Being more balanced is in part by growing our digital investing and U.K. wealth management offering to the scale that is aligned to the size and scale of our U.K. retail bank. This proposition has very high operating leverage and we are focused now on making specific enhancements to provide better service to our customers. Very recently we launched a new pricing structure and we will now focus on the content and digital capabilities we need to enhance the customer service and journey. In the U.K. wealth management space, we will lower the entry point to £250,000, and again focus on providing easily accessible advice, digitally enabled as much as possible, and a simplified transparent investment proposition. Both of these will be better integrated within our banking app and our website.
Moving to the private bank. Across the U.K. and our international business, we have over £160 billion of client assets and liabilities. And we provide a high-touch personalized client service. Our priorities are actually fairly similar for both segments. We need to build out our teams, including our U.K. regional footprint, as well as our teams in the international markets where we already have an investment banking presence. Also we need to invest in systems and processes to enhance the client experience. In addition, we will invest in our client solutions, including alternatives and lending capabilities. Altogether, these priorities are going to require an investment into our private bank, which will lead to our RoTE being greater than 25% by 2026, which is slightly lower than last year’s numbers.
We aim to deliver high-quality, double-digit asset and liability growth across segments and maintain a cost-income ratio in the high 60s. To conclude, we have a great opportunity in this business, and it’s one that I’m really excited about. We need to be simpler in terms of our business and the propositions, which we provide our customers and clients. We need to be better in terms of our service and technology capabilities and more balanced by scaling our UK wealth offering. Now, almost every bank talks about doing better in private banking and wealth. And so you might well ask, what makes Barclays succeed. I think there are three things. One is the scale and depth of our franchise in the UK and how few of our customers use our investment services today.
There are 3 million customers in Barclays UK with investable assets who we benefit from our digital investing or our UK wealth offering. The second in my opinion is that the UK market could be better served, particularly for those customers in the intermediate stages of their financial journey. I think there’s a real role for us to provide a service which is transparent, which is competitive, which is digitally available, but with access to human advice. And finally, we have proven we can grow this business. Over the last few years, five years, we’ve grown client assets and liabilities by 10% per annum. We have won awards internationally, the best foreign private bank in Switzerland, the number one private bank in Monaco, the number one international private bank in India.
And we are confident we can achieve an RoTE of greater than 25% by 2026. And to me, private banking and wealth represents a very attractive opportunity for the bank. It’s a capital-light fee income-based business and high returning. So with that, what we will do is I’ll invite my colleagues to come up, and we will move to the final part of Q&A or for today’s investor update with Q&A on the business presentation, which you’ve heard. As previously, please limit yourself to two questions and introduce yourself. And I am the MC [ph]. All right. Who would like to go first? Yeah, Alvaro.
Q – Alvaro Serrano: Happy to go first, again. To first again Alvaro Serrano from Morgan Stanley. Just a couple of questions. One is on the efficiency gains in the investment bank. I don’t know if you can make it a bit more tangible for us, given any examples of where you see capital efficiencies in particular. Obviously, there’s been discussion in the past about leverage finance deals that are still on the balance sheet. Is that a source of capital efficiency? And if so, maybe help us quantify it or give us a bit more sort of flavor on how easy those efficiencies are to deliver? And second, on US Cards, the 12% NIM. You’ve listed sort of quite a few things that drive the NIM improvement and rates wasn’t one of them. And I realize this business, it is lower rates is good for it. So maybe, I’ve seen your rate assumption at the back, but can you quantify maybe how much rate plays into that NIM expansion in the US Cards business? Thank you.
A – C.S. Venkatakrishnan: So, why don’t I take the first one? I’ll pass it to Anna to start on the second one, maybe, Denny, you can chime in afterwards. So, at a macro level within the investment bank, efficiency, capital efficiency, which is what I think you’re talking about, RWA per unit income is going to come in a few ways. Within markets, as we’ve said, we’ve always — we’ve maintained a high level. And I think recycling capital and focusing on liquidity and sort of revolving as a deals at 20% a quarter of what you put out and increasing that is going to be one source. In investment banking, it’s coming in a couple of ways. Number one, it is from the move from DCM, which is capital heavy into ECM and M&A. The second is recycling capital as it gets released into — into international corporate banking and the transactional services, which are going to be closely managed by the Investment Bank of managed within the Investment Bank and which represents higher recurring revenue and an allocation of RWAs into the financing side of markets.
So at a macro level, that’s how it happens. Obviously, with individual clients, over time, we will assess whether we are getting the right mix of business for the capital which we lay out. And — but that’s part of exactly that reallocation. Anna, then do you want to start on them?
