycle guidance.

We have also announced today GBP 3.7 billion of shareholder distributions for 2025. This is up from GBP 3 billion in 2024. This includes dividends of GBP 1.2 billion and share buybacks of GBP 2.5 billion, and that includes a GBP 1 billion tranche, which we announced today. And importantly, we remain well capitalized, ending the year at the top end of our 13% to 14% CET1 range after accounting for today's buyback.

We are delivering these improvements as we said we would. In 2025, we simplified the bank further, achieving GBP 700 million of gross efficiency savings versus the GBP 500 million target, which we had had for the year. We divested the remaining nonstrategic businesses, and we announced a long-term partnership for payment acceptance.

Operational improvements across the group are creating a better Barclays, driving stronger financial performance. All our divisions generated double-digit RoTE in 2025, and this was an improvement on the prior year. In the Investment Bank, greater capital productivity and cost efficiency contributed to a 2.1 percentage point increase in RoTE to 10.6%. And the U.S. Consumer Bank RoTE increased 1.9 percentage points to 11%. This reflects additional scale and operational progress to improve the business mix to improve pricing and improve efficiency.

Finally, we are continuing to rebalance the group towards the 3 highest returning U.K. businesses. We have now delivered GBP 20 billion of the GBP 30 billion RWA growth, which we targeted for the end of 2026, and this includes GBP 7 billion in 2025. So we see good momentum with 6 consecutive quarters of organic loan growth in Barclays U.K. and 5 such quarters in the U.K. Corporate Bank.

Progress in each of these 3 areas is delivering structurally higher and more consistent group returns. It has also increased my confidence in and my expectations for the group. Stronger and more consistent returns mean that we are better equipped to serve our clients and that we have more capacity to invest in the business. All of this is providing a solid foundation to create more value for our shareholders in the next phase of our plan through to 2028 and beyond. We will return to this later.

Our progress in the last 2 years reflects the consistently excellent work of our colleagues, over 90,000 of them. They implement our strategy every day and are core to our success. So I'm therefore pleased to announce today a grant of approximately GBP 500 of shares to the vast majority of our colleagues, essentially all full-time employees outside of managing directors.

This is the second year of such a reward, and it is more than just a reward for past effort. We are aligning the actions of our colleagues with the ultimate outcome of their efforts, which is the change in our share price. And I believe this equity ownership is really important for all our colleagues.

With that, over to you, Anna.

Thank you, Venkat, and good morning, everyone.

Slide 6 summarizes the financial highlights for the fourth quarter and full year. Before going into the detail, I would remind you that a weaker U.S. dollar reduced our reported income, costs and impairments. Return on tangible equity increased from 10.5% to 11.3% year-on-year, in line with guidance. Pre-provision profit increased by 13% as income growth, coupled with efficiency actions supported 3% positive jaws. Profit before tax increased 13% to GBP 9.1 billion and earnings per share by 22% to 43.8p.

My focus, as ever, is on operational progress, which strengthened throughout the year. Income increased by 9% year-on-year to GBP 29.1 billion. We grew stable income streams by 9%, supported by 8% growth in retail and corporate businesses and 17% growth in financing within markets. The strength and predictability of this growth means we are upgrading our expected group income to circa GBP 31 billion in '26 versus circa GBP 30 billion previously.

Elsewhere in the Investment Bank, intermediation revenues increased by 13% as we helped clients navigate a volatile environment whilst our IB fees were stable. Group net interest income increased for the fourth consecutive year and by 13% year-on-year to GBP 12.8 billion, reflecting 3 factors: First, stable deposits across the group supported further significant growth of structural hedge income, which I will discuss shortly. Second, lending grew across all divisions, and we exited the year with strong momentum. And third, operational progress in the U.S. Consumer Bank drove stronger NII and NIM.

Turning to the structural hedge. As a reminder, the hedge is designed to reduce income volatility and manage interest rate risk. We had assumed that we reinvest 90% of maturing hedges, but we fully reinvested assets throughout '25. We also reinvested hedges at higher rates than planned. As a result, hedge income increased GBP 1.2 billion to GBP 5.9 billion, contributing 46% of group NII, excluding IB and head office. The increase that I -- in the average hedge duration that I called out last quarter from 3 to 3.5 years further supports the predictability of hedge income, which I will return to later.

Now moving on to costs. We delivered GBP 700 million of gross efficiency savings in '25 and GBP 1.7 billion cumulatively towards the GBP 2 billion target by '26. These savings have contributed to 10% positive jaws since '23. The group cost-to-income ratio decreased again to 61%, in line with guidance despite several cost headwinds in the year. Total costs increased by GBP 1 billion to GBP 17.7 billion, with nearly half of this coming from the addition of Tesco Bank. And we chose to accelerate some discretionary investments, ending the year with structural cost actions around the top of the GBP 200 million to GBP 300 million guided range.

The '25 group cost base also included some items that we do not expect to repeat. First, the GBP 235 million of finance provision in Q3 without which we would have ended the year at 60%. and second, circa GBP 50 million of one-off costs in Q4, including a VAT expense in Barclays U.K. Turning now to impairment. The full year impairment charge of GBP 2.3 billion equated to a loan loss rate of 52 basis points, in line with the through-the-cycle guidance of 50 to 60 basis points.

The credit picture remains benign with low and stable consumer delinquencies and wholesale loan loss rates below the through-the-cycle range. The Q4 loan loss rate of 48 basis points fell versus Q3, reflecting lower single name charges in the Investment Bank.

Calibration of our impairment models to better capture consumer behavior resulted in lower loan losses in Barclays U.K. throughout '25, including in Q4. With these now largely complete, you should expect the Barclays U.K. loan loss rate to be closer to 30 basis points from Q1. The U.S. Consumer Bank loan loss rate was higher in the quarter as expected, shown on the next slide. 30- and 90-day delinquencies were seasonally higher versus Q3 and broadly stable year-on-year, and U.S. consumer behavior remains resilient as we show on Slide 95 in the appendix.

The Q4 impairment charge increased GBP 52 million quarter-on-quarter, reflecting higher balances. As a reminder, the Q1 loan loss rate tends to remain elevated following holiday-related spend in Q4.

Turning now to U.K. lending. We have now deployed GBP 20 billion of business growth RWAs in the U.K., including GBP 13 billion of organic growth, and we exited '25 with strong momentum. Mortgage balances have grown for 6 quarters, and we delivered GBP 3.1 billion of net lending in Q4. Mortgage applications in '25 were higher than in any prior year, supported by Kensington and increased broker engagement following improvements to the platform in Q3. We also acquired 1.4 million new credit card customers in the year, up from 1.1 million in '24. As we show in our operational data pack on Slide 79, this included 300,000 new Tesco Bank customers.

Supported by this, credit card balances grew to the highest level since 2017. Core business banking lending has grown for 4 consecutive quarters, and we expect overall balances to grow in half 2 as headwinds from the runoff portfolio diminish. U.K. Corporate Bank lending grew 18% year-on-year and market share increased 100 basis points in this period to 9.6%. In each case, we have further to go, supporting our plan to deploy GBP 30 billion of RWAs by '26 and onwards from there.

Turning to Barclays U.K. in more detail. You can see financial highlights on Slide 15, but I will talk to Slide 16. RoTE was 23.8% in the quarter and 20.7% for the year. NII of GBP 2 billion increased 11% year-on-year and 3% quarter-on-quarter. On a full year basis, NII of GBP 7.7 billion was in line with guidance, and we expect an increase to between GBP 8.1 billion and GBP 8.3 billion in '26.

The hedge is expected to drive around GBP 550 million of additional NII. As I'll cover in more detail later, this is a smaller allocation of the total hedge income growth versus '25 with more growth now allocated elsewhere in the group. We expect a circa GBP 100 million product margin impact in our mortgage book, driven by maturities of higher-margin loans written during the stamp duty holiday in early '21. This will be weighted to half 1.

We also expect lending growth to continue throughout the year. As a planning matter, we expect this benefit to be offset by continued, but easing deposit margin compression. These effects will lower NII quarter-on-quarter in Q1 with stability and growth from Q2 and Q3. And on a year-on-year basis, we expect growth in each quarter of '26.

Non-NII of GBP 247 million was broadly stable year-on-year with a full year just above GBP 1 billion. We expect a similar level in '26 with some seasonal variation. The one-off items I described earlier accounted for around half of the year-on-year increase in operating costs in Q4. These should not repeat in Q1 '26.

Moving on to the Barclays U.K. balance sheet. Deposit balances increased GBP 3.1 billion versus Q3 and were broadly stable versus last year. Customers continue to seek higher-yielding products and time deposits, which both grew quarter-on-quarter. Lending grew for the sixth consecutive quarter and by 4% year-on-year, driven by mortgages and cards.

Moving on to the U.K. Corporate Bank. RoTE was 19.1% in the quarter and 18.9% for the year. Q4 income grew by 18%, while costs grew by 8% as we accelerated discretionary investments. These investments support delivery of a high 40s cost/income ratio in '26 following a 4% improvement in '25 to 51%. Q4 NII growth of 22% reflected stronger volumes across both sides of the balance sheet. Lending grew 18% year-on-year, reflecting improvements in the lending process. Deposits grew by 7%, resulting in a 34% loan-to-deposit ratio, up 3 percentage points.

Turning now to Private Bank and Wealth Management. RoTE was 26.3% for the year, on track for the greater than 25% target for '26. Q4 RoTE was impacted by higher costs from an acceleration of investments and a historic litigation charge. This was small in the context of the group, but reduced this division's Q4 RoTE meaningfully to 12.6%. Client assets and liabilities grew 9% year-on-year and assets under management grew 11%. More than half of this AUM growth came from net new assets under management of GBP 3.3 billion, including GBP 0.6 billion in Q4. This contributed to 4% quarter-on-quarter income growth, and we expect continued volume and income growth in '26.

Turning now to the Investment Bank. As a reminder, our objective here is to generate higher structural returns by improving the productivity, mix and efficiency of the business. Risk-weighted assets have been stable for 4 years. Income to average RWAs has increased by 110 basis points since '23 to 6.6%. In the top right, more stable income from financing and the International Corporate Bank grew 14% and accounted for 42% of IB income, up from 32% in '22.

Moving to the bottom left, Markets income has grown year-on-year for 7 consecutive quarters as we deepen client relationships and investment banking income has grown for 5 of the past 7 quarters. Together with 7 consecutive quarters of positive operating jaws, this has improved the financial performance of the division.

The Investment Bank delivered a full year RoTE of 10.6% in '25, up 210 basis points. Q4 RoTE was seasonally low at 4%, up modestly year-on-year. Income grew 7%, which we show in more detail on Slide 25, and costs were flat. In U.S. dollars, markets income was up 17% year-on-year, delivering around 2/3 of the Investment Bank's income in the quarter. FICC and equities grew 14% and 21%, respectively. We saw particular strength in securitized products within FICC and prime and equity derivatives in equities.

Financing income grew 20% year-on-year and for the sixth consecutive quarter, with prime balances up 30% year-on-year, including strong growth in Asia. In Investment Banking, income was broadly stable. The U.S. government shutdown weighed on ECM activity with the majority of Q4 IPOs pushed into half 1 '26. This was offset by a 7% increase in DCM fees and an 18% increase in advisory fees. The M&A pipeline is strong, and our share of announced fees and volumes due to complete in '26, has increased year-on-year. International Corporate Bank income was broadly stable, including 5% growth in transaction banking income.

Turning now to the U.S. Consumer Bank. Operational progress has continued. Net receivables grew 5% quarter-on-quarter and 10% year-on-year, around half of which related to the addition of the General Motors balances at the end of Q3. Our partnership cards business has grown faster than the overall market in 16 of the last 20 quarters. NIM improved slightly versus Q3 to 11.6%, supported by the repricing that we undertook in '24 and portfolio mix. Retail deposits grew 5% quarter-on-quarter and 20% year-on-year, which improved the funding mix. And we continue to drive greater digital interactions, supporting a 41% cost/income ratio in the quarter.

We expect this progress to continue, reflecting sustainable improvements in returns. Q4 RoTE of 15.8%, was supported by a one-off benefit, which I'll come to shortly, adjusting for which RoTE was 12.5%. And the full year RoTE increased 190 basis points to 11%. In U.S. dollars, Q4 income grew by 28% year-on-year, whilst costs were up 4%. NII increased 19%, reflecting stronger volumes and margins.

Following a review of customer behavior, we have updated our assumptions to reflect more transacting versus revolving balances and longer duration customer relationships. This has allowed us to more precisely allocate partner rewards, which has 2 accounting effects. First, a one-off benefit largely in non-NII of circa GBP 45 million in Q4. Second, an ongoing change in income mix, reducing non-NII by circa GBP 50 million from Q1, offset by a broadly equivalent increase in NII. Q1 NIM will be around 12.5% with total income of circa GBP 950 million. There are considerable inorganic changes in the business in '26.

So to help with modeling, we have included some details in Slide 96 in the appendix. Following the sale of the AA portfolio in Q2, we expect NIM to rise to nearly 14% in half 2, supporting a circa 12% RoTE in '26 before the AA gain on sale. We ended the quarter with a CET1 ratio of 14.3%. This included 33 basis points of capital generation from profits.

Given this strong capital position, we have announced a GBP 1 billion share buyback and a GBP 0.8 billion final dividend equivalent to 5.6p per share. Looking ahead, we continue to expect between GBP 19 billion and GBP 26 billion of regulatory RWA inflation. Within this, the circa GBP 16 billion effect of IRB migration in the U.S. Consumer Bank remains our best estimate. Around GBP 5 billion of that will now happen with the implementation of Basel 3.1 on 1 January '27 with the remainder anticipated that year.

We expect a reduction in the group Pillar 2A requirement following each of these changes. We have been operating around the top of our 13% to 14% CET1 range, with the returns and distributions in the plan announced today based on that level. Post implementation, we will consider where we operate across the range. More broadly, in the U.K., we welcome the constructive tone in the recent FPC review of capital requirements and we'll continue to engage closely with the Bank of England.

Turning now to the RWA walk. Investment Bank RWAs decreased due to seasonality and accounted for 55% of group RWAs at the end of the year. The reduction in Barclays U.K. reflected a securitization in Q4 to manage risk on the balance sheet. As usual, a word on our overall liquidity and funding. We have a strong and diverse funding base, including a 73% LDR and an NSFR of 135%. And we are highly liquid across currencies with an LCR of 170%. These measures reflect purposeful and prudent management of our balance sheet, delivering resilience and thus ensuring we have the capacity to support customers in a range of economic environments. TNAV per share increased 17p in the quarter and 52p year-on-year to 409p. Attributable profit added 9p and 43p per share, respectively.

Movements in the cash flow hedge reserve added 5p per share in the quarter, and we expect this to largely unwind by the end of '26, adding around 9p to TNAV. To summarize, we are pleased with the group's performance in the second year of our 3-year plan, having achieved all our targets and guidance.

We now expect group income of GBP 31 billion in '26, GBP 1 billion more than originally expected. And continued operational progress means we are more confident in delivering target RoTE greater than 12% in '26. Venkat will now outline the next 3 years of the plan before I take you through the '28 financial targets in more detail. Venkat, over to you.

Thank you again, Anna, and welcome back.

Barclays is now on a journey to sustainably higher financial returns. I think of this journey as taking place in 4 stages. First, from 2021 to '23, we stabilized the bank's financial profile, exercising capital discipline in the Investment Bank while starting to build out our areas of strength.

Second, since the launch of our simpler, better, more balanced strategy in February '24, we've positioned the bank for income growth and for higher returns. We have simplified our processes to drive efficiency, and we exited nonstrategic businesses. We've invested in digital capabilities to create a better customer experience. And we've grown our highest returning U.K. businesses to create a more balanced Barclays with more stable returns.

Today, we set out the third stage of this plan all the way to the fourth. In this third stage, we will build on the foundations we have created so far to increase returns for the bank and to make them resilient across a range of environments. Year-by-year, we are improving the profit signature of the bank.

Stronger financial results create the capacity to invest to secure sustainably higher returns. This is the fourth stage, and it extends beyond 2028. Two years ago, we presented a vision anchored in measured ambition and disciplined delivery. I said then that we were building a potent set of businesses, which were strong in themselves and mutually reinforcing.

Our vision was harnessed to our home U.K. market, where we aim to deepen our presence even as we engaged with the world from London. Our vision today is one of accelerating ambition, still anchored in disciplined delivery. We will forge segment-leading operationally efficient businesses that are primed to support growth, and we will drive structurally deeper client relationships by connecting these businesses. We have more capacity to invest. We build upon a strong track record of delivery.

Our drive is greater and our commitment is unwavering. We will increase investments twofold to drive deep technological transformation and modernization of the bank. This includes embedding AI at scale across the group to deliver better products and services. And importantly, we will pursue our ambition while generating higher returns in each of the next 3 years.

In 2028, we are targeting a return on tangible equity of greater than 14%, up from greater than 12% for '26. Stronger capital generation will enable greater than GBP 15 billion of distributions across the period of '26 to '28. And this provides capacity for additional investment and growth beyond the levels set out in the plan today. And as we have done, we will exert considerable discipline over any investment given the importance, which we place on shareholder distributions.

In 2026, we expect the Investment Bank to represent a mid-50s percent of group RWAs. This is above the initial target, and it reflects the postponement of previously anticipated regulatory changes. We expect this proportion to fall to about 50% by 2028 as we continue to maintain broadly stable RWAs in the Investment Bank and deploy more capital in our consumer and corporate businesses.

We will continue to be guided by 3 goals, and these are to make Barclays simpler, to run it in a better way and to make it more balanced. Our journey began by creating a simpler business structure organized and operating in a simpler way. It continued with the simplification of our processes and customer journeys to improve the quality of our service and to drive efficiency.

In the next 3 years, we will be deploying digital capabilities and AI to further this progress. To harness these technologies successfully, we must standardize our data, we must modernize our approaches, and we must harmonize systems and processes. Delivering in this manner will not only enable greater productivity, it will improve our operational resilience, our reliability and security.

And importantly, and I'll come back to this, it will create a fulfilling working environment for our colleagues. For some time now, technology has revolved around our businesses. Now our businesses are revolving around technology. Customer interactions in the U.S. Consumer Bank are almost entirely digital today. Elsewhere in the group, we've made significant progress to build easy-to-use customer-facing platforms, and we'll continue on that journey.

By 2028, we will deliver a simpler but more sophisticated suite of products and AI-enabled services. So how are we doing this? Our transformation is built on 3 pillars: cloud computing, data platforms and AI adoption. To date, we have made the most progress in employing cloud computing built on scalable and robust infrastructure. We are one of the leading adopters in this sector with 89% of applications on the cloud versus 75% 2 years ago.

And this platform provides greater stability and faster product deployment. We are also migrating core data onto a standardized platform. This helps us to provide personalized services for our customers and to implement models more rapidly. And by building on these modular foundations, we can accelerate the development, testing and deployment of code and models.

So with cloud infrastructure and data platforms in place, we are now able to deploy AI at scale. Across the group, we have more than 250 AI tools and models in use. And by 2028, we expect more than half of our customer journeys in the U.S. Consumer Bank to be digitally personalized. Technology is creating a more stimulating working environment for our colleagues who are at the heart of these developments. And let me share some examples.

In the past 2 years, we've held a number of AI hackathons, where employees prototype quick solutions to existing business problems. Every time I visit a hackathon, including one just 2 weeks ago, I'm overwhelmed by the seemingly limitless ambition and inventiveness of our colleagues. And their winning ideas translate into actual projects and actual products. This includes an AI chatbot that we recently launched for FX trading. We call it Box bot. And this tool delivers FX quotes 75% faster than the previous approach. It is driving better execution for our traders and swifter service for our clients.

In the U.S. Consumer Bank, we are launching a conversational AI tool in our app. This accelerates customer query responses by 95% and enables more personalized service. We've also built the infrastructure and provided colleagues with tools to drive greater efficiency and productivity. In doing so, we enable them to perform in the economy of the future. The rollout of GitLab to 19,000 developers means we are now able to implement code 15% faster. And we are one of the largest users of Microsoft Copilot in the financial services industry with around 90% of our colleagues on the system.

In 2025 alone, this saved our teams more than 1 million hours of work. Insofar, I've spoken about improvements in the way we engage with clients and how they engage with us. I want Barclays to be renowned for operational performance, excellent operational performance. And to me, operational performance and financial success are 2 sides of the same coin. With 3/4 of our colleagues engaged in operating the bank, simpler operations can improve efficiency materially. So let me just highlight 2 examples to bring this to life.

In finance and Azeria, we are simplifying our accounting platforms, moving from 11 to 3 subledgers within the trading book. And this will lead to fewer manual reconciliations, faster reporting and more efficient data analysis. On the risk side, close to my own heart, our wholesale credit risk systems remain overly manual. And so we are rebuilding the architecture and using AI to aggregate and analyze data and generate reports. This supports fast and accurate credit decisions.

To summarize, the simpler Barclays is both well organized and well run for colleagues and customers alike. And at the beating heart of this is a standardized infrastructure supporting harmonized processes and enabling modern approaches to product development and delivery. And it's powered and curated by our talented and inventive colleagues.

Moving to better. Having a simpler business means we can focus on delivering better service for our customers, and this results in improved returns for our shareholders. In this next stage, we are building a better bank by forging segment-leading businesses and deepening client relationships. To me, segment leadership is built on 2 pillars: best-in-class offerings and deep client relationships. And we begin from a strong position. We are the largest non-U.S. investment bank with deep expertise in fixed income and financing markets.

We are a leading U.K. retail bank with an established and growing private bank and wealth management business. And our U.S. Consumer Bank is a highly sought-after partner for customers and corporate clients alike.

The second pillar of segment leadership is combining the strengths of our products in each business and our capabilities across businesses. In doing so, we create deeper client relationships. And there is significant potential to increase connections between Barclays U.K. and the Private Bank and Wealth Management through our premier proposition. The acquisition of BSG in the U.S. allows us to bring market-leading digital lending capabilities to our credit card partners. And as the only U.K. bank with U.K. investment bank, we bring a unique global reach and sophisticated capabilities to our U.K. corporate clients.

By investing to strengthen these connections, we make each business individually stronger. And by forging connections across the group, we will unlock sources, new sources of fee growth beyond 2028. So let me share how I think about this, and I'll start with the Investment Bank.

As I said, Barclays is the leading non-U.S. investment bank. We are U.K. domiciled, but we actually look more American than European with 50% to 60% of our revenues coming in the U.S. The Investment Bank has built a diverse and stable income mix.

Two years ago, when I stood in front of you, I said that improving the investment bank was the hardest part of our plan. So what have we done and how have we done it? At that time, we had asked our business to do 4 things: First, to leverage further the traditional areas of strength. And for a long time, fixed income has been the calling card of Barclays. This is true in trading, financing, debt capital markets. And in markets, we identified 3 focused businesses where we plan to grow income by gaining share, European rates, equity derivatives and securitized products.

We've made good progress, gaining share by about 150 basis points between 2023 and the first half of 2025. We have also leveraged our historical strength in fixed income financing to grow in prime.

My second task was to drive greater capital productivity. The business has consistently increased return on RWAs. Now we will build on those successes. The third request was to increase fee share. The bankers who we hired in 2023 and 2024 have become more productive. Early results are good, but there is more to do. And so we will continue to invest and realize the full benefits of this investment over time.

The final ask was to deepen relationships in the International Corporate Bank. And here, we've made strong progress rolling out what we call our treasury coverage model beyond the 1,500 top clients of the bank. And in the next 3 years, we will leverage strong transaction banking capabilities from the U.K. Corporate Bank and build on existing debt capital market strengths. We will be providing a more complete service to global corporates. And in doing so, we expect the International Corporate Bank to become a larger part of the Investment Bank by 2028. And this will remain an important source of fee growth beyond 2028, and I will discuss this later.

Turning to Barclays U.K. Barclays aims to be the premier bank for all U.K. customers. We have a strong customer base, including around 1.1 million, what we call mass affluent customers in Barclays U.K. Our premier proposition provides exclusive rewards and priority service for this cohort, but only 50% of eligible customers have a premier account. This provides a material opportunity to increase engagement. Investment to improve our service has raised NPS scores among premier customers, and we plan to enhance our offering further by expanding the product range and rewards.

We can also support this segment's investment needs more fully, and we will achieve this by strengthening connections between Barclays U.K. and Private Bank and Wealth Management. Within Barclays U.K., we have identified 400,000 customers who could benefit from financial advice.

In 2025 alone, we onboarded 65,000 customers to Barclays Direct Investing, which is the new name for our digital self-investment platform. And in 2026, we will launch Premier Wealth Management to provide planning and advice to Premier customers. This will be human-led, but digitally enabled, fairly priced, transparently constructed and clearly disclosed.

Turning now to the U.S. Consumer Bank. Our leading digital U.S. consumer bank is delivering strong growth and customer engagement. Our focus partnership business was among the top 4 fastest-growing credit card businesses in 16 of the last 20 quarters. And since 2023, we have achieved a 12% organic growth in receivables.

By driving growth and customer engagement in this way, we are retaining existing card partners and attracting new ones. Last year, we renewed partnerships with Upromise, Carnival and Wyndham Hotels, and we successfully integrated General Motors. Operational progress in the U.S. Consumer Bank is also driving higher returns for Barclays. We will continue to use our digital deposit capabilities. In fact, the launch of a tiered savings product in 2024, has enabled 34% retail deposit growth, with the cost of this funding being about 50 basis points below the funding it replaced.

And in doing so, we support the broader banking needs of our card customers. The acquisition of Best Egg n the second quarter of '26 will further expand the breadth of our digital capabilities. Around 90% of Best Egg consumer loan originations come through digital channels, including online aggregators. And Best Egg strong capabilities and enable flexible product design to suit a range of customer needs. We will leverage these capabilities to accelerate growth, including through closer integration with our card partners. So as you can see, the U.S. Consumer Bank is more than just a cards business.

I strongly believe that happy and satisfied customers are the cine of any enterprise. We aim to improve customer service by investing in it deeply, making it a point of ambition and pride. And as I said earlier, operational excellence and financial success are 2 sides of the same coin. I see them as the same.

In Barclays U.K., last year, we launched a new platform to improve materially the speed of more applications for more than 26,000 mortgage brokers. Digital adoption in the U.S. Consumer Bank is already higher than in any of our divisions. And as I said, we are deploying AI tools to improve personalization further and ease of use.

We're also making it easier for customers to come to Barclays, including in the Private Bank and Wealth Management division. Our digital platforms are a critical part of providing a superb experience to deepen customer engagement. This year, we will relaunch the Barclays app to deliver more personalized support through digital channels. Even as we emphasize digital engagement, we recognize that customers sometimes value the quality and depth of engaging with us in person, especially with complex issues and in important life moments.

So we will look to enhance and expand our branch footprint. This will enable us to tailor our services to meet the changing preferences of our customers. And in the U.S. Consumer Bank, we are leveraging our capabilities across cards, deposits and loans to drive even greater customer engagement.

The secret sauce in our investment bank is in our synergies, which we use to deepen client relationships. We are big enough to offer multiple sophisticated products to our clients, and we have the nimbleness and the cultural drive to customize delivery and create tailored solutions. We now rank top 5 with 62 of our top 100 markets clients. This is up from 30 in '21, 49 in '23, and we are on track of our target of 70 in 2026.

Our leading fixed income and prime equity financing products are integrated on a single platform. Operating in this way provides a single view of risk, both for the client and for Barclays. And of our top 100 markets clients, 97 are also financing clients.

So by continuing to leverage our integrated financing platform, we do 2 things. First, we build a stronger foundation of stable income, which supports returns in a range of environments. And second, we deepen relationships and drive greater engagement across the investment bank, including in intermediation. So over the next 3 years, we will bring together our investment banking and transaction banking strengths to accelerate growth in the International Corporate Bank. We are the top sterling clearing bank.

We have a comprehensive suite of products and differentiated payment strength. By replicating some of these capabilities in the U.S., we have already driven a circa 140% growth in dollar deposits since 2023. And we plan to leverage this strength in other products through simple, but complete digital channels. In Europe, we will also extend the reach of our existing product suite from 9 to 15 countries to provide a more complete client coverage. We are also creating a better client experience to support this growth. So by the end of the first quarter of this year, all U.K. corporate clients will be enabled on an enhanced platform that we call iPortal. This combines 5 previously separate platforms for corporate banking into one. And in doing so, we make it easier for clients to access a broader range of products.

Across the banking system, technology is not just affecting how we do business, it's also affecting what business we do. And nowhere is this likely to be greater than in new asset types and new payment methods. We are deeply engaged in understanding the role that digital assets will play in meeting the future needs of our clients. We are developing our own tokenized deposits to increase the speed and simplicity of transactions, and we are testing retail and wholesale use cases, including for corporate bond issuance and investment.

We have been structurally improving the profit signature of Barclays, and we're doing it in 2 ways. First, by changing the mix of the group by growing our highest returning U.K. businesses. And I'm pleased with our progress, having grown these businesses from 30% of group RWAs to 34% in the last 2 years. We also now expect higher returns in Barclays U.K. We will continue this progress, increasing lending by more than 5% annually while generating an RoTE greater than 20% across the 3 U.K. businesses.

Second, we said we would strengthen returns in the lower returning divisions. The U.S. Consumer Bank RoTE has increased from 4% in 2023 to 11% in 2025 in all the ways I described to you. And we expect this to build to mid-teens while absorbing regulatory RWA headwinds. And when I stood in front of you 2 years ago, I said we would increase returns in the Investment Bank by improving productivity on a stable RWA base.

And I'm very pleased with the progress to date. IB RoTE is up from 7% to 11% in 2 years, but we have more work to do. With greater visibility 1 year out to the end of '26, we expect the Investment Bank to generate circa 12% RoTE this year. And by 2028, we expect this to rise to more than 13% -- let me be very clear.

We remain ambitious for this business and for the returns it should be generating. And importantly, this should be done on a sustainable basis. More broadly, the ongoing change in the mix of RWAs across the group means that we are relying less on the IB to drive improvements in group RoTE. This is exactly as it should be.

In summary, the better Barclays will continue to show higher returns, and it will also be built on segment-leading businesses, which offer the best-in-client service and experience. Our third goal is to create a more balanced Barclays. We will continue to maintain capital discipline in the Investment Bank while growing parts of the retail and corporate businesses. But being balanced, being more balanced also means growing new sources of fee income beyond 2028.

Two years ago, I said that every global bank had to be strong at home. We've been a U.K.-centered bank for more than 3 centuries, and it remains a great place in which to do business and from which to do business. The economy is resilient. The legal and regulatory environment is both strong and trusted. And we remain committed to investing and growing in this our home market.

Our investment will focus on diversifying sources of NII beyond deposit income, and we will increase U.K. lending in 2 main ways. First, we will leverage strong multi-brand offerings to reach new customers. For instance, the acquisition of Kensington in 2023 enabled us to provide mortgages to more complex borrowers. And the acquisition of Tesco Bank added significant scale in unsecured and open market capabilities in personal loans.

Second, investment into the business is supporting growth by simplifying and improving customer journeys, as I discussed earlier. We are encouraged by progress in the U.K. Corporate Bank and expect momentum in core business -- core business banking lending to build in 2026.

Importantly, we expect to grow U.K. lending by more than 5% annually in the next 3 years, above the growth in nominal GDP. And we will do this by continuing to grow in segments where we were underrepresented and by leveraging our expanding -- expanded product range and capabilities. We will invest to support growth.

In the next 3 years, we plan to more than double investment to support growth and efficiency compared to the previous 3 years. We will accelerate the adoption of digital technologies and AI across the group. And investments in the next 3 years will be substantially more weighted towards new sources of fee income growth beyond 2028. Through these investments, we will continue to develop best-in-class offerings, which is the first pillar of segment leadership.

As I have said, we will also build connections across our business, and this is the second pillar of segment leadership. In the U.K., new capabilities will support customers across the wealth continuum. We will leverage U.K. transaction banking strength in the International Corporate Bank. and Best Egg will enable us to originate assets directly for investors in our leading U.S. asset-backed securities business in the Investment Bank.

So as we move beyond 2028, we expect more of our growth to come from fee income versus net interest income. And by building more diverse sources of revenue this way, we support more resilient returns and we position ourselves better to navigate a range of environments.

So changes in the operating environment globally present both risk and opportunities for large global banks like Barclays. And we look to manage this in 3 ways: First, by building strong customer businesses diversified by geography, customer, product and income type. Second, by deepening client relationships across products and where appropriate, across business segments; and third, through diligent management of economic, financial, operational and technological risks.

AI, for example, is a transformative opportunity, which contains risks that need to be managed. And so to harness the technology successfully, we are standardizing our data, modernizing our infrastructure and harmonizing our business processes. By approaching risk and opportunities in this way, we aim to deliver consistently for our customers with strong operational performance. And this, in turn, will generate resilient financial performance in a range of environments for our shareholders.

So to bring this all together, progress in the past 2 years provides a solid foundation for the next phase of our journey, and we are confident in the path to 2028. We're moving from a period of measured ambition to one of accelerating ambition. And now I'm going to pass it over to Anna to take you through the financial details of the plan. Anna?

Our confidence in the plan that Venkat has outlined reflects 3 factors. First, we plan on realistic assumptions that put delivery in our control. Second, the plan includes a significant increase in discretionary investment to support our future growth. And in doing so, we are intentionally prioritizing sustainably higher, longer-term returns over stronger shorter-term RoTE. And third, that delivery is grounded in existing momentum.

For example, target income CAGR of more than 5% compares to 7% delivered since '23, as you can see on the top row. Planned U.K. lending of more than 5% is in line with the momentum we've seen in '25. And we expect investment banking income to RWAs to increase by more than 40 basis points to greater than 7%, having increased 110 basis points in the last 2 years.

Our planning assumption is for a low single-digit IB income CAGR, '25 to '28 versus 9% achieved so far, and I'll come back to this in more detail. The low 50s target cost-income ratio in '28 represents more of a step change, but we are confident in delivering this, underpinned by circa GBP 2 billion of gross cost efficiency savings over the next 3 years. This compares to GBP 1.7 billion achieved in the last 2. And I will also come back to this topic in more detail later.

Stable income streams in the retail and corporate businesses will materially drive income growth in RoTE in the next 3 years. We expect modest cost growth, supported by planned efficiency savings and normalization of the elevated cost base in '25. This combination will deliver positive cost jaws in every year of the plan, yielding a low 50s group cost/income ratio by '28. So what drives income from here? As I said, in the past -- this mainly reflected management actions, but the environment has also been favorable, reflected in upgraded 2026 income guidance of circa GBP 31 billion.

