A – Anna Cross: Thank you, Alvaro. Let me pick up the capital detail there. So, if I just take the businesses in turn, As Venkat said, the overall objective is simplification. Our German cards business is not large in scale. You’ll see from our disclosures, it’s about €4.5 billion. And as we noted earlier, we would expect that to be — the disposal to be slightly accretive to capital but not an enormous number given the scale of the business. Our Italian mortgage business, we are relatively well-progressed. We might expect some negative impact on RoTE from the sales I called out previously, but we expect that to be capital-neutral. So, it’s actually neutral to our distribution plans. And in relation to the payments business, we’re not required — or our distribution plans do not require any action on that business at all.
As we said, we’ve got it under a strategic review as we consider in future options for it. But we don’t require a sale of that business to fulfill the £10 billion. As it relates to specific timing, the way I would think about it is we’d expect 2024 to be broadly similar to 2023 and we’d expect distributions to increase over time at the point when Basel 3.1 is behind us and when the high returns for the businesses start to come through. So, I would say a gradual increase over time. Okay, I was going to say Jason has his hand up for longer. So, let’s go to Jason.
Q – Jason Napier: Thanks. Good morning. Jason Napier from UBS. Two — thank you — and perhaps following on from comment you’ve just made. The impact of disposals in the round, all of the potential things that you’re trying to get done on this year’s RoTE, I appreciate Italy probably is a loss-making endeavor but there may be gains elsewhere. So, what have you got in the RoTE guide for this year for that? And then secondly, the targets for 2024 quite clearly suggests no negative operating leverage from all the moving around that’s going to take place in the balance sheet and so on. And while I appreciate a lot of the guidance you’ve given for 2026, as you look at consensus for 2024, it’s at least 10% lower in profit terms than you’re suggesting you’ll achieve today. Is there any color that you can provide on the place where you think the market is too pessimistic? Thank you.
A – Anna Cross: Yes. Okay. So, I referred to it in my scripted remarks. We’d expect the impact of inorganic to be around 40 or 50 basis points this year. So, that’s why we’ve distinguished between our statutory target of greater than 10 and indeed the number that I called out on an underlying basis, which is around 10.5. And as a RoTE matter, the biggest moving part in there is actually Italian mortgages. But as I said, no not expected to have a significant impact on capital. So, hopefully, that’s relatively clear for 2024. In just of 2024, I would say as I look at consensus, obviously, our plans are above their — my expectation of cost is broadly an element with consensus, so I think around 16.5%, I would be happy with that number.
There is clearly a difference in terms of income expectation. I’d also call out, it looks like there’s a difference in terms of impairment expectation as well. Remember, before I talked about US cards perhaps being a little bit heavier in the first half of the year and then falling later. So, I think they’re probably the biggest difference is, Jason.
Q – Raul Sinha: Thank you. It’s Raul Sinha from JPMorgan. If I can have two as well, please. The first one is just one of the key highlights of your plan is the growth ambition both in the UK and outside the UK. And I guess if we look at the evolution over the last few years, the change here seems to be the ambition to grow the UK and in particular, I guess, a change in the UK unsecured and cards strategy. I think, Anna, you described it has not a change in risk appetite. And I was wondering if you could elaborate that. Because from the outside, it might appear that you are changing your risk appetite to take more risk in the UK. So that’s the first question. The second question is, there are plenty of people out here who are more — who reward cost-cutting plans and might be less optimistic on the revenue environment.
So, just on that point, the 1.7 billion of business growth-related costs, could you give us a little bit more color in terms of how permanent those costs might be, and if you ended up in a macro environment, which is slightly different from what is in your plan, how much of that 1.7 billion can be flexed quite easily? Thank you.
A – C.S. Venkatakrishnan: Shall I take the first part, Anna on the risk and then you take the second part on cost. So within our broad risk appetite, which is the way we generally look at not just what our expected losses, our credit losses are, but also internal stress tests and so on. This fits well in. In a sense, it’s a reversal of a risk position, which the former Chief Risk Officer took a few years ago, where post-Brexit and in COVID, we were extremely cautious on the UK consumer, rightly or wrongly. And equally, there was a structure which we had in our credit card business that favored longer bigger balance transfers. What we’re talking about now is something that does not emphasize that. It is a generally higher quality, but broader expansion of unsecured lending.