A – Anna Cross: Yeah. Sure. Why don’t I start, and then I’ll hand to Denny. So you’re right, we’re not calling out rates. We saw a benefit from rates in 2023 actually because of the lag effect of repricing as rates rose within the US, which obviously we don’t expect to recur. Actually, our NIM expectations are much more about what we expect to happen to pricing to mix. And deposits do matter, but only to the extent that we expect a greater proportion of retail funding in the future. But Denny, you might want to expand on pricing?
A – Denny Nealon: Really as Anna just said, there’s really four things going on. So I think the whole industry will see some margin compression as rates come down. So that’s built into our forecast. But I highlighted three things that are going to help us drive NIM expansion. One is we have — we are going to be going more in the retail sector. We expect that to help us rebalance our FICO mix they’ll help deliver higher margins. Second, alongside the late-fee legislation, we’ll be re-pricing some of our existing accounts. And then we have a really strong award-winning deposit platform, and we’re investing in that. And so we expect to get more value from that going forward. So those three things are what offset that margin compression that you can expect from rates drop.
A – C.S. Venkatakrishnan: Next question Yeah, Joe? Joe then Rohith, and Raul.
Q – Joe Dickerson: Hi, Joe Dickerson from Jefferies. Just in terms of the competitive landscape in your two US areas, so the investment bank and then the Cards and Payments business. Could you just perhaps elaborate on how the Basel end game may be impacting the competitive landscape in the US, although, I do see that the banks in the US have done a pretty good job of pushing back on that. But your views on that would be interesting. And then in the consumer space and cards, in particular, we’ve seen in the past 24 hours, Capital One in Discover, effectively Capital One going to the network business. So, how you see the impact on the landscape changing in the US cards or not as may be the case as a result of that merger.
A – C.S. Venkatakrishnan: Yeah. So let me start with Capital One discover, then I will just give a broad answer to the first part of your question and let a Adeel and Denny talk about that. Unless, Anna, you want to add something, too? So on Capital One Discover, look, we’ve got to see the details on it. Clearly, it is a transaction that is based on a cards portfolio as well as payment rails and payment capabilities. And it shows, if anything, that these things are valued in the banking system today. As I hope you’ve seen in the last few hours, both cards and payments are critical parts of the Barclays proposition as well, and something which we think we’re good at and trying to do better. So that’s my sort of first takeaway from it.
And we’ll, of course, have to see the details. And I will say that there is a regulatory angle of it, which, you know, my colleague Jason Goldberg, I have to plug Barclays Research, wrote overnight with Terry Ma. And we have to understand that better as well. Okay. So then coming back to the competitive landscape in the U.S. So at one very high level, capital rules generally increase over time and banks adjust to them, The big banks adjust, right? And I imagine that’s what ultimately will happen. And what I do hope is whatever settles down in the U.K. — in the U.S. capital landscape is relatively mirrored in the U.K., whereas you know the regulators also have a competitiveness mandate in addition to financial safety. So we’ll have to see where it goes.
And what we hope is that it’s sort of fair across both sides of the pond. What you have seen us do is move to internalize what that will be, both at the overall Basel level, as Anna said, to the lower end of 5% to 10%, which includes what we said for IRB in the U.S. cards business, already included in U.K. cards, and then we’ve got a bit of corporates to go. So I think it will all finalize over the next two years. Hopefully, it will be relatively even but we will adjust competitively as we have done in the past. Adeel?
A – Adeel Khan : Yes, I agree with what completely agree with what you’re saying. I think as Anna referenced the impact of Basel, we expect it to be the lower end of 5% to 10%. So that that means mid to high single digits for markets. And look, I think, I go back to what I said earlier in my presentation, our ambition is to generate double-digit returns for shareholders. So if they’re businesses that will be impacted because of Basel, will be ruthless about allocating and reallocating capital within our portfolio to accommodate for that.
A – C.S. Venkatakrishnan: And on the card side, what I’d say is, as we showed actually on the slide, we expect that through the actions that we’re taking that we’ll be able to get our density rate to similar levels to what U.S. issuers will have. So I don’t think there’s going to be any competitive issue there. And at the end of the day, we’ve had capital differences over the years between the U.S. and U.K. over time. And it’s never kept us from winning business at good returns in the past, now, or in the future. And really, because what that really is about at the end of day is not just about price, it’s about can we help partners drive their business forward by helping them increase sales and customer loyalty. And we think because of the capabilities that we’ve built, we do that pretty well. Anna, anything to add?
A – Anna Cross : Yes, just a couple of comments, Joe. The first would be, clearly, we’re reacting to what we know here, and there’s some time to go to see the final rules. So what the teams are doing is they’re firmly focused on what we can control, both in Denny’s world and in Adeel’s world. We would expect to see some increase in capital in the U.S. from our U.S. peers. The exact level of that, we’ll see. I think what’s really important for us to just remember though is that less than 10% of our Greek capital is in the IHC. And so for us some of these movements in US rules are less important than what happens with our primary regulator in the — with the PRA in the UK, which we still expect to be the binding position for Barclays.