As a planning matter to '28, we do not assume similar tailwinds in rates or in investment banking wallet growth. So we expect income CAGR to moderate to more than 5% in the next 3 years. Most growth comes from group NII, excluding the IB and head office, which has grown 8% annually since '23. This reflects the U.K. lending CAGR target of greater than 5% and the stability of our deposit franchises, which underpins the structural hedge, but it also reflects progress outside of the U.K. in USCB, where balanced growth and NIM expansion supported 11% year-on-year NII growth in '25. In '26, we expect group NII to increase at least to at least GBP 13.5 billion, up from GBP 12.8 billion in '25 and for Barclays U.K. NII to increase to between GBP 8.1 billion and GBP 8.3 billion.

Relative to our previous plan, the Investment Bank contributes relatively less against the flat wallet assumption. Over time, we do expect the mix of our income growth to pivot more towards asset-based NII and fees versus deposit income. That's why we remain very focused on diversifying sources of NII beyond deposit income by continuing to grow lending. But for the next 3 years, the structural hedge alone will deliver 50% of planned income growth.

We have already locked in GBP 6.4 billion of gross structural hedge income in '26 and GBP 17 billion over the next 3 years. We plan to fully reinvest maturing hedges as we did throughout '25 and to assume a reinvestment rate of around 3.5%. This is below the current 7-year swap rate of 3.9%, which has become the most relevant proxy given the hedge duration. The average yield of maturing hedges remains below this level in '26, '27 and '28 at circa 1.5%, 2.1% and 2.7%, respectively. This will result in continued structural hedge income growth, including circa GBP 1 billion in '26.

The increase in the average hedge duration to 3.5 years during '25 will reduce the quantum of maturing hedges to circa GBP 35 billion per year from around GBP 50 billion in recent years. This slows the pace of structural hedge income growth, but therefore, prolongs the expected positive effect until at least '29.

Also note, the higher proportion of equity hedge and longer duration of product hedges outside of the U.K. means it will attract circa 55% of growth in '26 versus 75% in '25. This change in mix is equivalent to circa GBP 200 million less income in Barclays U.K. in '26, which instead will occur in other businesses, including the Investment Bank. Two years ago, we set out a plan to increase the Investment Bank returns by improving RWA productivity and modestly growing costs.

Since then, income to average RWAs has increased by 110 basis points to 6.6%, driven by a 9% income CAGR against flat RWAs. In Global Markets, we increased RWA productivity by 60 basis points and grew RWAs to take advantage of the environment. And in Investment Banking, we increased productivity by 150 basis points and released RWAs. Further capital productivity remains central to the Investment Bank's journey to higher returns with a target of greater than 7% RWA productivity by 2028, having absorbed the impact of Basel 3.1.

In part, this will come from a continued review of the loan book, which is around 60% complete. Of the GBP 2.1 billion increase in income since '23, 2/3 came from Global Markets where we have built capacity. Financing income grew by GBP 0.6 billion in a strong industry wallet, and we achieved the '26 target 1 year early. This is particularly important given our focus on stable sources of revenue within the Investment Bank. In our 3 focus businesses and markets, we grew share by 150 basis points between '23 and half 1 '25 and income grew by GBP 0.4 billion.

In Investment Banking, we have meaningfully improved RWA productivity, which was our main objective. Progress towards our secondary objective to add scale through fee share has been slower, although banking fees grew in a market 30% larger than we had planned. Our objective now is to consolidate these gains. We will further deepen our relationships with our top 100 clients and markets and our 3 focused businesses and financing. And we will continue to build banker productivity, including in ECM and M&A, which are capital-light.

In financial terms, given a flat wallet assumption, our plan does not, therefore, include material benefits from wallet growth to 2028. We expect proportionately more growth from the ICB as we leverage the treasury coverage model and the transaction banking investments outlined by Venkat. This builds on the circa 140% growth in deposits achieved in 2 years. And as a result, we expect the International Corporate Bank to be a larger part of the IB, leading to more stable income overall.

Moving on to costs on Slide 66. We delivered positive cost jaws in each of the past 3 years and expect positive jaws in each of the next 3 years. This is a result of the income growth we've just discussed and modest cost growth to 2028. So what underpins this cost pathway? First, we don't expect around GBP 0.3 billion of one-off costs in '25 to repeat, being Motor Finance and around GBP 50 million of unrelated one-offs in Q4.

Second, we expect circa GBP 2 billion of gross efficiency savings by '28 split roughly evenly across the years. This includes around GBP 0.2 billion of reduced Tesco Bank costs. We will deliver this by modernizing processes and platforms to increase efficiency as Venkat outlined. These savings will more than offset the effects of inflation and business growth over the next 3 years. We expect annual investment costs to increase by around GBP 0.8 billion by '28, including circa GBP 0.6 billion from the acquisition of BST EG in Q2 '26. This will result in modest overall cost growth and a high 50s cost/income ratio in '26 with broadly stable costs thereafter to '28, supporting a low 50s cost/income ratio.

The Barclays U.K. cost profile is an important part of this overall shape, so let me briefly cover the dynamics here. Barclays U.K. has been on a transformational journey for several years, reducing the cost-income ratio from high 60s in 2021. Dual running of Tesco Bank added circa GBP 400 million to costs in '25, including GBP 100 million integration costs.

Other costs increased by circa GBP 200 million, net of efficiency savings. This was due to increased investment as well as the GBP 50 million one-off items I mentioned earlier. In '26, we expect a modest reduction in costs versus '25 and a low 50s cost income ratio as we continue to integrate Tesco Bank and invest in the business. By '28, we expect larger gross and net efficiency savings in line with the group and for Tesco Bank costs to fall by circa GBP 200 million. As a result, we expect Barclays U.K. cost to fall in each of the next 3 years, contributing to a mid-40s cost/income ratio in '28.

Our investments to date, organic and inorganic are delivering revenue growth across the group. Investment in the financing platform from '23 to '25 has, for example, supported 60% growth in prime balances. And our investment in the mortgage broker platform has supported more than GBP 14 billion of mortgage applications since its launch. We have also realized GBP 100 million of funding synergies on Tesco and significant margin benefits through Kensington as both acquisitions support U.K. lending growth. We plan to double annual organic investment by '27, focused on technology change and fee growth.

In addition, we expect operational costs of Best Egg of circa GBP 0.3 billion in '26 and GBP 0.4 billion in '28. This highlights the increased intensity of investment at this stage to support stronger fee growth and returns beyond '28. Cost discipline remains a key focus of our plan and is the lever that we have most control of. During '26, we expect a high 50s group cost income ratio improving again from 61% in '25. This reflects strong progress in the U.K. businesses in particular. And looking ahead, we expect further improvements to deliver a low 50s percent group cost/income ratio by '28.

Turning now to impairment. The group has operated around the through-the-cycle target loan loss range of 50 to 60 basis points for the past decade, and this guidance remains appropriate. It reflects 2 offsetting factors.

First, in Barclays U.K., lower arrears and high credit card repayment rates have contributed to our loan loss rate consistently below the through-the-cycle expectations. Strong mortgage affordability criteria and credit card quality supports structurally lower impairment in the U.K. market. As a result, we now expect a lower through-the-cycle loan loss rate in Barclays U.K. of circa 30 basis points versus 35 basis points previously.

Second, we expect a circa 500 basis points through-the-cycle loan loss rate in USCB. This is up from circa 400 basis points previously due to the changing portfolio mix. It will be higher in '26 as of some nonperforming American Airlines balances. Both effects will diminish in '27 and will be more than offset by higher NIM. During the past 2 years, we have structurally improved Barclays profit signature. The Investment Bank and USCB now deliver double-digit returns, and we plan to drive these higher whilst continuing to allocate additional capital to our highest returning U.K. businesses. By '28, we expect capital generation to exceed 230 basis points, an improvement of more than 30% over the next 3 years.

We continue to exercise disciplined capital allocation, first, by holding a prudent level of regulatory capital. As you have seen, we've been operating around the top of the 13% to 14% target range ahead of the expected regulatory developments that I discussed earlier.

Second, we will distribute greater than GBP 15 billion to shareholders by '28, subject to regulatory and Board approval.

And third, we will maintain capacity for selective investments to support structurally higher returns beyond '28. Given the strength of capital generation, this capacity does exceed the level of investment set out in the plan today. As we have done, we will exert considerable discipline over any investment given the importance we place on shareholder distributions.

We expect a progressive increase in our total payout in 2026. We are also evolving the mix of distribution to reflect the growing consistency of capital generation and to recognize feedback from shareholders.

In addition to the move to quarterly buybacks announced in Q3, we plan to increase the dividend to GBP 2 billion in '26 from GBP 1.2 billion in recent years. While we continue to prefer share buybacks, we will review the mix of distributions periodically to reflect the level of our returns and the preferences of our shareholders. Bringing this together on the next slide.

Operational progress during the past 2 years means we are confident in achieving our '26 targets and guidance. But momentum across the group also underpins our confidence in delivering the '28 targets outlined today. We are focused as ever on driving greater efficiency and operating leverage, protecting returns in a range of environments, and we will drive structurally higher and more sustainable returns beyond '28 by investing to support more diverse sources of income and fee growth. Over to Venkat for final remarks.

All right. Thank you, Anna. So 2 years on since our investor update in February 2024. As we've discussed, we remain on track to deliver our goals. We are moving from a period of measured ambition to one of accelerating ambition. We aim for sustainably stronger returns, greater shareholder distributions and operational excellence.

The targets which we have shared today are underpinned by structural improvements to the profit signature of the bank, which we have made in the last 2 years and our drive to become a simpler, better and more balanced bank. We plan to continue this progress in the coming 3 years. And of course, our journey does not end in 2028. Our ultimate aim is to secure structurally higher and more resilient returns beyond 2028.

So now I'll pause for 15 minutes for a break before Anna and I open for Q&A. What shall I say, 10:40 U.K. 10:40 London, please be back in the room. There's refreshments outside, restrooms outside, and we'll be back.

[Break]

Thank you. Welcome back. So we will go to questions in the room.

[Operator Instructions]. So I'll begin with the person who raised his hand first and who taught me a lot of what I know about analyzing backs. Just for that, he gets preference.

Two questions. The first question is on the capital return of over GBP 15 billion. If you could just put this in context of capacity to support investment and growth. How should we think about this capacity that you're outlining? It looks like there's quite a bit of buffer. So we would like to understand that.

And then secondly, you're one of the few CEOs who actually discusses ledgers and middle office integration, which is not a -- it's a hot topic, but a lot of...

Will bring programmer, so that probably helps.

That's probably -- and probably because he came from the same organization that I'm from, which is a big focus. But trying to understand a little bit the investment phase, which has stepped up in '26 significantly. And you're going from EUR 1.1 billion to EUR 2.3 billion of investments. And just what the focus is and how should we think about post '28 basically in that respect?

Anna, do you want to start on the capital and then we can come back to the other one.

Yes, sure. Thanks, Kian. So one of the hallmarks of this plan is the level of capital generation. We've talked about that. And really, when we talk about an improving profit signature, that's really what we mean. It's this chart here that they've just brought up showing that sort of change to 230 basis points. And in the plan, what we've done is we've meaningfully increased the distribution to greater than 15%, but we've also meaningfully, in fact, doubled the level of investment. But such as the level of capital generation within the plan, -- the level of generation actually surpasses both of those 2 increases. So what we've done here is we've deliberately created some capacity for us to be able to invest further if and only if we determine that is the right thing for us to do.

And I'll just remind you of our very clear capital hierarchy here, specifically the importance of shareholder returns. So we're going to set a very, very high bar for any additional level of investment. And quite frankly, if we are unable to find such an investment, then the capital hierarchy will kick in, and we will distribute more than we have here in the plan. Or alternatively, we will be investing more than we have here in the plan, and we would expect the momentum of the business in the outer years to be higher than we're presenting here.

We have no inclination, no objective here to hold on to higher than required levels of capital. But what we're trying to do is create some capacity to underpin some of the meaningful opportunities for growth that we have, whilst meaningfully stepping up that level of distribution. Venkat?

Yes. And I would say, I think if you look at our track record of investment, Anna spoke about the investment which we had made in our prime and financing business and both the quantum of investment and the payback. You saw the quantum of investment in even the mortgage broker application and the payback. We look to make investments where you would get the revenue realization fairly quickly. And you see that even of Kensington Mortgages and Tesco and Bodweilling Best Egg. So we are looking to do that. And we need to keep that capacity for that reason because opportunities will be there and needs will be there.

I would say, Kian, on the second question about subledgers and the sort of the guts of the organization, it comes from both a philosophical place and from the actual reality of the business. The philosophical place is, as I said, for a long time in this industry, the businesses -- technology has revolved around the businesses. Now as you see not just in us, but across the industry, the depth and extent of technology-based services, products and delivery, the businesses are revolving around technology.

And what that means, especially if you're going to take advantage of the promise of new technologies like AI and cloud computing is that you've really got to, as I use the word, harmonize your processes and standardize your approaches and especially when it comes to data platforms and to the way in which you construct and store your data, the way in which you do computing, the way in which you build models and the way in which you deliver. And if these things are not standard, you add huge complexity. And so we've got to unravel that complexity. And in large complex GSIs, that's a big task, and that's what we are trying to do. All right. Alvaro?

One of them is actually -- sorry, Alvaro Serranoa from Morgan Stanley. One of them is kind of a follow-up to the second question maybe for you, Venkat. In one of the slides, and you pointed out that 75% of the employees are functions, I think support functions. And obviously, one of the -- at least for me, the surprise of the plan is the cost element as you were referring to. During the plan, how is that number going to come down during the plan in 2028? And beyond that, how low do you think it can go because it's obviously one of the core pillars.

And second, more -- maybe a more financial one on, again, maintaining the RWAs flat in the Investment Bank and one of the things coming out is ongoing RWA efficiencies. Is there anything -- maybe this one is for Anna, but is there anything you can point us to that is pretty mechanical around the way the business is done in investment banking, maybe less legacy LBO business, more sort of private credit capital-light businesses that we can gain conviction that mechanically the RWAs are going to be flat, I don't know pointing out to a proportion of contribution today versus 3 years out, something that will give us confidence that we can keep it flat.

We're going to tag team on both these questions, Alvaro. So first of all, on the cost, just a definitional point. When we call support functions, there's a bit of a legal entity aspect of Barclays. This is what we call Barclays Execution Services. And this includes technology and operations, but it also includes compliance, risk, finance, HR and legal. And so it includes basically the non-revenue generating parts or direct revenue-generating parts of the business. So that's the first thing.

The second thing, as I've said, and I'll have Anna chime in, we don't have an explicit target in terms of number of employees. What I've said is there will be productivity benefits from all these investments. We hope to harness this productivity benefit in improving the quality and delivery of services, whether that is to clients or whether that's internally, right? And there will be obviously a gross efficiency cost savings that we've outlined and investment in the group. But we are not outlining a particular people target. I think we are approaching this from something that creates efficiency in order to provide enablement -- and then we'll see where we go. Anna?

Yes, sure. If I can just add to that. Our real focus from here on in is really on that technology efficiency. So the majority of cost out, if you like, the efficiency is going to be driven by change delivery, by platform modernization and the kinds of things that Venkat was talking about, about enabling products to market, if you like, much, much faster than we have done before. So that's where we see the sort of meaningful change, if you like, in the cost base. Shall I start on RWAs, or do you want to add?

Yes, you do. But just one thing. It's no accident that the most digitally enabled part of the bank, which is the U.S. Consumer Bank, also has our lowest cost/income ratio, right? It's no accident. Go ahead.

Yes, sure. So on RWAs, I mean, this is not a new thing for the IB. They've been flat for 4 years. They were flat for 2 years before we started the last plan. And whilst we've made considerable progress, 110 basis points, we do think that there's more to go here. And I'd just call out -- so let me talk about a couple of whats. The first would be, if you remember when we did our investment banking deep dive, we talked about that review of the loan book being really good stewards of capital.

We are 2/3 of the way through that review with 1/3 to go. And it might be helpful actually if we can bring up the slide that's got the relative revenues over RWAs, and you'll really see what's happening in investment banking. At the same time, so it's that bottom right-hand chart that I'm calling out there. So absolute levels of RWAs have been coming down in banking as we have reviewed that loan book. That's allowed us to be much more nimble in how we deploy RWAs across the Investment Bank and really deploying them at the moment, as you've seen, in markets just because the market opportunity has been there.

The other thing I would call out is much of our growth that we're really leaning on from here on in, some of the things we talked about before, so M&A and ECM, but the international Corporate Bank is a really big part of this part of the plan. It's made tremendous progress in the last 2 years. And that again comes from the treasury coverage model that we talked about in our deep dive. We've increased our deposits by 140% here. And now we have the opportunity to really leverage that by deploying the technology that Venkat is talking about and really driving fee products from here. So we are confident in that trajectory. Venkat?

Yes. I mean I just add to what Anna said, I mean, structurally, it is the International Corporate Bank and transaction banking. It is the continued growth in our prime businesses, which revenue per unit RWA because of just the way the lending is structured is generally better. It is over a very long period of time, the way lending and banking has been changing from direct lending on individual credits to portfolio lending. But that's over a very long period of time. But it's the thing Anna said, it's corporate banking. It is an emphasis on fee businesses and also at the right points of the cycle intermediation. Yes, go ahead.

It's Guy Stebbings from BNP Paribas. The first question was on capital in terms of targets. You got the 13% to 40% target. I think you've talked sort of running at the top end of that range throughout this plan. And given this is the plan now to 2028, post Pillar 2A changes given the constructive tone from the regulator. I'm just wondering what do we need to see to sort of potentially move lower down in that range as sort of a formal way you're running from the business? Is it just getting that Pillar 2A change from the regulator?

And presumably you've got pretty good visibility as to what you're expecting there. So if things do land as you expect, maybe you could help sort of frame that so we can think about what that means for capital return and RoTE targets.

And then the second question was on the mortgage book in the U.K. You referred to the headwind in the first half of this year. Can I just check in terms of the definition of that headwind? Is that sort of a gross headwind? Because I'm mindful that with Kensington and the sort of flow of the book, you might be able to offset some of that as you have some higher LTV, higher-margin business coming through. So can you kind of frame the definition of that headwind?

Yes, sure, Guy. I'll take both of those. So on the first one, if you go back to the beginning of '25, what we said was that because we were carrying more Pillar 2 in advance of IRB implementation, you should expect us to operate at the top of the range or towards the top of the range. That's still what we're saying. It's no different to that.

And I do expect there to be some Pillar 2 offset when we get through Basel 3.1 and IRB. I just don't know what they are right now. And what we are trying to do in every single part of this plan is put it in our control. We want our distribution plan to be underpinned by the things that we are doing and that it can't be put, of course, by the timing of regulatory change or the certainty of that change. So that's all we're saying here.

So for us, in the short term, our planning assumption or actually throughout this plan, our planning assumption is that we will be at the top end of the range. And that's obviously -- you should reflect that in the way you think about our distributions, you should reflect that in the way that you calculate our RoTE. But once we get beyond that implementation and we have that clarity, we will, of course, review where we think we should be within that range.

I mean we still think that the 13% to 14% range is the right range for Barclays. But at this point in time, we just don't have the regulatory clarity, and we want this plan in our control. So that's the reason for it.

On mortgages, I'm specifically talking about a gross impact, and it relates to the mortgages that were written at the very end of 2020 and beginning of 2021. So as you remember, as we were all coming out of COVID, there was that stamp duty holiday and the mortgage market was very substantial. Those mortgages were written at very wide spreads, like 160 basis points -- that's quite meaningfully different from where we are now.

So just as they refinance, you're going to see some relatively short-term pressure across the market as a whole. We think it will be gone by the end of half 1. And then beyond that, you're going to see the kind of progress that you've seen in our NII to date. But it is a gross impact. We're obviously enjoying very good levels of net lending driven very much by Kensington and that broker platform. So it's a short-term hiatus, I would describe it as.

If I may just underline one thing, whether it's capital or looking at our RoTE, there are potential tailwinds, right? We are planning prudently, but what Anna is referring to, whether it's the new capital rules and what relief we get, there are potential tailwinds. We are not banking. Sorry, go ahead. And I'll come back to the back in a minute.

[indiscernible] bank and wealth management? What products are you currently missing from your Premier Banking proposition? And how easy is it for you to build those yourself? And then secondly, to continue on the U.K. loan book. U.K. retail banks continue to surprise to the upside on loan book growth relative to GDP. I think your guidance is for a 5% loan growth CAGR out to 2028. What's driving the growth in excess of GDP? And what's your outlook for volumes in the mortgage market for the next couple of years?

Let me start on both. We've got a pretty big and complete product suite. There are a couple of gaps in the product suite that are missing, SIPs, junior ISAs that are coming online. But if you put yourself at a higher level looking at it, starting at the self-directed end of the spectrum, what we've got is direct investment, what we used to call smart investor, which is you basically do-it-yourself investment buying stocks, bonds.

Then you come to the next piece, which is planning and advice. And that is where we are doing some work, as I said, to create products, which we will talk to you about soon, which are clearly constructed, fairly priced, transparently built and cheaply distributed and sorry, efficiently distributed. And there, we are looking to grow in scale, and we've got the basic product set. And then we've got our private bank, both domestically and internationally, was complete. So I would view it more as a scaling journey than as a completion of product capability. And that is our goal.

And look, I think more broadly, the U.K. is a nation of savers. I think it needs to be more of a nation of investors. I think we're going to have a broader tailwind and support for this. I think it's an important role for banks to play, and you'll see us emphasize it.

And then if I come to loan growth above GDP, let me begin and then Anna should fill in. We've said 5%, as you say, loan growth versus nominal GDP of 2%. Basically, there are parts of the business in corporate banking and business banking and even in parts of personal loans, where we were underrepresented in the last number of years. Tesco has given us the capability in personal loans, and you can see the increase. You're seeing the increase 18% growth in lending in the U.K. Corporate Bank. If you look at the U.K. Corporate Bank broadly, still loan to deposits is like 35%, 34%. So we have a lot to grow, right, versus what you might normally expect from somebody. Anna?

Yes. I mean, simply put, Ben, I think it's a combination of capability, increased capability. So we talked a lot about the mortgage platform. Actually, we're doing very similar things within the corporate banking environment, making it easier for that customer or client to engage with us and making that journey efficient, quick, giving them certainty, et cetera, that's making a really big difference. I think also the sort of broader product architecture that Venkat talked about, we see it in cards across multiple products. We obviously see it in our mortgage business. So we're just going to market with a much, much broader range and certainly, more of a step change than we've had sort of 2 or 3 years ago.

What it isn't is price and what it isn't is risk. So you can imagine as CFO, I've got a very keen eye on those things. So if you think about our corporate lending, it's up by 18% year-on-year. We've got more than 1,000 new clients in 2 years. About half of those are driving some of that lending. But as I look at the risk profile, it's not changed since the beginning of the plan. And as I look at the portfolio margin, it's not changed since the beginning of the plan. So it's really technology, intention to lend and I would say, breadth of product.

Go ahead, please.

Two with ACR. I think today in guidance, it's the first time you've pointed us to the 7-year swap rate from the 5-year swap rate on the hedge book. Could you talk about, is there a change in kind of the duration targeting there? And what gives you the confidence to make that change, looking at the deposit betas, et cetera?

Yes, sure. Thank you, Tim, for the question. So we actually extended the length of the hedge last year, taking it from roughly 3 years to 3.5, and that's why the 7-year swap rates becomes the most relevant rate. That really follows the observation of customer and client behavior because what we do is every single month, we are looking at how the deposit books perform across retail and corporate at a very, very granular level. And what we were observing was really that the customer and client lives were lengthening out, and we were getting more confidence around that. So it's purely a reflection of that change.

So on the Investment Bank. If I look at your 2026 targets, previously, you had a greater than 12% return target. It's now circa 12%, a high 50s cost income is now circa 60%. I'm assuming the change is primarily due to FX, but perhaps you could firstly confirm that.

And secondly, when I go back 2 years and think of the original plan, a lot of the revenue growth was assumed to come from market share gains, and you actually assumed a fairly flat wallet. Actually, what's materialized is a much better wallet than you expected, but flat market share. So perhaps you could also just talk to competitive dynamics and how that's played out versus what you thought 2 years ago and how that then fed through to your '28 assumptions as well?

And then on the U.S. Consumer Bank, I just wanted to understand some of the moving parts because you talk about greater than 13% NIM for 2026 full year.

But I think in your earlier commentary, you said 12.5% for Q1, 14% for the second half post the AA sale. So presumably it's the 14% you would argue we should be thinking about into the outer years. But then similarly, on the loan loss ratio charge, you're actually assuming that's coming down even as the exit NIM is higher. So perhaps you could just square the circle there.

Okay. Shall I start and then I'll hand to you on market shares, and then I'll take it back on. Okay. Thank you. So Andy, you are correct. The material moving part between the last plan and this plan is we previously planned on $1.27, we're now planning on $1.35 dollar rate. Now that has no impact on group capital, no impact on our ability to distribute. But in particular pockets of the bank, you see some concentrated effects. And EIB is one of those. You're going to see it in USCB as well.

So that movement in FX is worth about 50 basis points. So all we're doing is we're just truing up our expectations. We're pleased with the progress that it's made so far. I'm not going to mark that plan to market every single passing quarter. It's just that as we're resetting targets, we felt like it was the appropriate thing to do. Venkat?

Yes. And I think -- on the other side, what I would point to is, look, on the investment banking side, banking per se, as I said to you, we would like to see greater fee share. What you've seen so far is progress from the hires and the investments we've made, but -- and you've seen greater revenues, obviously, and excellent capital discipline. And as we make these investments, we hope to see the fee share.

On markets, I would point you to the fact that in the 3 focus businesses, we've done what we said we would do, and we've done it a year early. And as well as the number of our top 5 clients among the top 100 clients for whom we are top 5, that has gone from 30 to 50 to 60. So there is structural progress being made in these elements.

Okay. Can we bring up the slide at the back of the deck, I think it's 95 or 96, please, on U.S. Consumer Bank perhaps just to help this -- 96 Perfect. Thank you. So Andy, you're right. There's a lot going on in U.S. Consumer Bank in 2026, specifically being driven by the fact in Q2, we expect to exit the American Airlines partnership, and we'll also purchase Best Egg or complete the purchase of Best Egg in the same quarter. So firstly, that has a NIM impact. So I expect the NIM to go to around 12.5% in the first quarter. What's driving that? Well, it's just the accounting that I called out earlier. It's a movement between non-NII and NII.

Then we've always said that because American Airlines was such a high-quality portfolio, the NIM on it is relatively low, but also the loan loss rate on it is relatively low. So taken together, it was a relatively low returning portfolio because it's super prime. So what happens when that leaves the portfolio is the NIM will go up further. And so you're right, in the second half of next year, I'm expecting, if you like, a clean run rate of NIM, which looks more like 14%.

Now when I come to loan loss rates, that same impact is going to take us from 400 basis points to 500 basis points, but that will be more than offset by NIM. During '26, in isolation, what you're going to have is a couple of impairment effects. The first is, if you recall, when we buy something, we bring it all on at Stage 1. So it has to mature through Stage 2. So you get what we call stage migration. You're going to get that in the general Motus portfolio. So that's going to elevate impairments slightly.

And then for a period of time, we're going to be holding on to some nonperforming loans from the portfolio that won't go with them on the sale. So those 2 things together are going to show a little bit of elevation during 2026. So that's why I'm guiding you to around 550 million, but ongoing, 14% NIM and 500 loan loss rate.

Nothing to add.

Sorry, I forgot that this was working. Pui Mong from Bank of America. So thinking about the income guidance at the group level, so it's greater than 5% CAGR. And within that, obviously, Investment Bank is probably below and the Consumer Bank is above. And with the U.K. part also growing volumes greater than 5%. I'm just trying to think about what does it imply about margins. So in terms of product margin, that is, would you expect more of that growth -- income growth coming from the volume side? Or are we basically past the point where deposit margin is growing very substantially because of the hedge? And obviously, '26 will probably be a bit higher because of the more of the hedges coming through in '26. So in '27 and '28, how should we think about the margin piece? That's number one.

And number two is that -- so it sounds like Investment Bank RWAs is going to stay relatively flat because you still expect that to come down to about 50% of the group by '28. So roughly speaking, it's not much more to the Investment Bank. And the cost guidance at a group level only modestly growing from now to '28. That suggests investment bank is not getting very much cost either. So I'm just trying to think about why you've decided to do that in the context that, obviously, the IB probably is one of the businesses that has performed above expectations in the last cycle. And increasingly, there are questions about with the U.S. peers investing more and putting more capital behind the IB, why would you choose not to do something?

I'll let Anna take the first question, and she can start the second, and I might come in.

There we go, the plan. Thank you, Perlie. There's a lot in your question. Let me try and unpack it a bit. So how do we think about product margin in the U.K. is, I think, your question. So look, there's a bit more to go here. And you can see that from the -- can we go to the structural hedge slide, please? Thank you. Okay. So we are assuming that we are going to be reinvesting the structural hedge at 3.5%. The maturing yield over the next 3 years is materially below that. So 1.5%, 2.1%, 2.7%. So you're going to have a considerable hedge tailwind across at least this plan, probably beyond. And everything that we've done around the tenure of the hedge and extending it from 3% to 3.5% is only going to increase that momentum for longer. So that remains there as, if you like, an underpin for product margins.

Then if you think about lending more and particularly within our credit card business, all of the volume that we've written over the last 2 years coming to maturity from its promotional balances, that will start to increase the interest-earning lending in the credit card book. So we expect those things to continue. Now what we're not doing here is planning for any expansion of product margin really, though, because what we've said implicitly is that the growth that we're seeing in lending and some of the margin pressure that we're seeing in the U.K. market pretty much broadly offset. That's our planning assumption.

Now it may turn out differently to that, but we are not assuming that product margins either as a totality, if you like, Ply, get either better or worse, if that makes sense. You just continue with that hedge grinding in the background, products is broadly a wash. That's how we think about it or that's how we planned for it.

In terms of the Investment Bank, Look, what we're trying to do here is construct a plan that is carefully constructed, okay? We're trying to put as much of it within our control as possible. So we're planning on a flat wallet. We're not materially expecting any market share change in markets. We expect some in investment banking.

The pressure here in the plan is coming more from transaction banking, but that's where we're directing our investment. But don't conflate careful planning and lack of ambition. Because what we will do, of course, if the opportunity presents itself, then we will monetize it as we have done to date. Venkat?

I will emphasize that last point. I must say it's nice to be getting a question about why we shouldn't be bigger in the investment bank. But I think we've targeted -- we've been very clear to you over the last couple of years about where we are roughly targeting the IB as a percentage of the group. I think what you should expect us to do is exactly what Anna said, which is we're making a plan based on an assumption of a wallet. If there is opportunity, we've done it in the last number of years, which is we take advantage of it. Yes. Sorry, let's start, Chris.

Chris Hallam from Goldman Sachs. Just a question on the Investment Bank to begin with. Are you able to give any color on perhaps how much leverage exposure is tied up in the Investment Bank? I know we talk about RWAs, but as we shift towards the growth you're seeing in the financing businesses, how relevant that metric is.

And when you talk about flat market share in Global Markets, is that a conservative assumption or not given, I guess, the dereg story we're seeing building in the U.S. and also the ambitions one of your European peers has in FIC, specifically in the United States?

And then the second question is more broadly on AI. I think -- or I assume behind the scenes going through all the planning, you've looked at a lot of the opportunity set in that area. It feels as though more generally, there's a narrative that the technologies are becoming more impactful, but perhaps the speed at which you can get them into the enterprise is taking longer than people had expected and maybe slightly at a higher -- slightly higher cost. Is that a fair narrative or one that you would agree with when you think about the work you've done behind the scenes on this topic?

You want to go with the first one?

Yes, sure. So thanks, Chris, for the question. I mean we don't talk about return on leverage balance sheet a lot with this community, but you can imagine we're very focused on it in the background. And there are -- you're right, there are 2 big parts of the bank where leverage is deployed probably most extensively. One of them is obviously retail mortgages. The other one is financing within the Investment Bank. It's very high RoTE business because it's essentially secured lending, but it does consume leverage balance sheet. That's why we have the AT1 strategy that we have. And we're always thinking about what are those returns on the leverage balance sheet versus the cost of those AT1s. That's how we think about it in the background.

We have deployed more leverage in the business over the last few years, but so have our U.S. peers. And our perception to date certainly is that they have not been leverage constrained in the way that they have addressed that. And despite that, we've grown the balances by 60%. So it's a business, of course, we're focused on the returns across many lenses, but we're happy with where it's going.

Yes. I'd also say one of the things about the bank and the way we're building the bank is that we have lots of options and lots of opportunities. So just as you have 2 areas which consume leverage, you've also got the U.S. cards business, which helps you offset that because it's capital dense, relatively speaking. And what we are doing on the personal and unsecured side in the U.K., which is also relatively more capital dense. So I spoke on one of the slides about balancing product, income type mix -- all these factors are coming in to create the portfolio which we have.

Yes, sure. I think back to you on.

Back to me on AI. Yes. So you're right that I think what people are finding is that it's not just sort of enabling a particular type of model or a particular capability on everybody's computers and then get to work. So you have human adoption and then you have, more importantly, the ability to get it to work in the system.

To get it to work in the system requires 2 things or 3 things. One is the basic infrastructure, then adding the capability and then the third, the willingness to reengineer your processes. That is what we are trying to convey in the slides we spoke about on technology.

So the basic infrastructure is about both data and computing. Then on top of that, you build the model capability, which exists in some of the computing platforms, but which you might put on your own.

And then the third is the commitment to reengineer processes, and you've got to really do it end-to-end. So whether it is that box bot, whether it is what we are trying to do in credit risk, whether it is what we are trying to do in U.S. cards in the U.S. Consumer Bank and customer service, you can't leave pieces of this undone, okay? And that's the deep organizational commitment. So we recognize it. That's what we are finding behind the scenes, as you said, but we're trying to pick the right projects that will have the biggest impact on the bank and see it through from beginning to end. Yes.

So another question on the income planning assumptions.

Sorry, can you introduce yourself?

Sorry. Yes, Mike Houlton from BNY Newton. There are some that you talked about that do seem relatively conservative. Now whether they will be or not, we'll see over the planning period. But to the extent that they are and revenues are better, income is better than you're planning, should we expect as investors for that to flow to the bottom line? So profits are better, RoTE is better? Or over the course of the plan, would you invest that away, maybe make additional accelerated investments in the business such that you still hit or maybe beat your plan by a little bit, but you improve the sustainability perhaps of the profitability, pull some investments forward. So beyond '28, you're set up even better.

