A – C.S. Venkatakrishnan: Rohith.
Q – Rohith Chandra-Rajan: Thank you. Rohith Chandra-Rajan, Bank of America. A couple of questions along similar lines. Sorry to be boring. The US — sorry, the IB, thank you for the additional commentary around kind of the flows of the RWAs. I think — so, so far, really, you talked about optimization and move from DCM into ECM and Advisory and then a negative in terms of – a small negative in terms of Basel 3 in markets. Is there anywhere else within particularly, I guess, the markets business, where outside of optimization you might be taking some capital away from businesses in order to fund the capital-light growth that you’re talking about in some of the focus areas for markets? That would be the first one. And then again, on — the second one is just on — again, on US cards.
I guess what you’ve shown is you have some inefficiencies relative to your local peers from a capital density perspective, which you expect to offset through mitigation, but that usually comes at some cost. And Venkat, you talked earlier about the benefits of being a diversified business, but when you’ve got a standalone cards business without a broader US retail offering, there are some, I guess, some headwinds from an efficiency perspective relative to peers. So what is it that makes Barclays a good cards business in the US compared to a large US bank, for example.
A – C.S. Venkatakrishnan: Right. Adeel, do you want to take the first one on – let me start on cards and Den you can fill in. Thank you, Rohith. So we really think about our business through the lens of two components. We have a bunch of top five revenue rent franchises where we are maintaining a pretty high income to RWA ratio. And then you have the non-top five franchises, which we showed you. If you look at the non-top five franchises, there are two types of businesses there. One, which we need to maintain to be stable to our clients. Within those, we have a pretty, pretty low capital footprint. And then you have the rest of our franchise, which we think we have room to improve because we’ve either lost market share or the operating environment is changing.
If you look at that component of our franchise today, we have 38% of our RWAs allocated versus them driving 28% of our income. So it also tells you that those three focus businesses which we’ve talked to you about, we’ve already allocated the capital they need and the technology resources they need so we can drive that income over the next — over the coming years.
A – Adeel Khan: So then coming Rohith to the question on the US cards business. The first thing to import that I focus on is we have to have an apples-to-apples comparison. This is a specialized partnership card business. We are not looking to compare this to a broad-based US bank’s cards business, which includes its own branded cards. We are not in branded cards. In fact, the important thing, whether you talk about this or whether you can talk about our markets business or investment bank, is that we focus on the things which we try — which we think we do very well and which are attractive to our clients. This specialized cards business has a few attractive features to it. Number one is we have 20 corporate clients, B2B, B2C, 20 million customers.
We are not competing with the end customer — for the end customer with a corporate client. We are not trying to sell them a mortgage. We’re not trying to do other things with them, which many other banks might. And what it does is allow us to focus on increasing the engagement with the corporate — which the corporate customer has with the underlying client. And that is the thing that leads to the revenue uplift for the corporate client, and that’s what Denny had on one of his pages, 6x, 7x. So we don’t compete. Second is we are good at what we do. And that’s an indication of both the blue-chip quality of our clients and the 90% renewal rate that he spoke about. So it’s an apples-to-apples comparison would not have us talk against the broader US banking market.
Of course, there are things we need to do better. We need to adjust for the capital rules, we need to improve and increase our sort of own funding of this and manage our costs better. And as we get scale, improve the RoTE. So we have a lot to do to improve it. But the apples-to-apples comparison is not versus a general US bank. Anything to add?
A – Denny Nealon: You answered that really well. I’m very proud of you. No, I’d just piggyback on something I said earlier. We are a specialist issuer. Most of the largest US banks, I think you’re really asking about, they don’t compete every day in partnerships. They focus on their own proprietary brand. And the other thing I’ve pointed out earlier is the size and scale of the partnership market is very significant. So there’s a big game to play for, and we believe that we have built a sustainable competitive advantage and the capabilities we bring to the table. And as Venkat said, that focus on helping drive our partners’ businesses forward is different than most banks bring to the table. And so what we build is about how do we — because we believe if they do well, we do well. And so our focus there is pretty unique, and it’s worked really well.
A – C.S. Venkatakrishnan: And if I may add one thing — sorry, Raul, just one thing on risk management in that business is underlying credit risk management, but it’s also choosing your partners well, choosing partners with whom you can actually bring that expertise to bear and managing that relationship over time, right? And in the end, if those attributes that lead to a high renewal rate and it’s those attributes that lead to a test cultures in use in the UK. Sorry, Raul.
