Markets income was down 14% in US dollars, against a record Q4 comparator for us, whilst our business mix also affected us. Corporate lending income was materially down on Q3 at £40 million, primarily due to leverage loan finance marks of £85 million. Underlying corporate lending income was stable. Transaction Banking deposits were also stable whilst income fell slightly versus Q3. Whilst deposit migration continues, this was at a lower pace than earlier in the year. And as a result, we are now again rolling a portion of the structural hedge related to corporate deposits. Looking at markets in detail on the next slide. There were several factors driving our performance in markets this quarter. Similar to Q3, both our business mix and the record comparator contributed to FICC income being down 22% year-on-year in dollars.
Lower volatility in UK gilts compared to Q4 2022 and an industry-wide slowdown in rates and credit impacted Barclays more than our peers. And conversely, the market rebounded in securitized products where we currently lack scale. Equities performed broadly in line with peers up 3% in US dollars year-on-year. Looking at the longer-term trends in markets over the last four years, our share in income has been consistently higher than the previous three. And our income now includes a greater proportion of financing which, as we’ve said before, provides greater stability to our overall markets income. Turning now to the capital funding and liquidity metrics on the next slide. We continue to maintain a well-capitalized and liquid balance sheet with diverse sources of funding and a significant excess of deposits over loans.
Looking at capital in more detail on slide 21. We finished the year with a CET1 ratio of 13.8%. The announced £1 billion share buyback will take us to 13.5%, in the middle of our target range. We generated 18 basis points of capital from earnings in Q4 and just under 150 basis points over the full year, both of which exclude a circa 20 basis points impact of the Q4 structural cost actions. Excluding the reduction due to FX, the £6 billion increase in RWAs reduced capital in Q4 by 23 basis points. We’ll say more about our RWA flight path over the next three years later, but I want to address two main headwinds here. The first is a move of our US Cards portfolio to an Internal Ratings-Based or IRB model. We continue to make significant progress towards at least 85% of credit risk RWAs being IRB, which is the level required by the PRA for IRB bank.
This move results in an expected increase in RWAs of around £6 million from half2 2024. We don’t expect any further material impacts from model migrations from current portfolios beyond US cards. The second headwind is Basel 3.1, which we have quantified publicly for some time. The PRA’s recent policy paper was constructive, and we’ve also worked through some refinements and mitigations. Furthermore, our previous Basel 3.1 guidance included an element for US cards RWAs, which has been superseded by the IRB migration. The aggregate impact of these factors means a materially lower impact from Basel 3 on implementation. And given this lower estimate, the total effect of the two headwinds is broadly aligned to the previously guided day one impact of Basel 3.1 towards the lower end of the 5% to 10% of group RWAs. Furthermore, as more risks are captured in Pillar 1, we would expect some offsets in our Pillar 2 requirements.
On this slide, we’re illustrating the drivers of the RWA increase from implementing IRB for US cards. When applied to US cards, our IRB models generate greater risk weight density versus standardized models. And the key driver is that the models include 2009 financial crisis, stress loss assumptions despite current and expected experience being materially less adverse. Under the US Basel 3 end game treatment, we expect our peers in the US to also experience a capital increase, although noting that these rules are yet to be finalized. There will be further details on planned migration in the US consumer bank presentation later on. So to summarize, we delivered on our financial targets in 2023. This, along with our strong capital position, enabled us to deliver a material increase in distributions to shareholders.
It also represents a strong foundation on, which to improve over the next few years. I’m now going to take the Q&A. Given the time constraints we have, please, can I ask you to limit yourself to a maximum of two questions per person, and please stick to the full year results topics. There’ll be plenty of time to discuss the investor update later on. And if you could please introduce yourself, as usual, not least I’m blinded by lights, so I can’t actually see you very well. So thank you.
A – Anna Cross: Alvaro?
Alvaro Serrano: Hi. Alvaro Serrano from Morgan Stanley. A couple of questions, please. On the markets performance in Q4, you’ve touched obviously on the drivers behind it. But I wonder in the guidance you’ve given for 2024, what kind of environment are you factoring given it’s proven to be pretty volatile? And maybe the general environment for CIB, how you’re seeing it and what you factored it in that, how sensitive that 10.5% in the environment. And related to the Tesco slide, I mean, it does look pretty profitable. But maybe when you’ve discussed Tesco and what the discussion was with head of the Board, how did you compare that acquisition versus potential topping up your share buyback that you would have been able to announce otherwise? Thank you.
Anna Cross: Okay. Thank you for that. So thanks for both questions. So in terms of the markets environment, I’m not going to give a trading update at this point. But what you will see later on is that the assumptions that we’re making about both the markets and the banking wallet are very reasonable actually. We’re not expecting an increase in the market’s wallet in particular in 2024. So we believe they’re reasonable assumptions. And actually, that leaves the actions to grow revenues largely in our hands, and Venkat and Adeel will talk about those later. In terms of Tesco, we will be talking later about our desire to grow lending in the UK and unsecured lending in particular. Now many of you have commented on the fact that we’ve lost market share in unsecured over the last few years.