Do you want me to start? Okay. So Mike, the first thing I would say is that our targets that we've given you have very deliberately got a greater than sign in front of them. So we're balancing a few things here. The first is that, as I've said a few times, we want to put this within our control, the delivery of the plan. That's really, really important to us and particularly the delivery of the distributions of the plan. So that's number one.

Number two, we are balancing here the longer-term growth of the firm. So Venkat has talked a lot about the additional investments that we have and will continue to make. I mean, between Venkat and I, it would be relatively easy for us to optimize the returns of the firm across a short-term horizon. That is not what this is about. We are really balancing here, investing more in the business, and that means that the RoTE in the shorter term are probably a bit lower than they would otherwise be.

But we think it's really, really important to create a Barclays for 2 years' time when we're standing up maybe during the next phase of the plan, the third phase of the Trilogy, where we're talking about '28 and beyond. We want that momentum to continue. So that's why we've -- not so much on the income forecast, but when I was talking before about the capital capacity of the plan, that's exactly what I was driving at, our ability to flex our investment pathway if we feel that's the right thing to do.

But every time we are doing that, we are considering what is the returns on that investment relative to either the business as it stands now. So is it going to enhance those returns further? Or how does it look like versus the returns of a buyback? So we're thinking about all of those things as we deploy that.

Yes. I mean it's going to be -- we've presented a plan to you that is based on prudent financial planning in the way Anna has said, but we want to create a deep infrastructure for this bank, make it, as we said, returns in different environments, good produce strong returns in every -- through different environments and sustainably higher returns in the long run, which is a combination of investment and shareholder return, right? Sorry, going to the back and then I'll come here.

It's James Invine from Rothschild & Co. Redburn. I've got 2, please. Anna, can you talk about your thoughts on kind of deposit volumes and spreads in Barclays U.K., please? So we saw a pickup in volumes after a few quarters of kind of flat to slightly down. And I think as well, your U.K. net interest income guidance kind of implicitly assumes quite a bit of deposit pressure. So is that migration? Is it product spread pressure?

And then, Venkat, just back on the Investment Bank. I mean, it sounds like you're very theoretically open to putting more investment in there. But what actually has to happen? So the revenue on risk-weighted assets has gone up. You're talking about a 13% plus RoTE. How much higher do those numbers have to go before you think you'll give this business another GBP 20 billion of risk-weighted assets or something?

Okay. So on U.K. deposits, you can see that the deposits are up quarter-on-quarter by around, I think, GBP 3 billion if we go to the slide. What we continue to see, though, James, is we do continue to see some competitive pressure in the U.K. and specifically that move towards fixed or time deposits.

Now seasonally, I would expect some concentration of that in Q1, Q2 just because of the ISA season in the U.K. We always see that. And it feels like as a market, we're well primed to see that. But we are pleased with that deposit progress. What does that underpin? Well, I think just continued improvements in the business. I would say that we've deployed our multi-brands in deposits this year. We don't really talk about that.

We talk about it a lot in assets, but we are going to market with a much more sophisticated product architecture in deposits because we are now deploying the Tesco brand here. So that's really helping us. But we are not assuming from here that there is any real easing in that deposit environment. It may happen, it may not. But as I say, we're trying not to make significant market assumptions. Venkat?

Yes. So on the Investment Bank, first of all, investment comes in different ways. Investment comes in people, investment comes in technology, particularly in the markets business and then investment can come in RWAs.

What we've spoken about on the balancing side is basically Investment Bank RWAs as a percentage of the group, where we've set a target of around 50% seems right. We've also indicated flexibility around that number if there's a little opportunity, but 50% seems right. We have been investing heavily on technology and people. And we've spoken about it, whether it's bankers, whether it's trading capability and of course, electronic trading capability. We spoke a little earlier about the investments we've made in Prime.

So there's been and continues to be tremendous investment in technology and capability. Some of this or a lot of it is going towards things that are relatively capital-light and relatively high in fees. So we are prioritizing stable income. We are prioritizing corporate banking. And of course, electronic trading, which helps with our intermediation. And on the capital side, as I've said, there's a balancing act, and it's about 50% is where we would aim to target. And to get there right now, IB RWAs have to be relatively flat.

On the left-hand side, you've got Chris, Jonathan and Amit who are being incredibly patient. So...

All right. In that order, Chris.

It's Chris Cant from Autonomous. If I could just ask one point of detail and then on the IB again. So your effective tax rate has been quite difficult to predict over the last couple of planning periods. If you could just fill that gap in our models, I think that would be appreciated by all. And then on the investment banking side of the equation in terms of stable market shares, I guess one obvious development that's probably coming down the tracks at you in the next 12 months is this regulatory change in the U.S.

So are you seeing at the moment any change in the competitive environment? And do you make any allowance in the plan for a potential contraction in product margins as some of your U.S. competitors get more capital capacity, some of which is likely to be deployed into the IB?

Okay. I'll start with the tax rate. So Chris, I'm not going to give you a tax forecast. But I recognize that quarter-by-quarter tax can be a bit lumpy because it relates not only to the changing shape of the business, but also things that may have happened in the past. So I would encourage you to look at it over a sort of full year basis, maybe for the last couple of years and start from there. And always, if we've got significant tax impacts, we typically call them out for you. So start with that.

And Chris, just to clarify, by regulatory change, do you mean capital regulations in the U.S.? Or do you mean individual banks that might be under regulatory structures now that might lift?

More the former?

The former. Right. Look, U.S. capital regulation is very likely diverging from what's there in the U.K. and what's there in Europe. We have operated this investment bank through multiple capital regimes in different locations, and we adapt. The question is then how do we adapt? I said earlier in our presentation that the secret sauce of our investment bank is the synergies, our strength in fixed income and structured financing and the nimbleness of our approach with our clients and deepening the way in which we engage with clients. So we'll see what comes out.

We will see whether we are at a relative advantage or disadvantage in certain things. But the most important thing is to keep investing in the infrastructure, the people, the products so that -- and the client relationships so that we can manage it through different points in the market cycle through different differences in capital regimes. This has always been a very competitive business, and we expect it to continue to be so. Jonathan -- and then Amit.

It's Jonathan Pierce from Jefferies. If I can take it up a level, if that's okay, a couple of questions. I'm really trying to triangulate the capital generation targets on Slide 71 with the RoTE and the distribution expectations. I mean greater than 230 basis points on circa GBP 400 billion of RWA is obviously getting you to an attributable profit number of over GBP 9 billion. So putting to one side, that's quite a bit ahead of consensus, even if we assume 3% RWA growth, which if the investment bank is pretty flat, is quite a lot. That's only going to take us down to about GBP 8 billion of free capital generation, which is obviously huge in the context of the GBP 15 billion plus over the 3 years. So can I just firstly ask you recognize those numbers? Are these distributions going to be really quite back-end loaded such that when you are stood here in 2 years' time, the next 3 years of distributions are going to be markedly above the greater than 15% that you've talked about today.

Secondly, connected, the RoTE on that 230 basis points plus, if we use consensus TNAV would be closer to 15%, maybe a little above 15%. I just wonder if you can talk to TNAV growth over the next few years. It would be great if you can reference consensus, but maybe some of the things that are harder for us to model like the own credit unwind, the pension surplus, maybe even the cash flow hedge reserve moves to a positive. How should we be thinking about TNAV 2 or 3 years forward, please, particularly versus consensus?

Thanks, Jonathan. I guess both of those are for me. So let me just start with capital. So I'm not going to comment on your math, Jonathan. Where I agree with you is that the organization is generating a lot of capital, and we expect that to continue. And so when we give you a distribution target of greater than 15%, I would concentrate on 2 things within that slide. One is the greater than. And the second is this point that we are making that beyond the investment that we've got in the plan, so beyond the doubling of investment and beyond the level of distributions, there is an element of capital creation here that we are holding for additional investment if we think that is the right thing to do. Now if we don't, then we will, of course, return that to shareholders. That's what our capital hierarchy says. It says first, be well capitalized, then deliver it to shareholders, then invest it to meaningfully improve the returns of the group. So that capital hierarchy remains. We have no desire to hold on to excess levels of capital. So your thought process is as ours is. But as I say, I will leave the math to you. In terms of the sort of -- in terms of the RoTE point, we've given you a RoTE target, which is greater than. So again, I'm not going to comment on the math that you've given me. Last time I looked at it, TNAV was broadly -- our expectations of TNAV and consensus TNAV were broadly similar. I think the difference here is probably in the greater than sign simplistically put.

So maybe one, Amit.

Again, just say, for example, looking at BUK. -- profitability targets, so 28% greater than 20%, similar to 26 greater than 20% despite a mid-40s cost income versus the low 50s, further progression in terms of the income from the hedge. I mean, I guess just wondering why isn't that number, say, greater than 25% or higher, you don't want to show a number like that. So just curious on that. That's the first question.

The second, again, just on the IB, just on IB fees, again, this comes back to the market share point. So I understand the flat wallet assumption going into '28. But again, when I look at the trajectory, I think last time we were thinking that there had been investment in '23 and so forth, which should drive market share gains. We saw gains into '24. I think we went from about 3% to 3.3% -- sorry, into '25 or '24, but that's come back down now to around 3% again. So just wondering what's going to create the reacceleration back to the 3.5%, and what gives the conviction on that piece?

Do you want to take BUK and then I'll come back to the energy. And that's Amit Goel, by the way, from Mediobanca.

You did a good job.

I don't say anything.

So a couple of things just to call out, Amit, just to help you. Firstly, again, I'm going to lean on the greater than. The second thing is that although this is not true for the group for BUK, it is true. We are expecting some impairment normalization within that business. So as we said, it's been running relatively low because we've been recalibrating these impairment models that are consistently overpredicting impairment in the U.K. So we've been running pretty low in BUK, we do expect that to normalize up to around 30 basis points. That's not true of the group. The group is running in totality where I expect it to be. So that's not flattering the group, but I think it is flattering BUK. -- right now. So if you take that plus just lean on the greater than number, then that should hopefully explain Venkat?

Yes. So I'll begin with an answer on fees similar to one I often give on markets. So when we have quarter-by-quarter or annual returns and results in markets, people will always ask, why are you better in this or why are you worse than that? Some of it has to do with where we are relatively -- where our relative strengths and then how do the markets evolve to either give -- play to your relative strengths or not. And you've got to look at it over a long period of time.

On investment banking fees, as I said, we made the investment in bankers. And debt capital markets is relatively strong. It's equity capital markets and M&A, where we need to do more catching up. And leveraged finance is obviously reasonably strong. So when you then look at that, some of it has to do with the pattern of deals in the last year versus the year before. They were larger, more lumpy deals. Sometimes if you're lucky to be in them, you're good. Otherwise, you're not.

So '24 was a helpful year, '25, less helpful. But over the long run, we expect to get that market share simply by having the right bankers and the right product, and we look at this over a longer period. So I will give that kind of answer to you.

Right. Anybody else? Going once. All right. Well, listen, thank you very much. Let me say that over the last couple of years, Anna and I have really appreciated the engagement from all of you and your organizations as we've been on this journey. We appreciate your candid feedback, supportive and encouraging.

We welcome the opportunity to continue these conversations with you. Some of it will be on the road and one-on-ones. And I want to really thank all my colleagues who have helped put this together, Marina, starting with you and your team and the Investor Relations team. So please go easy on them. And then thank you. If you have a minute or 2, there are refreshments outside, and you can linger or you can run back to your computers. I'll leave that to you. Thank you.

Thank you.

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

Good morning, everyone. Thank you for joining Barclays' Third Quarter 2025 Results Call. We are well into the second half of the 3-year plan, which we shared with you in February 2024. I'm very pleased with the momentum and consistency of progress, which we have shown in the last 7 quarters. This quarter, our top line income increased by 11% to GBP 7.2 billion from GBP 6.5 billion in the same quarter last year. Our income growth has allowed our tangible net asset value per share, TNAV to rise to 392p compared to 384p per share in the previous quarter.

And we have delivered a third quarter RoTE of 10.6%, which equates to 12.3% for the year-to-date 2025. We are, therefore, upgrading our 2025 RoTE guidance to greater than 11%, and we are reaffirming our 2026 target of more than 12%. Our returns are supported by a stronger outlook for stable income. We now expect group NII for 2025 to be more than GBP 12.6 billion, up from more than GBP 12.5 billion, and this has been supported by U.K. lending momentum, positive stability and operational progress in the U.S. Consumer Bank.

Further, we are pleased to bring forward a portion of our full year distribution plan with a GBP 500 million share buyback. This is the result of a strong capital generation of a CET1 ratio of 14.1% and disciplined execution of our capital priorities. This buyback will commence as soon as the current one is completed. Looking ahead, we plan to announce buybacks quarterly, reflecting the consistency of our capital generation, and this is subject, as usual, to regulatory and board approvals.

And we reiterate our guidance to return at least GBP 10 billion of capital over our 3-year plan with a progressive increase in the total payout for 2025 versus 2024. Over the past 7 quarters, we have simplified our businesses, rebalanced our footprint and are generating higher returns. Our progress has raised our expectations, and we see how much more potential there is to be realized in Barclays. Hence, alongside our full year results for 2025, Anna and I aim to share with you new targets for Barclays through to 2028.

The group is delivering strong top line momentum, efficiency savings that are earlier than planned and loan losses within our planning range. We are well positioned to achieve the circa 61% cost income target for 2025 despite an additional provision for motor finance, and this reflects strong delivery of planned efficiency savings. And we are managing credit within our range with a 57 basis point loan loss rate, and this is despite a well-publicized single name charge in the investment bank. Our plan is delivering operational improvements across each of our divisions and is driving structurally higher and more consistent returns.

In the third quarter, we achieved our circa GBP 500 million gross efficiency savings target for 2025, and this was 1 quarter earlier than planned. And we remain focused on delivering the circa GBP 2 billion gross efficiency target by the end of 2026, having achieved GBP 1.5 billion so far. All divisions generated a double-digit RoTE again this quarter. This included a 1.3 percentage point year-on-year improvement in the investment bank's RoTE to 10.1% and a 2.6 percentage point improvement in the U.S. consumer bank to 13.5%, reflecting continued operational progress in the business.

And we are driving stronger and more consistent group returns through active and disciplined capital management. We are rebalancing the group by growing RWAs in the three highest returning U.K. businesses, where we continue to see good momentum. We are simplifying the group. And in August, we announced the sale of our stake in Entercard to Swedbank. And we are demonstrating our commitment to shareholder distributions with today's buyback announcement.

In summary, the momentum of our operational progress has increased our confidence and expectations for the group. Improvements in the consistency of our returns also mean that we are more strongly equipped to help clients navigate the still uncertain environment, and to provide a foundation for our plan and targets through to 2028, which we look forward to discussing with you in February.

Anna, over to you now to take us through the third quarter financials.

Thank you, Venkat, and good morning, everyone. Slide 4 summarizes the financial highlights for the third quarter. Before going into detail, I would remind you that the year-on-year performance in Q3 was impacted by a weaker U.S. dollar, which reduced our reported income, costs and impairments. Return on tangible equity was 10.6%, including double-digit returns in all 5 divisions. This was lower than last year, reflecting 8% growth in tangible book value and a GBP 235 million motor finance provision, which also reduced our profit before tax and earnings per share. Notwithstanding this provision, I remain focused as ever on the operational performance of the business, which have continued to strengthen, and the signs of momentum that I described to you last quarter are visible across the businesses in today's results.

Income in Q3 increased 9% year-on-year to GBP 7.2 billion. This was driven by growth in stable income streams, now accounting for 76% of group income from retail and corporate and financing within markets. Group net interest income increased 16% year-on-year to GBP 3.3 billion. We now expect group NII excluding IB and head office to be more than GBP 12.6 billion for FY '25, up from more than GBP 12.5 billion previously, driven by 3 developments.

First, the signs of U.K. lending momentum that I called out last quarter have continued and in place has strengthened. Second, operational progress in the U.S. consumer bank is translating into stronger NII growth of 12% year-on-year this quarter. And third, stable deposits for the group have supported full reinvestment of the structural hedge at yields that exceeded our planning assumption.

We have now locked in GBP 11.8 billion of gross structural hedge income in 2025 and 2026, up from GBP 11.1 billion last quarter. Whilst our plan assumes that we reinvest 90% of maturing hedges at 3.5%, Q3 was more favorable on both yield and notional. We have locked in hedges at a higher rate than planned at circa 3.8%. The stability of hedgeable customer balances throughout 2025 also underpinned two developments.

First, we have fully reinvested in maturing balances for the past 4 quarters with the notional standing at GBP 233 billion in Q3. We now expect the hedge notional to remain broadly stable. And second, our decision this quarter to increase the average hedge duration from 3 years to 3.5 years. This increase reflects the stability of hedgeable balances and further supports the predictability of structural hedge income. As we said previously, the structural hedge is expected to drive multiyear NII growth beyond 2026. For 2027, specifically, the yield on maturing hedges is around 2.1%, which remains significantly below the expected reinvestment rate.

Moving on to costs. The group cost-to-income ratio was 63% in Q3. Total costs increased by around GBP 500 million year-on-year or 14% which included a GBP 235 million motor finance provision within head office. Following the FCA's proposal for an industry-wide redress scheme, our charge reflects the increased likelihood of a greater number of cases being eligible for redress. Specifically, the provision has been calculated using a scenario-based approach with probability weightings being applied to them.

As Venkat mentioned, we have already delivered circa GBP 500 million of gross efficiency savings in 2025, showing further progress towards the circa GBP 2 billion target by the end of 2026. Around half of the increase in investment costs related to the addition of Tesco Bank. The remainder relates to structural cost actions in the quarter with around GBP 190 million recognized so far this year. And looking ahead, we expect structural cost actions to be around the top of the GBP 200 million to GBP 300 million normal annual range during 2025. Inclusive of the motor finance provision, we remain well positioned to deliver a circa 61% cost-to-income ratio in 2025, in line with guidance and the high 50s target in 2026.

Turning now to impairment. The Q3 group impairment charge of GBP 632 million equated to a loan loss rate of 57 basis points. This includes a lower-than-expected day 1 charge following the acquisition of General Motors card balances due to lower-than-forecast delinquency rates on the book. Excluding this effect, the group loan loss rate was 52 basis points. This included the circa GBP 110 million single name charge in the investment bank. More broadly, the U.K. and U.S. credit picture remains benign with low and stable delinquencies in our consumer books and wholesale loan loss rates below our through-the-cycle expectations. And we continue to expect a group loan loss rate within the through-the-cycle guidance of 50 to 60 basis points for FY 2025.

Focusing on the U.S. consumer bank, 90-day delinquencies are stable with a seasonal 10 basis point increase in 30-day delinquencies in the quarter to 2.9%. Consumer behavior remains resilient as can be seen on Slide 39 in the appendix. Excluding the day 1 charge for GM, the loan loss rate of 436 basis points was broadly stable year-on-year. As a reminder, Q4 impairments tend to be seasonally higher, and we continue to expect a post-acquisition stage migration charge for the GM portfolio of circa GBP 50 million for the next few quarters.

Turning now to our U.K. lending momentum. We have now shown the slide for a few quarters, and I'm pleased to say that momentum continues. Let me call out some highlights rather than talking through each area in detail. In mortgages, we have grown balances for the past 5 quarters, and Q3 net lending of GBP 3.1 billion was higher than in any quarter since 2021.

We are achieving this in 2 ways. First, by expanding the product range with full utilization of the Kensington brand, increasing the mix of higher LTV lending to levels more in line with the market. Second, we are improving processes. This year, we launched a new platform to more than 26,000 mortgage brokers, which has reduced application processing times from around 45 to around 15 minutes on average. This has significantly improved broker net promoter scores and have increased the capacity and efficiency of the mortgage business.

In the U.K. Corporate Bank, lending grew for the fourth consecutive quarter and by 17% year-on-year as we continue to increase market share. More than half of this growth came from new clients acquired since 2024, a key strategic focus for the business. And we continue to simplify the borrowing process for new and existing clients. In both cases, we have further to go, supporting our plan to deploy GBP 30 billion of U.K. business growth RWAs by 2026.

Turning to Barclays U.K. in more detail. You can see financial highlights on Slide 13, but I will talk to Slide 14. RoTE was 21.8% in the quarter, NII of GBP 1.96 billion increased 18% year-on-year and 6% quarter-on-quarter with NIM up 13 basis points versus Q2. Around half of this increase came from the reinvestment of the structural hedge. Consistent with the guidance we gave you, product margin increased NII by GBP 50 million in the quarter. A large part of this move was due to the phasing of historic swaps income, which, as we called out last quarter, suppressed product margin in half 1.

We expect a broadly neutral product margin contribution in Q4 and remain confident in our guidance for NII to exceed GBP 7.6 billion in 2025. Non-NII of GBP 292 million rose versus Q2, reflecting seasonally higher holiday spend and some one-off effects, and we would expect this to be lower in Q4. Costs were stable versus Q2, but increased by 19% year-on-year, mainly reflecting Tesco Bank and structural cost actions in Q3. As we told you previously, we expect the cost-to-income ratio for Barclays U.K. to increase this year from 52% in 2024 before falling to circa 50% in 2026.

Moving on to the Barclays U.K. balance sheet. Deposits remained broadly stable versus Q2, though competition for higher-rate deposits continued in Q3 and is likely to persist. Lending grew for the fifth consecutive quarter and by 7% year-on-year, driven by mortgages. As a broader market trend, mortgage refinance activity remained elevated, and we expect this to continue into the middle of next year as 5-year fixed rate mortgages written during the stamp duty holiday in 2020 and 2021 mature. Our retention experience remained strong in the quarter and the capability improvements that I called out earlier are supporting lending momentum.

Moving to the U.K. Corporate Bank on Slide 17. Q3 RoTE was 22.8%. Income growth of 17% exceeded cost growth of 5%, leading to an improved cost-to-income ratio of 45%. NII growth of 24% reflected stronger volumes. Lending increased 17% year-on-year, supporting a 70 basis point increase in market share to 9.3%. Deposit market share of more than 20% also increased and balances grew by 5% year-on-year. Together, this growth supported a 3 percentage point increase in the loan-to-deposit ratio to 33%.

Turning now to Private Bank and Wealth Management. Q3 RoTE was 26.4%, client assets and liabilities grew 10% year-on-year and assets under management grew by 12%, supported by GBP 0.7 billion of net new assets under management in the quarter. Strong client engagement supported deposit growth versus last quarter and last year with a continued change in mix towards lower-margin products as clients rebalance assets. Income grew by 3% year-on-year, though fell modestly versus Q2 as a result of this mix effect, and we expect Q4 income to be broadly stable versus Q3. Costs increased by 10% year-on-year and the cost-to-income ratio rose to 73%, reflecting investment in the business. We expect to continue this investment to support growth and the high 60s cost-to-income ratio in 2026.

Turning now to the Investment Bank. Before getting into the detail of the quarter, let me remind you that our focus in the IB is to drive consistently higher and more stable returns. Q3 RoTE of 10.1% increased 1.3% year-on-year despite the single name impairment charge and year-to-date RoTE was 12.9%. This performance reflects operational improvements in the business, which are evident in the quarter.

Stable income streams, financing in Markets and International Corporate Bank in Investment Banking have accounted for nearly half of the IB's income this quarter. Income over average RWAs has improved in every one of the last 6 quarters as a year-on-year matter and by 60 basis points in Q3. We also remain disciplined on costs with a sixth consecutive quarter of positive jaws. These improvements support the Investment Bank's income and returns in a wide range of environments.

Turning now to look at income by business on Slide 22. Using the U.S. dollar figures, markets income was up 6% year-on-year, whilst investment banking fee income was up 11%. Let me highlight some areas of strength and some areas where we need to do better. First, on strength. Financing income has now grown year-on-year for 5 consecutive quarters, including by 21% in Q3. In Prime, we ranked joint fifth globally and client balances have grown circa 30% year-on-year.

In the International Corporate Bank, stable income growth has been supported by the rollout of the treasury coverage model now to 1,500 top clients versus 800 at the end of 2024. This has also helped to drive circa 20% year-to-date growth in U.S. deposits and strong growth in corporate FX and risk solutions revenues in the Investment Bank. And we have made good progress in M&A with sponsors, a key focus area where our year-to-date market share increased by circa 140 basis points year-on-year.

In other areas, we need to do better. This includes corporate M&A, where we were less able to capture stronger activity in the quarter and in equity derivatives, where our performance was impacted by lower volatility. We also have more to do to sustainably increase market share in ECM, where we did not participate in some larger deals and others were pushed into Q4.

Turning now to the U.S. Consumer Bank. Before I get into the numbers, let me first cover operational performance of USCB. Starting with volumes, and net receivables grew by 10% year-on-year, of which around half related to GM coming on board at the end of August. As a reminder, we expect this acquisition to enhance RoTE from Q4. NIM continued to progress towards the greater than 12% target by 2026, rising circa 110 basis points year-on-year to 11.5%, driven by 3 actions.

First, repricing that we undertook in 2024 continued to support margins as customers repay and rebuild balances on new terms and conditions. This accounted for around half of the year-on-year increase in NIM in Q3. Second, we continue to optimize the lending book mix. Following the acquisition of GM card balances at the end of August, retail partners account for 19% of end net receivables versus the circa 20% target by 2026, up from circa 15% at the start of the plan. Third, we continue to see strong core retail deposit growth, though as expected, the increase in wholesale funding to support GM temporarily reduced core deposit funding to 68% of the total.

These improvements in the income profile were complemented by ongoing progress to improve efficiency, supporting a 43% cost-income ratio in the quarter, on track for the mid-40s target. All of these actions have contributed to the strong financial performance in the quarter, which you can see on the next slide.

RoTE was 13.5%, up 2.6% year-on-year and 9.4% year-to-date. Using the U.S. dollar figures, income was up 21% year-on-year and costs up 6%. Stronger noninterest income accounted for around half of the income growth year-on-year, reflecting higher interchange and account fees. NII, which grew by 14% year-on-year and 12% quarter-on-quarter, was supported by stronger volumes and margins. The broad range of factors supporting higher returns in the U.S. Consumer Bank reflect the operational progress that I outlined, underpinning our confidence in the sustainability of this progress. We ended the quarter with a CET1 capital ratio of 14.1%. This included circa 40 basis points of capital generation from profits.

Given the consistency of our capital generation, a CET1 ratio of 14.1% and disciplined execution of our capital priorities, we have announced a GBP 500 million share buyback. This brings forward our full year distribution plans rather than increasing total distributions for the year. The CET1 ratio pro forma for this buyback is 13.9%. RWAs increased GBP 4.3 billion quarter-on-quarter, driven largely by FX and the acquisition of the GM portfolio. Excluding FX, Investment Bank RWAs remained broadly stable and accounted for 56% of the group RWAs.

As usual, a word on our overall liquidity and funding on Slide 28. We have strong and diverse funding, including a 74% LDR and an NSFR of 135%, and we are highly liquid across currencies with an LCR of 175%. These measures reflect purposeful and prudent management of our balance sheet, delivering resilience and capacity to support customers in a range of economic environments. TNAV per share increased 8p in the quarter and 41p year-on-year to 392p. Attributable profit added 10p per share during Q3, partially offset by dividends paid in the quarter and movements in the cash flow hedge reserve.

The cash flow hedge reserve is expected to unwind by the end of 2026, adding to TNAV per share as it has in recent quarters. The more significant effects of earnings growth and buybacks give us confidence that TNAV will continue to grow consistently as it has done for the last 9 consecutive quarters. So to summarize, we are pleased with the group's strong performance in Q3. This positions us well to deliver on all our 2025 guidance and 2026 targets and provides a strong foundation to build from as we look to update the market on the second leg of our transformation journey.

Over to you, Venkat, for concluding remarks.

We are 7 quarters into our 12-quarter plan and remain on track to deliver our goals. We are working hard to deliver sustainable operational and financial improvement across our businesses. And this, in turn, will generate higher group returns and drive shareholder distributions.

I will now open for questions and answers. As ever, please limit yourself to 2 questions per person so we can get around as many of you as possible and please also introduce yourself as you ask your questions.

[Operator Instructions]

Our first question comes from Guy Stebbings from BNP Paribas.

The first one is on the U.S. consumer top line. Clearly, very strong, up sort of 20% year-over-year, both noninterest income and the NIM moving up to 11.5%. Just help us to understand if there's anything particularly lumpy in there? So I guess, first is to confirm that we should be thinking about growth of that 11.5% NIM base given the sort of ongoing lending mix actions you talked to and growth in retail deposit base? And then within that GBP 250 million of noninterest income in Q3, anything lumpy in there you would point to tempt us away from annualizing north of GBP 800 million before thinking about things like gains on sales of portfolios next year?

And then the second question was just on U.K. mortgages. From a volume perspective, very strong, both net and gross lending, I think nearly GBP 10 billion in gross lending is certainly above typical run rate. I'm just interested if that's the level you think you will continue to write out. And then from a sort of competitive perspective, what you're seeing in the market? I know the actions you're taking and the Kensington offers quite a bit of insulation, but are you seeing any competitive pressures on new lending spreads when you look at like-for-like lending?

Thanks, Guy. I'll take both of those, and thanks for opening the call for us. Just on the U.S. consumer top line, I think what you're seeing coming together now is a real combination of all of the operational actions that we've been undertaking over the last few quarters, and you can see that on a new slide on Slide 24. Because it's drawn from those operational actions, we do have confidence in its sustainability. Really what's driving the NIM is the things that we've talked about before.

So it's the repricing, which remember, it takes some time to work its way through into the NIM because customers need to draw down on those new terms and conditions. It's also the increase in the level of retail deposits, and retail deposits are about 50 to 60 basis points cheaper than the other sources of funding we've had previously. And then thirdly, there is this increasing proportion of retail balances, which are higher NIM.

So I expect over the next couple of quarters, Q4 and Q1 to be broadly at the level of NIM that we're currently running at, around 11.5%. I'm not going to guide you to Q2 and beyond because, obviously, once we exit the AA portfolio, that NIM is going to jump up again. So I will guide you to that a little nearer the time.

In terms of noninterest income, there's a couple of things going on in there. The first is obviously the increase in volume that we're seeing, not just from GM, but also the organic growth in this business. So if you go back to the equivalent quarter, just before the start of the plan, we've grown 13% since then. So you're seeing that coming through in non-NII, and you're also seeing some improvement in partner sharing agreements just reflected in that number. So we do have confidence in the momentum in the income line. I'd just remind you that this is a seasonal business and you get that seasonality in NII because of balances, but you also get it in noninterest income. But yes, we're pleased with that progress.

In U.K. mortgages, the U.K. mortgage market is robust, and we see that across the piece. We see it in house purchase. First-time buyers are up 11% year-on-year. We're seeing strong levels of refinancing. And the margins in Barclays, if you like, in the more vanilla book have been broadly stable over the last few quarters. Obviously, we're seeing a margin benefit coming through from Kensington, which is 3 to 4x higher. And really, what you're seeing here is our capabilities reaching the marketplace. And by that, what I mean is both the product breadth because we know what Kensington in play, but also the operational capabilities because we launched a new broker platform, which is working extremely well.

The only thing I'd call out for you is, we're about to enter a period market-wide, it's not a Barclays thing, where we've got coming to maturity, the 5-year business that was written during the stamp duty holiday in FY '20 and FY '21. That's at relatively wide margins. So you're going to see a little bit of sort of churn compression, if you like, come through on that. But of course, we captured that in the guidance that we've already given you around NII progression for the U.K. Thank you. Next question, please.

Our next question comes from Jason Napier from UBS.

The first one, just looking at competitive conditions in U.S. investment banking. We've had some of the peers talk about potentially very significant levels of additional capital that's available for deployment following some of the deregulation and stress test changes. And prime appears to be one of the places that they may be looking to allocate additional capacity. So given it's a focus for the bank, could you just talk about whether you think you have additional capital to deploy, given the changes in things like stress tests and what you're seeing on product margins and that sort of thing?

And then secondly, on the nonbank financial intermediary space, thank you for the additional disclosures, those are really welcome, and it's good to see the impairment charge at a group level below consensus today.

Venkat, I wonder whether you could talk a little bit about risks in that industry, how mature the exposures are, whether there are any vintages we should be bothered about? We could observe that the cases we've seen so far all involve fraud, but we have seen very strong growth in the industry, writ large. And so I wonder with your risk management hat on, whether you could just talk about whether this is an industry that is yet to grind into fully mature loss run rates and how you think about that sort of thing?

Thank you, Jason. Good questions. On the first one, on capital regulation or disparity -- potential disparity in capital regulation between Europe, the U.K. and the U.S., look, it is, I think, an important factor in the industry. We haven't seen ultimately what will be the changes in the U.S. and how much the U.K., which is the important jurisdiction for us, as a home regulator, makes itself consistent or not. I think what I would point out on things like prime is, A, we've got a good and strong market share. We work with a few important and big clients carefully. It is as much a balance sheet business as it is a capital business.

And so we think we've got the wherewithal, and given our current market position given our product capability, given our client penetration, we've got the wherewithal to compete effectively and continue to compete effectively. Of course, it's all subject to capital rules. We'll have to see where they are but I'm pretty confident in the strength of that business and how we will adapt overall in the investment bank because ultimately, it's about that.

Coming back to private credit and NBFI, so here's what I will say. First of all, I view credit as credit as credit, right? There's a distinction about where it's originated from and private credit, generally, we at least think of that as the kind of credit that's originated outside of banks and outside of the public debt market. But I think of lending as lending. And through the cycle, you've got to be careful about all the aspects of lending, client selection, sector concentrations, name concentrations, terms and continuous monitoring, qualifying them initially and monitoring it over life over the time period. So that's important and that you've got to do through the period.

Look, I'm obviously disappointed that we had Tricolor. The fact that it was for is no excuse. But we've looked at what lessons we can learn from that and applied it across our portfolio, and I'll talk a little about that. We did not have first brands. We were approached a couple of times, and we said no. And we said no because our credit officers felt that there was not enough data or information to support the financial projections they may. That's how credit selection is supposed to work.

Now at this point in time, and you talk a little about vintages, less to me a question about vintage, but a question -- two questions. One is, are there circumstances either because of inflation, either because of tariffs or changes in general economic conditions that put stress on credit performance? So do companies find themselves stretched?

Now fraud can be isolated bad actors or it could be economic conditions that increase the propensity towards bad acting, if you like. And then if you worry about that, you've got to consider very carefully the independence and strength of the financial controls employed within the companies. As you can imagine, we consider all of these things over time. But I think what these two instances show is that we will likely be monitoring our portfolios more carefully, particularly understanding the impact of changed economic conditions on companies and looking closely at the strength and independence of financial controls. Hope that answers your question.