And this is both in loans and in cards. The Tesco portfolio by our judgment has a very similar credit profile to our own. And so it is within the broader risk limits. Obviously, you’re taking on more risk by doing it than if you didn’t, which is the point of your question. But we think on a risk return basis, it’s going to be accretive, which is why — of course, why we do it.
A – Anna Cross: Thank you, Venkat. I think also, Raul, it’s really important to remember where we start. So in BUK, I think over the last 10 quarters or so, we’ve had a very, very low loan loss rate. We’ve consistently — under consensus consistently under 30 basis points. So we’re starting from an extremely low base rate. And actually, we’ve already started acquiring. We stepped back into the market in ’22. It just takes a while for that lending to season through, which is what we’re observing now. On your second question around costs, our fundamental objective here is the RoTE, it’s 12%. And therefore, as far as Venkat and I are concerned, the primary target is the cost-income ratio target. The £17 billion is the number that falls out, okay?
And that £1.7 billion is the business growth that we would expect to flex. Now most of that is run the bank cost, there’ll be an element of performance costs in there. And of course, we will seek to flex that if the income is either up or down relative to that £17 billion, and that’s why we’re calling that number out specifically. As to your point around the macro though, I’ll take you back to the point where we feel like we’ve made realistic assumptions. We’ve got a well-diversified bank. So we’re confident in our ability to grow. We’ve set out today for you the expectation of that, which is 30 and 17. Obviously, over time, we’ll flex both of those numbers, but the RoTE is the heart.
A – C.S. Venkatakrishnan: And when we’ve looked at this plan through the range of economic scenarios Anna put out, we think it’s fairly robust. Nothing is ever totally in variant, but it’s fairly robust to changes in that. Okay. Sorry. And then Joe and then Andy, all right?
Q – Ben Toms: Ben Toms from RBC. You mentioned at the beginning, if you wind back 10 years and look at the last investor update and since that point in time, we’ve had £16 billion of litigation and issues. Going forward, could you just give us kind of what you’ve penciled in to the plan for conduct and litigation going forward, given that was probably quite a big surprise versus last time. And maybe comment on whether there’s anything in there for motor finance. And then secondly, in terms of the ambition for the investment bank and keeping RWAs flattish, 50% of total group by 2026. Can you maybe just give some color on which product lines are the ones in the investment bank that will probably bear the brunt of absorbing the Basel 3.1 RWA inflation?
A – C.S. Venkatakrishnan: Can I just say on the second half, why don’t we wait until we have the investment bank presentation? You’re going to get more detail on that. And then if you still have a question, we can on the first half, Anna, if you want to take it.
A – Anna Cross: So as we plan going forward, obviously, we plan for an ongoing and relatively low level of litigation and conduct costs just purely as a technical matter if we were planning for anything in a concrete way or if we expected anything in a concrete way, then we’d be providing now and calling that out in today’s results. So that’s how we think about it. As it relates to motor finance, we exited the business in 2019. Up to that point, we had a relatively low single-digit market share. There’s clearly the FCA review ongoing. There are a number of potential outcomes from that. And so at this point, we have not sought to make a provision both because of that range of outcomes, but also because we haven’t received a material number of complaints. So that’s the reason why we haven’t provided at this stage
A – C.S. Venkatakrishnan: Sorry, Joe, go ahead. Then I’ll come back there.
Q – Joe Dickerson: Hi, thank you. It’s Joe Dickerson again from Jefferies. Just on the — looking at the optionality in the UK merchant acquiring business. One, I’m supposing there’s nothing in the 2026 targets that suggests completing something on that front, correct me if I’m wrong. And then two, is this something that you’re looking at more from a cost efficiency standpoint? Or what would be the rationale there? Is it that it doesn’t fit with the integrated overall payment solution, et cetera?
A – C.S. Venkatakrishnan: So let me again go to the second part first and then Anna can come to the first part. We’ll talk more about it. But in a nutshell, what it is, is about a form of partnership to deliver better technology more efficiently on acquiring to our clients. We intend to remain in the full ecosystem of payments, which includes acquiring. It’s just we think that part can be delivered better in partnership with others, and that’s what we’re talking about. And so we’ll come back to that.
A – Anna Cross: And Joe, just in relation to the 2026 targets, we’ve included merchant acquiring within those targets, partly because we are exploring options at this point in time, we haven’t made any decisions. But also, as Venkat pointed out this business in whatever form is critical to Barclays, the Barclays ecosystem, and in particular, to our corporate and SME clients. So either way, it’s a service that we would expect to have.