And actually, what Tesco does is it allows us to accelerate and secure the plans that we would otherwise have pursued organically. And we believe that we can make those investments and fulfill the distribution plans, not only the ones that we’ve announced today, but the targets that we are giving ourselves over the next three years. So we’ll balance shareholder returns with investments but in our high returning businesses. Okay. Next question, please. If I could go to Joe, please. Thank you. If you’re beyond the first row of tables, I really won’t be able to see you.
Joe Dickerson: Thank you. It’s Joe Dickerson from Jefferies. Just a quick question since we’re sticking to the Q4 here. This other element of the UK NIM keeps on rearing itself. So that was a favorable nine basis points quarter-on-quarter. Do you expect that to smooth out over 2024, this kind of volatility from the other aspect? And I suppose related to that, what are the market indicators we might be able to look at to see how that line is moving? Because it’s been pretty material now for — off and on for some quarters.
Angela Cross: Okay. So just to remind you, what’s included in that other. So two things really, basically any other product other than deposits and mortgages. So to the extent that we’re seeing cards or, indeed, our SME lending moving around, you’re going to see it flow through there but also treasury. So our NIM, remember, is an all-in NIM, some of our peers have a banking NIM, which excludes those treasury impacts. Really, what’s going on in the fourth quarter is a reversal of what we talked about a year ago. And as such I don’t expect that that impact to reverse as we go into 2024. So it’s really a reversal of the previous impacts in most material form. Thank you. Okay. Can I go to this corner, please?
Guy Stebbings: Thank you. It’s Guy Stebbings form BNP Paribas Exane. One on UK mortgages and one on US cards. I think you said in your remarks earlier that you’re going to see a net reduction in mortgage balances in the UK, excluding the Tesco acquisition. It just seems a little bit odd given some of the improving dynamics within that market from a volume perspective, in terms of the data. So I just wanted to check assumptions there. Also, some peers have talked better new lending spreads in 2024 versus 2023? And then on US cards, it’s quite a step up in capital requirements from that model change. Just interested to hear if that changes your views at all in terms of the appropriate pace of growth for that business, or was this something that was always going to happen at some point in time? It’s just particular timing? Thank you.
Angela Cross: Thank you, Guy. So the mortgage market through 2023 and actually as we enter 2024 has been somewhat dominated by refinancing activity. So it’s pretty skinny margins, still attractive but skinny. And it tends to lead to a negative net in the market, which is what we’ve seen. So we’re calling out nothing more than that, really, that the trends through the tail end of 2023 have been towards negative net. And similarly, that matches up with, I would say, the broader macro trend around deposits, where with QT and a sort of more constricted money supply, we’d expect deposits to fall. So it’s really that, that we’re calling out in BUK, a contraction in the market in those two larger products, which we would expect to reduce our net interest income expectations before ultimately we see the balance sheet start to grow, and we’d expect that in the second half of 2024.
Your second question, so I’m not going to comment too much on the strategy of the cards business because we’re going to come to that. But we obviously always knew that we were going to have to go through an IRB conversion for US cards. We typically update the market when the quantum becomes clear and when the timing becomes clear. And that’s become clear to us in Q1 of this year. Why are we updating you now? As I said previously, we included an estimate for it contained within our Basel number. Actually, the way things have turned out, it’s a bit bigger, it’s a year earlier, but conversely is offset by some of the updates that we have on Basel. But later on, Denny will take you through some of the ways in which we expect to specifically counter at this.
Okay. Thank you.
Ben Toms: Good morning. It’s Ben Toms from RBC. Just back to the NIM, if that’s okay. Your NIM for the full year came in above expectations. Can you just talk a little bit about the deposit dynamics you saw in Q4 and where they were better than you previously expected? And then into 2024, I think you talked about deposits, expectations for the deposit balance to continue to fall. Maybe just about how you would extrapolate Q4 into 2024? Thank you.
Anna Cross: Thank you, Ben. Yes, we ended the year with a Q4 NIM of 307, bringing the full year to 313. You might recall at Q3, we said we expected to be between 305 and 310, but that was largely dependent on deposit dynamics. And actually, it might be good to go to Slide 15, if we can because it might be helpful for this question. We said it’d be largely dependent on deposit dynamics, and if we saw a replication of Q3, we’d be at the top end of that range. And by my math, that’s around 296. We ended up at 307 and the biggest driver is really that movement that you can see on the slide, where the deposit pressure in Q3 was 16 basis points and the deposit pressure in Q4 was 7. And that’s really because we saw a stabilization of deposits across Q4.
And I think that comes sort of in two ways. Firstly, customer behavior, customer migration really slowed down. And secondly, we saw a stabilization in pricing as the rate environment settled. So as a result, it was a markedly different deposit — deposit environment. Now clearly, we take that forward into 2024, noting those macro trends. And I would say, also noting that Q1 and Q2 tend to be fairly active as a deposit matter just because of seasonal effects, so paydown of tax, et cetera, but also because of the season. But in the second half of 2024, I would expect this deposit activity to slow down and perhaps a little. And of course, we’ve got that ongoing impact of the structural hedge. So as we go into 2024, I think it’s fair to say perhaps there’s a bit more NIM stabilization than we might have expected.