Your next question comes from Chris Cant from Autonomous.

I just wanted to follow up on the U.S. consumer business and then another one around sort of risks that investors are worrying about of late. So on U.S. consumer, we've had this target for a while for the business to get to a greater than 12% RoTE for next year. I appreciate that quite a few things have changed over the last 18 months, 2 years since you gave that guidance in terms of the AA book, now expecting to move off and so on. Given where we've got to with 3Q in terms of the returns, could you give us a bit more color as to what return you expect that segment to be delivering in '26? Obviously, greater than 12% is open-ended. That would be helpful, I think, to sort of realign consensus expectations on that division a little bit.

And then the other topic I wanted to throw out there beyond private credit was stablecoins. There's been some nervousness over the summer months from some investors around what threat stablecoin issuance creates for the banking system, I guess, more so on the other side of the pond, given that's where most of these innovations are being deployed first. So I just wanted to invite you to comment, Venkat, in terms of how you think that potentially shapes up for the business longer term?

Thanks, Chris. I'll start on U.S. consumer and then I'll hand to Venkat. In terms of U.S. consumer, it's exactly where we expected it would be, and we continue to target that RoTE of greater than 12%. Clearly, 2026 statutory rate will be impacted by the gain on sale of AA. It's a bit too early to guide you on that. Chris, we will do nearer the time. But think on an underlying basis that we are aiming to achieve the kind of progress that we set out for you in the targets that we set. Beyond '26, we remain committed to pushing this business further and you can see that with the momentum that's coming through now, and we'd expect to continue around income, around operational costs also. So we've got many levers that we can continue to pull. And we really think this should be a mid-teens business. Venkat?

Yes. Look, stablecoin, it's a broad and fascinating subject, Chris. So thanks for the question. I'll try to confine my answer though. So there are a couple of dimensions of it. One is, what does it do to deposits? Second is, how much does it represent an alternative form of payment? And third is, is it an alternative form of payment on an alternative network? I think the deposit question for the big banks is something which the banks will have to consider along with our regulators.

Because the real question is, is this something that sits outside the deposit system or is it brought within the deposit system? And it's a very critical question to answer because it relates to the transmission of monetary policy. The second thing is, as a store of value and the form of deposit that it takes. The initial use cases seem to be more promising outside of the developing countries in developed -- in developing countries, so where people who might use it as a dollar substitute for their local currency. Less clear case within, say, the U.S. or the U.K. or even Europe.

The third thing is even if you accepted the first two, is there then a separate network upon which this can travel? I can tell you what Barclays' approach is. We think any of these are possibilities. It's a very promising and broad-reaching technology. Will it ultimately work? I don't know, but we've got to investigate it and be part of it. So you might have seen announcements that we are part of consortiums with other bank -- consortia with other banks. And obviously, no one bank can act alone. We are studying the technology. And I think it will take some time to know clearly and with some confidence what exactly the use cases could be and how valuable they are. But it's important enough that we've got to study it carefully.

The next question comes from Rob Noble from Deutsche Bank.

Just on private credit again. Could you help us with the economics of how that business works? So what spread are you making on the business, the risk weights? I presume it's been growing very quickly. Are you worried that if the Bank of England -- I mean, regardless of how confident, low risk your particular book is, are you worried that if the Bank of England is looking into it, it's going to deter you from further growth in that area? And then in Kensington in the U.K., I see you've doubled the book, so that makes around GBP 4 billion now, if I'm not mistaken. Do you have any designs to go into any other areas of specialized lending in the U.K.?

Right. Let me take the first one, Rob, and then Anna will cover Kensington. So what I would say about -- we have a disclosure slide, Slide 43 in our pack on private credit. What I would say is that the exposure is growing in a sort of relatively stable manner, right, and has been for us for a while. I'm not going to get into RWAs and spreads. I think we've been very clear about the strong credit controls we put on this and the types of people we work with. To reiterate, we work with the most experienced, well-regarded, top-notch, top players in the industry. We provide financing generally against both pools of loans of credits, which they originate on a secured basis, those portfolios are diversified.

We have limits on borrower concentration and sector concentrations. We're skewed towards large-cap corporates. We require lower relative ease, so that we can get better first-loss protection. And we've got some statistics there, and we've retained revaluation rights, which means mark-to-market rights on the portfolio, and enforce the maintenance of LTVs, and collateral additions require our individual approval. So it's a risk management process and practice. I think it's important that regulators examine all aspects of the financial system. We welcome the review of the Bank of England -- by the Bank of England. And we think, as I said, that we've got strong risk management practices. So we're comfortable and confident in that.

Thanks, Venkat. Rob, on your question on Kensington, the balances are around GBP 4 billion in Kensington. Just to sort of highlight how we think about this business. I mean, it's no difference actually in risk management terms to the way Venkat has just described private credit or indeed any kind of credit. So we're very focused on the choice of customers. So Kensington has 30 years of experience of really focused client and product level and affordability assessment.

And then once the balances are on our balance sheet, then we do manage them actively, and that was one of the capabilities that we drew from Kensington. So you might have noticed that in Q3, we actually did a Stage 3 securitization from there. So it is quite a sophisticated risk capability, and it is contributing not only to breadth of mortgage offering, but also to the blended margin. But thank you for the question. Next question, please.

Our next question comes from Nicolas Payen from Kepler Chevreux.

I have two, please. The first one would be on your U.K. RWA deployment. I think you have deployed circa GBP 1 billion of RWA during Q3. And it seems to me that the run rate was actually closer to GBP 2 billion per quarter, so especially in the context where you had a good lending performance in Q3. So I just wanted to discuss how we should think about it and whether or not we should have a catch-up in U.K. RWA deployment a bit later?

And then the second one is just a follow-up on the mortgage headwinds coming from the maturity of the mortgage underwritten during COVID . So what kind of headwinds are you expecting and for how long should we expect this?

Thank you very much. So we've got a GBP 30 billion RWA target. We deployed GBP 18 billion so far, GBP 11 billion of that is organic. It's interesting because when we set out these targets, the RWA growth in the U.K. is really a shorthand for our desire to lend into the U.K. And actually, what you find is that in some quarters, RWAs grow faster than lending, and that's what we saw earlier in the year. And actually, in this quarter, lending grew faster than RWAs. It's actually the lending that we're really focused on internally.

It's a lending, not the RWAs that we generate income from, and we're really pleased with the progress. It's our highest quarter of net lending in mortgages since 2021. And we've now got 4 consecutive quarters of lending in our corporate book. So we're happy, we're happy with the progress, nothing really to call out. It's just timing differences between RWAs and loans.

In terms of mortgage headwinds, look, our churn effects on our book have been broadly stable, neutral for some time. All we're calling out here is there will be a period of pressure. Actually, overall, we expect the product margin impact on the U.K., as a whole, taking all products into account, will be broadly neutral into Q4. So expect that number to be broadly zero in the NIM walk.

But it's really towards the end of '20 and the first quarter of 2021, there was a stamp duty holiday in the U.K. and a lot of business was written, that's going to mature. It will compress margins a little as that business flips over onto front book. I'm not going to call out a particular spread, that will be different by lender and different by products. But it's just something for you to consider. And as I say, we've already taken it into account in the guidance that we've given you. But thank you for the questions. Next question, please?

Our next question comes from Jonathan Pierce from Jefferies.

I've got 2 questions actually. The first is on what we're going to get full year with regard to these 2027, '28 targets? I'm not after the numbers, of course, unless you want to give them to us, but the sort of detail. I'm assuming it's probably not another 100 slide presentation like we got last February, but I'm assuming we will get RoTE targets for '28 distribution amounts and mix, maybe even equity tier 1 targets, these sorts of things. So just to give us an idea of what we should be expecting qualitatively ahead of February would be helpful.

Secondly, maybe I can try and preempt one little piece of that, though, which is on the structural hedge. The weighted average life has moved out now 3.5 years. When we think about the size of maturities coming through in '27 and '28, should we be thinking, therefore, [Technical Difficulty] we've been getting recently to GBP 35 billion a year? Or will it hold up at GBP 50 billion for a little longer? And maybe I can invite you to give us the maturity yield in 2028 itself, if that's possible?

Okay. Jonathan, I will take both of those. So we have said that we will give you updated targets in FY '25. So in February, we've also said that Venkat and I will do that together. So you should hopefully read from that, that it won't be quite such a long update as it was last time. But we will be focused on '26, '27, '28. So what should you expect? We were really clear at the time that greater than 12% rate was not an endpoint, and that was true of every target that we gave you. That remains true.

So you should expect us to come back with details on how we expect to push rates higher not just as a group, but specifically in some business areas also. And you know, there's a pattern of delivery that you should be seeing that you should continue to expect, which is higher levels of revenue, but particularly focused on the stability and predictability of that revenue. Secondly, that we'll continue to push gross efficiency savings to create capacity and cost for investments. And thirdly, that we will continue to be very disciplined in capital. So more on the February 10th, but that's the trailer, if you like.

In terms of the structural hedge, just back to this point around predictability, the reason that we extended the duration is because we see greater stability in deposits. So it's a response to that. What that will naturally do is slightly lower the level of maturities as you go out a little bit further. We haven't yet given a maturing yield for '28. We will do that in February. We have given you 2027. That is 2.1%. So you've got 1.5% in '25 and '26, then 2.1% in '27. And really, what's happening here is because we are extending that, clearly, we have a mix of maturities within that maturing yield or a mix of tenors within that maturing yield. And there is a portion of 7-year in there that is really holding down that maturing yield as we go a little bit further out. So hopefully, that gives you some things to work on, and we'll come back to it in February.

Our next question comes from Amit Goel from Mediobanca.

So 2 follow-up questions actually. One, just coming back in terms of the strategy update or new targets for '28 that we get with full year. I'm just kind of curious how you're going through that process? And are you thinking about kind of things like revising capital allocation to the businesses, things like that? Or is it more about efficiency and driving more out of the business with the kind of path already set?

And then secondly, just on the U.S. CB. I think your remarks earlier that for the next couple of quarters, so Q4, Q1, you'd anticipate kind of a flattish NIM on what we've just seen the 11.5%. I'm just kind of curious, given the factors that you outlined before in terms of improvement, why that would be flat and why that wouldn't continue to show a bit of growth in the coming periods?

Amit, good questions. I'll take the first one and Anna will take the second one. So you should see what you -- the way we're thinking about the strategy is actually what you said in the second half of your statement, which is happy with the business footprint, intensification of the aspects, which Anna just referred to, top line revenue, efficiency, depth and breadth of product reach. And so basically getting more out of each of the businesses and getting more out of the collective. So see a continuation and an intensification of what we've done.

And Amit, on your second question, I mean, I wouldn't really add anything. There is a degree of seasonality to the business. But no, I mean NIM, we do see as many of those effects having flowed through largely already. Typically, we see slightly lower levels of retail funding as we go into the full year just because balances grow, and we tend to use a bit more sort of the brokered deposits. So that does have a little bit of an impact on NIM. But nothing really to call out. Just assume it's broadly flat really over the next couple of quarters. And as I say, it's going to pop up again from Q2 onwards, but we'll tell you a little bit more about that.

Our next question comes from Perlie Mong from Bank of America.

Just a couple of questions. First on distribution. So I think it's very welcome to see a buyback this quarter and moving to quarterly distribution. Can you just tell us how you thought about it, why did you decide to go to quarterly cadence? And in terms of going forward, is there like a sort of monthly rolling number that you are thinking about? And within the wider distribution context, now that it's closer to price-to-book, are you thinking about maybe doing more distribution? So that's number one.

Number two is on cost. You highlighted that you've achieved your efficiency savings one quarter earlier than expected. But also for next quarter, you would expect to run towards the top end of the GBP 200 million to GBP 300 million cost to achieve, or CTAs, if you like. So is that something that you would expect to run at that level in 2026? And as part of the strategy update, I think last time we did it, I think there was maybe GBP 900 million or GBP 1 billion cost to achieve upfront as well. Is that something that you are thinking about as well?

Thanks, Perlie. Let me take both of those. So the buyback decision, really what that reflects is our confidence in the consistency of generation of capital. And it's just a clear articulation of the capital priorities that we gave you at the outset of the plan which were, number one, you should expect us to be well capitalized as a regulatory matter; number two, returning capital to shareholders; and number three, investing in the businesses.

So as we reflected really over the last few quarters, actually, and we've seen the strength and quality and resilience of that capital generation, this is something that we've been thinking about. So what we've done is, we've accelerated a portion that we would otherwise have paid at the full year, and that's really our desire to put it in the hands of shareholders. So nothing more significant than that.

In terms of the go-forward plan, in terms of balance, cadence, et cetera, we will cover that with you in February when we give you those target updates. In terms of costs, so our primary objective here is to continue to drive efficiencies. That's what we're doing. And our structural cost actions play a really key role in driving that forward. But there's no real change here at all.

And in fact, given the delivery of that sort of gross efficiencies a quarter early, and given we've got such momentum in our NII, had it not been for motor finance, I would have been expecting today to upgrade the cost-to-income ratio to around 60. As it is, given that progress we've been able to absorb motor finance and reiterate our 61% guidance to you. I still expect next year to be in the high 50s.

Typically, in any year, we spend between GBP 200 million and GBP 300 million. That's what we're guiding you to this year. We're just calling out, it might be towards the top end of that. But again, that is all encapsulated within the guidance that we've given you of circa 61 for this year. So there's no real change to anything that we are seeing in terms of costs. But thank you for the question. Perhaps we could go to the next question, please?

Our next question comes from Alvaro Serrano from Morgan Stanley.

I guess there are 2 follow-ups. I apologize for another one on private credit. As you look at what went wrong in Tricolor, and you've reviewed the rest of the book, are you satisfied that you've got the collateral is -- the collateral integrity is there? And can you reassure us? And when we think about this business going forward, obviously, financing has been a source of growth for a while. I think, Venkat, you may have alluded to this, but should we expect that growth to slow down from that 20% run rate that you've been doing for a while?

And the second question, I guess, it's also a follow-up on U.S. cards. To get to that 15% RoTE, Anna, that you've often quoted, do you think you've got the right scale? I'm thinking, obviously, in the post-American Airlines world? Or would you expect more JVs and more contract wins? And how is the pipeline looking on any further wins? Because I haven't seen sort of chunky ones. Obviously, you've had GM, but that's been announced a while ago. So maybe some comments on the pipeline on wins on there.

Alvaro, let me start with the first one. So about the review that we took, it's along the 3 dimensions, which I said to you. One is, our company is being financially stretched. Second, the thing -- the second part is, strength of financial controls in the company and independence of financial controls. I also want to be very clear, there's sort of broad financing, there's private credit. The slide we've given you is on private credit. And on our pattern of growth, it's been relatively stable, growing a little, but growing slowly.

And I would always say on these things on lending, it is a case-by-case decision. We will look at loans, and we will decide. We tend not to grow these books that aggressively. And as you also know, I think that we tend to employ, over the cycle, risk transfer transactions, and we've been doing so for a decade. So that's been our broad approach to both risk management, to credit risk management and to the overall portfolio.

And then the second part of your question on private credit was basically for Anna. So I'll pass it over.

Yes, sure. So your question references the mid-teens sort of aspiration we have for this business. I mean a large part of that is in our hands now, and you can see the progress that we're making around efficiency. We targeted mid 40s cost-to-income ratio, we're already at 43. So expect us to push on. You can see the progress in the NIM. So all of those things are within our control.

We do want to grow the book. We will never do so at the expense of RoTE, and we have seen opportunities to do organically, as I said, and inorganically. So for example through GM. As you can imagine, we look at portfolios all the time, and we assess those as to whether or not they are RoTE generative, both for USCB and in the context of the group.

The nature of this business is that it is always a balance of those two things. It's always a balance of leaning into the partners that we've already got and expanding those, which we've got good experience of but also acquiring new capabilities and partners as we go.

So I'll hand to Venkat.

Sorry, there was one part I didn't answer, Alvaro. You asked me about the review we did and what we found. So we reviewed it in the way I just said, looking at companies and looking at the controls. We're satisfied with what we've seen so far in our portfolio, what we've seen in the review we've conducted. Obviously, you're going to have to remain vigilant, which we would have done anyway, but we will be vigilant going forward.

Our next question comes from Chris Hallam from Goldman Sachs.

A couple of just follow-ups left over. Venkat back on NBFI, sorry, Venkat, you mentioned the importance of initial qualification and continuous monitoring. And I guess, in light of recent events, that review that you're running through in that book and just triple checking everything, how far through that review are you? Or have you fully completed that review? Maybe I missed that in your earlier comments? Sorry, if I did.

And then second, on the IB, and it's a bit of a follow-up to Jason's question earlier on the call. I guess this is a pretty difficult regulatory backdrop against which to set a 3-year plan. You mentioned that we're yet to see what the U.S. will do and the degree of alignment that U.K. will settle at. So should we think that the 2020 IB business plan is going to be sort of caveated that it's reg dependent? Or do you think that the balance of outcomes on dereg and your earlier point on capital versus balance sheet headroom means that you have and will sustain a plan for all seasons?

Thanks, Chris. I'll let Anna take the second question. On the first one, the review is completed. As I said, I'm satisfied with what we saw, but we're going to have to continue to be vigilant and that's always been the case.

Chris, just on your second question, I mean, you're right. There is a degree of regulatory uncertainty out there. And clearly, what we would want to have is consistency of regulation, both in its approach and its implementation date across all 3 jurisdictions, so Europe, U.K. and U.S. So that is difficult from a timing perspective in terms of planning. But sort of more holistically than that, the plans and the strategy that we have for the investment bank.

Venkat referred to it before as running our own race. And we remain extremely focused on doing that, obviously mindful of the competitive environment also. But our objective here is and will remain to drive higher returns in the investment bank, more consistent returns, and that's really about focusing on the stability of income, both stable sources of income, like the international corporate bank, like financing, but also stabilizing the intermediation and fees parts of the business.

There's a really important piece here around cost and efficiency and technology-led efficiency. And so what you've seen over the last few quarters, we've had 6 quarters of consecutive positive jaws in this business. And then the third piece is just this continued driving capital efficiency. We think we've got a ways to go. You've seen, again, 6 consecutive quarters of year-over-year improvement, but there's more there for us to do.

So I think it's really important that we focus on the things that we can control and then navigate the regulatory environment as it emerges, and we are well used to doing that. We've seen divergences before, we continue to see them, and we'll deal with it when we have the facts in front of us. Thank you for the questions. Next question, please?

Our next question comes from Andrew Coombs from Citi Group.

Two questions, please. Firstly, if I could just follow up on the Investment Bank. Obviously, you had a very strong first half of the year. Q3 is slightly lagged the growth seen at the U.S. peers. Can you just explain how much you think that's just a mix effect? Is it a mix effect by business segment, by region, across equities and across primary? Or are there any gaps that you're still looking to infill there?

And then the second question, broader question on the U.K. You've obviously seen strong mortgage and corporate loan growth in Q3. But can you perhaps touch upon customer behavior and activity going into the November budget?

Andy, thanks. Let me begin with the IB, and then I will pass over to Anna on the U.K. As I've told you, I take a long view of this. We are running our own race. We set out targets. We put in an RWA target for the Investment Bank, which was to keep it flat and we've kept flat. We also instituted our discipline, which Anna just spoke about. And then we had both revenue targets, cost efficiency targets and overall return targets, profitability targets, all of which we've been meeting.

We also put in within that certain areas of focus within markets and banking. In markets, it was European risk, it was securitized products. It was equities, particularly equity derivatives. In banking, it was certain sectors, health care and tech, and then it was M&A and ECM. Now over this long period, we have shown strong progress in all these dimensions.

Even if you look at something like equity derivatives, we've been growing a couple of percent over this year, less than what the U.S. peers had this quarter. Quarter-to-quarter, there will be variations. Some of that variation is about the amount of capital and balance sheet, some of the competitors allocate over time. Some of that variation is geographical concentration. So Asia has been strong. We've always been very clear that we have a solid Asian presence, but it's not as deep and broad as others have. There are times when commodities plays a role. There's times when credit plays a role, and that's generally good for us.

So I would view what you've seen in this quarter's results as that kind of normal Q-on-Q variation, I don't think when I look at the plans of the Investment Bank, what we've had, what we intend to do, that there are sort of gaps or holes we need to fill. I think we continue to build on technology, continue to build on product sophistication, continue to build on client reach, and we will show the returns that we've set out to and we've displayed over the last 7 quarters.

Andy, here's how I think about the U.K. landscape. So I think about it, first, on how our consumer is spending? What does the demand for credit look like? And then thirdly, how is that credit performing? And if you look through these lenses, then you get a pretty good view. So I mean U.K. consumer behavior is slightly cautious, but we continue to see signs of improvement, so credit spend is higher than debit spend. We've seen an slight increase in nonessential spending and confidence metrics have grown slightly. So, so far, so good.

And we also see that flowing into, for example, the demand for credit. And you can see that in terms of our U.K. momentum, the demand for mortgage credit is good. And as I said, that's not just refinancing. So in a very cautious environment, you see less house purchase. But what we see is, house purchase growth, first-time buyer growth and also refinancing demand.

There's good demand from cards, as you can see. And actually, the thing we talk about less is demand from corporates. And you can see really good lending in our corporate book. That is coming broadly half and half from existing clients as new clients. We've originated more than 400 new clients this year. That's on top of the 550 that we did last year, and our lending market share is up 70 bps. So we don't see a lack of demand for credit at a macro level. If we're looking for points that were slightly more hesitant, we would say we see a little bit of hesitancy in mid-corp but generally speaking, good demand for credit.

And then finally, credit performance is good. We see that in mortgages, we see it in cards. I mean U.K. cards' delinquencies are extremely low. And I would say across all of the portfolios are low and stable and exactly as we would have expected them to be. And the same is true of corporates. There are no significant single names in our corporate book. So the U.K. landscape remains pretty robust. But thank you, Andy, for your questions. Can we have the next question, please?

Our next question comes from Benjamin Toms from RBC.

The first is in relation to European Bank peer share suffered this week in relation to losing a U.S. litigation case. It was underpinned by the fact that the bank has provided finance to a sanctioned nation. I think that Barclays settled with the U.S. regulators in 2010 in respect to providing finance to a sanction nation. Can you provide any comfort for us why we shouldn't add this to a potential litigation risk for Barclays in the future?

And then secondly, in your Private Banking and Wealth Management, the AUM and AUS grew pretty quickly in the quarter. To what extent do you expect this organic growth trend to continue over the next 12 months?

In terms of the first point, there's nothing of which I would call out, Ben. We can follow up with you with a bit more detail about the historic cases, but nothing I would call out. On your second point, we continue to make good progress with the private bank, another GBP 0.7 billion of net new money in the quarter. So we're pleased with its progress. And obviously, its RoTE remains above its target level, which was greater than 25%, so pretty robust.

Obviously, the opportunity for that business, we believe, really comes in the future as we start to access the sort of mass affluent and wealth markets. So probably more to come on that, I wouldn't call out anything specific now. But again, thank you for the questions.

And then operator, perhaps we could have the next question, which I believe is our last question.

Our final question today comes from Edward Firth from KBW.

I just had a question on your '26 targets actually because if I look across the piece, I mean, you're pretty much nailing everyone and some by some margin. But I guess the one that stands out is the Investment Banking RWAs, which I can see you reiterated today at 50%, which is still quite a long way from where we are today. And I'm just thinking that in terms of -- if I look at the returns, that's the business that has -- the returns are significantly below the other divisions, I guess. And I would hazard that the cost of equity is higher as well.

And I guess that's probably the division which is the reason for you trading where you do. So I do think that 50% is quite an important target, particularly in terms of a statement of intent and where we see it going from there. But I don't really see how you're going to get there. And so just can you give us sort of some flavor? Are we talking about a big reduction in investment banking RWAs? Is there some sort of risk transfer you're going to do? Or are we looking at much bigger growth somewhere that I'm not thinking about? Because you're talking about more than a 10% swing there.

Okay. Why don't I start and then I'll hand to Venkat. So just in terms of the 50%, remember, when we wrote that we were in a very different environment in terms of regulatory timing, so there are 2 things that are under our control and one that isn't. The first is holding the IB RWA flat. We've actually done that for more than 3.5 years now. It's not just part of this strategy. It was there before. Secondly, continuing to grow in the U.K., and you can see the progress.

The thing that I can't control is the implementation date of the IRB model. That's very difficult to say, particularly on the call, or indeed, some of the Basel implementation effects. But the strategic intent that sits underneath that 50% remains the same, Ed, but there's regulatory timing that I can't control.

As to your point on returns, I mean we were really clear that the returns of the IB were not where they needed to be, but you can see that we're making progress. Just to call it out, it's 12.9% year-to-date, much more in line with the group versus 10.1% last year. So we are making good progress, but I'll hand to Venkat for more comments.

Look, I'll say exactly that. We were very, very clear at the start of our strategy that we were going to hold the IB RWAs flat. And the reasoning behind that was we felt and we feel we've got a very strong, capable full IB. And at those levels of RWA, with greater RWA efficiency, which we've demonstrated, it can be very competitive, and we've shown our competitiveness over the long time, over this period.

What we said also was that the percentage is an outcome, as Anna just described, which is based on not just holding it flat but growing in the U.K. and then assumptions about capital calculations for the rest of our book, particularly U.S. cards. The first two, we control, holding the IB RWAs flat, and then what we've been doing in the U.K. where we've been showing the growth which we said we would, right? The third part we cannot control, and that affects the percentage. And if you go beyond that strategically...

Just flat, which is the goal.

Yes. The flat is the important point.

Yes. That's exactly -- the flat is exactly the important point. And as Anna said, on RoTE, it's again been behaving exactly the way we would want. It's a returns-focused business. And it is approaching and in some instances, if you look at the time periods in the past, the group average. So exactly what was outlined exactly what has been delivered, promises kept. Thank you very much, everybody.

Thank you, everybody. Thank you, Ed, for that question. We will see you on the road from tomorrow, and we are looking forward to an analyst lunch as opposed to an analyst breakfast next Tuesday. So hope to see you all soon and thank you for your continued interest in Barclays. Thank you.

Thank you.

That concludes today's conference call. You may now disconnect your lines.

I am Perlie Mong. I am the UK Banks analyst here at Bank of America. It's my pleasure to welcome Anna Cross, Finance Director of Barclays on stage with me. Anna, thank you for coming.

Thank you very much.

I know you said last week that you're very confident that you can reach all your 2026 targets that you've set out. You've also said that you'll give new financial targets before the current ones expire, which is very exciting, but I won't get ahead of myself just yet. So should we go through your current strategy by divisions, starting with the U.K.?

Yes.

So you've committed to putting GBP 30 billion RWAs incremental in your U.K. businesses. You've deployed GBP 17 billion already, including Tesco. What has driven this growth? And where are you seeing the best opportunities from here?

Yes. Thanks, Perlie. So we've got a GBP 30 billion RWA target for the U.K. across '24 to '26. And at the halfway point of the plan, we are at GBP 17 billion. Now a proportion of that around GBP 8 billion has come from Tesco, the rest of it organic. And we're running, Perlie, at around a little over GBP 2 billion per quarter. So that with 6 quarters to go, that gives you an idea as to why we're confident that we'll meet that target. And really, we do see clear opportunities to grow in the U.K., and we're experiencing that across retail. So for example, we've had 4 consecutive quarters of mortgage growth. Since the start of the plan, we've originated 1.6 million new current credit card customers. But we're also now seeing it in SME and in corporate. So in SME, we've seen -- and for us, business banking is everything below sort of GBP 6.5 million turnover. That one has been a little slower to start, but we've now seen 2 consecutive quarters of core loan growth.

And then in our Corporate Bank, we've now seen 3 consecutive quarters. So real opportunity there. That has been enhanced by some of these sort of additional capabilities that we have landed. We talked a lot about Kensington. So Kensington is the mortgage brand that we bought a couple of years back. That really helps us access the market in a broader way, particularly around being able to lend into more complex risk. And that's been very successful for us in accessing higher loan-to-value and also buy-to-let. And the margins in that business are around 4x the scale of what we see in the vanilla business in Barclays U.K. But there's more going on in mortgages than that.

We recently launched a new broker application process to 26,000 brokers in the U.K. And remember, 85% or so of mortgage growth in the U.K. comes via broker. And the reason that's important is it cuts the application time from about 45 minutes to about 15 minutes now. So we've seen our Net Promoter Score go up dramatically with the brokers. It's reducing processing time. We can process more applications. So all of that capability is really underpinning the growth and then when I get into cards, obviously, we're now using multi-brand.

So we're originating not just in Barclay Card, but in Tesco, in Amazon and across the Avios platform. And then I think the thing that is a little bit more embryonic and one that we talk less about is really how we can link the U.K. businesses together. And the one that we're really excited about is how we run really from our private banking and wealth business into the premier banking side of Barclays U.K. and the opportunities there across our Premier Banking proposition, which, again, we are improving, investing in, and we're seeing better take-up of products and again, Net Promoter Score growing. But the real link into our private banking business and the wealth proposition is what really excites us.

You've mentioned the strength in U.K. corporate lending. I would just like to pick you up on that. Growth was very strong in the first half, up almost 10% in the half. So what was driving that? And how do you feel about the growth prospects from here, especially in light of all the macro headlines lately?

So in order to understand our corporate position, you've got to understand where we started from. So when we started the plan, we had 22% deposit share and 9% lending share. So very, very skewed book in corporate. So -- and remember, this is the part of Barclays, which is genuinely 330 years old. So really core part of our franchise. And our corporate bank somewhat suffered from being part of a much larger division previously. So it was in the Corporate and Investment Bank. And for good strategic reasons, we were skewing reasons, we were skewing away from that business, which is why we ended up with the shape that we did. So for the last 6 quarters, we've been trying to undo that really and really investing both in terms of capital and cost into this business.

So it is about digital engagement with those clients. So we're now seeing a 10% increase in the amount of self-serve that those clients are doing because of the digital investment that we're putting down. Again, a 6 percentage point improvement in client satisfaction. So all that investment is really leading to greater client engagement. But of course, what we're really doing here is extending facilities to clients. Now we see RWA growth as a lead indicator for that because we put the facilities out there and then subsequently, the clients draw down on them.

To give you a bit more color on the second part of your question, so we have what we call a business prosperity index, which is where we survey those corporate clients and try and really work out what's going on in their minds. And as you say, there's been a lot of headlines, not only about tariffs, but around national insurance, et cetera, minimum wage. But actually, what we found is that the confidence to invest is increasing amongst that corporate population. And it's up to sort of slightly greater than 5% now versus about 1.7% earlier in the year. So really seeing that come through. And actually, those things are linked. As you see a bit of economic pressure, so some of those clients are really keen to invest in their own productivity. So I think it's demand and supply and our willingness to lend.

That's fantastic to hear, much better than the headlines. So on margins, maybe going a little bit into the structural hedge. So you've recently told us that the maturing yield on the hedge will be about 2.1% in 2027. So it sounds like '27 will be another year with quite substantial NII growth especially in the context of the loan growth. Is that fair?

Yes is the answer. But let me give you a tiny bit more color. So for those of you less familiar with it, the structural hedge is basically what we do in order to smooth the income profile through the interest rate environment changing. So what has happened is, as rates have risen because we've swapped our positions into fixed rates. That held back NII growth and now rates are stabilizing and start to fall. It's actually preserving that NII. And actually, we're still continuing to see growth. We've got around GBP 50 million -- sorry, GBP 50 billion maturing each year. So it's been very, very programmatic this hedge. This year and next year, the maturing growth, the maturing yield is 1.5%. So imagine that's what's rolling off, what it's rolling on to. We plan for it to be about 3.5%. That's what our target is based on. But actually, think of it more like the 5-year swap on average if you're trying to model that. So 1.5% this year and next year, 2.1% the year after.

So our structural hedge is not at its peak. It's got quite a few years to go. And actually, if you think about the structural hedge and the benefit that it gives us is it locks in and secures that NII. So it gives us considerable certainty about what we see in front of us. And the good news about that is we've got about 80% of next year's structural hedge income locked in already. Now clearly, that's only 1/2 of the balance sheet. And what's really important is that we look beyond even '27, '28 all the way into the 2030s. That's how Venkat and I think about the bank, which is why we're very focused on loan growth now because it's really important that the loan side of the balance sheet is ready to pick up that mantle when eventually the structural hedge starts to dissipate, which is why we're really focused on the things that we discussed before.

That's really helpful. Should we move on to the IB?

Yes.

So again, very strong performance there, beating consensus, 6 consecutive quarters in markets. The consensus, I think, still looks a little bit cautious. I think market income is expected to grow by about 2% in '26 and '27. How much do you think the performance we've seen in the last 6 quarters is sustainable? And can you give us some more color on market share gain, client wallet share gains, et cetera?

Okay. So I'm definitely not going to give you a Q3 trading update. However, what I would say is that we think about the IB and markets in particular, in 2 ways, what's structural and what's cyclical? And what's really important about that is our objective in the IB is not just to get it in line with the group next year, but to meaningfully stabilize and create a structural RoTE, which is evergreen. That is our general objective in the IB. So the structural part really is about raising the base. And there's a few things going on there. We've talked a lot about financing. Financing grew by more than 20% in Q2. And you're really seeing there our prime business maturing alongside the fixed income business and us gaining both balances and managing margin well.

But in addition to that, we have gained market share across both FICC and equities. And that's really important to us because if you think historically, Barclays was a fixed income house. Lehman was a fixed income house. We're really trying to broaden out this business and stabilize it. And -- what we're very focused on as we do that, and I think one of the key drivers is the way we think about our top 100 clients. So we said at the time of our investor update that we had -- so with 49 of those top 100 clients, we were top 5. We want to get to 70. We're currently at 60. So we're making really good progress in broadening out the capability in terms of those really, really large clients. The cyclical piece is around investing in parts of the business that allow you to be more successful in a range of environments.

So we talked previously about our focus businesses. So equity derivatives are securitized products business, our European rates business. We're investing in those, and that allows us to start increasing our market share, which again is what we've seen. So the progress that we observe is that our income CAGR is about 9% across the IB, but that then has to be matched with really good cost control and good capital control really to drive that structural change.

You've just mentioned cost and RWA control. So the other part of the strategy is, of course, keeping risk-weighted assets flat with modest cost growth, which you have also achieved. Can you talk about how you've managed that precisely? And do you feel like that has in any way constrained your ability to capitalize on opportunities when they materialize?

