Q – Unidentified Analyst: The next question comes from from RBC.
Q – Unidentified Analyst: Please go ahead. Your line is now open.
Q – Unidentified Analyst: Morning both, and thank you for taking my questions. The firstly is around just some recent press speculation that you’re looking to sell a stake in your UK merchant acquiring business. I know you won’t want to comment on that directly, so perhaps the best way to phrase the question is to ask what do you think is the best way of Barclays generating value out of its UK merchant acquiring business going forward? And then secondly, I noted your statement around the PRA rules being the most relevant to the expected impact under Basel 3.1 in that context. The regulator gave a Mansion House speech last week. Our interpretation of that speech is that we’ll likely see a softening of the rules around Basel 3.1 when they’re announced later this year and in May 2024. Would you agree with that assertion? Thank you.
C.S. Venkatakrishnan : Right, let me take both of them. First of all, in the UK merchant acquiring business, I think we are fortunate that we’ve got a business that has both issuances and acceptance. And it is very much a business which is targeted at corporates and SMEs. And what it does is that it adds another quiver to our arrow. It’s a very positive quiver to our arrow. When we deal with them, we provide them transaction services, we provide them obviously, baited banking, foreign exchange services and then payments. So merchant acquiring the business itself overall is very good. I think there’s a broader strategic question for us which other banks have faced, which is it’s a very technology driven business. What is your comparative advantage in this?
Is your comparative advantage in developing the technology or in implementing the technology or building machines which you put with clients? Or is your comparative advantage in helping service them as part of a larger set of banking services? That’s the question we are looking at. And then I think the commercial arrangement will come out of the answer to that question. So that’s the way we are thinking about that business. As far as Basel 3.1 goes, I would say two things. I also read the Mansion House speech with interest. I think the UK rules are solidifying. They will probably on the market risk side resemble the US rules and it is still too soon to say how much of an impact, what kind of changes going forward there are from what we’ve seen.
So I don’t want to sort of comment one way or another. I mean, the only thing I will say on this more broadly is I think at the end of the day, I know there’s some commentary from the US banks that the impacts are greater on them. But these capital regimes, and we’ve been under the UK capital regime, of course these capital regimes are very difficult to calculate apple for apple. And so I think at the end of it, when you look at what the Fed has done and when you look at what the bank of England has done, what you’re probably going to have is roughly comparable capital regimes between the US and the UK. Roughly comparable. So let me just round that off. I think, ###, we’re obviously we know these speeches with interest, but we’re waiting the final rules both in the US and in the UK and elsewhere.
And of course we don’t yet know what the impact of any changes around Color Two might be. So until we see it in print, still some uncertainty. So we continue to guide to that 5% to 10% that we’ve given you before, erring, towards probably the bottom end of that range. But thank you for the question. Next question, please. The next question comes from [Indescribablefrom Numis.
Q – Unidentified Analyst: Go ahead, Your line is now open. Hello there. Two from me again, please. The first, I just wondered what was in this seven basis points other drag that’s coming through in the UK MIM in the quarter. I think you described it in the email as product mix, but is it just that or is there some treasury effect coming through there again like we saw earlier in the year and if so, how large? The second question is to focus on one of the bright spots of today’s numbers that the TNAV very powerful move in the third quarter and the cash for hedge reserve seems to run my own by about 20%, I think, in just three months. I don’t want to preempt anything you’re going to say for the year on new financial targets and the like, but are you completely comfortable that in the medium term, including next year in 2025, that you can still do greater than 10% Rote target as it is today?
All in, including any additional structural cost of actions, are taken through next year against this quite powerful move up in the Tnab? Because there’s nothing to suggest the Tnab isn’t going to keep moving up a pace from here. So they’re the two questions. A – C.S. Venkatakrishnan – Okay, thanks I will take both of those. So in the seven bits other it is product, it contains pretty much everything else that isn’t to the left. There’s nothing significant in there individually, there’s a bit of cards. There’s a bit of business banking, as we see the government backed lending being paid down. There’s also a little bit on barclays partner payments, barclays partner finance, rather. You might recall that we said that we were pausing new business in that space whilst we replatformed that business technology wise, because that’s unsecured.
Although it’s small, it can have an impact on NIM. So nothing more than that. Nothing specifically in treasury to call out at all on TNAV. Clearly, that has moved significantly in the quarter. In part, that is actually a reversal of what you saw from the beginning of the year. So just to sort of unpack this a little bit, clearly what drives TNAV over time is attributable profit and us driving good returns, as we have done this quarter. So that’s eight basis points. There was also three basis points that came from the fact that we’d conducted a large part of the share buyback by the end of the quarter. And this is obviously a per share measure. You’re right to call out the cash flow hedge reserve, which was ten pence in this single quarter. But if you look at the disclosures at the back of the results announcement, actually, you can see that quarter to quarter, these reserve movements can be relatively material.
And the third quarter just unwound the position from the beginning of the year. And what’s actually going on here is that as rates fell back a little bit in the third quarter, the negative drag from that cash flow hedge reserve just lessened a little bit. But that was just unwinding. You might recall in the second quarter, there was a big move in the opposite direction that actually depressed TNAV. So really, as we think going forward from here, we try and strip out that kind of quarter to quarter volatility. What we’re really focused on is the accretion of profit and driving robust returns. And that’s really what we’ll come back to you on in february. I want to come back to deposits and competition for deposits again. Clearly you’ve been surprised in the quarter by the level of competition out there, but the comments you’re giving us back is very much that you’re confident in your current pricing.
I mean, what needs to change in terms of the level of competition out there for your view on that to change? If you look at your savings rates, they’re clearly a step below your closest peers. And from what we can see in the data, then you’re losing deposits that, whilst pricing up might be a threat to NIM, at least you’re keeping deposits on the platform. So I just want to kind of understand your approach to competition short term, but also medium term. If these very competitive rates continue to stay out there. And second, you mentioned on the hedge that the hedge come down in relation to your hedgeable deposits. If I look at the disclosures you’re giving us today, then it looks like you’re hedging much, much more of your savings products than your peers.
So I’d just like to get a bit more color around how you run that hedge versus your deposits, what your hedgeable deposits actually are, and how you see those developing over the next couple of quarters. Thank you. Okay. Thanks, Why don’t I take those and I’m sure ###### might add, particularly on pricing. So as I said on the previous answer, we are pretty comfortable with the way that we are placed on our pricing. Clearly, there is a difference in competitive pricing across the industry between what I would describe as bigger banks and challenger banks who might have a different need for liquidity, particularly over the next couple of years as Tffme runs off. So we are mindful of that and we keep our savings pricing under review. But as we are making savings decisions, we think about the franchise and we think about our liquidity and our balance sheet.