A – C.S. Venkatakrishnan: Yes, Andy. Andrew Coombs
Q – Andrew Coombs: Thank you. Andrew Coombs from Citi, again. Two questions. First, big picture strategic question. If you believe the press is part of Project Minerva, originally, there were some bigger strategic decisions considered the US cards, the equities business, et cetera, et cetera. Obviously, what you’ve decided today is more kind of shifting things around the edges and reallocation of capital as opposed to any larger exits or divestments. So if you could just elaborate on thoughts there, if there was anything you consider anything you ruled out, that would be helpful. Second question, number-specific question on Slide 48, our favorite hedge roll. I missed this initially, but in the footnote, you say you only plan to roll three quarters of the hedge, which would suggest quite a sizable decline in the notional.
So why is that? What’s the rationale there? And if you could also just provide us with the split of where the income is recognized now on the new segmentation basis. So two-thirds will be in UK, but how does the other one-third split between IBAN and corporate UK?
A – C.S. Venkatakrishnan: So, what I said at the start, Andy, was that in two years as CEO, working with my colleagues, working with the Board, we’ve obviously taken a broad and deep look at the bank and the direction which we want to take. And your question was specifically about the investment bank. And it has been very clear to me from the very start that the investment bank, a, has been at scale, approaching scale, that the businesses which we have work fairly well together and are linked and are mutually reinforcing. We’ll talk a little about efficiencies which we can do within the investment bank, between banking and markets and even within markets. So I’ll come back later to that question about where are we getting our the efficiencies from when we come to the investment bank section.
But it’s equally important to recognize where we start from in the investment bank. There are many businesses in which we are not. And we are at scale for what we do. We are not in commodities. We are not in Asian equities. We are not in local emerging markets other than in India and a bit in Brazil and Mexico, actually Mexico. So there are things we are not in and we don’t plan to get into them. And if you even look at the last three or four years, the areas we have built are three and talk about it, areas of focus. Financing is one of them where we’ve been steadily accreting market share. Equities has been one of them through prime, but not just prime; and securitized products because in the fixed income is the calling card of Barclays, as I said, and you can’t be in fixed income without being strong in securitized products.
And we’ve always been good in origination and financing and what we are doing is building trading. So it is very conscious of the ecosystem in markets — and in banking, as we will talk about, it’s been debt capital markets heavy moving to equity and ECM. But it fits together. We don’t feel the need at the scale which we have and the footprint that we have to take any of the sort of more drastic actions that others have taken. So let’s come back to US cards. I believe it’s a business of great synergy, as said, and it stands on its own two feet. It had a low RoTE print this year, but we’re going to talk to you about how we manage the capital change as well as how we — not just in some capital management but also cost management. So we’ll come back to that.
A – Anna Cross: And on the hedge roll, I mean, what that three quarters tells you is that we do expect continued migration and reduction in deposits called out the sort of broader macro effects and really we’re reflecting those. So that’s why we’re saying we — our assumption is that we’ll roll about three-quarters of it, and that’s what builds up the math that I referred to. As to where that actually lands, still two-thirds within BUK. The rest of it will be spread across UK corporate. There will be some in the investment bank both because of the international corporate bank, but also remember, the equity structural hedges allocated through RWAs and then obviously the private banking and wealth. So perhaps we’ll come back to you and others, Andy, with a bit more of a detailed split of how we expect to land in the future.
Q – Andrew Coombs: Thanks.
Q – Guy Stebbings: Thank you. It’s Guy Stebbings from BNP Paribas Exane. Building with you on the first of Andy’s question again around the outlook for the IB in the plan. I presume you had multiple iterations that you considered, and one of those perhaps you wouldn’t have constrained capital to the IB at all as you are in real terms here ex the regulatory changes. I’m just interested in that plan, how much incremental revenues you might have generated from the IB. Obviously, not looking for a number, but just in broad senses. And with that being the case, if you are constraining capital, I’m just trying to get a sense as to how much that could inhibit market share gains? Thank you.
A – C.S. Venkatakrishnan: So just as we — I said, we came to a conclusion very quickly that the IB was at scale. We came to a conclusion equally quickly that it was at the appropriate scale, right? And in fact, what we needed to get was capital efficiency, which is what we are doing. And that’s what we’re going to talk about. So in essence, the analysis didn’t go there. I didn’t think it needed to go there, right? Capital efficiency was what we thought we could get. And what you will see later is a plan that looks to get greater revenues with less capital. Right. Other questions, yes.