So actually, RWAs in the Investment Bank have been flat for 3.5 years. So they were flat for 2 years even before we started the strategy. And we did a lot of work prior to announcing that strategy. And what we felt and we still feel is that we have the waterfront of the Investment Bank correct. So we're in the right businesses, in the right geographies, but there are still opportunities for us to increase the capital efficiency of that business. So we don't see it as a constraint. partly because of that improvement that we expect to see in capital efficiency, and you can observe that because we are reporting quarter in, quarter out income over RWAs.

That is the measure by which we hold that team accountable and how we hold ourselves accountable to you as shareholders. But we're also very focused on being nimble in that capital. So as the wallet changes for the IB, so we are moving that capital around. So if you look in the first half of this year, you will see our RWAs skewed slightly more towards markets. So market risk RWAs have gone up and away from banking. So credit risk RWAs have gone down. So that's just being nimble.

And then the last thing I would say is that we're also very focused on growing parts of the Investment Bank, which are less capital dependent. So treasury coverage within investment banking. What we mean by that is how we really knit together our debt capital markets business and our International Corporate Bank, transaction banking for our very largest FTSE 350 and above clients. How are we growing in equity capital markets and in mergers and acquisitions, again, capital-light. How are we growing in our financing business, again, capital-light. So they're all really important.

On costs, just pivoting to that, it's really about 2 things. One, we've been focused on for many years now. And again, we talked about in February 2024, which is really streamlining and upgrading our technology and retiring technical debt. So getting rid of that legacy technical burden. And that's important not just for the front office, but if you think about having multiple legacy systems, the impact that then has on the middle and back office for functions like finance, for example. But it's also about really how we think about processes from beginning to end, from trade capture all the way through to booking or even putting it in the ledger.

So those 2 things that are our real focus. And what you can see is that we've had 5 consecutive quarters of positive jaws. You don't necessarily expect that every quarter in this business, but we're very, very focused on it. And in doing that, if you look at 2024, what you can see is that our costs grew by 2%. Our income was up by 7%. But if you look at our performance costs, they were up by 13%. So we're paying for talent and we're driving cost efficiency elsewhere. So we feel like it's a sustainable model.

That's very clear. Thank you. So moving now to the Consumer Bank, USCB.. So you've often said that, that strategy is a plan of many parts. And you think you can -- returns can go back to the mid-teens. Can you give us more detail on the different parts that you're working on?

Everything is the answer. It is a plan of many parts. It's a business which historically had returns in the mid-teens. And clearly, during COVID, it lost some momentum, which impacted its RoTE, which at its lowest point fell to 4%, but you can see from more recent results, it's back up around 10%. So we're making progress. So the start point to this is the net interest margin. And even within that, there are multiple things going on. So we repriced the book last year. We really felt that we were out of line with our U.S. peers in the way we position that with our customers. That repricing is now flowing through into the net interest margin as customers spend on those new terms and conditions. We're raising more retail deposits. That again reduces the funding costs.

So retail deposits are up meaningfully year-on-year, delivered digitally direct-to-consumer with much more compelling savings products. The third thing is through mix. So we said at the time of our strategy, we wanted to rebalance the mix of this business towards retail and have a much more balanced book. Actually, the most meaningful start point of that has been General Motors. So we've taken on board the General Motors portfolio this quarter. So you're going to start to see that move the mix. And actually, we've been acquiring GM for a couple of quarters now. So that's NIM.

On costs, really driving digital and digital engagement as we do across all of our retail businesses. And you can see that coming through in the cost-income ratio, which in the last quarter was 48%. We want to see that more like 45%. And then really being really clear and very disciplined about how we manage our credit. And you can see that the credit performance continues to season out. We saw delinquencies fall in the second quarter, in line with seasonal trends, but probably a bit more positive than that. So all underway.

And now that you've mentioned impairment, notwithstanding the day 1 impairment charge for General Motors in Q3, anything that you're seeing at the front end that concerns you?

No. So credit quality in the U.S. is stable. And in many ways, that shouldn't surprise us because when you look at the fundamentals that the customer is experiencing, they remain robust. So real income growth, still high levels of cash deposits, unsecured exposure significantly lower than historic levels. And actually, what we're experiencing in U.S. cards very similar to U.K. cards is that repayment rates remain meaningfully above pre-COVID levels. So over 30% in our U.S. cards business. And then you also have to reflect on the fact that our U.S. cards business is a high FICO business. So the average FICO is 757. We have a low FICO. So everything that we sort of define as sort of lower FICO of 660 and below is around 12% of the book. So really, we are not exposed to the sort of lower credit quality in large part in the U.S.

The thing I would say is that in Q2, we saw our delinquency, 30-day delinquency fall to 2.8%. We would have expected that to happen. That's when tax rebates come through in the states. So we typically see seasonally delinquencies fall in Q2. But what was really interesting to me was the lowest 3 FICO bands fell year-on-year. So we're really happy with that. And with my retail hat on, what I really am concerned about is 90-day delinquencies because that's the one that is the real lead indicator to losses, and that is very stable at 1.6%.

Fantastic. That's very reassuring. I think I've covered most revenue-related questions, especially in the context of the divisions. So just a couple of questions on costs at the group level. I know we've touched on IB costs briefly already, but at the group level, can you help us understand the profile and nature of your efficiency savings and the investments needed to enable these and drive growth? And should we expect lower net absolute cost in '26 versus '25 as a result?

Okay. Thank you. So our plan is one about efficiency, and that's really important. So what we've been doing is we've been driving efficiency in the plan in order to give us the capacity to invest in the businesses. And we gave ourselves a target at the beginning of 2024 of delivering GBP 2 billion of cost efficiency across the 3 years, and that was phased GBP 1 billion; GBP 500 million, GBP 500 million. So we delivered GBP 1 billion last year. We delivered at the half year this year, GBP 350 million of that GBP 500 million. So we're going in the right kind of clip, I would say, in order to reach our efficiency targets. And we're guiding to around 61% cost-income ratio this year. We're at 58% at the half year. So all so far, so good. What's driving that in the early part, it was about people, property infrastructure. Fundamentally, that is much easier to achieve than what we're now doing, which is why we phased it as we did.

So now we're really focused on what we would call customer journeys or client journeys, a bit like what I talked about in relation to the IB. So how does a process work straight through? That was a really good example in terms of the mortgage application process that I gave you before. That's the kind of thing that we're doing that takes cost out of the system, but actually, it leads to a better client result, which is really important. AI is part of that. And I would say probably becoming more so over time. And a really good example is that we've launched a Gen AI facility that allows the 16,000 people who are customer-facing in our U.K. retail businesses to access information very quickly, deal with those customers very robustly and quickly. That's, again, a better customer result and saves those colleagues considerable time.

So in terms of next year, you have to think about sort of the 3 big factors in the 2 years. So the first is the inflation. So inflation this year, we expect to be higher than next year. That's because it impacts us on a lagged basis. By the time inflation sort of flown through property costs and technology costs, it can be sort of 12 to 24 months lag. So we're really dealing with the peak of inflation now, but we expect that to fall in 2026, relatively speaking. Now then you have to think, well, I'm also -- my second factor, I'm driving the same level of efficiency in both years.

So actually, the net impact between efficiency and inflation in those 2 years is more positive in '26 than it is in '25. And then there's been a real step change in investment in '25 that I wouldn't expect to replicate in '26. And that's partly about Tesco because we're going through the really hard yards of integrating it right now. But it's also because we step changed our investment in the other businesses like Corporate and Private Banking and Wealth Management in the second half of '24. So we do expect cost to be at least stable, if not modestly down in '26 versus '25.

That's fantastic. And to bring everything together on returns on tangible equity, can we talk a bit about your ambitions there? Because you've been clear, you see momentum beyond 2026. So greater than 12% is clearly not the end point. Can you talk about the drivers that could result in an improved RoTE beyond the current plan? I promise I wasn't going to get ahead of myself.

Yes. So when we set out the plan, we gave you 3 years' worth of targets. but it was never supposed to be an endpoint. 2026 was only ever a step in the road. And what you should be seeing now is a pattern of results and a formula, if you like, which is very simple. So we're driving income and we're driving stability and quality of income because that sustainability point is really important. We're managing our costs very tightly and driving efficiency so we can invest in the businesses. And then we are allocating capital more towards our higher returning U.K. businesses. We will not stop that at the end of 2026. So if you're looking for what '27 and '28 will look like, it will be more of a continuation of what we are doing now. And I think it's clear to Venkat and I that putting external targets out there and speaking to investors with the sort of specificity that we did has been really helpful, both externally, I hope, but very much internally within the businesses. So it's not lost on us.

And so what we've said is that we will give new targets before these ones run out. So we expect them sometime in 2026. But in terms of the points of momentum, it's not just that formula, but specifics. We talked about the structural hedge. We talked about efficiency. In 2026, the Investment Bank and Barclays U.K., in particular, will not be where we want them to be. There is still more to go in efficiencies in those 2 businesses in particular. And then the last thing I would say is, again, that 50% capital allocated to the IB was again, never supposed to be an endpoint. So continue to expect us to want to disproportionately invest in the U.K.

That's great. And while we're on that topic, does that in any shape or form, depend on politics and autumn budget, et cetera, especially with regards to bank taxes. I think bank had said last week that you have options.

Well, I mean, there are always 3 parts to that sort of 50% target. Two of them are under our control, one less so. So what's under our control is holding the IB flat. The second one is investing in the U.K. businesses. Those are the 2 strategically really important parts of the plan. We feel like they're under control. We're on target. We expect to continue driving that. The piece which we are somewhat reliant on the external world is how the regulatory environment emerges. We've given some clarity around Basel 3.1 in the U.K., which is between GBP 3 billion and GBP 10 billion. And that doesn't relate to anything particular around FRTB. It's actually really around us being able to sort of finalize and run those models to see what the real business impacts are.

So we feel like that number is actually relatively modest and well contained. The piece that is somewhat reliant on timing is the implementation of the new cards model in the U.S. That could be in '26 or '27. And obviously, that will impact that 50% number. But what's really important here is the strategic intent around the IB, around the U.K. business and don't expect that to stop in 2026.

And while we're on that topic, can you comment a little bit more broadly on your expectations around the autumn budget? Clearly, you probably don't have any more information than we do at this point. But is there anything that you're concerned about, the things that you're looking out for bank taxes included in that?

Yes. So we don't have more information than you. All I can bring you back to is the intent of the U.K. government is for the U.K. to grow, to grow in the long term, underpinned by investment in productivity and in infrastructure. We feel as a banking industry that we play a large role in that. And particularly as the U.K.'s only investment bank, we feel we play a particularly large role in that investment for the future. The U.K. banks are already large taxpayers. We are amongst the highest taxpayers in the U.K. generally and have been for many, many years. It's not just about the levy or the surcharge, it's actually around irrecoverable VAT, et cetera. So our view is that further taxes would be somewhat inconsistent with our growth objective, but it remains the purview of the chancellor, and we need to wait till November.

Of course, let's all wait and see. So just maybe one more question before I open the floor up. On M&A, you've said that you are interested in acquisitions that can add capability and/or scale. Where do you think you would benefit most -- from more scale? And what sort of capability would you like to acquire?

So my start point would be that it's an organic plan. So when we set this plan out, we were really clear that it was Tesco plus organic in terms of our U.K. growth. And that's really where we're focused on in terms of that capital growth, as I've outlined. Actually, the 2 things that we have acquired gave us something slightly different. So Kensington was about capability. Tesco was mainly about scale and scale in unsecured lending. So where we to look at things, those are the things we would be looking for across our U.K. businesses. But our bar is very high. So it would have to deliver those. It would have to not distract us from our plan.

We are extremely execution focused. And then the third thing is that price is really important to us because really, what we're doing here is we're running a very strict capital hierarchy that, number one, goes regulatory capital, as you would expect it to; number two, shareholder distributions; number three, investment in our higher returning businesses. So we're really disciplined about it. To the extent that you see us doing anything in the future, it would have to hit those 3 things.

That's very clear. I will just take the opportunity to ask if anybody in the room wants to ask Anna a question. Well, if not, I've always got more as usual. I think the only business we haven't really got into a huge amount of details is the Private Bank and Wealth Management. It's actually been doing 20% to 30% returns on tangible equities in the last few quarters. How much do you think you can grow that business? And do you see more opportunities given the government's focus on retail investments?

Yes. So we call it one business. It's actually 3. So there's 3 within there. So if I start with our private bank, there, we do see some opportunities to grow. Think about what that private bank is. So it's U.K.-based and then it has a nexus into international areas, which really are corridors into the U.K. So Geneva, Monaco, Singapore, Dubai, India. So we do see opportunities to grow across that, and you'll see that we've now launched a new booking platform in Singapore that will help with that growth. But that's a largely mature business. The areas of more significant growth are really when we get into sort of wealth space or digital investing space. And we want to see more customers in the U.K. participate in capital markets. And even within our own U.K. business, there are 4 million customers who have, we believe, the propensity, if you like, to want to invest or the requirement to have some kind of investment advice.

So they are already within the confines of our business, even without going out to attract new customers. So we feel that we have them. The advice guidance boundary work that's been undertaken by the government and the regulator, we would very much welcome those 4 million customers in mind. And then the other staggering statistic is that our wealth team have done some work that would tell you that there's over GBP 600 billion currently sitting in savings in the U.K. across the market that would be better served within investments. So actually, this work that the government is doing in order to free up advice and make that advice simple and easy to access is super, super important for the U.K. consumer and ultimately, the health of the U.K. economy.

So we're very focused on that. We believe the right way to approach that market is digitally, self-serve where possible with simple products, fairly priced. So we're going through a process now of testing that proposition. Too early to give you any results, but that's really the opportunity for us to grow. So this business is growing really well so far. So Private Banking and Wealth has grown by about 11% across its client assets and liabilities. In the first half of the year, GBP 2 billion of net new money. But actually, the opportunity to lift that further in future years, probably beyond the life of this plan, we see as really significant.

Thank you. Any last minute questions for Anna? If not, then I think we can bring the session to a close. Thank you very much. I am very looking forward to the new targets.

Okay. Thank you. Thanks, Perlie. very much.

Good afternoon. I think I know most of you in the room. But for those that I don't, I'm Jason Goldberg, and I cover the U.S. large-cap bank stocks at Barclays. Thank you for attending our 23rd Annual Global Financial Services Conference. The feedback so far on the presentations and the meetings this morning have been terrific, and I'm sure the rest of the conference will measure up.

I am very excited to showcase Barclays at lunch again this year. You may recall last year, Barclays announced a new 3-year plan to create a simpler, better and more balanced company, aiming for stronger returns, greater shareholder distributions and operational excellence by having a simpler structure, better operation and financial performance and a more balanced businesses. Results so far have kind of lived up to that. They've kept pace with kind of strong financial targets they've laid out, and the stock market and my wife have certainly taken notice.

We're pleased to welcome Venkat and Anna back to the stage this year. Venkat has been Barclays Group Chief Executive since November 2021. Prior he was Head of Global Markets and Co-President of Barclays Bank and was Group Chief Risk Officer before that, while Anna has been Group Finance Director since April of 2022. So a perfect business mix, two perfect resumes to make for a fruitful lunch discussion today. So Venkat and Anna, thank you so much for joining us.

Thank you, Jason.

Maybe the best place to start, and I kind of touched on it in my opening remarks, was you presented a 3-year plan in the beginning of last year. We're through the first half results of 2025. Maybe just how do you feel about the progress so far? How confident are you in delivering your 2026 commitments? And maybe you can also just share some of your thoughts on what we can expect beyond 2026.

Yes, thank you. Well, first of all, thank you all of you for coming. I said it at the opening this morning, but we really value the franchise that Barclays has built overall, Jason, this 23rd year of the conference and for all of you who are clients of the bank for your partnership with Barclays. We don't take anything for granted, and we value your attendance, the time you're giving us and the engagement. This conference has done very well, but does very well because of your participation. So thank you.

Now I guess I need to answer your question. Well, look, I'm very, very pleased with the progress so far. And I look at it in two ways. First, there's the numbers. So we've had over the last 6 quarters since we announced the plan, but actually going before that, strong and improving financial performance. When we just -- we reported Q2, for instance, income was up 14%, PBT was up 28%, and earnings per share up 41% versus a year ago. We've had 8 quarters consecutively of tangible book value growth. We had, in that quarter, all five divisions of the bank producing double-digit RoTE. And we've announced since the start of this plan, GBP 1.4 billion worth of capital distributions, and a buyback that was 21% up year-on-year. All that's good, and that GBP 1.4 billion was as part of a GBP 3 billion total capital distribution over this 3-year plan.

So we're making progress on all the things we said we do. And of course, we are committed to delivering and confident in delivering our targets for next year through end of '26, which is a group RoTE of greater than 12%, distributions, as I said, of greater than GBP 10 billion. And the Investment Bank coming to about 50% of the group, right, circa around that. What that does is that it takes -- is changing the profit signature of the bank, right? We're getting more returns and more capital invested in the higher returning parts of our bank, which are in the U.K. So we said we'd allocate GBP 30 billion worth of RWAs to these parts of the bank in the U.K., our U.K. retail bank, our corporate bank, private banking and wealth.

We are at GBP 17 billion at the half year, so well on pace. And so while changing the mix, keeping RWAs in the IB stable. And by the way, they've been stable since around 2023, and getting more returns per unit of RWA from the IB, so greater capital efficiency. We've had a CAGR in the Investment Bank of around 9% since this plan began or actually for the last 3 years. So all that's going well. That's the numerical thought, right?

But then if you step back or I step back, what are we trying to do here? We are trying to create a bank that has great strategic focus, financial strength, management discipline, operational rigor, prudent risk management, ultimately to drive shareholder delivery, right? Each of these things is important when you run a bank. And when I think about it, one of the interesting things about the journey we've been on is that, of course, it forces you to do all the things I just said. But also you learn how to get better at it and you learn what the potential of the bank is, you learn how much more you can do. And to me, that's actually been in the last number of months, the interesting part of the journey, right?

And what we are working on now in our heads is to understand what that potential is to gauge it to estimate it and then to decide how we're going to deliver it and to target delivery. And so you can -- obviously, while we do that, we are going to give new financial targets before the current ones expire. But what you should hear from us is great confidence in achieving the current ones.

And if I can add a word or two because I do like to add. The word that I've been looking for is consistency because what's really important here is that we are delivering to the new profit signature that Venkat talked about, but we're doing it quarter in, quarter out. So one of the things that I look at is what's the trailing 12 months RoTE of the business. And when we started out on this plan, it was 10%, then it went 10.1%, 10.4%, 10.5%, 11%, and now we're at 11.1%. So this is about growing income, growing the stability of that income, holding the cost tightly and driving efficiency through the firm and managing risk well, as Venkat said, and letting that drop to the bottom line. And that is the pattern of delivery that you are seeing and you should expect to see beyond '26. Because it's been successful, clearly, we are going to continue that kind of formula.

There's a few things I'd call out, particularly the structural hedge. We talked about that, and I'm sure we'll go there again. But that structural hedge has considerable momentum even beyond '26 into '27. The kind of stability and growth that you can see in the IB and coming from the U.K. growth will continue. So as Venkat said, we will deliver you some new targets, but expect the pattern and formula of delivery to be very consistent with what we're currently doing.

Got it. So feel confident in greater than 12% RoTCE by 2026. And then come next year, we'll get something presumably that's above 12%, maybe approaching maybe somewhere the U.S. banks are approaching.

The CFO smiles, that's all I can say.

The CFO is thinking, please don't answer that question.

I actually noticed, I didn't.

That's informative. And I guess maybe shifting gears to the U.K., that's something that I was told to make sure to ask about. But we regularly hear reports of our U.K. businesses and households struggling about low growth and confidence. And also recent weeks, we've read about weakness in kind of long-dated gilts and about a report on a new bank tax. So it feels like it's kind of rhetoric to die down here and maybe picked up over there. So maybe just what do you think about the U.K.'s economic prospects and gilt yields? Are you worried about these new bank taxes? And how does it affect kind of plans to growing in the U.K.? And are you able and willing to deploy -- you talked about that GBP 30 billion in risk-weighted assets. Just how you're thinking about that?

Yes. So I mean, look, this is a rich set of questions. So I'll give a bunch of quick answer, and then I'll elaborate, if I may. So first of all, on yields. Look, U.K. yields have basically moved with global yields just with a higher beta. This is largely technical. It's not a fundamental issue yet, in my opinion. And the fundamental issue in the U.K. is growth. The government has this absolutely front of mind, and I'm confident that they are up to the challenge and going to put in place the policies -- are putting in place the policies to drive that higher growth. Obviously, that is a challenging task because you're going to have to make decisions about investment, spending taxation.

One part of that taxation that you've heard about is bank taxes. I think additional bank taxes in the U.K., where U.K. banks are subject to some of the highest taxes in the world, additional bank taxes are not a good idea in any way, shape or form. And that -- if I can be clear. And I think it's not a path to higher growth in the U.K., right? And I think most economists would agree. But net-net, we are extremely confident in the U.K. We are committed to that extra GBP 30 billion of RWA deployment. As I said, we are well beyond halfway at GBP 17 billion. And we expect that as our home market to be central and a growing central part of the bank.

Now let me elaborate. First of all, on yields. U.K. yields, as I've said, are basically long-dated gilts is what people focus on, have been moving along with the broader market, but moving with a higher beta, a beta of about 1.5-ish. In fact, if you look at the last 3 days, and I'm going to get the numbers approximately right, maybe approximately wrong. But in the last 3 to 4 days, including today, 30-year gilts have rallied -- I mean, U.S. treasuries, 30-year treasuries have rallied by around 25 basis points and gilts have rallied by around 40-ish basis points.

There was news in the U.S. There was nonfarm payrolls on Friday. There's been essentially no news from the U.K., right? And if you look at it day by day, roughly that's what's happening. That's technical. Now why does it go with a higher beta? And I'm sorry, Jason, I'm an old bond geek, so you'll forgive this answer. Why does it go with a higher beta? Growth with a higher beta for a couple of reasons. One, advantages from the U.K. is they've got a deep liquid market for gilts. It's actually a longer maturity profile market. The average maturity of the U.K. bond market, the gilt market in issuance is around 15 years. It's about 7 years for the U.S. So because of that, there is a larger volume at the longer end. And the U.K. has had a weaker fiscal profile, which I'll come to in a second.

So it allows it to be, if you like, the choice of medium in which to express the trade. But these are all technical issues, right? The fundamental issue is growth on which I'm optimistic. And by the way, on the technical side, just to stay there for a second, the U.K. has options because it is a very transparent, liquid, well-governed interest rate market and gilt market with a strong pattern of issuance, you can -- they can control the issuance. They can make the issuance more short dated. They've already got a longer profile. And look, as you can imagine, Barclays plays a very large role in U.K. government bond issuance and gilt issuance.

There was an auction last week, 10 years, I think it was GBP 4 billion or so, 10x oversubscribed. And so there's strong institutional demand for gilts, right? So I think there are means. It's been operating with a higher beta, but I view it as technical and being sympathetic with global market yields. So then you come to the fundamental question. And the fundamental question is how is the U.K. economy doing? And the U.K. economy, what I would say, has had higher inflation, right, stubbornly, 4% versus 2% elsewhere. On-trend growth at around 1%. That 1% should be higher. And reasonable wage growth and wage inflation, which is double-edged. So that part of the U.K. is, I think, basically fine. And what the government has to do is to increase that growth number from 1% to something higher. And I think that comes from deep structural change in the economy, from investments in the right forms of the sectors. It's front and center for them, and I'm confident that they're going to put in the necessary mechanisms to get that growth.

Now as I said, it involves hard choices, right? It involves choices of spending, choices of taxation, choices of where to make the investments. And we have to watch that, but this government has 4 years left. And when you think about it, one of the choices was, as we said, bank taxes. But U.K. banks pay approximately 48% tax rates versus 28-ish percent in the U.S. and I think the highest in the EU is 39%. So we can say hand to heart, we gave at the office. And additional bank taxes would be damaging to the economy as a whole and damaging to an important sector of the economy, which has about 10% of all employment.

And lastly, I would say, of the top 7 taxpayers in the U.K., the banks are the top 4, Barclays being one of them. So I think the route to this growth is through investment, through appropriate forms of spending and taxation, but not through bank taxes. Net-net, we are very confident in the right answer. We are very confident we'll get it. We are confident we'll get the growth, and we continue to be invested in the U.K. in a big way. We have choices, of course, as a multinational bank, choice we make.

And I think the U.K. consumer, the U.K. corporate has been incredibly resilient, whether it's post Brexit, all the way through COVID, out of that into the affordability difficulties that we've seen very, very consistent performance. And actually, we see good opportunities to grow. You can see that in our numbers. We've had 4 consecutive quarters of mortgage growth. And actually, what we're doing now is we're able to deploy the Kensington brand into our overall mortgage portfolio, and that's allowed us to put a lot more products out there, much more breadth. The Kensington product range has a margin, which is about 4x higher than the equivalent Barclays product.

In cards, we are generating very, very good acquisition volumes. So the demand is there. And of course, again, the brand matters. Because remember, Barclays until very recently was a single brand entity as it came to retail in the U.K. Now in mortgages, you've got Barclays and Kensington. And when it comes to cards, we've got Barclaycard, we've got Tesco, we've got Amazon, we've got Avios. So it really allows us to go to market. So we've originated 1.6 million new card customers since the beginning of the plan.

And actually, corporate growth, which you might expect to be one of the weaker areas given some of the economic backdrop that Venkat talked about, has been very resilient. So we've now seen 3 quarters of consecutive corporate growth. Because the areas that we set out to grow in the plan were areas where either we under-indexed in mortgage in market share or areas where we ceded market share over time. So we've got opportunities to grow. We're using those new brands and the new digital capabilities. And as Venkat said, we've delivered GBP 17 billion at the halfway mark. We're running at a little over GBP 2 billion per quarter, and we've got 6 quarters to go. That's why we're confident. And if anything, the momentum is picking up.

Maybe shifting gears. There's been speculation in the press that Barclays is considering M&A activity in the U.K. Maybe just talk to your philosophy around acquisitions. How does that tally versus your comments that you want to operate in the upper end of the 13% to 14% CET1 target and your commitment to return GBP 10 billion to shareholders.

Yes. So I spoke in the beginning about the importance of shareholder delivery. And one of the things we said was when we laid out this plan, what is the importance and the way in which we look at the capitalization of the bank. So number one, we want to be a well-capitalized institution. Number two, we've put our shareholder return priorities come next. And then number three, subject to that, we look at investment in organic or otherwise. Our plan is an organic plan, right? We've made a couple of inorganic acquisitions in the past. Anna mentioned Kensington, a mortgage company. And then we did Tesco, which is a bank, more credit card oriented.

Now when it comes to inorganic, as I said, that's not plan A. But we would always look to try to get three things. One is either get scale or capability -- and/or capability and at a good price. we would do something if it met all three criteria, right, scale, capability and a good price, and, of course, fit into the overall capital hierarchy. We've not seen anything yet that has.

Fair. I guess, Anna, you mentioned before structural hedge. Net interest income is certainly a part of the story, and we've had kind of an evolving interest rate backdrop now kind of falling, I guess, in the U.K. Maybe just talk to -- you mentioned material tailwinds from structural hedge. I'm not sure everyone in the audience actually knows what structural hedge actually means. Maybe just expand on that a little bit and just talk about how that kind of drives NII.

Do you want to start with -- I'll hand the ex-CRO to start the conversation.

So I have to tell you, when I joined Barclays 9 years ago, having spent my life in the U.S. banking system, and I was told about the structural hedge. I thought it was something from the moon. And I then had to get my head around it for -- it took me a while. And I will say to you that now I've become converted and I have the zeal of a convert, which is that I think it is a very good way to manage interest rate risk in the banking book. What it basically does is that it -- you obviously have a deposit base. And what you do is after you hedge out all your products and your assets, you buy interest rate swaps. We do it with a roughly 5-year maturity, but on a ladder, so it keeps rolling down to get a higher yield, right?

So what you're trying to preserve is a relative constancy of the yield through the interest rate cycle. So your option is to be entirely floating or your option is to do this. If you get this right, what happens is you get a more stable net interest income profile or even a NIM profile over time. What you give up is that when rates rise, your number rises more slowly. And when rates fall, your number falls more slowly. So you lag in a rate rise and you lag again in a rate decline, but you do outperformance.

It actually works well both from a predictability of earnings and income and from managing interest rate risk in the banking book because it forces you to ask exactly deep questions about what you think about your deposit base, the stability of your deposit base and how much you're going to do this. So those of you who find this unfamiliar and look at other banks, I suggest taking a look at this, it's actually very instructive. With that, Anna?

So we are in that position at the moment where we're seeing continued momentum just because the maturing yield on those swaps that are coming up now is below the yield at which we will refix them in the market. That's what's happening. So the maturing yield over this year and next is around 1.5%. And even in 2027, it's 2.1%. So that means that the pickup in the current interest rate environment with each passing month as we roll a bit more of this hedge every single month is very predictable. We've actually locked in 80% of the structural hedge income for 2026 even now. And as we look ahead into '27, '28 and beyond, it gives us a really good framework, really good picture about what we expect our net interest income to do.

And what's really important for us as we think about the next stage of our plan is what happens beyond that, which is why we're very focused on lending because clearly, we want a strong lending portfolio so that inevitably, when the rate cycle does turn, what's turning now, but the structural hedge starts to catch up with that. Actually, what we've got is growing net interest income coming from the asset side of the book. But for now and actually for the reasonable future, certainly through this plan and the next, we should expect to see that considerable momentum.

And maybe kind of turn to this side of the pond. On the consumer front, can you just talk to are you seeing any signs of deteriorating in the economy or signs of stress in your book? We got a nonfarm payrolls number last Friday that some people took exception to. Any thoughts you may have?

It's a bit like the U.K. The performance is very, very resilient. So if you start at the macro level for the U.S. consumer, cash deposit levels remain very high, real wage growth remains very robust. The degree of kind of unsecured leverage in each household is much, much lower than it has been historically. So even though there are, if you like, some macroeconomic signs, that is not translating through into consumer behavior as we see it. And in fact, consumers have continued to perform really well in our U.S. cards book.

Remember that our FICO score is relatively high. So our average FICO is over 750. Around 12% of the book is less than 660. So it's actually quite a tight distribution, if you like. And about 40% of the book is over 760. So we are tending towards a sort of prime, super prime base. But delinquencies have been very stable. And in fact, in the second quarter, they performed really well, fell quarter-on-quarter as you would expect them to seasonally, but actually were better year-on-year even at the lower risk cohorts, which is good to see. So overall, we don't see any signs of stress in the U.S. portfolio. It's very robust.

Can I just add something you didn't ask about the U.K., but let me talk a little about it. We get through our payments business, we see about 1/3 of all payments that go through the U.K. And one of the fascinating things which we do internally is we look at the growth of spending through this payments book and compare it to inflation. And in the last 3 years, what I've seen over and over, month after month is whatever the trailing 12-month public inflation number was, the growth of spending in our book is about half of that, give or take. So if inflation was post-COVID highs, 8% or 9%, plus 4.5%, if it's 4%, it's 2%. If it's 2%, it's 1%, if it's 1%, it's 0-ish.

Now that lower growth comes from people economizing. So spending less, spending more carefully, meaning at going down in quality, going down in size, going down in something else, and then shifting between discretionary and nondiscretionary. That's great for the credit portfolio, right? It's great for impairments in the bank. What it's not so good for is ultimate economic growth because spending is a part of that. And I think it gives you a clue to what the U.K. has to do because people have to have confidence in their jobs and confidence in wage growth in order to spend more. So it's a good credit story, but it's part of what has to change ultimately.

Helpful. Now this question is not my question, it's from investors. I'll preface it. But they do ask about the U.S. Consumer Bank and kind of what does it bring to Barclays? And quite frankly, is Barclays the best owner of it? And I guess linked to this, you stated to deliver improved returns in this division, but it's still below that kind of 12% number we talked about earlier. What, I guess, gives you confidence you can deliver that and then even higher returns looking out?

So maybe, Anna, I'll start. Yes. So let me say that the U.S. Consumer Bank is an important and fundamental part of Barclays. What does it bring to us? It brings us many, many important attributes. But just a couple. First, it brings you diversification on its own. right? Because it is a component, it's about 7% of the capital of the bank. So it's a big part of the non-investment bank portion of the bank. As you know, we are trying to keep the Investment Bank stable in RWAs and grow the rest so that the Investment Bank becomes proportionately a smaller part of the bank, and the consumer bank at 7% is an important contributor to that.

Second, it fulfills a really important need for our corporate clients. Just a couple of weeks ago, we onboarded the credit card portfolio of General Motors, right, 2 million customers. And this co-branded proposition which we have represents a really important part of the overall U.S. cards market. And in fact, I think there was an article yesterday in The Wall Street Journal talking about the importance of credit cards to airlines. And if you then extrapolate 35% of the U.S. credit card market is co-branded. And that means people who -- companies which want to operate credit unsecured debt and lending in their name, not in the name of the bank, right? For us, our strategy in the U.S. is not a brand-led strategy. So this fits perfectly with us. It's good for us and it's good for the customer because we are not competing on our brand.

Third, for us, we've got through this 20-odd million customers in the U.S., $30 billion in balances. Now it's not the biggest player, but in this space, it's an important player. And it gives us access to the largest, most sophisticated consumer market in the world and allows us to be a very important player in unsecured debt in this market, right? And we've developed -- with these strategic advantages, we are developing and have developed the full suite of consumer tools, including a very good online banking app, which gives you very good rates, I might add.

So we're a strong operator in this space. We've got 20-plus years of experience. Now you would accept all of this if you thought this is great, and then is it profitable as well. And we are moving quickly towards that target level of profitability of 12-odd percent. The long-term RoTE of this business, we think, can be what it was before, which is greater than 14%. We expect to make our target RoTE of 12% in 2026, greater than 12%. And we are doing this through greater digital execution, better digital execution, more retail deposits, cheaper deposit funding and managing the entire operational cost of this business.

One of the questions we get asked is, well, are you the best holder because your capital cost as a U.K. bank under U.K. regulations may be higher than what a U.S. bank does. That is true. And if that's the only measure at which you looked at, you might wonder. But for us, remember, part of that capital cost goes into RoTE, but there is diversification, which somebody once said is the greatest freelance in the financial markets. And that diversification for us is important, both for our U.S. business and for the business overall.

So you take all of that together, the value we bring to our corporate customers, our competitive advantage in it, the place in which we play, co-branded, right, the right sizes of that portfolio, the enormous customer reach, our operational scale, efficiency and capability and the fact that we can run it profitably, it's good for us, it's good for our clients, it's an important part of our strategy.