Q – Raul Sinha: Thanks, Venkat. It’s Raul here from JPMorgan. Still plenty of questions, but I’ll stick to two. The first one is on what’s going on in the UK in terms of consumer duty. So — in terms of consumer duty. So there’s a broad agenda that is leading to various implications for financial services players. Obviously, apart from motor finance, you’re present in most products in the UK, but one of the features of the UK market is very limited cross-selling. So I guess the question for you and for Vim is where do you think are the risks for you in your current business model as configured, especially as we go into the new rules, July this year on the back book? And then secondly, where might be the opportunities for you as other players have to reconfigure their own pricing. And I think your recent stock broker changes have probably been a step in that direction.
A – C.S. Venkatakrishnan: Let me start with the second half, and then I’ll turn it over to Vim. So I think consumer duty, which is a very beneficial way to look at actually what products people provide to customers and managing mis-selling risk across an appropriateness risk across the consumer product landscape is a good thing for the customer. As in all forms of regulation, it actually ends up benefiting the larger players because what we were able to do is understand it, manage it, absorb the fixed costs, and operate. Frankly, over the long-term service as a barrier to entry. I think, therefore, when I spoke earlier about Wealth and I said fairly priced, transparently constructed, efficiently delivered, it’s easier for us to do these things than for smaller companies because we can, — A, we know how to do it because we do it in other parts of our business; and B, we can sort of structure it and absorb the cost better.
So, I think it’s an advantage to the large players as generally forms of regulation are.
A – Vim Maru: So, I think a couple of things to add. And I think that point about our scale and what we’ve done in the past is quite important because I think one of the things that struck me about Barclays and you’ll see it in other banks too, I guess, is just the culture from a customer focus perspective is really strong. And treating customers fairly has been around for a while and the nature and behavior that we have here has been strong, too. Of course, Consumer Duty made us think through every line of our business and consider very carefully with the tweaks that we should make, but it’s not been as heavier lift because of the culture that’s already innate in our business. And so I think that’s been a huge help in where we were and the steps that we have to take.
And actually, I think we’ve made lots of great progress. I think the important thing here is a level playing field. Actually, there are some things that sit outside of the fence in terms of regulation and then making sure that the regulators then apply all of that in a similar and coherent way right across the market. I think that’s the important thing to call out. And then you touched a little bit about sort of limited cross-selling. To some extent, when you look at our balance sheet, and I talked about it, conscious steps that we’ve taken have led to that. And actually, one of the things that we’re trying to do as we lean into the changing shape of our balance sheet as we move forward is actually protecting our franchise and increasing that cross-selling capability.
So, at the moment, some of our customers are going somewhere else for a credit card because of what we’ve chosen to do in the past. That’s a real opportunity for us to really deepen the franchise and increase the number of products and services that we offer to our customers.
Q – Raul Sinha: One more just on buyback capacity, mainly for Anna. I’m sorry to ask about the next buyback when you’ve not even started this one. But the capital walk for 2024 is quite difficult to nail down, just given the moving parts that you’ve got. You start with 13.5% pro forma and then obviously, first quarter of every year, usually there is a trading related RWA pickup. So, it tends to be not very capital-generative. And then I guess you build capital towards your 125 basis points per year sort of run rate through the year. But when we think about the moving parts around the £16 billion of RWA you had on coming in the second half, plus the various acquisitions, Tesco, whether or not you sell the timing of German cards, should we still be thinking about six months as the right kind of beat of looking at capital return and buybacks? Or do we think about that as sort of end of 2024?
A – Anna Cross: Thank you. So, I think the root of this is the capital-generative nature of the business and our ability to consistently generate capital year-on-year out, which we’ve demonstrated. And I would say that, clearly, there is some seasonality to the business. You’ve called it out, we typically deploy more capital in Q1, but typically, we generate more capital in Q1. That’s what we demonstrated in most years. Around the £16 billion and indeed the onboarding of Tesco, those are in our capital flight path. And you wouldn’t expect me to talk to you specifically about timing today. That’s a matter for the Board, and it’s something that we’ll consider. But we have got a fairly a fairly consistent pathway going, if you like to look at it that way.
And the other thing that we’ve done is very clearly highlight for you today our priority, which is number one, regulation; number two, the shareholder; and three, investment. So that should tell you how we’re thinking about the return of capital as we go through 2024, but actually beyond 2025 and 2026.
A – C.S. Venkatakrishnan: We have time for one more ahead. Go ahead, Ben.
Q – Ben Toms: Ben Toms from RBC. You talked about the improvement in application margins in the UK for mortgages. I just wonder whether you might give a sense of where we’re at now and where you expect those application margins to go to? It sounds like it’s largely mixed base for those margins? And then secondly, in Wealth and Private Banking, the RoTE. I appreciate the guidance is greater than 25%, which includes some scope for a bigger than that, but the step down from where you are today to that number is relatively large. Is there something in there for the fact that you’re still having to invest in that business in 2026, and therefore, post 2026, you’d expect a step-up? Or is there an acceptance that it requires ongoing investment in that business every year? Thank you.