Yes. I mean, just to add a few. This is a business that previously was subsumed within a much broader part of the bank. It was part of a broader division. And we exposed it as part of our strategy last February. And in so doing, we've been really transparent both about its existing level of returns, which needed some improvement and the path to get there. And that should tell you something about the confidence that we have in being able to execute against that. But it is a plan of many parts. I mean, as we looked at this business versus its competitor set, it felt to us that work needed to be done around the optimization of pricing. That was done last year. You can start to see it now flowing through into the NIM.

Actually, our funding costs were relatively high relative to our peers. What we've done now is we are growing more strongly the retail deposits that we're getting in the Delaware business. They're up by nearly 30% year-on-year. That allows us to fund this business much more economically. Again, that's flowing into the NIM. As Venkat said, actually, in terms of a digital business, the sort of operational handling was much lower than we would have seen in our other retail businesses across the globe. So we've really developed that in terms of not only digital onboarding of customers, but the way they can then interact with us subsequently. And as Venkat called out, the integration of the GM portfolio over the last month or so has been very successful, digitally achieved. So that also helps us to take down that cost-income ratio. The cost/income ratio is now sub-50%, and we want to get it to mid-40s. We think that's the right sort of level here.

And then the final thing I would say is this capital efficiency part of the business. Credit cards are, by definition, capital-hungry businesses. So how do you optimize that within the U.S. environment? So we did a transaction last year with Blackstone, which is very successful, allowed us to risk transfer the assets from the portfolio. And actually, that's given us a good blend of servicing income, which is noninterest income. Clearly, we give up the NII. But as RoTE matter, it's actually enhancing to the business. So expect us to continue to pursue that kind of strategy, too. But ultimately, we're confident that we're making steps, and you can see the RoTE climbing quarter after quarter.

If I may, Jason, and this is purely in the spirit of scientific inquiry. One of the things I do, do is I collect bank accounts and credit cards, just to see the user experience, how easy is it to get yourself on board and so on. And I recommend you do. Get yourself a bank account at Barclays Bank in the U.S. on the app or go and get one of our partnership co-brand cards and see how easy it is or not and form your judgment. I think you'll find it good and easy.

Maybe shifting gears to the Investment Bank. Over the last 18 months, we've seen 9% CAGR revenue growth, costs and capital very controlled, as you said. Markets, if you noticed has been particularly strong this year. Maybe just talk to how sustainable is this? And just how do you think about managing the cyclicality in this business?

Yes. So at a macro level, the importance of the Investment Bank to Barclays, obviously, it's a big part of Barclays and of the U.S. cards business, is that through these two vehicles, we get a great access and great part of our business in the United States, which is still the dominant financial economy in the world, the dominant economy in the world, the dominant tech economy in the world and the highest growth in the world of the major economy. So it's really important as part of the multinational or the global bank, which we are, that while we are U.K. domiciled, a good 40-ish percent, give or take, depending on currency and market levels of our revenues come from the U.S.

The Investment Bank itself, I think of from both a structural point of view and a cyclical point of view. On the market side, structurally, right, we've said that we wanted growth in certain segmented areas. We said it was in European rate, in derivatives and securitized products. And we've seen market share growth in both FICC and in equities. And you saw that last quarter, and we've seen it even before that. Financing, which we call a ballast as a percentage of markets revenues has been growing, right? And I strongly feel it's a great business. We think we're very good at it. You manage the risks well, and it can be a very stable source of growth. And for us, it's stable because we do well both in fixed income and in equities. So when one part of the market is doing well, we continue sustaining the other part and vice versa.

The most important thing is broadening and deepening our relationship with our clients. And one of the statistics we said in markets was we want to have the top 5 rank. We're #6 on average with the top 100 markets clients in the Barclays book. That was around 50. Now it's about 60, and it's on track to 70 by the year of next year. So increasing market share, increasing presence with our largest clients.

On the investment banking side, you sort of see a similar picture. One is we laid out returns per unit for RWA, the capital efficiency, which we've achieved, in fact, overachieved in the Investment Bank. We've also said that we have an important role in growing our transaction bank or our corporate bank, and that's been happening. And think of that corporate bank as providing a similar ballast to banking as financing does to markets, right? It is, again, engaging in transaction relationships with a relatively high RoTE with customers that are stable on an ongoing basis and allow you to have cyclical part.

Now on the cyclical part, we manage the cyclicality in two ways. One, which you've already got the drift of, which is reducing the relative size of the cyclicality, right, by increasing the relative size of the noncyclical part. That's financing growing up and the consumer -- and the corporate bank in banking growing up. And then the second part is managing the risk of the cyclicality better and increasing skill sets and then better return per unit risk, better return per unit RWA. So that's how we think we've been able to get this strategy to produce stronger results in the last 6 quarters, getting that 9% CAGR. I think there's more to go. I think there's more efficiency. I think there's more growth. I think -- and there's more deepening of relationships with clients.

And again, coming back to sampling, those of you here are obviously working with our Investment Bank, and you can judge yourself how much we are doing to make that relationship with you better and how much we are investing in it.

And I think you have to do all of that whilst you are maintaining really, really good discipline in costs. And one of the things that we said when we set out our strategy at the beginning was we had invested in the Investment Bank over a period of 2 to 3 years running up to February 2024, and now was the time that we started to monetize that investment. So what you're seeing coming through now is several successive quarters of positive jaws. That's a really important part of this formula.

And then similarly, Venkat talked about the RWA discipline. I think the other thing that you see is the nimbleness of that RWA deployment across the entirety of the IB. We do think of it as one business. Clearly, banking and markets have different opportunities at different times. So you've seen that come through over the last few quarters. And then the last thing, as Venkat said, running risk well.

One of the things that we've been reporting over the last couple of quarters is the VaR, particularly in the markets business. And you can see that, that VaR, if anything, on an average basis has been coming down. So we're generating these results by managing our risk well. And in the second quarter, I think we had 2 loss days, which I think given the volatility through the quarter compares really well to our peers. So again, a plan of many parts.

I'll get in trouble if I don't ask you this, but I appreciate that we don't give intra-quarter guidance, other people don't. But maybe just give us some color in terms of what activity in the investment banking you're seeing so far this quarter.

Look, I think right now, this period, especially coming into the later part of the summer, has seen a pickup in activity. You can see it in the broad numbers that are being published in Dealogic and other places. So volumes have gone up in the market. And so we think it's coming from a relative stability in the macroeconomic situation, especially on tariff land, things seem to have calmed down a bit. Companies -- smaller companies have been spending more time taking decisions. We see that in the corporate world. But the larger companies are using this pause, using this opportunity to deal aggressively with questions about efficiency, questions about broader productivity, market footprint. So activity has picked up, and we expect it will remain sustained through this quarter and the next quarter.

Maybe shifting gears to the expense side, listening to earnings calls and like there's definitely some importance on cost discipline, and we've certainly seen improvement in the efficiency ratio. Maybe just talk to kind of what areas of focus are here in particular? And just what role AI kind of plays into changing the banking industry and improving productivity.

Shall I start and then hand? I mean, clearly, cost is the thing that you can control most as a management team. So for Venkat and myself and the rest of the ExCo and all the way through management, one of the things that we are very focused on. And it's not just about the financial consequences on the cost line, but we really think about this as efficiency because the other way of thinking about this is client time, it's customer time. So the better your operational processes are, the lower the cost, but the better that client experience is. So that's really how we think about it.

So if you remember this year, we're targeting a cost/income ratio of around 61%. We are at 58% at the first half. So we feel like we're on track. We've delivered GBP 350 million of this year's GBP 500 million cost savings. And that means that we now deliver GBP 1.35 billion of the GBP 2 billion that we said we would over the 3-year period. But expect us to keep going. We're very focused on not just modernizing technology, which I know Venkat will talk about, but also about streamlining our processes, really taking a customer or client lens end-to-end rather than thinking about the organization as a series of silos.

And 2026 is only a point in time. We do see that particularly in the Investment Bank and in Barclays U.K., which is our U.K. retail business. Even in 2026, given the targets that we've given you, the businesses will still not be where we want them to be. And they, in particular, will have more room to run beyond that stage.

Venkat, do you want to talk about AI?

Yes. Look, AI is a great opportunity. It's also something that you have to go through very carefully in order to get the value out of that opportunity. So simpler forms of AI, known Agentic, but more machine learning tools and so on, have been part of the bank toolkit for a long, long time, whether it's in fraud detection or types of risk management. What the new generation of AI or Agentic AI allows you to do is, of course, do much more front-footed service of your customers and of solving problems and helping deliver products. We've been embarked on a range of very important initiatives within the bank. One of the most important is we developed a Gen AI tool to help about 16,000 of our customer service and customer-facing people, especially in the retail parts of our business, deal with customer queries in a much faster way.

We're at the early stages of getting the benefits of it, and I think there's more to come. And then in Global Markets, we've started employing bots, if you'd like, to offer responses to customers, which happens sometimes 2 to 3x the speed of normal customer queries. And then we've got, at the ground level, giving the capability to all of our colleagues, hackathons to identify ways in which you can improve the running of this bank, small and large.

At the same time, what this gives us is the opportunity fundamentally to look at making the large technology investments in the bank consistent on common platforms and on next-generation platforms. And then, of course, there's all the stuff you read about trying to make code development faster, try to make even the technology delivery faster. So we are at the early stages. There's a lot more to be done, but we are deeply, deeply committed to it. And as a bank, you can revolve around the access of products, you revolve around the access of customers. Increasingly, we've got to revolve around the access of technology and AI.

I guess maybe shifting gears. We heard this morning from Comptroller of the Currency, Jonathan Gould, about just kind of what's going on in the U.S. regulatory landscape. And it seems a lot of movement, kind of the pendulum swinging back. U.K. has made some headlines as well. Maybe just talk to the opportunities and risks for Barclays and maybe kind of what would you like to see?

Yes. I think the most important thing for any global bank is to have relative consistency in the regulatory approach across the countries in which you operate, and relatively fair and standardized treatment of your exposures between home country and host country. That's the thing which we want. You'll never really get perfection in it, but you've got to move a lot closer than where we are. So in the U.K., we welcome what the FPC is doing on its review of prudential regulation, that's the Financial Policy Committee of the Bank of England. And for the Bank of England as they have in their mandate and they said they'll do to support both competitiveness and regulatory stability, financial stability.

And look, we need to get to the end of Basel 3.1 ultimately, and we need it to be standardized, and we need total capital requirements to be roughly the same, which means capital plus stress testing plus any add-ons. And we need this roughly to be similar between home and host countries. So I hope that we get there in the next couple of years.

Got it. I don't know if there's any questions from the audience, we have a little bit of time. I guess while they're thinking, I'll go one more. But Barclays is obviously a global bank. Economic performance globally is diverging. Obviously, geopolitical risks are increasing. Maybe just talk to, does it help Barclays, hurt Barclays. Just how do you think about that?

Yes. I mean, look, we are a global bank. We've got two big centers of our activities. One is in the U.S., the other is in the U.K., but a strong presence in Europe and a presence around the world in the Middle East and India, Singapore, Hong Kong, Tokyo. These are the important centers through which we are in the North America. We are here, of course, in the United States and as well as Mexico and Canada. And it's important for us to, as I said, one is have a relatively harmonious regulatory relationship among all of these. I think geopolitical risks have obviously increased. It means that risk management is more important, where you select your customers from is more important and where you -- how you operate and where you operate is important.

The U.S. remains the generating force in the financial markets, the important force of economic growth. And we're very pleased with the great exposure, which we have here. That's what makes us, I think, many different -- very different from many European domiciled banks. And when you look at us, and I've said it when I've spoken about the cards business, when I spoke about the Investment Bank, that is what is unique about us and I think compelling about us.

But having said that, while these geopolitical differences happen, it's important that in the two home markets in which we are, those differences do not come into play. And I've been very happy with the speed and the pace with which the U.K. has reached its tariff agreements with the U.S. It was very early and that President Trump will be in the U.K. next week as part of a state visit, continuing to deepen those economic ties. Many of you, I'm sure, spend your time between London and New York and you know relatively how seamless it is.

Questions from the audience?

Yes. I wonder if I could get your thoughts, all the publicity about blockchains and stablecoins and that it seems to offer in addition to opportunities, particularly for retail to greatly simplify international transactions. My experience as a customer in the U.K. some period ago was that transactions in the U.K. would put the U.S. banks I dealt with to shame. Transactions outside the U.K. were, a, expensive; b, complex and whereas my U.S. credit card could be used in Europe without incurring a surcharge, my Barclays card could not -- U.K. Barclays card could not be. Are there opportunities or a focus on introducing more international products to the U.K. domestic retail base?

Yes. I'll start and maybe Anna should step in as well. First of all, we do have cards that allow you -- Barclays cards in the U.K., which allow you to spend overseas without some of those charges. Of course, not every card does that, but some cards do. But I take the basic point that you're making correctly, which is I think domestic transactions in the U.K. are extremely quick, extremely sophisticated. And the apps, including our own function very well and allow customers to do most of the things they want. I think there is a role, obviously, for some of these newer technologies when it comes to payments internationally or between different countries sort of outside the mainstream Western European or U.S. economies.

For a large bank, one of the important things is that we do this in a compliant way with people whom we know are qualified to bank with us and to receive monies from us. So the KYC and AML and fincrime elements of that are extremely important. We think over time, we will adopt these technologies, but we've just got to be careful about how we do it. Anna?

Yes. I mean there's a group of U.K. banks who are coming together. Our own CEO of the U.K. bank is sort of heading up that effort really to look at how this technology can be deployed not just into retail banking, but also into corporate banking. But it does feel like we should be talking to you about an Avios card. So we'll catch you on the way out.

You'll get British Airways mouth.

Great. On that note, please join me in thanking Venkat and Anna for their time today.

Thank you.

Welcome to Barclays Half Year 2025 Fixed Income Conference Call. I will now hand over to Anna Cross, Group Finance Director; and Dan Fairclough, Group Treasurer.

Good afternoon, and welcome to the Half 1 2025 Fixed Income Investor Call. I'm joined by Dan Fairclough, our Group Treasurer.

Let me begin with a brief overview of our financial performance. These results marked the midpoint of our 3-year plan to deliver a better run, more strongly performing and higher returning Barclays. I am pleased with the group's operational and financial progress so far.

Return on tangible equity was 13.2% in the first half of the year and 12.3% in the quarter. Total income grew 14% year-on-year to GBP 7.2 billion, while costs grew by 5%, supporting a 4 percentage point improvement in our cost/income ratio to 59%. By design, our plan is delivering operational improvements across each of our divisions to drive structurally higher and more consistent group returns in 2026 and beyond.

All divisions generated a double-digit RoTE in Q2. This included a 2.6 percentage point year-on-year improvement in the Investment Bank's RoTE to 12.2% and a 1 percentage point improvement in the U.S. Consumer Bank to 10.2%.

Our 3-year plan set out in February 2024 outlined a road map to produce higher and more balanced returns. And I would stress that our 2026 targets were never intended to be a resting place and do not represent the extent of our ambition. We are executing against our plan, as we said we would. And momentum that we are seeing across the group positions us well to deliver our RoTE guidance and targets by continuing to drive income growth, operating leverage and business mix changes.

Since 2023, we have deployed GBP 17 billion of business growth RWAs into Barclays UK, the U.K. Corporate Bank and Private Bank and Wealth Management. This includes GBP 10 billion from organic growth. This organic progress and the acquisition of Tesco Bank mean that we have now deployed more than half of the planned GBP 30 billion by 2026. Within the Investment Bank, we have intentionally kept RWAs broadly stable for 3.5 years to drive optimization and productivity, and to ensure that the division is a consistent source of capital generation for the group which has not always been the case.

Stable income streams now account for 40% of the investment bank's income in the past year, up from 29% in 2021. In addition, progress has been delivered alongside prudently managed risk reflected in stable VaR. By continuing to execute our plan, we will produce structurally higher and more consistent returns supported by our diversified business model.

As debt investors, I appreciate credit quality is a key focus area. So I will cover this topic in more detail on the next slide.

The Q2 group impairment charge of GBP 469 million equated to a loan loss rate of 44 basis points. The U.K. credit picture remains benign with low and stable delinquencies in our consumer books and wholesale loan loss rates below our through-the-cycle expectations. The Barclays UK charge was GBP 79 million in Q2, resulting in a loan loss rate of 14 basis points. The improvement versus Q1 reflected a release of credit card provisions and diminishing post-acquisition stage migration effects for Tesco Bank balances.

The US Consumer Bank charge of GBP 312 million was stable year-on-year and down 22% versus last quarter. Consumer behavior remains resilient with payment rates in our book above pre-COVID levels and consistent with Q1 and a stable mix of new account acquisitions as can be seen on Slide 23 in the appendix. This is reflected in stable 90-day delinquencies and 30-day delinquencies, which fell 20 basis points versus Q1 to 2.8%, consistent with normal seasonal trends.

Looking forward, the acquisition of General Motors card balances is expected to lead to a circa GBP 100 million day 1 charge in Q3 and a post acquisition stage migration charge of circa GBP 50 million for the next few quarters from Q4. Including this charge, we continue to expect a group loan loss rate within the through-the-cycle guidance of 50 to 60 basis points for full year 2025.

I'll now hand over to Dan for the highlights.

Thanks, Anna. Let me begin first with capital on Slide 7. We ended with a CET1 ratio of 14% or 13.7% adjusted for the announced H1 buyback. This is in line with our guidance that we expect to operate towards the upper half of our 13% to 14% target range. This is a deliberate consequence of the strategy, which was designed to drive higher and more consistent returns and improved capital generation.

We generated 100 basis points of capital from attributable profits in H1 and expect around 170 basis points this year aligned to our circa 11% RoTE guidance versus around 150 basis points in 2024. Looking ahead, we note the recent PRA publications on Basel 3.1. We remain confident in our existing guidance of GBP 3 billion to GBP 10 billion of RWA inflation from Basel 3.1.

Although we are still working through the details regarding the option to delay implementation of the model aspect of FRTB, some elements of the PRA proposals have increased our confidence in this range. For the avoidance of doubt, the range itself reflects fine-tuning of implementation and potential business responses to provide mitigation. It is not specifically related to the FRTB rule set.

In addition, I would note that the proposals do not deal with the divergent international position, which is a principle that we will continue to engage with regulators on. As previously noted, we expect some offset in Pillar 2A. We are still awaiting further guidance in this area, which is an important element of the final impact.

On the topic of Basel 3.1, we note that European banks have recently provided detail on the effect of the output floor, which for Barclays is not expected to be binding at any point. This reflects our business mix and applies both the group and the ring-fence level.

Moving up the capital stack on Slide 8, we show our Tier 1 and total capital requirements as a proportion of RWAs. We continue to target a prudent buffer against each of these requirements, which helps us manage any RWA and FX movements as well as our issuance and redemption profiles. Our Tier 1 ratio is 17.8% with a healthy headroom above our 14.6% regulatory requirement. Within this ratio, we had an AT1 component of 3.8%. We continue to operate with high levels of AT1 versus Tier 2. This reflects AT1's contribution to a number of regulatory metrics, specifically Tier 1, total capital, MREL and leverage requirements. As a result, AT1 supports the deployment of leveraged balance sheet into liquid areas such as financing within the investment bank, which generates returns significantly in excess of the cost differential between AT1 and Tier 2. Clearly, our regular core and issuance schedule provides the opportunity to adjust this, if required.

In line with previous guidance, we expect AT1 issuance and redemptions to be broadly balanced over time. For 2025, we've so far issued GBP 2.2 billion equivalent of AT1 against up to GBP 3.1 billion of potential call decisions.

Turning now to Slide 9. Our MREL ratio was 35.4% as of H1. We are pleased with the progress made against our GBP 14 billion issuance plan, which is now over 70% complete. Following this, we may look at some prefunding subject to market conditions. We continue to seek MREL currency diversification where it makes sense. For example, during H1, we successfully issued a AUD 1 billion offering and our first offshore Chinese renminbi private placements.

We have also been proactive and thoughtful in extending our weighted average life at historically tight spreads when compared to long-run averages. This can be helpful in reducing our overall sensitivity to spreads and annual issuance requirements.

Finally, a brief word on our legacy capital. We have made continued progress on redeeming legacy instruments such as the call of the euro preference share announced in May. We remain comfortable with our residual position, which is now less than GBP 1 billion, representing a very small amount when compared to our overall capital stack. The largest position within this is our U.S. dollar preference share where we do not have an initial call until 2034. Given this, you should not expect to hear much more from us on legacy capital.

On to the next slide on liquidity. Our average LCR of 178% represents GBP 135 billion in excess of our regulatory requirements and includes the initial effect of methodology changes introduced in June. The average net stable funding ratio was 136%, and the loan-to-deposit ratio was 74%, both demonstrating a continued robust liquidity position. To give a bit more detail on the revised methodology for the LCR, we're making changes to the way we measure outflows from our secured financing activities. These changes result in a higher and more conservative net outflow calculation from modeling a more asymmetric unwind of client activity, which we have not observed in actual client behavior. As this is being implemented prospectively in our reporting, we expect a reduction in our average LCR ratio over time from current levels, which have grown over recent years.

Although these changes will utilize some of the group's surplus funding position, we expect the LCR to remain broadly within levels reported in recent years, as shown on the slide back to 2022. We will continue to hold a liquidity surplus well above regulatory requirements and maintain a robust and prudent approach to liquidity.

Moving on to Slide 11. Total deposits have increased around GBP 4 billion year-to-date. The diversification of our deposit base has supported this outcome with growth in deposits from corporates and banks offsetting a small contraction in consumer deposits. Corporate deposit growth has been driven by the development of our U.S. dollar offering in the International Corporate Bank and an improved market share in the UK Corporate Bank. In Barclays UK, savings deposit balances reduced slightly as customers took advantage of favorable term deposit rates around the new ISA season. We were disciplined around pricing for term deposits, which was competitive in the first half of the quarter. This dynamic moderated later in the quarter, and our market share in current accounts has remained stable.

Moving on to Slide 12. Income from the structural hedge is material and predictable and underpins our confidence in delivering our income targets. We have now locked in GBP 11.1 billion of gross structural hedge income across 2025 and 2026, up from GBP 10.2 billion last quarter. And beyond 2026, we currently expect the structural hedge to deliver multiyear NII growth.

As we said in April, our plan assumes that we reinvest around 90% of maturing hedges at a 3.5% yield. In each case, the Q2 outcome was more favorable than these assumptions. On rates, we locked in hedges at a higher rate of circa 3.7%, and we kept hedge balances flat, reflecting the continued stability of hedgeable deposits.

Finally, a quick word on credit ratings. Our aim remains for Barclays PLC senior to qualify a single A composite across all indices. We will continue to engage with all credit rating agencies and view this objective as consistent with the delivery of our 3-year plan. Throughout 2025, we have continued to demonstrate the strength of the Barclays balance sheet. We expect our plan to continue to deliver increased capital generation supported by a more balanced business model and growth in more stable income streams.

With that, I'll hand back to Anna.

Thank you, Dan. In conclusion, this is the sixth quarter of progress against our 2026 targets that we are reiterating today and remain on track to deliver.

We'll now open the call for questions. Operator, please go ahead.

[Operator Instructions] Our first question today comes from the line of Lee Street from Citigroup.

Well done on the results today. Two for me, please. Just on the US Consumer Bank, just wanted to understand like how does that -- how do you see that fitting with the rest of the Barclays businesses that they operate? And then synergies, how does it actually fit in? And how should I think about that in terms of its strategic significance given its current size? And secondly, on capital. I know there's a lot of questions this morning. I'm not going to ask what you think is going to happen. But if capital requirements were to say drop by 100 basis points, just a bigger round number for whatever reason. Is it fair to assume that your target CET1 ratio would also commensurately drop by 100 basis points, that's what I'd like to understand. That would be my two questions.

Okay. Thanks for the questions, Lee. Why don't I start and then I'll add to -- I'll ask Dan to add. So strategically, where is the US Bank fit? I mean from our perspective, we believe that this is a business where we can make good returns, and you can see that progress over time. So RoTE that we reported this morning is over 10%. We are focused on getting that business to be in line with the group at greater than 12% for 2026. And beyond that, we think we can get it back to the sort of mid-teens that we operated this business historically. To get there, there's a number of things that we need to do work on the NIM, and you can see that improving through time. We repriced the book last year, and you can see it coming through. And we're also really focused on generating dollar deposits in that business, which are up 27% year-on-year.

The cost base is also important. You can see the cost income ratio falling to 48%. We want that to be mid-40s. And delinquency is well under control, as you can see. So we do have confidence in the operating moving parts. Beyond that, how does it connect to the rest of the group? Well, I think it's important to understand that we see this because it's a partnership business, it's not a direct to consumer business in the same way as our U.K. business is. We really see this as a business with 20 million customers, yes, of course, but it's actually 20 significant corporate clients. And we see ourselves as providing consumer credit to those largely IB clients. So that's really what's different about the bank or that part of the bank. So you can see the nexus that it's got to the IB, but it's also important to just stress the amount of connectivity between the 2 cards businesses on either side of the Atlantic. So we share modeling capital approaches. We also are able to use the capability that we have in the U.S. to bring across the Barclays UK. You can see it increasingly running a partnership model, not just with Tesco, but with Amazon and with Avios. All of that capability in attitude comes from the U.S. It's quite a connectivity here. As a stand-alone business, it's customer service record and its level of digitization is very high. So actually, it sets a good track for the rest.

Finally, I'll just say in terms of the sort of overall capital efficiency of the bank, what the US Cards business does is it does candidly give us a better CCAR result because it creates diversification within the U.S. So you can see the low point of our CCAR was 10.8%, and our stress buffer is around 3.3, pretty much in line with some of the other diversified banks in the U.S. So that's really important. If we were not to have this business, we would be holding proportionately more capital against the IB in the states. So provided it can wash its face and generate good returns, it provides other ancillary benefits.

As to your second question about CET1, we think about CET1 across a really long time horizon. We're satisfied with our target of 13% to 14% now. We're obviously mindful of regulatory change when and if that may come. But there's some significant pieces of that regulatory change that are still outstanding, notably what is happening on Pillar 2 as part of Basel, but also the international alignment. Dan?

Yes. I mean I'd sort of broadly say that it will be a big driver. What the regulatory expectations are will be a big driver of where our target is. But we will take into account a range of other things as well. So we'll look at what investors expect. We'll look at where the peer set is and peer comparisons and we'll look at it through stress as well as BAU. So there's a pretty strong link, but there are other factors as well.

The next question comes from the line of Daniel David from Autonomous.

Congratulations on the results. I just want to touch on a couple of topics. The first one on SRT, and the second one on capital. On risk transfer trades, I appreciate the disclosure. You've got your bigger slide pack. I just wanted to ask, is there a kind of target level you plan to get to, noting that you're kind of one of the bigger users in Europe? And how SRT kind of plays into loan pricing? Is it something you think about when you write new corporate loans? And although unlikely, what would be the impact on CET1, if you couldn't roll over your current risk transfer trades?

The second one, I guess, picks up on Lee's question somewhat. And I guess there's quite a bit of excitement growing on whether requirements could be lower for large U.K. banks. I'm just interested in your opinion, is there any areas you think that should be kind of eased, so whether that's leverage Pillar 2 or countercyclical? And then the second part of that, I guess, is on your range. And I think the -- the lower end of the range makes us slightly nervous and then it's less than 100 basis points over the MDA. So do you think you're likely to operate at the lower end of the range, let's say, over the next year? I think we all appreciate that you're intentionally at the higher end at the moment. But just interested to hear your thoughts there.

Yes. Thanks for the questions, Dan. So on SRT, I mean, obviously, we consider market capacity quite carefully in sizing the SRT amount. We're also very aware, which links into the last point of your question about the amount of RWAs that we would have amortizing in any particular period. So we've said that for the Colonnade program that's less than GBP 2 billion. That's something that we will use as a guide. We would always want to make sure that we could respond to any particular stress in the market. And we think we're well position for that at the size that we're at. As we've said before, broadly, that Colonnade program is kind of at maturity in terms of scale.

In terms of the loan pricing, we don't reflect it directly into the loan pricing. We don't provide details with the loan originators as to what's going into the call and what's not. And we think that's just very clear that they would not be swayed in their commercial or credit decisioning based on whether we were getting protection or not getting protection on the assets. So we keep those two things quite separate. It's more of a risk management tool rather than a commercial tool.

In terms of the capital position, I mean, I think we probably covered this broadly before. We took the decision to guide you to the upper half of the 13% to 14% range. We did that because we thought it was appropriate compared to where the MDA was, which was 12.2%. We think that gives a sufficient comfort buffer particularly bearing in mind both the CET1 generation that we've obviously now demonstrated very consistently and also the flexibility that we have on RWAs. So I wouldn't sort of change your view of where we expect to operate in the range. Do you want to add anything, Anna?

Yes. I mean the only thing I would add, Dan, is that one of the things that we would hope that the regulator is seeking to achieve is actually how these different parts of the regulation fit together. So stress testing plus the capital plus leverage plus GSIB quite frankly, all of those things together need to be taken as a whole. So that's what we will be seeking to discuss and are discussing with the regulators in the background.

The next question comes from Paul Fenner-Leitao from Societe Generale.

I got -- I've got a couple -- actually, the first one -- I've got three, sorry. The first one was, Dan, you mentioned when you were talking about supply, I'm sorry, I missed the comment you made, something about not having maturities or calls until 2034. What was it that I missed about that? That's part one on supply. The second was -- is it fair to assume that you're still going to be doing another AT1 to cover your calls and that you're done in Tier 2, that's -- that on supply. The second question relating to the US Consumer Bank, much of that has been covered. I just got kind of a mechanical question with -- so you've got -- in the non-UK credit card business, you've got 8% NPLs. I think I've got my maths right. If I don't, please let me know. But you've got over 4% cost of risk. What's -- have you just got enormous charge-offs, but that doesn't really tally with your relatively low delinquency rates. What is it -- what's happening with the mechanics there on the cost of risk versus the actual NPL balances, which seem reasonably low? And then the very last question is one I've asked before, but nothing seems to come of it is -- what is it that you're looking for in terms of bad news around consumer behavior that you haven't yet seen? I mean what's the first marker of that you guys care about in terms of our risk metric to tell us that we're in a new and more negative environment?

Thanks, Paul. So I'll take the first supply question, I think Anna will pick up the rest. So just to clarify, the point about the call in 2034 was in relation to our legacy capital. So we haven't got very much legacy capital left, but one of the larger transactions is a dollar preference share. So we were just clarifying that we don't have an issue a call on that until 2034. So not too much more to say on that.

In relation to supply for the rest of the year, we haven't provided guidance on specific splits. But we do have, if we were to exercise at the first call, GBP 3.1 billion of AT1 calls, and we've only issued GBP 2.2 billion. So we said we would be a broadly balanced issuer in AT1 as we go through the year.

Paul, just in terms of your question about cost of risk, I mean the way I think about it is cost of risk covers two things. It covers the piece that you've called out, which is your sort of real experience sort of true risk, if you like, which is the NPLs. But it also, in very large part, covers the sort of procyclicality of IFRS 9. So what that requires us to do is basically to use macroeconomic forecasts to imagine what would happen to our portfolio in a range of economic scenarios. And to give you an idea, the weighted average unemployment rate that we are looking -- that we are using in our U.S. portfolio right now is 5.1%. And then you might recall, in Q1, we took an additional charge because of the uncertainty. All in all, that basically means that we are running a cost of risk here that is imagining a 5.75% unemployment rate in the U.S. It's just that procyclicality point about IFRS 9, I think that's drawing that distinction for you.

The second question that you've got, which is what really is it that we are looking for. I mean be reassured, we look very hard at all of the data that we see, both in terms of our owned portfolios, but also high-frequency data more generally. We see nothing either in the U.K. or in the U.S., and that includes retail and wholesale. And specifically for cards, the kind of thing I would be looking for would be either a market change in the way people were spending their money. And if anything, in the U.K., in particular, I would say people are getting a little bit more confident. We're seeing credit card spend outstripping debit card spend. In the U.S., we haven't really seen a huge change in spending patterns despite quite a lot of speculation about inflation and potential of inflation, but nothing significant. And then the other thing I would be looking for is change in payment rates. So are customers going much more to the sort of minimum payment level that we asked them for. The answer to that is we're not seeing that either. If anything, they remain higher than pre-COVID levels. That's true both of the U.K. and the U.S., and it's true all the way through the risk stack. So we're seeing quite conservative consumer behavior that's pretty reassuring at this stage. Hopefully, that helps and answers your questions, but -- Thanks for that, Paul.

Our final question today comes from the line of Robert Smalley from Veriton Fund Management.

And a lot have been asked and answered. So just a couple. First, you talked a little bit about the LCR and the LCR calculation. Can you talk about why these numbers went up so much? And what you think the proper running rate should be, if it should be in the 150s? Also, you're running pretty hefty NSFR as well if you could address that? Secondly, I talked about this on the last call, but NDFI exposure, exposure to non-depository financial institutions. Could you give us an update on that specifically what kind of exposure you have to alternative asset managers and BDCs? I know there's a lot of nomenclature issues around that, but that's really what I'm looking for as we continue to see banks lend more to their non-depository peers competitors?

And then third, you talked about raising deposits in the U.S., pretty active in the Yankee CD program. Can you see doing more larger transactions, market transactions from the US Bank, the same way that some of your Visa peers do bank level issuance in market size.

Thank you, Robert. I'll make a start on those. So you're right, we have operated at a pretty high level of liquidity. I'd say that's partly a function of the macroeconomics and money supply and to some extent, that's seen in banks globally. I think specifically as well, in terms of our case, we have got a strategy that kind of puts deposits at the center of the relationship in a number of different business lines. So I'd call out the growth of our US Transaction bank that has obviously seen growth in deposits. Obviously, our private bank and wealth management has got a good deposit franchise as well. So we're probably a significant beneficiary of that overall trend in money supply and in deposits.

We called out today that we're making some changes in the LCR calculation. That will bring the LCR down a little bit. But I think you should expect it to remain at high levels. And we're kind of calling back, if you go back to '22 or '23, it was 156% or 161% LCR ratio. So just to sort of have that sort of in your mind. Generally, we view it as -- it's still economic to run at that level of surplus liquidity just because the liquidity to us is low cost and therefore, it's efficient.

Your second question on NDFI. So there's obviously been a bit of a push in the U.S. For the U.S. regulators to disclose more information on that. So you can see some disclosure from us on those specific lending types. There is almost no exposure in our Barclays Bank Delaware or in our HC entities. There is some exposure in our New York branch, which is where we would do a lot of that type of activity. And the number there is about $20 billion. It will be to a range of NDFI. But maybe, Anna, you want to pick up on kind of why we do this type of activity.

Yes. Thanks, Robert. I mean, we do think that occupies a really important part of the lending infrastructure more generally. And stepping back, regulation and impending regulation tends to penalize illiquid risk as it sits on bank balance sheets. But yes, the world, both in the U.S. and in the U.K. needs this sort of longer-term infrastructure spending. So we think they do perform a really important part of that infrastructure. And we do have a very intertwined relationship with these parties, which doesn't mean that we -- we know them well, and we can choose the ones that we really want to do business with. So some providers are our competitors on the lending basis, but we may lend to them. We bring their companies to market. We are quite often offering bespoke risk management transactions for them. So it's like any other counterparty really. We choose those counterparties carefully, and we monitor their interactions with us carefully over time.

And then, Robert, your last question on -- just on U.S. wholesale funding. So look, we've got no plans to change the mix of U.S. wholesale funding that we do. Generally wholesale funding would be at the more expensive end of our liability sources. So we wouldn't do that unless we had a big push to. Look, if anything, as we've discussed on this call, the funding strategy for Barclays Bank Delaware is actually to do more deposits, more retail deposits, if anything, sort of less CDs in that mix. So no real change on the overall mix of the U.S. funding.

Thank you, Robert. Thank you for asking the questions. And thank you all for joining the call. Thank you for your continued interest and support for Barclays. We hope to see many of you on the road, if not over the next few days, then perhaps into September. But thanks very much. Operator, we can now close the call.

Thank you. That concludes today's conference call. You may now disconnect.

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

Good morning, everyone. Thank you for joining Barclays' Second Quarter 2025 Results Call. I'm very pleased to announce very strong results for this quarter. Income grew by 14% year-on-year to GBP 7.2 billion. Profit before taxes grew by 28% to GBP 2.5 billion, and earnings per share grew by 41% to 11.7p. Return on tangible equity was 13.2% in the first half of the year and 12.3% in the quarter.

This compares to 11.1% in the first half of 2024 and 9.9% in the second quarter of last year. Cost-to-income ratio at 59% in the second quarter is a 4 percentage point improvement versus last year. This performance drove an eighth consecutive quarter of growth in tangible book value per share now to 384p and it has driven strong capital generation with a CET1 ratio of 14%.

As a result, we are announcing a GBP 1 billion buyback today, up from GBP 750 million in the first half of 2024, and we expect to initiate this in the coming days. And we are also announcing a dividend per share of 3p. This total of GBP 1.4 billion of shareholder distributions for the first half of 2025 is up 21% year-on-year.

And we expect our distributions to continue to build progressively, supported by increasing capital generation. These strong results mark the midpoint of our 3-year plan to deliver a better run, more highly performing and higher returning Barclays.

I'm very pleased with the group's operational and financial progress so far. We remain committed to and confident in achieving the full objectives of this plan, and this includes a return on tangible equity of circa 11% in 2025 and more than 12% in 2026.

By design, our plan is delivering operational improvements across each of our divisions to drive structurally higher and more consistent group returns in 2026 and beyond. In the second quarter, we achieved a further GBP 200 million of gross efficiency savings or GBP 350 million for the first half of 2025. This is good progress against our target of circa GBP 500 million for the year.

All of our divisions generated a double-digit RoTE in the second quarter. This includes a 2.6 percentage point year-on-year improvement in the Investment Bank's RoTE to 12.2% and a 1% improvement in the U.S. Consumer Bank RoTE to 10.2%.

Before handing over to Anna to take you through the results in more detail, let me share a few reflections on our progress at the midpoint of our plan. I am very pleased with what we have achieved so far. Our 3-year plan set out in February 2024 outlined a road map to produce higher and more balanced returns.

We have seen the value of clearly articulating our targets and capital framework, the value of providing transparency for shareholders and the value of driving accountability and disciplined execution internally. I would stress that our 2026 targets were never intended to be a resting place and nor do they represent the extent of our ambition for RoTE capital distributions nor the proportion of group capital allocated to the Investment Bank.

We are executing against our plan as we said we would, resulting in higher shareholder returns. And the momentum which we are seeing across the group positions us well to deliver our RoTE guidance and targets by continuing to drive income growth by increasing operational leverage and with our business mix changes.

Since 2023, we have deployed GBP 17 billion of business growth risk-weighted assets into our U.K. focused businesses, Barclays U.K., the U.K. Corporate Bank and Private Bank & Wealth Management. This includes GBP 10 billion from organic growth. This organic progress and the acquisition of Tesco Bank mean that we have now deployed more than half of the planned GBP 30 billion by 2026.

Within the Investment Bank, we have intentionally kept RWA stable for 3.5 years. This is driving efficiency and productivity and to ensure that the division is a consistent source of capital generation for the group. I am very pleased with our performance halfway through the plan with annualized income growth of 9% since 2023, in line with the division's high single-digit growth target.

I think about the Investment Bank's performance through 2 lenses: Structural and cyclical. Structural improvements in the business are driving broader and deeper client relationships, and they are supporting income in a range of environments. A good example of this progress is in our markets franchise, where we now rank top 5 with 60 of the top 100 clients in the business.

This is well on our way to our target of 70 by 2026, up from 49 in 2023. By strengthening our institutional client franchise, we have increased market share in our 3 focus businesses by more than 1 percentage point during 2024 and with good momentum since then. And in financing, good momentum of client onboarding and balanced growth contributed to a 23% year-on-year increase in income in U.S. dollar terms in the second quarter with particular strength in prime.

So stable income streams now account for 40% of the Investment Bank's income in the past year, up from 29% in 2021. From this structurally stronger base, the Investment Bank is also better positioned to monetize cyclical market activity by helping clients to manage volatility as we demonstrated in the early part of the second quarter of this year.

This cyclical activity is included in traditional areas of strength for us, such as credit and macro and also in new areas of strength, such as equity derivatives and prime. Our work is not finished. With the ongoing execution of our plan, we will continue to produce structurally higher and more consistent returns for our shareholders.

And with that, over to Anna to take us through the second quarter.

Thank you, Venkat, and good morning, everyone. Slide 5 summarizes the financial highlights for the second quarter and first half of 2025. Before going into the detail, I would remind you how our results are affected by FX rates. The year-on-year performance in Q2 was impacted by a weaker U.S. dollar, which decreased our reported income, costs and impairments.

I'll call out these effects where appropriate. The group delivered a Q2 RoTE of 12.3% against the previous year's 9.9%. Excluding the effect of last year's business disposal losses, income rose 9% with growth across all divisions, while our efficiency actions led to another quarter of positive jaws of 4%. Profit before tax increased by 28% year-on-year to GBP 2.5 billion, and our earnings per share grew 41%, supported by the effect of share buybacks.

As ever, I am focused on 4 aspects of performance: Income stability with an emphasis on growth, cost discipline and progress on efficiency savings, credit performance and a robust capital position. By focusing on these 4 building blocks, we are now driving higher returns on a sustainable, predictable and consistent basis. And from this strong foundation, I am now looking for signs of increasing momentum across our businesses, which I'll call out as we go, starting on Slide 7.

Income in Q2 increased 14% year-on-year to GBP 7.2 billion. We grew stable income streams by 13% year-on-year, supported by sustained retail and corporate NII growth and 15% growth of financing income within markets. Elsewhere in the Investment Bank, our multiyear investment meant we were well positioned to help clients navigate volatility in April and throughout the quarter.

Group net interest income increased 12% year-on-year in Q2 to GBP 3.1 billion. Stable deposits for the group supported continued reinvestment of the structural hedge alongside lending momentum. Within this, we have consistently taken market share in U.K. corporate bank deposits and lending since 2023 and year-to-date. And in Barclays U.K., we maintained our share in current accounts and chose to remain disciplined on term deposit pricing in the quarter amid strong competition. The overall stability of deposits will support growth of the structural hedge income as we show on Slide 9. Income from the structural hedge is material and predictable and underpins our confidence in delivering NII guidance for the group and Barclays U.K. in 2025. And beyond 2026, we currently expect the structural hedge to deliver multiyear NII growth. We have now locked in GBP 11.1 billion of gross structural hedge income in 2025 and 2026, up from GBP 10.2 billion last quarter.

As we said in April, our plan assumes that we reinvest 90% of maturing hedges at a 3.5% yield. In each case, the Q2 outcome was more favorable than these assumptions. On rates, we locked in hedges at a higher rate at circa 3.7%, and we kept hedge balances flat, as you can see on Slide 35 in the appendix, reflecting the continued stability of hedgeable deposits.

Moving on to costs. The group cost-to-income ratio was 59% in Q2, down 4 percentage points year-on-year. Total costs increased by GBP 219 million year-on-year or 5%, which includes a circa GBP 100 million increase in investment costs, mainly from the acquisition of Tesco Bank and associated integration costs.

The effects of business growth, inflation and other investments on the cost base were largely offset by gross efficiency savings. Structural cost actions in the first half were around GBP 100 million, down slightly versus H1 '24.

Looking ahead, we expect structural cost actions to be skewed towards the second half of the year and to be towards the top of the GBP 200 million to GBP 300 million normal annual range. Inclusive of these costs, we remain well positioned to deliver a circa 61% cost-to-income ratio in 2025, in line with guidance and the high 50s target in 2026.

Turning now to impairments. The Q2 group impairment charge of GBP 469 million equated to a loan loss rate of 44 basis points. The U.K. credit picture remains benign with low and stable delinquencies in our consumer books and wholesale loan loss rates below our through-the-cycle expectations. The Barclays U.K. charge was GBP 79 million in Q2, resulting in a loan loss rate of 14 bps.

The improvement versus Q1 reflected a release of credit card provisions and diminishing post-acquisition stage migration effects for Tesco Bank balances. The U.S. Consumer Bank impairment charge of GBP 312 million was stable year-on-year and down 22% versus last quarter. The acquisition of General Motors card balances is expected to lead to a circa GBP 100 million day 1 charge in Q3 and a post-acquisition stage migration charge of circa GBP 50 million for the next few quarters from Q4.

Including this charge, we continue to expect a group loan loss rate within the through-the-cycle guidance of 50 to 60 basis points for FY 2025. Focusing on the U.S. consumer bank, 90-day delinquencies were stable in the quarter, whilst 30-day delinquencies fell 20 basis points to 2.8%, consistent with normal seasonal trend. The loan loss rate of 456 basis points increased by 18 basis points year-on-year, reflecting modestly higher write-offs. Consumer behavior remains resilient with payment rates in our book above pre-COVID levels and consistent with Q1 and a stable mix of new account acquisitions as can be seen on Slide 39 in the appendix.

I said I would highlight signs of increasing momentum, which we are seeing. So turning to our U.K. businesses on Slide 13. We are on track to deploy GBP 30 billion of business growth RWAs in the U.K. by 2026, having achieved GBP 17 billion so far, including GBP 10 billion organically.

During 2024, the 3 U.K. businesses delivered circa GBP 1.5 billion of organic business RWA growth per quarter on average. This has accelerated to circa GBP 2 billion per quarter in half 1 2025. Given the momentum that you can see on the slide, we expect this growth to continue.

Mortgage balances have grown for the past 4 quarters and strong purchase activity continues to support resilient demand. This includes stronger demand for higher LTV products, including through Kensington, where application margins are around 4x higher than comparable Barclays-branded mainstream mortgages.

In credit cards, the organic acquisition of 1.6 million customers in the past 18 months has supported consistent balance growth, and we expect this to lead to higher interest-earning lending from half 2 2025 as promotional balances mature. Core business banking lending has started to inflect with a headwind from COVID era loan repayments diminishing.

This growth has been supported by GBP 1.6 billion of loans provided to U.K. business banking customers in half 1, up 50% year-on-year. And U.K. Corporate Bank lending has grown for the past 3 quarters as clients continue to draw down lending facilities. Given momentum across these products, we remain confident in achieving the GBP 30 billion target in 2026. This implies a little over GBP 2 billion of growth per quarter, modestly above the recent run rate.

Turning now to Barclays U.K. in more detail. You can see financial highlights on Slide 14, but I will talk to Slide 15. RoTE was 19.7% in the quarter. NII of GBP 1.9 billion, increased 16% year-on-year and 2% quarter-on-quarter with NIM stable versus Q1. We remain confident in our guidance for NII to exceed GBP 7.6 billion in 2025, which in turn means more than GBP 3.9 billion in the second half of the year.

Reinvestment of the structural hedge will continue to support material and predictable NII growth alongside sustained lending momentum. In addition, we expect a neutral or positive contribution from the product margin in Q3 and Q4. This partly reflects the benefit of promotional card balances translating into higher interest-earning lending in half 2. In addition, as an accounting matter, the phasing of some historic swap maturities suppressed product margin in half 1. This was known when we upgraded our guidance for NII last quarter and will not repeat in future as these swaps expire.

We would therefore encourage you to look at H2 2025 as a reasonable baseline for NII dynamics beyond 2025, noting that NII is expected to build in Q3 and Q4. Non-NII of GBP 264 million rose modestly versus Q1, and we continue to expect a quarterly run rate above GBP 250 million. Cost growth of 14% reflected the acquisition and subsequent ongoing integration of Tesco Bank.

As a reminder, we expect the cost-to-income ratio for Barclays U.K. to increase this year from 52% in 2024 before falling to circa 50% in 2026. Moving on to the Barclays U.K. balance sheet. Deposit balances fell by GBP 1.8 billion in the quarter as customers took advantage of favorable term deposit rates around the new ISA season. We were disciplined around pricing for term deposits, which was competitive in the first half of the quarter. This dynamic moderated later in the quarter, and our market share in current accounts has remained stable.

Lending once again grew by GBP 1.6 billion quarter-on-quarter, driven by mortgages and credit cards. Mortgage redemptions will increase in half 2 versus H1, but our recent retention experience and the momentum that we are seeing underpin our confidence in sustained loan growth.

Moving on to U.K. Corporate Bank on Slide 18. Q2 RoTE was 16.6%, inclusive of a GBP 39 million litigation and conduct charge. This charge was in relation to a historic issue and drove a 19% year-on-year increase in costs in this business. Excluding this, costs increased by 2%, while income grew 17%. NII was up 21% year-on-year, reflecting deposit and lending growth and the benefit from structural hedge reinvestments.

Operationally, investments into our digital and lending propositions have helped to attract around 330 new clients during H1 2025 and circa 880 new clients in the first half of the 3-year plan. Turning now to Private Bank & Wealth Management. Q2 RoTE was 31.9%. Net new assets under management of GBP 0.9 billion helped support 8% year-on-year growth in client assets and liabilities despite a weaker U.S. dollar. An annualized growth of 11% since 2023 is in line with our double-digit growth target.

Within the quarter, growth of assets under supervision offset a reduction in short-term deposits held at the end of Q1. Income growth of 9% matched cost growth of 9%, resulting in a broadly stable cost-to-income ratio. As previously guided, we are continuing to invest in this business, underpinning sustained growth and a high 60s cost-to-income ratio in 2026.

Turning now to the Investment Bank. RoTE was 12.2% in Q2 and 14.2% in half 1. Total income was up 10% year-on-year, which coupled with broadly stable RWAs now for 3.5 years, drove an 80 basis point improvement in income over average RWAs to 6.7%. We continue to be similarly disciplined on costs, which rose 2%, resulting in another quarter of positive jaws and a cost-to-income ratio of 59%.

Using the U.S. dollar figures to help comparisons to U.S. peers, markets income was up 34% year-on-year. As Venkat mentioned, the growing breadth and depth of our client relationships are supporting structurally higher income whilst better positioning the investment bank to monetize cyclical activity.

Our performance in Q2 helps to demonstrate this. In April, for instance, we monetized cyclical market activity by supporting clients through the period of volatility. Whilst in May and June, structural improvements in the business enabled a higher daily income run rate in markets versus last year despite more normalized volatility. This was supported by momentum of more stable financing income, which grew 23% year-on-year in U.S. dollar terms.

This occurred across financing products with particular strength in prime, supported by growth in balances and wider spreads. We also delivered this performance whilst managing risk well, maintaining stable VAR and incurring 2 trading book loss days, 1 in April and 1 in May, in line with the average since 2019.

Looking at our income by product, FICC rose 35%, reflecting growth across the credit and macro franchises and in financing. The mix of our macro business weighted towards rate and FX was well suited to activity in the quarter. Equities income was up 34%, driven by strength in cash, prime and equity derivatives. In banking, the environment was quiet in April, but improved in May and June, and our half 1 market share was stable at 3.4%.

Banking income fell 10% in the quarter, reflecting the year-on-year effect of our large ECM transaction in Q2 2024. Looking through this effect, ECM activity gained momentum towards the end of Q2 with Barclays acting as bookrunner on 7 of the top 12 U.S. IPOs in the quarter.

In DCM, we grew market share in all products and activity picked up as the quarter progressed, particularly in investment grade and the pipeline for leveraged finance is encouraging. And whilst advisory activity has been subdued, our announced volumes are up nearly 40% year-on-year, which we expect to support stronger completed market share in the future.

In transaction banking, income increased 4%, whilst corporate lending income was impacted by fair value losses on lending positions. Turning now to the U.S. Consumer Bank. RoTE was 10.2% in the quarter, up from 9.2% in Q2 2024. The business performed as we expected it to in the quarter with operational improvements supporting our confidence in delivering a RoTE of greater than 12% in 2026. Total income increased 7% year-on-year in U.S. dollar terms, reflecting end net receivables growth of 5% to $33.9 billion on a managed basis. NIM expanded to 10.8%, and we expect continued momentum towards our greater than 12% target in 2026, reflecting 3 effects.

First, asset repricing actions taken last year are supporting margins and will continue to feed through in the coming quarters. Second, we are growing higher-margin retail balances as a percentage of net receivables from around 15% currently to circa 20% by 2026. Third, we are improving our funding mix with retail deposits growing by $0.7 billion quarter-on-quarter or 27% year-on-year, increasing the share of funding from core deposits to 73%.

The acquisition of General Motors cards receivables is also expected to enhance RoTE from Q4 2025 despite a GBP 50 million stage migration charge in the quarter that I mentioned earlier. We continue to complement income growth with efficiency, driving a 2 percentage point improvement in the cost-to-income ratio to 48%, on track for our mid-40s target by 2026.

Moving to capital. We ended the quarter in the upper half of the 13% to 14% target range with a CET1 ratio of 14%. This is a deliberate consequence of the strategy, which was designed to drive higher and more consistent returns, improved capital generation and higher shareholder distributions. We generated around 100 basis points of capital from attributable profits in H1 and expect around 170 basis points this year, aligned to our circa 11% RoTE target. This enabled us to increase distributions by 21% year-on-year in half 1 to GBP 1.4 billion, in line with our guidance to deliver a progressive increase in total distributions in 2025 versus 2024. This included and announced GBP 1 billion share buyback, which will reduce the reported ratio by circa 30 bps to 13.7%. RWAs were broadly flat at GBP 353 billion, net of a GBP 5.8 billion reduction due to FX. Barclays U.K. and the U.K. Corporate Bank saw a combined RWA increase of GBP 2.2 billion. Given our continued discipline, Investment Bank RWAs remained broadly in line with the Q1 level and represented 56% of the overall group RWAs.

Looking ahead, we note that some European banks have recently provided detail on the effect of output floors, which for Barclays are not expected to be binding at any point. This reflects our business mix and applies at both the group and the ring-fenced level.

As usual, a word on our overall liquidity and funding on Slide 28. We have strong and diverse funding, including a 74% loan-to-deposit ratio and a net stable funding ratio of 136%. And we are highly liquid across currencies with an average LCR of 178%, incorporating the initial effect of methodology changes introduced in June.

Although these changes will utilize some of the group's GBP 135 billion surplus funding position, we expect the LCR to remain broadly within levels reported in recent years. 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.

TNAV per share increased 12p in the quarter and 44p year-on-year to 384p. Attributable profit added 10p per share during Q2 and the unwind of the cash flow hedge reserve added 9p. We expect the majority of the remaining cash flow hedge reserve to unwind by the end of 2026. This unwind, combined with earnings growth and buybacks, give us confidence that TNAV will continue to grow consistently as it has done for the last 8 quarters.

So to summarize, we are pleased with the strong performance of the bank in the first half of the year, which sets us up well to deliver on all our 2025 guidance and 2026 targets. Over to you, Venkat, for concluding remarks.

Thank you, Anna. So halfway into the 3-year plan, as you can see, we remain firmly on track to deliver our goals. We are working hard to deliver sustainable operational and financial improvements across our businesses. And this, in turn, will drive higher group returns and shareholder distributions. And as we have said, 2026 is a point in time for us, and we have ambition beyond it. By making structural improvements, we are improving the profit signature of the bank to drive higher returns in the years to follow.

I will now open for questions and answers.

[Operator Instructions]

Our first question today comes from the line of Alvaro Serrano from Morgan Stanley.

A couple of questions, please. First of all, on capital and then one on the Investment Bank. On capital, you're at 13.7% sort of obviously after the buyback. That's a pretty comfortable position given your 13% to 14% FRTB been delayed. When you think about your capital position versus the over GBP 10 billion in distribution, and obviously, M&A options that you've appeared on the press contemplating, how do you see upside to distribution versus additional firepower for M&A, whether that's a portfolio in the U.S. or something else? If you can maybe sort of walk us through your thinking?

And second, on the Investment Bank, obviously, trading, you've explained Anna, very strong, clearly doing better than U.S. peers. And that's worked very well, but investment banking fees not so well. So in a world where we seem to be heading famous last words to low volatility environment, I know you've touched on it at the end of the quarter, but I'm -- just sort of if you can elaborate if that low volatility banking fees picking up thesis has held at the later part of the quarter. And as we look into the rest of the year, can we still expect sort of decent growth in a low volatility environment, i.e., banking fees making up for whatever sort of normalization of global markets we might see?

Okay. Alvaro, thank you very much for kicking off the call for us. I'll take the first question, and then I'm going to hand to Venkat. So look, our capital position just reflects the execution of the strategy. The strategy is designed to create higher, more consistent returns, which in turn allows us to return more to shareholders and indeed invest in the business.

And that's really what you're seeing here. It's exactly what we expected. So to call out 13.7% post the buyback, we indicated at the beginning of the year that actually we expected to operate towards the upper half of our capital range just because of the Pillar 2 that we're carrying in advance of the U.S. model being implemented.

So we are exactly where we expected to be. And the broader aspect of your question, I would say the capital hierarchy remains completely intact. So we're generating higher levels of capital from more consistent and higher returns. And our priorities are: Number one, of course, regulatory; number two, distributions. Those distributions are up 21% year-on-year. The buyback is up 33% year-on-year.

And we said that the distributions should be progressive in 2025. That's what you're seeing. And of course, our guidance and target for the 3 years is at least 10%. So that all remains intact. And then finally, continuing to invest in the U.K. businesses. We do believe our plan is an organic one. And you can see at the halfway point, we put down GBP 17 billion of the GBP 30 billion RWAs that we are planning to. So that's how we feel about capital, really no change, just the execution of the strategy. Venkat?

Yes. Thanks for the question, Alvaro. On the Investment Bank, sort of let me give you a longer-term view and then I'll come to your very specific question. So on the Investment Bank over the last 6 quarters, and in fact, since before then, we've been obviously investing in our structural capabilities. What you see in the results in the Investment Bank is a combination of deep structural improvements, which we think are sustainable over the long run and then cyclical aspects, which benefited the trading business and may have been a headwind for the banking business, and then I'll come to that.

So on the structural side, basically, you're seeing deeper client engagement. One of the statistics we put out was we are #6 Investment Bank. So of our top 100 clients, who are we in the top 5 with. That number was 49 before the plan started. Our target is 70. We are at 60 now. You can see it in the market shares which we have in global markets. Financing is up 23% year-on-year in U.S. dollars. Our 3 focus areas are up by 1 percentage point, '24 versus '23, and that's the latest data we have. And then I mentioned the top 5 clients.

And then when you look at the overall -- and then when you look at banking, capital discipline has really taken root. Return on risk-weighted assets is improving. And market share has improved, although a little slower this year. So that is the structural benefit that we see. And you can see it in the results. When you look at the Investment Bank's performance versus consensus, for 6 quarters now, we've beaten consensus and the size of that beat has been growing to about GBP 300-odd million this quarter.

So I think what you're seeing is the combination there of both structural and cyclical. So let me come to cyclical. Cyclical in the markets business has been helped obviously by volatility, and that's been a tailwind. And in banking, as you point out, as decision-making has slowed, that volatility has been a bit of a headwind.

Now looking forward, we are seeing that headwind in banking dissipating as there is more deal activity, and we expect that to continue. As for markets, I think a lot of the positioning that's taken place in the last 6 months has been in reaction to immediate volatility. So what I would call shorter-term risk management. And that has obviously delayed longer-term decision-making, which drives banking.

Now though, in the market side, you could see more longer-term positioning and decision-making as people take a clearer view on different asset classes and within asset classes rotation. I hope and expect, given all the structural improvements I outlined that we will benefit from that.

The next question comes from Guy Stebbings from BNP Paribas.

Two questions, if I may. The first one was on Barclays U.K. I was wondering if you could expand on this historic swap maturity impact that landed in H1 that comes out in H2 and should support expansion in the product margin in the second half. I don't know if you can sort of frame the size of that perhaps.

And then attached to that, looking at your full year guide and talk to quarter-on-quarter growth, it looks like we're getting to a sort of exit quarterly run rate of about GBP 8 billion or so on the NII for Barclays U.K. consensus at GBP 8.3 billion for next year. It doesn't feel overly challenging versus that sort of exit rate.

So can we infer that you're comfortable with market expectations next year, perhaps even some upside despite the miss in the second quarter? And then the second question was on the U.S. consumer business on the impairment side, encouraging to see that step down impairments in Q2 and the lower 30-day delinquencies. Perhaps I can invite you to comment on how you're thinking about impairments in the second half and beyond on that book. I mean there have been some skepticism that the 2026 impairment guide could be challenging to get to that sort of 400 basis points long run. So are you sort of more confident on delivery there today than perhaps 3, 4 months ago?

Okay. Thanks, Guy. Why don't I take both of those, and I'm sure Venkat may add on the second. So let me start with BUK NII in totality. So we are confident in the greater than GBP 7.6 billion. And when we gave you that guidance, we were clearly aware of the swap matter that you're talking about here. So the phasing is panning out as we expected it to.

And therefore, that means by definition, we're expecting income to be in excess of GBP 3.9 billion in the second half of the year. And within that, I would just add for Q4 to be higher than Q3, and I'll come back to the second part of your question in a minute. So what really drives that? Well, there's clearly the things we've talked about, which is the structural hedge, loan growth. So you can see the momentum in BUK. The other thing I would just call out as a product margin matter, Guy, is not just the swap effect, but it's also the fact we expect to see maturing cards balances, maturing promotional cards balances in the second half of the year.

And obviously, we expect to see deposit trends to continue to mitigate. But this swap point, it's a historic matter, and it's an accounting point and it's accounting timing. And it basically relates to the maturity profile of historic swaps versus how we recognize swaps against products internally. It's purely timing.

To try and put some quantum around it, what I would say is it's probably most of the consensus miss in Q2, and it was relatively similar across Q1 and Q2. So it's a half 1 versus half 2 point. It's now behind us. It's not operational, purely accounting timing. And from '22 onwards, we're now booking our swaps in a different way. So I'm not expecting this will recur.

So in terms of the jumping off point, as I said in my prepared remarks, please use half 2 as a jumping off point for NII next year and within that note, the Q3, Q4 momentum. It's a bit too early to talk about explicit numbers or consensus for next year. But just please note from this, I guess, our confidence in terms of that building NII momentum, not just in meeting '25 guidance, but underpinning RoTE in 2026 and having momentum even beyond that point.

So let me now come to U.S. consumer impairment. Look, it's fallen Q-on-Q as we would have expected it to seasonally, and you can see that 30-day delinquencies are down 20 basis points. So it's performing well. Interestingly, within that, the lowest 3 FICO bands are also down year-on-year in delinquency, which I see as encouraging. What we expect in the second half is obviously normal seasonal trends. You tend to see a build towards the back end of the year just as holiday spending picks up. The only other notable thing I would call out is, obviously, in Q3, we onboard the General Motors back book. You should expect to see GBP 100 day 1 charge then. And then you're going to see some migration effects, probably about GBP 50 per quarter for a few quarters just because we onboard things at Stage 1. But overall, I think within the context of the group guidance of 50 to 60 basis points, we're very comfortable. Venkat, anything to add?

Yes. Look, I'll just add at a broader macroeconomic level. It has been remarkable really quite how resilient the U.S. economy has been and the U.K. economy to everything that's going on in tariffs. Obviously, there is inflationary pressure, but employment remains very strong. And I mean, the Fed is having a meeting tomorrow, but it's not cut once so far this year. So I think we have to see how that plays out. But I would say at a macroeconomic level, there is room for hope in the strength of the economy, especially as the frequency of tariff announcements and the amplitude of tariff changes reduce, both frequency and amplitude reduce.

The next question today comes from the line of Jason Napier from UBS.

Two, please. The first, just focusing on the retained targets for 2026. I guess at the halfway point for the strategic plan, the bank is doing better than expected, right? As Venkat, you mentioned, you've beaten in the IB 6 quarters in a row. And consensus is pretty close to your GBP 30 billion revenue target for next year. But the market is well over GBP 1 billion below your expectations for the Investment Bank.

So I wanted to invite you to sort of give us your thinking on that GBP 30 billion guide. Is it still that number because you're not in the habit of refreshing it every quarter? Is it the cyclical tailwinds in the IB that you've enjoyed so far, you think are a bit of a headwind from here? Because if we put in your IB number, if we add that to consensus, you're a 13% RoTE company. Not the sort of more than 12% at which we seem to be a little bit stuck.

And then secondly, perhaps just as a follow-on, consensus beyond 2026 has got the bank growing revenues by 3% and costs by 2%. I wonder whether just at a footprint level, you think that makes sense? Are the markets in which you're playing growing that little in the next few years?

Okay. Jason, I'm going to start and then hand to Venkat. So we've retained and indeed repeated our targets for '25 and for 2026. And when we step back, we're clearly on a strong platform here. So at the end of the first half of this year, we're sitting on a 13% RoTE. And we clearly got momentum across all 5 of the businesses. And really, this is what the strategy is about.

So we're not surprised by these results. Our objective was to drive income momentum and income stability whilst holding costs and capital discipline, and that's exactly what we're doing here, and you can see that in the results. But clearly, what it does is it gives us, obviously, confidence for the current year. But even more than that, it gives us confidence for 2026 and beyond as a RoTE matter. And income-wise, that being the specific part of your question, what you're seeing here is clear NII momentum, as I covered in the previous conversation. Loan growth will underpin that. You're going to see the maturation of card balances that will underpin that.

You can see the structural hedge underpinning that. And then elsewhere in the bank, you can see the progress that we are making structurally in the IB, both as a revenue matter and in terms of a RoTE matter. So we believe that with each passing quarter, clearly, we're more confident and hopefully, the market becomes so in that delivery. Sort of beyond 2025 and 2026, hopefully, you're starting to see a pattern here. The strategy is not hard. As I said, it's about driving income momentum and stability, keeping costs controlled and being really disciplined about where we allocate our capital.

We're not going to suddenly stop doing that at the end of 2026. So from our perspective, we expect to continue to driving that level of momentum.

Venkat, you may want to add specifically?

Yes. Look, Jason, you asked a question or two questions, which really hit at the heart of what our strategy and our strategic plan is. So one is what is the -- how well are the businesses performing and how are you getting that better performance? As Anna just said, there's an important part that is structural. We are just trying to run the place much better with deeper client engagement, greater efficiency in cost, greater revenue growth, strong risk controls. And we are very happy with the numbers we've seen over the first 6 quarters. We think the structural underpinnings, as Anna said, give us expectations to carry that forward not just into the next 6 quarters, but beyond that.

So one part is running the bank better. The second part comes to the footprint, as you put it, which is what are the businesses and where are they. Now a large at-scale bank like us should grow at top line roughly at the nominal rate of the economies in which we are. And both in the U.K. and in the U.S., that nominal rate, the U.S. is running a 1% GDP growth real Q4 '25 to '24. It's probably going to be 2% next year. But with inflation at around 4-ish percent, call it a 5%, 4.5% to 5% nominal growth, similar in the U.K.

So you would expect us, absent of capturing market share, to grow at roughly that level is what I would think in the long run, a good bank should do. That's not a target. That's not a forecast, but it's just saying to you that when you think about how our footprint is, right, that's a reasonable assumption to start with.

Your next question today comes from the line of Rob Noble from Deutsche Bank.

Can I just ask on the promotional card? Aren't they booked at effective interest rates? So why would you get a pickup in H2 from there? And if you could just elaborate on the size of the balances on promotional, how much is rolling, what the EIR rate is?

Secondly, I think there's been sort of 1 quarter's growth in the last 8 in the U.K. deposit book. And I presume a couple of years ago, that wasn't the plan. So what's not working there? What's going -- what could be improved to turn the deposit to give you the confidence for it to be stable going forward? And then lastly, how big is the Kensington book now? And what's it growing at? And who are you taking share from in that business?

Okay, Rob. I will take those. Well, I'm not going to go into the details of EIR assumptions. But what I would say is that when we do reflect effective interest rates across our cards books, we do so conservatively as we do across all of our businesses. And typically, what we're doing there is we're showing -- we're spreading the upfront fee, but we're also reflecting a bit of post-promotional balances. But actually, what we're seeing is the '24 cohort maturing nicely, and that's really what we're calling out here.

And in terms of U.K. deposits, we're broadly following the trends of our peers. Current accounts market share is being maintained. And you can see that we are not encountering anything unexpected simply because we're rolling 100% of the hedge. Our planning assumption is 90%. We rolled 100% of it in the second quarter. So that tells you that things are broadly panning out.

We continue to see some deposit migration, but that is -- the ISA season aside, that continues to just normalize. So nothing unexpected here. And on Kensington, we're seeing now high loan-to-value mortgages occupy about 25% of our flow. That's up from around 15% a couple of years back. I won't call out Kensington balances specifically, but they are being very, very helpful in helping us address the full scale, the full breadth of the mortgage market, which is why we are now taking gross share a little ahead of stock. Retention is very good.

And of course, what's notable about Kensington is the margins are much richer. On equivalent products, they're about 4x the scale of a normal BUK mortgage margin. So we're really pleased with its performance, and it's fully integrated now into the business.

The next question comes from Chris Cant from Autonomous.

I have a couple on regulation, please. So firstly, thinking about what's happening in the U.S. If we get these eSLR changes and your U.S. competitors have effectively significantly more leveraged balance sheet capacity handed to them and they seek to deploy that in markets. How should we think about the effect of that on the IB growth you've seen over the last 5, 6 years, particularly around financing? Do you see that as a competitive threat? And what can you do about it if those peers now have more capacity to muscle in?

And with regards to CCAR and the U.S. consumer business, the reasoning you've given for retaining that business in the past is partly because it helps your CCAR performance. Obviously, CCAR is getting more benign. Do you now feel less compelled to retain that business? What is the argument for keeping that?

And on the U.K. side of the fence, if I could just invite you to comment on what, if any, outcomes we might expect from the current U.K. capital framework review that's happening in the background. Are you expecting that to be a positive? And Venkat, I know you've expressed some views contrary to your peers, other banks around the ring-fencing regime. What are your updated thoughts given the changes we may see there?

Chris. So I will start on the first 2 of those, and then I'll hand to Venkat for the third point on the U.K. capital framework. Look, on SLR, we note peer comments. We're confident in our ability to continue to grow our prime business and indeed our fixed income financing business. We're seeing that continue good balance growth, good spreads and actually expanding a bit into Asia, which is relatively new for us.

So very much open for business and confident in our ability to grow. And really what's underpinning that is a couple of things. Firstly, as we look at our U.S. peers, it looks like the leverage is not binding for all right now. So this may or may not make a significant amount of business -- of difference rather. And secondly, we look forward to what the FPC might do in the U.K. as it looks at the framework more holistically, as you point out.

So no specific concerns. On CCAR, look, Barclays in the U.S. typically has a good CCAR results and has exactly the same this year, a low point of 10.8%, a stress buffer of 3.3%. And we still see that diversified banks across that CCAR stack get a better result. And that is very, very clear. There were some aspects of this year's CCAR stress test where the market shock component was a little lower than we might have previously seen. We can't always anticipate that, that will be the case. So important that we don't react to one stress test in isolation.

And just stepping back, this is a business that we believe we can improve the returns on. You can see that. We believe we can get the returns, not just to be in line with the group, but more towards mid-teens. And it offers income and geographic diversification as well as the particular capital efficiency point. So that's how we feel about CARs. Venkat, do you want to.

Yes. Moving to the U.K. First of all, I welcome the broader capital framework review that was announced recently. And I think -- I welcome it in 2 ways. One is it's an important topic. And the second is it's looking at the entirety of it, which is not just capital rules itself, but stress testing and everything that goes into the final number.

And the way I think about it is that capital and capital regulation is an important part of a healthy banking system and of growth. And so it is what you do to run a robust banking system. Ring-fencing is an important -- it's a bedrock of depositor protection. And what it helps is with the so-called gone concern. It's a will. It is if a bank has a problem like Icelandic banks did in 2007, '08, then how do you make sure that depositors get their deposits back over and above the protection scheme? And what can you do in terms of the assets that are attached to those deposits. The Governor of the Bank of England a few weeks ago spoke with the Treasury Select Committee, and he made a point that about 99% of assets from ring-fenced banks are deployed within the U.K. and 32% of the corresponding assets from non-ring-fenced banks are deployed in the U.K. That's the illustration of the problem.

So that's why I continue to believe strongly in the maintenance and sustenance of that ring-fence as it is structured. I mean, let's see what comes out of the government review, but that's my view certainly. And then on capital, as I said, that is part of growing the economy and growing the banking system. Now the governor made another point last week at the Treasury Select Committee where he said there is no trade-off between financial stability and growth. He's absolutely right. Financial stability is a scenic one on. It's a necessity, but not all regulation necessarily contributes to financial stability, and that's where the debate is to be had, which regulation is excessive, super flows gilding the lily in the whole capital framework? And can you relax some of that regulation and improve growth? I'm optimistic for those outcomes.

The next question comes from Jonathan Pierce from Jefferies.

Two questions, please. The first is on these additional structural hedge tailwinds that you've alluded to post 2026. The yield on the hedge at the moment is about 2.5%. So if you take your guidance over the next 18 months, we're probably exiting next year at about 3.2%. If you're assuming a reinvestment rate of 3.5%, where is the extra tailwind coming from into 2027 and beyond? Is it just an averaging effect of the 2026 maturities? Or is there something a bit more material going on? That's the first question.

The second question, I'm going to try again on capital, if that's okay. At the moment, I understand you want to operate in the upper half of your 13% of CET1 target range. Consensus though, is still a bit above 14% by the end of 2027. So how are you thinking this sort of pans out? I know your comments on Pillar 2A dropping with U.S. IRB and Basel 3.1, and I suppose one for one, that would reduce your equity requirement by maybe 50 basis points.

And then you've got this point on the SBC having a look and maybe something happens there elsewhere in the capital stack. Into the medium term, would it be unreasonable to assume that you could operate towards the lower end of the 13% to 14% range? Because obviously, the delta there versus consensus would be worth about GBP 4 billion, which is not immaterial.

Jonathan. So the comment on the structural hedge tailwinds is this. And it's just to help people sort of think beyond, I guess, the targets that we've already given you for 2026 and to understand how we feel about NII growth through 2026 and beyond. But the average yield on the structural hedge in 2027 will still be below 3.5%.

Simplistically, that is what we're saying. There's nothing funny or quirky or anything in the kind of '26 maturities. It's literally that simple. That's what we're drawing out there. I think the other point that we are drawing out this time that's perhaps a little bit different is the locked-in level of that hedge. So remember that this year, and you can see it on the structural hedge slide on Slide 9, the locked-in amount for this year is 97% and a bit lower than that next year, but you can see us really getting good line of sight of that 80%.

So to your second question, look, from our perspective, we still think 13% to 14% is the right target range for us. We plan across multiple, multiple years when it comes to capital. There are a few regulatory moving parts out there, whether that be what the FPC is doing. Obviously, we don't know what is happening yet on Basel 3 in terms of Pillar 2A. We also don't know what's happening in terms of sort of international alignment.

So there's a lot on the regulatory front that is still uncertain. What's important to us is that we're delivering on our distributions as we currently set them out, so at least GBP 10 billion, and you can see that prioritization that we're doing there.

But fundamentally, the plan was designed to create a higher returning bank. And importantly, what you're seeing now is about with higher returns and higher capital. That is really, really important for the consistency, not only of shareholder distributions, but our ability to invest in the businesses longer term. So we are happy with the range that we've got, and we'll just await regulatory clarity when it comes.

Understood. I don't know if there's any chance you could tell us what the maturity yield on the hedges is in 2027.

Not off the top of my head. The average is about 3, but we'll come back to you if there's anything that we can help you on the detail. Okay. sorry, that's 3 years average rather than the specific maturing yield. But we'll come back to you.

The next question comes from the line of Chris Hallam from Goldman Sachs.

Two questions on RWAs in the Investment Bank. I guess the dynamics here in Q2 feels similar to what we saw in Q3 last year, so U.S. dollar depreciation Q-on-Q. Last year, you let that feed through to lower headline RWAs. This quarter, that hasn't been the case. So I guess what's changed there? This quarter, without reinvesting the FX tailwind, you would have obviously seen a step down in RWAs as a percentage of group towards the target. You would have seen the CET1 tailwind, but then you also, I guess, would have missed out on some commercial opportunities. And I suppose being there for clients on the financing side continues to be an important part of the rankings improvements you flagged. So how are you thinking about juggling those priorities given that they may be at the margin, a little bit mutually exclusive? And do you feel comfortable saying 56% is peak and it trends down from here?

And then secondly, just a confirmation, I think, on RWA productivity. There was a tick down in the second quarter. Obviously, Q1 is quite a high number. Anything you want to call out in the quarter, maybe it's the ICB one-offs Q-on-Q? And it feels like that level of RWA productivity is a level that would support the RoTE target for next year. So I just wanted to check that you agree with that.

Okay. Chris. Look, step back for a minute. The RWAs in the IB have been broadly flat for 3.5 years. That is our clear strategic intent and what we keep coming back to quarter after quarter after quarter. It's a key part of the plan and the capital discipline that we talked about. What you might see in any particular quarter is either higher or lower levels of client activity as we pass the quarter end, and it's honestly nothing more than that.

You can see that we are very disciplined in the way that we manage our risk. You can see that in the bar and in the loss days. And if you look at the distribution of trading income, that's all on Page 37. So we deployed more RWAs to support clients, not really in taking materially more risk. That's what you should expect us to do.

And we really don't feel that RWA discipline and growth in the IB are mutually exclusive. So since the beginning of the plan, the IB RWAs, as I said, well, more than the plan for 2 years before the plan started have been flat, and we've got an income CAGR of 9%. That's what we're trying to do here.

And I think you're seeing that flow through into the second part of your question, which is really about RoTE productivity. There's a clear seasonality to the IB generally, higher in Q1, higher in Q2 than Q3 and Q4 typically. And so you're seeing nothing more than a seasonal change year-on-year. It's up meaningfully, I think, 80 basis points year-on-year.

So what we're doing here, which is driving capital discipline in banking and driving our focused businesses in markets is working. And what's really important to us, and it's probably the most important part of the plan for me is not just the returns in the IB, but the consistency of those returns. That's really important. So you're going to see that hopefully in the coming quarters.

I'll just add, not just consistency but quality. So the consistency and quality go together, right? As we do more in financing revenue, as we do more in corporate banking revenue, you get the consistency, but you're also getting more predictable high-quality revenues. So endorse everything Anna just said, obviously.

The next question comes from Andrew Coombs from Citigroup.

One on the U.K. and one on the U.S., please. On the U.K., I just want to come back to the deposit trends. You talked about being disciplined on term deposit pricing against very tough competition. If I look back over a longer period of time, your deposit balance has contracted in 4 of the 5 of the last quarters. So perhaps you could just elaborate on how you think about margins versus volumes on that U.K. deposit book? What it would take for you to reengage in terms of pricing dynamics more broadly across the space?

And then secondly, on U.S. consumer. I wanted to ask about mix shift and what it means for your targets. If I look at your NIM in U.S. consumer, impressive Q-on-Q improvement of 30 basis points. At the same time, you're talking about a GBP 50 million additional charge over the next few quarters from Q4 on post-acquisition stage migration from General Motors. Just given that mix shift that you've seen with AA coming out, General Motors coming on, what does it mean for your targets, the GBP 40 billion receivables, the greater than 12% NIM, the 400 basis points cost of risk in that division, and they're all now subject to a slight change?

Andy, I'll take both of those. So look, we had a similar question on deposit trends earlier in the call. There's nothing specific going on here. We feel like we're broadly following our peers in terms of market share, particularly in current accounts, and you can see that, as I said, in the role of the hedge. Let me specifically speak about fixed term deposits and the ISA season, which I think is probably what's underpinning your question. So look, the ISA season was very, very different this year. We can all, I guess, have a view about why that might be the case. But it was bigger and earlier than we've ever seen before. And if you look at the quantum of flows during the early part of April, I think the second week of April, the flows on those products were around GBP 6 billion, not for us, but for the market. Then if you look at the average of May and June, that's more like GBP 1 billion a week. So that gives you an idea of the scale of flows.

The pricing we felt was not economic, and therefore, we stepped back from fixed-term pricing in that ISA season and remained disciplined. We did, however, grow our ISA balances year-on-year and feel like we had a good season. So where we think it's important for the relationship, we do step into pricing, and you can see there's a divergence between our core pricing and our relationship pricing. And over time, you might see that -- you've seen it widening, particularly through Q2. So it is important to us, but we're not going to price uneconomically in the market whilst we have a stable underlying base.

Just moving to U.S. consumer. Look, we've said a number of times, it's a plan of many parts. It's about NIM. You're seeing NIM going up. Why is it going up? It's because we repriced the book last year, and that's feeding through. It's also because U.S. deposits are up 27% in that business. The cost-to-income ratio is now 48%, and it's headed downwards and risk is well controlled. So we are controlling everything that we can within that business and driving the operational discipline, as we said we would in the plan.

We clearly still have ambition to grow in the business, and we're looking for a balance, you might recall, of being roughly 15% in retail at the moment and moving much more towards 20% in retail. And actually, GM will fulfill a large part of that move for us. That will clearly flow into NIM and will give us a better risk-adjusted return, which is what we are trying to do. So we do want to grow this business. We've gained 1 partner in GM. We've retained 4. But RoTE is the North Star. We're not going to grow it to meet the target and compromise RoTE. And indeed, that's true of every single business across all 5 divisions.

Our next question comes from Amit Goel from Mediobanca.

So two questions. One, again, just a follow-up on the product margin. I just want to check what your thinking is in terms of 2026, given there are a few more kind of parts to it versus '25, would you expect a positive contribution then? I guess I'm just thinking that in terms of the broader guide, so there's the GBP 7.6 billion of NII in '25, there's 2/3 of roughly GBP 1 billion hedge benefit in '26. So that by itself gets you to kind of the GBP 8.3 billion consensus NII. There's potentially a little bit of volume growth. So then the product margin is kind of the delta then.

And then the second question, just on the IB. I mean, I think it's obviously a very strong performance in markets. Costs were well contained. Just curious how you're thinking about investment then also into that business and managing that cost piece if revenues continue to be strong.

Okay. Amit, I'll take the first and then hand to Venkat for the second. Look, as I said, it's a bit too early to talk about 2026 NII or particularly the product margin. And I'd just call out a couple of things, one on the numerator and one on the denominator. So on the denominator, we do intend to continue to originate assets, and you can see that coming through not only in our strong mortgage growth. So we've had 4 consecutive quarters of mortgage growth on a net basis and cards continue to grow.

Now clearly, more mortgages in the mix will slightly dilute your margin, but only on a mix basis, higher NII, of course. So I think growth in assets, but I would call out this maturity of the cards and promotional cards balances. We said it would start in '25. Actually, the longer maturities, which is the larger part of the promotional balance mix really start to mature in '26 and beyond. So you're going to see a bit more from there. So I think you've got a numerator and a denominator impact, Amit, which is why I'm not going to be drawn on the product margin specifically. Venkat?

Yes. Amit, when we announced our plan 6 quarters ago, one of the things we said about the Investment Bank is that in markets, we have been doing a lot of investment in technology over the past few years and that we would expect to see the benefits of that investment coming through during the period of this plan. And that's what we're seeing. And then in banking, we said that we'd identified important segments of the market, including tech and health care M&A and also capabilities in the corporate and transaction bank, which we were investing in. We've been doing so, and I think we're seeing the results of that. So expectations should be that we continue to operate according to the plan we laid out.

Perhaps we can go to the next question, please, operator, noting that, that last question -- that is the last question of the call. Thank you.

Our final question today comes from Perlie Mong from Bank of America.

Just a couple of quick ones. So the U.K., noted that very clearly done GBP 10 billion of organic RWA allocation to the business. I guess there is a little bit of nervousness about the U.K. macro from here. Certainly, there is some nervousness around what the autumn budget might have.

So in the case that confidence drops off and maybe activity comes down and you find it more difficult to allocate the remaining RWAs in the U.K. business, do you have a plan B? Like would you do acquisition to top it up to make sure you hit GBP 30 billion? And if that's the case, how would you think about that in the context of the GBP 10 billion distribution? So I guess that's number one.

Number two, quickly touching on cost. So I think previously, you've said that you would expect cost to come down in 2027. I guess it looks like the efficiency savings are coming through as expected, all on track. And if anything, the FX should be a little bit of help as well. So is that still what you would expect that 17 -- sort of maybe closer to GBP 17 billion next year?

Okay, Perlie. So we're pleased with the GBP 10 billion organic growth in the U.K. And you can see from Slide 13 that, that momentum is picking up, not just in BUK, in the areas that we've talked about before, which is cards and mortgages, we talk about a lot, but also in U.K. Corporate. So we've had 3 successive quarters of growth in U.K. Corporate, and you can actually see BUK business banking now starting to turn. And when we set our plan, we focused that plan on areas where we were either underweight or we felt we had opportunities to grow because we lost market share.

So that's true of, for example, high loan-to-value mortgages or corporate and business banking, where we have had a much higher loan-to-deposit ratio than our peers in the past. So we remain confident that we can deploy that, noting that we're at a run rate of around GBP 2 billion per quarter in 2025. We're GBP 17 billion at the halfway point. We've got 6 quarters to go. You can do the math, particularly given that, that momentum appears to be picking up. So it is and always has been an organic plan. And our capital hierarchy as I said before, remains intact. Number one, regulation. Number two, at least GBP 10 billion. Number three, deploy capital into the U.K. So we're not going to compromise on the quality or the returns of that lending in order to meet a target. We're very disciplined.

And then on the second question, actually, we said it was 2026 when costs would come down. That's still our plan. Our cost-to-income ratio guidance for the full year of this year is 61%. You can see that we've got a strong platform for that from the first half. I just note a couple of things. Firstly, income is a bit seasonal. And secondly, the fact that we did say that we would expect to skew our structural cost actions into the second half of the year. So we've done about GBP 100 million so far, expect us to be at the top end of the GBP 200 million to GBP 300 million. All of that is contained in the 61% guidance that we've given you for the cost-to-income ratio. And at this point, we're GBP 1.35 billion through a GBP 2 billion target. So we feel like we've got real momentum, Perlie, so I wouldn't change how we feel about the 2026 cost position. It's a really, really key part of the plan and delivering higher returns, more consistent returns.

So with that, we will close the call. I'd like to thank you for all of your questions today. We look forward to seeing many of you either on the road over the next few days or indeed on the analyst call next Monday. And if we don't see you, then have a good summer break when it comes. Thank you for that.

Thank you.

Thank you. That concludes today's conference call. You may now disconnect.

Excellent. Well, I'd like to invite the panelists up on the stage. We've got a very focused audience to talk about opportunities and challenges. First up is Sophie Ahmad, who's Chief Commercial Officer at Sky. Then we've got Claire Gillies, CEO designate, BT Consumer; and Patricia Cobian, who's CFO of Virgin Media.

I think this sits very nicely for this discussion because we have what I think is, in Sky, one of the largest but asset-light facilities like telcos. We've got BT, which is clearly, by definition, incumbent and very dominant. And we've got Patricia for VMED, which is the largest infrastructure-based challenger. So hopefully, we'll sort of explore 3 different perspectives on this big concept of opportunities and challenges.

I think one of the biggest issues in this topic is growth. Where do we get growth in telecom? Markets are generally mature. Data growth is slowing. I'd love to hear from each of you is, is there further growth to go in connectivity? Can you grow in mature markets? Can prices move up?

One of the analogies I picked up at this conference that I thought was very pertinent was actually Mark Evans years ago at BT saying -- sorry, at O2 saying, "You pay GBP 4 for your Starbucks each day. And each year, it goes up by CPI. But you cannot price telecom services at CPI plus plus." So I guess the big question on the opportunities and challenges panel is, is there growth in core connectivity in the U.K. Sophie?

I think when we think -- at Sky, we think about all of the services that we can provide to customers' homes. Connectivity is, of course, the foundation of those services, particularly as we've moved over to be focused on products delivered over IP. So when we think about how do you monetize connectivity, how do you make sure that you've got the best connectivity experience, the best in-home WiFi experience and out-of-home experience that can enable all the other services that customers love, whether that be engaging in sport or movies or entertainment or some of our newer services like Sky Protect, we've moved into smart home equipment, we want to make sure that we have a brilliant foundation that enables us to provide even better services to the home.

I think just to build on that, I've used the Starbucks analogy a number of times with the team that says, on average today, many consumers are paying less than GBP 1 a day for their broadband service or their mobile service. And yet we go and get that morning coffee and spend GBP 3.50 or GBP 4. It's quite remarkable given the utility that the product actually offers. And if you ask a group of consumers what would it mean to you to have a service outage for a day, half a day, typically, I can get people to an outage of more than an hour is quite disruptive in their lives these days. And it impacts their ability to work. It impacts their ability to do school to view content, et cetera, et cetera.

And so I think the single most important thing as we think about the future is how do we actually grow the quality of our products because it is so imperative to life. And I think we have to continue to do that each and every day, build on the application layer that we offer across all of our services. Build convergence, right, I think that's another big thing. And the impact and the benefit you get from having all of your services with one provider can be immense. And so I think there continues to be growth, of course, in the innovation that we do in this industry. And just think about the number of industries that telecoms has supported on a global basis, and so what is our fair share of some of those other industries as we look to our next wave of growth.

That's right. Patricia?

Yes, absolutely. And look, the GBP 1 a day has been around, I think, ever since that panel that you were referring to, Alex. So I think that, yes, traffic growth is slowing down. I think that the latest census report talks about 10% year-on-year. It used to be around 30%. So that is a potential room for some rebalancing in investment that may not be unwelcome. But clearly, it's not just about data traffic volume. It is about the speed. It is about reliability. It's about seamlessness.

So you were talking about the broader quality. And look, when it comes to price rises, I think that many telcos have those embedded in their Ts and Cs, even those that don't continue to push them through. So are they going to go away? It's unlikely. But that doesn't negate the absolutely astounding value for money that the U.K. consumer gets for telco services if you compare it to any other market in Continental Europe or the U.K. a few years back. Does that negate growth? I don't think so.

Look, it's a tough market, but we've talked about convergence. But even before we go into the breadth of services, I think our brand portfolio enables growth through being able to access and better serve additional segments. That is part of our strategy. Wholesale is a source of growth, and we have a relevant share in the MVNO market, and we serve competitors for our partners. And we're also wholesale-ready. In fixed, we have to the tune of 7 million full-fiber premises and a wholesale-ready fixed infrastructure that we are testing and demonstrated as we launch gift card in broadband. So that's another route for growth.

I think that convergence is not just connectivity, it's not the breadth of the end-to-end connectivity services for a household, but there's potential to expand into other categories. We already include digital content subscriptions. That could be security, smart home, connected health, a number of other areas. For us, B2B is a source of growth, and we're very excited about the deal recently announced with Daisy Group to create a stand-alone company focused on the B2B segment, being able to serve customers across the range of segments there in a manner that perhaps gives them, as Lutz often says, the sunshine and the rain that needs to grow and to blossom, not embedded in a more consumer-focused environment. So there's no single bullet, and it is a tough market, but the growth is there, and we are definitely working on driving that forward.

I want to go straight on convergence next, but I want to sort of just push on this beyond connectivity. And as a telco, you own the customer. You have a billing relationship. You have a brand. You have a strong relationship. But there's an argument, have you actually been able to upsell into that relationship? Can you go beyond connectivity? Can you sell other products, financial services, energy? Are there other scopes for growth? Or do you see those as distractions away from your core purpose?

Maybe I'll jump in on that first because I think you raised an interesting point. It's about what are you selling to that converged customer. And the first thing is you have to start with we are selling connectivity, like that is the first piece, and serving the activity that a customer wants across all of our various different platforms. Do they want to -- as we said, do they want to game? Do they want to watch? Do they want to work? What are the types of things that they're doing?

And it's not so much about convergence as what you're really talking about, it's using your customer base as a distribution channel. In many ways, that's what you're actually affording. And you've seen this industry evolve across the globe to be a content distribution channel. And you've seen large players in the market start to build their content into our services. And so that's less about convergence and more about what we see as our assets. And earlier, on some of the panels, you heard people speak about leverage. And scale can provide you leverage. It can provide you access or appeal to some of these organizations who look to you to do those things.

On the topic of can you use that customer base to sell other things, the answer is yes. We're very fortunate. Our product is in the pockets, in the hands of consumers many, many, many hours a day. They're a highly engaged audience, in fact, an addictive product, if you will. And so how we use that to sell other adjacent products and services, I think, is up to each one of us independently in our business to say what makes the most sense for the consumer base we serve.

At EE, we've chosen to move into some of those new categories. You've seen us over the last number of years do things like gaming and tech. Well, it's because it's adjacent, and we feel we can be experts in that category and speak to it in an intelligent way. Who better to sell you products and services for home security than the people who provide the broadband that connects those services reliably for those who have that need? So I think there's lots of different things, but it's less about is it about converging your networks and it's more about using your customer base as a distribution channel, if you will, selling adjacent products that you have credibility to do.

I would agree. I think the key is that you have to live up to your brand. What does the customer expect for your brand? The Sky customer expects that we'll live up to believe in better, that we'll give them an innovative service that's making their home life better at a good value. So when we think about the additional value-add services that we can provide, they've got to live up to the Sky brand, and they've got to make sense to the consumers that they think, "Of course, I would take that from Sky."

Can I just come back to this concept of convergence? What does it actually mean to all of you though? I think of convergence as just selling fixed and mobile products into a customer base to reduce churn, to try and grow it. A lot of people argue that's unproven. In fact, you're discounting into your own customer base. A lot of people would challenge you in that the purchasing decision is different between the mobile and the broadband. Can you just -- and then I talk very narrowly between fixed and mobile, so you probably think more broadly about it. Can we just get a quick synopsis from each of you of how do you think about this concept of convergence and how do you use it in your businesses?

Yes. If I may start, I think in the U.K., we're still in the early stages of convergence. I look at other markets. So for instance, Spain, I think it's levels of 70% to 80% of converged households in the market. You look at France, Portugal, the Netherlands, it's around 50% penetration of convergence. If you look at the U.K. market as a whole, we're around the 20-something percent. So there's a lot of room for growth. And I don't believe that it's not real. I think that there's different market structures and different paths to growth.

But ultimately, being able to serve the breadth of connectivity services in a household, it's a valuable proposition and not having to worry about whether it's mobile or it's fixed, it's 1 or it's 3, there's a value wrapped around it that I think we've started to exploit when we launched Volt 4 months into [ Liberty ] joint venture. And it was not necessarily about discounting. It's about more value for our converged customers, right? So they get double data or they have a higher speed, they get priority perks. And you can then further evolve into different levels and options of connectivity or, as Claire said, you can then expand. And if you earn the trust and you have the credibility as a brand or a portfolio of brands, you can then further develop the relationship with those customers that our experience tells us that they are more valuable and more loyal and they're more satisfied.

Converged is an interesting word, too, because if we actually look at the definition of converged, it's integration, right? And truly, when we look across the platform of telecoms, convergence has been at the level of having one bill for a customer in your line. You have both services, ergo, you get a discount. What I think we see next is you start to move into converged applications and products and services, one set of controls across broadband and mobile, one set of networks moving from your wireless network to your WiFi networks.

What are the various different actual practical converged applications that we'll see in the future. In telecoms today, it's largely bills and discounting. I think we move into more advanced, deeper consumer benefits as we go forward into the future. I think that's going to be key. Right now, it's largely a source of multiproduct bundling discounts or value-adds, if you will. But I think that evolves as we think more deeply because consumers ultimately, I say this a lot, they don't care what network they're on. What they care about is the activity that they're doing. And we, we think about selling broadband and we think about selling mobile. What that consumer mostly cares about is what application it is that they're going to do and how we're serving it up in the most credible and reliable way to them.

So convergence moves forward. Does it provide value-adds, to your point, stronger customer lifetime value. You've seen different cases of it around the world. I absolutely think if we collectively do convergence right, then it can add tremendous benefit.

It's got to bring some joy to customers. They've got to be using the products that they're taking from you and thinking, "I love taking these products. I love this brand. I love having this brand in my home." And discounting is not necessarily going to do that. It might be a good rational decision when you're thinking about who your next provider is going to be. But if the actual experience isn't converged and if you're not getting a product benefit, then I don't think it works.

So ultimately, we're talking about broadening the role that we play in customers' lives and being able to deliver to a broader set of their needs. And convergence could be connectivity, could be content. For our partners in Tesco Mobile, it's supermarket needs. So convergence can take many different dimensions, but it's about that service to a broader set of needs in our customers.

Okay. So let me move to infrastructure. I mean, because you need that infrastructure to deliver that service. Is infrastructure ownership a source of competitive differentiation? Can you serve your customers better by owning your infrastructure?

I'll start. I think you described us as asset-light. That's the strangest introduction I've ever had. So thank you for that. I think we don't think that you have to own the network to offer a really differentiated customer experience. When we launched Sky Mobile on what was the O2 network a few years ago, we created some really differentiated propositions such as being able to roll your data or just having unlimited data to watch as much Sky content as you wanted. You don't need to be a network owner to find the issues that customers are having and create a proposition that's going to make a difference for them. I think the challenge is you've got to also keep providing great value for money. And so ensuring that you can build these unique and innovative propositions whilst also providing great value, I think, is the key.

Yes. I think if you look at it from the customer perspective, right, does it drive customer differentiation, infrastructure ownership? I think that the answer is no. I think that to drive customer differentiation, you need to have quality of service. You need to have scale and then you need to have the credibility and trust of customers in your brands. And we see the power of scale in the market, I think in the prior panel, there was a lot of references to it, and subscale players struggling and behaving in an irrational way. So I think that from a customer perspective, that doesn't really exist as a source of differentiation. In fact, there's a lot of customers that get confused about the relationship between retail ISPs and the networks. So therefore, it's that service quality, it's the credibility, the trust in the brand and the quality of service.

Now for us as Virgin Media, to drive the quality of service, the experience that our customers deserve, we do need to invest quite significantly in our networks, in our mobile network and our fixed network and in customer service and then in building additional capabilities. So it's not that it doesn't matter, but it's not necessarily the driver of differentiation in customer markets.

Clearly, I believe in infrastructure, right? I believe that someone who's been able to afford 11 years of mobile network leadership at BT and the EE brands, infrastructure ownership makes a difference, right? It allows you to think about the most critical elements of the customer experience and how you integrate that into your product.

When you read customer surveys over and over again, I'm yet to read one in 25 years in this industry that doesn't say network performance and quality is the single most important thing. We can look at reliability, we can look at coverage, we can look at speed. And more importantly, we can look these days on security and the applications we put, and I think that close relationship between the products and services and the network infrastructure ownership makes a meaningful difference. And the surveys show it time and again. And I think customers choose what they can afford. And if they want to have the very best quality, they're willing to spend a little bit more to do that. So I think it's a huge benefit to us and something that I strongly believe in.

Let me come back to Sophie just because you're the biggest customer is possibly here. When you look at how you buy your mobile and your MVNO or how you buy your wholesale broadband fiber, do you have similar methods or the different ways you look at the mobile market versus the fixed? How do you make that decision over which wholesale provider to pick?

Well, I think you have to be strategically aligned with the partner. And so for us, it's about making sure that we can work with the partner to launch the services and to provide the services to customers that they want. So we've been good partners on Sky Mobile since launch. That was an important moment for us to make sure that we had a partner that we could grow with. And so I think you have to take each experience or customer need one by one and find the right partner to support you there.

I would just say one other thing, which is we're not a network owner, but we have access to an incredible global product road map with Comcast, and they produce the best WiFi hardware and have the best network management and reliability team in the U.S. And so I believe that the broadband experience and the WiFi experience that we can offer customers is second to none because we have the benefit of having access to brilliant global partners that do that day in, day out. And I think that, that means that we're in violent agreement because I think that -- look, that network quality, does it matter? Of course, it does. It does to BT, to Sky, to Virgin Media. Absolutely fundamentally, it makes a difference to our customers. It's whether, in their minds, is the ownership that makes the difference or are there other considerations. I think that that's where we have a different nuances.

And I agree with that. And I also think it's important to recognize that not all consumers value the precisely same thing. So Sophie may decide that the network that they participate and they partner with to provide that access doesn't have the same quality because it's not as important to their customers. They're willing to trade off quality for price. This happens in the market all of the time. So I think you have to remember, each of us respectfully look at the market and decide which customer base we want to serve to determine what price we put in the market, what margins we're delivering. We have differentiated customer opportunities.

You can't have a panel like this without going into AI. One of the fine features of telco is you feel like you've -- I think the sector has enabled digitalization across society, but hasn't really monetized it. The big value has been created away from the networks. AI is now clearly transforming society. How much of that value can be captured by -- if I classify you broadly as telcos, can you capture, will you capture a lot more revenue traffic? How do you see that being monetized in your businesses?

I think look, it's early days, and there's a lot of uncertainty around how it will evolve. But at Virgin Media O2, we have AI increasingly embedded in our operations and we see increasingly becoming core in our ability to deliver value, not necessarily just cost savings, but also a differential customer experience. So let me give you an example. So when it comes to protecting customers against fraud, for instance, we flag over 50 million calls as spam or scam per month, 50 million calls, to support and protect our customers against fraud. And in the last 2 years, we've intercepted around 170 million scam or spam messages for our customers. It's absolutely fundamental, and it's a topic that is going to continue to increase in relevance and drive broader impact in our operation and in the service that we deliver for our customers.

AI is making a meaningful difference in our customer service. We ask our customers what they're calling us about, and we use that information with AI-enabled tools to direct the customer to the right team to reduce call times and to drive first-time resolution higher. Now that drives shorter calls and therefore, potential efficiencies, but it also improves NPS. So there is very clear customer-related applications to AI already.

And then if we go back to the network, for instance, clearly, AI-enabled tools help us identify better and target where we build and proactively manage and fix across network management and operations. So I think that AI is already a reality and will continue to evolve. And you're right, there's no AI without telco. So clearly, AI will drive traffic growth, and we are fundamental to the development of a supercharged AI leadership position that the U.K. government is trying to achieve. But that requires that telcos, as enablers of AI, their position is well understood and appropriately positioned.

It's a really exciting area for the telcos. And to your point, I completely agree that whether you're talking about customer experience, whether you're talking about efficiencies in support and care, whether you're talking about where you put inventory or where you roll your trucks and how they get to locations to do repairs in a more timely manner, there's not a single part of our businesses that can't leverage AI. And what's also exciting about it is we have an incredible amount of data, all right? When you think about knowing what customers are doing, how the network is performing, et cetera, how we leverage that data, again, how we leverage that data to feed each of those respective areas, I think it drives cost savings. I think it drives customer experience benefit. I think it impacts our ability to grow revenue, as we spoke about earlier. I think every part of the business starts to evolve as AI develops and we get deeper learning and more comfort with the technologies.

We've got 1 minute left. And so I want to get the last -- because we've got Qualcomm coming later. Just to wrap up, if you had one single regulatory change that would really positively impact your business, what would that be? I can ask each of you, really starting with you, Sophie, what would that be?

I think you want to operate a connectivity business in a regulatory environment that encourages competition, that enables us to keep giving customers an offering at a great price, but also encourages network investment and build.

I think they've generally done a good job. I mean we have a vibrant, highly competitive market here. Light touch is going to be better. Let us each work respectfully across our own businesses to differentiate, to win customers.

Yes. And what I would say is we're not a problems sector. We're a solutions sector, right? We enable growth across so many areas of the economy. And to do so, we need to continue to invest in new generation digital infrastructures. So the ask would be to create the environment for that investment to be incentivized. And hopefully, we can continue to make progress because the direction of travel, as you say, Claire, I think, is positive.

Excellent. Now that's us out of time. Can I have a round of applause for Sophie, Claire and Patricia.